<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 24, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CTB INTERNATIONAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 3523 35-1970751
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
STATE ROAD 15 NORTH
P.O. BOX 2000
MILFORD, INDIANA 46542-2000
(219) 658-4191
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL J. KISSANE
STATE ROAD 15 NORTH
P.O. BOX 2000
MILFORD, INDIANA 46542-2000
(219) 658-4191
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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<S> <C>
GARY I. HOROWITZ, ESQ. EMANUEL S. CHERNEY, ESQ.
SIMPSON THACHER & BARTLETT KAYE, SCHOLER, FIERMAN, HAYS & HANDLER, LLP
425 LEXINGTON AVENUE 425 PARK AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10022
(212) 455-7113 (212) 836-8000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434 under
the Securities Act, please check the following box. [ ]
------------------------
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CALCULATION OF REGISTRATION FEE
=======================================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share..... 5,750,000 $16.00 $92,000,000 $27,878.79
=======================================================================================================================
</TABLE>
(1) Includes 750,000 shares of Common Stock which the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 24, 1997
PROSPECTUS
, 1997
5,000,000 SHARES
[LOGO] CTB INTERNATIONAL CORP. [LOGO]
COMMON STOCK
All of the 5,000,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), of CTB International Corp. (the "Company") offered hereby (the
"Offering") are being sold by the Company.
Prior to the Offering, there has been no public market for the Common
Stock. It is currently anticipated that the initial public offering price will
be between $14.00 and $16.00 per share. See "Underwriting" for information
relating to the factors to be considered in determining the initial public
offering price of the Common Stock. The Company will file an application for
approval to quote the Common Stock on the Nasdaq National Market under the
symbol "CTBC".
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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- -=---------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................ $ $ $
Total(3)............................. $ $ $
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses of the Offering payable by the Company estimated
at $ .
(3) Certain stockholders of the Company (the "Selling Stockholders") have
granted the Underwriters a 30-day option to purchase up to an additional
750,000 shares of Common Stock, at the Price to the Public, less
Underwriting Discounts and Commissions, solely to cover over-allotments, if
any. If such option is exercised in full, the total Price to the Public and
Underwriting Discounts and Commissions will be $ and $ ,
respectively, and the Proceeds to the Selling Stockholders will be
$ . See "Underwriting."
The shares of Common Stock are being offered by the several Underwriters,
when, as and if delivered to and accepted by the Underwriters and subject to
various prior conditions, including their right to reject orders in whole or in
part. It is expected that delivery of the shares of Common Stock will be made in
New York, New York on or about , 1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GEORGE K. BAUM & COMPANY
CHASE SECURITIES INC.
<PAGE> 3
[Company's ULTRAPAN Pullet Feeding System]
[Company's grain storage bins]
[Company's button nipple drinker]
[Company's broiler production system]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated and pro
forma financial statements and notes thereto appearing elsewhere in this
Prospectus. Unless otherwise noted, or the context otherwise requires, (i)
references to the "Company" refer to CTB International Corp. and its
subsidiaries on a consolidated basis and their respective predecessors, (ii)
references to "CTB" refer to CTB, Inc., a wholly-owned subsidiary of the
Company, and its subsidiaries on a consolidated basis, (iii) references to Old
CTB refer to CTB, Inc., the predecessor company to CTB, Inc., and references to
the Predecessor Company refer to Old CTB and its subsidiaries on a consolidated
basis, (iv) references to the Butler Acquisition refer to the acquisition by the
Company of substantially all of the assets of Butler Manufacturing Company's
grain systems division and the payment of the related fees and expenses, (v)
references to the Fancom Acquisition refer to the acquisition by the Company of
all the capital stock of Fancom Holding B.V. and the payment of the related fees
and expenses, (vi) all information in this Prospectus assumes the following
transactions are completed prior to or concurrent with the consummation of the
Offering: (1) a 12.0933 for 1 stock split of the Common Stock (the "Stock
Split"), (2) the exchange of 9,069 shares of the Existing Preferred Stock (as
defined herein) for 604,600 shares of Common Stock (at an assumed initial public
offering price of $15.00 per share), (3) the redemption of the remaining 15,000
outstanding shares of the Existing Preferred Stock and (4) the repayment of all
amounts outstanding under the Existing Credit Agreement (as defined herein) with
the proceeds of borrowings under the New Credit Agreement (as defined herein)
and a portion of the net proceeds of the Offering, and (vii) the information
contained in this Prospectus assumes that the Underwriters' overallotment option
is not exercised. Unless otherwise defined herein, capitalized terms used in
this summary have the respective meanings ascribed to them elsewhere in this
Prospectus.
THE COMPANY
The Company is a leading manufacturer and marketer of automated feeding,
watering and ventilation systems, feed bins, grain storage bins and integrated
commercial egg laying and handling systems for the poultry, swine, grain and egg
production industries. The Company believes that it has more than 50% of the
domestic market for (i) broiler chicken, swine and turkey feeding systems, (ii)
integrated commercial egg laying and handling systems and (iii) poultry and
swine feed storage and delivery systems. With the Butler Acquisition, the
Company is the leading domestic producer of grain storage bins. The Company
markets its agricultural products on a worldwide basis primarily under the
CHORE-TIME(R) and BROCK(R) brand names through a network of over 500 U.S. and
international independent distributors and dealers, which network the Company
believes is one of the strongest in the industry. The Company believes that its
strong brand names and market positions reflect its 45-year history as the
leading innovator in its core markets. The Company recorded net sales and
operating income of $148.9 million and $19.3 million, respectively, in 1996 and
of $31.5 million and $2.8 million, respectively, in the first quarter of 1997.
Pro forma for the Butler and Fancom acquisitions, the Company's net sales and
operating income would have been $217.4 million and $26.8 million, respectively,
for 1996 and $45.1 million and $4.2 million, respectively, for the three months
ended March 31, 1997.
The Company's feeding, watering and ventilation products are used primarily
by growers that raise poultry and swine, typically on a contract basis, for
large integrators such as Tyson Foods, Inc. Because growers are partially
compensated by integrators based on the efficiency with which they convert feed
to meat (the "feed-to-meat ratio"), they seek to purchase systems which minimize
the feed-to-meat ratio. The Company believes that its systems are among the most
cost-efficient in the industry and that it is currently the only provider of a
complete line of poultry feeding, watering and ventilation systems which have
been widely approved by integrators for use by their growers. The Company's egg
laying and handling products are similarly used by egg producers for whom a key
determinant of profitability is the ability to maximize the ratio of eggs
produced to feed and other costs of production. The Company believes that its
egg product lines are also among the most cost-effective in the industry. The
Company's grain storage products are primarily used by farm users or commercial
businesses such as feed mills, grain elevators, port storage facilities or
commercial grain processors. The Company believes that its grain storage and
handling systems are of the
3
<PAGE> 5
highest quality due to their strength and durability, facilitation of efficient
handling and minimization of grain spoilage.
The Company has benefited from favorable worldwide trends in poultry
consumption and grain production. Domestically, per capita poultry consumption
has increased approximately 78% in the past 20 years due to rising disposable
income, the increasing availability of value-added, pre-packaged poultry
products and poultry's growing appeal to consumers as a healthier source of
protein than other meat products. International poultry consumption is growing
at a significantly higher rate than U.S. consumption, primarily due to, in
addition to the factors impacting domestic demand, significant population
growth, rising international disposable income and poultry's status as a low
cost source of protein compared to other meat products. Rising worldwide poultry
consumption is resulting in increased automation of poultry production and,
therefore, significant demand for the Company's products. In China and Brazil,
the two largest consumers and producers of poultry after the United States, the
Company estimates that only 10% and 60% of poultry production is automated,
compared to nearly 100% in the U.S. Widespread economic and population growth,
with increased demand for animal protein, is driving increased demand for world
feed grain production. Furthermore, the Company believes that less functionally
sophisticated and efficient grain storage facilities outside the U.S. and
Western Europe, which experience relatively high levels of grain spoilage and
loss, are increasingly likely to be replaced by more modern equipment. The
Company believes that these factors will create significant future demand for
the Company's products.
CTB International Corp. was incorporated in Delaware on November 20, 1995
in connection with the CTB Acquisition. See "Business" and "Certain
Relationships and Related Transactions--CTB Acquisition." The Company's
principal executive office is located at State Road 15 North, P.O. Box 2000,
Milford, Indiana, 46542-2000, and its telephone number is (219) 658-4191.
BUSINESS STRATEGY
In January 1996, affiliates of American Securities Capital Partners, L.P.
("ASCP"; together with its affiliates, "American Securities"), along with senior
management and certain founding family members, acquired Old CTB (the "CTB
Acquisition"). As a result of the new ownership, management of the Company is
implementing a growth strategy designed to position the Company as the premier
worldwide provider of high quality, cost-efficient systems for poultry, egg and
swine production and integrated grain storage and handling equipment for the
agricultural equipment industry. To implement this growth strategy, the Company
intends to:
- CONTINUE TO BUILD LEADING MARKET SHARES IN ATTRACTIVE GROWTH
MARKETS. The Company believes that it has more than 50% of the domestic
market share of broiler (chicken raised for consumption), swine and
turkey feeding systems, integrated commercial egg laying and handling
systems and poultry and swine feed storage and delivery systems. With the
Butler Acquisition, the Company is the leading domestic producer of grain
storage bins. The Company intends to continue to build its market share
in these product lines and believes that it will continue to benefit from
strong growth trends in worldwide poultry and swine production, and in
demand for grain storage and handling products. The Company believes that
the diversity of its end users in the agricultural market, coupled with
its increasing international focus, will mitigate the impact of any
reduction in demand within any of its individual product lines.
- CAPITALIZE ON SIGNIFICANT INTERNATIONAL GROWTH OPPORTUNITIES. The
Company's products are marketed in over 60 countries through
approximately 180 international distributors, with international sales
representing approximately 35% of net sales in 1996, pro forma for the
Butler and Fancom acquisitions. The Company intends to leverage its
worldwide brand name recognition, leading market positions and strong
international distribution network to capture the significant demand for
its products in international markets. In Brazil, the world's third
largest consumer of poultry and swine products, the Company has recently
established a subsidiary to manufacture and market its products locally.
In China, the world's second largest consumer and producer of poultry and
swine products, the Company has recently appointed a master distributor,
supported by a network of subdistributors, to complement its existing
direct sales and enhance its distribution network in Southeast Asia.
4
<PAGE> 6
- OFFER INCREASED VALUE THROUGH INTEGRATED EQUIPMENT SYSTEMS. The Company
believes it can significantly lower total production costs and help end
users achieve further productivity gains by offering integrated systems
for their total feeding, watering and ventilation needs. Integrated
equipment systems offer significant benefits to distributors, including
lower administrative and shipping costs and the ease of dealing with a
single supplier for all of their customer needs. In 1994, the Company
initiated a program to expand its product offerings of poultry watering
and poultry and swine ventilation systems and has recently begun offering
an integrated line of feeding, watering and ventilation products.
Currently, the Company believes it is the only provider of a complete
line of poultry feeding, watering and ventilation systems which have been
widely approved by integrators for use by their growers. Additionally,
with the acquisition of Fancom, the Company now manufactures its own line
of control products which increases the Company's flexibility in offering
fully integrated feeding, watering and ventilation systems.
- CONTINUE TO DEVELOP AND INTRODUCE INNOVATIVE PRODUCTS. The Company
intends to leverage its research and development expertise and its broad
distribution network to introduce additional innovative products that
meet customers' needs for enhanced productivity. To maintain and enhance
its position as a leader in product innovation and quality, the Company
has spent an average of approximately $3.8 million per year over the last
five years on research and development, which the Company believes is
significantly higher than that of its competitors. The Company has
introduced some of the most innovative products in the industry including
(i) the centerless FLEX AUGER(R) which provides for the delivery of feed
to poultry and swine in a uniform fashion, and whose design has become
the industry standard, (ii) the round, pan-type poultry feeder, which
maximizes the accessibility of feed in limited space, and whose design
has also become the industry standard, (iii) the TURBO HOUSE(R)
ventilation system which offers consistent temperatures and airflow, (iv)
the button nipple drinker, which delivers water through a patented nipple
that produces a large bead of water allowing young birds to find water
rapidly and easily, thereby facilitating weight gain, and (v) the
ULTRA-FLO(R) feeder which provides rapid and consistent feed delivery to
layers (chickens raised for egg production).
- PURSUE SELECTED PRODUCT LINE EXTENSIONS/ACQUISITIONS. The global poultry
and swine production equipment market is generally characterized by a
large number of small, niche manufacturers, many of whom lack a broad
product line, extensive marketing and distribution networks or the
financial and management resources necessary to capitalize on emerging
opportunities in domestic and international markets. The Company believes
that based on its leading brand names, broad product line and strong
distribution network, it is uniquely positioned to take advantage of
consolidation opportunities and plans to continue to pursue a selective
acquisition strategy by targeting acquisitions that broaden its product
range, leverage its distribution base, increase its geographic reach or
otherwise enhance its ability to offer its customers integrated systems
solutions. The Butler and Fancom acquisitions are intended to advance
this strategy. See "--Recent Transactions."
RECENT TRANSACTIONS
Butler Acquisition. On June 23, 1997, the Company acquired substantially
all of the assets of Butler Manufacturing Company's grain systems division
("Butler"). Based in Kansas City, Missouri, Butler manufactures grain storage
bins and markets grain storage, conditioning and handling systems for grain
producers and processors throughout the world. The Company believes that the
Butler Acquisition will contribute to the Company's competitive position in the
grain storage bin business by greatly increasing the scope of its current
distribution network, enhancing the Company's grain storage bin manufacturing
capability and adding an additional range of on-farm and commercial grain
storage bins to its existing product line, thereby making the Company the
leading U.S. manufacturer of grain storage bins. The purchase price for Butler
was $32.5 million, subject to adjustment. Butler had net sales and operating
income of $41.7 million and $6.1 million, respectively, in 1996 and of $6.6
million and $0.9 million, respectively, for the three months ended March 31,
1997.
Fancom Acquisition. On May 1, 1997, the Company acquired all of the
capital stock of Fancom Holding B.V. ("Fancom"). Fancom, based in The
Netherlands, is a manufacturer of climate control systems
5
<PAGE> 7
and software applications for the agricultural equipment business. These systems
permit the simultaneous remote monitoring and operation of multiple poultry and
swine locations and the complete control of all critical processes within
facilities where poultry and swine are raised and eggs are produced, including
climate, feeding, watering, weighing and storage. The Company believes that the
Fancom Acquisition strengthens the Company's ability to offer integrated
equipment solutions and to further access the European market where 90% of
Fancom's sales are currently made through approximately 100 distributors and
dealers. To date, Fancom's distribution and product development efforts have
been limited in regions such as the U.S., China and Brazil where the Company has
been active. The Company intends to utilize its extensive distribution network
with Fancom's expertise in product development and design to market existing and
new products in these markets. The purchase price for Fancom was 35.1 million
Dutch Guilders ("NLG") ($18.1 million at the May 1 Rate, as defined herein),
subject to adjustment, including the assumption of NLG 11.4 million ($5.9
million at the May 1 Rate) of Fancom's indebtedness. Fancom had net sales and
operating income of $27.2 million and $2.8 million, respectively, in 1996 based
on an average exchange rate of NLG 1.691 per U.S. dollar for 1996 (the "1996
Exchange Rate") and of $7.0 million and $0.8 million, respectively, for the
three months ended March 31, 1997 based on the average exchange rate for such
period. See "Business--Recent Transactions--Fancom Acquisition."
Vinyl Division Divestiture. On May 29, 1997, the Company sold
substantially all assets (other than accounts receivable) relating to its PVC
deck, dock and fence business for approximately $8.2 million to a subsidiary of
Royal Group Technologies Limited (the "Vinyl Division Divestiture"). In
conjunction with the sale, the Company entered into a joint venture with the
acquirer to produce certain extruded PVC agricultural equipment component parts
for the Company for a period of five years.
THE OFFERING
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Common Stock Offered................................... 5,000,000 shares
Common Stock to be outstanding after the Offering(1)... 12,881,804 shares
Use of Proceeds(2)..................................... The net proceeds from the Offering will
be used as follows:
(i) approximately $34 million to repay
indebtedness incurred in connection with
the purchase price and the related fees
and expenses of the Butler Acquisition;
(ii) approximately $13 million to repay a
portion of the indebtedness incurred in
connection with the purchase price and
the related fees and expenses of the
Fancom Acquisition;
(iii) $15 million to redeem 15,000 shares
of the outstanding Existing Preferred
Stock;
(iv) approximately $6 million to repay
outstanding revolving credit loans under
the Existing Credit Agreement; and
(v) the remainder, if any, to finance
general working capital needs.
Proposed Nasdaq National Market Symbol................. CTBC
</TABLE>
- ------------------------------
(1) Excludes 858,624 shares of Common Stock subject to outstanding options. See
"Management--Compensation Pursuant to Benefit Plans and
Arrangements--Non-Qualified Stock Option Agreements."
(2) See "Use of Proceeds" for a description of indebtedness to be repaid with
the proceeds of the Offering.
6
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SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following summary historical financial data for each of the years in
the five year period ended December 31, 1996 has been derived from the audited
consolidated financial statements of the Company and the Predecessor Company.
The following summary historical financial data for each of the three month
periods ended March 31, 1996 and March 31, 1997 and as of March 31, 1997 have
been derived from unaudited consolidated financial statements of the Company
which reflect all adjustments necessary in the opinion of the Company's
management (consisting only of normal recurring adjustments) for a fair
presentation of such data. The summary unaudited pro forma as adjusted income
statement data for the year ended December 31, 1996 and for each of the three
month periods ended March 31, 1996 and March 31, 1997 give effect to the
following transactions as if they had been completed on January 1, 1996: (i) the
Butler Acquisition, (ii) the Fancom Acquisition, (iii) the repayment of all
amounts outstanding under the Existing Credit Agreement with the proceeds of
borrowings under the New Credit Agreement and a portion of the net proceeds of
the Offering, (iv) the Stock Split, (v) the Preferred Stock Exchange, (vi) the
Preferred Stock Redemption and (vii) the Offering. The summary unaudited pro
forma as adjusted balance sheet data as of March 31, 1997 give effect to the
transactions described above as if they had been completed on such date. The
summary pro forma data do not purport to be indicative of the Company's actual
results of operations or financial position that would have been reported had
such events actually occurred on the dates specified, nor do they purport to be
indicative of the Company's future results or financial position. The following
summary consolidated historical and pro forma financial data should be read in
conjunction with "Selected Consolidated Financial Data," "Unaudited Pro Forma
Consolidated Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements,
including the notes thereto, of the Company, the Predecessor Company, Butler and
Fancom appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
--------------------------------------------- ------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------------------------- ------------------------
1992 1993 1994 1995 1996
------------------------
PRO FORMA
ACTUAL AS ADJUSTED
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales......................................... $105,509 $113,538 $140,505 $138,119 $148,853 $ 217,427
Gross profit...................................... 27,784 29,428 37,014 32,541 38,550 58,178
Selling, general and administrative expenses...... 18,345 19,310 20,069 20,606 18,257 29,556
Amortization of goodwill.......................... -- -- -- -- 959 1,796
Operating income.................................. 9,439 10,118 16,945 11,935 19,334 26,826
Other non-recurring expenses...................... -- -- -- 1,396(1) -- --
Interest income (expense)--net.................... 268 313 489 721 (5,332) (4,352)
Income before income taxes........................ 9,707 10,431 17,434 11,260 14,002 22,474
Net income........................................ 6,404 6,681(2) 10,769 6,530 8,502 13,642(3)
Pro forma net income per common share............. $ 0.90(4) $ 1.03(5)
Pro forma weighted average common shares
outstanding...................................... 9,405(4) 13,302(5)
OTHER FINANCIAL DATA:
EBITDA(6)......................................... $ 12,262 $ 12,866 $ 20,062 $ 15,562 $ 24,902 $ 34,728
Depreciation...................................... 2,823 2,748 3,117 3,627 4,609 6,106
Amortization(7)................................... -- -- -- -- 1,251 1,946
Capital expenditures.............................. 1,980 2,867 5,335 4,698 3,402 5,360
Gross profit margin............................... 26.3% 25.9% 26.3% 23.6% 25.9% 26.8%
EBITDA margin(8).................................. 11.6% 11.3% 14.3% 11.3% 16.7% 16.0%
<CAPTION>
COMPANY
---------------------------------------------------
THREE MONTHS ENDED MARCH 31,
---------------------------------------------------
1996 1997
----------------------- ------------------------
PRO FORMA PRO FORMA
ACTUAL AS ADJUSTED ACTUAL AS ADJUSTED
<S> <C><C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales......................................... $31,552 $42,167 $31,520 $45,069
Gross profit...................................... 6,936 10,273 7,604 12,127
Selling, general and administrative expenses...... 4,732 7,418 4,549 7,434
Amortization of goodwill.......................... 240 449 240 449
Operating income.................................. 1,964 2,406 2,815 4,244
Other non-recurring expenses...................... -- -- -- --
Interest income (expense)--net.................... (1,344) (1,108) (1,292) (782)
Income before income taxes........................ 620 1,298 1,523 3,462
Net income........................................ 356 756 918 2,074
Pro forma net income per common share............. $ 0.04(4) $ 0.06(5) $ 0.10(4) $ 0.16(5)
Pro forma weighted average common shares
outstanding...................................... 9,405(4) 13,302(5) 9,405(4) 13,302(5)
OTHER FINANCIAL DATA:
EBITDA(6)......................................... $ 3,425 $ 4,083 $ 4,190 $ 6,081
Depreciation...................................... 1,221 1,228 1,135 1,388
Amortization(7)................................... 312 486 312 486
Capital expenditures.............................. 487 840 897 1,240
Gross profit margin............................... 22.0% 24.4% 24.1% 26.9%
EBITDA margin(8).................................. 10.9% 9.7% 13.3% 13.5%
</TABLE>
(See footnotes on following page)
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<TABLE>
<CAPTION>
AT MARCH 31, 1997
-------------------------
PRO FORMA
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................................................... $ 11,214 $ 31,665
Total assets......................................................................................... 105,851 166,327
Total debt (including current portion)............................................................... 64,375 64,787
Total stockholders' equity........................................................................... 14,642 66,995
</TABLE>
- ------------------------------
(1) Non-recurring costs related to the CTB Acquisition.
(2) Includes increase in net income of $211 for cumulative effect of change in
accounting method for adopting the asset and liability method of accounting
for income taxes as prescribed by the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes."
(3) Excludes pro forma extraordinary charge of $647 (net of tax) for the
write-off of deferred financing costs related to the repayment of all
amounts outstanding under the Existing Credit Agreement.
(4) Pro forma net income per common share is calculated by dividing net income
by the pro forma weighted average common and common equivalent shares
outstanding, after giving effect to the following transactions as if they
had been completed on January 1, 1996: (i) the Stock Split, (ii) the
Preferred Stock Exchange, (iii) the Preferred Stock Redemption and (iv)
solely to the extent the proceeds will be used for the Preferred Stock
Redemption, the Offering (assuming an initial public offering price of
$15.00 per share). Due to the changes in the Company's capital structure
resulting from the CTB Acquisition and the planned recapitalization,
historical net income per common share is not meaningful and therefore is
not presented.
(5) Pro forma as adjusted net income per common share is calculated based upon
pro forma as adjusted net income divided by the pro forma weighted average
common and common equivalent shares outstanding.
(6) EBITDA represents earnings before interest, income taxes, depreciation,
amortization and non-recurring costs related to the CTB Acquisition. EBITDA
is presented because it is a widely accepted financial indicator used by
certain investors and analysts to analyze and compare companies on the
basis of operating performance. EBITDA is not intended to represent cash
flows for the period, nor has it been presented as an alternative to
operating income as an indicator of operating performance and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
(7) With respect to the actual year ended December 31, 1996, comprised of
amortization of goodwill of $959 and amortization of deferred financing
costs of $292 relating to the Existing Credit Agreement, and with respect
to the pro forma year ended December 31, 1996, comprised of pro forma
amortization of goodwill of $1,796 and pro forma amortization of deferred
financing costs of $150 relating to the New Credit Agreement. With respect
to both of the actual three month periods, comprised of amortization of
goodwill of $240 and amortization of deferred financing costs of $72
relating to the Existing Credit Agreement and with respect to both of the
pro forma three month periods, comprised of pro forma amortization of
goodwill of $449 and pro forma amortization of deferred financing costs of
$37 relating to the New Credit Agreement, respectively.
(8) EBITDA margin represents EBITDA as a percentage of net sales. EBITDA margin
is presented because it is a widely accepted financial indicator used by
certain investors and analysts to analyze and compare companies on the
basis of operating performance. EBITDA margin should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
8
<PAGE> 10
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered in evaluating an investment in the Common Stock
offered hereby.
AGRICULTURAL INDUSTRY
Historically, the agricultural industry has been cyclical. The Company's
sales of automated feeding, watering and ventilation systems, feed bins and
integrated egg laying and handling systems have historically been affected by
the level of construction activity by poultry, swine and egg producers, which is
affected by feed prices and domestic and international demand for poultry, pork
and eggs. See "Business." The Company's sales of grain storage bins have
historically been affected by feed and grain prices, acreage planted, crop
yields, demand, government policies and government subsidies. Increases in feed
and grain prices have in the past resulted in a decline in sales of feeding,
watering and ventilation systems, although these same conditions have tended to
improve sales of grain storage bins. Declines in domestic or international
demand for poultry, swine or eggs would likely have a material adverse effect on
the Company's sales of poultry, swine and egg production equipment. Future
declines in grain prices may result in decreased grain production and may have a
material adverse effect on sales of the Company's grain storage and handling
products. During previous economic downturns in the farm sector, sales have
declined. Such sales are expected to be subject to such market fluctuations in
the future.
Weather conditions can also affect farmers' and other agricultural
producers' buying decisions. Severe weather can adversely impact the
agricultural industry and delay planned construction activity, resulting in
fluctuating demand for the Company's products and lost revenues.
Events beyond the control of the Company, such as an outbreak of disease in
poultry or swine may result in decreased production of poultry and swine in
local markets or generally. For example, a recent outbreak of hog cholera in The
Netherlands has resulted in the slaughter of approximately 16% of the swine
population in The Netherlands in an effort to contain the spread of the disease.
The public perception of health risks (such as salmonella food poisoning)
associated with poultry and swine products may result in reduced consumption of
these products. Crop diseases could affect grain production in local markets or
generally. Any of these events could have an adverse effect on demand for the
Company's products and its business, financial condition and results of
operations.
RISKS ASSOCIATED WITH ACQUISITIONS
The Company plans to continue to make strategic acquisitions, such as the
acquisitions of Butler and Fancom. In pursuing this acquisition strategy, the
Company faces risks commonly encountered with growth through acquisitions. These
risks include incurring significantly higher than anticipated capital
expenditures and operating expenses, failing to assimilate the operations and
personnel of acquired businesses, losing customers, entering markets in which
the Company has no or limited experience, disrupting the Company's ongoing
business and dissipating the Company's management resources. Realization of the
anticipated benefits of a strategic acquisition may take several years. There
can be no assurance that the Company will be successful in overcoming these
risks or any other problems encountered with acquisitions, including the Butler
Acquisition and the Fancom Acquisition and any future acquisitions. To the
extent that the Company does not successfully avoid or overcome these risks or
problems related to acquisitions, the Company's financial condition and results
of operations could be adversely affected. Future acquisitions also may have a
significant impact on the Company's financial position and earnings, and could
cause substantial fluctuations in the Company's quarterly and yearly results of
operations. Acquisitions could include significant goodwill and intangible
assets, resulting in substantial amortization charges to the Company that would
reduce stated earnings. In addition, although the Company will continue to
evaluate potential acquisitions, there can be no assurances that the Company
will be successful in effecting any acquisitions in the future.
9
<PAGE> 11
COMPETITION
The market for the Company's products is competitive. Domestically and
internationally, the Company competes with a variety of manufacturers and
suppliers, many of which offer a limited number of the products offered by the
Company and two of which offer products across most of the Company's product
lines. Competition is based on the price, value, reputation, quality and design
of the products offered and the customer service provided by distributors,
dealers and manufacturers of the products. Although the Company believes that it
is competitive in all of these categories, there can be no assurance that the
Company will remain competitive in general or in any particular area of its
business. To the extent that the Company's competitors provide more innovative
and/or higher quality products, better designed products, better pricing or
offer better customer service through their distributors and dealers, the
Company's ability to compete and therefore its financial condition and results
of operations could be adversely affected. Independent distributors and dealers
who market, sell and install the Company's products may also market, sell and
install competing product lines. There can be no assurance that distributors and
dealers will continue to give a high priority to the Company's products. See
"Business--Competition."
INTERNATIONAL OPERATIONS; EXPOSURE TO FOREIGN CURRENCY RISK
International operations are generally subject to various risks that are
not present in domestic operations, including restrictions on dividends,
restrictions on repatriation of funds, unexpected changes in tariffs and other
trade barriers, difficulties in staffing and managing foreign operations,
political instability, fluctuations in currency exchange rates, reduced
protection for intellectual property rights in some countries, seasonal
reductions in business activity and potentially adverse tax consequences, any of
which could adversely impact the Company's international operations. There can
be no assurance that one or more of such factors will not have a material
adverse effect on the Company's future international operations and,
consequently, on the Company's business, financial condition and results of
operations. See "Business--Product Distribution."
The Company currently manufactures or purchases substantially all of its
products in the U.S. and, pro forma for the Butler and Fancom acquisitions,
derived approximately 35% of its net sales in 1996 from foreign countries
(excluding Canada). The production costs, profit margins and competitive
position of the Company are affected by the strength of the U.S. dollar relative
to the strength of the currencies in countries where its products are sold. The
Company's results of operations and financial condition may be adversely
affected by fluctuations in foreign currencies and by translations of the
financial statements of the Company's foreign subsidiaries from local currencies
into U.S. dollars. As a result of the Fancom Acquisition and the recent
establishment of a subsidiary in Brazil, the Company will be exposed to
additional risk with respect to these fluctuations and translations in the
future.
SEASONALITY
Sales of agricultural equipment are seasonal, with poultry, swine and egg
producers purchasing equipment during prime construction periods in the spring,
summer and fall and farmers traditionally purchasing grain storage bins in the
summer and fall in conjunction with the harvesting season. The Company's net
sales and net income have historically been lower during the first and fourth
fiscal quarters as compared to the second and third quarters. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results."
REGULATION AND GOVERNMENT POLICY
Domestic and foreign political developments and government regulations and
policies, including, without limitation, import/export quotas, government
subsidies and reserve programs directly affect the agricultural industry in the
United States and abroad and thereby indirectly affect the Company's business.
Foreign trade embargoes and import quotas have in the past reduced U.S. exports
of poultry and grain, adversely affecting the Company's sales. The application
or modification of existing laws, regulations or policies or the adoption of new
laws, regulations or policies could have an adverse effect on the Company's
business. A recent dispute between the U.S. and the European Union over health
and safety inspection standards at U.S. poultry-
10
<PAGE> 12
processing plants has resulted in a ban on the import of U.S. poultry into
European Union countries. This dispute may have an adverse effect on the
Company's business, financial condition and results of operations.
REGULATORY AND ENVIRONMENTAL MATTERS
Like other manufacturers, the Company is subject to a broad range of
federal, state, local and foreign laws and requirements, including those
governing discharges to the air and water, the handling and disposal of solid
and hazardous substances and wastes, the remediation of contamination associated
with releases of hazardous substances at the Company's facilities and offsite
disposal locations, workplace safety and equal employment opportunities. The
Company has made, and will continue to make, expenditures to comply with such
laws and requirements. The Company believes, based upon information currently
available to management, that it is in compliance with applicable environmental
and other legal requirements and that it will not require material capital
expenditures to maintain compliance with such environmental and other legal
requirements in the foreseeable future.
Governmental authorities have the power to enforce compliance with such
laws and regulations and violators may be subject to penalties, injunctions or
both. Third parties may also have the right to enforce compliance with such laws
and regulations. Like most other industrial concerns, the Company's
manufacturing operations entail some risk of future noncompliance with
environmental regulations and there can be no assurance that material costs or
liabilities will not be incurred by the Company as a result thereof. It is also
possible that other developments, such as additional or increasingly strict
requirements of laws and regulations of these types and enforcement policies
thereunder could significantly increase the Company's costs of operations. See
"Business--Regulatory and Environmental Matters."
RESTRICTIONS IMPOSED BY TERMS OF THE NEW CREDIT AGREEMENT
The New Credit Agreement (as hereinafter defined), will contain covenants
which, among other things, restrict the ability of CTB to pay dividends to the
Company (which will limit the Company's ability to pay dividends on the Common
Stock), incur additional indebtedness, repay certain other indebtedness,
consummate certain asset sales, enter into certain transactions with affiliates,
enter into sale and leaseback transactions, incur liens, merge or consolidate
with any other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of CTB and also requires CTB
to maintain specified financial ratios and satisfy certain other financial
condition tests. Depending upon CTB's leverage ratio, obligations under the New
Credit Agreement may be secured by a lien on substantially all of the assets of
CTB. See "Description of Credit Agreement" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
CTB's ability to comply with the covenants contained in the New Credit
Agreement may be affected by events beyond its control, including prevailing
economic, financial and industry conditions. The breach of any of such covenants
or restrictions could result in a default under the New Credit Agreement which
would permit the lenders to declare all amounts borrowed thereunder to be due
and payable, together with accrued and unpaid interest, and the commitments of
the lenders to make further extensions of credit under the New Credit Agreement
could be terminated.
PRODUCT LIABILITY RISK
Products sold by the Company may expose it to potential liabilities for
personal injury or property damage claims relating to the use of such products.
Although product liability claims historically have not had a material adverse
effect upon the Company, there can be no assurance that the Company will not be
subject to or incur liability for such claims in the future. While the Company
maintains third-party product liability insurance which it believes to be
adequate, there can be no assurance that the Company will not experience claims
in excess of its insurance coverage, or claims that are not ultimately covered
by insurance. There can also be no assurance that such insurance will continue
to be available on economically reasonable terms. A significant claim that is
uninsured or partially insured could result in loss or deferral of revenues,
diversion of resources or damage to the Company's reputation, any of which could
have a material adverse effect on the
11
<PAGE> 13
Company's business, operating results and financial condition. See
"Business--Product Liability and Legal Proceedings."
DILUTION
Purchasers of shares of the Common Stock in the Offering (assuming an
initial public offering price of $15.00 per share) will incur immediate and
substantial dilution of $14.54 per share in the pro forma net tangible book
value per share from the initial public offering price. Additional dilution will
occur upon the exercise of outstanding options. See "Dilution."
CONTROL BY AND RELATIONSHIP WITH PRINCIPAL STOCKHOLDERS
Upon consummation of the Offering, American Securities will collectively
own 39.3% of the outstanding shares of Common Stock (or 35.3% if the
Underwriters' allotment option is exercised in full). American Securities will
control the Company and, through its control of the Company, will have the power
to elect a majority of the members of the Board of Directors of the Company (the
"Board of Directors"), will retain the voting power to determine the outcome of
corporate actions requiring stockholder approval and, consequently, will
continue to have significant influence over the affairs of the Company. For
example, American Securities may influence decisions concerning whether to sell
the Company's assets and the terms, including the price, of any such sale,
whether to issue additional shares of the Company's capital stock and the terms,
including the price, of any such issuance, and whether to acquire other
businesses and the terms, including the price, of any such acquisition. Among
other things, American Securities is in a position to prevent a takeover of the
Company by one or more third parties. The effect of American Securities' control
position may be to deprive the Company's stockholders of a control premium that
might otherwise be realized by them in connection with an acquisition of the
Company. See "Principal Stockholders" and "Certain Relationships and Related
Transactions."
POTENTIAL ADVERSE MARKET EFFECT OF FUTURE SALES OF COMMON STOCK
Sales of a substantial number of shares of Common Stock in the public
market, whether by purchasers in the Offering, American Securities or other
existing stockholders of the Company could adversely affect the prevailing
market price of the Common Stock and could impair the Company's future ability
to raise capital through an offering of its equity securities. Upon completion
of the Offering, there will be 12,881,804 shares of Common Stock outstanding, of
which the 5,000,000 shares offered in the Offering will be freely tradable
without restriction or further registration. The remaining 7,881,804 shares will
be owned by American Securities and the other existing stockholders (the
"Existing Stockholders") and will be "restricted securities" for purposes of the
Securities Act of 1933, as amended (the "Securities Act"). The Existing
Stockholders and the Company have agreed with the Underwriters that they will
not sell or offer to sell any Common Stock for a period of 180 days after the
public offering without the prior consent of Donaldson, Lufkin & Jenrette
Securities Corporation. Upon the expiration of these lock-up agreements, all of
the outstanding shares of Common Stock will be eligible for sale in the public
market subject to the restrictions of Rule 144 under the Securities Act,
applicable to the shares owned by the Existing Stockholders. See "Underwriting"
and "Shares Available for Future Sale."
ABSENCE OF PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock. There can be no assurance that an active market for the Common Stock will
develop or be sustained after the Offering. Although the Company will file an
application for approval to quote the Common Stock on the Nasdaq National
Market, the Common Stock has not been approved for quotation on the Nasdaq
National Market and, once approved, no assurance can be given that the Common
Stock will continue to be included in the Nasdaq National Market after the
completion of the Offering or that an active trading market for the Common Stock
will develop or be sustained after completion of the Offering. The initial
public offering price of the Common Stock will be determined through
negotiations between the Company and the representatives of the Underwriters.
See "Underwriting." The market price of the Common Stock may be volatile and
subject to
12
<PAGE> 14
wide fluctuations in response to a variety of reasons, including variations in
operating results, announcements of new products or technological innovations by
the Company or its competitors and general industry or public market conditions.
These broad market fluctuations may adversely affect the market price of the
Common Stock and the negotiated initial public offering price may not be
indicative of future market prices of the Common Stock. See "Underwriting."
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS
Certain provisions of the Restated Certificate of Incorporation of the
Company (the "Certificate") and the Company's By-laws may delay, deter or
prevent a tender offer or takeover attempt that a stockholder might consider to
be in such stockholder's best interest, including attempts that might result in
a premium over the market price for the shares held by stockholders. The By-laws
provide that the number of directors shall be as fixed, from time to time, by
resolution of the Board of Directors. Further, the Certificate permits the Board
of Directors to issue up to 4,000,000 shares of Preferred Stock and establish
the powers, designations, preferences and relative participating, optional or
other special rights of such shares without any further vote or action of the
Company's stockholders. The Preferred Stock could be issued on terms that are
unfavorable to the holders of the Common Stock or that could make a takeover or
change in control of the Company more difficult. In addition, the Company is
subject to Section 203 of the Delaware General Corporation Law, which places
restrictions on certain business combinations with certain stockholders that
could render more difficult a change in control of the Company. See "Description
of Capital Stock."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein under "Prospectus Summary," "Risk
Factors" and "Business," including statements concerning (i) the Company's
strategy, (ii) the Company's expansion plans for its various businesses, (iii)
the terms of certain acquisitions, (iv) the possible increases in demand for
poultry, eggs, swine and grain and for the Company's products and (v) the
effects on the Company of certain legal proceedings, contain certain
forward-looking statements concerning the Company's operations, economic
performance and financial condition. Because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause such
differences include, but are not limited to, those discussed under "Risk
Factors."
USE OF PROCEEDS
The net proceeds to the Company from the Offering (at an assumed initial
public offering price of $15.00 per share and after the deduction of
underwriting discounts and commissions and expenses payable by the Company) are
estimated to be $68.0 million.
The Company intends to use approximately $34 million of the net proceeds of
the Offering to repay indebtedness incurred in connection with the purchase
price and the related fees and expenses with respect to the acquisition of
Butler. The Company intends to use approximately $13 million of the net proceeds
of the Offering to repay a portion of the indebtedness incurred in connection
with the purchase price and the related fees and expenses with respect to the
acquisition of Fancom. See "Business--Recent Transactions."
The Company intends to use approximately $6 million of the net proceeds of
the Offering to repay outstanding revolving credit loans under the Credit
Agreement, dated as of December 22, 1995, among CTB, the financial institutions
named therein and KeyBank National Association, as successor to Society National
Bank, as amended (the "Existing Credit Agreement"). Concurrently with the
consummation of the Offering, CTB will enter into a new credit agreement (the
"New Credit Agreement") with its existing group of lenders to repay all term
loans and other amounts outstanding under the Existing Credit Agreement. The
revolving credit loans under the Existing Credit Agreement bear interest at the
prime rate or at the eurodollar rate plus 1.75% and mature on December 31, 1998.
The Term A loan under the Existing Credit Agreement bears interest at the prime
rate or at the eurodollar rate plus 2.00% with a final maturity on December 31,
2001. The
13
<PAGE> 15
Term B loan under the Existing Credit Agreement bears interest at the prime rate
plus 0.25% or at the eurodollar rate plus 2.25% and matures on December 31,
2001.
The Company intends to use $15 million of the net proceeds of the Offering
to redeem (the "Preferred Stock Redemption") 15,000 shares of the outstanding 6%
Series A Preferred Stock of the Company (the "Existing Preferred Stock"). In
addition, concurrently with the consummation of the Offering, the Company will
exchange 604,600 shares of Common Stock (at the assumed initial public offering
price of $15.00 per share) for the remaining 9,069 shares outstanding of the
Existing Preferred Stock (the "Preferred Stock Exchange"). See "Description of
Capital Stock."
The remaining net proceeds of the Offering, if any, will be used to finance
working capital needs.
DIVIDEND POLICY
Following consummation of the Offering, the Board of Directors does not
anticipate paying any dividends on the Common Stock in the foreseeable future,
but intends to retain all earnings, if any, for general corporate purposes. The
declaration and payment of dividends, if any, by the Company will be dependent
upon the Company's results of operations, financial condition, cash requirements
and other relevant factors, subject to the discretion of the Board of Directors.
The Company's ability to declare and pay dividends on the Common Stock is
dependent on CTB's ability to declare and pay dividends to the Company. The New
Credit Agreement contains certain restrictions on CTB's ability to pay dividends
or make other distributions to the Company. See "Description of Credit
Agreement."
The Company paid no cash dividends to its stockholders during 1996. Old CTB
declared dividends of $1,519,000 during 1995. The dividends historically paid by
the Company are not indicative of its future dividend policy.
DILUTION
The pro forma net tangible book deficit of the Company as of March 31, 1997
was $62.1 million or $7.88 per share, after giving effect to (i) the Butler
Acquisition, (ii) the Fancom Acquisition, (iii) the repayment of amounts
outstanding under the Existing Credit Agreement with the proceeds of borrowings
under the New Credit Agreement, (iv) the Stock Split, (v) the Preferred Stock
Exchange and (vi) the Preferred Stock Redemption without giving effect to the
offering. See "Unaudited Pro Forma Consolidated Financial Statements."
Net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of shares of Common Stock in the
Offering and the pro forma net tangible book value per share immediately after
consummation of the Offering. After giving effect to the Offering (at the
assumed initial public offering price of $15.00 per share) and the application
of the estimated net proceeds therefrom, the pro forma net tangible book value
of the Company as of March 31, 1997 would have been approximately $5.9 million
or $0.46 per share. This represents an immediate increase in net tangible book
value of $8.34 per share to existing stockholders and an immediate dilution in
net tangible book value of $14.54 per share to new investors purchasing shares
in the Offering, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Initial public offering price per share(1)................. $ 15.00
Pro forma net tangible book deficit per share before the
Offering(2).............................................. 7.88
Increase per share attributable to new investors........... 8.34
------
Pro forma net tangible book value per share after the
Offering(3).............................................. 0.46
------
Dilution per share to new investors(4)..................... $ 14.54
======
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1997,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the
14
<PAGE> 16
average price per share paid by the Existing Stockholders and to be paid by the
new investors in the Offering (at an assumed offering price of $15.00 per share
and before deduction of the underwriting discounts and commissions and estimated
offering expenses payable by the Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders................ 7,881,804 61.2% $15,300,000 16.9% $ 1.94
New investors........................ 5,000,000 38.8 75,000,000 83.1 15.00
---------- ----- ----------- -----
Total...................... 12,881,804 100.0% $90,300,000 100.0%
========== ===== =========== =====
</TABLE>
- ------------------------------
(1) Before deduction of estimated underwriting discounts and commissions and
estimated expenses of the Offering payable by the Company.
(2) Pro forma net tangible book value per share before the Offering is
determined by dividing the net tangible book value (assets less liabilities
and intangible assets) of the Company after giving effect to the Butler
Acquisition, the Fancom Acquisition, the repayment of amounts outstanding
under the Existing Credit Agreement with the proceeds of borrowings under
the New Credit Agreement, the Preferred Stock Exchange and the Preferred
Stock Redemption by the number of shares of Common Stock outstanding after
giving effect to the Stock Split and the Preferred Stock Exchange.
(3) Gives effect to the Offering (at the assumed initial public offering price
of $15.00 per share) and the application of the estimated net proceeds
therefrom (assuming the Underwriters' over-allotment option is not exercised
and after deducting estimated underwriting discounts and commissions and
expenses of the Offering aggregating $7.0 million) as described in "Use of
Proceeds," but without taking into account any other changes in net tangible
book value subsequent to March 31, 1997.
(4) Dilution is determined by subtracting the pro forma net tangible book value
per share after the Offering (which gives effect to the Butler Acquisition,
the Fancom Acquisition, the repayment of all amounts outstanding under the
Existing Credit Agreement with the proceeds of borrowings under the New
Credit Agreement and a portion of the net proceeds of the Offering, the
Preferred Stock Exchange, the Preferred Stock Redemption and the Offering)
from the initial public offering price paid by a new investor for a share of
Common Stock.
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<PAGE> 17
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company as of March 31, 1997 (i) on an actual basis and (ii) on a pro forma
as adjusted basis giving effect to the Butler Acquisition, the Fancom
Acquisition, the Stock Split, the repayment of all amounts outstanding under the
Existing Credit Agreement with the proceeds of borrowings under the New Credit
Agreement and a portion of the net proceeds of the Offering, the Preferred Stock
Exchange, the Preferred Stock Redemption, the issuance of and sale by the
Company of 5,000,000 shares of Common Stock in the Offering at an assumed
initial public offering price of $15.00 per share and the application of the net
proceeds therefrom as described under "Use of Proceeds." The pro forma as
adjusted data do not purport to be indicative of the actual capitalization that
would have occurred had the transactions and events reflected occurred on the
date specified. This table should be read in conjunction with "Unaudited Pro
Forma Consolidated Financial Statements" and the consolidated financial
statements, including the notes thereto, of the Company, Butler and Fancom
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1997
------------------------
PRO FORMA
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Short-term Debt:
Existing Credit Agreement........................................ $ 5,875 $ --
Debt assumed in Fancom Acquisition(1)............................ -- 2,202
-------- --------
Total Short-term Debt....................................... $ 5,875 $ 2,202
======== ========
Long-term Debt:
Existing Credit Agreement........................................ $ 58,500 $ --
New Credit Agreement(2).......................................... -- 58,862
Debt assumed in Fancom Acquisition(1)............................ -- 3,723
-------- --------
Total Long-term Debt........................................ 58,500 62,585
-------- --------
Stockholders' Equity:
Preferred Stock, $.01 par value, $1,000 liquidation preference,
50,000 shares authorized, actual; 4,000,000 shares authorized,
pro forma as adjusted; 24,069(3) shares issued and outstanding,
actual; no shares issued and outstanding, pro forma as
adjusted(4)..................................................... -- --
Common Stock, $.01 par value, 950,000 shares authorized, actual;
40,000,000 shares authorized, pro forma as adjusted; 601,755(3)
shares issued and outstanding, actual; 12,881,804 shares issued
and outstanding, pro forma as adjusted(4)....................... 6 129
Additional paid-in capital(4).................................... 29,994 82,871
Reduction for carryover of predecessor cost basis(5)............. (24,704) (24,704)
Retained earnings................................................ 9,420 8,773(6)
Cumulative translation adjustment................................ (74) (74)
-------- --------
Total Stockholders' Equity.................................. 14,642 66,995
-------- --------
Total Capitalization........................................ $ 73,142 $ 129,580
======== ========
</TABLE>
- ------------------------------
(1) Represents debt assumed in the Fancom Acquisition translated into U.S.
dollars at the exchange rate in effect on March 31, 1997.
(2) The New Credit Agreement will provide a $90 million five-year revolving
credit facility under which the Company will borrow to repay (together with
a portion of the net proceeds of the Offering) all amounts outstanding under
the Existing Credit Agreement. As of March 31, 1997, on a pro forma as
adjusted basis, the Company would have $31.0 million of availability under
the New Credit Agreement (less amounts allocated to letters of credit). See
"Description of Credit Agreement."
(3) Includes Preferred Stock and Common Stock issued subsequent to March 31,
1997.
(4) Pro forma as adjusted data gives effect to the Preferred Stock Exchange, the
Preferred Stock Redemption, the Stock Split and the Offering and excludes
858,624 shares issuable upon the exercise of outstanding options. See
"Shares Available for Future Sale."
(5) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and Note 1 to the Consolidated Financial Statements of the
Company.
(6) Pro forma as adjusted retained earnings reflects an extraordinary charge of
$647 for the write-off (net of tax) of deferred financing costs associated
with the repayment of amounts outstanding under the Existing Credit
Agreement.
16
<PAGE> 18
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma as adjusted consolidated income
statements for the year ended December 31, 1996 and for each of the three month
periods ended March 31, 1996 and March 31, 1997 give effect to the following
transactions as if they had been completed on January 1, 1996: (i) the Butler
Acquisition, (ii) the Fancom Acquisition, (iii) the repayment of all amounts
outstanding under the Existing Credit Agreement with the proceeds of borrowings
under the New Credit Agreement and a portion of the net proceeds of the
Offering, (iv) the Stock Split, (v) the Preferred Stock Exchange, (vi) the
Preferred Stock Redemption and (vii) the Offering. The unaudited pro forma as
adjusted consolidated balance sheet as of March 31, 1997 gives effect to the
transactions described above as if such transactions had been completed on such
date.
The pro forma consolidated income statements and pro forma consolidated
balance sheet are unaudited, and reflect all adjustments necessary in the
opinion of the Company's management (consisting only of normal recurring
adjustments) for a fair presentation of such data. They do not purport to be
indicative of the Company's actual results of operations or financial position
that would have been reported had such events actually occurred on the dates
specified, nor do they purport to be indicative of the Company's future results
or financial position.
The unaudited pro forma consolidated financial statements, including the
notes thereto, should be read in conjunction with the historical consolidated
financial statements, including the notes thereto, of the Company, Butler and
Fancom appearing elsewhere in this Prospectus.
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
COMPANY BUTLER(1) FANCOM(2) ADJUSTMENTS(3) AS ADJUSTED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales................................ $148,853 $41,693 $27,175 $ (294)(a) $ 217,427
Cost of sales............................ 110,303 32,416 16,386 144(b) 159,249
-------- ------- ------- ------- --------
Gross profit......................... 38,550 9,277 10,789 (438) 58,178
Selling, general and administrative
expenses............................... 18,257 3,220(a) 7,987(a) 92(c) 29,556
Amortization of goodwill................. 959 -- -- 837(d) 1,796
-------- ------- ------- ------- --------
Operating income..................... 19,334 6,057 2,802 (1,367) 26,826
Interest expense......................... (5,500) -- (467) 1,435(e) (4,532)
Interest income.......................... 168 -- 12 -- 180
-------- ------- ------- ------- --------
Income before income taxes........... 14,002 6,057 2,347 68 22,474
Income tax expense....................... 5,500 2,349 830 153(f) 8,832
-------- ------- ------- ------- --------
Net income........................... $ 8,502 $ 3,708 $ 1,517 $ (85) $ 13,642(4)
======== ======= ======= ======= ========
Pro forma net income per common share.... $ 0.90 (5) $ 1.03(6)
Pro forma weighted average common shares
outstanding............................ 9,405 (5) 13,302(6)
</TABLE>
- ------------------------------
(1) Historical income statement of Butler for the year ended December 31, 1996.
(a) Net of other income of $183.
(2) Historical income statement of Fancom for the year ended December 31, 1996,
translated into U.S. dollars at the 1996 Exchange Rate.
(a) Includes minority interest of $77 in Fancom's 40% owned subsidiary
Wolters WX B.V.
(3) Pro forma adjustments to reflect the Butler Acquisition, the Fancom
Acquisition, the repayment of all amounts outstanding under the Existing
Credit Agreement with the proceeds of borrowings under the New Credit
Agreement and a portion of the net proceeds of the Offering, the Preferred
Stock Exchange, the Preferred Stock Redemption and the Offering:
(a) Represents the elimination of sales transactions between the Company and
Butler.
17
<PAGE> 19
(b) Represents net increase in cost of sales as follows (in thousands):
<TABLE>
<S> <C>
Elimination of cost of sales transactions between the Company
and Butler................................................. $(223)
Net increase in depreciation expense for Butler resulting
from purchase accounting adjustments to increase property,
plant and equipment to estimated fair market value......... 510
Net decrease in depreciation expense for Fancom resulting
from purchase accounting adjustments to increase property,
plant and equipment to estimated fair market value offset
by an increase in depreciable lives to conform to Company
policy..................................................... (143)
-----
Net increase in cost of sales...................... $ 144
=====
</TABLE>
(c) Represents net increase in selling, general and administrative expenses
as follows (in thousands):
<TABLE>
<S> <C>
Net increase in depreciation expense for Butler resulting from
purchase accounting adjustments to increase property, plant
and equipment to estimated fair market value................ $128
Net decrease in depreciation expense for Fancom resulting from
purchase accounting adjustments to increase property, plant
and equipment to estimated fair market value offset by an
increase in depreciable lives to conform to Company
policy...................................................... (36)
----
Net increase in selling, general and administrative
expenses.......................................... $ 92
====
</TABLE>
(d) Represents amortization of goodwill of Butler of $514 (based on a 40
year estimated life) and Fancom of $323 (based on a 25 year estimated
life) resulting from the Butler and Fancom Acquisitions.
(e) Represents the net decrease in interest expense as follows (in
thousands):
<TABLE>
<S> <C>
Interest expense on borrowings under the New Credit
Agreement................................................ $ 3,756
Elimination of interest expense on borrowings under the
Existing Credit Agreement................................ (5,049)
Amortization of deferred financing costs associated with
New Credit Agreement..................................... 150
Elimination of amortization of deferred financing costs
associated with Existing Credit Agreement................ (292)
-------
Net decrease in interest expense................. $(1,435)
=======
</TABLE>
The assumed blended effective interest rate on the New Credit Agreement
and the Fancom indebtedness is 6.3% per annum.
(f) Represents income tax effect of above adjustments including amortization
of non-deductible goodwill of $323.
(4) Excludes extraordinary charge of $647 (net of tax) for the write-off of
deferred financing costs relating to the repayment of all amounts
outstanding under the Existing Credit Agreement.
(5) Pro forma net income per common share is calculated by dividing net income
by the pro forma weighted average common and common equivalent shares
outstanding, after giving effect to the following transactions as if they
had been completed on January 1, 1996: (i) the Stock Split, (ii) the
Preferred Stock Exchange, (iii) the Preferred Stock Redemption and (iv)
solely to the extent the proceeds will be used for the Preferred Stock
Redemption, the Offering (assuming an initial public offering price of
$15.00 per share).
(6) Pro forma as adjusted net income per common share is calculated based upon
pro forma as adjusted net income divided by the pro forma weighted average
common and common equivalent shares outstanding.
18
<PAGE> 20
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
COMPANY BUTLER(1) FANCOM(2) ADJUSTMENTS(3) AS ADJUSTED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales................................ $31,552 $4,891 $ 5,798 $(74)(a) $42,167
Cost of sales............................ 24,616 3,931 3,318 29(b) 31,894
------- ------ ------ ---- -------
Gross profit........................ 6,936 960 2,480 (103) 10,273
Selling, general and administrative
expenses............................... 4,732 709(a) 1,954(a) 23(c) 7,418
Amortization of goodwill................. 240 -- -- 209(d) 449
------- ------ ------ ---- -------
Operating income.................... 1,964 251 526 (335) 2,406
Interest expense......................... (1,393) -- (122) 358(e) (1,157)
Interest income.......................... 49 -- -- -- 49
------- ------ ------ ---- -------
Income before income taxes.......... 620 251 404 23 1,298
Income tax expense....................... 264 92 145 41(f) 542
------- ------ ------ ---- -------
Net income.......................... $ 356 $ 159 $ 259 $(18) $ 756(4)
======= ====== ====== ==== =======
Pro forma net income per common share.... $ 0.04(5) $ 0.06(6)
Pro forma weighted average common shares
outstanding............................ 9,405(5) 13,302(6)
</TABLE>
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
COMPANY BUTLER(1) FANCOM(2) ADJUSTMENTS(3) AS ADJUSTED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales................................ $31,520 $6,575 $ 7,038 $(64)(a) $45,069
Cost of sales............................ 23,916 4,997 4,021 8(b) 32,942
------- ------ ----- ---- -------
Gross profit........................ 7,604 1,578 3,017 (72) 12,127
Selling, general and administrative
expenses............................... 4,549 657(a) 2,215(a) 13(c) 7,434
Amortization of goodwill................. 240 -- -- 209(d) 449
------- ------ ----- ---- -------
Operating income.................... 2,815 921 802 (294) 4,244
Interest expense......................... (1,323) -- (91) 601(e) (813)
Interest income.......................... 31 -- -- -- 31
------- ------ ----- ---- -------
Income before income taxes.......... 1,523 921 711 307 3,462
Income tax expense....................... 605 361 270 152(f) 1,388
------- ------ ----- ---- -------
Net income.......................... $ 918 $ 560 $ 441 $155 $ 2,074
======= ====== ===== ==== =======
Pro forma net income per common share.... $ 0.10(5) $ 0.16(6)
Pro forma weighted average common shares
outstanding............................ 9,405(5) 13,302(6)
</TABLE>
- ------------------------------
(1) Historical income statement of Butler for the applicable three month period.
(a) Net of other income of $13 and $45 for the three months ended March 31,
1996 and 1997, respectively.
(2) Historical income statement of Fancom for the applicable three month period
translated into U.S. dollars at the average exchange rate for such period.
(a) Includes minority interest in Fancom's 40% owned subsidiary Wolters WX
B.V. of $(5) and $3 for the three months ended March 31, 1996 and 1997,
respectively.
19
<PAGE> 21
(3) Pro forma adjustments to reflect the Butler Acquisition, the Fancom
Acquisition, the repayment of all amounts outstanding under the Existing
Credit Agreement with the proceeds of borrowings under the New Credit
Agreement and a portion of the net proceeds of the Offering, the Preferred
Stock Exchange, the Preferred Stock Redemption and the Offering:
(a) Represents the elimination of sales transactions between the Company
and Butler.
(b) Represents net increase in cost of sales as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1997
(IN THOUSANDS)
<S> <C> <C>
Elimination of cost of sales
transactions between the Company and
Butler.............................. $ (62) $ (45)
Net increase in depreciation expense
for Butler resulting from purchase
accounting adjustments to increase
property, plant and equipment to
estimated fair market value......... 127 100
Net decrease in depreciation expense
for Fancom resulting from purchase
accounting adjustments to increase
property, plant and equipment to
estimated fair market value offset
by an increase in depreciable lives
to conform to Company policy........ (36) (47)
-------- --------
Net increase in cost of
sales..................... $ 29 $ 8
======== ========
</TABLE>
(c) Represents net increase in selling, general and administrative expenses
as follows:
<TABLE>
<S> <C> <C>
Net increase in depreciation expense
for Butler resulting from purchase
accounting adjustments to increase
property, plant and equipment to
estimated fair market value......... $ 32 $ 25
Net decrease in depreciation expense
for Fancom resulting from purchase
accounting adjustments to increase
property, plant and equipment to
estimated fair market value offset
by an increase in depreciable lives
to conform to Company policy........ (9) (12)
-------- --------
Net increase in selling,
general and administrative
expenses.................. $ 23 $ 13
======== ========
</TABLE>
(d) Represents amortization of goodwill of Butler of $128 (based on a 40
year estimated life) and Fancom of $81 (based on a 25 year estimated
life) resulting from the Butler and Fancom Acquisitions.
20
<PAGE> 22
(e) Represents the net decrease in interest expense as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1997
(IN THOUSANDS)
<S> <C> <C>
Interest expense on borrowings under
the New Credit Agreement............ $ 939 $ 696
Elimination of interest expense on
borrowings under the Existing Credit
Agreement........................... (1,262) (1,262)
Amortization of deferred financing
costs associated with New Credit
Agreement........................... 37 37
Elimination of amortization of
deferred financing costs associated
with Existing Credit Agreement...... (72) (72)
-------- --------
Net decrease in interest
expense................... $ (358) $ (601)
======== ========
</TABLE>
The assumed blended effective interest rate on the New Credit Agreement
and the Fancom indebtedness is 6.3% per annum.
(f) Represents income tax effect of above adjustments including
amortization of non-deductible goodwill of $81.
(4) Excludes extraordinary charge of $647 (net of tax) for the write-off of
deferred financing costs relating to the repayment of all amounts
outstanding under the Existing Credit Agreement.
(5) Pro forma net income per common share is calculated by dividing net income
by the pro forma weighted average common and common equivalent shares
outstanding, after giving effect to the following transactions as if they
had been completed on January 1, 1996: (i) the Stock Split, (ii) the
Preferred Stock Exchange, (iii) the Preferred Stock Redemption and (iv)
solely to the extent the proceeds will be used for the Preferred Stock
Redemption, the Offering (assuming an initial public offering price of
$15.00 per share).
(6) Pro forma as adjusted net income per common share is calculated based upon
pro forma as adjusted net income divided by the pro forma weighted average
common and common equivalent shares outstanding.
21
<PAGE> 23
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
COMPANY BUTLER(1) FANCOM(2) ADJUSTMENTS(3) AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term
investments............... $ 191 $ -- $ 267 $ -- $ 458
Accounts receivable......... 14,304 1,901 5,335 -- 21,540
Inventories................. 14,986 8,025 5,008 1,923(a) 29,942
Deferred income taxes....... 1,863 -- -- 239(e) 2,102
Prepaid expenses............ 955 12 543 -- 1,510
-------- ------- ------- ------- --------
Total current assets... 32,299 9,938 11,153 2,162 55,552
Property plant & equipment-net... 35,393 4,046 3,239 7,006(b) 49,684
Intangibles-net.................. 38,141 -- -- 22,932(c) 61,073
Other assets..................... 18 -- -- -- 18
-------- ------- ------- ------- --------
Total assets........... $105,851 $ 13,984 $14,392 $ 32,100 $ 166,327
======== ======= ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............ $ 7,512 $ 1,458 $ 2,552 $ -- $ 11,522
Current portion of long-term
debt...................... 5,875 -- 2,202 (5,875)(d) 2,202
Accrued liabilities......... 7,698 1,050 1,415 -- 10,163
-------- ------- ------- ------- --------
Total current
liabilities.......... 21,085 2,508 6,169 (5,875) 23,887
Long-term debt................... 58,500 -- 3,723 362(f) 62,585
Deferred income taxes............ 9,593 -- 169 539(g) 10,301
Accrued postretirement
benefits....................... 2,031 180 101 -- 2,312
Other liabilities................ -- -- 247(a) -- 247
-------- ------- ------- ------- --------
Total liabilities...... 91,209 2,688 10,409 (4,974) 99,332
Stockholders' equity............. 14,642 11,296 3,983 37,074(h) 66,995
-------- ------- ------- ------- --------
Total liabilities and
stockholders'
equity............... $105,851 $ 13,984 $14,392 $ 32,100 $ 166,327
======== ======= ======= ======= ========
</TABLE>
- ------------------------------
(1) Represents balance sheet of Butler as of March 31, 1997.
(2) Represents the balance sheet of Fancom as of March 31, 1997, translated into
U.S. dollars at the exchange rate in effect on such date.
(a) Includes minority interest of $37 in Fancom's 40% owned subsidiary
Wolters WX B.V.
(3) Pro forma adjustments to reflect the Butler Acquisition, the Fancom
Acquisition, the repayment of all amounts outstanding under the Existing
Credit Agreement with the proceeds of borrowings under the New Credit
Agreement and a portion of the net proceeds of the Offering, the Preferred
Stock Exchange, the Preferred Stock Redemption and the Offering:
(a) Represents purchase accounting adjustments to increase Butler's
inventory by $1,423 and Fancom's inventory by $500 in each case to
reflect their estimated fair market value (see (i) below).
(b) Represents purchase accounting adjustments to increase Butler's
property, plant and equipment by $5,466 and Fancom's property, plant
and equipment by $1,540 in each case to reflect their estimated fair
market value (see (i) below).
22
<PAGE> 24
(c) Represents net increase in intangibles, as follows (in thousands):
<TABLE>
<S> <C>
Goodwill in connection with the Butler Acquisition......... $15,315
Goodwill in connection with the Fancom Acquisition......... 7,928
Deferred financing costs relating to the New Credit
Agreement................................................ 750
Write-off of deferred financing costs relating to the
Existing Credit Agreement................................ (1,061)
-------
$22,932
=======
</TABLE>
(d) Represents repayment of current portion of the Company's borrowings
under the Existing Credit Agreement.
(e) Represents net increase in deferred income taxes as follows (in
thousands):
<TABLE>
<S> <C>
Tax benefit from write-off of deferred financing costs
related to the Existing Credit Agreement assuming an
effective tax rate of 39%.................................. $ 414
Deferred tax liability associated with the purchase
accounting adjustments to inventory of Fancom assuming an
effective tax rate of 35%.................................. (175)
-----
Net increase in deferred income taxes.............. $ 239
=====
</TABLE>
(f) Represents net increase in long-term debt as follows (in thousands):
<TABLE>
<S> <C>
Borrowings under New Credit Agreement..................... $ 58,862
Repayment of amounts outstanding under Existing Credit
Agreement............................................... (58,500)
--------
Net increase in long-term debt.................. $ 362
========
</TABLE>
(g) Represents deferred tax liability associated with purchase accounting
adjustments to property, plant and equipment of Fancom assuming an
effective tax rate of 35%.
(h) Represents net increase in stockholders' equity as follows (in
thousands):
<TABLE>
<S> <C>
Offering proceeds......................................... $ 75,000
Fees and expenses of Offering............................. (7,000)
Redemption of Existing Preferred Stock.................... (15,000)
Elimination of Butler stockholders' equity................ (11,296)
Elimination of Fancom stockholders' equity................ (3,983)
Write-off of deferred financing costs, net of taxes....... (647)
--------
Net increase in stockholders' equity............ $ 37,074
========
</TABLE>
(i) The Company has accounted for the Butler Acquisition and the Fancom
Acquisition using the purchase method of accounting. As such, the
purchase price has been allocated to the assets acquired and
liabilities assumed based on their estimated fair values. The
allocations used reflect management's preliminary estimates of fair
values of such assets and liabilities. An independent appraisal of the
acquired assets and liabilities has not yet been performed; as such,
the allocations are subject to adjustment upon completion of appraisals
and other valuation analyses.
23
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The selected consolidated income statement data and balance sheet data
presented below for the year ended December 31, 1996 and as of December 31, 1996
were derived from the audited consolidated financial statements, including the
notes thereto, of the Company appearing elsewhere in this Prospectus. The
selected consolidated income statement data and balance sheet data presented
below for each of the years in the two-year period ended December 31, 1995 and
as of December 31, 1995 were derived from the audited consolidated financial
statements, including the notes thereto, of the Predecessor Company appearing
elsewhere in this Prospectus. The selected consolidated income statement data
and balance sheet data presented below for each of the years in the two year
period ended December 31, 1993 and as of December 31, 1992, 1993 and 1994 were
derived from audited consolidated financial statements, including the notes
thereto, of the Predecessor Company not appearing in this Prospectus. The
selected consolidated income statement data and balance sheet data presented
below for each of the three month periods ended March 31, 1996 and March 31,
1997 and as of March 31, 1997 were derived from unaudited consolidated financial
statements, which reflect all adjustments necessary in the opinion of the
Company's management (consisting only of normal recurring adjustments) for a
fair presentation of such data, including the notes thereto, of the Company
appearing elsewhere in this Prospectus. The financial data presented below
should be read in conjunction with the consolidated financial statements,
including the notes thereto, of the Company, the Predecessor Company, Butler and
Fancom appearing elsewhere in this Prospectus, "Unaudited Pro Forma Consolidated
Financial Statements," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
COMPANY
PREDECESSOR COMPANY ------------------------------------------
------------------------------------------- YEAR ENDED THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, MARCH 31,
------------------------------------------- ------------ ---------------------
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. $105,509 $113,538 $140,505 $138,119 $148,853 $ 31,552 $ 31,520
Cost of sales.......... 77,725 84,110 103,491 105,578 110,303 24,616 23,916
-------- -------- -------- -------- -------- ------- -------
Gross profit........... 27,784 29,428 37,014 32,541 38,550 6,936 7,604
Selling, general and
administrative
expenses............. 18,345 19,310 20,069 20,606 18,257 4,732 4,549
Amortization of
goodwill............. -- -- -- -- 959 240 240
-------- -------- -------- -------- -------- ------- -------
Operating income....... 9,439 10,118 16,945 11,935 19,334 1,964 2,815
Other non-recurring
expenses............. -- -- -- 1,396(1) --
Interest income
(expense)--net....... 268 313 489 721 (5,332) (1,344) (1,292)
-------- -------- -------- -------- -------- ------- -------
Income before income
taxes................ 9,707 10,431 17,434 11,260 14,002 620 1,523
Income tax expense..... 3,303 3,961 6,665 4,730 5,500 264 605
-------- -------- -------- -------- -------- ------- -------
Income before
cumulative effect of
change in accounting
method............... 6,404 6,470 10,769 6,530 8,502 356 918
Cumulative effect of
change in accounting
method............... -- 211 -- -- -- -- --
-------- -------- -------- -------- -------- ------- -------
Net income............. $ 6,404 $ 6,681(2) $ 10,769 $ 6,530 $ 8,502 $ 356 $ 918
======== ======== ======== ======== ======== ======= =======
Pro forma net income
per common
share(3)............. $ 0.90 $ 0.04 $ 0.10
Pro forma weighted
average common shares
outstanding(3)....... 9,405 9,405 9,405
</TABLE>
24
<PAGE> 26
<TABLE>
<CAPTION>
COMPANY
PREDECESSOR COMPANY ---------------------------------------------
------------------------------------- YEAR ENDED THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, MARCH 31,
------------------------------------- --------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA(4)................. $12,262 $12,866 $20,062 $15,562 $ 24,902 $ 3,425 $ 4,190
Depreciation.............. 2,823 2,748 3,117 3,627 4,609 1,221 1,135
Amortization(5)........... -- -- -- -- 1,251 312 312
Capital expenditures...... 1,980 2,867 5,335 4,698 3,402 487 897
Gross profit margin....... 26.3% 25.9% 26.3% 23.6% 25.9% 22.0% 24.1%
EBITDA margin(6).......... 11.6% 11.3% 14.3% 11.3% 16.7% 10.9% 13.3%
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT MARCH 31,
------------------------------------- --------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........... $14,294 $15,072 $18,891 $22,150 $ 10,773(7) $ 7,730 $ 11,214
Total assets.............. 41,386 44,651 54,355 58,045 103,351 105,417 105,851
Total debt (including
current portion)........ 344 40 -- -- 65,150 71,500 64,375
Total stockholders'
equity.................. 29,059 30,902 37,202 40,841 13,741 5,478 14,642
</TABLE>
- ------------------------------
(1) Non-recurring costs related to the CTB Acquisition.
(2) Includes increase in net income of $211 for cumulative effect of change in
accounting method for adopting the asset and liability method of accounting
for income taxes as prescribed by the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
(3) Pro forma net income per common share is calculated by dividing net income
by the pro forma weighted average common and common equivalent shares
outstanding, after giving effect to the following transactions as if they
had been completed on January 1, 1996: (i) the Stock Split, (ii) the
Preferred Stock Exchange, (iii) the Preferred Stock Redemption and (iv)
solely to the extent the proceeds will be used for the Preferred Stock
Redemption, the Offering (assuming an initial public offering price of
$15.00 per share). Due to the changes in the Company's capital structure
resulting from the CTB Acquisition and the planned recapitalization,
historical net income per common share is not meaningful and therefore is
not presented.
(4) EBITDA represents earnings before interest, income taxes, depreciation,
amortization and non-recurring costs related to the CTB Acquisition. EBITDA
is presented because it is a widely accepted financial indicator used by
certain investors and analysts to analyze and compare companies on the basis
of operating performance. EBITDA is not intended to represent cash flows for
the period, nor has it been presented as an alternative to operating income
or as an indicator of operating performance and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(5) With respect to the year ended December 31, 1996, comprised of amortization
of goodwill of $959 and amortization of deferred financing costs of $292
relating to the Existing Credit Agreement. With respect to each of the three
month periods, comprised of amortization of goodwill of $240 and
amortization of deferred financing costs of $72 relating to the New Credit
Agreement.
(6) EBITDA margin represents EBITDA as a percentage of net sales. EBITDA margin
is presented because it is a widely accepted financial indicator used by
certain investors and analysts to analyze and compare companies on the basis
of operating performance. EBITDA margin should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(7) The reduction in working capital reflects the use of cash to fund a portion
of the CTB Acquisition and a $5.5 million increase in short-term debt
associated with such transaction.
25
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company and the Predecessor Company should be read in
conjunction with the consolidated financial statements, including the notes
thereto, of the Company and the Predecessor Company appearing elsewhere in this
Prospectus.
OVERVIEW
The Company's products are used on a worldwide basis by producers of
poultry, swine and eggs, whose primary cost of production is the cost of feed
grain consumed by the animals, and by producers or storers of grain.
Consequently, significant fluctuations in the supply and cost of grain to users
of the Company's products can impact the Company's operating results. The
Company believes that its diversified product offerings have historically
mitigated some of the effects of increases in the cost of feed grain, as the
demand for grain storage and handling equipment has tended to increase during
periods of higher grain prices, somewhat offsetting the declines in production
of poultry, swine and eggs and the resulting reduction in demand for the
Company's products by producers of these commodities which can occur as a result
of higher grain prices. The supply and cost of grain and feed is affected by a
number of factors including acreage planted, crop yields, weather, government
policies, government subsidies and levels of exports.
Sales of agricultural equipment are seasonal, with poultry, swine and egg
producers purchasing equipment during prime construction periods in the spring,
summer and fall and farmers traditionally purchasing grain storage bins in the
summer and fall in conjunction with the harvesting season. The Company's net
sales and net income have historically been lower during the first and fourth
fiscal quarters as compared to the second and third quarters.
The Company was organized in November 1995 by ASCP for the purpose of
acquiring Old CTB. The CTB Acquisition was consummated on January 4, 1996 and
funded by the issuance of $30 million of equity and $75.5 million of borrowings
under the Existing Credit Agreement (net of cash acquired). The CTB Acquisition
was accounted for under the purchase method of accounting to the extent of the
change in ownership interest (67.9%). Accordingly, CTB's financial statements
for 1996 reflect the effects of purchase accounting adjustments (including
increased depreciation expense and amortization of goodwill) and interest
expense (including amortization of deferred financing costs) associated with the
financing of the CTB Acquisition. Results for 1995 also include a non-recurring
charge of $1.4 million for expenses associated with the CTB Acquisition and a
corresponding reduction in book equity.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items in the Company's and the Predecessor
Company's statements of income.
<TABLE>
<CAPTION>
COMPANY
PREDECESSOR COMPANY ------------------------------------------------
-------------------------------- YEAR ENDED THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, MARCH 31,
-------------------------------- ------------ ----------------------
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales........................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales....................... 73.7 74.1 73.7 76.4 74.1 78.0 75.9
----- ----- ----- ----- ----- ----- -----
Gross profit........................ 26.3 25.9 26.3 23.6 25.9 22.0 24.1
Selling, general and administrative
expenses.......................... 17.4 17.0 14.3 15.0 12.3 15.0 14.4
Amortization of goodwill............ -- -- -- -- 0.6 0.8 0.8
----- ----- ----- ----- ----- ----- -----
Operating income.................... 8.9 8.9 12.0 8.6 13.0 6.2 8.9
Other non-recurring expenses........ -- -- -- 1.0 -- -- --
Interest income (expense), net...... 0.3 0.3 0.4 0.5 (3.6) (4.2) (4.1)
----- ----- ----- ----- ----- ----- -----
Income before income taxes.......... 9.2 9.2 12.4 8.1 9.4 2.0 4.8
Income tax expense.................. 3.1 3.5 4.7 3.4 3.7 0.8 1.9
Cumulative income effect of change
in accounting method.............. -- 0.2 -- -- -- -- --
----- ----- ----- ----- ----- ----- -----
Net income.......................... 6.1% 5.9% 7.7% 4.7% 5.7% 1.2% 2.9%
===== ===== ===== ===== ===== ===== =====
</TABLE>
26
<PAGE> 28
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
Net sales decreased 0.1% to $31.5 million in the three months ended March
31, 1997 compared to $31.6 million in the corresponding period of 1996.
Historically high domestic grain prices coupled with other factors such as a
threatened Russian embargo of U.S. produced chicken, delayed expansion plans of
many U.S. poultry producers beginning in February 1996. In many cases delays
continued through the three months ended March 31, 1997 which had the effect of
lowering the Company's sales of poultry feeding products when compared to the
corresponding period of 1996. This effect was mitigated by continued growth in
sales of the Company's watering products as well as strong sales of egg laying
and handling systems.
Gross profit increased to $7.6 million in the three months ended March 31,
1997 or 24.1% of net sales compared to $6.9 million in the corresponding period
of 1996 or 22.0% of net sales. The favorable change in gross profit margin was
primarily attributable to (i) the Company's more aggressive purchasing policies,
(ii) raw material price declines and (iii) price increases in certain product
lines.
Selling, general and administrative expenses decreased 3.9%, or $0.2
million, to $4.5 million in the three months ended March 31, 1997 from $4.7
million in the corresponding period of 1996. As a percent of net sales, selling,
general and administrative expenses decreased to 14.4% in the three months ended
March 31, 1997 from 15.0% in the corresponding period of 1996. The improvement
from 1996 to 1997 resulted primarily from the elimination of certain
non-essential positions in the latter part of the three months ended March 31,
1996 partially offset by the filling of certain positions since that time.
Operating income increased 43.3% or $0.9 million to $2.8 million in the
three months ended March 31, 1997 compared to $2.0 million in the corresponding
period of 1996. Operating income margins increased to 8.9% of net sales in the
three months ended March 31, 1997 from 6.2% in the corresponding period of 1996.
This increase in operating income and operating income margin was primarily
attributable to the improvement in gross profit margins and lower selling,
general and administrative expenses.
Interest expense decreased 5.0% or $0.1 million to $1.3 million in the
three months ended March 31, 1997 compared to $1.4 million in the corresponding
period of 1996. The lower interest expense reflected the lower levels of debt in
the three months ended March 31, 1997 compared to the corresponding period of
1996.
The effective income tax rate for the three months ended March 31, 1997 was
39.7% as compared to 42.6% in the corresponding period of 1996.
Net income increased 157.9% or $0.6 million to $0.9 million in the three
months ended March 31, 1997 compared to $0.4 million in the corresponding period
of 1996. The increase was primarily due to higher operating income.
1996 COMPARED TO 1995
Net sales increased 7.8% or $10.7 million to $148.9 million in 1996
compared to $138.1 million in 1995. A significant portion of this increase in
net sales was due to an increase in sales of grain storage products resulting
primarily from historically high domestic grain prices. These high grain prices,
however, combined with a threatened Russian embargo of U.S. produced chicken,
delayed the 1996 expansion plans of many U.S. poultry integrators, resulting in
reduced sales of the Company's poultry feeding products. Sales of the Company's
watering products, however, were not affected to the same extent due primarily
to the Company's increased emphasis in 1996 on expanding its share of this
market. Ventilation product sales also increased during 1996 due to the
introduction of a new line of ventilation products during the year. Sales of egg
laying and handling systems increased during 1996, benefiting from shipments
which were delayed or postponed during 1995 due to severe weather which
interrupted the 1995 construction season.
Gross profit increased to $38.6 million in 1996 or 25.9% of net sales
compared to $32.5 million in 1995 or 23.6% of net sales. The increase in gross
profit reflected the impact of increased sales, as well as the benefit of price
increases in certain product lines, together with operating efficiencies and the
return of certain raw material prices to levels more consistent with recent
historical levels. The positive impacts of the above items
27
<PAGE> 29
were partially offset by a change in sales mix towards lower margin products due
to the increase in grain prices discussed above.
Selling, general and administrative expenses decreased 11.4% or $2.3
million to $18.3 million in 1996 from $20.6 million in 1995. As a percentage of
net sales, selling, general and administrative expenses decreased to 12.3% in
1996 from 15.0% in 1995. This improvement resulted from the elimination of costs
and expenses related to certain non-essential functions, a refocus of the
Company's advertising program which resulted in cost savings, and a
non-recurring gain of $0.6 million from an asset sale. These favorable results
were partially offset by increases in incentive bonuses paid as a result of
improved operating performance.
Operating income increased 62.0% or $7.4 million to $19.3 million for 1996
compared to $11.9 million for 1995. Operating income margins increased to 13.0%
of net sales in 1996 from 8.6% in 1995. This increase in operating income and
operating income margin was attributable to the 7.8% increase in sales, improved
gross margins and lower selling, general and administrative expenses.
Interest expense increased $5.5 million for 1996, reflecting borrowings
used to fund the CTB Acquisition. Interest income decreased to $0.2 million for
1996 compared to $0.7 million in 1995, reflecting lower average cash balances
due to the CTB Acquisition.
The effective income tax rate for 1996 was 39.3% as compared to 42.0% in
1995. The decrease in the effective tax rate was attributable to the inclusion
in 1995 results of $1.4 million of non-deductible expenses related to the CTB
Acquisition.
Net income increased 30.2% or $2.0 million to $8.5 million in 1996 compared
to $6.5 million in 1995. This increase was due to increased operating income,
$1.4 million of non-recurring transaction costs relating to the CTB Acquisition
that negatively impacted 1995 and a lower effective tax rate, partially offset
by higher interest costs related to the CTB Acquisition.
1995 COMPARED TO 1994
Net sales decreased 1.7% or $2.4 million to $138.1 million in 1995 compared
to $140.5 million in 1994. This decrease in net sales reflected a slowdown in
the rate of expansion of U.S. poultry integrators following the significant
expansion that took place in the southeastern U.S. during 1994. Sales of egg
laying and handling systems decreased as a result of low egg prices and weather
related construction delays which postponed shipments of orders placed in 1995
to 1996. These decreases were partially offset by the Company's increased
emphasis on international markets, with international sales (excluding Canada)
increasing 25.0% to $36.0 million in 1995 from $28.8 million in 1994.
Gross profit decreased to $32.5 million in 1995 or 23.6% of net sales
compared to $37.0 million in 1994 or 26.3% of net sales. The decrease in gross
margin was primarily attributable to increases in raw material costs of steel,
polypropylene, packaging materials and aluminum, as well as lower absorption of
overhead costs as compared to 1994.
Selling, general and administrative expenses increased 2.7% or $0.5 million
to $20.6 million in 1995 from $20.1 million in 1994. As a percentage of net
sales, selling, general and administrative expenses increased to 15.0% in 1995
from 14.3% in 1994. This increase was primarily attributable to hiring of
personnel in areas targeted for future growth, including international
expansion.
Operating income decreased to $11.9 million in 1995 compared to $16.9
million in 1994. Operating income margins decreased to 8.6% in 1995 from 12.0%
in 1994. This decrease in operating income and operating income margin was
attributable to the decrease in sales discussed above, together with lower gross
margins and the higher selling, general and administrative costs discussed
above.
Interest income increased to $0.7 million in 1995 compared to $0.5 million
in 1994. The increase reflected higher average invested cash balances.
The effective tax rate for 1995 was 42.0% as compared to 38.2% in 1994. The
increase in the effective rate was attributable to non-deductible, non-recurring
expenses related to the CTB Acquisition incurred in 1995.
28
<PAGE> 30
Net income decreased 39.4% or $4.2 million to $6.5 million in 1995 compared
to $10.8 million in 1994. The decrease in net income was attributable to lower
operating income, $1.4 million of non-recurring transaction costs relating to
the CTB Acquisition that were recorded in 1995 and the higher effective tax rate
discussed above.
QUARTERLY RESULTS
The Company attempts to ship products to its distributors and dealers on a
level basis throughout the year to reduce the effect of seasonal demands on its
manufacturing operations and to minimize its investment in inventory. However,
demand for agricultural equipment is seasonal, with producers traditionally
purchasing agricultural equipment in the prime construction periods of the
spring and summer and the fall harvesting season. The Company's net sales and
income from operations have historically been lower in the first and fourth
quarters and have increased in subsequent quarters as distributors and dealers
increase inventory in anticipation of seasonal demand.
The following table presents unaudited interim operating results of the
Company and the Predecessor Company. The Company believes that the following
information includes all adjustments (consisting only of normal, recurring
adjustments) that the Company considers necessary for a fair presentation for
the respective periods indicated, in accordance with generally accepted
accounting principles consistently applied throughout such periods. The
operating results for any interim period are not necessarily indicative of
results for any interim period or the entire fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------
SEPT.
MARCH 31 JUNE 30 30 DEC. 31
(IN THOUSANDS)
<S> <C> <C> <C> <C>
COMPANY 1996:
Net sales.......................................... $31,552 $38,056 $44,506 $34,739
Gross profit....................................... 6,936 9,946 12,801 8,867
Gross margin.................................. 22.0 % 26.1% 28.8% 25.5%
Operating income................................... $ 1,964 $ 5,709 $ 7,765 $ 3,896
Operating income margin....................... 6.2 % 15.0% 17.4% 11.2%
Net income......................................... $ 356 $ 2,682 $ 3,902 $ 1,562
PREDECESSOR COMPANY 1995:
Net sales.......................................... $32,893 $36,556 $37,624 $31,046
Gross profit....................................... 7,392 8,800 9,524 6,825
Gross margin.................................. 22.5 % 24.1% 25.3% 22.0%
Operating income................................... $ 2,303 $ 3,604 $ 4,186 $ 1,842
Operating income margin....................... 7.0 % 9.9% 11.1% 5.9%
Net income......................................... $ 1,568 $ 2,355 $ 2,714 $ (107)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Historically, CTB's principal sources of liquidity have been available
cash, cash generated from operations and temporary borrowings for seasonal
working capital needs. In January 1996, the Company incurred approximately $75.5
million of borrowings (net of cash acquired) and issued approximately $30.0
million of equity in connection with the CTB Acquisition.
The Company's working capital requirements for its operations are seasonal,
with investments in working capital typically building in the second and third
quarters and then declining in the first and fourth quarters. As of December 31,
1996 the Company had $10.8 million of working capital, a decrease of $11.4
million from working capital as of December 31, 1995. The decrease in working
capital was primarily due to the use of cash to fund a portion of the CTB
Acquisition and a $5.5 million increase in short-term debt associated with such
transaction, partially offset by a purchase accounting adjustment of $4.4
million. As of March 31, 1997 the
29
<PAGE> 31
Company had working capital of $11.2 million, as compared to working capital of
$10.8 million at December 31, 1996.
During 1996, the Company utilized $3.4 million for capital expenditures
versus $4.7 million in 1995. For the first three months of 1997, the Company had
capital expenditures of $0.9 million as compared to $0.5 million for the first
three months of 1996. The Company has budgeted approximately $5.0 million of
capital expenditures for 1997. In addition, the Company acquired Fancom on May
1, 1997 and expects to acquire Butler during the second quarter of 1997. The
total consideration and related fees and expenses for Butler is approximately
$34.0 million, subject to adjustment, and the total consideration and related
fees and expenses for Fancom was approximately $19.1 million (including the
assumption of approximately $5.9 million of Fancom's indebtedness), subject to
adjustment, at the May 1 Rate. Both the Fancom Acquisition and the Butler
Acquisition were financed through borrowings under the Existing Credit Agreement
which will be repaid with the proceeds of the Offering. The Company plans to
continue to pursue a selective acquisition strategy which may result in the need
for additional debt or equity financing in the future. The Company sold its
vinyl products business in May 1997 for approximately $8.2 million and applied
the proceeds to reduce indebtedness under the Existing Credit Agreement.
Upon consummation of the Offering, outstanding amounts under the Existing
Credit Agreement will be repaid with the proceeds of borrowings under the New
Credit Agreement and a portion of the net proceeds of the Offering. The New
Credit Agreement provides for up to $90.0 million of revolving loans under a
five year facility with no scheduled amortization. Borrowings under the New
Credit Agreement will bear interest at various rates ranging from 0.25% to
0.625% over LIBOR depending upon certain financial ratios. See "Description of
Credit Agreement."
At December 31, 1996, Fancom had approximately $5.7 million of long term
debt outstanding, including a NLG 8.5 million ($4.9 million at the exchange rate
in effect on such date) 5-year term loan, which has quarterly payments of
principal plus interest at 5.1% (fixed for three years). Fancom also maintains a
NLG 3.5 million ($2.0 million) overdraft facility which had NLG 2.3 million
($1.3 million) of borrowings and NLG 1.2 million ($0.7 million) of availability
at December 31, 1996.
The Company believes that existing cash, cash flow from operations and
available borrowings under the New Credit Agreement will be sufficient to
support its working capital, capital expenditures and debt service requirements,
absent further acquisitions, for the foreseeable future.
INFLATION
The Company does not believe that inflation has had a material effect on
its results of operations.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"). SFAS No. 128 simplifies the earnings per share ("EPS") computation and
replaces the presentation of primary EPS with a presentation of basic EPS. This
statement also requires dual presentation of basic and diluted EPS on the face
of the income statement for entities with a complex capital structure and
requires a reconciliation of the numerator and denominator used for the basic
and diluted EPS computations. SFAS No. 128 requires restatement of all
prior-period EPS data presented. The Company will implement SFAS No. 128 as of
and for the year ending December 31, 1997, and the adoption will not have an
effect on the financial statements.
30
<PAGE> 32
BUSINESS
INTRODUCTION
The Company is a leading manufacturer and marketer of automated feeding,
watering and ventilation systems, feed bins, grain storage bins and integrated
commercial egg laying and handling systems for the poultry, swine, grain and egg
production industries. The Company believes that it has more than 50% of the
domestic market for (i) broiler chicken, swine and turkey feeding systems, (ii)
integrated commercial egg laying and handling systems and (iii) poultry and
swine feed storage and delivery systems. With the Butler Acquisition, the
Company is the leading domestic producer of grain storage bins. The Company
markets its agricultural products on a worldwide basis primarily under the
CHORE-TIME(R) and BROCK(R) brand names through a network of over 500 U.S. and
international independent distributors and dealers, which network the Company
believes is one of the strongest in the industry. The Company believes that its
strong brand names and market positions reflect its 45-year history as the
leading innovator in its core markets. The Company recorded net sales and
operating income of $148.9 million and $19.3 million, respectively, in 1996 and
of $31.5 million and $2.8 million, respectively, in the first quarter of 1997.
Pro forma for the Butler and Fancom acquisitions, the Company's net sales and
operating income would have been $217.4 million and $26.8 million, respectively,
for 1996 and $45.1 million and $4.2 million, respectively, for the three months
ended March 31, 1997.
The Company's feeding, watering and ventilation products are used primarily
by growers that raise poultry and swine, typically on a contract basis, for
large integrators such as Tyson Foods, Inc. Because growers are partially
compensated by integrators based on the efficiency with which they convert feed
to meat (the "feed-to-meat ratio"), they seek to purchase systems which minimize
the feed-to-meat ratio. The Company believes that its systems are among the most
cost-efficient in the industry and that it is currently the only provider of a
complete line of poultry feeding, watering and ventilation systems which have
been widely approved by integrators for use by their growers. The Company's egg
laying and handling products are similarly used by egg producers for whom a key
determinant of profitability is the ability to maximize the ratio of eggs
produced to feed and other costs of production. The Company believes that its
egg product lines are also among the most cost-effective in the industry. The
Company's grain storage products are primarily used by farm users or commercial
businesses such as feed mills, grain elevators, port storage facilities or
commercial grain processors. The Company believes that its grain storage and
handling systems are of the highest quality due to their strength and
durability, facilitation of efficient handling and minimization of grain
spoilage.
The Company's initial predecessor, Chore-Time Equipment Inc. ("Chore-Time
Equipment"), was founded in 1952 by Howard S. Brembeck who also established
Brock Manufacturing Inc. ("Brock") in 1957 as a manufacturer of bulk storage
feed bins. In 1976, Chore-Time Equipment and Brock came under common ownership
and in 1985 were merged into a single corporation, Old CTB.
The Company and its wholly owned subsidiary, CTB Ventures, Inc. ("CTB
Ventures"), an Indiana corporation, were organized by ASCP in connection with
the CTB Acquisition. Pursuant to the Stock Purchase Agreement (the "Stock
Purchase Agreement") dated November 29, 1995 among CTB Ventures, Old CTB and the
selling shareholders parties thereto, which included certain members of senior
management (the "Old CTB Shareholders"), CTB Ventures purchased all of the
issued and outstanding capital stock of Old CTB. Immediately following the
consummation of the acquisition, Old CTB merged into CTB Ventures, with CTB
Ventures remaining as the surviving corporation, and changed its name to CTB,
Inc. See "Certain Relationships and Related Transactions--CTB Acquisition."
INDUSTRY OVERVIEW
Demand for the Company's products is driven by the overall worldwide level
of poultry, swine, egg and grain production as well as the increasing focus both
domestically and internationally on improving productivity in these industries.
These markets are driven by a number of factors including consumption trends,
which are affected by economic and population growth and government policies.
Because the U.S. is a net exporter of all of these products, both the Company's
domestic and international sales benefit from positive worldwide trends in these
markets.
31
<PAGE> 33
Demand for the Company's products is positively impacted by the significant
economic and population growth occurring in the Company's international markets,
including Asia (where average annual gross domestic product growth rates over
the past ten years have been nearly triple that of the U.S.), Latin America and
to a lesser extent, Eastern Europe and Russia. As a result of increasing
disposable income in these international markets, consumers are devoting larger
portions of their income to improved and higher protein-based diets. This has
stimulated stronger demand for meat, specifically poultry and, to a lesser
extent, pork, as these meats provide more cost-effective sources of animal
protein than beef.
Demand for grain and the required infrastructure for grain storage,
conditioning and handling, is driven by several factors, including the need for
additional grain for increased international production of poultry, swine and
other meats discussed above. The U.S. Federal Agricultural Improvement and
Reform (FAIR) Act of 1996 and continued crop yield enhancements are expected to
lead to increased worldwide grain production. Furthermore, the Company believes
that less functionally sophisticated and efficient grain storage facilities
outside the U.S. and Western Europe, which experience higher levels of grain
spoilage and loss, are increasingly likely to be replaced by more modern
equipment. The Company believes that these dynamics will continue to support
rising domestic and international demand for the Company's grain storage and
handling systems.
POULTRY INDUSTRY
Domestic. The U.S. poultry industry has enjoyed steady growth over the
past several decades with U.S. broiler production growing at a compound annual
growth rate of 5.8% since 1976 to 26.1 billion pounds in 1996 with estimated
annual growth rates between 4% and 5% projected through 2002. Industry sources
attribute this increase to a number of factors, including consumers' rising
disposable incomes and population growth. Additionally, nutritional and health
concerns among consumers have led to poultry market share increases relative to
red meat due to poultry's relatively low fat, low cholesterol and high protein
content. These market share increases have been accelerated by increasing
production and managerial efficiencies in the poultry industry which have
steadily lowered the relative prices of poultry to beef. Broiler retail prices
have declined over 55% in real terms since 1960, as compared to a 25% reduction
in beef prices, bringing the price per pound for a broiler to one third that of
beef. Finally, the added convenience of poultry preparation has significantly
increased the use of poultry by the food service industry, including the fast
food, institutional service and the value-added frozen dinner segments. As a
result, per capita annual consumption of poultry has increased from its 1976
level of 51 pounds, or approximately 26% of total meat consumption, to an
estimated 91 pounds, or 43% of total meat consumption in 1996. Industry sources
suggest that the trends that have led to the rise in poultry consumption are
likely to continue and will result in an increase in the per capita annual
consumption of poultry to 113 pounds by the year 2005.
International. World poultry consumption grew at a compound annual rate of
approximately 5% between 1988 and 1994 (the most recent year for which data is
available) due to rising disposable incomes, population growth, declining
relative prices of poultry to other meats and product innovations such as the
proliferation of pre-packaged poultry products. Further international growth is
projected to exceed the rate experienced in the U.S. due to the rapid rate of
international economic development and the relatively low market shares that
poultry holds of the total meat market in a number of developing countries.
Despite 18% compound annual growth in China's per capita poultry consumption
between 1992 and 1996, 1996 per capita consumption in China's market of over 1.2
billion people was 16 pounds, well below the 91 pounds per capita in the U.S. in
1996. Furthermore, poultry meat accounts at present for only 16% of the market
for meat in China, which is currently the second largest producer and consumer
of poultry, compared to 43% in the U.S. As a result of this growth to date and
the inability of a number of developing countries to increase their production
facilities at a like rate, U.S. poultry exports have grown at a compound annual
rate of 25% since 1985, and are projected to grow at approximately 7% annually
through 2000. Consequently, the U.S. is now the world's largest exporter of
poultry and is expected to hold this position for the foreseeable future.
Additionally, as developing markets expand their existing production
infrastructures to meet this growing demand, international growers and
integrators are seeking the most efficient production systems available. Because
the U.S. has developed the most advanced and efficient model of poultry
production and because a significant portion of the international poultry
production is currently not automated, U.S. integrators and
32
<PAGE> 34
manufacturers of production equipment are playing a large role in educating and
developing markets worldwide. This dynamic as well as the increasing importance
of U.S. exports in meeting demand has created significant opportunities for both
domestic and international product sales for the Company.
EGG INDUSTRY
Domestic egg production increased 3% in 1996 compared to 1995 due to rapid
growth in the export market and strengthened domestic demand for eggs, after a
period of relatively slow growth. With domestic trends towards eating away from
home and the increased role of food service companies in food preparation and
delivery, demand for eggs in meals and as an ingredient of further processed
products has increased. Internationally, combined U.S. exports of eggs and egg
products have grown for five years at a compound annual rate of over 16% per
year. The principal causes of this growth have been increased shipments of egg
products to Japan, Canada and Mexico and increased sales of table eggs to China.
Industry sources expect growth in U.S. exports to continue as, among other
things, European exports are hampered by decreases in export subsidies and
environmental issues that have negatively affected their cost competitiveness.
PORK INDUSTRY
Although pork production has experienced slow growth over the past 10
years, there has been a trend, similar to that experienced by the poultry
industry, towards industry consolidation from a large number of small operators
to a smaller number of larger, integrated operators creating increased demand
for automated production systems including feeding and ventilation systems.
Since 1980, the number of U.S. swine farms has fallen from over 650,000 to under
250,000. Total pork production, however, has increased from 14.0 billion pounds
in 1986 to 17.1 billion pounds in 1996, due to greater capital investment in
automated systems by larger operators. This consolidation is likely to further
lower production costs and therefore pork prices which may have a favorable
impact on per capita pork consumption. Internationally, world pork production is
projected to grow at a rate of 2.8% per year from 1996 to 2000. The primary
growth areas are expected to include Asia and Mexico with growth also
anticipated in the countries of the former Soviet Union and central and eastern
Europe. As in the U.S., much of the production is expected to shift from small
unconfined manual facilities to more modern automated, confined facilities
resulting in lower production costs and improved meat quality. International
growth, combined with the shift in production to more automated facilities, is
expected to increase demand for the Company's swine feeding and ventilation
systems.
GRAIN AND OTHER AGRICULTURAL COMMODITIES
After several years of flat growth and constrained supply, world grain
production is projected to increase steadily through 2005 to meet demand for
grain products. Widespread economic and population growth, which increases
demand for animal protein, is driving increased demand for world feed grain
production. The U.S. Federal Agricultural Improvement and Reform (FAIR) Act of
1996 and continued crop yield enhancements are expected to permit increased
worldwide grain production to meet this demand. Industry experts believe the
increasing demand for grain, combined with short crops and poor weather in key
growing regions in the last several years, resulted in a tightening of inventory
positions and the lowest level of U.S. and worldwide grain reserves in recent
history. For the 1996/1997 marketing year, the world grain stocks-to-use ratio,
while recovering slightly at 15% from 8% in 1995/1996, is still well below a
historical average of 24% over the past eight years. Consequently, grain prices
have risen both in real and nominal terms over the last several years, while
also creating significant pricing volatility and variability beyond the normal
seasonal variations. Higher grain prices have greatly increased the income and
cash reserves of North American grain farmers providing them with the means to
invest in additional farm assets. Commodity price variations provide incentives
for grain producers and users to utilize on-farm or commercial grain storage
capacity to take advantage of favorable points in the pricing cycle.
BUSINESS STRATEGY
In January 1996, American Securities, along with senior management and
certain founding family members, acquired Old CTB. As a result of the new
ownership, management of the Company is implementing a growth strategy designed
to position the Company as the premier worldwide provider of high quality, cost-
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efficient systems for poultry, egg and swine production and integrated grain
storage and handling equipment for the agricultural equipment industry. To
implement this growth strategy, the Company intends to:
- CONTINUE TO BUILD LEADING MARKET SHARES IN ATTRACTIVE GROWTH
MARKETS. The Company believes that it has more than 50% of the domestic
market share of broiler, swine and turkey feeding systems, integrated
commercial egg laying and handling systems and poultry and swine feed
storage and delivery systems. With the Butler Acquisition, the Company is
the leading domestic producer of grain storage bins. The Company intends
to continue to build its market share in these product lines and believes
that it will continue to benefit from strong growth trends in worldwide
poultry and swine production, and in demand for grain storage and handling
products. The Company believes that the diversity of its end users in the
agricultural market, coupled with its increasing international focus, will
mitigate the impact of any reduction in demand within any of its
individual product lines.
- CAPITALIZE ON SIGNIFICANT INTERNATIONAL GROWTH OPPORTUNITIES. The
Company's products are marketed in over 60 countries through approximately
180 international distributors, with international sales representing
approximately 35% of net sales in 1996, pro forma for the Butler and
Fancom acquisitions. The Company intends to leverage its worldwide brand
name recognition, leading market positions and strong international
distribution network to capture the significant demand for its products in
international markets. In Brazil, the world's third largest consumer of
poultry and swine products, the Company has recently established a
subsidiary to manufacture and market its products locally. In China, the
world's second largest consumer and producer of poultry and swine
products, the Company has recently appointed a master distributor,
supported by a network of subdistributors, to complement its existing
direct sales and enhance its distribution network in Southeast Asia.
- OFFER INCREASED VALUE THROUGH INTEGRATED EQUIPMENT SYSTEMS. The Company
believes it can significantly lower total production system costs and help
end users achieve further productivity gains by offering integrated
systems for their total feeding, watering and ventilation needs.
Integrated equipment systems offer significant benefits to distributors,
including lower administrative and shipping costs and the ease of dealing
with a single supplier for all of their customer needs. In 1994, the
Company initiated a program to expand its product offerings of poultry
watering and poultry and swine ventilation systems and has recently begun
offering an integrated line of feeding, watering and ventilation products.
Currently, the Company believes it is the only provider of a complete line
of poultry feeding, watering and ventilation systems which have been
widely approved by integrators for use by their growers. Additionally,
with the acquisition of Fancom, the Company now manufactures its own line
of control products which increases the Company's flexibility in offering
fully integrated feeding, watering and ventilation systems.
- CONTINUE TO DEVELOP AND INTRODUCE INNOVATIVE PRODUCTS. The Company
intends to leverage its research and development expertise and its broad
distribution network to introduce additional innovative products that meet
customers' needs for enhanced productivity. To maintain and enhance its
position as a leader in product innovation and quality, the Company has
spent an average of approximately $3.8 million per year over the last five
years on research and development, which the Company believes is
significantly higher than its competitors. The Company has introduced some
of the most innovative products in the industry including (i) the
centerless FLEX AUGER(R) which provides for the delivery of feed to
poultry and swine in a uniform fashion, and whose design has become the
industry standard, (ii) the round, pan-type poultry feeder, which
maximizes the accessibility of feed in limited space, and whose design has
also become the industry standard, (iii) the TURBO HOUSE(R) ventilation
system which offers consistent temperatures and airflow, (iv) the button
nipple drinker, which delivers water through a patented nipple that
produces a large bead of water allowing young birds to find water rapidly
and easily, thereby facilitating weight gain, and (v) the ULTRA-FLO(R)
feeder which provides rapid and consistent feed delivery to layers.
- PURSUE SELECTED PRODUCT LINE EXTENSIONS/ACQUISITIONS. The global poultry
and swine production equipment market is generally characterized by a
large number of small, niche manufacturers, many of whom lack a broad
product line, extensive marketing and distribution networks or the
financial and management resources necessary to capitalize on emerging
opportunities in domestic and international
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markets. The Company believes that based on its leading brand names, broad
product line and strong distribution network, it is uniquely positioned to
take advantage of consolidation opportunities and plans to continue to
pursue a selective acquisition strategy by targeting acquisitions that
broaden its product range, leverage its distribution base, increase its
geographic reach or otherwise enhance its ability to offer its customers
integrated systems solutions. The Butler and Fancom acquisitions are
intended to advance the implementation of this strategy. See "--Recent
Transactions."
RECENT TRANSACTIONS
Butler Acquisition. On June 23, 1997, the Company acquired substantially
all of the assets of Butler. Based in Kansas City, Missouri, Butler manufactures
grain storage bins and markets grain storage, conditioning and handling systems
for grain producers and processors throughout the world. The Company believes
that the Butler Acquisition will contribute to the Company's competitive
position in the grain storage bin business by greatly increasing the scope of
its current distribution network, enhancing the Company's grain storage bin
manufacturing capability and adding an additional range of on-farm and
commercial grain storage bins to its existing product line, thereby making the
Company the leading U.S. manufacturer of grain storage bins. The acquisition
will expand the Company's grain bin distribution base by an additional 300
dealers, expanding dealership coverage in key grain producing states. Butler had
net sales and operating income of $41.7 million and $6.1 million, respectively,
in 1996 and of $6.6 million and $0.9 million, respectively, for the three months
ended March 31, 1997. The purchase price for Butler was $32.5 million, subject
to adjustment. Butler Manufacturing Company transferred the assets of Butler to
the Company free of all liens, claims and encumbrances, and the Company has
assumed only certain specified ordinary course liabilities of Butler. The
Company has the right to use the Butler logo for two years after the closing
date of the Butler Acquisition and the trademark and tradename for three years
after such closing date.
Fancom Acquisition. On May 1, 1997, the Company acquired all of the
capital stock of Fancom. Fancom, based in The Netherlands, is a manufacturer of
climate control systems and software applications for the agricultural equipment
business. These systems permit the simultaneous remote monitoring and operation
of multiple poultry and swine locations and the complete control of all critical
processes within facilities where poultry and swine are raised and eggs are
produced, including climate, feeding, watering, weighing and storage. The
Company believes that the Fancom Acquisition strengthens the Company's ability
to offer integrated equipment solutions and to further access the European
market where 90% of Fancom's sales are currently made through approximately 100
distributors and dealers. To date, Fancom's distribution and product development
efforts have been limited in regions such as the U.S., China and Brazil where
the Company has been active. The Company intends to utilize its extensive
distribution network with Fancom's expertise in product development and design
to market existing and new products in these markets. The purchase price for the
Fancom Acquisition was NLG 35.1 million ($18.1 million at an exchange rate of
NLG 1.915 to $1.00, the rate at which the Company purchased Dutch Guilders on
May 1, 1997 for the purpose of closing the Fancom Acquisition (the "May 1
Rate")), subject to adjustment, including the assumption of NLG 11.4 million
($5.9 million at the May 1 Rate) of Fancom's indebtedness. Fancom had net sales
and operating income of $27.2 million and $2.8 million, respectively, in 1996
based on the 1996 Exchange Rate and of $7.0 million and $0.8 million,
respectively, for the three months ended March 31, 1997 based on the average
exchange rate for such period.
Vinyl Division Divestiture. On May 29, 1997, the Company sold
substantially all assets (other than accounts receivable) relating to its PVC
deck, dock and fence business for approximately $8.2 million to a subsidiary of
Royal Group Technologies Limited. In conjunction with the sale, the Company
entered into a joint venture with the acquirer to produce certain extruded PVC
agricultural equipment component parts for the Company for a period of five
years.
PRODUCTS
Historically, the Company has been primarily a producer of feeding systems,
commercial egg laying and handling systems and grain and feed storage bins.
Although in the past the Company has also offered watering and ventilation
systems, recently the Company increased its emphasis on these products by
introducing more advanced poultry watering systems and poultry and swine
ventilation systems, which the Company believes
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<PAGE> 37
equal or exceed the quality of competing products. The increased emphasis on
these product offerings reflects the Company's strategy to offer complete,
integrated feeding, watering and ventilation systems for poultry and egg
production and feeding and ventilation systems for swine production. The Company
believes that its ability to offer integrated systems provides it with a
competitive advantage by enabling producers to purchase complete, integrated
production systems from a single distributor who can offer high quality
installation and service. The Company believes that its systems are among the
most cost-efficient in the industry and that it is currently the only provider
of a complete line of poultry feeding, watering and ventilation systems which
have been widely approved by integrators for use by their growers. The Company
is also a manufacturer of grain storage bins and worldwide marketer of grain
storage and handling systems for on-farm and commercial storage. The Company
believes that its grain storage and handling systems are of the highest quality
due to their strength and durability, facilitation of efficient handling and
minimization of grain spoilage.
With the addition of Butler's product offerings, the Company has further
strengthened its grain storage bin business and believes it is the leading
domestic producer of grain storage bins. With the addition of Fancom's product
lines, the Company manufactures its own line of control products which increases
the Company's flexibility in offering fully integrated feeding, watering and
ventilation systems.
FEEDING SYSTEMS
The Company manufactures feeding systems for the buildings in which
broilers, turkeys and breeders (chickens and turkeys raised to produce hatching
eggs) are raised. Broilers and turkeys are raised in grow-out houses and
breeders are raised in breeder houses. The Company also manufactures swine
feeding systems for all stages of swine production, including feed storage bins,
feed delivery systems and volumetric feeders.
In addition to the individual product features outlined below, the Company
believes that its poultry and swine feeding systems are distinguished by
non-corrosive plastic and galvanized steel parts specially engineered for
durability and reliable operation, the FLEX-AUGER(R) system which allows feed to
be conveyed up, down and around corners, and automated controls which coordinate
feeding, watering, ventilation and lighting schedules. Additionally, the
Company's feed storage bins, used for bulk feed storage, are distinguished by a
number of patented features that are designed to maximize capacity, permit easy
cleaning and ensure proper feed flow. These features are reflected in the
"All-Out(TM) System" which is designed to manage the quality of stored feed and
prevent rain and condensation from entering feed storage bins and provide
first-in, first-out material flow, thereby keeping feed fresh to prevent
spoilage, and blended to provide uniform quality rations to the poultry and
swine.
The Company sells its feeding systems under the CHORE-TIME(R) brand name.
It also markets its feed storage bins under the BROCK(R) brand name.
Poultry. The Company believes that feed accounts for between 60% and 70%
of the total cost of raising poultry. Therefore, the profitability of broiler
and turkey growers is largely dependent upon the feed-to-meat conversion ratio
and the profitability of growers of breeders is largely dependent upon the total
amount of feed required to maximize egg production. The Company's feeding
systems for broilers and turkeys are designed to minimize the feed-to-meat
conversion ratio by making feed attractive and easily accessible to broilers and
turkeys at all stages of growth while simultaneously limiting feed waste. The
Company's feeding systems for breeders are designed to maximize egg production
by delivering appropriate diets at scheduled times, by reducing competition for
feed among breeders and by separately feeding hens and roosters thereby reducing
stress and enhancing productivity of the hens and roosters. The Company also
manufactures and markets a feeding system that is mounted on its egg layer
cages. See "--Egg Laying/Handling Systems."
The Company's poultry feeding systems consist of feed storage bins located
outside the grow-out or breeder houses, a feed delivery system which delivers
the feed from the feed storage bin into the house and an internal feed
distribution system which delivers the feed to the birds. The feed delivery and
distribution systems include the Company's FLEX-AUGER(R) conveying products
which convey the feed through an enclosed pipe from the feed storage bin to the
house and then to feeding pans. These feeding pans are suspended throughout the
grow-out and breeder houses with suspension apparatus and other components
allowing direct feed delivery to each bird. The suspension apparatus for
grow-out houses raises and lowers the pans according to the size of the birds.
In addition, these patented feed pans automatically adjust from flood
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feeding for young chicks to regulated feed levels for older birds. Automatic
timers are also available to allow for automated periodic feeding. Feed storage
bins manufactured by the Company are sold as an integrated component of the
Company's feeding systems.
Swine. The profitability of swine producers is significantly affected by
the feed-to-meat conversion ratio and the number of pounds of lean meat of swine
produced for consumption, and with respect to sows (swine produced for breeding
purposes), the size and number of litters per sow per year. The Company's
feeding systems for swine are designed to minimize the feed-to-meat conversion
ratio of swine by delivering appropriate diets at scheduled times to prevent
swine from eating continuously, thus reducing feed waste and improving feed
conversion and utilization. The Company's feeding systems for sows are designed
to maximize the production of piglets by lowering animal stress and reducing the
associated costs by limiting feed waste and minimizing labor costs.
The Company's swine feed delivery systems are similar in concept to those
designed for poultry, consisting of a feed storage bin outside of the swine
building, a FLEX-AUGER(R) feed delivery system which conveys the feed to and
through the building to feed dispensers suspended within the building which
provide individualized feeding through automatic timers.
WATERING SYSTEMS
The Company has recently begun producing nipple watering systems for
breeder, layer and broiler houses. The ability of each bird to obtain water
easily and rapidly is an essential factor in facilitating weight gain. The
Company's watering system consists of a water pipe system which distributes
water throughout the house to drinking units supported by winches, cables and
other components. The water is delivered to the system through a regulator
designed to provide differential water pressure according to demand. For
grow-out houses, the watering system delivers water through a patented button
nipple drinker that produces a large bead of water allowing young birds to find
water rapidly and easily, thereby facilitating weight gain.
The Company's watering systems are further distinguished by water pressure
and height adjustments which allow the delivery of appropriate flow rates to
birds of all ages, corrosion resistant parts and easy installation, maintenance
and self-cleaning features.
In addition, the Company's watering systems, together with its poultry
feeding and ventilation systems, allow the Company to offer poultry growers a
complete integrated production system controlled by its automated controls. See
"--Automated Controls." The Company sells its watering systems under the
CHORE-TIME(R) brand name.
VENTILATION SYSTEMS
The Company manufactures and supplies ventilation systems for breeder,
layer and broiler grow-out houses and swine buildings. The systems consist of
fans, shutters, evaporative cooling systems, winches, inlets and other
accessories to regulate temperature and air flow. The acquisition of Fancom
complements the Company's product line of ventilation systems with the most
advanced climate control and software applications commercially available which
permit the remote control and monitoring of the climates of multiple poultry and
swine locations. Proper ventilation systems are crucial for minimizing the
feed-to-meat conversion ratios by reducing stress caused by extreme temperature
fluctuation, allowing for higher density production and providing for optimum
bird and swine health through disease prevention.
The Company's ventilation systems are distinguished by ease of assembly in
the field, energy-efficient airflow management, a design well suited for
international sales because it ships compactly and inexpensively and assembles
with little hardware and few tools, a reliable system of environmental controls
and a non-corrosive line of fans designed for layer and swine buildings. In
addition, the Company's ventilation systems may be marketed with the Company's
feeding and watering systems to poultry growers and with the Company's feeding
systems to swine growers to offer integrated production systems which can be
controlled by the Company's automated controls. See "--Automated Controls." The
Company sells its ventilation systems under the CHORE-TIME(R) brand name.
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EGG LAYING/HANDLING SYSTEMS
The Company is a leading U.S. manufacturer of egg laying and handling
systems. Its integrated system approach includes layered galvanized wire mesh
cages, feed storage bins, a feed delivery system, cage mounted feeders, an egg
collection system, ventilation, watering and waste removal equipment. The
feeding, watering and ventilation components of each system are similar to those
described above.
The profitability of poultry egg producers is significantly affected by the
number and size of eggs produced by each bird, the cleanliness of the eggs and
the length of each bird's laying cycle. Egg production is optimized by factors
similar to those minimizing the feed-to-meat conversion ratio for broilers and,
therefore, product features such as periodic individualized feeding, easy access
to water and adequate ventilation distinguish the Company's egg laying systems.
In addition, profitability depends upon the gentle handling of eggs to minimize
breakage. The Company's egg handling system is distinguished by a patented egg
collection system, designed to handle eggs more gently, resulting in fewer
cracked or broken eggs. In addition, because the Company manufactures all the
necessary production systems for an egg house, it can offer fully integrated egg
laying and handling systems monitored and operated locally or remotely by the
Company's automated controls. See "--Automated Controls." The Company sells its
egg laying and handling systems under the CHORE-TIME(R) brand name.
AUTOMATED CONTROLS
In conjunction with sales of automated poultry, swine and egg laying and
handling systems, the Company sells a full range of systems controls, many of
which are manufactured by third parties. Controls are available for breeder,
grow-out and egg laying houses and swine buildings to operate automatically the
feeding, watering, ventilation and lighting operations, either individually or
as fully integrated systems.
With the acquisition of Fancom, the Company now manufactures its own line
of control products which includes a broad range of sophisticated, whole-house
personal computer-based control systems and increases the Company's flexibility
in offering fully integrated systems. Fancom offers the only computerized
agricultural control systems whose products are ISO 9001 certified, with systems
ranging from individual climate, liquid and dry feeding, and weighing controls
to personal computer based systems allowing for simultaneous remote monitoring
and control of multiple poultry and swine locations.
In the U.S., the egg industry has achieved greater levels of automation
than the poultry and swine industries by utilizing personal computer-based
control systems to coordinate the feeding, watering, ventilation and lighting
schedules in the layer houses on an integrated basis. The Company anticipates
similar advances in domestic broiler, turkey and swine production.
GRAIN STORAGE BINS
The Company manufactures and sells a complete line of grain storage bins
made of galvanized steel under the BROCK(R) brand name. The Company manufactures
over 300 models of grain storage bins for on-farm and commercial grain storage
in diameters ranging from 15 to 105 feet with capacities to over 600,000
bushels. The Company also manufactures and markets a line of industrial bulk
storage bins and conveying equipment. In addition to the products marketed under
the BROCK(R) brand name, the Company produces grain storage bins on a private
label basis.
The Company's grain storage bins are distinguished by an aeration floor
which helps preserve grain condition, patented corrosion resistant bolts and
certain additional patented features which prevent clumps of grain from blocking
bin unloading wells. The Company believes its grain storage bins are further
distinguished by superior roof strength, ease of installation, special
engineering for durability and reliable operation and superior cosmetic
appearance.
With the acquisition of Butler, the Company has enhanced its grain storage
bin manufacturing capability and has added an additional range of on-farm and
commercial grain storage bins to its existing product line. The Butler
Acquisition has expanded the Company's grain bin distribution base by an
additional 300 dealers, expanding dealership coverage in key grain producing
states. The Company has the right to use the Butler logo for two years after the
closing date of the Butler Acquisition and the trademark and trade name for
three years after such closing date.
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PRODUCT DISTRIBUTION
The Company sells its products primarily through a network of over 500 U.S.
and international independent distributors and dealers who offer targeted
geographic coverage in key poultry, swine, egg and grain producing markets
throughout the world. The Company's distributors and dealers sell products to
poultry, egg, swine and grain producers, agricultural companies and other end
users. These independent distributors and dealers install and service the
Company's products and many of them also offer technical support and service to
the end user. Some of the Company s distributors sell products directly to end
users and others sell products through their own dealer networks. The Company
trains its distributors and dealers at its technical training center to install
and service the Company's products and systems. The Company believes that its
distribution network is one of the strongest in the industry, providing its
customers with high levels of service. The Company maintains longstanding
relationships with its distribution network, with its top 25 distributors and
dealers having an average tenure with the Company of 17 years.
The Company also maintains a 59 person sales force. In addition to
providing oversight services of the distribution network, the sales force is
responsible for maintaining continual contact with the marketplace by
interacting with integrators and end users, recruiting new and additional
distribution outlets for the Company's products, and continually educating the
distributors and dealers on the Company's product uses and functions. The
Company further supports its products and markets with a 38 person technical
service and support team who provide training and advice to distributors,
dealers and end users regarding installation, operation and service of products
and, when necessary, provide on-site service.
In 1994, 1995 and 1996, no individual company or distributor represented
more than 10% of the Company's net sales.
DOMESTIC DISTRIBUTION AND CUSTOMERS
The Company sells its products domestically (including Canada) through a
network of over 400 independent distributors and dealers who market, sell and,
in many cases, install the Company's products and provide post-sale technical
support and service. The Company believes that its domestic distribution
network, which provides targeted geographic coverage in key poultry, swine, egg
and grain producing markets, is the strongest in the industry. The Company's
distribution network is supported by its internal sales management force
consisting of 24 professionals, as well as its 17 person technical service and
support team.
Distributors and dealers are given a primary coverage area but are not
restricted from competing in other markets. The turnover of distributors and
dealers is low. Many distributors and dealers market and sell several of the
Company's different product lines.
Feeding Systems. The Company typically sells its poultry and swine feeding
systems along with its feed storage and delivery systems to its network of
distributors and dealers who then market, sell and install the Company's
products and provide post-sale technical support and service to poultry and
swine producers. The Company has approximately 137 distributors and dealers of
its CHORE-TIME(R) brand feeding systems. These distributors and dealers
typically sell several of the Company's products.
Watering and Ventilation Systems. The Company sells its watering and
ventilation systems either to its distributors and dealers of CHORE-TIME(R)
brand products or directly to poultry and swine producers.
Egg Laying/Handling Systems. The Company sells its integrated egg laying
and handling systems both directly to large domestic egg producers and through
the Company's seven distributors and dealers who sell and service egg laying and
handling systems.
Grain Storage Bins. The Company sells its grain storage bins to its
distributors and dealers who market them for commercial grain storage and farm
grain storage markets. The Company occasionally makes direct sales of its
commercial storage bins. The Company currently has approximately 270
distributors and dealers of its grain storage bins.
INTERNATIONAL DISTRIBUTION AND CUSTOMERS
The Company markets its products outside of the U.S. and Canada through its
international marketing arm, Chore-Time/Brock International ("CTBI"), and
licenses a limited number of its products to a small
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group of foreign distributors and dealers who manufacture and sell those
products. In addition, CTBI markets complete equipment systems utilizing
products from several manufacturers for the world market. Products sold under
the CHORE-TIME(R) brand name, however, account for the majority of international
sales. International sales of the Company's grain storage bins are primarily for
commercial use.
The Company believes that its network of international distributors and
dealers is one of the strongest in the industry. The Company has more than 80
distributors and dealers located in over 60 countries outside the U.S. and
Canada. Most of these distributors sell many of the Company's products. In
addition, most of these distributors do not sell competitors' products. The
Company also sells directly into some international markets and provides
engineering and construction management support. The Company's international
distribution network is supported by its internal sales management force
consisting of 35 professionals, as well as its 21 person technical service and
support team.
The Company's products have been sold in over 100 countries. The Company
prefers to sell its products to local distributors and dealers, while
maintaining the right to make direct sales to key international customers. CTBI
sales representatives are assigned to specific geographic areas and are
responsible for development of their respective markets and distributor and
dealer networks. While the Company anticipates that sales will continue to be
generated worldwide, the Company is targeting Brazil, China and India, where it
believes the greatest potential for significant growth exists.
Net sales generated by the Company by international market region in 1996
were as follows:
1996 NET SALES BY FOREIGN REGION
<TABLE>
<CAPTION>
COMPANY
---------------------------
ACTUAL PRO FORMA(1)
(IN THOUSANDS)
<S> <C> <C>
Latin America...................................... $14,129 $16,723
Europe/Mideast..................................... 10,334 37,567
Asia............................................... 14,174 20,739
</TABLE>
- ------------------------------
(1) Pro forma for the Butler and Fancom acquisitions.
BUTLER DISTRIBUTION
Butler sells its products through over 300 independent distributors and
dealers located in various regions throughout the U.S. and Canada. Butler's
grain bin distribution is strongest in the western portion of the U.S. grain
belt, complimenting the Company's grain bin distribution which is highly
concentrated in the eastern portion of the U.S. grain belt. Butler oversees its
distribution network through five sales managers primarily responsible for
maintaining and recruiting dealers and distributors as well as a limited number
of direct sales. Additionally, Butler markets grain storage and handling systems
internationally through its staff of four sales professionals.
FANCOM DISTRIBUTION
Fancom markets its controls systems through several distribution channels.
In The Netherlands, which accounts for nearly 50% of its sales, Fancom sells
through 80 dealers specializing in the agricultural market. In Denmark and
France, Fancom has established its own local offices and distributes through
those local offices. In all of its other markets, which span 22 countries,
Fancom has more than 100 distributors and dealers. Fancom supports these
distribution networks with marketing and product development initiatives.
COMPETITION
The market for the Company's products is competitive. Domestically and
internationally, the Company competes with a variety of manufacturers and
suppliers, many of which offer only a limited number of the products offered by
the Company and two of which offer products across most of the Company's product
lines.
Competition is based on the price, value, reputation, quality and design of
the products offered and the customer service provided by distributors, dealers
and manufacturers of the products. The Company believes that its leading brand
names, strong distribution network, diversified product line, product support
and high
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quality products enable it to compete effectively. The Company further believes
that its ability to offer integrated systems to poultry, egg and swine
producers, which significantly lower total production costs and help producers
achieve further productivity gains, provide it with a competitive advantage. The
Company also believes that integrated equipment systems offer significant
benefits to distributors, including lower administrative and shipping costs and
the ease of dealing with a single supplier for all of their customer needs.
Currently, the Company believes it is the only provider of a complete line of
poultry feeding, watering and ventilation systems which have been widely
approved by integrators for use by their growers. In addition, the Company's
distributors and dealers provide producers with high quality service,
installation and repair. With the Butler Acquisition, the Company is the leading
domestic producer of grain storage bins.
NEW PRODUCT DEVELOPMENT
The Company has a product development and design engineering staff of
approximately 57 people, most of whom are located in Milford, Indiana.
Expenditures by the Company for product research and development amounted to
approximately $3.8 million, $3.8 million and $3.6 million for the years ended
December 31, 1994, 1995 and 1996, respectively. The Company charges research and
development costs to operations as incurred. The Company anticipates product
research and development spending to continue at historic levels.
With the Fancom Acquisition, the Company enhanced its research and
development activities by adding a staff of 18 research and development
specialists who, together with four product development specialists, are
dedicated to product innovation and development in automated controls in
Fancom's core markets. In 1996, Fancom spent approximately $1.2 million (at the
1996 Exchange Rate) in product research and development.
SUPPLIERS
The Company manufactures its products primarily with galvanized steel,
steel wire and polymer materials, including PVC pipe, polypropylene and
polyethylene. In addition, it purchases certain components including electric
motors for incorporation in certain of its products. It also purchases grain
handling systems which it sells together with grain storage bins outside of the
U.S. The PVC pipe is purchased from a company formed in conjunction with the
Vinyl Division Divestiture in which CTB has a 50% ownership interest. The
Company is not dependent on any one of its suppliers and has not experienced
difficulty in obtaining any parts or materials. The Company purchases galvanized
steel from a variety of integrated mills and galvanizing processors. In
addition, the components or substitute components, materials and parts purchased
by the Company are readily available from alternative suppliers.
FACILITIES
The following table sets forth information regarding the principal
properties of the Company:
<TABLE>
<CAPTION>
LOCATION FACILITY DESCRIPTION SQUARE FEET LEASED/OWNED
<S> <C> <C> <C>
Milford, Indiana Plant, corporate headquarters 611,000 Owned
and miscellaneous areas
Kansas City, Missouri(1) Plant and office 396,000 Owned
Decatur, Alabama Plant and office 120,000 Owned
Panningen, The Netherlands(2) Plant and office 43,600 Owned
Wierden, The Netherlands(2) Plant and office 25,800 Leased
Deurne, The Netherlands Warehouse and office 8,300 Leased
Londrina, Brazil Warehouse and office 5,000 Leased
Vitre, France(2) Warehouse and office 3,900 Owned
Vitre, France(2) Warehouse 2,900 Leased
</TABLE>
- ------------------------------
(1) Acquired in connection with the Butler Acquisition.
(2) Acquired in connection with the Fancom Acquisition.
Management believes that its facilities and equipment are generally well
maintained and are in good operating condition and that its capacity for the
manufacture of its products is adequate to satisfy anticipated demands for the
foreseeable future.
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<PAGE> 43
MANAGEMENT INFORMATION SYSTEMS
The Company has historically developed its own computer software to perform
order entry, production planning and accounting functions. The Company recently
decided to purchase software to meet current and future functional requirements.
The new software system will replace a number of the Company's current systems
and support the Company's future software needs. The new system of fully
integrated applications will allow the Company to improve customer service by
reducing order lead times, improving manufacturing process quality and lowering
costs. The Company anticipates that the new system will be fully implemented by
early 1998.
SEASONALITY
Sales of agricultural equipment are seasonal, with poultry, swine and egg
producers purchasing equipment during prime construction periods in the spring,
summer and fall and farmers traditionally purchasing grain storage bins in the
summer and fall in conjunction with the major harvesting season. The Company's
net sales and net income have historically been lower during the first and
fourth quarters as compared to the second and third quarters. See "Management's
Discussion and Analysis of Financial Conditions and Results of
Operations--Quarterly Results."
BACKLOG
Backlog is not a significant factor in the Company's business taken as a
whole, because most of the Company's products are delivered within a few weeks
of their order. The Company's backlog at April 30, 1997 was $30.7 million.
PATENTS AND TRADEMARKS
Since Old CTB's inception, the Company has obtained nearly 100 U.S. patents
covering innovations in poultry and livestock feeding and other agricultural
equipment. The Company aggressively seeks patent protection for its
technological developments. The Company currently has 70 active U.S. patents and
has applied for 5 additional U.S. patents. No significant patents will expire
prior to December 31, 2001.
The Company has 35 U.S. trademarks and has submitted applications for an
additional 14 U.S. trademarks. While the Company believes its patents and
trademarks have significant value, the Company does not believe that its
competitive position is dependent on patent protection or that its operations
are dependent on any individual patent or group of related patents.
PRODUCT LIABILITY AND LEGAL PROCEEDINGS
From time to time, the Company is involved in various litigation matters
involving ordinary and routine claims incidental to the Company's business.
Products sold by the Company may expose it to potential liabilities for personal
injury or property damage claims relating to the use of such products. The
Company maintains third-party product liability insurance which it believes to
be adequate. To date the aggregate costs to the Company for claims, including
product liability actions, has not been material. However, a significant claim
that is uninsured or partially insured could result in loss or deferral of
revenues, diversion of resources or damage to the Company's reputation, any of
which could have a material adverse effect on the financial condition of the
Company.
There are no legal proceedings pending against the Company which, in the
opinion of management, would have a material adverse effect on the Company's
financial position, results of operations or liquidity.
REGULATORY AND ENVIRONMENTAL MATTERS
Like other manufacturers the Company is subject to a broad range of
federal, state, local and foreign laws and requirements, including those
governing discharges to the air and water, the handling and disposal of solid
and hazardous substances and wastes, the remediation of contamination associated
with releases of hazardous substances at the Company's facilities and offsite
disposal locations, workplace safety and equal employment opportunities. The
Company has made, and will continue to make, expenditures to comply with such
laws and requirements. The Company believes, based upon information currently
available to management, that it is in compliance with applicable environmental
and other legal requirements and that it will not require material
42
<PAGE> 44
capital expenditures to maintain compliance with such environmental requirements
in the foreseeable future. Governmental authorities have the power to enforce
compliance with such laws and regulations and violators may be subject to
penalties, injunctions or both. Third parties may also have the right to enforce
compliance with such laws and regulations.
EMPLOYEES
As of April 30, 1997, the Company had 887 employees. Management believes
that its relationships with the Company's employees are good. The Company added
approximately 174 employees pursuant to the Butler Acquisition and approximately
153 employees pursuant to the Fancom Acquisition. Butler's hourly employees are
currently subject to a collective bargaining agreement which expires January 31,
2000.
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<PAGE> 45
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their respective
ages and positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
J. Christopher Chocola...................... 35 President, Chief Executive Officer and
Director
Don J. Steinhilber.......................... 39 Vice President, Chief Financial Officer and
Treasurer
Bruce H. Marshall........................... 47 President of CTBI
Robert W. Martin............................ 59 Executive Vice President of CTB
Roger W. Townsend........................... 42 Executive Vice President and General
Manager--Grain Systems of CTB
Michael J. Kissane.......................... 40 Vice President, General Counsel and Secretary
Mark A. Lantz............................... 36 Vice President and General Manager--Cage
Systems of CTB
Brian D. Dawes.............................. 38 Vice President and General Manager--Floor
Systems of CTB
Michael G. Fisch............................ 35 Chairman of the Board of Directors
Caryl M. Chocola............................ 58 Director
Larry D. Greene............................. 40 Director
Frank S. Hermance........................... 49 Director
David Horing................................ 34 Director
Charles D. Klein............................ 59 Director
</TABLE>
J. Christopher Chocola became President of the Company in February 1996 and
Chief Executive Officer of the Company in April 1997. Mr. Chocola has served as
Chief Executive Officer of CTB (prior to January 1996, Old CTB) since March
1994. From July 1993 to March 1994, Mr. Chocola served as Executive Vice
President of Old CTB. From November 1993 to July 1996, Mr. Chocola served as the
General Manager of the Chore-Time division. From October 1991 to November 1993,
Mr. Chocola served as the General Manager of the Brock division. Mr. Chocola
joined Old CTB in 1988. Mr. Chocola was elected to the Board of Directors of Old
CTB in February 1991 and of the Company in February 1996.
Don J. Steinhilber became Vice President, Chief Financial Officer and
Treasurer of the Company in April 1997. Mr. Steinhilber served as Vice President
and Assistant Treasurer of the Company from December 1995 until April 1997.
Since December 1996, Mr. Steinhilber has served as Vice President, Chief
Financial Officer and Treasurer of CTB. From July 1993 to December 1996, Mr.
Steinhilber served as Vice President and Treasurer of CTB (prior to January
1996, Old CTB). From July 1991 to July 1993, Mr. Steinhilber served as
International Controller of Old CTB. Mr. Steinhilber joined the Company in July
1991.
Bruce H. Marshall joined CTB in December 1996 as President of CTBI. Prior
to joining the Company, Mr. Marshall was Vice President and General Manager of
Thiokol Technologies International, a commercial aerospace business, from 1989
to November 1996.
Robert W. Martin became Executive Vice President of CTB in December 1996.
Mr. Martin served as Vice President and Chief Financial Officer of CTB from
April 1996 until December 1996. Mr. Martin joined CTB in March 1996. Prior to
joining CTB, Mr. Martin was Vice President, Treasurer and Chief Financial
Officer of Fairfield Manufacturing Company, Inc., a manufacturer of high
precision custom gears and planetary gear systems, from 1990 to 1994.
Roger W. Townsend has served as Executive Vice President of CTB since April
1996 and became General Manager--Grain Systems of CTB in May 1997. Mr. Townsend
was Chief Operating Officer of CTB (prior to January 1996, Old CTB) from March
1994 until May 1997. From November 1993 to July 1996, Mr. Townsend served as
General Manager of the Brock division. From July 1993 to November 1993, Mr.
Townsend served as Vice President of Engineering of Old CTB. From October 1991
to July 1993,
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<PAGE> 46
Mr. Townsend served as Assistant General Manager of the Brock division. Mr.
Townsend joined the Company in 1977.
Michael J. Kissane became General Counsel and Secretary of the Company in
April 1997 and Vice President of the Company in December 1995. Mr. Kissane has
been a Vice President of CTB (prior to January 1996, Old CTB) since July 1993,
the Secretary of CTB (prior to January 1996, Old CTB) since March 1994 and has
served as General Counsel of CTB (prior to January 1996, Old CTB) since joining
the Company in January 1992. Prior to joining the Company, Mr. Kissane was a
member of the law firm of Strauss & Kissane in San Diego, California.
Mark A. Lantz became Vice President and General Manager--Cage Systems of
CTB in May 1997. Mr. Lantz served as Vice President--Operations of CTB from
February 1996 until May 1997. Mr. Lantz served as Operations Manager of CTB
(prior to January 1996, Old CTB) from November 1993 until February 1996, as Vice
President--Manufacturing of Old CTB from July 1993 until November 1993 and as
Plant Manager of Old CTB from October 1991 until July 1993. Mr. Lantz joined Old
CTB in 1989.
Brian D. Dawes has served as Vice President and General Manager--Floor
Systems of CTB since May 1997. Mr. Dawes was Vice President of the Vinyl
Products Division of CTB (prior to January 1996, Old CTB) from July 1994 until
May 1997. Mr. Dawes served as Manager of National Contract Sales at Zimmer,
Inc., an orthopedics product division of Bristol-Myers Squibb, from 1992 until
July 1994. Mr. Dawes rejoined Old CTB in 1994, having served in management
positions at Old CTB from 1981 until 1986.
Michael G. Fisch was elected to the Board of Directors in November 1995.
Mr. Fisch has been President of ASCP since 1994 and a Managing Director of
American Securities, L.P. since 1993. From 1991 to 1993, Mr. Fisch served as a
Managing Director of First Atlantic Capital, Ltd., a private investment firm.
Mr. Fisch is presently Chairman of the Board of Caribbean Restaurants Holdings,
Inc., a Burger King franchisee, and is a director of MVE Holdings, Inc., a
manufacturer of cryogenic storage vessels, Caire, Inc., a medical supply
company, and Ketema, Inc., a diversified industrial company.
Caryl M. Chocola was elected to the Board of Directors in February 1996 and
has served on the Board of Directors of CTB (prior to January 1996, Old CTB)
since 1976. Ms. Chocola has been President of K.C. Equine Systems Inc., a
provider of fencing and feeder equipment since 1993. Ms. Chocola has been an
employee of CTB since 1987. Ms. Chocola is the mother of Mr. Chocola.
Larry D. Greene was elected to the Board of Directors in April 1997. Mr.
Greene has served as Senior Vice President of Tauber Enterprises, a private
investment company, since 1992. He served as Executive Vice President and Chief
Operating Officer of Sinai Health System, a healthcare company, from 1988 until
1992. Mr. Greene also serves on the board of directors of Complex Tooling &
Molding, Inc., an injection molder of plastic components.
Frank S. Hermance was elected to the Board of Directors in June 1997. Mr.
Hermance has served as President and Chief Operating Officer of AMETEK, Inc., a
diversified industrial company, ("AMETEK"), since November 1996. Mr. Hermance
served as Executive Vice President and Chief Operating Officer of AMETEK from
January 1996 until November 1996 and as President of the Precision Instruments
Group of AMETEK from 1994 until November 1996. From 1990 until 1994, Mr.
Hermance was Group Vice President of AMETEK.
David Horing was elected to the Board of Directors in November 1995. Mr.
Horing has been a Principal of ASCP since May 1995. Prior to that time, Mr.
Horing served as a Manager of The Dyson-Kissner-Moran Corporation, a private
investment firm, which he joined in 1988. Mr. Horing is a director of the
general partner of Community Pacific Broadcasting Company, L.P., a radio
broadcaster, and Caribbean Restaurants Holdings, Inc.
Charles D. Klein was elected to the Board of Directors in November 1995.
Mr. Klein has been a financial advisor to the William Rosenwald family and a
Managing Director of American Securities, L.P. and its predecessors since 1978.
Mr. Klein is a director of AMETEK, Ketema, Inc., the general partner of
Community Pacific Broadcasting Company, L.P. and Caribbean Restaurants Holdings,
Inc.
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<PAGE> 47
TERM OF OFFICE
There are currently seven members of the Board of Directors. Directors are
elected annually by a plurality of votes by the stockholders present and voting
at the annual meeting. Each director holds office until his successor is elected
or qualified.
COMMITTEES OF THE BOARD OF DIRECTORS
There are two committees of the Board of Directors: the Audit Committee
(comprising Ms. Chocola and Messrs. Fisch and Horing) and the Compensation
Committee (comprising Ms. Chocola and Messrs. Fisch and Klein). Upon completion
of the Offering, the Board of Directors will establish an Executive Committee.
The Board of Directors also may establish from time to time any other committees
that it deems necessary or advisable.
The Audit Committee is responsible for making recommendations to the Board
of Directors regarding the selection of independent accountants to audit the
Company's annual financial statements, conferring with the independent
accountants and reviewing the scope and the fees of the annual audit, reviewing
the Company's audited financial statements, accounting and financial procedures,
monitoring the Company's ethics and conflict of interest procedures and
approving the nature and scope of nonaudit services performed by the independent
accountants. Upon completion of the Offering, the Audit Committee will be
comprised of Messrs. Horing, Greene and Hermance.
The Compensation Committee is responsible for reviewing and making
recommendations to the Board of Directors on all matters concerning compensation
of employees and management. Upon completion of the Offering, the Compensation
Committee will be comprised of Messrs. Fisch, Greene and Hermance.
The Executive Committee will be responsible for meeting when required on
short notice during intervals between meetings of the Board of Directors and
will have authority to exercise all of the powers of the Board of Directors in
the management and direction of the affairs of the Company subject to specific
directions of the Board of Directors and to the limitations of the Delaware
General Corporation Law. The Executive Committee also will be responsible for
reviewing the financial policies and procedures of the Company, considering
corporate financing and the issuance and sale of the Company's securities,
recommending certain acquisitions and dispositions, and reviewing certain other
financial matters. Upon completion of the Offering, the Executive Committee will
consist of Messrs. Chocola, Fisch and Horing.
DIRECTOR COMPENSATION
Each director of the Company who is not an employee of the Company or an
employee of American Securities will receive an annual fee of $10,000 plus a fee
of $2,500 for each Board of Directors meeting attended and $2,500 for each
committee meeting attended if not held concurrently with a meeting of the Board
of Directors. Directors who are also employees of the Company will receive no
remuneration for serving as directors. In 1997, directors who were officers or
employees of the Company or American Securities received no compensation for
service as members of the Board of Directors or any committees thereof. Messrs.
Greene and Hermance were each granted options to purchase 18,140 shares of
Common Stock at an exercise price of $10.92 per share on May 13, 1997 and June
18, 1997, respectively.
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned and/or paid for
services rendered to the Company for the year ended December 31, 1996, with
respect to (i) the Chief Executive Officer of the Company and (ii) the four
other most highly compensated executive officers of the Company (collectively,
the "Named Executive Officers").
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<PAGE> 48
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS(#)
<S> <C> <C> <C> <C> <C>
J. Christopher Chocola................... 1996 $144,200 $123,170 $16,513(3) 14,512
President, Chief Executive Officer and
Director
Roger W. Townsend........................ 1996 113,300 96,766 6,764 21,768
Executive Vice President and General
Manager--Grain Systems of CTB
Don J. Steinhilber....................... 1996 90,492 64,762 6,940 14,512
Vice President, Chief Financial Officer
and Treasurer
Robert W. Martin......................... 1996 82,244 64,017 25,824(4) --
Executive Vice President of CTB
Mark A. Lantz............................ 1996 83,700 54,659 6,449 14,512
Vice President and General
Manager--Cage Systems of CTB
</TABLE>
- ------------------------------
(1) Includes amounts paid pursuant to the Management Incentive Compensation Plan
and includes a holiday bonus of 5% of base salary payable to all employees
in December 1996 with 1,000 hours of service for the twelve months ended
November 30, 1996. See "--Compensation Pursuant to Benefit Plans and
Arrangements--Management Incentive Compensation Plan."
(2) Includes amounts paid under the Profit Sharing Plan that are determined
based on the Company's results of operations, matching contributions under
the 401(k) Plan and imputed income on term life insurance policies. See
"--Compensation Pursuant to Benefit Plans and Arrangements--Profit Sharing
Plan."
(3) Includes $5,422 for the value of the personal use of an automobile.
(4) Includes $19,557 for commuting and living expenses.
COMPENSATION PURSUANT TO BENEFIT PLANS AND ARRANGEMENTS
NON-QUALIFIED STOCK OPTION AGREEMENTS
In connection with the CTB Acquisition, the Board of Directors granted
options to purchase a total of 689,318 shares of Common Stock (the "Option
Shares") at an exercise price of $0.83 per share (the "Options") to certain key
employees of the Company. The following table provides information concerning
the Options granted to the Named Executive Officers during 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------ ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION -------------------------
NAME GRANTED(#) IN 1996 (PER SHARE) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
J. Christopher
Chocola............. 72,560 10.53% $ 0.83 01/03/2006 $1,712,884 $2,763,022
Roger W. Townsend..... 108,840 15.79 0.83 01/03/2006 2,569,326 4,144,532
Don J. Steinhilber.... 72,560 10.53 0.83 01/03/2006 1,712,884 2,763,022
Robert W. Martin...... -- -- -- -- -- --
Mark A. Lantz......... 72,560 10.53 0.83 01/03/2006 1,712,884 2,763,022
</TABLE>
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<PAGE> 49
Under the Non-Qualified Stock Option Agreements pursuant to which the
Options were granted (the "Non-Qualified Stock Option Agreements"), the Options
are exercisable in full commencing on January 4, 2003 and terminate on January
3, 2006. The date of exercise may be accelerated based on the achievement of
certain corporate goals set forth in the Non-Qualified Stock Option Agreements.
If, on the last day of each of the Company's fiscal years beginning with the
fiscal year ending December 31, 1996 through the fiscal year ending December 31,
2000 (each, an "Accelerated Vesting Date"), the Company meets certain EBITDA
targets, the Options will immediately become exercisable as to 20% of the Option
Shares per fiscal year. Any portion of the Options that would have become
exercisable on any applicable Accelerated Vesting Date will be exercisable on a
subsequent Accelerated Vesting Date if the Company meets a cumulative EBITDA
target for that Accelerated Vesting Date. The Company met the EBITDA targets for
fiscal 1996 resulting in the vesting of 20% of the Options. None of the Options
have been exercised. The Options are nonassignable and unexercised Options
terminate a short time after termination of employment (or immediately in the
case of termination for cause). Full payment for shares of Common Stock
purchased upon exercise of an Option must be made at the time of exercise.
In the event that American Securities no longer holds any shares of capital
stock of the Company, nor has any ownership interest in the Company, any
affiliate of the Company, any successor or surviving entity to the Company, or
any of the Company's substantial assets, the Options will immediately become
exercisable as to 100% of the Option Shares.
In the event that the shares underlying the Options are changed by reason
of a stock split, stock reverse, stock dividend or recapitalization, or
converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization, the Board of Directors will make adjustments in
the number and class of shares of stock subject to the Options and to the
exercise price.
The Non-Qualified Stock Option Agreements provide that, upon issuance, the
Option Shares will be subject to the transfer restrictions contained in the
Stockholders Agreement. See "Certain Relationships and Related Transactions--CTB
Acquisition--Stockholders Agreement."
PROFIT SHARING PLAN
CTB has established a profit sharing plan (the "Profit Sharing Plan")
covering all of its eligible U.S. employees. At the beginning of each fiscal
year, the Board of Directors of CTB determines the amount, if any, that CTB will
contribute to the Profit Sharing Plan in that fiscal year based on the
achievement of certain financial targets for that year. CTB is not required to
make any contributions to the Profit Sharing Plan if those targets are not met.
The Profit Sharing Plan also provides for the making of cash-or-deferred
contributions pursuant to Section 401(k) of the Internal Revenue Code. Under
this provision, employees may elect to contribute a whole percentage of between
1% and 16% (or a particular dollar amount within that range) of their pre-tax
earnings to the 401(k) plan. Each year, the Company has the discretion to elect
to make a matching contribution with respect to each employee equal to 50% of
the amount contributed by such employee up to a total matching contribution of
2% of base compensation.
MANAGEMENT INCENTIVE COMPENSATION PLAN
CTB established a management incentive compensation plan (the "Management
Incentive Compensation Plan") which provides certain employees with the
opportunity to receive an annual bonus based on CTB's annual performance. The
Management Incentive Compensation Plan covers individuals employed at CTB for
the entire calendar year in positions designated by senior management of CTB as
those that impact corporate earnings. Individual awards under the Management
Incentive Compensation Plan are determined based on the degree to which certain
financial and market position targets are achieved by CTB. Actual incentive
compensation awards may be more or less than targeted amounts depending upon
actual results compared with the goals established.
At the beginning of each calendar year, the Board of Directors of CTB, in
consultation with senior management, approves certain financial goals, including
EBITDA targets and net sales growth and gross profit, and certain nonfinancial
goals. Attainment of these goals determine whether awards will be made under
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<PAGE> 50
the Management Incentive Compensation Plan and the extent of any such awards. No
bonuses will be paid unless at least 75% of target EBITDA is achieved. Bonuses
for CTB's executive officers are based solely on the achievement of target
EBITDA. Bonuses for other employees are based on EBITDA as well as group and
employee category achievements.
EMPLOYMENT AGREEMENT
On February 26, 1996, CTB and Robert W. Martin, the Executive Vice
President of CTB, entered into a letter agreement summarizing Mr. Martin's
employment arrangements with CTB. Under this agreement, Mr. Martin is entitled
to receive an annual salary of $100,000 and a bonus in an amount up to $86,250
under the Management Incentive Compensation Plan. He is also entitled to
participate in the Profit Sharing Plan and to reimbursement for certain living
expenses. The agreement with Mr. Martin terminates on December 31, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CTB ACQUISITION
In November 1995, the Company and CTB Ventures were organized by ASCP for
the purpose of consummating the acquisition of Old CTB. Prior to its acquisition
by the Company, Old CTB's equity was primarily owned by Howard S. Brembeck and
members of his family (including J. Christopher Chocola and Caryl Chocola (the
"Chocolas")) with minimal ownership by non-family management. In connection with
the CTB Acquisition, the existing members of the management team and certain
founding family members (the "Individual Stockholders") of Old CTB exchanged
shares of common stock of Old CTB valued at $9.9 million for an equal value of
Common Stock and the Existing Preferred Stock, and the Individual Stockholders,
together with American Securities (collectively, the "Existing Stockholders")
invested $20.1 million in cash in the Company, and CTB borrowed $75.5 million
under the Existing Credit Agreement (net of cash acquired) to fund the purchase
of the shares of the exiting family members. On January 4, 1996, ASCP received a
$750,000 fee, plus the reimbursement of its expenses, from CTB for services
provided in connection with the CTB Acquisition.
ASCP is a private investment firm. The Common Stock and Preferred Stock
owned by American Securities is owned of record by two limited partnerships,
American Securities Partners, L.P. and ASP/CTB, L.P. The shares of Common Stock
owned by American Securities Partners, L.P. and ASP/CTB, L.P. are beneficially
owned by American Securities Partners GP (Management) Corp. and ASP/CTB G.P.
Corp., respectively. See "Principal Stockholders."
STOCK PURCHASE AGREEMENT
In connection with the CTB Acquisition, the Company, CTB Ventures, Old CTB
and the Old CTB Shareholders entered into the Stock Purchase Agreement pursuant
to which CTB Ventures purchased all of the issued and outstanding capital stock
of Old CTB, and the Company and the Existing Stockholders entered into a
Stockholders Agreement dated as of January 4, 1996 (the "Stockholders
Agreement") pursuant to which the Company issued the shares of the capital stock
of the Company to the Existing Stockholders. Concurrently with the consummation
of the CTB Acquisition, Old CTB merged into CTB Ventures, with CTB Ventures
being the surviving corporation, and changed its name to CTB, Inc.
Pursuant to the Stock Purchase Agreement, the Company and CTB have, jointly
and severally, agreed to make certain contingent payments to the Old CTB
Shareholders (the "Earn-Out Amount") based on a calculation of cumulative EBITDA
for the three year period ended December 31, 1998. CTB and the Company may be
liable to pay the Old CTB Shareholders up to an amount equal to $13.5 million in
respect of the Earn-Out Amount.
If an Earn-Out Amount is payable, the Company and CTB are obligated to pay
the Earn-Out Amount in four semi-annual installments beginning on August 31,
1998. The first installment is equal to 25% of the
49
<PAGE> 51
estimated Earn-Out Amount, the second installment is equal to 50% of the actual
Earn-Out Amount minus the amount of the first installment and the third and
fourth installments are each equal to 25% of the actual Earn-Out Amount. Accrued
interest from January 1, 1999 at the prime rate on the last business day of 1998
will be payable on the third and fourth installments, provided that interest at
such interest rate on the first installment payment from August 31, 1998 to
December 31, 1998 will be credited against such amount. The payment of the
Earn-Out Amount will be subordinated to amounts payable under the New Credit
Agreement.
In connection with the Stock Purchase Agreement, the Old CTB Shareholders
entered into an Escrow Agreement dated as of January 4, 1996 (the "Escrow
Agreement") with CTB Ventures and NBD Bank, N.A., as escrow agent (the "Escrow
Agent"), creating an escrow fund of $5 million as security for the obligations
of the Old CTB Shareholders under the indemnity provisions of the Stock Purchase
Agreement. The parties have agreed, with the Escrow Agent's consent, to a
partial distribution of the amount held by the Escrow Agent, leaving a principal
balance of $500,000 on deposit with the Escrow Agent for potential claims.
STOCKHOLDERS AGREEMENT
The Company and the Existing Stockholders entered into the Stockholders
Agreement which, among other things, imposed certain restrictions on the
transfer of shares by Existing Stockholders and their permitted transferees.
Each Individual Stockholder has agreed to transfer shares only to related
persons, the Company or American Securities and, after January 4, 2003, to
permitted third parties as described therein, subject to a right of first
refusal granted to the Company and American Securities. Upon receipt of notice
from an Individual Stockholder intending to transfer shares, the Company may
elect to purchase all of the shares owned by such Individual Stockholder (or
less than all if the remaining portion is to be purchased by American
Securities). If the Company elects not to exercise its purchase option, American
Securities may elect to purchase all of the shares owned by the Individual
Stockholder. If neither the Company nor American Securities exercises its
option, the Individual Stockholder has 30 days in which to transfer the shares
to a third party, subject to the consent of the Company and American Securities,
which consent will not be unreasonably withheld.
Shares of Common Stock and options owned by the Individual Stockholders
(excluding those owned by J. Christopher Chocola) and their permitted
transferees are further subject to purchase options granted first to the
Company, second to American Securities and third to the Chocolas exercisable
upon the termination of each Individual Stockholder's employment with the
Company. The Company may elect to purchase an Individual Stockholder's shares
within 30 days of the date of termination of the Individual Stockholder's
employment with the Company. If the Company elects not to purchase the
Individual Stockholder's shares, American Securities may elect to exercise its
option to purchase the shares. If neither the Company nor American Securities
elects to purchase the Individual Stockholder's shares, then the Chocolas may
elect to purchase the shares.
The Individual Stockholders have agreed to consent to a sale of the Company
or a sale of the majority of the Company's Common Stock in an initial public
offering if such sale is approved by the Board of Directors and the holders of a
majority of the Company's outstanding Common Stock. The Individual Stockholders
have also agreed to sell all of their stock if the transaction is structured as
a sale of stock.
Pursuant to the Stockholders Agreement, the Individual Stockholders were
granted piggy-back registration rights exercisable in connection with an initial
public offering of the shares of Common Stock held by American Securities. Each
Individual Stockholder has agreed that it will not effect a public sale or
distribution of shares for 180 days after receipt of the piggy-back notice or 90
days after the effective date of a registration statement in connection with an
initial public offering of shares of Common Stock by the Company. Each Existing
Stockholder has waived its registration rights in connection with the Offering.
PREFERRED STOCK REDEMPTION
The Company intends to use $15 million of the net proceeds of the Offering
to redeem 15,000 shares of the Existing Preferred Stock, including 10,060 shares
held by American Securities, 1,556 shares held by
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<PAGE> 52
J. Christopher Chocola and 3,384 shares held by Caryl Chocola. Each share of
Preferred Stock will be redeemed for $1,000.
PREFERRED STOCK EXCHANGE
Concurrently with the consummation of the Offering, the Company intends to
exchange the remaining 9,069 shares outstanding of the Existing Preferred Stock
for shares of Common Stock, including 5,460 shares held by American Securities,
844 shares held by J. Christopher Chocola, 1836.75 shares held by Caryl Chocola
and 928.25 shares held by other executive officers of the Company. Each share of
Preferred Stock will be exchanged for 66.7 shares of Common Stock (at an assumed
initial public offering price of $15.00 per share).
RELATIONSHIP WITH PRINCIPAL STOCKHOLDER
American Securities currently owns approximately 64.5% of the outstanding
Common Stock and approximately 64.5% of the Existing Preferred Stock. Upon
completion of the Offering, the Preferred Stock Redemption and the Preferred
Stock Exchange, American Securities will own 39.3% of the outstanding Common
Stock (or 35.3% if the Underwriters' over-allotment option is exercised in
full). Accordingly, upon completion of the Offering, American Securities will
remain able to direct the election of a majority of the members of the Board of
Directors and exercise a controlling influence over the business and affairs of
the Company. While American Securities may reduce its ownership interest in the
Company, American Securities has advised the Company that it presently has no
plans to do so. However, American Securities is not subject to any contractual
obligation to retain its controlling interest, except that American Securities
has agreed, subject to certain exceptions, not to sell or otherwise dispose of
any shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation. See "Risk Factors--Control by and Relationship with
Principal Stockholders" and "--Potential Adverse Market Effect of Future Sales
of Common Stock."
Pursuant to a Management Consulting Agreement dated January 4, 1996 (the
"Management Consulting Agreement") between ASCP and CTB, CTB has engaged ASCP as
a consultant for a fee of $300,000 per annum plus expenses. CTB has agreed to
indemnify ASCP and its partners, directors, officers, employees, agents and
affiliates from and against all claims arising out of the Management Consulting
Agreement except for any claims arising from the gross negligence or willful
misconduct of ASCP. The agreement terminates on December 31, 2000 unless
extended pursuant to its terms.
The Company has agreed to pay ASCP advisory fees in connection with the
Butler Acquisition, the Fancom Acquisition and the Offering. The advisory fee
payable to ASCP in connection with the Butler Acquisition will be in an amount
equal to 1% of the purchase price of the Butler Acquisition, payable upon the
consummation of the Butler Acquisition. The advisory fee payable to ASCP in
connection with the Fancom Acquisition will be in an amount equal to 1% of the
purchase price of the Fancom Acquisition, plus the amount of any debt assumed by
the Company in connection therewith, payable upon the consummation of the later
of the Fancom Acquisition or the Butler Acquisition. The advisory fee payable to
ASCP in connection with the Offering will be in an amount equal to 0.5% of the
proceeds of the Offering (before deducting underwriting discounts and
commissions and expenses) payable upon the consummation of the Offering.
From time to time the Company and ASCP have entered into, and can be
expected to continue to enter into, certain agreements and business transactions
in the ordinary course of their respective businesses.
BOARD REPRESENTATION AGREEMENT
Pursuant to a Board Representation Agreement dated January 4, 1996 (the
"Board Representation Agreement") among the Company, ASCP, and the Chocolas,
ASCP has agreed that it will vote and will cause its affiliates to vote all
shares of Common Stock owned by them in favor of two nominees to the Board of
Directors selected by the Chocolas (one of which shall be J. Christopher
Chocola) and take all other action to cause the Chocolas' nominees to be elected
to the Board of Directors so long as the Chocolas beneficially own at least 20%
of the outstanding shares of Common Stock of the Company. The Board
Representation Agreement terminates when either the Chocolas or American
Securities no longer own at least 20% of the outstanding shares of Common Stock
of the Company.
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<PAGE> 53
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of June 18, 1997, as adjusted to
reflect the sale of shares of Common Stock offered hereby (assuming the
over-allotment option is not exercised) for (i) each person known by the Company
to beneficially own more than 5% of the Common Stock, (ii) each of the Company's
directors, (iii) each Named Executive Officer and (iv) all current directors and
executive officers as a group. Unless otherwise noted, the address of each of
the stockholders named below is the Company's principal executive office.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY PERCENT OF SHARES NUMBER OF PERCENT OF SHARES
OWNED PRIOR TO BENEFICIALLY SHARES OWNED BENEFICIALLY
THE OWNED PRIOR BENEFICIALLY AFTER OWNED AFTER
NAME OF BENEFICIAL OWNER OFFERING(1)(2) TO THE OFFERING THE OFFERING(1)(3) THE OFFERING
<S> <C> <C> <C> <C>
American Securities Partners
GP (Management) Corp.(4)............. 4,226,548 58.1% 4,554,414 35.4%
ASP/CTB G.P. Corp.(5)................ 465,653 6.4 501,775 3.9
J. Christopher Chocola............... 740,110 10.2 796,397 6.2
Roger W. Townsend.................... 45,955 0.6 51,288 0.4
Don J. Steinhilber................... 51,445 0.7 59,589 0.5
Mark A. Lantz........................ 26,605 0.4 29,272 0.2
Caryl M. Chocola..................... 1,578,405 21.7 1,700,847 13.2
All directors and executive officers
as a group......................... 7,200,774 97.8% 7,769,401 59.9%
</TABLE>
- ------------------------------
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of a given date which such person
has the right to acquire within 60 days after such date. For purposes of
computing the percentage of outstanding shares held by each person or group
of persons named above on a given date, any security which such person or
persons has the right to acquire within 60 days after such date is deemed to
be outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage of ownership of any other person. Includes options
to purchase Common Stock exercisable within 60 days after the Offering held
by Messrs. Chocola (14,512 shares), Townsend (21,768 shares), Steinhilber
(14,512 shares) and Lantz (14,512 shares).
(2) Gives effect to the Stock Split.
(3) Gives effect to the Stock Split, the Preferred Stock Exchange and the
Preferred Stock Redemption.
(4) Shares of Common Stock shown as beneficially owned by American Securities
Partners GP (Management) Corp. are owned of record by American Securities
Partners, L.P. of which American Securities Associates, L.P. ("ASALP") is
the sole general partner and possesses sole voting and investment power.
American Securities Partners GP (Management) Corp. is the sole general
partner of ASALP and possesses sole voting and investment power. Messrs.
Klein, Fisch and David P. Steinmann and Ms. Elizabeth R. Varet, as the
stockholders of American Securities Partners GP (Management) Corp., may be
deemed to have beneficial ownership of the shares shown as beneficially
owned by American Securities Partners GP (Management) Corp. Such persons
disclaim beneficial ownership of such shares.
(5) Shares of Common Stock shown as beneficially owned by ASP/CTB G.P. Corp. are
owned of record by ASP/CTB, L.P. of which ASP/CTB G.P. Corp. is the sole
general partner and as to which it possesses sole voting and investment
power. Messrs. Klein and Fisch and Ms. Varet, as the shareholders of ASP/CTB
G.P. Corp., may be deemed to have beneficial ownership of the shares shown
as beneficially owned by ASP/CTB G.P. Corp. Such persons disclaim beneficial
ownership of such shares.
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<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon consummation of the Offering, the authorized capital stock of the
Company will consist of 40,000,000 shares of Common Stock, par value $0.01 per
share, and 4,000,000 shares of Preferred Stock, par value $0.01 per share. As of
June 23, 1997, the Company had 7,277,204 shares of Common Stock and 24,069
shares of Existing Preferred Stock outstanding. Upon the consummation of the
Offering, the Preferred Stock Exchange, and the Preferred Stock Redemption,
there will be 12,881,804 shares of Common Stock outstanding and there will be no
shares of Preferred Stock outstanding. The following summary description of the
capital stock of the Company is qualified in its entirety by reference to the
Certificate and the Bylaws of the Company, copies of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
Subject to the rights of holders of any shares of Preferred Stock that may
be issued and outstanding from time to time, holders of shares of Common Stock
are entitled to share ratably in such dividends as may be declared by the Board
of Directors out of funds legally available therefor. See "Dividend Policy."
Subject to the rights of holders of any shares of Preferred Stock that may be
issued and outstanding from time to time in the event of dissolution,
liquidation or winding up of the Company, holders of shares of Common Stock are
entitled to share ratably in all assets remaining after payment or provision for
payment of all debts or other liabilities and the liquidation preference of any
then outstanding shares of Preferred Stock.
Holders of shares of Common Stock have no preemptive, subscription,
redemption or conversion rights. The outstanding shares of Common Stock are, and
the shares of Common Stock being sold in the Offering are and will be, duly
authorized, validly issued, fully paid and nonassessable.
Each outstanding share of Common Stock is entitled to one vote per share on
any matter submitted to a vote of stockholders. Holders of shares of Common
Stock have no cumulative voting rights. Subject to the rights of holders of any
shares of Preferred Stock that may be issued and outstanding from time to time
and provided a quorum is present, the affirmative vote of a majority of the
shares of Common Stock represented and voting at any meeting of stockholders is
required for action by stockholders on any matter, unless the vote of a greater
number of shares or voting by classes or series is required under Delaware law.
Prior to the date of this Prospectus, there has been no public market for
the shares of Common Stock. See "Risk Factors--Absence of Prior Public Market;
Possible Volatility of Stock Price."
The transfer agent and registrar for the Common Stock is First Chicago
Trust Company of New York, 525 Washington Boulevard, Jersey City, New Jersey
07310.
PREFERRED STOCK
The Board of Directors is authorized, without further shareholder action,
to provide for the issuance of shares of Preferred Stock in one or more series
and to establish the number of shares in each series, the designations,
preferences and powers and relative, participating, optional and other rights,
qualifications, limitations and restrictions thereof, including but not limited
to the dividend rate, conversion privileges, voting rights, redemption price and
liquidation preferences. The terms of the Preferred Stock may adversely affect
the voting power and other rights of the holders of Common Stock and may make it
more difficult to gain control of the Company. As of the date of this
Prospectus, the Board of Directors has not authorized any series of Preferred
Stock and has no plans, agreements or understandings for the issuance of any
shares of Preferred Stock.
CERTAIN PROVISIONS OF THE CERTIFICATE AND BY-LAWS
The Certificate provides that, to the fullest extent permitted by Delaware
law as it may be amended from time to time, no director of the Company shall be
liable to the Company or its stockholders for monetary
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<PAGE> 55
damages resulting from a breach of fiduciary duty as a director. Under current
Delaware law, the effect of this provision is to eliminate the rights of the
Company and its stockholders to recover monetary damages from a director unless
the liability results from a breach of the duty of loyalty, an act or omission
not in good faith or that involves intentional misconduct or a knowing violation
of law, a violation under Section 174 of the Delaware General Corporation Law or
a transaction from which the director derived an improper personal benefit. The
Certificate and By-laws also provide indemnification for the benefit of
directors and officers of the Company to the fullest extent permitted by
Delaware law as it may be amended from time to time, including most
circumstances under which indemnification otherwise would be discretionary.
DELAWARE TAKEOVER STATUTE
Section 203 of the Delaware General Corporation Law ("Section 203")
provides that, subject to certain exceptions specified therein, an "interested
stockholder" of a Delaware corporation shall not engage in any business
combination, including mergers or consolidations or acquisitions of additional
shares of the corporation with the corporation for a three-year period following
the date at which the stockholder becomes an "interested stockholder" unless (i)
prior to such date, the board of directors of the corporation approved either
the business combination or the transaction which resulted in the stockholder
becoming an "interested stockholder," (ii) upon consummation of the transaction
which resulted in the stockholder becoming an "interested stockholder," the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain shares), or
(iii) on or subsequent to such date, the business combination is approved by the
board of directors of the corporation and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested stockholder."
Except as otherwise specified in Section 203, an "interested stockholder" is
defined to include (x) any person which is the owner of 15% or more of the
outstanding voting stock of the corporation, or is an affiliate or associate of
the corporation and was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within three years immediately prior to the
relevant date and (y) the affiliates and associates of any such person.
These provisions could have the effect of delaying, deterring or preventing
a change of control of the Company. The Company's stockholders, by adopting an
amendment to the Certificate or Bylaws, may elect not to be governed by Section
203, effective twelve months after adoption. Neither the Certificate nor the
Bylaws presently exclude the Company from the restrictions imposed by Section
203.
DESCRIPTION OF CREDIT AGREEMENT
GENERAL
In connection with the CTB Acquisition, CTB entered into the Existing
Credit Agreement. Upon consummation of the Offering, all amounts outstanding
under the Existing Credit Agreement will be repaid with the proceeds of
borrowings under the New Credit Agreement and a portion of the net proceeds of
the Offering. The following is a description of the general terms of the New
Credit Agreement.
The New Credit Agreement will provide CTB with a $90 million revolving
credit facility with a $5 million swingline facility and a $10 million sublimit
for trade and standby letters of credit. There is no mandatory principal
amortization prior to the maturity date in 2002. After giving effect to the
borrowings to repay the Existing Credit Agreement, the Company estimates that
CTB will have approximately $40 million undrawn capacity available under the New
Credit Agreement. Borrowings under the New Credit Agreement will bear interest
at various rates ranging from 0.25% to 0.625% over LIBOR depending upon certain
financial ratios.
The obligations of CTB under the Credit Agreement will be unconditionally
and irrevocably guaranteed by each domestic subsidiary of CTB. In addition, in
the event that either the net proceeds of the Offering are insufficient to
reduce the ratio of funded debt to capitalization to less than 52.5%, then
obligations under the New Credit Agreement will be secured by a first priority
security interest in all of the assets and properties (including, without
limitation, accounts receivable, inventory, real property, machinery, equipment,
contracts
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<PAGE> 56
and contract rights, trademarks, copyrights, patents, license agreements and
general intangibles) of CTB, a pledge of all of the capital stock held by CTB in
each of its domestic subsidiaries, and a pledge of 66% of the capital stock of
each of its foreign subsidiaries.
The New Credit Agreement will require CTB to meet certain financial tests,
including minimum consolidated net worth, consolidated cash flow coverage ratio,
minimum interest coverage ratio and maximum leverage ratio. The New Credit
Agreement will contain covenants which, among other things, will limit the
incurrence of additional indebtedness, the nature of the business of CTB and its
subsidiaries, investments, leases of assets, ownership of subsidiaries,
dividends, transactions with affiliates, asset sales, acquisitions, mergers and
consolidations, prepayments of other indebtedness, liens and encumbrances and
other matters customarily restricted in such agreements.
The New Credit Agreement will contain customary events of default,
including payment defaults, breach of representations and warranties, covenant
defaults, cross-default to certain other indebtedness, certain events of
bankruptcy and insolvency, ERISA violations, judgment defaults, failure of any
guaranty or security agreement supporting the New Credit Agreement to be in full
force and effect and change of control of the Company or CTB.
Under the New Credit Agreement, CTB will be required to maintain a minimum
net worth of not less than 90% of its net worth immediately following the
Offering. The minimum net worth is to be increased quarterly by an amount equal
to 50% of the quarterly earnings of CTB. This covenant will limit the dividends
CTB can pay to the Company and, therefore, the dividends the Company can pay to
its stockholders.
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<PAGE> 57
SHARES AVAILABLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have 12,881,804 shares
of Common Stock issued and outstanding. All of the shares of Common Stock to be
sold in the Offering will be freely tradeable without restrictions or further
registration under the Securities Act, except for any shares purchased by an
"affiliate" of the Company (as that term is defined in Rule 144 adopted under
the Securities Act ("Rule 144")), which will be subject to the resale
limitations of Rule 144. The 7,881,804 shares of Common Stock outstanding prior
to the Offering (including shares of Common Stock to be issued in the Preferred
Stock Exchange) are "restricted securities" under the Securities Act. These
shares and any shares purchased by affiliates of the Company may not be sold
unless they are registered under the Securities Act or unless an exemption from
registration, such as the exemption provided by Rule 144A under the Securities
Act, is available. Under the Stockholders Agreement, the Existing Stockholders
have certain rights to require the Company to effect registration of the shares
of Common Stock owned by them. See "Certain Relationships and Related
Transactions--CTB Acquisition--Stockholders Agreement."
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated) who has beneficially owned
"restricted securities" for at least one year, including a person who may be
deemed an "affiliate", is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of Common Stock or the average weekly reported trading volume of the
Common Stock during the four calendar weeks immediately preceding the date on
which notice of the sale is filed with the Securities and Exchange Commission
(the "Commission") pursuant to Rule 144 (or, if no such notice is required, the
date of receipt of the order to execute the transaction by the broker or the
date of execution of the transaction directly with a market maker). Sales under
Rule 144 also are subject to certain other requirements relating to manner of
sale, notice of sale and availability of current public information with respect
to the Company. A person (or persons whose shares are required to be aggregated)
who is not and has not been an "affiliate" of the Company at any time during the
three months preceding a sale is entitled to sell such shares under Rule 144
without regard to the volume limitations described above, provided that two
years have elapsed since the date on which such restricted shares were acquired
from the Company or the date on which they were acquired from an affiliate of
the Company. The foregoing summary of Rule 144 is not intended to be a complete
description thereof.
Prior to the Offering, there has been no market for the Common Stock, and
no prediction can be made as to the effect, if any, that market sales of
outstanding shares of Common Stock, or the availability of such shares for sale,
will have on the market price of the Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock in the public market,
or the perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock. While American Securities in the future may
effect additional sales of Common Stock that would reduce its ownership interest
in the Company, American Securities has advised the Company that it presently
has no such plans to reduce its ownership interest through sales or other
dispositions. In connection with the Offering, the Company and the Existing
Stockholders agreed, subject to certain exceptions, not to sell or offer to sell
any shares of Common Stock for a period of 180 days after the public offering
without the prior consent of Donaldson, Lufkin & Jenrette Securities
Corporation. See "Underwriting."
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<PAGE> 58
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus (the "Underwriting Agreement"), the
underwriters named below (the "Underwriters"), for whom Donaldson, Lufkin &
Jenrette Securities Corporation, George K. Baum & Company and Chase Securities
Inc. are acting as representatives (the "Representatives"), have severally
agreed to purchase from the Company an aggregate of 5,000,000 shares of Common
Stock. The number of shares of Common Stock that each Underwriter has agreed to
purchase is set forth opposite its name below.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation........................
George K. Baum & Company...................................................
Chase Securities Inc.......................................................
Total............................................................
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase the shares of Common Stock offered hereby are subject
to approval of certain legal matters by their counsel and to certain other
conditions. If any of the shares of Common Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, the Underwriters are
obligated to purchase all such shares (other than those covered by the
over-allotment option described below).
Prior to the Offering, there has been no established market for the Common
Stock. The initial price to the public for the Common Stock set forth on the
cover page of this Prospectus has been determined by negotiation between the
Company and the Representatives. The principal factors considered in determining
the initial price to the public were the information set forth in this
Prospectus and otherwise available to the Representatives, the history and
prospects for the industry in which the Company competes, the ability of the
Company's management, the past and present operations of the Company, the
historical results of operations, the prospects for future earnings of the
Company, the present state of the Company's development, the general condition
of the securities markets at the time of the Offering and the recent market
prices and demand for publicly traded common stock of generally comparable
companies.
The Company has been advised by the Underwriters that they propose to offer
the shares of Common Stock to the public initially at the price to the public
set forth on the cover page of this Prospectus and to certain dealers (who may
include the Underwriters) at such price, less a concession not in excess of
$ per share. The Underwriters may allow, and such dealers may re-allow,
a concession not in excess of $ per share to certain other dealers.
After the initial public offering, the price to the public, the concession and
the discount to dealers may be changed by the Representatives.
The Selling Stockholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
750,000 additional shares of Common Stock at the initial price to the public
less underwriting discounts and commissions, solely to cover over-allotments. To
the extent that the Underwriters exercise such option, each of the Underwriters
will be committed, subject to certain conditions, to purchase a number of option
shares proportionate to such Underwriter's initial commitment as indicated in
the preceding table.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
The Company and certain stockholders each have agreed that they will not,
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation, offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable for
shares of Common Stock or in any manner transfer all or a portion of the
economic consequences associated with the ownership of Common Stock, for a
period of 180 days after
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<PAGE> 59
the date of this Prospectus, except for gifts, provided that the donee agrees to
be bound by the foregoing restrictions, and except that the Company may grant
options under its employee benefit plans consistent with past practice or issue
shares of Common Stock upon the exercise of outstanding options. See "Shares
Available for Future Sale."
The Company will file an application for approval to quote the Common Stock
on the Nasdaq National Market under the symbol "CTBC".
In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot the Offering,
creating a syndicate short position. In addition, the Underwriters may bid for
and purchase Common Stock in the open market to cover syndicate short positions
or to stabilize the price of the Common Stock. Finally, the underwriting
syndicate may reclaim selling concessions from syndicate members in the
Offering, if the syndicate repurchases previously distributed Common Stock in
syndicate covering transactions, in stabilization transactions or otherwise. Any
of these activities may stabilize or maintain the market price of the Common
Stock above independent market levels. The Underwriters are not required to
engage in these activities, and may end any of these activities at any time.
George K. Baum & Company, an Underwriter in the Offering, has been retained
to act as financial advisor to Butler and will receive customary investment
banking fees in connection with the sale of the assets of the grain bin division
of Butler to the Company. See "Business--Recent Transactions."
An affiliate of Chase Securities Inc., an Underwriter in the Offering, owns
a 7% limited partnership interest in American Securities Partners, L.P. and a
52% limited partnership interest in ASP/CTB, L.P. See "Principal Stockholders."
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Simpson Thacher & Bartlett (a partnership which includes professional
corporations), New York, New York and for the Underwriters by Kaye, Scholer,
Fierman, Hays & Handler, LLP, New York, New York.
EXPERTS
The consolidated balance sheet of the Company as of December 31, 1996 and
the consolidated statements of income, stockholders' equity and cash flows for
the year ended December 31, 1996 appearing in this Prospectus and Registration
Statement have been audited by Deloitte & Touche LLP, independent certified
public accountants, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance on such report given upon the authority of
such firm as experts in accounting and auditing.
The consolidated balance sheet of CTB, Inc. as of December 31, 1995 and the
consolidated statements of income, stockholders' equity and cash flows for the
years ended December 31, 1995 and 1994 included in this Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The balance sheets of Butler as of December 31, 1995 and 1996 and the
statements of earnings and division equity and cash flows for each of the years
in the three year period ended December 31, 1996 included in this Prospectus
have been included herein in reliance on the report of KPMG Peat Marwick, LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated balance sheets of Fancom as of December 31, 1995 and 1996
and the consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three year period ended December 31, 1996 included
in this Prospectus have been included herein in reliance on the report of
Coopers & Lybrand N.V. Eindhoven, The Netherlands, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
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<PAGE> 60
CHANGE IN INDEPENDENT ACCOUNTANTS
During 1996, the Company terminated its relationship with its independent
accountants and engaged Deloitte & Touche LLP as its new independent
accountants. Deloitte & Touche LLP served as the independent accountants for the
Company beginning with the fiscal year ended December 31, 1996.
On June 20, 1996, the Company terminated its relationship with Price
Waterhouse LLP as its independent accountants. The reports of Price Waterhouse
LLP on the financial statements of CTB, Inc. as of December 31, 1995 and for
each of the two years in the period then ended contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle. The decision to terminate the relationship
with Price Waterhouse LLP was recommended by the Audit Committee and approved by
the Board of Directors of the Company. In connection with its audits of the
financial statements of CTB, Inc. for the two fiscal years ended December 31,
1994 and 1995 and through June 20, 1996, there have been no disagreements with
Price Waterhouse LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Price Waterhouse LLP would
have caused them to make reference thereto in their report on the financial
statements of CTB, Inc. for such fiscal years. During the two fiscal years ended
December 31, 1994 and 1995 and through June 20, 1996, there were no reportable
events (as defined in Regulation S-K Item 304(a)(1)(v)).
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement"), under the Securities Act, and the rules and
regulations thereunder, for the registration of the Common Stock offered hereby.
This Prospectus, which forms a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
parts of which have been omitted as permitted by the rules and regulations of
the Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement, a
copy of which may be obtained from the Commission at its principal office in
Washington, D.C. upon payment of the fees prescribed by the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to herein are not necessarily complete and, in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
by such reference.
As a result of the Offering, the Company will be subject to the periodic
reporting and other informational requirements of the Securities Exchange Act of
1934, as amended. As long as the Company is subject to such periodic reporting
and informational requirements, it will file with the Commission all reports,
proxy statements and other information required thereby. The Registration
Statement, as well as such reports and other information filed by the Company
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at Seven World
Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
all or any portion of the Registration Statement can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the Registration Statement is publicly
available through the Commission's site on the Internet's World Wide Web,
located at http://www.sec.gov.
59
<PAGE> 61
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
CTB INTERNATIONAL CORP. AND SUBSIDIARIES
Report of Deloitte & Touche LLP.................................................. F-2
Consolidated Balance Sheets at December 31, 1996 and (unaudited) March 31,
1997.......................................................................... F-4
Consolidated Statements of Income for the year ended December 31, 1996 and
(unaudited) three months ended March 31, 1996 and 1997........................ F-5
Consolidated Statements of Stockholders' Equity for the year ended December 31,
1996 and (unaudited) three months ended March 31, 1997........................ F-6
Consolidated Statements of Cash Flows for the year ended December 31, 1996 and
(unaudited) three months ended March 31, 1996 and 1997........................ F-7
Notes to Consolidated Financial Statements....................................... F-8
CTB, INC. AND SUBSIDIARIES
Report of Price Waterhouse LLP................................................... F-3
Consolidated Balance Sheet at December 31, 1995.................................. F-4
Consolidated Statements of Income for the years ended December 31, 1994 and
1995.......................................................................... F-5
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1994 and 1995................................................................. F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1994 and
1995.......................................................................... F-7
Notes to Consolidated Financial Statements....................................... F-8
BUTLER (GRAIN SYSTEMS DIVISION)
Report of KPMG Peat Marwick LLP.................................................. F-20
Balance Sheets at December 31, 1995 and 1996..................................... F-21
Statements of Earnings and Division Equity for the years ended December 31, 1994,
1995 and 1996................................................................. F-22
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996.... F-23
Notes to Financial Statements.................................................... F-24
FANCOM HOLDING B.V.
Report of Coopers & Lybrand N.V. ................................................ F-27
Consolidated Balance Sheets at December 31, 1995 and 1996........................ F-28
Consolidated Statements of Income for the years ended December 31, 1994, 1995 and
1996.......................................................................... F-29
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995
and 1996...................................................................... F-30
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1995 and 1996.................................................... F-31
Notes to Consolidated Financial Statements....................................... F-32
</TABLE>
F-1
<PAGE> 62
INDEPENDENT AUDITORS' REPORT
To the Stockholders and
Board of Directors of CTB International Corp.:
We have audited the consolidated balance sheet of CTB International Corp.
and its subsidiaries as of December 31, 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its
subsidiaries at December 31, 1996, and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
February 5, 1997
Chicago, Illinois
F-2
<PAGE> 63
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and
Board of Directors of CTB, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of CTB, Inc.
and its subsidiaries (the "Predecessor Company") at December 31, 1995, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Predecessor Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
South Bend, Indiana
February 16, 1996
F-3
<PAGE> 64
CTB INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995, 1996 AND (UNAUDITED) MARCH 31, 1997 AND PRO FORMA
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
COMPANY ----------------------------------------------
------------ MARCH 31, 1997
DECEMBER 31, DECEMBER 31, MARCH 31, 1997 PRO FORMA
1995 1996 (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents............. $ 13,103 $ 258 $ 191
Accounts receivable, less
allowance for doubtful
accounts of $435, $449
and $538,
respectively............ 13,720 11,694 14,304
Inventories............... 8,762 14,153 14,986
Deferred income taxes..... 1,993 1,863 1,863
Prepaid expenses and
other................... 422 1,206 955
------- -------- --------
Total current
assets............. 38,000 29,174 32,299
PROPERTY, PLANT AND
EQUIPMENT--Net............... 18,097 35,644 35,393
INTANGIBLES--Net............... -- 38,453 38,141
OTHER ASSETS................... 1,948 80 18
------- -------- --------
TOTAL.......................... $ 58,045 $103,351 $105,851
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......... $ 3,856 $ 4,481 $ 7,512
Current portion of
long-term debt.......... -- 5,500 5,875
Accrued liabilities....... 7,300 6,802 4,998
Deferred revenue.......... 4,694 1,618 2,700
------- -------- --------
Total current
liabilities........ 15,850 18,401 21,085
------- -------- --------
LONG-TERM DEBT................. -- 59,650 58,500
DEFERRED INCOME TAXES.......... 1,272 9,593 9,593
ACCRUED POSTRETIREMENT BENEFIT
COST......................... 82 1,966 2,031
COMMITMENTS AND CONTINGENCIES
(Note 8)
STOCKHOLDERS' EQUITY:
Common stock.............. 1,313 6 6 $ 6
Preferred stock........... -- -- -- --
Additional paid-in
capital................. 2,248 29,994 29,994 14,994
Reduction for carryover of
predecessor cost
basis................... -- (24,704) (24,704) (24,704)
Retained earnings......... 37,244 8,502 9,420 9,420
Cumulative translation
adjustment.............. 36 (57) (74) (74)
------- -------- -------- --------
Total stockholders'
equity............. 40,841 13,741 14,642 $ (358)
========
------- -------- --------
TOTAL.......................... $ 58,045 $103,351 $105,851
======= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 65
CTB INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1995, 1996 AND
(UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
COMPANY -------------------------------------------
--------------------- YEAR ENDED
YEAR ENDED DECEMBER DECEMBER THREE MONTHS ENDED
31, 31, MARCH 31,
--------------------- ----------- ---------------------------
1994 1995 1996 1996 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES...................... $140,505 $138,119 $ 148,853 $ 31,552 $ 31,520
COST OF SALES.................. 103,491 105,578 110,303 24,616 23,916
-------- -------- -------- -------- --------
Gross profit......... 37,014 32,541 38,550 6,936 7,604
OTHER OPERATING EXPENSE:
Selling, general and
administrative
expenses................ 20,069 20,606 18,257 4,732 4,549
Amortization of
goodwill................ -- -- 959 240 240
-------- -------- -------- -------- --------
OPERATING INCOME............... 16,945 11,935 19,334 1,964 2,815
OTHER INCOME (EXPENSE):
Interest income........... 491 721 168 49 31
Interest expense.......... (2) -- (5,500) (1,393) (1,323)
Expenses associated with
the sale of the
company................. -- (1,396) -- -- --
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES..... 17,434 11,260 14,002 620 1,523
INCOME TAXES................... 6,665 4,730 5,500 264 605
-------- -------- -------- -------- --------
NET INCOME..................... $ 10,769 $ 6,530 $ 8,502 $ 356 $ 918
======== ======== ======== ======== ========
Pro forma net income per common
share (unaudited)......... $ 0.90 $ 0.04 $ 0.10
Pro forma weighted average
common shares outstanding
(unaudited)............... 9,405 9,405 9,405
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 66
CTB INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------------------------------------------------------------------------------
TREASURY COMMON COMMON
COMMON COMMON TREASURY STOCK STOCK STOCK ADDITIONAL
STOCK STOCK STOCK (AT COST) SUBSCRIBED SUBSCRIBED SUBSCRIPTIONS PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT RECEIVABLE CAPITAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994................ 67,565 $1,731 844 $ (267) 41 $ 25 $ (15) $1,077
NET INCOME..............................
PURCHASE OF TREASURY STOCK.............. 6,074 (4,509)
RETIREMENT OF TREASURY STOCK............ (6,918) (1,120) (6,918) 4,776
CASH DIVIDEND DECLARED..................
COMMON STOCK SUBSCRIBED................. 135 98 (98)
SALE OF COMMON STOCK.................... 30 23
SETTLEMENT OF COMMON STOCK
SUBSCRIPTION.......................... 25 15 (25) (15) 48
EXERCISE OF STOCK OPTIONS............... 3,137 598
TAX BENEFIT FROM EXERCISE OF STOCK
OPTIONS............................... 1,171
CUMULATIVE TRANSLATION ADJUSTMENT.......
------ ------ ------ -------- --- ---- ----- ------
BALANCE, DECEMBER 31, 1994.............. 63,839 1,247 -- -- 151 108 (65) 2,248
------ ------ ------ -------- --- ---- ----- ------
NET INCOME..............................
PURCHASE OF TREASURY STOCK.............. 1,500 (1,430)
RETIREMENT OF TREASURY STOCK............ (1,500) (20) (1,500) 1,430
CASH DIVIDENDS DECLARED.................
SETTLEMENT OF COMMON STOCK
SUBSCRIPTION.......................... 72 53 (72) (53) 43
CUMULATIVE TRANSLATION ADJUSTMENT.......
------ ------ ------ -------- --- ---- ----- ------
BALANCE, DECEMBER 31, 1995.............. 62,411 $1,280 -- $ -- 79 $ 55 $ (22) $2,248
====== ====== ====== ======== === ==== ===== ======
<CAPTION>
PREDECESSOR COMPANY
-------------------------------
CUMULATIVE
TRANSLATION RETAINED
ADJUSTMENT EARNINGS TOTAL
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1994................ $ (8) $28,359 $30,902
NET INCOME.............................. 10,769 10,769
PURCHASE OF TREASURY STOCK.............. (4,509)
RETIREMENT OF TREASURY STOCK............ (3,656) --
CASH DIVIDEND DECLARED.................. (1,829) (1,829)
COMMON STOCK SUBSCRIBED................. --
SALE OF COMMON STOCK.................... 23
SETTLEMENT OF COMMON STOCK
SUBSCRIPTION.......................... 48
EXERCISE OF STOCK OPTIONS............... 598
TAX BENEFIT FROM EXERCISE OF STOCK
OPTIONS............................... 1,171
CUMULATIVE TRANSLATION ADJUSTMENT....... 29 29
---- ------- -------
BALANCE, DECEMBER 31, 1994.............. 21 33,643 37,202
---- ------- -------
NET INCOME.............................. 6,530 6,530
PURCHASE OF TREASURY STOCK.............. (1,430)
RETIREMENT OF TREASURY STOCK............ (1,410) --
CASH DIVIDENDS DECLARED................. (1,519) (1,519)
SETTLEMENT OF COMMON STOCK
SUBSCRIPTION.......................... 43
CUMULATIVE TRANSLATION ADJUSTMENT....... 15 15
---- ------- -------
BALANCE, DECEMBER 31, 1995.............. $ 36 $37,244 $40,841
==== ======= =======
</TABLE>
<TABLE>
<CAPTION>
COMPANY
-----------------------------------------------------------------------------------------------------
REDUCTION FOR
ADDITIONAL CARRYOVER OF CUMULATIVE
COMMON STOCK PREFERRED STOCK PAID-IN PREDECESSOR TRANSLATION RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL COST BASIS ADJUSTMENT EARNINGS TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL CAPITALIZATION,
JANUARY 1, 1996......... 600,000 $ 6 24,000 $ $ 29,994 $ 30,000
REDUCTION FOR CARRYOVER OF
PREDECESSOR COST
BASIS................... $ (24,704) (24,704)
NET INCOME................ $8,502 8,502
CUMULATIVE TRANSLATION
ADJUSTMENT.............. $(57) (57)
--
------- ------ ------ ------- -------- ---- ------ --------
BALANCE, DECEMBER 31,
1996.................... 600,000 6 24,000 -- 29,994 (24,704) (57) 8,502 13,741
--
------- ------ ------ ------- -------- ---- ------ --------
NET INCOME (unaudited).... 918 918
CUMULATIVE TRANSLATION
ADJUSTMENT
(unaudited)............. (17) (17)
--
------- ------ ------ ------- -------- ---- ------ --------
BALANCE, MARCH 31, 1997
(unaudited)............. 600,000 $ 6 24,000 $ -- $ 29,994 $ (24,704) $(74) $9,420 $ 14,642
======= == ====== ====== ======= ======== ==== ====== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 67
CTB INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
------------------ ------------------------------------------
YEAR ENDED YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
------------------ ------------ --------------------------
1994 1995 1996 1996 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................ $10,769 $ 6,530 $ 8,502 $ 356 $ 918
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation......................... 3,117 3,627 4,609 1,221 1,135
Amortization......................... -- -- 1,251 312 312
Gain on sale of property, plant and
equipment.......................... (55) (35) (574) -- (24)
Changes in operating assets and
liabilities:
Accounts receivable.............. (694) (1,750) 2,226 1,734 (2,610)
Inventories...................... (3,575) 2,103 (967) (260) (833)
Prepaid expenses and other
assets......................... (524) 274 1,318 1,417 313
Accounts payable, accruals and
other liabilities.............. 3,692 514 (4,651) (250) 2,357
------- ------- --------- -------- -------
Net cash flows from operating
activities.............................. 12,730 11,263 11,714 4,530 1,568
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and
equipment............................ (5,335) (4,698) (3,402) (487) (897)
Acquisition of CTB, Inc., net of cash
acquired............................. -- -- (104,741) (104,741) --
Proceeds from sale of property, plant and
equipment............................ 57 52 1,537 20 37
------- ------- --------- -------- -------
Net cash flows from investing
activities.............................. (5,278) (4,646) (106,606) (105,208) (860)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from acquisition debt:
Revolving credit..................... -- -- 24,000 24,000 --
Term loans........................... -- -- 65,000 65,000 --
Issuance of common stock.................. 1,801 43 6,000 6,000 --
Treasury stock acquisitions............... (4,509) (1,430) -- -- --
Issuance of preferred stock............... -- -- 24,000 24,000
Principal payments on long-term debt...... -- -- (4,750) (1,000) (1,375)
Proceeds from revolving credit............ -- -- 20,400 2,500 6,800
Payments on revolving credit.............. -- -- (39,500) (19,000) (6,200)
Dividends paid............................ (2,049) (1,967) -- -- --
------- ------- --------- -------- -------
Net cash flows from financing
activities.............................. (4,757) (3,354) 95,150 101,500 (775)
------- ------- --------- -------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................. 2,695 3,263 258 822 (67)
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR........................................ 7,145 9,840 -- -- 258
------- ------- --------- -------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR........ $ 9,840 $13,103 $ 258 $ 822 $ 191
======= ======= ========= ======== =======
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 68
CTB INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 AND 1997
1. BASIS OF PRESENTATION
On January 4, 1996, CTB International Corp. (the "Company"), formerly CTB
Holdings, Inc., through its wholly owned subsidiary, CTB Ventures, Inc. ("CTB
Ventures"), corporations formed by affiliates of American Securities Capital
Partners, L.P. ("ASCP"), acquired all of the outstanding stock of CTB, Inc. (the
"Predecessor Company") in a leveraged buyout transaction for an aggregate
purchase price of approximately $117.8 million, including acquisition costs of
approximately $2.3 million and cash acquired of approximately $13.1 million (the
"Acquisition"). The Acquisition was funded by the issuance of $6 million of
common stock, $24 million of preferred stock, bank term loans of $65 million and
revolving credit loans of $24 million. Immediately following the Acquisition,
the Predecessor Company merged into CTB Ventures and CTB Ventures changed its
name to CTB, Inc. For convenience, the Acquisition was accounted for as if it
had occurred on January 1, 1996.
In connection with the Acquisition, shareholders of the Predecessor Company
exchanged $9.9 million in shares of stock of the Predecessor Company for an
equal value of shares of common and preferred stock of the Company. Accordingly,
at the date of the Acquisition, the Company was owned 67.9% by affiliates of
ASCP and certain new management investors, with the remaining 32.1% owned by
former stockholders of the Predecessor Company. The Acquisition has been
accounted for using the purchase method of accounting to the extent of the 67.9%
change in ownership with the remaining 32.1% valued at historical book value. To
the extent of the change in ownership, the purchase price has been allocated to
the assets and liabilities of the Predecessor Company based on their fair values
as of the Acquisition date. The fair values of assets and liabilities were based
on independent appraisals and estimates by management. The Company has recorded
an adjustment ("reduction for carryover of predecessor cost basis") to reduce
the Predecessor Company stockholders' investment in the Company to the
historical cost basis of their investment in the Predecessor Company.
The following summarizes the purchase price allocation as of the
Acquisition date (in thousands):
<TABLE>
<S> <C>
Current assets, excluding cash acquired........................... $ 32,380
Property, plant and equipment..................................... 37,814
Intangibles and other assets...................................... 39,884
Liabilities assumed............................................... (30,041)
--------
Total............................................................. 80,037
Reduction for carryover of predecessor cost basis................. 24,704
--------
Total purchase price.............................................. $104,741
========
</TABLE>
The 1994 and 1995 consolidated financial statements of the Predecessor
Company have been prepared on the historical cost basis. Accordingly, the
financial statements of the Company are not directly comparable to those of the
Predecessor Company. The following summarized unaudited pro forma results of
operations for the year ended December 31, 1995 assume that the Acquisition had
occurred on January 1, 1995 and the purchase price was the same. The unaudited
pro forma results have been prepared for comparative purposes only and do not
purport to represent what the results of operations would have been if the
Acquisition had actually occurred on January 1, 1995 or to project future
results.
F-8
<PAGE> 69
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Net sales.............................................................. $138,119
Cost of sales.......................................................... 106,514
--------
Gross profit........................................................... 31,605
Other operating expense:
Selling, general and administrative expenses...................... 20,771
Amortization of goodwill.......................................... 959
--------
Operating income....................................................... 9,875
Other income (expense):
Interest income...................................................... 721
Interest expense..................................................... (5,500)
--------
Income before income taxes............................................. 5,096
Income taxes........................................................... 2,251
--------
Net income............................................................. $ 2,845
========
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business -- The Company manufactures grain and feed storage,
feeding, watering, ventilation, and egg laying and handling systems used
primarily in the agricultural industry. To a lesser extent, the Company
manufactures fencing and other vinyl products for use in agricultural,
commercial and residential markets.
Principles of Consolidation -- 1996 -- The consolidated financial
statements include the accounts of the Company, its wholly owned subsidiary,
CTB, Inc., and its wholly owned subsidiaries, CTB Credit Corporation, CTB Sales
Corporation ("FSC"), Chore-Time Brock B.V., Chore-Time Brock Ltda, and
Chore-Time Brock S.A. All intercompany accounts and transactions have been
eliminated.
Principles of Consolidation -- 1994 and 1995 -- The consolidated financial
statements include the accounts of CTB, Inc., and its wholly owned subsidiaries,
CTB Credit Corporation, CTB Sales Corporation ("FSC"), Chore-Time Brock B.V. and
Chore-Time Brock S.A. All intercompany accounts and transactions have been
eliminated.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash Equivalents -- The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents. At
December 31, 1995, cash equivalents consisted primarily of U.S. Treasury Bills,
carried at cost which approximated fair value.
Inventories -- Inventories are stated at the lower of cost or market using
the last-in, first-out ("LIFO") method.
Property, Plant and Equipment -- Property, plant and equipment is stated at
cost. Maintenance and repairs are charged to expense as incurred. Depreciation
is provided using straight-line and accelerated methods over the estimated
useful lives of individual assets. The estimated useful lives range from 10 to
40 years, or the life of the lease if shorter, for buildings and improvements,
and from 3 to 10 years for machinery and equipment.
F-9
<PAGE> 70
Goodwill -- Goodwill represents costs in excess of the fair value of net
assets acquired and is amortized using the straight-line method over 40 years.
The Company periodically assesses the recoverability of intangibles based on its
expectations of future profitability and undiscounted cash flow of the related
operations. These factors, along with management's plans with respect to the
operations, are considered in assessing the recoverability of goodwill and other
purchased intangibles.
Deferred Finance Costs -- Costs associated with the issuance of debt are
being amortized using the straight-line method over the life of the related
debt. Amortization expense is included in interest expense.
Income Taxes -- The Company provides for income taxes under the asset and
liability method of accounting for deferred income taxes. Deferred tax assets
and liabilities are recorded based on the expected tax effects of future taxable
income or deductions resulting from differences in the financial statement and
tax bases of assets and liabilities. An allowance is provided whenever
management believes it is more likely than not that tax benefits will not be
utilized.
Revenue Recognition of Deferred Revenue and Product Warranties -- Sales of
products and services are recorded based upon shipment of product and
performance of services. Egg laying and handling system contracts, which
generally do not exceed one year, require predetermined payment intervals and,
in some instances, customer prepayments. Such revenue is deferred and recognized
at the date that the product is shipped or the service is performed. The Company
provides its customers with a one- to five-year, depending on the product,
warranty from the date of purchase. Estimated warranty costs are accrued at the
time of sale. Warranty expenses for the years ended December 31, 1994, 1995 and
1996 were approximately $694,000, $1,312,000 and $1,171,000, respectively, and
for the three months ended March 31, 1996 and 1997 were approximately $199,000
and $413,000, respectively.
International export sales (excluding Canada) consisted of the following
(in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
------------------- ----------------------------------
YEAR ENDED YEAR ENDED THREE MONTHS
DECEMBER 31, DECEMBER 31, ENDED MARCH 31,
------------------- ------------ -----------------
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Latin America........................... $12,484 $11,146 $ 14,129 $2,343 $3,004
Europe/Mideast.......................... 6,689 10,941 10,334 3,326 2,589
Asia.................................... 9,652 13,919 14,174 2,933 2,281
------- ------- ------- ------ ------
$28,825 $36,006 $ 38,637 $8,602 $7,874
======= ======= ======= ====== ======
</TABLE>
Concentration of Credit Risk -- Financial instruments which potentially
subject the Company to concentration of credit risk consist principally of trade
receivables. The Company's customers are not concentrated in any specific
geographic region, but are concentrated in the agricultural industry. No single
customer accounted for a significant amount of the Company's sales in 1994, 1995
and 1996 and there were no significant accounts receivable from a single
customer at December 31, 1995 or 1996. The Company reviews a customer's credit
history before extending credit. The Company establishes an allowance for
doubtful accounts based upon factors surrounding the credit risk of specific
customers, historical trends and other information. To reduce credit risk, the
Company generally receives down-payments on large orders.
Research and Development -- Research and development expenditures are
charged to operations as incurred. Total research and development expenses for
the years ended December 31, 1994, 1995 and 1996 were approximately $3,750,000,
$3,830,000 and $3,555,000, respectively, and for the three months ended March
31, 1996 and 1997 were approximately $914,000 and $848,000, respectively.
Postretirement Health Care Benefit Plans -- The Company has unfunded
postretirement plans and uses the minimum amortization method for recognizing
gains and losses for postretirement benefits, as prescribed by SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
Foreign Currency Translation -- The Company has determined the local
currency to be the functional currency of all foreign subsidiaries. Assets and
liabilities of non-U.S. subsidiaries are translated at current exchange rates,
and related revenues and expenses are translated at average exchange rates in
effect during the period. Resulting translation adjustments are recorded as a
currency component in stockholders' equity.
F-10
<PAGE> 71
Interest Rate Swap Agreements -- The Company enters into various rate swaps
in managing its interest rate risk and holds such instruments for purposes other
than trading. In these swaps, the Company agrees with other parties to exchange,
at specific intervals, the difference between fixed and floating interest
amounts calculated on an agreed-upon notional principal amount. Because some of
the Company's interest-bearing liabilities are floating rate obligations,
interest rate swaps in which the Company pays the fixed rate and receives the
floating rate are used to reduce the impact of market interest rate fluctuation
on the Company's net income. The differential to be paid or received on interest
rate swap agreements entered into to reduce the impact of changes in interest
rates is recognized as an adjustment to interest expense related to the hedged
liability over the life of the agreement. In the event of early extinguishment
of the debt obligation, any realized or unrealized gain or loss from the swap
would be recognized in income, coincident with the extinguishment.
Forward Exchange Contracts -- The Company enters into foreign currency
forward exchange contracts on a limited basis. Contracts entered are for
significant outstanding accounts receivable for which timing of the receipt of
payment can be reasonably estimated. The purpose of the Company's hedging
activities is to protect the Company from the risk that eventual dollar net
inflows resulting from the sale of products to foreign customers will be
adversely affected by changes in foreign currency exchange rates. Option
contracts that are designed as hedges are marked to market with realized and
unrealized gains and losses deferred and recognized in earnings as an adjustment
to the assets and liabilities being hedged. The Company's foreign exchange
contracts do not subject the Company's results of operations to risk due to
exchange rate movements because gains and losses on the contracts generally
offset gains and losses on the assets and liabilities being hedged.
All contracts outstanding at December 31, 1995 and 1996 have a term of
three months or less. Differences between the contract rate and the fair value
for contracts outstanding at December 31, 1995 and 1996 were insignificant.
Impairment of Long-Lived Assets -- The Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," on January 1, 1996. Management reviews long-lived assets and
the related intangible assets for impairment of value whenever events or changes
in circumstances indicate the carrying amount of such assets may not be
recoverable. If the Company determines it is unable to recover the carrying
value of the assets, the assets will be written down using an appropriate
method. Management does not believe current events or circumstances provide
evidence that suggest that values have been impaired.
New Accounting Pronouncement -- In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS No. 128"). SFAS No. 128 simplifies the earnings per
share (EPS) computation and replaces the presentation of primary EPS with a
presentation of basic EPS. This statement also requires dual presentation of
basic and diluted EPS on the face of the income statement for entities with a
complex capital structure and requires a reconciliation of the numerator and
denominator used for the basic and diluted EPS computations. SFAS No. 128
requires restatement of all prior-period EPS data presented. The Company will
implement SFAS No. 128 as of and for the year ending December 31, 1997, and the
adoption will not have an effect on the financial statements.
Interim Financial Statements (Unaudited) -- The financial statements as of
March 31, 1997 and for the three months ended March 31, 1996 and 1997 were
prepared on the same basis as the audited consolidated financial statements and,
in the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for these periods. Operating results for the
interim periods included herein are not necessarily indicative of the results
that may be expected for the entire year.
Pro Forma Per Share Information (Unaudited) -- Pro forma net income per
common share is calculated by dividing net income by the pro forma weighted
average number of common and common equivalent shares outstanding, after giving
effect to the following proposed transactions as if they had been completed on
January 1, 1996: (i) the Stock Split (a 12.0933 for 1 stock split of the common
stock in connection with a planned initial public offering (the "Offering")),
(ii) the Preferred Stock Exchange (see definition below), (iii) the Preferred
Stock Redemption (see definition below) and (iv) solely to the extent the
proceeds will be
F-11
<PAGE> 72
used for the Preferred Stock Redemption, the Offering (assuming an initial
public offering price of $15.00 per share) and assuming that all options to
purchase common stock were exercised (applying the treasury stock method
assuming an initial public offering price of $15.00 per share). Stock and
options to purchase common stock issued or granted in the twelve months ended
June 23, 1997 are treated as outstanding for all periods reported. Due to the
changes in the Company's capital structure resulting from the Acquisition and
the planned recapitalization, historical net income per common share is not
meaningful and therefore is not presented.
The Company intends to use $15 million of the net proceeds of the Offering
to redeem (the "Preferred Stock Redemption") 15,000 shares of the outstanding 6%
Series A Preferred Stock of the Company (the "Existing Preferred Stock"). In
addition, concurrently with the consummation of the Offering, the Company will
exchange 604,600 shares of common stock (at the assumed initial public offering
price of $15.00 per share) for the remaining 9,069 shares outstanding of the
Existing Preferred Stock (the "Preferred Stock Exchange").
Pro Forma March 31, 1997 Balance Sheet Information (Unaudited) -- The March
31, 1997 pro forma balance sheet information gives effect to the proposed Stock
Split, Preferred Stock Exchange and Preferred Stock Redemption (without giving
effect to the offering proceeds) as if they had occurred on March 31, 1997.
Reclassifications -- Certain reclassifications have been made to conform
the prior year's financial statements with classifications adopted in 1996.
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
------------ ----------------------------
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
(UNAUDITED)
<S> <C> <C> <C>
Raw material................................... $ 7,396 $ 7,753 $ 7,101
Work in process................................ 2,954 2,503 3,063
Finished goods................................. 3,861 3,897 4,822
------- ------- -------
14,211 14,153 14,986
Allowance to state inventories at LIFO cost.... (5,449) -- --
------- ------- -------
Total.......................................... $ 8,762 $ 14,153 $14,986
======= ======= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
------------ ----------------------------
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
(UNAUDITED)
<S> <C> <C> <C>
Land and improvements......................... $ 1,050 $ 1,161 $ 1,161
Buildings and improvements.................... 13,033 15,062 15,063
Machinery and equipment....................... 36,495 22,783 23,266
Construction in progress...................... 227 1,220 1,554
-------- ------- -------
50,805 40,226 41,044
Less accumulated depreciation................. (32,708) (4,582) (5,651)
-------- ------- -------
Total......................................... $ 18,097 $ 35,644 $35,393
======== ======= =======
</TABLE>
F-12
<PAGE> 73
5. INTANGIBLES
Intangibles consist of the following (in thousands):
<TABLE>
<CAPTION>
COMPANY
-------------------------------
DECEMBER 31, MARCH 31,
1996 1997
(UNAUDITED)
<S> <C> <C>
Goodwill................................................. $ 38,351 $ 38,350
Accumulated amortization................................. (959) (1,198)
------- -------
Goodwill--net............................................ 37,392 37,152
------- -------
Deferred finance costs................................... 1,353 1,353
Accumulated amortization................................. (292) (364)
------- -------
Deferred finance costs--net.............................. 1,061 989
------- -------
Total.................................................... $ 38,453 $ 38,141
======= =======
</TABLE>
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
------------ ----------------------------
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
(UNAUDITED)
<S> <C> <C> <C>
Salaries, wages, and benefits................. $2,973 $4,049 $ 2,986
Warranty...................................... 476 1,050 1,120
Non-recurring expenses........................ 1,396 -- --
Other......................................... 2,455 1,703 892
------- ------ -------
Total......................................... $7,300 $6,802 $ 4,998
======= ====== =======
</TABLE>
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
COMPANY
-------------------------------
DECEMBER 31, MARCH 31,
1996 1997
(UNAUDITED)
<S> <C> <C>
Revolving line of credit................................. $ 4,900 $ 5,500
Term loans payable to bank............................... 60,250 58,875
------- -------
65,150 64,375
Less current portion..................................... 5,500 5,875
------- -------
Long-term debt........................................... $ 59,650 $ 58,500
======= =======
</TABLE>
The Company has a senior credit facility totalling $90,000,000 (the
"Existing Credit Agreement"). The facility, secured by 100% of the Company's
assets, consists of a $25,000,000 revolving line of credit ("Revolver"), a
$45,000,000 term loan ("Term A Loan") and a $20,000,000 term loan ("Term B
Loan").
The Revolver, subject to a borrowing base, carries a three-year maturity
date with an annual one-year extension option. Interest is determined at prime
or, at the Company's option, 175 basis points above a LIBOR-based rate of
interest.
The Term A Loan, repayable in twenty-four quarterly installments, carries
an interest rate of prime or, at the Company's option, 200 basis points above a
LIBOR-based rate of interest. The total amount outstanding under the Term A Loan
is $40,250,000 at December 31, 1996.
F-13
<PAGE> 74
The Term B Loan is due in full at November 30, 2001, subject to certain
mandatory prepayments. The total amount outstanding under the Term B Loan is
$20,000,000 at December 31, 1996. Interest is determined at prime plus 0.25% or,
at the Company's option, 225 basis points above a LIBOR-based rate of interest.
The credit facility is subject to a $50,000 annual administration fee and
an annual 0.25% facility fee on the total Revolver commitment. The terms of the
credit agreement contain, among other provisions, requirements regarding net
worth, capital expenditures and various financial ratios. The Company was in
compliance with all debt covenants at December 31, 1996.
In conjunction with the debt agreements, the Company maintains an interest
rate swap agreement which effectively converts $15,000,000 of the variable rate
Term B Loan into 7.83% fixed rate debt. This swap arrangement expires December
31, 1998. In addition, the Company entered an interest rate swap agreement which
effectively converts $40,250,000 of the variable rate Term A Loan into 7.71%
fixed rate debt. This swap arrangement expires December 31, 2001.
The aggregate maturities of long-term debt at December 31, 1996 are as
follows (in thousands):
<TABLE>
<CAPTION>
TERM LOANS REVOLVER TOTAL
<S> <C> <C> <C>
1997................................................. $ 5,500 $ 5,500
1998................................................. 7,000 $4,900 11,900
1999................................................. 8,500 8,500
2000................................................. 9,000 9,000
2001................................................. 30,250 30,250
-------- ------ -------
Total................................................ $ 60,250 $4,900 $65,150
======== ====== =======
</TABLE>
Interest paid was approximately $5,080,000 for the year ended December 31,
1996 and $1,226,000 and $1,954,000 for the three months ended March 31, 1996 and
1997, respectively.
The carrying value of debt approximates fair value because the floating
interest rates reflect market rates. The fair value of interest rate swaps is
$626,000 at December 31, 1996.
The Predecessor Company had an agreement with a bank for an unsecured line
of credit of $15,000,000 at December 31, 1995. The line of credit bore interest
based upon a floating rate market index. No borrowings were outstanding against
the line at December 31, 1995.
8. COMMITMENTS AND CONTINGENCIES
The Company was named in a lawsuit arising from a fire at a cage house
construction site. The lawsuit seeks damages approximating $500,000 from the
Company. While it is reasonably possible that an unfavorable outcome will occur,
it is not possible at this time to estimate the amount of any obligation because
of the uncertainty of whether the Company will prevail in the lawsuit or the
amount of insurance coverage that will be available to the Company to settle
this potential obligation. The Company has not recorded an accrual for this
contingency at December 31, 1996.
In addition, there are various other claims and pending legal proceedings
against the Company involving matters arising out of the ordinary conduct of
business. While the Company is unable to predict with certainty the outcome of
current proceedings, based upon the facts currently known to it, the Company
does not believe that resolution of these proceedings will have a material
adverse effect on its financial condition or results of operations.
Pursuant to the Stock Purchase Agreement, the Company has agreed to make
certain contingent payments to the Predecessor Company stockholders (the
"Earn-Out Amount") based on a calculation of cumulative Earnings before
Interest, Taxes, Depreciation and Amortization ("EBITDA") (calculated in
accordance with the Stock Purchase Agreement). The Earn-Out Amount is determined
based on cumulative EBITDA for the three-year period ended December 31, 1998.
The Company could be liable to pay the Predecessor Company stockholders up to a
maximum amount equal to $13,500,000.
F-14
<PAGE> 75
If an Earn-Out Amount is payable, the Company is obligated to pay the
Earn-Out Amount in four semi-annual installments beginning on August 31, 1998.
The first installment is equal to 25% of the estimated Earn-Out Amount, the
second installment is equal to 50% of the actual Earn-Out Amount minus the
amount of the first installment and the third and fourth installments are each
equal to 25% of the actual Earn-Out Amount. Accrued interest from January 1,
1999 at the prime rate on the last business day of 1998 will be payable on the
third and fourth installments, provided that interest at such interest rate on
the first installment payment from August 31, 1998 to December 31, 1998 will be
credited against such amount.
The Company has a Management Incentive Compensation Plan whereby certain
employees receive annual bonuses based upon achievement of certain financial
goals, including EBITDA targets.
9. PROFIT SHARING
Substantially all employees of the Company participate in a defined
contribution, qualified profit-sharing retirement plan. The agreement provides
that the Company contributions to the profit-sharing trust be made in amounts as
determined by the Company's Board of Directors. Contributions are allocated to
participants on the basis of proportionate qualified compensation at the close
of each fiscal year. Benefits to participants are limited to funds in their
individual accounts. The Company and the Predecessor Company recorded profit
sharing expenses of approximately $1,652,000, $1,160,00 and $1,403,000 for the
years ended December 31, 1994, 1995 and 1996, respectively and for the three
months ended March 31, 1996 and 1997 of approximately $180,000 and $215,000,
respectively.
The profit-sharing plan has a 401(k) provision which allows participants to
contribute a percentage of their pretax compensation to the plan within Internal
Revenue Code limits. Upon authorization of the Board of Directors, the Company
may make matching contributions. Matching contributions made by the Company and
the Predecessor Company approximated $315,000, $334,000 and $337,000 for the
years ended December 31, 1994, 1995 and 1996, respectively and for the three
months ended March 31, 1996 and 1997 of approximately $82,000 and $85,000,
respectively.
10. POSTRETIREMENT HEALTH CARE BENEFIT PLANS
The Company provides medical and dental benefit programs for retired
employees. Substantially all of the Company's employees become eligible for
these benefits upon retirement.
Summary information of the plan is as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
------------ ------------
DECEMBER 31, DECEMBER 31,
1995 1996
<S> <C> <C>
Accumulated postretirement benefit obligations (assets):
Retirees................................................. $ (180) $ 263
Fully eligible active employees.......................... (125) 322
Other active employees................................... 596 1,299
----- ------
291 1,884
Unrecognized net gain.................................... 126 82
Unrecognized transition obligation....................... (335) --
----- ------
Accrued postretirement benefit cost...................... $ 82 $1,966
===== ======
</TABLE>
The accumulated postretirement benefit obligation was determined using
relevant actuarial assumptions and the timing of the Company's medical and
dental plans. The effect of a 1% annual increase in the assumed medical
inflation rate on the accumulated postretirement benefit obligation and the
related expense would be insignificant.
Measurement of the accumulated postretirement obligation was based on a
7.0% and 7.5% discount rate at December 31, 1995 and 1996, respectively. At
December 31, 1996, medical trend rates were assumed at 12% (under age 65) and 8%
(over age 65) which trend down to 6%. At December 31, 1995, medical trend rates
were assumed at 15% (under age 65) and 9% (over age 65) which trended down to
6%.
F-15
<PAGE> 76
The Company funds medical and dental costs as incurred. The components of
net periodic postretirement benefit expense are as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
------------- ------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------- ------------
1994 1995 1996
<S> <C> <C> <C>
Service cost............................................. $ 51 $40 $158
Interest cost............................................ 29 15 109
Amortization of unrecognized gain........................ -- (12) --
Amortization of unrecognized transition obligation....... 20 20 --
---- --- ----
$100 $63 $267
==== === ====
</TABLE>
11. STOCK OPTION PLANS
Executives and other key employees have been granted options to purchase
common shares of the Company under a stock option plan adopted in 1996. In each
case, the option price equals the fair market value of the common shares on the
day of the grant and an option's maximum term is ten years. Options granted vest
in seven years or over an accelerated period of five years should certain annual
or cumulative earnings targets be met. No options were exercised and 3,000
common share options were canceled in the current year.
In accordance with the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company has elected to apply the accounting
prescribed by APB Opinion No. 25 and related interpretations in accounting for
its stock option plan. If the Company had elected to recognize compensation cost
based on the fair value of the options granted at grant date as prescribed by
SFAS No. 123, net income for the year ended December 31, 1996 would have been
reduced to the pro forma amounts indicated in the table below (in thousands):
<TABLE>
<S> <C>
Net income--as reported.................................................... $8,502
Net income--pro forma...................................................... 8,477
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black Scholes option-pricing model with the following assumptions:
<TABLE>
<S> <C>
Volatility............................................................. 0%
Expected dividend yield................................................ 0%
Risk free interest rate................................................ 5.36%-6.00%
Expected life of options............................................... 5 years
</TABLE>
The weighted average fair value of options granted during 1996 is $3.62 per
share. A total of 60,000 share options are authorized and outstanding at
December 31, 1996. The options outstanding at December 31, 1996 have a weighted
average exercise price of $15 per share and a weighted average remaining
contractual life of 9 years. None of the options outstanding are exercisable.
The options outstanding at December 31, 1996 have exercise prices ranging from
$10 to $60 per share.
Prior to 1996, the Predecessor Company maintained the CTB, Inc. Incentive
Stock Option Plan which provided for officers and key employees options to
purchase up to 20,000 shares of common stock at prices not less than the fair
market value of the shares at the date of grant, as defined. The plan was
terminated in conjunction with the sale of the Predecessor Company. There were
no options granted, exercised or terminated during 1995. There were no options
outstanding at December 31, 1995.
During 1994, 3,137 option shares were exercised at prices ranging from $118
to $337 per share and the Predecessor Company subsequently repurchased 5,954
shares during 1994 at prices ranging from $719 to $795 per share. As a result,
the Predecessor Company realized an income tax benefit from the early
disposition of
F-16
<PAGE> 77
these option shares of $1,171,000. This benefit resulted in a decrease in
current income taxes payable and an increase in additional paid-in capital.
12. INCOME TAXES
The elements of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------------- ------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
----------------- ------------
1994 1995 1996
<S> <C> <C> <C>
Current income taxes:
U.S. federal....................................... $5,796 $4,389 $4,628
State.............................................. 1,007 792 909
Foreign............................................ 90 36 26
------ ------ ------
Total current........................................ 6,893 5,217 5,563
------ ------ ------
Deferred:
U.S. federal....................................... (199) (426) (55)
State.............................................. (29) (61) (8)
------ ------ ------
Total deferred....................................... (228) (487) (63)
------ ------ ------
Provision for income taxes........................... $6,665 $4,730 $5,500
====== ====== ======
</TABLE>
Income taxes paid were approximately $4,655,000, $6,379,000 and $6,055,000
for the years ended December 31, 1994, 1995 and 1996, respectively and
approximately $26,000 for the three months ended March 31, 1996. The Company
received a tax refund of $630,000 for the three months ended March 31, 1997.
A reconciliation of the provision for income taxes for consolidated
operations to the U.S. federal income tax statutory rate is as follows (in
thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------------- ------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
----------------- ------------
1994 1995 1996
<S> <C> <C> <C>
U.S. tax at federal statutory rate................... $6,102 $3,828 $4,901
Increase (decrease) in tax resulting from:
State income taxes, net of U.S. tax benefit..... 668 482 591
FSC benefit..................................... (208) (234) (316)
Goodwill........................................ -- -- 336
Non-deductible expenses associated with the sale
of CTB, Inc................................... -- 475 --
Other, net...................................... 103 179 (12)
------ ------ ---------
Provision for income taxes........................... $6,665 $4,730 $5,500
====== ====== =========
</TABLE>
F-17
<PAGE> 78
Deferred tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
------------------- ------------
DECEMBER 31, DECEMBER 31,
1995 1996
<S> <C> <C>
Deferred tax assets -- current:
Accrued liabilities........................... $ 1,329 $ 1,151
Inventory..................................... 390 507
Allowance for doubtful accounts receivable.... 174 180
Other......................................... 100 25
------- --------
Total.................................... 1,993 1,863
------- --------
Deferred tax assets (liabilities) -- noncurrent:
Property, plant and equipment................. (1,272) (8,577)
Inventory..................................... -- (1,770)
Accrued postretirement benefit cost........... -- 754
------- --------
Total.................................... (1,272) (9,593)
------- --------
Deferred income taxes.............................. $ 721 $ (7,730)
======= ========
</TABLE>
13. STOCK
At December 31, 1996, the Company had common stock of $.01 par value,
950,000 shares authorized and 600,000 shares issued and outstanding. At December
31, 1996, the Company also had preferred stock of $.01 par value, 50,000 shares
authorized and 24,000 shares issued and outstanding.
The preferred stock carries with it noncumulative dividend rights of 6%. In
the event of any voluntary or involuntary liquidation, the stockholders are
entitled to a liquidation preference to be paid at $1,000 per share plus an
amount equal to all declared but unpaid dividends. Upon occurrence of an Initial
Public Offering or a Change of Control, the preferred stock is redeemable, at
the option of the Company, in whole or in part, at a redemption price of $1,000
per share plus an amount equal to all declared but unpaid dividends.
At December 31, 1995, the Predecessor Company had common stock of no par
value, 200,000 shares authorized and 62,411 issued and outstanding.
14. RELATED PARTY TRANSACTIONS
Under the terms of the purchase agreement, the Company is required to pay
annual management fees of $300,000 plus expenses to ASCP. Such expense has been
charged to operations during 1996. Additionally, in connection with the
Acquisition, the Company paid fees of $750,000 to ASCP.
15. STOCK REDEMPTION AGREEMENT
During calendar 1994 and 1995, the Predecessor Company purchased 6,074 and
1,500 shares of treasury stock for a total cost of $4,509,000 and $1,430,000,
respectively, under the terms of a stock redemption agreement which was
terminated in conjunction with the sale of the Predecessor Company.
16. SUBSEQUENT EVENTS (UNAUDITED)
On May 1, 1997, the Company acquired all of the capital stock of Fancom
Holding B.V., a Netherlands company ("Fancom"), for 35.1 million Dutch Guilders
("NLG") ($18.1 million at the May 1, 1997 exchange rate), subject to adjustment,
including the assumption of NLG 11.4 million ($5.9 million at the May 1, 1997
exchange rate) of Fancom indebtedness. The acquisition of Fancom was funded
through additional borrowings under the revolving line of credit.
On June 23, 1997, the Company acquired substantially all of the assets of
Butler Manufacturing Company's grain systems division ("Butler"). The purchase
price for Butler was $32.5 million, subject to adjustment. The acquisition of
Butler was funded by borrowings through a new term loan under the Existing
Credit Agreement.
On May 29, 1997, the Company sold substantially all assets (other than
accounts receivable) relating to its PVC deck, dock and fence business for
approximately $8.2 million to a subsidiary of Royal Group
F-18
<PAGE> 79
Technologies Limited. In conjunction with the sale, the Company entered into a
joint venture with the acquirer to produce certain extruded PVC agricultural
equipment component parts for the Company for a period of 5 years.
During May and June 1997, the Board of Directors granted options to certain
employees to purchase a total of 11,000 shares of common stock at an exercise
price of $132.
In May 1997, subsequent to the acquisition of Fancom, the Company issued 69
shares of preferred stock at $1,000 per share and 1,755 shares of common stock
at $132 per share, to certain key employees of Fancom.
17. PARENT COMPANY FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
DECEMBER 31, 1996 AND (UNAUDITED) MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
(UNAUDITED)
<S> <C> <C>
ASSETS
Equity investment in subsidiaries............................. $13,741 $ 14,642
------- -------
TOTAL ASSETS........................................... $13,741 $ 14,642
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity........................................ $13,741 $ 14,642
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......... $13,741 $ 14,642
======= =======
</TABLE>
CONDENSED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1996 AND (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1996 MARCH 31, 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Equity in undistributed net income of
subsidiaries................................. $ 8,502 $356 $918
------- ---- ----
NET INCOME........................... $ 8,502 $356 $918
======= ==== ====
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
(UNAUDITED) FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1996 MARCH 31, 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................... $ 8,502 $ 356 $ 918
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed net income of
subsidiaries............................ (8,502) (356) (918)
------- ----- -----
Net cash provided by operating activities.... -- -- --
------- ----- -----
Net increase in cash........................... -- -- --
Cash at beginning of the period................ -- -- --
------- ----- -----
CASH AT END OF THE PERIOD...................... $ -- $ -- $ --
======= ===== =====
</TABLE>
F-19
<PAGE> 80
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Butler Manufacturing Company:
We have audited the balance sheets of Grain Systems Division (a division of
Butler Manufacturing Company) (the Division) as of December 31, 1995 and 1996
and the related statements of earnings and division equity and cash flows for
each of the years in the three year period ended December 31, 1996. These
financial statements are the responsibility of the Division's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Division at December 31,
1995 and 1996 and the results of its operations and its cash flows for each of
the years in the three year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Kansas City, Missouri
March 13, 1997
F-20
<PAGE> 81
GRAIN SYSTEMS DIVISION
(A DIVISION OF BUTLER MANUFACTURING COMPANY)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents................................................ $ -- $ --
------- ------
Receivables
Trade.......................................................... 441 1,615
Other.......................................................... 19 5
------- ------
460 1,620
Less allowance for possible losses............................. 184 204
------- ------
Net receivables........................................... 276 1,416
------- ------
Inventories......................................................... 4,135 5,903
Other current assets................................................ 16 30
------- ------
Total current assets...................................... 4,427 7,349
------- ------
Property, plant and equipment, at cost:
Land................................................................ 506 506
Buildings........................................................... 6,791 6,865
Machinery, tools and equipment...................................... 9,848 10,490
Office furniture and fixtures....................................... 1,278 1,615
Transportation equipment............................................ 26 26
------- ------
18,449 19,502
Less accumulated depreciation....................................... 15,176 15,582
------- ------
Net property, plant, and equipment........................ 3,273 3,920
------- ------
$ 7,700 $ 11,269
======= ======
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable.................................................... $ 640 $ 1,798
Cash overdraft...................................................... 104 136
Due to parent company............................................... 966 390
Accrued expenses.................................................... 2,306 2,553
Accrued payroll..................................................... 192 335
------- ------
Total current liabilities................................. 4,208 5,212
Division equity.......................................................... 3,492 6,057
Commitments and contingencies
------- ------
$ 7,700 $ 11,269
======= ======
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE> 82
GRAIN SYSTEMS DIVISION
(A DIVISION OF BUTLER MANUFACTURING COMPANY)
STATEMENTS OF EARNINGS AND DIVISION EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Net sales................................................. $28,594 $30,588 $41,693
Cost of sales............................................. 23,091 24,071 32,416
------- ------- -------
Gross profit............................... 5,503 6,517 9,277
Selling, general and administrative expenses.............. 2,895 3,224 3,403
------- ------- -------
Operating income........................... 2,608 3,293 5,874
Other income.............................................. 97 199 183
------- ------- -------
Earnings before income taxes............... 2,705 3,492 6,057
Income taxes.............................................. 1,021 1,299 2,349
------- ------- -------
Net earnings............................... 1,684 2,193 3,708
Division equity at beginning of year...................... 3,086 2,705 3,492
------- ------- -------
4,770 4,898 7,200
Transfers of division equity.............................. 2,065 1,406 1,143
------- ------- -------
Division equity at end of year............................ $ 2,705 $ 3,492 $ 6,057
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE> 83
GRAIN SYSTEMS DIVISION
(A DIVISION OF BUTLER MANUFACTURING COMPANY)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................................. $ 1,684 $ 2,193 $ 3,708
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization....................... 424 384 407
Provision for doubtful accounts..................... 10 (1) 20
Change in assets and liabilities:
Accounts receivable............................... (626) 779 (1,160)
Inventories....................................... 473 (418) (1,768)
Other current assets.............................. 4 (10) (14)
Accounts payable.................................. 1,150 (1,009) 1,158
Due to parent company............................. (1,385) (119) (576)
Accrued expenses.................................. 746 290 247
Accrued payroll................................... -- (263) 143
------- ------- -------
Net cash provided by operating activities...... 2,480 1,826 2,165
Cash flows from investing activities -- capital
expenditures................................................ (401) (332) (1,054)
Cash flows from financing activities -- transfers of division
equity...................................................... (2,065) (1,406) (1,143)
------- ------- -------
Net change in cash............................. 14 88 (32)
Cash overdraft at beginning of year........................... (206) (192) (104)
------- ------- -------
Cash overdraft at end of year................................. $ (192) $ (104) $ (136)
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE> 84
GRAIN SYSTEMS DIVISION
(A DIVISION OF BUTLER MANUFACTURING COMPANY)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Business Description
The Grain Systems Division (the Division) manufactures and markets grain
storage, handling and conditioning systems for worldwide use by grain
producers and processors through a network of grain systems dealers.
The Division has no unusual concentration of customers or credit risk
within its primary market. The worldwide and domestic agricultural
economies are subject to fluctuations which have a direct impact on the
operations of the Grain Division.
(b) Affiliation
The Division is a division of Butler Manufacturing Company (parent
company).
Intercompany payable amounts are shown as current liabilities in the
accompanying financial statements as they are due upon demand.
(c) Use of Estimates
Management of the Division has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
(d) Income Taxes
The Division's operations are included in the consolidated federal income
tax return filed by the parent company. Income tax expense is allocated
to the Division which approximates the amount that would have been
applicable on a separate income tax return basis.
Deferred taxes for the Division have been recorded by the Corporate
Division of the parent company and are included in the intercompany
accounts as of December 31, 1995 and 1996.
(e) Property, Plant and Equipment
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets. Expenditures for maintenance and
repairs are charged to expense as incurred. Upon sale or retirement of
assets, the cost and the accumulated depreciation amounts are removed
from the accounts.
(2) INVENTORIES
Inventories are valued at the lower of cost or market. The last-in,
first-out (LIFO) method of determining cost is used for substantially
all domestic inventories. If the first-in, first-out method had been
used for all locations, inventories would have been $952,000, $971,000
and $923,000 higher than those reported at December 31, 1994, 1995 and
1996, respectively.
The use of the LIFO method decreased net earnings by $101,000 in 1994 and
$11,000 in 1995 and increased net earnings by $29,000 in 1996.
F-24
<PAGE> 85
GRAIN SYSTEMS DIVISION
(A DIVISION OF BUTLER MANUFACTURING COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1995 1996
(IN THOUSANDS)
<S> <C> <C>
Raw materials..................................... $3,036 $4,401
Work in process................................... 126 154
Finished goods.................................... 1,944 2,271
------ ------
5,106 6,826
LIFO reserve...................................... (971) (923)
------ ------
$4,135 $5,903
====== ======
</TABLE>
(3) LEASES
Rental expense under operating leases was $35,052, $21,079 and $9,258 in
1994, 1995 and 1996, respectively. Minimum rental commitments under
noncancelable operating leases are $46,291 in 1997, $46,291 in 1998,
$40,450 in 1999, $27,790 in 2000 and $9,227 in 2001.
(4) RELATED PARTY TRANSACTIONS
The parent company provides certain management, corporate, financial and
administrative services to the Division. Charges for these services are
determined by both allocations and direct charges. The charges relate to
pension benefits, insurance and legal costs, taxes, rent and other
business services. All significant charges of the Division incurred by
the parent company have been recorded in the intercompany accounts.
These charges amounted to $1,335,000, $1,616,000 and $1,860,000 in 1994,
1995 and 1996, respectively.
The financial statements of the Division include amounts of land and
buildings of $199,000 and $1,600,000 that are recorded on the books of a
wholly-owned subsidiary of the parent company. A portion of these assets
are used by the Division for office space. The cost, accumulated
depreciation and depreciation expense have been recorded for all years
presented.
(5) COMMITMENTS AND CONTINGENCIES
The Division is a defendant in pending or threatened lawsuits involving its
role as a contractor. Provisions have been made for estimated losses on these
lawsuits. Management believes that the amount of such losses will not exceed
provided amounts.
(6) INCOME TAXES
Deferred taxes are provided for differences arising from using the
accelerated cost recovery method for property, plant and equipment for income
tax purposes and the straight-line depreciation method for financial statement
purposes and where other differences exist between the period in which
transactions are reported for income tax and financial reporting purposes.
The Company has sufficient taxable income in the three-year carryback
period to support the recognition of deferred tax assets.
F-25
<PAGE> 86
GRAIN SYSTEMS DIVISION
(A DIVISION OF BUTLER MANUFACTURING COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following represents the breakout of the deferred tax assets and
liability that have been reflected in the intercompany accounts (in thousands):
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Deferred tax assets:
Operating expenses............................. $ 92 $ 84
Depreciation expense........................... 87 --
----- -----
179 84
----- -----
Deferred tax liabilities:
Operating expenses............................. (286) (465)
Depreciation expenses.......................... -- (69)
----- -----
(286) (534)
----- -----
Net deferred taxes........................ $(107) $(450)
===== =====
</TABLE>
F-26
<PAGE> 87
<TABLE>
<S> <C> <C> <C>
COOPERS ACCOUNTANTS SEUKENLAAN 77 TELEPHONE +31-40-250 06 00
&LYBRAND 5616 VC EINDHOVEN TELEFAX +31-40-250 06 05
P.O. BOX 6365
5500 MS EINDHOVEN
THE NETHERLANDS
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Fancom Holding B.V.
INTRODUCTION
We have audited the accompanying consolidated balance sheets of Fancom
Holding B.V., Panningen, as of December 31, 1995 and 1996 and the related
statements of consolidated income, consolidated cash flow and consolidated
changes in stockholders' equity for each of the years in the three year period
ended December 31, 1996. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
SCOPE
We conducted our audit in accordance with auditing principles generally
accepted in the Netherlands, that are not significantly different from those in
the United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
OPINION
In our opinion, the financial statements present fairly, in all material
respects, the financial position of the company at December 31, 1995 and 1996
and of the results of its operations and its cash flows for each of the years in
the three year period ended December 31, 1996 in accordance with accounting
principles generally accepted in the United States of America.
Eindhoven, June 10, 1997
Coopers & Lybrand N.V.
F-27
<PAGE> 88
FANCOM HOLDING B.V., PANNINGEN
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash................................................................ $ 322 $ 169
Trade receivables................................................... 4,812 5,382
Less: allowance for doubtful accounts............................... (297) (46)
Inventories......................................................... 5,221 4,989
Prepaid expenses and other.......................................... 185 552
------ ------
Total current assets........................................... 10,243 11,046
Property, plant and equipment -- Net................................ 3,519 3,491
------ ------
Total.......................................................... $13,762 $14,537
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.................................................... $ 1,783 $ 1,732
Current portion of long-term debt................................... 1,430 1,326
Bank overdrafts..................................................... 608 1,326
Taxes and social premiums payable................................... 43 430
Other payables and accrued expenses................................. 1,115 1,027
------ ------
4,979 5,841
------ ------
LONG-TERM DEBT........................................................... 5,906 4,324
------ ------
PROVISIONS
Deferred income taxes............................................... 165 183
Accrued postretirement benefits..................................... 124 110
Other provisions.................................................... 200 196
------ ------
489 489
------ ------
MINORITY INTEREST........................................................ (34) 43
------ ------
STOCKHOLDERS' EQUITY
Common stock........................................................ 7,500 7,637
Retained earnings................................................... (6,317) (4,800)
Cumulative translation adjustment................................... 1,239 1,003
------ ------
Total stockholders' equity..................................... 2,422 3,840
------ ------
Total.......................................................... $13,762 $14,537
====== ======
COMMITMENTS AND CONTINGENCIES (NOTE 13).
</TABLE>
See notes to consolidated financial statements.
F-28
<PAGE> 89
GRAIN SYSTEMS DIVISION
(A DIVISION OF BUTLER MANUFACTURING COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FANCOM HOLDING B.V., PANNINGEN
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Net sales..................................................... $17,760 $22,312 $27,175
Cost of sales................................................. 10,389 13,182 16,386
------- ------- -------
Gross profit.................................................. 7,371 9,130 10,789
------- ------- -------
Other operating expenses
Selling expenses.............................................. 3,075 4,193 4,723
General and administrative expenses........................... 2,000 3,084 3,187
------- ------- -------
5,075 7,277 7,910
------- ------- -------
Income from operations........................................ 2,296 1,853 2,879
------- ------- -------
Other income (expense)
Interest income............................................... 17 26 12
Interest expense.............................................. (241) (184) (467)
------- ------- -------
(224) (158) (455)
------- ------- -------
Income before income taxes.................................... 2,072 1,695 2,424
Income taxes.................................................. (706) (720) (830)
Minority interest............................................. 22 141 (77)
------- ------- -------
Net income.................................................... $ 1,388 $ 1,116 $ 1,517
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-29
<PAGE> 90
GRAIN SYSTEMS DIVISION
(A DIVISION OF BUTLER MANUFACTURING COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FANCOM HOLDING B.V., PANNINGEN
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................................... $1,388 $1,116 $1,517
Adjustments to reconcile net income to net cash flows from
operating activities:
Movement in allowances
Inventories............................................ 160 172 (317)
Accounts receivable.................................... 34 (32) (251)
Depreciation tangible fixed assets.......................... 358 495 631
Movement in provisions...................................... 33 22 0
Movement minority interest.................................. 0 (34) 77
Changes in operating assets and liabilities:
Accounts receivable.................................... (651) (796) (570)
Inventories............................................ (181) (1,042) 549
Prepaid expenses and other assets...................... (35) (41) (367)
Accounts payable, accruals and other liabilities....... 642 124 248
------ ------ ------
Net cash flows from operating activities......................... 1,748 (16) 1,517
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment..................... (534) (634) (904)
Exchange differences............................................. (1) 6 13
------ ------ ------
Net cash flows from investing activities......................... (535) (628) (891)
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment to stockholders (restructuring)........................ 0 (6,250) 0
Issuance of common stock......................................... 0 0 137
Proceeds from long-term debt..................................... 0 6,250 51
Payment on debt.................................................. (338) (163) (1,737)
Movements bank overdrafts........................................ (972) 506 718
------ ------ ------
Net cash flows from financing activities......................... (1,310) 343 (831)
NET INCREASE/(DECREASE) IN CASH.................................. (97) (301) (205)
TRANSLATION DIFFERENCES.......................................... 333 328 52
CASH BEGINNING OF YEAR........................................... 59 295 322
------ ------ ------
CASH END OF YEAR................................................. $ 295 $ 322 $ 169
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
F-30
<PAGE> 91
FANCOM HOLDING B.V., PANNINGEN
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
(IN THOUSANDS OF US DOLLARS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
-------------------- RETAINED TRANSLATION
SHARES AMOUNT EARNINGS ADJUSTMENTS TOTAL
<S> <C> <C> <C> <C> <C>
CHANGES 1995
Balance January 1, 1995............... 20 $ 10 $ 6,307 $ 642 $ 6,959
Net income for the year ended December
31, 1995............................ 0 0 1,116 0 1,116
Restructuring December 29, 1995....... 1,199,980 7,490 (13,740) 0 (6,250)
Translation adjustment................ 0 0 0 597 597
--------- ------ -------- ------ -------
Balance December 31, 1995............. 1,200,000 $7,500 $ (6,317) $1,239 $ 2,422
========= ====== ======== ====== =======
CHANGES 1996
Balance January 1, 1996............... 1,200,000 $7,500 $ (6,317) $1,239 $ 2,422
Issuance of shares.................... 24,000 137 0 0 137
Net income for the year ended December
31, 1996............................ 0 0 1,517 0 1,517
Translation adjustment................ 0 0 0 (236) (236)
--------- ------ -------- ------ -------
Balance December 31, 1996............. 1,224,000 $7,637 $ (4,800) $1,003 $ 3,840
========= ====== ======== ====== =======
</TABLE>
See notes to the consolidated financial statements.
F-31
<PAGE> 92
FANCOM HOLDING B.V., PANNINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1994, 1995 AND 1996
(AMOUNTS IN THOUSANDS OF US DOLLARS, EXCEPT FOR SHARE INFORMATION)
1 GROUP INFORMATION
Fancom Holding B.V. was founded on December 29, 1995. At the incorporation
of Fancom Holding B.V. the shares of Fancom B.V., valued at NLG 22 ($13.75)
million, were paid-in as a contribution in kind on the shares issued ($7,500)
and a debt to the sellers of Fancom B.V. ($6,250).
Consequently the financial statements in this report include:
- the consolidated balance sheets of Fancom Holding B.V. as per December
31, 1995 and 1996 and of Fancom B.V. as per December 31, 1994;
- the consolidated statements of income and the consolidated statements of
cash flows of Fancom Holding B.V. for the year ended December 31, 1996
and of Fancom B.V. for the years ended December 31, 1994 and 1995;
- the statement of changes in stockholders' equity of Fancom B.V. for the
years ended December 31, 1994 and 1995 and of Fancom Holding B.V. for the
years ended December 31, 1995 and 1996.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Below, as appropriate, figures are presented taking into account the
changes in group structure described in Note 1.
2.1 NATURE OF THE BUSINESS
The activities of the Fancom Group mainly consist of the development,
the production and selling of computers and peripheral equipment for the
agricultural industry.
2.2 CONSOLIDATION PRINCIPLES
In the consolidated balance sheets and consolidated income statements
the following companies are included, based on management control:
- Fancom Holding B.V., established at Panningen
- Fancom B.V., established at Panningen (100%) and its subsidiaries:
- Masterfan Ventilation B.V. , established at Wierden, Holland (100%)
- E.U.R.L. Fancom, established at Vitre, France (100%)
- Ninova Fancom S.r.l., established in Italy (100%)
- Wolters WX B.V., established at Zwolle, Holland (40% of the
ordinary shares and 100% of the priority shares).
The priority shares entail the appointment, suspension and dismissal
of management, policy-making, the proposal for profit appropriation and the
approval of certain management decisions.
At the end of 1996, the decision was taken to liquidate the Italian
subsidiary as per April 1, 1997. The activities will be transferred to the
Netherlands. The impact on result and equity is minimal.
As per December 31, 1996, stockholders' equity of the Italian
subsidiary amounts to $91. Total assets and net income 1996 amount to $389
and $13 respectively.
Intercompany balances and transactions have been eliminated.
F-32
<PAGE> 93
FANCOM HOLDING R.V., PANNINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1994, 1995 AND
1996 -- (CONTINUED)
2.3 GENERAL ACCOUNTING PRINCIPLES
The principles of valuation and determination of the result remained
unchanged over the periods presented. Assets and liabilities are valued at
costs unless otherwise indicated.
The company recognizes revenue upon shipment of goods to customers or
upon performance of services.
Result represents the difference between the realizable value of the
goods delivered and the costs and other charges for the year. The results
on transactions are recognized in the year in which they are realized;
losses are taken as soon as they are foreseeable.
2.4 FOREIGN CURRENCIES
These financial statements have been translated from the functional
currency (NLG) into US dollars, using the average rates for the respective
income statements and the year-end rates for the related balance sheets.
Resulting gains and losses are included in a separate component of
stockholders' equity.
Assets and liabilities denominated in foreign currencies are
translated at the rate of exchange prevailing on balance sheet date.
Settled transactions in foreign currencies during the reporting period have
been incorporated in the financial statements at the rate of settlement.
Foreign group companies are considered as independent foreign units.
The financial statements denominated in foreign currencies are translated
at the rate prevailing on balance sheet date. The exchange difference for
the initial capital and for the equity movements in the course of the
financial year are directly added to or charged against stockholders'
equity.
2.5 INCOME TAXES
The company accounts for income taxes under Statement of Financial
Accounting Standards No. 109. FAS 109 requires an asset and liability
method of accounting for income taxes. Deferred tax assets are recognized
when it is more likely than not that the benefits will be recognized.
2.6 CASH
Includes $57 which is pledged as a bank guarantee to a supplier. This
item is the only one considered as "cash equivalent".
2.7 INVENTORIES
Finished products and semi-finished products and work in progress are
valued at the lower of cost and market. Cost includes materials (based on
average purchase prices) and direct wages. Raw materials and trade goods
are valued at average purchase prices. An allowance for possible
obsolescence has been included based on the turnover and the aging of the
inventories.
2.8 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at historical cost less
depreciation calculated on the basis of the straight-line method on the
estimated useful lives of the individual assets. Maintenance and repairs
are charged to expense as incurred. The estimated useful lives range from
10 to 25 years for buildings and improvements and from 3 to 7 years for
machinery and equipment.
F-33
<PAGE> 94
FANCOM HOLDING R.V., PANNINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1994, 1995 AND
1996 -- (CONTINUED)
2.9 RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as
incurred.
2.10 ACCRUED POSTRETIREMENT BENEFITS
The company shares in a multi-employer plan both for postretirement
and preretirement benefits. For some employees the company provides
additional pension insurance.
2.11 OTHER PROVISIONS
These provisions have been set up for possible guarantee obligations
resulting from products delivered. In principle the guarantee term is one
year. The provision is based on specific claims asserted against the
company. In addition a provision has been calculated based on recent claim
history.
2.12 DEBTS AND BANKERS
The company pledged the following assets as collateral for the long
term debts and the bank overdrafts:
- the building of the subsidiary in France (on a mortgage)
- the premises (land and buildings) of the company in Parmingen
- the fixtures and furniture, stocks and trade debtors.
3 INVENTORIES
Inventories at December 31, 1995 and 1996 consist of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Raw materials.............................................. $2,658 $2,286
Semi-finished products and work in progress................ 1,617 1,466
Finished products and trade stock.......................... 1,774 1,748
------ ------
Totals..................................................... 6,049 5,500
Less: allowance for obsolete stock......................... (828) (511)
------ ------
Net........................................................ $5,221 $4,989
====== ======
</TABLE>
4 PREPAID EXPENSES AND OTHER
Specified as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Related parties:
Loan general manager..................................... $ 0 $ 57
Due from stockholders.................................... 0 50
Other......................................................... 185 445
---- ----
$185 $552
==== ====
</TABLE>
F-34
<PAGE> 95
FANCOM HOLDING R.V., PANNINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1994, 1995 AND
1996 -- (CONTINUED)
5 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1995 and 1996 consists of the
following (in thousands):
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Land..................................................... $ 336 $ 308
Buildings and improvements............................... 2,689 2,634
Machinery and equipment.................................. 2,466 2,968
----- -----
Total at cost............................................ 5,491 5,910
Less: accumulated depreciation........................... (1,972) (2,419)
----- -----
Book value............................................... $ 3,519 $ 3,491
===== =====
</TABLE>
Specifications of changes in book value (in thousands):
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Acquisitions............................................. $ 634 $ 904
Depreciation............................................. (495) (631)
Translation adjustments.................................. 263 (301)
----- -----
Balance.................................................. $ 402 $ (28)
===== =====
</TABLE>
6 CURRENT LIABILITIES
Other payables and accrued expenses are specified as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Accrued expenses:
Holiday allowance................................... $ 341 $ 325
Miscellaneous....................................... 506 531
----- -----
847 856
Other payables........................................... 268 171
----- -----
$1,115 $1,027
===== =====
</TABLE>
F-35
<PAGE> 96
FANCOM HOLDING R.V., PANNINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1994, 1995 AND
1996 -- (CONTINUED)
7 LONG-TERM DEBT
Specifications of the loans (in thousands):
<TABLE>
<CAPTION>
INTEREST
RATE (1996) 1995 1996
<S> <C> <C> <C>
ABN-Amro bank:
Loan 023.................................................. 9.90% $ 289 $ 165
Loan 160.................................................. 10.10 250 189
Loan 697.................................................. 5.10 6,250 4,871
Loan 700.................................................. 4.15 177 129
Loan 974.................................................. 5.10 285 218
Financial lease........................................... 11.50 33 0
BNP (France)................................................... 9.00 52 40
FMN Finance House (financial lease)............................ 6.40 0 38
------ ------
7,336 5,650
Current portion................................................ 1,430 1,326
------ ------
$5,906 $4,324
====== ======
</TABLE>
Current portion has been included in current liabilities.
Repayment schedule (in thousands):
<TABLE>
<S> <C>
1998................................................................ $1,327
1999................................................................ 1,264
2000................................................................ 1,239
2001................................................................ 379
2002................................................................ 115
------
$4,324
======
</TABLE>
Under declaration of joint and several liability, Fancom B.V. and Masterfan
Ventilatie B.V. pledged the following assets in relation to the loans issued by
ABN-Amro:
- the company facility and the site Industrieterrein 34 at Pannington
(mortgage of $1,862);
- pledge of business inventory, stocks and receivables.
8 ACCRUED POSTRETIREMENT BENEFITS
The company has defined benefits pension plans covering nearly all of its
employees in the Netherlands. Plan benefits are based on years of service and
compensation levels at the time of retirement or average compensation levels
over the last years before retirement.
The major part of the pension obligations is covered by a mandatory pension
plan. This mandatory plan is administered by the pension fund
"Bedrijfstakpensioenfonds van de metaalindustrie". The mandatory plan is a
multi-employer plan as defined in SFAS No. 87, "Employers' Accounting for
Pensions". For the years ended December 31, 1994, 1995 and 1996, amounts charged
(credited) to earnings by the company for the multi-employer defined benefit
pension plans totalled $63, $(32) and $72 respectively.
The remaining plans are single employer plans providing benefits to
employees with salaries in excess of the maximum salary for the multi-employer
plan, and for the two directors of the company.
F-36
<PAGE> 97
FANCOM HOLDING R.V., PANNINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1994, 1995 AND
1996 -- (CONTINUED)
The company's funding policy is to fund amounts as are necessary on an
actuarial basis to provide for vested benefits.
Plan assets of the single employer plans are participating annuity
contracts as defined in SFAS No. 87.
Net periodic pension expense of single employer plans for the years 1994,
1995 and 1996 included the following components (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Service cost benefits earned during the year.................. $18 $21 $25
Interest cost on the projected benefit obligations............ 17 21 24
Actual return on plan assets.................................. (7) 2 3
Net total of other components................................. 6 (4) (7)
--- --- ---
Net periodic pension cost..................................... $34 $40 $45
=== === ===
</TABLE>
The actuarial present value of benefit obligations and funded status for
the company's single employer plans were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated............................................................ $ 353 $ 278
Projected.............................................................. 330 353
Plan assets at fair value................................................... 172 202
----- -----
Plan assets less than projected benefit obligation.......................... (158) (151)
Unrecognized transition obligation.......................................... 34 28
Unrecognized net loss....................................................... 0 13
----- -----
Accrued pension cost........................................................ $(124) $(110)
===== =====
</TABLE>
Assumptions used in developing the projected benefit obligation as of
December 31 were as follows:
<TABLE>
<CAPTION>
1994 1995 1996
% % %
<S> <C> <C> <C>
Weighted average discount rates....................................... 7.0 7.0 7.0
Expected long-term rate of return on assets........................... 4.0 4.0 4.0
Assumed rate of increase in future compensation....................... 2.0 2.0 2.0
</TABLE>
9 STOCKHOLDERS' EQUITY
Authorized capital as at December 31, 1996 amounts to $11,460, being
2,000,000 ordinary shares of $5.73 (NLG 10) each. Issued and fully paid are
1,224,000 shares. No dividends have been paid on these shares yet.
As at December 31, 1996, 33,000 share options have been issued to the
general manager at an exercise rate of $5.73 (NLG 10) per share. The option
rights are exercised April 1997.
F-37
<PAGE> 98
FANCOM HOLDING R.V., PANNINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1994, 1995 AND
1996 -- (CONTINUED)
10 TAXES
10.1 DEFERRED TAXES
The deferred tax liability relates to the pension obligations in the
Netherlands (fiscal unity) and has been calculated as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Pension obligations:
Fiscal purposes............................................ $595 $632
In US GAAP................................................. 124 110
---- ----
Difference...................................................... $471 $522
==== ====
35% deferred taxes.............................................. $165 $183
==== ====
</TABLE>
Deferred tax liabilities are principally long-term.
The company has tax losses carried forward in Italy in an amount of
$114, but does not recognize a deferred tax asset, since realization is not
expected because of discontinued operations as per April 1, 1997.
No other deferred tax assets exist.
10.2 CURRENT TAXES
Per tax jurisdiction the position is as follows (in thousands):
<TABLE>
<CAPTION>
CURRENT INCOME
PAYABLE BEFORE TAXES
END OF YEAR TAXES ON INCOME
<S> <C> <C> <C>
1994
The Netherlands (fiscal unity)........... $ 511 $2,203 $ 685
The Netherlands (other).................. 0 (166) 0
France................................... 0 51 17
Italy.................................... 0 (16) 3
----- ------ -----
$ 511 $2,072 $ 705
===== ====== =====
1995
The Netherlands (fiscal unity)........... $ (41) $1,787 $ 692
The Netherlands (other).................. 0 (112) 0
France................................... 6 65 28
Italy.................................... (3) (44) 0
----- ------ -----
$ (38) $1,696 $ 720
===== ====== =====
1996
The Netherlands (fiscal unity)........... $ (72) $2,120 $ 746
The Netherlands (other).................. 38 179 40
France................................... 11 105 38
Italy.................................... 7 20 6
----- ------ -----
$ (16) $2,424 $ 830
===== ====== =====
</TABLE>
F-38
<PAGE> 99
FANCOM HOLDING R.V., PANNINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1994, 1995 AND
1996 -- (CONTINUED)
11 ADDITIONAL INCOME STATEMENT INFORMATION
11.1 GEOGRAPHICAL DIVISION OF NET SALES (IN % OF TOTAL)
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
The Netherlands...................................... 41 43 45
Other EU--countries.................................. 44 44 46
USA and Canada....................................... 11 6 4
Rest of world........................................ 4 7 5
--- --- ---
100 100 100
=== === ===
</TABLE>
11.2 NET SALES PER PRODUCT GROUP (IN % OF TOTAL)
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Pigs climate control................................. 45 48 54
Pigs feeding/manure rinsing.......................... 7 12 14
Mushrooms/storage.................................... 10 9 6
Poultry automation................................... 34 28 22
Other................................................ 4 3 4
--- --- ---
100 100 100
=== === ===
</TABLE>
11.3 RESEARCH AND DEVELOPMENT EXPENSES (IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Expenses........................................... $870 $1,157 $1,170
</TABLE>
12 ADDITIONAL CASH FLOW INFORMATION (IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Interest paid....................................... $226 $ 227 $402
Corporate taxes paid................................ 582 1,310 811
</TABLE>
13 CONTINGENCIES AND COMMITMENTS
The company leased some cars and computer equipment. Some subsidiaries are
located in a rented building.
Further a bank guarantee of approximately $179 has been rendered. The Dutch
companies within the group form a fiscal entity for income tax purposes; each of
the companies is jointly and severally liable for the tax debt of the entire
entity.
F-39
<PAGE> 100
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING OTHER
THAN THAT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE COMMON STOCK BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR
IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 9
Special Note Regarding Forward-Looking
Statements............................... 13
Use of Proceeds............................ 13
Dividend Policy............................ 14
Dilution................................... 14
Capitalization............................. 16
Unaudited Pro Forma Consolidated Financial
Statements............................... 17
Selected Consolidated Financial Data....... 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 26
Business................................... 31
Management................................. 44
Certain Relationships and Related
Transactions............................. 49
Principal Stockholders..................... 52
Description of Capital Stock............... 53
Description of Credit Agreement............ 54
Shares Available for Future Sale........... 56
Underwriting............................... 57
Legal Matters.............................. 58
Experts.................................... 58
Additional Information..................... 59
Index to Consolidated Financial
Statements............................... F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTION.
======================================================
======================================================
5,000,000 SHARES
[LOGO]
CTB INTERNATIONAL CORP.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GEORGE K. BAUM & COMPANY
CHASE SECURITIES INC.
, 1997
======================================================
<PAGE> 101
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an itemization of the estimated costs expected to be
incurred in connection with the offer and sale of the securities registered
hereby.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.............................. $27,878.79
----------
NASD filing fee.................................................................. 9,700.00
Nasdaq National Market Listing Fee............................................... 30,000.00
----------
Transfer Agent Fee............................................................... *
Blue Sky Fees and Expenses....................................................... *
Printing and Engraving Expenses.................................................. *
Legal Fees and Expenses.......................................................... *
Accounting Fees and Expenses..................................................... *
Miscellaneous.................................................................... *
----------
Total.................................................................. $ *
==========
</TABLE>
- ------------------------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe his or her conduct was illegal.
A Delaware corporation may indemnify officers and directors against expenses
(including attorney's fees) in connection with the defense or settlement of an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such officer or director actually and reasonably incurred.
In accordance with the Delaware Law, the Restated Certificate of
Incorporation of the Company contains a provision to limit the personal
liability of the directors of the Company for violations of their fiduciary
duty. This provision eliminates each director's liability to the Company or its
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware Law providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions or (iv) for any transaction from which a director derived an
improper personal benefit. The effect of this provision is to eliminate the
personal liability of directors for monetary damages for actions involving a
breach of their fiduciary duty of care, including any such actions involving
gross negligence.
II-1
<PAGE> 102
Pursuant to underwriting agreements filed as exhibits to registration
statements relating to underwritten offerings of securities, the underwriters
parties thereto have agreed to indemnify each officer and director of the
Company and each person, if any, who controls the Company within the meaning of
the Securities Act of 1933, against certain liabilities, including liabilities
under said Act.
The directors and officers of the Company are covered by directors' and
officers' insurance policies.
The Restated Certificate of Incorporation of the Company provides for
indemnification of the officers and directors of the Company to the full extent
permitted by applicable law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the CTB Acquisition, the Company issued and sold 388,000
shares of its Common Stock and 15,520 shares of its Preferred Stock to American
Securities, 190,519 shares of its Common Stock and 7,620.75 shares of its
Preferred Stock to certain founding family members, 21,481 shares of its Common
Stock and 859.25 shares of its Preferred Stock to certain members of management
of the Company. The purchase price was $10 per share of Common Stock and $1,000
per share of Preferred Stock in cash or, in the case of the founding family
members and certain members of management, an equivalent value in shares of
common stock of Old CTB.
In connection with the acquisition of Fancom Holding B.V., the Company
issued and sold 1,755 shares of its Common Stock and 69 shares of its Preferred
Stock to two members of Fancom's management at a purchase price of $132 per
share and $1,000 per share, respectively.
The foregoing transactions were exempt from registration under the
Securities Act by virtue of Section 4(2) thereof as transactions not involving
any public offering.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Form of Restated Certificate of Incorporation of the Company*
3.2 Form of By-laws of the Company*
4.1 Specimen Certificate of Common Stock of the Company*
5.1 Opinion of Simpson Thacher & Bartlett regarding the legality of the Common Stock*
10.1 Credit Agreement, dated as of , 1997, by and among CTB, Inc. and KeyBank
National Association*
10.2 Guaranty, dated as of December 22, 1995, by and among the Company, CTB, Inc. and
KeyBank National Association*
10.3 Asset Purchase Agreement, dated as of March 31, 1997, by and among Butler
Manufacturing Company and CTB, Inc.
10.4 Share Purchase Agreement, dated as of May 1, 1997, by and among Chore-Time Brock
Holding B.V. and Halder Investments III B.V., Halder Investments III C.V.,
Stichting Fondshebeer Fincon, Beldor B.V., V. Berger, A. Faber, J. Paquet, J.H.M.
Cremers and H.W. Gootzen and Fancom Holding B.V.
10.5 Asset Purchase Agreement, dated as of May 29, 1997, between CTB, Inc. and Royal
Crown Limited
10.6 Stock Purchase Agreement, dated as of November 29, 1995, by and among the Company,
CTB Ventures, Inc., CTB, Inc., and the selling shareholders party thereto
10.7 Stockholders Agreement, dated as of January 4, 1996, by and among the Company and
the Individual Shareholders party thereto
10.8 Board Representation Agreement, dated as of January 4, 1996, by and among American
Securities Capital Partners, L.P., J. Christopher Chocola, Caryl Chocola and the
Company
10.9 Form of Non-Qualified Stock Option Agreement
10.10 Profit Sharing Plan*
10.11 Management Incentive Compensation Plan*
</TABLE>
II-2
<PAGE> 103
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
<C> <S>
10.12 Escrow Agreement, dated as of November 29, 1995, by and among CTB Ventures, Inc.,
the shareholders party thereto and NBD Bank, N.A.
10.13 Management Consulting Agreement, dated as of January 4, 1996, by and among CTB, Inc.
and American Securities Capital Partners, L.P.
10.14 Agreement for Partial Release of Escrowed Funds, dated as of March 1, 1997, by and
among CTB, Inc. and each of the shareholders party thereto
10.15 Transaction Consulting Agreement, dated as of April 30, 1997, by and among the
Company and American Securities Capital Partners, L.P.
10.16 Transaction Consulting Agreement, dated as of April 30, 1997, by and among CTB, Inc.
and American Securities Capital Partners, L.P.
11.1 Statement regarding computation of per share earnings*
16.1 Letter regarding change of Independent Accountants
21.1 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Price Waterhouse LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Coopers & Lybrand N.V.
23.5 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1)*
24.1 Power of Attorney (contained on signature page)
27.1 Financial Data Schedule*
</TABLE>
- ------------------------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the
Representatives of the Underwriters at the closing specified in the Underwriting
Agreement certificates for Common Stock in such denominations and registered in
such names as required by the Representatives of the Underwriters to permit
prompt delivery to each purchaser of Common Stock.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 104
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the State of Indiana, on the 24th day
of June, 1997.
CTB INTERNATIONAL CORP.
By: /s/ J. CHRISTOPHER CHOCOLA
-----------------------------------
Title: President and Chief
Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being an
officer or director, or both, of CTB International Corp., a Delaware corporation
(the "Company"), do hereby make, constitute and appoint Michael G. Fisch, David
Horing, Michael J. Kissane and Don J. Steinhilber, and each of them
attorneys-in-fact and agents of the undersigned with full power and authority of
substitution and resubstitution, in any and all capacities, to execute for and
on behalf of the undersigned any and all pre-effective and post-effective
amendments or supplements to this Registration Statement on Form S-1 relating to
the shares of Common Stock of the Company and any other documents and
instruments incidental thereto, including any Registration Statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, and to deliver and
file the same, with all exhibits thereto, and all documents and instruments in
connection therewith, with the Securities and Exchange Commission, and with each
exchange on which any class of securities of the Company is registered, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing that said
attorneys-in-fact and agents, and each of them, deem advisable or necessary to
enable the Company to effectuate the intents and purposes hereof, and the
undersigned hereby fully ratify and confirm all that said attorneys-in-fact and
agents, or any of them, or their respective substitutes, if any, shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------ ----------------------------- -------------------
<C> <S> <C>
/s/ J. CHRISTOPHER CHOCOLA President, Chief Executive June 24, 1997
- ------------------------------------------ Officer and Director
J. Christopher Chocola (Principal Executive Officer)
/s/ DON J. STEINHILBER Vice President, Chief June 24, 1997
- ------------------------------------------ Financial Officer and
Don J. Steinhilber Treasurer (Principal
Financial Officer and Chief
Accounting Officer)
/s/ MICHAEL G. FISCH Chairman of the Board of June 24, 1997
- ------------------------------------------ Directors
Michael G. Fisch
/s/ CARYL M. CHOCOLA Director June 24, 1997
- ------------------------------------------
Caryl M. Chocola
/s/ DAVID HORING Director June 24, 1997
- ------------------------------------------
David Horing
/s/ CHARLES D. KLEIN Director June 24, 1997
- ------------------------------------------
Charles D. Klein
</TABLE>
II-4
<PAGE> 105
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DOCUMENT DESCRIPTION PAGE
<C> <S> <C>
1.1 Form of Underwriting Agreement*
3.1 Form of Restated Certificate of Incorporation of the Company*
3.2 Form of By-laws of the Company*
4.1 Specimen Certificate of Common Stock of the Company*
5.1 Opinion of Simpson Thacher & Bartlett regarding the legality of the Common
Stock*
10.1 Credit Agreement, dated as of , 1997, by and among CTB, Inc. and
KeyBank National Association*
10.2 Guaranty, dated as of December 22, 1995, by and among the Company, CTB,
Inc. and KeyBank National Association*
10.3 Asset Purchase Agreement, dated as of March 31, 1997, by and among Butler
Manufacturing Company and CTB, Inc.
10.4 Share Purchase Agreement, dated as of May 1, 1997, by and among Chore-Time
Brock Holding B.V. and Halder Investments III B.V., Halder Investments
III C.V., Stichting Fondshebeer Fincon, Beldor B.V., V. Berger, A.
Faber, J. Paquet, J.H.M. Cremers and H.W. Gootzen and Fancom Holding
B.V.
10.5 Asset Purchase Agreement, dated as of May 29, 1997, between CTB, Inc. and
Royal Crown Limited
10.6 Stock Purchase Agreement, dated as of November 29, 1995, by and among the
Company, CTB Ventures, Inc., CTB, Inc., and the selling shareholders
party thereto
10.7 Stockholders Agreement, dated as of January 4, 1996, by and among the
Company and the Individual Shareholders party thereto
10.8 Board Representation Agreement, dated as of January 4, 1996, by and among
American Securities Capital Partners, L.P., J. Christopher Chocola,
Caryl Chocola and the Company
10.9 Form of Non-Qualified Stock Option Agreement
10.10 Profit Sharing Plan*
10.11 Management Incentive Compensation Plan*
10.12 Escrow Agreement, dated as of November 29, 1995, by and among CTB
Ventures, Inc., the shareholders party thereto and NBD Bank, N.A.
10.13 Management Consulting Agreement, dated as of January 4, 1996, by and among
CTB, Inc. and American Securities Capital Partners, L.P.
10.14 Agreement for Partial Release of Escrowed Funds, dated as of March 1,
1997, by and among CTB, Inc. and each of the shareholders party thereto
10.15 Transaction Consulting Agreement, dated as of April 30, 1997, by and among
the Company and American Securities Capital Partners, L.P.
10.16 Transaction Consulting Agreement, dated as of April 30, 1997, by and among
CTB, Inc. and American Securities Capital Partners, L.P.
11.1 Statement regarding computation of per share earnings*
16.1 Letter regarding change of Independent Accountants
21.1 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Price Waterhouse LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Coopers & Lybrand N.V.
23.5 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1)*
24.1 Power of Attorney (contained on signature page)
27.1 Financial Data Schedule*
</TABLE>
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* To be filed by amendment.
<PAGE> 1
EXHIBIT 10.03
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
between
BUTLER MANUFACTURING COMPANY
and
CTB, INC.
Dated as of March 31, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PAGE
<TABLE>
<S> <C>
1. Purchase and Sale of Assets, Assumption of Certain Liabilities........................................... 1
1.1 Transfer of Assets........................................................................... 1
1.2 Excluded Assets.............................................................................. 3
1.3 Instruments of Conveyance and Transfer....................................................... 5
1.4 Further Assurances........................................................................... 5
1.5 Assumed Liabilities.......................................................................... 5
2. Closing, Payment of Purchase Price....................................................................... 7
2.1 Closing Date................................................................................. 7
2.2 Preliminary Purchase Price and Payment....................................................... 7
2.3 Cash Purchase Price Adjustment and Payment................................................... 8
2.4 Allocation of Purchase Price................................................................. 10
2.5 Accounts Receivable.......................................................................... 11
3. Representations and Warranties........................................................................... 11
3.1 Representations and Warranties of Seller..................................................... 11
(a) Due Organization, Power; Capacity, Good Standing, Ownership........................... 11
(b) Authorization and Validity............................................................ 11
(c) No Governmental Approvals or Notices Required; No Conflict............................ 12
(d) Financial Information, Liabilities.................................................... 12
(e) Title and Condition of Properties, Absence of Liens................................... 13
(f) Governmental Regulations.............................................................. 13
(g) Licenses and Government Approvals..................................................... 14
(h) Contracts, List of Properties, Permits and Other Data................................. 14
(i) Real Estate........................................................................... 15
(j) Legal Proceedings..................................................................... 17
(k) Insurance............................................................................. 17
(l) Labor................................................................................. 18
(m) Accounts Receivable................................................................... 19
(n) Inventories........................................................................... 19
(o) Product and Service Warranty.......................................................... 19
(p) Intellectual Property................................................................. 19
(q) Compliance with Law and Requirements.................................................. 20
(r) Employee Benefit Programs............................................................. 20
(s) Certain Fees.......................................................................... 21
(t) Absence of Certain Changes or Events.................................................. 21
(u) Environmental Matters................................................................. 22
(v) Entire Business....................................................................... 23
(w) Tax Matters........................................................................... 23
(x) Affiliate Transactions................................................................ 24
(y) Disclosure............................................................................ 24
</TABLE>
i
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<TABLE>
<S> <C>
3.2 Representations and Warranties of Buyer...................................................... 24
(a) Due Organization and Power............................................................ 24
(b) Authorization and Validity............................................................ 24
(c) Governmental Approvals; No Conflict................................................... 25
(d) Brokers' Fees......................................................................... 25
(e) Disclosure............................................................................ 25
(f) Financing............................................................................. 25
(g) Confidential Information.............................................................. 25
3.3 Survival of Representations.................................................................. 26
3.4 Disclosure Schedules......................................................................... 26
4. Agreements............................................................................................... 26
4.1 Access to Information........................................................................ 26
4.2 Conduct of the Business...................................................................... 27
4.3 Further Actions.............................................................................. 29
4.4 Antitrust Laws............................................................................... 29
4.5 Notification................................................................................. 30
4.6 No Inconsistent Action....................................................................... 30
4.7 Representations and Warranties............................................................... 30
4.8 Execution of Additional Acquisition Agreements............................................... 30
4.9 Covenant Not to Compete...................................................................... 30
4.10 Termination of Affiliate Transactions........................................................ 32
4.11 Customer Claims on Product Warranties and Purchase of Past Due
Accounts Receivable...................................................................... 32
4.12 Confidentiality.............................................................................. 32
4.13 Right to Challenge........................................................................... 33
4.14 Certain Losses............................................................................... 33
4.15 Title Commitment and Survey.................................................................. 33
(a) Title Commitment...................................................................... 33
(b) Survey................................................................................ 33
(c) Review of Title and Survey............................................................ 33
4.16 Other Agreements............................................................................. 34
4.17 Environmental Review......................................................................... 34
5. Conditions Precedent..................................................................................... 34
5.1 Conditions Precedent to Obligations of Parties............................................... 34
(a) No Injunction, etc.................................................................... 34
(b) HSR Act............................................................................... 34
(c) Government Actions.................................................................... 35
(d) Pension Benefit Guaranty Corporation.................................................. 35
(e) Supply Purchase Agreement. .......................................................... 35
5.2 Conditions Precedent to Obligations of Buyer................................................. 35
(a) Accuracy of Representations and Warranties............................................ 35
(b) Performance of Obligations............................................................ 35
</TABLE>
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<TABLE>
<S> <C>
(c) Officer's Certificate................................................................. 35
(d) Opinions.............................................................................. 35
(e) Consents, etc......................................................................... 35
(f) Additional Acquisition Agreements..................................................... 36
(g) Title Insurance; Surveys.............................................................. 36
(h) Environmental Matters................................................................. 36
5.3 Conditions Precedent to the Obligations of Seller............................................ 36
(a) Accuracy of Representations and Warranties............................................ 36
(b) Performance of Obligations............................................................ 36
(c) Officer's Certificate................................................................. 37
(d) Opinions.............................................................................. 37
(e) Additional Acquisition Agreements..................................................... 37
(f) Environmental Issues.................................................................. 37
6. Employees and Employee Benefits.......................................................................... 37
6.1 Employment Agreements........................................................................ 37
6.2 Collective Bargaining Agreements............................................................. 38
6.3 Offer of Employment to Other Employees....................................................... 38
6.4 Compliance with "WARN"....................................................................... 38
6.5 Non-Solicitation of Employees; No Transfers.................................................. 38
6.6 Employee Benefits and Compensation........................................................... 38
(a) Hourly Employees--Hourly Employees' Pension Plan...................................... 38
(b) Transferred Employees - Benefits After the Closing.................................... 39
(c) Employees-Obligations With Respect to Retiree and Other Benefits
Pre Closing and Severance Claims................................................... 39
(d) COBRA Coverage........................................................................ 40
(e) Workers' Compensation, Disability and Unemployment
Compensation Claims................................................................ 40
(f) Record Keeping........................................................................ 40
(g) Payment of Regular Payroll Accrued As of the Closing Date and
Vacation........................................................................... 40
(h) No Third Party Beneficiaries.......................................................... 41
7. Termination.............................................................................................. 41
7.1 General...................................................................................... 41
7.2 No Liabilities in Event of Termination....................................................... 41
8. Indemnification.......................................................................................... 41
8.1 Seller Indemnity............................................................................. 41
8.2 Buyer Indemnity.............................................................................. 42
8.3 Third Party Claims........................................................................... 42
8.4 Additional Agreements........................................................................ 43
</TABLE>
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<TABLE>
<S> <C>
9. Miscellaneous............................................................................................ 44
9.1 Public Announcements......................................................................... 44
9.2 Expenses..................................................................................... 45
9.3 Transfer Taxes and Recording Expenses........................................................ 45
9.4 Notices...................................................................................... 45
9.5 Entire Agreement............................................................................. 46
9.6 Binding Effect; Benefit...................................................................... 46
9.7 Bulk Sales Law............................................................................... 46
9.8 Assignability................................................................................ 46
9.9 Amendment; Waiver............................................................................ 46
9.10 Section Headings; Table of Contents.......................................................... 47
9.11 Severability................................................................................. 47
9.12 Counterparts................................................................................. 47
9.13 Arbitration.................................................................................. 47
9.14 APPLICABLE LAW; JURISDICTION; VENUE.......................................................... 47
9.15 Knowledge.................................................................................... 48
</TABLE>
iv
<PAGE> 6
SCHEDULES
<TABLE>
<S> <C>
Schedule 1.1(a) -- Intellectual Property
Schedule 1.1(b) -- Assumed Contracts
Schedule 1.1(c) -- Real Property
Schedule 1.1(d) -- Leaseholds
Schedule 1.1(f) -- Equipment, Machinery and Vehicles
Schedule 1.2(c) -- Excluded Contracts
Schedule 1.2(k) -- Jointly Used Assets
Schedule 1.2(n) -- Excluded Real Estate
Schedule 2.3(g) -- Pro Forma Closing Balance Sheet
Schedule 3.1(c) -- Consents, Approvals, etc.
Schedule 3.1(d)(i)(a) -- Year-End Financial Statements
Schedule 3.1(d)(i)(b) -- Interim Financial Statements
Schedule 3.1(g) -- Licenses, Permits and Franchises
Schedule 3.1(i) -- Liens on Real Property
Schedule 3.1(k) -- Insurance
Schedule 3.1(1) -- Labor Issues
Schedule 3.1(q) -- Compliance With Law
Schedule 3.1(r) -- Employee Benefit Programs
Schedule 3.1(t) -- Certain Changes and Events
Schedule 3.1(u) -- Environmental Matters
Schedule 3.1(x) -- Affiliate Transactions
Schedule 3.2(c) -- Consents, Approvals, etc.
Schedule 4.2(d) -- Permitted Contracts
Schedule 4.2(e) -- Permitted Employment Agreements
Schedule 4.10 -- Termination of Affiliate Transactions
Schedule 4.11 -- Procedure for Customer Claims
Schedule 6.1 -- Employment Agreements
Schedule 6.4 -- WARN Pre-Closing Activities
</TABLE>
v
<PAGE> 7
EXHIBITS
Exhibit A -- Form of Assumption Agreement
Exhibit B -- Form of Escrow Agreement
Exhibit C -- Form of Opinion of Seller's General Counsel
Exhibit D -- Form of Opinion of Buyer's General Counsel
Exhibit E -- Form of Trademark License Agreement
vi
<PAGE> 8
INDEX OF DEFINED TERMS
Acquisition ....................................... 1
ADA ............................................... 14
Additional Acquisition Agreements ................. 30
Adjusted Net Asset Value .......................... 9
Affiliate ......................................... 5
Agreement ......................................... 1
Allocation ........................................ 10
Antitrust Division ................................ 29
Assets ............................................ 3
Assumed Contracts ................................. 1
Assumed Liabilities ............................... 6
Assumption Agreement .............................. 6
Balance Sheet ..................................... 12
Bucon ............................................. 34
Business .......................................... 1
Buyer ............................................. 1
Buyer Acquisition Documents ....................... 24
Buyer Indemnified Persons ......................... 41
Buyer's Closing Balance Sheet ..................... 8
Cash Purchase Price ............................... 9
Claim ............................................. 43
Closing ........................................... 7
Closing Balance Sheet ............................. 10
Closing Date ...................................... 7
Code .............................................. 10
Confidential Information .......................... 44
Customer Claim .................................... 44
Division .......................................... 1
Environmental Claim ............................... 44
Environmental Laws ................................ 22
Environmental Permits ............................. 23
Environmental Report .............................. 23
ERISA ............................................. 20
Escrow Agent ...................................... 7
Escrow Agreement .................................. 7
Estimated Closing Balance Sheet ................... 8
Excluded Assets ................................... 3
Excluded Contracts ................................ 3
Excluded Liabilities .............................. 6
Excluded Liability ................................ 6
Express Disclosure Schedule ....................... 26
Final Closing Balance Sheet ....................... 19
vii
<PAGE> 9
FTC ......................................................... 29
GAAP ........................................................ 10
Hourly Employees ............................................ 38
HSR Act ..................................................... 12
Indemnitee .................................................. 43
Indemnitor .................................................. 43
Independent Accounting Firm ................................. 9
Intellectual Property ....................................... 1
IRS ......................................................... 10
Jointly Used Assets ......................................... 4
Lease ....................................................... 17
Licenses .................................................... 14
Liens ....................................................... 12
Material Adverse Effect ..................................... 15
Materials of Environmental Concern .......................... 23
Noncompete Period ........................................... 30
Other Disclosure Schedules .................................. 26
Owned Real Property ......................................... 33
Pension Plan ................................................ 39
Permitted Liens ............................................. 13
Plans ....................................................... 20
Preliminary Adjusted Net Asset Value ........................ 8
Preliminary Cash Purchase Price ............................. 8
Pro Forma Closing Balance Sheet ............................. 10
Product Warranties .......................................... 1
Real Property ............................................... 15
Review Period ............................................... 33
Salaried Employees .......................................... 38
Seller ...................................................... 1
Seller Acquisition Documents ................................ 11
Seller Indemnified Person(s) ................................ 42
Seller's Adjusted Net Asset Value Calculation ............... 8
Seller's Dispute Notice ..................................... 8
Severance Claims ............................................ 37
Supply Purchase Agreement ................................... 11
Survey ...................................................... 33
Tax authority ............................................... 24
Tax Claim ................................................... 44
Tax Returns ................................................. 24
Tax(es) ..................................................... 23
Title Commitment ............................................ 33
Title Insurer ............................................... 33
Title Policies .............................................. 36
Trademark License Agreement ................................. 4
Transferred Employees ....................................... 39
viii
<PAGE> 10
ASSET PURCHASE AGREEMENT, dated as of the close of business on March
31, 1997 (this "AGREEMENT"), between BUTLER MANUFACTURING COMPANY, a Delaware
corporation ("SELLER") and CTB, INC., an Indiana corporation ("BUYER").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of manufacturing and
marketing grain storage bins and marketing grain conditioning and handling
equipment through its Grain Systems Division (the "DIVISION");
WHEREAS, upon and subject to the terms and conditions set forth herein,
Buyer desires to buy and Seller desires to sell the business, assets and other
rights of the Division (collectively, the "BUSINESS"), and Buyer is willing to
assume certain related ordinary course liabilities and obligations of Seller
related to the Business, all as hereinafter set forth (such acquisition and
assumption is collectively referred to as the "ACQUISITION");
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereto, it is hereby agreed as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS, ASSUMPTION OF CERTAIN LIABILITIES
1.1 TRANSFER OF ASSETS. On the basis of the representations,
warranties, covenants and agreements and subject to the satisfaction (or waiver
by the party whose obligations hereunder are subject to such satisfaction) of
the conditions set forth in this Agreement, on the Closing Date (as defined in
Section 2.1), Seller shall sell, convey, assign, transfer and deliver to Buyer,
and Buyer shall purchase and acquire from Seller, all of Seller's right, title
and interest in and to the properties, assets and other rights (other than the
Excluded Assets) owned or leased by, or licensed to Seller and used exclusively
in the Business, including, without limitation, the following:
(a) all copyrights, trademarks, tradenames, service marks,
patents and other similar rights or intellectual property of Seller
which is listed on Schedule 1.1(a), including all goodwill associated
therewith and all applications and registrations therefor and all
licenses, sublicenses, covenants or other agreements with respect
thereto (collectively, the "INTELLECTUAL PROPERTY");
(b) all contracts and agreements of Seller for the conduct of
the Business, including leases of real and personal property, license
and distributorship agreements, dealer agreements, supply agreements,
purchase agreements and purchase orders, outstanding quotations and
agency agreements, listed on Schedule 1.1(b) and such other contracts
and agreements of Seller for the conduct of the Business entered into
prior to the date hereof and not listed on Schedule 1.1(b) the benefits
of which Buyer elects to assume in its sole discretion, together with
all such contracts and agreements for the conduct of the Business that
are entered into in the ordinary course of business of the Business
between the date hereof and the Closing Date other than in violation of
Section 4.2 and other than express or implied product warranties
("PRODUCT WARRANTIES") issued in connection with the sale of goods by
the Business (the "ASSUMED CONTRACTS");
<PAGE> 11
(c) all real property used by the Business that is owned by
Seller and listed on Schedule 1.1(c) and all buildings, structures and
other improvements and fixtures located on such real property and any
additions, improvements, replacements and alterations thereto between
the date of this Agreement and the Closing Date;
(d) all leasehold interests in real property relating to the
Business leased by Seller listed on Schedule 1.1(d), including all
buildings, structures and other improvements located on such real
property and any additions, improvements, replacements and alterations
thereto between the date of this Agreement and the Closing Date;
(e) all office furniture, furnishings and fixtures of Seller
that is used exclusively in the Business and that is located on the
real property or leaseholds listed on Schedules 1.1(c) and 1.1(d) and
any additions, improvements, replacements and alterations thereto
between the date of this Agreement and the Closing Date and all
warranties and guarantees, if any, express or implied in respect of the
foregoing;
(f) all equipment, machinery and vehicles of Seller used
exclusively by the Business, including, without limitation, all
equipment, machinery and vehicles listed on Schedule 1.1(f) and any
additions, improvements, replacements and alterations thereto between
the date of this Agreement and the Closing Date, and all warranties and
guarantees, if any, express or implied in respect of the foregoing;
(g) all management information systems and software, customer,
subscriber and vendor lists, catalogs, research material, technical
information and technology used exclusively by the Business;
(h) all prepayments and prepaid expenses made exclusively for
the Business unless the same relate to contracts or agreements that are
not included in the Assumed Contracts and Assumed Liabilities;
(i) all advertising, promotional, marketing and other similar
agreements entered into exclusively for the benefit of the Business and
all sales promotion and selling literature and promotional and
advertising materials used exclusively by the Business;
(j) all books, records and accounts of Seller used exclusively
for the Business;
(k) all right, title and interest of the Seller under or in
respect of the Plans (as defined below) and all assets relating to the
Plans, if such Plans are assumed by Buyer in its sole discretion;
(l) all accounts receivable of the Business;
(m) all franchises, permits and non-governmental licenses or
sublicenses of Seller used for the exclusive benefit of the Business;
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<PAGE> 12
(n) to the extent transferable under applicable law, all
franchises, approvals, permits, licenses, orders, registrations,
certificates, variances and similar rights obtained from government
authorities used for the exclusive benefit of the Business;
(o) all telephone numbers of Seller used for the exclusive
benefit of the Business to the extent that the numbers may be
transferred without interference to Seller's use of telephone numbers
beginning with the 968 prefix for its operations other than those of
the Business;
(p) all inventories, raw materials, office supplies,
production supplies, packaging materials and other supplies, spare
parts, work in process, goods consigned to third parties, finished
goods and other tangible property used exclusively by the Business of
any kind;
(q) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind of the Seller arising out of
or held for the benefit of the Business (other than those related to
Excluded Assets or Excluded Liabilities);
(r) all goodwill of the Business as a going concern including,
without limitation, all goodwill associated with the Intellectual
Property;
(s) all other properties, assets and rights owned by the
Seller which are exclusively used in the Business (other than those
related to Excluded Assets or Excluded Liabilities); and
(t) all right, title and interest of Seller to those items
listed on Schedule 1.2(k) which are marked to be sold and conveyed to
Buyer.
The assets being sold, conveyed, assigned, transferred and delivered to Buyer by
Seller hereunder are sometimes hereinafter referred to as the ("ASSETS.") All
Schedules hereto shall be prepared as of the date of this Agreement as specified
above unless otherwise specified in the Schedule.
1.2 EXCLUDED ASSETS. It is expressly understood and agreed that the
Assets shall not include the following (the "EXCLUDED ASSETS"):
(a) all corporate minute books, stock transfer books,
corporate tax returns, checks, check registers and insurance polices of
Seller;
(b) all intercompany receivables;
(c) all contracts other than the Assumed Contracts ("EXCLUDED
CONTRACTS"), including, without limitation, those listed or described
on Schedule 1.2(c);
(d) Seller's rights under or pursuant to this Agreement;
3
<PAGE> 13
(e) all prepayments and prepaid expenses related to other
Excluded Assets or Excluded Liabilities;
(f) all right, title and interest in and to the "Butler"
tradename and trademark and to the trademarks 'BUTLER AGRI-BUILDER,'
'BUTLER AGRI-CONTRACTOR,' 'AGRI-BUILDER' and 'AGRI-CONTRACTOR,' which
shall remain the property of Seller and will be subject to a Trademark
License Agreement to be entered into between Seller and Buyer (the
"TRADEMARK LICENSE AGREEMENT") on the Closing Date, substantially in
the form attached hereto as Exhibit E, and all other trade names, trade
marks, service marks, copyrights, patents, and similar rights as well
as applications and registrations therefor and all licenses,
sublicenses, covenants or other agreements with respect thereto, not
specifically included on Schedule 1.1(a);
(g) all claims, causes of action, choses in action, rights of
recovery, rights of set-off, counterclaims, cross claims and defenses
of any kind related to other Excluded Assets or Excluded Liabilities;
(h) all right, title and interest of the Seller under or in
respect of the Plans which are not included in the Assumed Liabilities;
(i) all reserves established for (a) the nonpayment of
accounts receivable and (b) warranty claims and obligations and other
claims or suits or any future claims and suits not included in the
Assumed Liabilities;
(j) all of Seller's assets which are used exclusively in
Seller's other businesses;
(k) all of Seller's books, records and information which are
used in Seller's other businesses and in the Business, which shall be
made available to Buyer for inspection and copying at all reasonable
times, and properties, assets and other rights jointly used by the
Business and Seller's other business which are listed on Schedule
1.2(k) and designated as being retained by Seller, the continued joint
use of which shall be governed by the terms set forth on Schedule
1.2(k) (all of which excluded assets under this subsection are referred
to as the "JOINTLY USED ASSETS");
(l) all contracts of insurance and any claims or rights of
Seller thereunder, including, without limitation, any claims or rights
of Seller to reserves, unearned premiums or return of premiums arising
thereunder;
(m) all cash in payroll accounts and other accounts
established specifically for the payment of obligations that are not
included in the Assumed Liabilities;
(n) Real Estate described on Schedule 1.2(n); and
4
<PAGE> 14
(o) all cash and cash equivalents on hand in bank accounts
maintained for or otherwise held for the Business on the Closing Date.
1.3 INSTRUMENTS OF CONVEYANCE AND TRANSFER. On the Closing Date, Seller
shall (a) deliver or cause to be delivered to Buyer such deeds, bills of sale,
endorsements, consents, assignments, and other good and sufficient instruments
of conveyance and assignment, all in recordable form, where applicable, as shall
be effective to vest in Buyer all right, title and interest of Seller in and to
the Assets, and as shall otherwise be in the form and substance reasonably
satisfactory to Buyer and Buyer's counsel, and (b) transfer to Buyer originals
of all contracts, agreements, commitments, books, records, files, certificates,
licenses, permits, plans and specifications and other data of Seller relating to
the Business, including, without limitation, computer tapes and
computer-generated records. All materials referred to in clause (b) of the
immediately preceding sentence shall be delivered to Buyer in the form and order
in which they are maintained by Seller on the date hereof.
1.4 FURTHER ASSURANCES. From time to time after the Closing Date,
Seller and any person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
Seller (an "AFFILIATE") shall execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such other instruments of conveyance,
assignment, transfer and delivery and will take or cause to be taken such other
actions as Buyer may reasonably request in order more effectively to sell,
convey, assign, transfer, and deliver to Buyer any of the Assets, or to enable
Buyer to protect, exercise and enjoy all rights and benefits of Seller with
respect thereto, and as otherwise may be appropriate to carry out the
transactions herein contemplated.
1.5 ASSUMED LIABILITIES.
(a) The Assets shall be sold and conveyed to Buyer free and
clear of all Liens (as defined below), except Permitted Liens (as
defined below). Subject to Section 1.5(b) below, at the Closing, Buyer
will assume and agree to fully pay, perform or discharge in a timely
manner, fully in accordance with the respective terms thereof, as and
when they become due, (i) all liabilities and obligations of Seller
relating to the Assets or the Business arising from, or in connection
with, the conduct of the Business or the ownership of the Assets by
Buyer or any other person after the Closing Date; (ii) all liabilities
and obligations of Seller under the terms of the Assumed Contracts,
except for (A) those liabilities and obligations which Seller is
required to satisfy prior to the Closing (except to the extent such
liabilities or obligations are reflected on the Final Closing Balance
Sheet) or (B) which arise due to a breach by Seller of an Assumed
Contract prior to the Closing; (iii) all accounts payable and other
current liabilities of the Seller as of the Closing Date in each case
incurred in the ordinary course of the Business to the extent reflected
on the Final Closing Balance Sheet; (iv) to the extent that the FANAV
exceeds the Cap, any liabilities or obligations under Assumed
Contracts, accounts payable and other current liabilities of the Seller
not set forth in clauses (i), (ii) or (iii) above that were incurred in
the ordinary course of the Business as of the Closing Date and of the
type reflected as liabilities on the Pro Forma Balance Sheet (but any
such additional obligations and liabilities shall be assumed only to
the extent of the amount by which
5
<PAGE> 15
FANAV exceeds the Cap); (v) all liabilities and obligations of Seller
to Employees of the Business to the extent provided in Section 6; and
(vi) all other liabilities and obligations of the Seller incurred in
the ordinary course of the Business to the extent expressly accrued or
reserved for on the Final Closing Balance Sheet (collectively, the
"ASSUMED LIABILITIES"). Except as set forth in this Section 1.5, Buyer
will assume no other liabilities in connection with the Assets, the
Business or the transactions contemplated hereby. All liabilities and
obligations which are not Assumed Liabilities are "EXCLUDED
LIABILITIES" and each is an "EXCLUDED LIABILITY." On the basis of the
representations, warranties and covenants and agreements and subject to
the satisfaction of the conditions set forth in this Agreement, on the
Closing Date, Buyer shall deliver to Seller an undertaking to assume
the Assumed Liabilities in substantially the form attached hereto as
Exhibit A (the "ASSUMPTION AGREEMENT").
(b) Without limiting the generality of Section 1.5(a), and
notwithstanding any other provision hereof, each of the following is an
Excluded Liability:
(i) all intercompany payables;
(ii) any of Seller's obligations hereunder;
(iii) any liability or obligation of Seller arising
from, or in connection with, the conduct of the Business or
the ownership of the Assets by the Seller or any other person
prior to the Closing Date except for liabilities and
obligations set forth in clauses (ii), (iii), (iv) (if
applicable), (v) and (vi) of Section 1.5(a) (which shall
constitute Assumed Liabilities);
(iv) any liability of Seller arising from indebtedness
for borrowed money;
(v) any liability of Seller for Taxes owed to any
taxing authority except to the extent included in current
liabilities on the Final Closing Balance Sheet and tax
liabilities referred to in Section 9.3;
(vi) any liability or obligation arising out of or
related to past, present or future litigation or other claims
to the extent arising out of or relating to the ownership or
operation of the Assets or the Business prior to the Closing
Date including, without limitation, claims with respect to
Product Warranties and any other claims with respect to
defective products or services, alleged improper sales
practices, warranty claims, claims for any loss, damage or
cost arising out of any property damage or personal injury due
to the use of any product manufactured or sold by or services
furnished by the Business prior to the Closing Date;
(vii) any of Seller's liabilities or obligations, the
existence of which constitutes a breach of a representation or
warranty set forth in this Agreement (without regard to the
survival period, if any, associated therewith);
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(viii) any liability of any other division of Seller or
any Affiliate of Seller (including, without limitation, any
owner of capital stock of Seller);
(ix) except as provided in Section 6, all obligations
and liabilities arising out of or relating to the Plans or any
other employee benefit plan, program, policy or arrangement
presently or formerly maintained or contributed by any member
of the controlled group of companies (as such term is defined
in Section 414 of the Code) of which Seller is or was a
member, or with respect to which Seller or such controlled
group member has any liability;
(x) any liability or obligation relating to workers
compensation claims which are filed on or before the Closing
Date or which are filed after the Closing Date and which
relate to occurrences or events on or before the Closing Date;
(xi) any claim, liability or obligation to the extent
such claim, liability or obligation arises out of or relates
to Materials of Environmental Concern existing on, at or under
any Asset before the Closing Date, or otherwise arises from,
or in connection with, the conduct of the Business or the
ownership of the Assets by the Seller or any other person
prior to the Closing Date; and
(xii) any obligations or liabilities arising out of or
relating to all claims and causes of action under federal,
state and/or municipal civil rights and/or employment law
statutes including, but without limitation, Title VII of the
Civil Rights Acts of 1964, the Americans with Disabilities
Act, the Age Discrimination in Employment Act, the Fair Labor
Standards Act, the Occupational Health & Safety Act, the
National Labor Relations Act, or the Missouri Civil Rights Act
for actions of Seller arising prior to the Closing Date.
SECTION 2. CLOSING, PAYMENT OF PURCHASE PRICE
2.1 CLOSING DATE. On and subject to the conditions herein set forth,
the closing with respect to the transactions provided for in this Agreement (the
"CLOSING") shall take place at the offices of Simpson Thacher & Bartlett located
at 425 Lexington Avenue, New York, New York at 10:00 a.m., Eastern time, on the
earlier of (x) June 30, 1997 or (y) such earlier date as shall be designated by
Buyer on at least three business days prior written notice to Seller, or at such
other time and place as shall be agreed upon by the parties hereto. The actual
time and date of the Closing are herein referred to as the ("CLOSING DATE.")
2.2 PRELIMINARY PURCHASE PRICE AND PAYMENT. As consideration for the
Assets, and subject to the terms and conditions of this Agreement, including,
without limitation, Sections 2.3 and 9.3, Buyer shall on the Closing Date (a)
assume the Assumed Liabilities as provided in Section 1.5, (b) deposit the
amount of $300,000 into an account to be maintained with Commerce Bank of Kansas
City, N.A. (the "ESCROW AGENT"), pursuant to an Escrow Agreement to be entered
into on or prior to the Closing Date among Buyer, Seller and the Escrow Agent,
substantially in the form attached hereto as Exhibit B (the "ESCROW AGREEMENT")
and (c) transfer to the order of Seller in immediately available funds an amount
equal to the sum of $32,200,000
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minus the amount by which the Preliminary Adjusted Net Asset Value (as defined
below) is less than $10,100,000 or, if the Preliminary Adjusted Net Asset Value
is greater than $10,100,000, plus the lesser of (x) the amount by which the
Preliminary Adjusted Net Asset Value exceeds $10,100,000 or (y) $2,500,000 (the
"Cap"). The sum of (b) and (c) is herein referred to as the "PRELIMINARY CASH
PURCHASE PRICE."
2.3 CASH PURCHASE PRICE ADJUSTMENT AND PAYMENT.
(a) Not later than four (4) business days prior to the Closing
Date, Seller shall deliver to Buyer a certificate setting forth its
good faith estimate of the Closing Balance Sheet (the "ESTIMATED
CLOSING BALANCE SHEET"). The Estimated Closing Balance Sheet shall be
derived from Seller's internal books and records. The amount of the
Adjusted Net Asset Value reflected on the Estimated Closing Balance
Sheet is hereinafter referred to as "SELLER'S ADJUSTED NET ASSET VALUE
CALCULATION." Buyer shall have the right to review, approve and copy
the computations and work papers (including accountant's work papers)
and underlying books and records used in connection with Seller's
preparation of the Estimated Closing Balance Sheet and the
determination of Seller's Adjusted Net Asset Value Calculation and to
have access to Seller's employees and accountants, and their respective
books and records, in connection therewith. Seller's Adjusted Net Asset
Value Calculation, with such changes, if any, as are agreed upon by
Seller and Buyer not later than the business day prior to the Closing
Date shall be referred to as the "PRELIMINARY ADJUSTED NET ASSET
VALUE".
(b) Not later than the 45th day following the Closing Date,
Buyer shall provide to Seller a certificate setting forth its good
faith determination of the Closing Balance Sheet (the "BUYER'S CLOSING
BALANCE SHEET"). The Buyer's Closing Balance Sheet shall be derived
from the books and records of the Business. Seller will give Buyer and
its representatives access during the normal business hours of Seller
to the personnel, books and records of the Seller relating to the
Business to assist Buyer in the preparation of Buyer's Closing Balance
Sheet. Seller shall notify Buyer in writing ("SELLER'S DISPUTE NOTICE")
within fifteen (15) days after receiving Buyer's Closing Balance Sheet
if Seller disagrees with Buyer's calculation of the final Adjusted Net
Asset Value, which notice shall set forth in reasonable detail each
item which Seller disputes, the amount in dispute and the basis for its
disagreement. Buyer will give Seller and its representatives access
during the normal business hours of Buyer to the personnel, books and
records of the Business to assist Seller in the preparation of Seller's
Dispute Notice. If no Seller's Dispute Notice is received by Buyer
within such fifteen (15) day period, Buyer's determination of the final
Adjusted Net Asset Value as of the Closing Date as set forth in Buyer's
Closing Balance Sheet shall be the final Adjusted Net Asset Value
("FANAV") and shall be final and binding on the parties and Buyer's
Closing Balance Sheet shall be the Closing Balance Sheet.
(c) Seller and Buyer shall negotiate in good faith to resolve
any disagreement with respect to the FANAV. To the extent Buyer and
Seller are unable to agree with respect to the FANAV within thirty (30)
days after the receipt by Buyer of the Seller's Dispute Notice, Buyer
and Seller shall select a mutually acceptable partner at any "big
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six" accounting firm other than Arthur Andersen LLP, KPMG Peat Marwick
LLP or Deloitte & Touche LLP mutually selected by Buyer and Seller (the
"INDEPENDENT ACCOUNTING FIRM"), and submit their dispute to the
Independent Accounting Firm. The Independent Accounting Firm will be
requested to review only the disputed items identified in Seller's
Dispute Notice and not previously resolved by Seller and Buyer. The
Independent Accounting Firm shall resolve such dispute after reviewing
written submissions of Buyer and Seller supporting their respective
determinations of the items in dispute and stating each of their
estimates of Adjusted Net Asset Value. The Independent Accounting Firm
shall make an independent determination of all disputed items and then
calculate a FANAV based upon such independent determination and
Seller's and Buyer's determination of all amounts not in dispute. In
its determination, the Independent Accounting Firm shall be entitled to
rely on presentations prepared by Buyer and Seller. The decision of the
Independent Accounting Firm shall be conclusive between, and final and
binding on, the parties hereto. The fees and expenses of the
Independent Accounting Firm will be paid by the party (either Buyer or
Seller) whose calculation of the Adjusted Net Asset Value would result
in a Cash Purchase Price that deviates the furthest from the final Cash
Purchase Price determined based upon the Adjusted Net Asset Value as
calculated by the Independent Accounting Firm. If the Closing Balance
Sheet is not produced under the preceding subsection (b), then the
Buyer's Closing Balance Sheet as adjusted by the final resolution of
the dispute under this subsection shall be the Closing Balance Sheet
and the Accountant's determination of the Adjusted Net Asset Value
shall be the FANAV.
(d) Upon the final determination of FANAV in accordance
herewith (i) Buyer shall pay to Seller the amount by which the Cash
Purchase Price (as defined below) exceeds the Preliminary Cash Purchase
Price or, (y) if the Cash Purchase Price shall be less than the
Preliminary Cash Purchase price, Seller shall pay to Buyer the amount
by which the Preliminary Cash Purchase Price exceeds the Cash Purchase
Price, in either case, together with interest thereon from the Closing
Date at a rate of interest equal to the prime rate established by The
Chase Manhattan Bank, N.A., on the date of payment. In either case,
such payment shall be made within five business days after all
disputes, if any, have been resolved as set forth above, or, if Seller
shall have accepted (or shall have been deemed to have accepted)
Buyer's determination of the FANAV, within five business days after
such acceptance. Such payment shall be made by wire transfer of
immediately available funds to a bank account specified by the
recipient not less than two business days prior to such payment date.
(e) "ADJUSTED NET ASSET VALUE" means, with respect to each of
the Estimated Closing Balance Sheet, the Buyer's Closing Balance Sheet
and the Closing Balance Sheet, the amount by which the assets exceed
the liabilities reflected on such balance sheet.
(f) "CASH PURCHASE PRICE" shall mean the sum of (i)
$32,200,000 plus (ii) the $300,000 escrow and (to the extent FANAV does
not equal $10,100,000) (iii) minus the amount by which the FANAV is
less than $10,100,000 or, if the FANAV is greater than $10,100,000,
plus the lesser of (x) the amount by which the FANAV exceeds
$10,100,000 or (y) $2,500,000.
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(g) "CLOSING BALANCE SHEET" means a balance sheet of the
Business reflecting the Assets and Assumed Liabilities as of the close
of business on the day immediately preceding the Closing Date. Except
as set forth in this Section 2.3(g), the Closing Balance Sheet shall be
prepared in accordance with generally accepted accounting principles as
in effect in the United States ("GAAP") as if such date were the
Business's normal year end, applied on a basis consistent with the
financial statements of the Business referenced in Section 3.1(d).
Notwithstanding the foregoing, the Closing Balance Sheet (i) will
contain a liability of $180,000 for post-retirement health and life
insurance obligations for active employees of the Business (and no
other liability for such obligations) if such obligations are assumed
by Buyer in its sole discretion, (ii) will not contain any reserve for
liabilities not being assumed by Buyer, (iii) will contain all accounts
payable and other current liabilities as of the Closing incurred in the
ordinary course of business of the type reflected in the Pro Forma
Balance Sheet and (iv) will include all other liabilities and
obligations of the Seller incurred in the ordinary course of business
as of the Closing of the kind accrued or reserved for in the Pro Forma
Balance Sheet. The Closing Balance Sheet will be prepared in the form
of the balance sheet attached hereto as Schedule 2.3(g) (the "PRO FORMA
CLOSING BALANCE SHEET"), which Pro Forma Closing Balance Sheet reflects
the form of the Closing Balance Sheet as if the Closing Date had
occurred on April 1, 1997.
2.4 ALLOCATION OF PURCHASE PRICE.
(a) Buyer and Seller agree that they shall allocate the sum of
the Cash Purchase Price and the Assumed Liabilities among the Assets
and the covenant not to compete (set forth in Section 4.9 of this
Agreement) as of the Closing Date on Internal Revenue Service ("IRS")
Form 8594, in accordance with Section 1060 of the Internal Revenue Code
of 1986, as amended (the "CODE"), and the Treasury regulations
promulgated thereunder. The allocation described in the preceding
sentence shall be determined by the joint agreement of Buyer and Seller
based upon the fair market value of the Assets and such covenant not to
compete, as of the Closing Date. Buyer shall provide Seller with a copy
of Buyer's proposed fair market value allocation (the "ALLOCATION") as
promptly as reasonably practicable; provided, however, that Buyer shall
provide Seller with a copy of the Allocation within 30 days after the
determination of the Cash Purchase Price pursuant to Section 2.3. In
the event that Buyer and Seller are unable to agree on the Allocation
within 90 days after the determination of the Cash Purchase Price
pursuant to Section 2.3, a third-party appraiser jointly selected by
Buyer and Seller, the cost of which shall be borne equally by Buyer and
Seller, shall resolve all items with respect to the Allocation to which
there is a dispute between the parties.
(b) Buyer and Seller shall timely file with the appropriate
Tax authorities copies of the agreed upon IRS Form 8594 and shall use
the Allocation in the preparation of all Tax Returns (including any
attachments thereto) and for all other Tax purposes. In the event any
party hereto receives notice of an audit in respect of the Allocation,
such party shall notify the other party in writing as to the date and
subject of such audit as promptly as reasonably practicable.
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(c) If any Tax Return filed by Buyer or Seller relating to the
transactions contemplated hereby is challenged by the Tax authority
with which such Tax Return was filed on the basis of the Allocation, as
finally adjusted, the filing party shall assert in good faith the
validity and correctness of the Allocation and such party shall not
agree to any adjustment to the Allocation without obtaining the prior
written consent of the other party (which consent shall not be
unreasonably withheld). If any such Tax Return is challenged as herein
described, the party filing such Tax Return shall keep the other party
apprised of its decisions and the current status and progress of all
administrative and judicial proceedings, if any, that are undertaken at
the election of such party with respect thereto.
2.5 ACCOUNTS RECEIVABLE. All accounts received by Seller subsequent to
12:01 A.M., Kansas City Time, on the date of Closing and pertaining to the
Business and/or the Assets, shall be the property of Buyer, and Seller shall
promptly remit the same plus all documentation regarding said payment to Buyer.
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller makes the
following representations and warranties to Buyer:
(a) DUE ORGANIZATION, POWER; CAPACITY, GOOD STANDING,
OWNERSHIP. Seller is a corporation duly organized, validly existing and
in good standing under the laws of Delaware and has the requisite
corporate power and authority to own, lease and operate its properties
and assets and to conduct its business as now conducted by it. Seller
has all requisite corporate and other power and authority to enter into
this Agreement, the Assumption Agreement, the Trademark License
Agreement, the Supply Purchase Agreement between Buyer and Seller
whereby Buyer shall have the right to purchase certain raw materials
with and through Seller for a fixed period of time as contemplated by
Section 4.16 (the "SUPPLY PURCHASE AGREEMENT"), the Escrow Agreement
and any other agreements contemplated hereby to which it is a party
(collectively, the "SELLER ACQUISITION DOCUMENTS") and to perform its
obligations hereunder and thereunder.
(b) AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by Seller of this Agreement and the other Seller
Acquisition Documents and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action. This Agreement has been, and on the Closing
Date each other Seller Acquisition Document will be, duly executed and
delivered by Seller and this Agreement constitutes, and each other
Seller Acquisition Document will upon execution and delivery thereof
constitute, a legal, valid and binding obligation of Seller,
enforceable against it in accordance with their respective terms,
except as affected by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or
at law) or by an implied covenant of good faith and fair dealing.
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(c) NO GOVERNMENTAL APPROVALS OR NOTICES REQUIRED; NO
CONFLICT. Except for (1) the expiration or termination of all
applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), (2) provisions
contained in Assumed Contracts which require the consent of third
parties to the assignment thereof where the failure to obtain such
consents would not, individually or in the aggregate, have a Material
Adverse Effect (as defined below) and none of which individually and
all of which collectively are not material to the conduct of the
Business, and (3) as set forth in Schedule 3.1(c), the execution,
delivery and performance of this Agreement and the other Seller
Acquisition Documents by Seller and the consummation by Seller of the
transactions contemplated hereby and thereby (i) will not violate (with
or without the giving of notice or the lapse of time or both), or
require any consent, approval, filing or notice under any provision of
any License (as defined in Section 3.1(g)), law, rule or regulation,
court or administrative order, writ, judgment or decree applicable to
Seller, the Business or any of the Assets or the Assumed Liabilities
and (ii) will not (with or without the giving of notice or the lapse of
time or both) (x) violate or conflict with, or result in the breach,
suspension or termination of any provision of, or constitute a default
under, or result in the acceleration of the performance of the
obligations of Seller under, or (y) result in the creation of any lien,
mortgage, pledge, security interest, claim, charge or encumbrance or
other restriction of any kind or nature (collectively, "LIENS") upon
the Business or the Assets of Seller pursuant to the charter or by-laws
of Seller, or any indenture, mortgage, deed of trust, lease, agreement,
contract or instrument to which Seller is a party or by which Seller,
the Business or the Assets is bound.
(d) FINANCIAL INFORMATION, LIABILITIES.
(i) The audited balance sheets of the Business as at
December 31, 1995 and 1996 (such latest balance sheet being
referred to herein as the "BALANCE SHEET") and the related
statements of earnings, division equity and cash flows for
each of the years in the three year period ending on December
31, 1996, copies of which have been furnished to Buyer and
which are attached hereto as Schedule 3.1(d)(i)(a), present
fairly the financial condition of the Business as at December
31, 1995 and 1996, and the results of its operations for each
of the years in the three year period ending on December 31,
1996 (the "YEAR-END FINANCIAL STATEMENTS"). The balance sheet
of the Business as at March 31, 1997 and the related statement
of earnings of the Business for the three-month period then
ended, copies of which have been furnished to Buyer and which
are attached hereto as Schedule 3.1(d)(i)(b), present fairly
the financial condition of the Business as at March 31, 1997
and the results of its operations for the three-month period
ending on March 31, 1997 (the "INTERIM FINANCIAL STATEMENTS").
All Year-End Financial Statements, including the related
schedules and notes thereto, have been prepared in accordance
with GAAP, consistently applied. The Interim Financial
Statements were prepared in accordance with GAAP consistently
applied. Seller did not have with respect to the Business, at
December 31, 1996, any material contingent obligation,
contingent liability or liability for taxes, or any
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long-term lease or unusual forward or long-term commitment not
reflected in the Balance Sheet or in a footnote thereto.
(ii) Except to the extent set forth in the Balance
Sheet, the Business does not have any liabilities or
obligations (absolute, accrued, contingent or otherwise),
whether due or to become due which would be required, in
accordance with GAAP, to be set forth on a consolidated
balance sheet of the Business, other than any such liabilities
or obligations incurred since December 31, 1996 in the
ordinary course of business consistent with past practice and,
to the extent applicable, the requirements of Section 4.2.
(e) TITLE AND CONDITION OF PROPERTIES, ABSENCE OF LIENS.
Except as specifically disclosed on the Schedules:
(i) Seller has, and Buyer on the Closing Date will
receive, good, marketable and insurable fee simple title to
all real property, and good and marketable title to all
personal property (tangible and intangible), constituting
Assets, free and clear of all Liens, except (1) with respect
to Assets leased, licensed or not owned by Seller or other
contractual rights of Seller (and which are not reflected on
the Balance Sheet or the Closing Balance Sheet as owned) for
contractual restrictions or claims on such Assets pursuant to
the lease, license or other Assumed Contract relating to such
Assets and restrictions imposed by any law or regulation with
respect to licenses, permits, copyrights, trademarks and the
like, (2) Liens for current property taxes not yet due and
payable or being contested in good faith by appropriate
proceedings, (3) statutory liens of landlords, carriers,
warehousemen, and other liens imposed by law incurred in the
ordinary course of business for amounts not then delinquent
and (4) with respect to real property, easements,
rights-of-way, restrictions and other similar charges or
encumbrances and other title defects or irregularities which,
individually or in the aggregate, do not interfere with the
ordinary conduct of the Business or the use of any such real
property for its current uses or diminish the value of such
real property for its current use ("PERMITTED LIENS").
(ii) All tangible Assets taken as a whole are in good
operating condition and state of repair (ordinary wear and
tear excepted) other than machinery and equipment temporarily
out of repair or out of service for routine maintenance in the
ordinary course of the Business, and are adequate and
sufficient for the current operations of the Business as
conducted in the year ended December 31, 1996, and, subject to
the last sentence of Section 3.1(f), conform to all applicable
laws, statutes, ordinances and regulations.
(f) GOVERNMENTAL REGULATIONS. To the Seller's knowledge, the
Seller is complying with all laws, statutes, rules, regulations,
ordinances, decrees or orders of any federal, state, local or foreign
authority applicable to the Business, including, without limitation,
zoning, wage and hour, equal employment opportunity or occupational
safety and health laws or regulations, and the Seller has and holds all
governmental permits and
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authorizations necessary to entitle it to own and operate the
properties of the Business and to conduct the operations of the
Business. There are no proceedings pending or, to the best knowledge of
Seller, threatened, or any notices received, with respect to a
violation of any such law, rule, regulation, decree or order or which
might result in the revocation, cancellation, suspension or adverse
modification of any such governmental permits or authorizations. Seller
makes no representation or warranty that the Real Property included in
the Assets or the operations conducted thereon comply with requirements
of the Americans with Disabilities Act (the "ADA").
(g) LICENSES AND GOVERNMENT APPROVALS. Schedule 3.1(g)
includes all licenses, permits, approvals, consents, certificates of
public convenience, orders, franchises and other authorizations of any
federal, state, local or foreign governmental authority ("LICENSES")
possessed by or granted to the Seller with respect to the Business or
the Assets. Except as disclosed on Schedule 3.1(g), Seller is not aware
of any impediment to the renewal of such Licenses. All such Licenses
are valid and in full force and effect and no proceeding is pending or
threatened seeking the suspension, modification, revocation or
limitation of any such License. No other Licenses are required to
permit the continued operation after the date hereof of the Business as
now conducted, except where the failure to have such License,
individually or in the aggregate, would not have a Material Adverse
Effect (as defined below).
(h) CONTRACTS, LIST OF PROPERTIES, PERMITS AND OTHER DATA.
Schedule 1.1(b) hereto accurately lists the following contracts,
leases, agreements, plans and arrangements, whether written or oral,
express or implied, or having any other legally binding basis
undertaken by or for the Business and to which the Seller or any of its
Affiliates is a party or by which they or any of their property is
bound:
(1) any such contract, lease, agreement, plan or
arrangement involving commitments to others to make capital
expenditures or purchases or sales involving $25,000 or more
in any one case except commitments which may be terminated
without liability or penalty by the Buyer on not more than 30
days' notice;
(2) any such contract, lease, agreement, plan or
arrangement relating to any direct or indirect indebtedness
for borrowed money (including but not limited to loan
agreements, lease-purchase arrangements, guarantees,
agreements to purchase goods or services or to supply funds or
other undertakings on which others rely in extending credit),
or any conditional sales contracts, chattel mortgages,
equipment lease agreements, and other security arrangements
with respect to personal property with a value in excess of
$25,000 in each instance used or owned by the Seller;
(3) any such contract, lease, agreement, plan or
arrangement with or for the benefit, directly or indirectly,
of any business or operation of the Seller or any Affiliate of
the Seller that is not included within the Business and that
is also for the benefit, directly or indirectly of the
Business;
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(4) any contract containing covenants limiting the
freedom of the Business to compete in any line of business
with any person or in any area or territory;
(5) any license agreement, either as licensor or
licensee, or any other agreement of any type relating to any
of the patents, trademarks or trade names or other assets
listed on Schedule 1.1(a) hereto;
(6) any contract or arrangement of any kind
whatsoever, whether exclusive or otherwise, containing
expressed terms and conditions with any sales agent,
representative, franchisee or distributor of any of the
products of the Business;
(7) any contract or arrangement of any kind
whatsoever which requires the payment of royalties in
connection with the Business; and
(8) any other legally binding contract, lease,
agreement, plan or arrangement not of the type covered by any
of the other items of this Section 3.1(h) which is not in the
ordinary course of business or which is material to the
business, operations, properties, liabilities, condition
(financial or otherwise) or prospects of the Business.
True and complete copies of all documents (including all
amendments thereto and waivers in respect thereof) referred to in the
foregoing Schedules have been delivered or made available to Buyer.
Summaries of all oral contracts listed on the foregoing schedules
previously provided to the Buyer are correct and do not omit to state
any fact necessary to make the statements therein complete or not
misleading. No contract, agreement, plan or arrangement exists between
the Seller and any other party based upon a past course of dealing. All
contracts, agreements, leases, licenses, sublicenses, permits and
franchises referred to in such Schedules are in full force and effect.
Seller is not (and to the best knowledge of Seller, each other party
thereto is not) in breach or default in the performance of any
obligation thereunder, and, to the best knowledge of Seller, no event
has occurred or has failed to occur whereby, with or without the giving
of notice or the lapse of time or both, a default or breach will be
deemed to have occurred thereunder or any of the other parties thereto
have been or will be released therefrom or will be entitled to refuse
to perform thereunder, except for such breaches, defaults and events
which, either individually or in the aggregate, could not have a
material adverse effect on the condition (financial or other), results
of operations, assets, properties or prospects of the Business, the
Assets or the Assumed Liabilities or have a material adverse effect on
Seller's ability to perform its obligations hereunder or under any
other Seller Acquisition Document (each of such effects is herein
called a "MATERIAL ADVERSE EFFECT").
(i) REAL ESTATE. Schedule 1.1(c), Schedule 1.1(d) and Schedule
3.1(i) hereto accurately list all real property relating to the
Business owned or leased by the Seller ("REAL PROPERTY") and identify
whether each such item of Real Property is owned or
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leased by Seller. Except as disclosed on such Schedules and in the
Title Commitment and the Survey to be delivered to Buyer pursuant to
Section 4.15:
(1) The Seller has good and marketable title to all
such owned Real Property and good and valid leasehold
interests in all such leased Real Property, in each case free
and clear of all Liens except for Permitted Liens and as set
forth on Schedule 3.1(i).
(2) There are no condemnation proceedings or eminent
domain proceedings of any kind pending or, to the best
knowledge of the Seller, threatened against the Real Property.
(3) To the knowledge of Seller all of the Real
Property is occupied under a valid and current certificate of
occupancy or similar permit, if required, the sale of the
Assets hereunder will not, except as required by the City of
Kansas City, Missouri, require the issuance of any new or
amended certificate of occupancy and there are no facts which
would prevent the Real Property from being occupied and used
by the Seller after the Closing Date in the same manner as
before.
(4) All improvements on the Real Property constructed
by or on behalf of the Seller or any other person were
constructed in compliance with all then applicable federal,
state, local or foreign statutes, laws, ordinances,
regulations, rules, codes, orders or requirements (including,
but not limited to, any building, zoning or environmental laws
or codes) affecting such Real Property.
(5) All improvements on the Real Property and the
present use and conditions thereof do not violate any
applicable deed restrictions or other applicable covenants,
restrictions, agreements, existing site plan approvals and, to
the knowledge of seller, zoning or subdivision regulations or
urban redevelopment plans as modified by any duly issued
variances, and no permits, licenses or certificates pertaining
to the ownership or operation of all improvements on the Real
Property by the Seller are required by any governmental agency
having jurisdiction over the Real Property, it being
understood that Seller makes no representation concerning the
transferability of Seller's existing licenses and permits or
those which Buyer may be required to obtain.
(6) All improvements on the Real Property are wholly
within the lot limits of such Real Property and do not
encroach on any adjoining premises and there are no
encroachments on any Real Property by any improvements located
on any adjoining premises.
(7) There have been no improvements made to or
constructions on any Real Property within the period provided
by law for the filing of mechanic's liens except in the
ordinary course of the Business.
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(8) The Seller enjoys peaceful and quiet possession
of each parcel of Real Property, and there is not under any
lease of any of the leased Real Property (a "LEASE") any
default by the Seller thereunder or any condition which notice
or the passage of time or both would constitute such a
default, and Seller has not received notice asserting the
existence of any such default or condition. Seller has no
knowledge of any default under any Lease by the landlord
thereunder.
(9) The Seller has heretofore furnished to the Buyer
a true and complete copy of each Lease and all amendments
thereto pertaining to any leased Real Property.
(10) Each Lease is valid and binding and in full
force and effect.
(11) The rental set forth in each Lease is the actual
rental being paid, and there are not separate agreements or
understandings with respect to the same.
(12) There are no renewal options contained in the
respective Leases.
(13) Neither the execution of this Agreement nor the
sale of the Assets hereunder shall cause a default under any
Lease or require the prior written consent of any landlord
under any Lease.
(j) LEGAL PROCEEDINGS. There is no litigation, proceeding or
governmental investigation to which Seller is a party pending or, to
the best knowledge of Seller, threatened against it that relates to the
Business, the Assets, the Assumed Liabilities or the transactions
contemplated by this Agreement which could, either individually or in
the aggregate, result in a Material Adverse Effect or which seeks to
restrain or enjoin the consummation of any of the transactions
contemplated hereby. Seller is not in violation of any term of any
judgment, writ, decree, injunction or order entered by any court or
governmental authority (domestic or foreign) and outstanding against
Seller or with respect to the Business or any of the Assets, except for
such violations which could not, individually or in the aggregate, have
a Material Adverse Effect. To the best knowledge of Seller, there are
no facts which would provide a basis for any successful prosecution of
any such litigation, proceeding or investigation.
(k) INSURANCE. The properties and assets of Seller which are
of an insurable character and are used or useful in the Business are
insured against loss or damage by fire or other risks, and Seller
maintains liability insurance, to the extent and in the manner and
covering such risks as is customary for companies engaged in a business
similar to the Business or owning assets similar to the Assets. The
coverage under each such policy and binder is in full force and effect,
and no notice cancellation or nonrenewal with respect to any such
policy or binder has been received by Seller. Schedule 3.1(k) lists
insurance maintained by Seller on the Assets and with respect to the
employees and representatives of the Business and the operations of the
Business.
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(l) LABOR. Except as set forth on Schedule 3.1(1), (i) there
have been no labor strikes, grievances, slow-downs, work stoppages,
administrative, arbitration or court proceedings or other material
labor controversies or disputes during the past three (3) years, nor is
any such strike, grievance, slow-down, work stoppage administrative,
arbitration or court proceeding or other material labor controversy or
dispute pending or, to the best knowledge of Seller, threatened between
Seller and any of the employees, prospective employees, former
employees, retirees or labor unions now employed or formerly employed
by the Business or affecting the Business, (ii) no unfair labor charges
or complaints have been filed against Seller with respect to its
operations related to the Business, and Seller has not received any
notice or communication reflecting an intention or a threat to file any
such charges or complaints, (iii) Seller is not party to any labor
contract, collective bargaining agreement ("CBA"), contract, letter of
understanding or, to Seller's knowledge, any other agreement, formal or
informal with any labor union or organization respecting the operation
of the Business, nor are any of the employees of the Business
represented by any labor union or organization nor have there been any
labor union organizing activities at the facilities of the Business
within the last three (3) years, (iv) Seller has paid in full to all of
its employees now employed or formerly employed by the Business all
wages, salaries, commissions, bonuses, benefits and other compensation
due to such employees, (v) Seller has not closed any facility,
effectuated any layoffs within the meaning of the Worker Adjustment &
Retraining Notification Act ("WARN") of employees or implemented any
early retirement, separation or window program within the past three
years with respect to its operations related to the Business, nor has
Seller planned or announced any such action or program relating to the
Business other than as contemplated by the Transaction for the future,
(vi) no promises of benefit improvements under the Plans (as defined in
Section 3.1(r) have been made by Seller or any Affiliate thereof to any
employee now employed or formerly employed by the Business of Seller,
and (vii) Seller is not party to any written and/or undisclosed
severance benefit applicable to any employees of the Business except as
referred to in Schedule 3.1(l), Section 6 or Section 6.1.
Seller has provided to Buyer true, correct and complete copies
of the executed CBAs relating to the Business, including true, correct
and complete copies of any and all written modifications and
interpretations thereof and descriptions of any and all oral
modifications and interpretations thereof. No representations have been
made by Seller or its employees or agents to employees of Seller with
respect to Buyer's intentions to employ, or not to employ, any of
Seller's employees, or to assume, or not to assume, any CBA, or to
change or to maintain any wages or benefits. Seller has or will notify
any labor union or organization representing any of its employees of
the decision to sell and will satisfy its obligations, if any, to
negotiate concerning that decision and its obligation to bargain
concerning the effects of that decision.
Between December 31, 1996 and the date hereof, no person
employed by the Business was transferred to any other business or
operation of Seller or any of its Affiliates.
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(m) ACCOUNTS RECEIVABLE. Seller's accounts receivable
reflected on the Balance Sheet are, and those reflected on the "FINAL
CLOSING BALANCE SHEET" will be valid receivables arising in the
ordinary course of business. No person or entity has any lien on such
receivables or any part thereof, no agreement for deduction, free
goods, discount or other deferred price or quantity adjustment has been
made with respect to any such receivables and to the knowledge of
Seller such receivables are not subject to any valid counterclaims or
setoffs.
(n) INVENTORIES. The inventories of the Business reflected on
the Balance Sheet (except the inventories which have been sold or
disposed of in the ordinary course of business since the date of the
Balance Sheet and except for excess and obsolete inventory which has
been written off) and the inventories thereafter acquired or
manufactured in connection with the Business and not subsequently sold
or disposed of in the ordinary course of business do, and the
inventories reflected on the Final Closing Balance Sheet will, consist
of items of a quality and quantity which in the aggregate are (i)
usable in the ordinary course of the Business or (ii) saleable in the
ordinary course of the Business at net realizable values (i.e., normal
selling price less all applicable discounts, commissions and shipping
costs) not less than their respective book value amounts. Inventory on
the Balance Sheet is, and Inventory on the Final Closing Balance Sheet
will be, except for obsolete and below-standard quality inventory
described below, stated at the lower of cost (determined by the FIFO
method) or market in accordance with GAAP, consistently applied. The
value of excess and obsolete inventory and inventory of below standard
quality reflected on the Balance Sheet has been, and to be reflected on
the Final Closing Balance Sheet will be, written down to net realizable
marketable value or written off or adequate reserves in accordance with
GAAP, consistently applied, have been provided therefor. The inventory
on hand is, and as of the Closing Date shall be, at levels consistent
with expected customer demand and consistent with the Business's past
practice.
(o) PRODUCT AND SERVICE WARRANTY. Each product repaired or
delivered and each service rendered by the Business has been in
conformity in all material respects with all applicable contractual
commitments and all express and implied warranties, and neither Seller
nor any of its Affiliates has any liabilities or obligations for
replacement or repair thereof or other damages in connection therewith
in excess of past custom and practice. No product repaired or delivered
or service rendered by the Business prior to the date hereof is subject
to any guaranty, warranty or other indemnity for a term in excess of
the periods specified on express warranties delivered to Buyer
hereunder from the date such product was repaired or delivered or such
service rendered. Prior to the date hereof, Seller has delivered to
Buyer copies of the standard terms and conditions of sale for products
delivered and services rendered by the Business (containing applicable
guaranty, warranty, and indemnity provisions).
(p) INTELLECTUAL PROPERTY. Seller has, and will transfer to
Buyer on the Closing Date, good and marketable title to all the
Intellectual Property, free and clear of all Liens, except as provided
for in Section 1.2(f) above. No claims have been asserted against
Seller to the effect that the use of the Intellectual Property by
Seller infringes on
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any intellectual property of any other person. The use of all
Intellectual Property by Seller (and by Buyer in connection with the
operation after the Closing of the Business in the manner currently
operated) does not (and will not, as of the Closing Date) infringe on
the rights of any person. There is no infringing use of any of such
trademarks and trade names (or brandmarks, brand names or trade dress)
or infringement of any of such copyrights and patents by any other
person, either within or outside the United States. Seller owns or has
a license to use all Intellectual Property used in the Business as
presently conducted.
(q) COMPLIANCE WITH LAW AND REQUIREMENTS. Except as set forth
in Schedule 3.1(q), Seller has conducted the Business in compliance
with all applicable laws, ordinances, regulations, rights of
concession, licenses, know how or other proprietary rights of others,
the failure to comply with which could, individually or in the
aggregate, have a Material Adverse Effect.
(r) EMPLOYEE BENEFIT PROGRAMS. Except as otherwise provided in
Schedule 3.1(r):
(i) Schedule 3.1(r) sets forth all of the "employee
benefit plans" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
employment, change-in-control, incentive, deferred
compensation and severance policies, plans and arrangements,
and all other employee benefit, fringe benefit plans and
programs maintained or contributed to by the Seller with
respect to current or former employees of the Business (the
"PLANS"). Seller has provided or made available to Buyer (a) a
copy of each of the Plans, including all amendments thereto,
(b) any trust agreements thereunder, (c) each summary plan
description, (d) the most recent favorable determination
letter issued by the Internal Revenue Service, if applicable,
and (e) for the three most recent years, the Form 5500 and
attached schedules, audited financial statements, and
actuarial valuation reports.
(ii) To the knowledge of Seller, each Plan is in all
material respects, in compliance with the applicable
requirements of law, including, if applicable, ERISA and the
Code, and has been established and administered in accordance
with its terms.
(iii) Each Employee Pension Benefit Plan which is
intended to qualify under Section 401(a) of the Code has
received a favorable determination letter that it is so
qualified, and, to the knowledge of Seller, no facts or
circumstances exist which would cause any of such favorable
determination letters to be revoked. In addition, to the
knowledge of Seller, no such Plan has incurred any
"accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), and to the knowledge of
Seller, no "reportable event" (as defined in Section 4043(c)
of ERISA) has occurred with respect to any such Plan.
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(iv) Except as set forth in Schedule 3.1(r), and to
the knowledge of Seller, no plan or arrangement exists which
would be reasonably likely to result in the payment to any
employee or former employee of the Business of any money or
other property or rights or accelerate or provide any other
rights or benefits to any employee or former employee of the
Business as a result of the transactions contemplated by this
Agreement, whether or not such payment would constitute a
parachute payment within the meaning of Section 280G of the
Code, and there are no contracts, agreements or other
arrangements which would be reasonably likely to result in the
payment to any such employee of an excess parachute payment"
as that term is used in Section 280G of the Code.
(v) Except as set forth in Schedule 3.1(r). Seller
has not contributed to or participated in any pension plan
which is a "multiemployer plan", as defined in Section 3(37)
of ERISA, or in any "multiple employer" plan within the
meaning of Section 4063 or 4064 of ERISA, in respect of
Business employees.
(vi) To the knowledge of Seller all contributions with
respect to employees of the Business required to be made on or
prior to Closing under the terms of any Plan have been (or
will by Closing be) timely made by Seller.
(vii) There are no pending or, to the knowledge of
Seller threatened, claims (other than with respect to benefits
in the normal course), lawsuits, investigations,
administrative proceedings or other actions arising out of, or
in connection with the operation or administration of any Plan
with respect to the Business or the employment of any current
or former employee of the Business.
(viii) As of March 31, 1997, the assets of the Seller's
Pension Plan for Hourly Paid Factory Employees of the Kansas
City Plant are at least equal in value to the present value of
the vested and unvested accrued benefits obligations, based on
actuarial assumptions of Seller's actuaries as contained in
the January 1, 1997 actuarial valuation; provided that this
warranty shall not be deemed to have been given unless Buyer
in its sole discretion assumes the Pension Plan. Between March
31, 1997 and the Closing Date there will have been no material
adverse change in the funding of the Pension Plan.
(s) CERTAIN FEES. Neither Seller nor any of its respective
officers, directors or employees or Affiliates has employed any broker
or finder or incurred any other liability for any brokerage fees,
commissions or finders' fees in connection with the transactions
contemplated hereby except for fees to be paid by Seller to George K.
Baum & Co., which fees and all related expenses shall be the
responsibility of Seller.
(t) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1996 and except as otherwise disclosed herein or set forth in Schedule
3.1(t) or the other Schedules hereto, there has not been (i) any
Material Adverse Effect with respect to the Business, the Assets, the
Assumed Liabilities or in the condition (financial or other), results
of operations or prospects of the Business, (ii) any material damage,
destruction or loss
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relating to the Business or the Assets, whether or not insured, (iii)
any liability created or incurred which Buyer will assume under the
Assumption Agreement except for liabilities accruing after December 31,
1996 in the ordinary course of business in a manner consistent with
past practice and, to the extent applicable, the requirements of
Section 4.2, (iv) any Lien created on any Asset except Permitted Liens,
(v) any increase in, or commitment or plan adopted to increase, the
wages, salaries, compensation, pension or other benefits or payments to
any of the Business's employees, (vi) any capital expenditures or
commitment to make any such expenditures with respect to the Assets or
as to which Buyer will become obligated after the Closing pursuant to
the Assumption Agreement, except (A) with respect to any such
expenditures or commitments incurred prior to the date hereof, to the
extent such expenditures and commitments do not exceed $200,000 in the
aggregate and (B) with respect to any such expenditures or commitments
incurred on or after the date hereof as permitted under Section 4.2,
(vii) any condemnation proceedings commenced with respect to any Asset
or notice received by Seller as to the proposed commencement of any
such proceedings, (viii) any rights of substantial value knowingly
waived with respect to the Assets or the Business or (ix) any sale or
transfer of any Assets other than dispositions of inventory and
obsolete or worn out equipment in the ordinary course of business.
Since December 31, 1996, other than acts relating to the transactions
contemplated by this Agreement, the Business has been conducted in all
significant respects only in the ordinary course, consistent with past
practice and, to the extent applicable, Section 4.2.
(u) ENVIRONMENTAL MATTERS. Except as set forth on Schedule
3.1(u), with respect to the Business and the Assets: (i) Seller
complies and has complied in all material respects with all applicable
Environmental Laws, and possesses and complies in all material respects
with and has possessed and complied with all Environmental Permits;
(ii) there are and have been no Materials of Environmental Concern, or,
to the knowledge of Seller other conditions, at any property owned or
leased by Seller and included in the Assets that could give rise to any
liability under any Environmental Law or result in costs arising out of
any Environmental Law; (iii) no judicial, administrative, or arbitral
proceeding (including any notice of violation or alleged violation)
under any Environmental Law to which Seller is, or to the knowledge of
Seller will be, named as a party is pending or, to the knowledge of
Seller, threatened, nor is Seller the subject of any investigation in
connection with any such proceeding or potential proceeding; (iv) there
are no past or present conditions, circumstances, practices, plans, or
legal requirements that to the knowledge of Seller would be expected to
prevent, or materially increase the burden on the Business of complying
with applicable Environmental Laws or of obtaining, renewing, or
complying with all Environmental Permits required under such laws; and
(v) Seller has provided to Buyer true and complete copies of all
Environmental Reports relating to the Business in its possession or
control.
"ENVIRONMENTAL LAWS" shall mean any and all laws,
rules, orders, regulations, statutes, ordinances, guidelines,
codes, decrees, or other legally enforceable requirement
(including, without limitation, common law) of the United
States, or any state, local, municipal or other governmental
authority,
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regulating, relating to or imposing liability or standards of
conduct concerning protection of the environment or of human
health, or employee health and safety.
"ENVIRONMENTAL PERMITS" shall mean any and all
permits, licenses, registrations, notifications, exemptions
and any other authorization required under any Environmental
Law.
"ENVIRONMENTAL REPORT" shall mean any report, study,
assessment, audit, or other similar document that addresses
any issue of actual or potential noncompliance with, or actual
or potential liability under or cost arising out of, any
Environmental Law that may in any way affect the Business or
the Assets.
"MATERIALS OF ENVIRONMENTAL CONCERN" shall mean any
gasoline or petroleum (including crude oil or any fraction
thereof) or petroleum products, polychlorinated biphenyls,
urea-formaldehyde insulation, asbestos, pollutants,
contaminants and radioactivity, and any other substances of
any kind that are regulated pursuant to or could give rise to
liability under any Environmental Law.
(v) ENTIRE BUSINESS. The Assets, when taken together with the
Excluded Assets listed in Section 1.2 hereof, constitute all of the
properties, assets and other rights of Seller and its Affiliates used
in or necessary for the conduct of the Business as currently conducted.
On the Closing Date, subject to the provisions hereof, Seller will
transfer to Buyer all of the properties, assets and other rights used
in or necessary for the conduct by Buyer of the Business as currently
conducted by Seller, except for the Excluded Assets listed in Section
1.2 hereof.
(w) TAX MATTERS. All Tax Returns required to be filed by
Seller on or before the Closing Date with respect to the Business or
its activities, properties or employees have been or shall be timely
filed and all Taxes which are due or which may be claimed to be due
with respect to the Business or its activities, properties or employees
have been or shall be timely paid or accrued within the prescribed
period, including any extension thereof. All such Tax Returns are
complete and accurate in all material respects. There are no Liens upon
any of the Assets in respect of Taxes except for Liens for current
Taxes that are not yet due and payable. All Taxes required to be
withheld by Seller with respect to the Business or its activities,
properties or employees have been withheld and paid over to the
appropriate Tax authority. Seller (or any predecessor of Seller) is not
a party to and has not received any notice with respect to any proposed
or pending action by any governmental authority for assessment or
collection of Taxes with respect to the Business or its activities,
properties or employees, nor is Seller a party to any dispute or
threatened dispute in which action or dispute an adverse determination
reasonably could be expected to result in a foreclosure of the Assets
and no such claim for assessment or collection of Taxes has been made
upon Seller. Seller is not a "foreign person" within the meaning of
section 1445 of the Code, and Seller will furnish Buyer with an
affidavit that satisfies the requirements of section 1445(b)(2) of the
Code. For purposes of this Agreement, (i) the term "TAX" or "TAXES"
shall mean all United States federal, state, provincial, local and
foreign income, profits, franchise, gross receipts, payroll, sales,
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employment, use, property, excise, value added, net worth, intangible,
privilege, business, license, transfer, estimated, stamp, alternative
or add-on minimum, environmental, withholding and any other taxes,
duties or assessments, together with all interest, penalties and
additions imposed with respect to such amounts, (ii) the term "TAX
RETURNS" shall mean any return (including any consolidated combined or
unitary return), declaration, estimated, installment, report, claim for
refund or information return or statement relating to Taxes which is
required to be filed with the appropriate governmental agency,
including any schedule or attachment thereto, and including any
amendment thereof and (iii) the term "TAX AUTHORITY" shall mean any
authority having jurisdiction over Taxes.
(x) AFFILIATE TRANSACTIONS. Except as set forth in Schedule
3.1(x), there are no agreements, arrangements, undertakings or other
transactions between the Business and any other division or business of
Seller or any Affiliate of Seller (including, without limitation, any
owner of capital stock of Seller).
(y) DISCLOSURE. Section 3.1 of this Agreement and the related
Schedules hereto contain no untrue statement of any material fact nor
omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which
they were made, not misleading.
3.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller as follows:
(a) DUE ORGANIZATION AND POWER. Buyer is a corporation duly
organized and validly existing under the laws of the State of Indiana.
Buyer has all requisite corporate and other power and authority to
enter into this Agreement, the Assumption Agreement, the Trademark
License Agreement, the Supply Purchase Agreement, the Escrow Agreement
and any other agreement contemplated hereby to which it is a party
(collectively, the "BUYER ACQUISITION DOCUMENTS") and to perform its
obligations hereunder and thereunder. Buyer is duly authorized,
qualified or licensed to do business as a foreign corporation, and is
in good standing, in each of the jurisdictions in which its right,
title or interest in or to any asset, or the conduct of its business,
requires such authorization, qualification or licensing, except where
the failure to so qualify or to be in good standing could not have an
adverse effect on the ability of Buyer to perform its obligations
hereunder or under any other Buyer Acquisition Document.
(b) AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by Buyer of this Agreement and the other Buyer Acquisition
Documents and the consummation by Buyer of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action. This Agreement has been, and on the Closing
date each other Buyer Acquisition Document will be, duly executed and
delivered by Buyer and this Agreement constitutes, and each other Buyer
Acquisition Document will upon execution and delivery thereof
constitute, a legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with their respective terms, except as
affected by bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, by general equitable principles
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(regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good faith
and fair dealing.
(c) GOVERNMENTAL APPROVALS; NO CONFLICT. Except for the
expiration or termination of all applicable waiting periods under the
HSR Act and as set forth in Schedule 3.2(c), the execution, delivery
and performance of this Agreement and the other Buyer Acquisition
Documents by Buyer and the consummation by Buyer of the transactions
contemplated hereby and thereby (i) will not violate (with or without
the giving of notice or the lapse of time or both), or require any
consent, approval, filing or notice under any provision of any law,
rule or regulation, court or administrative order, writ, judgment or
decree applicable to Buyer or its assets or properties and (ii) will
not (with or without the giving of notice or the lapse of time or both)
(x) violate or conflict with, or result in the breach, suspension or
termination of any provision of, or constitute a default under, or
result in the acceleration of the performance of the obligations of
Buyer under, or (y) result in the creation of any Liens upon the assets
or properties of Buyer pursuant to the charter or by-laws of Buyer or
any indenture, mortgage, deed of trust, lease, agreement, contract or
instrument to which Buyer is a party or by which Buyer or any of its
assets or properties is bound.
(d) BROKERS' FEES. Neither Buyer nor any of its officers,
directors or employees, on behalf of Buyer, has employed any broker or
finder or incurred any other liability for any brokerage fees,
commissions or finders' fees in connection with the transactions
contemplated hereby except for fees to be paid by Buyer to American
Securities Capital Partners, L.P., which fees and all related expenses
shall be the responsibility of Buyer.
(e) DISCLOSURE. Section 3.2 of this Agreement and the related
Schedules hereto contain no untrue statement of any material fact nor
omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading.
(f) FINANCING. Buyer has delivered to Seller a copy of a bank
commitment received by Buyer from KeyBank, N.A. in such amount and for
such duration so as to enable Buyer, without disruption of the Closing
schedule contemplated by this Agreement, to consummate the purchase of
the Assets for the Cash Purchase Price and under the payment and other
terms described in this Agreement. Although Buyer may be planning a
public offering of its capital stock, Buyer warrants that the
transactions contemplated by this Agreement are not dependent upon the
progress or success of any such offering.
(g) CONFIDENTIAL INFORMATION. Buyer warrants and represents
that the requirements of Section 4.12 concerning Confidential
Information have been and will be satisfied through any termination or
Closing of the transactions contemplated by this Agreement.
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3.3 SURVIVAL OF REPRESENTATIONS. The representations and warranties
contained in Sections 3.1 and 3.2 of this Agreement shall survive the Closing
until April 30, 1998, at which time they shall terminate, provided that the
representations and warranties contained in Sections 3.1(a), 3.1(b), 3.1(e)(i),
3.1(u), 3.1(w), 3.2(a) and 3.2(b) shall survive indefinitely and shall not
terminate. The Escrow shall be terminated on April 30, 1998, and all funds
contained therein at such date shall be paid to the Seller.
3.4 DISCLOSURE SCHEDULES. Any matter disclosed on any Schedule to
Section 3.1 (the "EXPRESS DISCLOSURE SCHEDULE") will be deemed disclosed and
incorporated by reference onto all other Schedules of Section 3.1 to which such
matter is applicable (the "OTHER DISCLOSURE SCHEDULES") if the specific matter
which is disclosed on the Express Disclosure Schedule also must be disclosed on
the applicable Other Disclosure Schedule.
SECTION 4. AGREEMENTS
4.1 ACCESS TO INFORMATION. Prior to Closing, Seller agrees to (a) give
or cause to be given to Buyer and its employees, advisors and other
representatives such access, during normal business hours, to the offices,
employees, properties, books and records of Seller and its Affiliates relating
to the Business, the Assets and the Assumed Liabilities as Buyer may from time
to time reasonably request and (b) furnish or cause to be furnished to Buyer
such financial and operating data and other information with respect to the
Business, the Assets and the Assumed Liabilities as Buyer may from time to time
reasonably request. After the Closing Date, Buyer shall, at reasonable times,
permit Seller to make reasonable examination of the books and records of the
Business relating to time periods ending at or prior to the Closing Date and
shall permit Seller to make copies of the relevant portions of such books and
records at Seller's expense, in each case to the extent necessary for Seller or
its Affiliates to comply with applicable legal, tax or accounting requirements.
After the Closing Date, Seller shall, at reasonable times, permit Buyer to make
reasonable examination of the books and records of the Seller relating to the
Business and shall permit Buyer to make copies of the relevant portions of such
books and records at Buyer's expense to the extent necessary for Buyer or its
Affiliates to comply with applicable legal, tax or accounting requirements.
In addition to the foregoing, (A) Buyer shall make available to Seller
at Seller's expense (x) all documents and records of the Business for copying
and inspection and (y) all Buyer personnel employed or formerly employed by the
Business to interview or use as a witness, which Seller shall reasonably request
for the prosecution or defense of any claim or demand arising out of or relating
to any Excluded Liability or Excluded Assets of the Business or to otherwise
satisfy its obligations to Buyer under Section 8.1 and (B) Seller shall make
available to Buyer at Buyer's expense (x) all documents and records relating to
the Business for copying and inspection and (y) all Seller personnel formerly
employed by the Business to interview or use as a witness, which Buyer shall
reasonably request for the prosecution or defense of any claim or demand arising
out of or relating to any Assets or the Business or to otherwise satisfy its
obligations to Seller under Section 8.2. Any use of Buyer's personnel by Seller,
or Seller's personnel by Buyer, for more than one half a day shall be charged at
a per diem rate equal to a pro rata portion of the employee's total
compensation, plus any travel expenses.
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4.2 CONDUCT OF THE BUSINESS. Seller agrees that, except as expressly
required by this Agreement or otherwise consented to in writing by Buyer, during
the period commencing March 31, 1997 and ending on the Closing Date, Seller
shall, and shall cause its Affiliates to, with respect to the Business, the
Assets and the Assumed Liabilities:
(a) operate the Business only in the usual, regular and
ordinary manner, on a basis consistent with past practice and, to the
extent consistent with such operation, use its reasonable best efforts
to preserve its present business organization intact, keep available
the services of its present employees, preserve its present business
relationships and maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of the Business;
(b) maintain its inventory of supplies, parts and other
materials and keep its books, accounts, files and records in the usual,
regular and ordinary manner, on a basis consistent with past practice,
and comply with and perform in all material respects all laws and
contractual and other obligations applicable to the Business, the
Assets or the Assumed Liabilities;
(c) maintain in full force and effect adequate insurance with
respect to the Business, the Assets and the employees of the Business
covering risks customarily insured by similar businesses;
(d) not (i) enter into any contract, agreement or other
commitment which is not terminable by the parties upon 30 days' notice
or less and without penalty or which involves aggregate consideration
in excess of $25,000 except as set forth in Schedule 4.2(d) and except
for purchases and sales of inventories in the ordinary course of
business consistent with past practice, (ii) amend, supplement, waive
or otherwise modify any contract or agreement included in the Assets,
other than in the ordinary course of business consistent with past
practice or (iii) permit any of its Affiliates to do, or agree, in
writing or otherwise, to do, any of the foregoing;
(e) except as set forth on Schedule 4.2(e) or as required by
applicable law or to the extent required under existing employee
benefit plans, agreements or arrangements as in effect on the date of
this Agreement, not (i) increase the compensation or fringe benefits of
any of the Business's officers or employees, except for increases, in
the ordinary course of business, in salary or wages of employees who
are not officers, (ii) except in the ordinary course of business grant
any severance or termination pay, (iii) hire, except in the ordinary
course of business, any new employees or consultants, or (iv) enter
into or amend or terminate any collective bargaining, bonus, profit
sharing, thrift, compensation, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
past or present officers or employees;
(f) not (i) dispose of or abandon any of the Assets, other
than the disposition of obsolete or worn-out equipment or machinery in
the ordinary course of business, consistent with past practice, (ii)
enter into or engage in any transaction with or for the
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benefit of any other division or business of Seller or any Affiliate of
Seller except as is required by an existing written agreement set forth
in Schedule 3.1(x) or (iii) permit any of its Affiliates to do, or
agree, in writing or otherwise, to do, any of the foregoing;
(g) not (i) permit or allow any of the Assets to become
subject to any Liens, except for Permitted Liens, (ii) waive any
material claims or rights relating to the Business or the Assets, (iii)
grant any increase in the compensation or benefits of the employees of
the Business (including any such increase pursuant to any deferred
compensation, severance, bonus, pension, profit-sharing or other plan
or commitment) except for annual salary increases in the ordinary
course of business consistent with past practice, except as otherwise
required by applicable law, (iv) establish, enter into or adopt any
employment agreement or collective bargaining agreement with employees
of the Business or other Employee Benefits Programs or modify or
terminate any Employee Benefits Programs or (v) permit any of its
Affiliates to do, or agree, in writing or otherwise, to do, any of the
foregoing;
(h) not acquire or agree to acquire outside the ordinary
course of business any assets that are material, individually or in the
aggregate, to the Business, or make or agree to make any capital
expenditures except for capital expenditures not in excess of $25,000
for any individual expenditure and $100,000 in the aggregate;
(i) not pay, discharge or satisfy any claims, liabilities or
obligations of the Business (absolute, accrued, asserted or unasserted,
contingent or otherwise), except for the payment, discharge or
satisfaction, of liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their
terms as in effect on the date hereof (including scheduled principal
payments on the Seller Indebtedness), or transfer any rights of
material value of the Business or modify or change in any material
respect any existing license, lease, contract or other document
relating to the operations of the Business, other than in the ordinary
course of business consistent with past practice;
(j) not change any material accounting principle that would
affect the Balance Sheet or Final Closing Balance Sheet;
(k) not acquire or agree to acquire, by merging or
consolidating the Division with, or by using any of the Assets to
purchase a substantial portion of the stock or assets of, or by
incurring a liability which is an Assumed Liability, any business or
any corporation, partnership, joint venture, association or other
business organization or division thereof;
(l) not (i) incur any indebtedness for borrowed money, or
guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of Seller, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, or (ii) make any
loans, advances or capital contributions to, or
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investments in, any other person, where any such action under clause
(i) or (ii) would create an Assumed Liability or have a Material
Adverse Effect; and
(m) not authorize any of, or commit or agree to take any of,
the foregoing actions.
4.3 FURTHER ACTIONS. Subject to the terms and conditions hereof, Seller
and Buyer agree to use their reasonable efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including using its reasonable efforts (without payment of money,
commencement of litigation, the assumption of any material obligation or the
entering of any agreement to divest or hold separate any assets): (i) to obtain
at the earliest practicable date prior to the Closing Date (pursuant to
instruments reasonably satisfactory to Buyer in form and substance) all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts, leases, licenses or
agreements with Seller or its Affiliates as are necessary for the consummation
of the transactions contemplated hereby (including, without limitation, the
expiration or termination of all applicable waiting periods under the HSR Act);
(ii) to effect all necessary registrations and filings (including, without
limitation, all filings under the HSR Act); (iii) to furnish to each other such
information and assistance as reasonably may be requested in connection with the
foregoing; and (iv) to obtain, prior to the Closing Date, all governmental
licenses, permits, consents, approvals, authorizations, qualifications and
orders as are necessary in order to enable Buyer to conduct the Business in the
ordinary course as of and from the opening of business on the Closing Date.
Notwithstanding anything to the contrary set forth in this Agreement, to the
extent that any consent or approval is not obtained with respect to any
contract, lease, license or agreement as contemplated above, this Agreement
shall not constitute an assignment or an attempted assignment thereof and the
failure to obtain such consent shall not be deemed a breach by Seller of any
obligation hereunder so long as reasonable arrangements may be made as otherwise
contemplated in this paragraph. In each such case, Seller agrees to cooperate
with Buyer in any reasonable arrangement designed to (i) provide for Buyer the
benefits under any such contract, lease, license or agreement, including
enforcement at the cost and for the account of Buyer of any and all rights of
Seller against the other party or otherwise and (ii) insure performance by Buyer
of Seller's obligations thereunder to the extent Buyer receives such benefits.
If and to the extent that such arrangement cannot be made, Buyer shall not have
any obligation with respect to any such contract, lease, license or agreement.
Seller shall vacate and cease to occupy as of the close of business on the
Closing Date all Real Property included in the Assets used and shall deliver
possession of all such Real Property to Buyer as of the close of business on the
Closing Date, except for office space leased to Bucon at the Kansas City Plant.
4.4 ANTITRUST LAWS. The Buyer and the Seller shall each file with the
U.S. Federal Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice (the "ANTITRUST DIVISION") any notifications
required to be filed by themselves or their respective "ultimate parent"
companies (as such term is defined in the HSR Act and the regulations
promulgated thereunder) under the HSR Act with respect to the transactions
contemplated by this Agreement. Subject to the terms of this Agreement the
parties hereto will use their respective best efforts to make such filings
promptly, to respond to any requests for
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additional information made by either of such agencies and to cause the waiting
periods under the HSR Act to terminate or expire at the earliest possible date.
Each party hereto shall promptly inform the other of any material communication
from the FTC, the Antitrust Division or any other domestic or foreign
governmental authority regarding the sale of the Business or any of the other
transactions contemplated by this Agreement. If either party hereto or any of
their respective Affiliates receives a request for additional information or
documentary material from any such government or authority with respect to the
sale of the Business or the other transactions contemplated by this Agreement,
then such party will endeavor in good faith to make, or cause to be made, as
soon as reasonably practicable and after consultation with the other party
hereto, an appropriate response in compliance with such request.
4.5 NOTIFICATION. Seller shall notify Buyer and keep it advised of (i)
any litigation or administrative proceeding pending or, to the best knowledge of
Seller, threatened against Seller or affecting the Business which could, if
adversely determined, have a Material Adverse Effect, (ii) any material damage
or destruction of any of the Assets, and (iii) any material adverse change in
the Business or the condition (financial or other), results of operations,
assets or prospects of Seller or the Business.
4.6 NO INCONSISTENT ACTION. Subject to Sections 7.1 and 7.2, the
parties hereto shall not take any action inconsistent with their obligations
under this Agreement or which could materially hinder or delay the consummation
of the transactions contemplated by this Agreement. None of the parties hereto
shall take or omit to take any action that could result in any of their
respective representations and warranties not being true in all material
respects on the Closing Date.
4.7 REPRESENTATIONS AND WARRANTIES. Seller shall give prompt notice to
Buyer, and Buyer shall give prompt notice to Seller prior to the Closing, of (a)
any representation or warranty made by it or them contained in this Agreement
that is qualified as to materiality becoming untrue or inaccurate in any
material respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect or (b) the failure by it
or them to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it or them under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this agreement.
4.8 EXECUTION OF ADDITIONAL ACQUISITION AGREEMENTS. On the Closing
Date, each of the Buyer and Seller shall execute and deliver each of the
Assumption Agreement, the Trademark License Agreement, the Supply Purchase
Agreement and the Escrow Agreement (the "ADDITIONAL ACQUISITION AGREEMENTS").
4.9 COVENANT NOT TO COMPETE.
(a) In consideration of the Buyer entering into this Agreement
with the Seller, the Seller hereby agrees effective as of the Closing
Date, and for a period of five years thereafter (the "NONCOMPETE
PERIOD"), that the Seller shall not, and the Seller shall cause each of
its controlled Affiliates to not, directly or indirectly, either for
itself or through
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any other Person, engage in, or provide any technical or marketing
assistance to, or permit its name to be used by any enterprise engaging
in, the production, sale or distribution anywhere in the world of any
grain storage bin or of any grain conditioning or handling equipment of
the general type produced, sold or distributed by the Business on the
date hereof (collectively, "Relevant Products"). For purposes of this
Agreement, the phrase "directly or indirectly engage in" shall include
any direct or indirect ownership or profit participation interest in
such enterprise, whether as an owner, stockholder, partner, joint
venturer of otherwise, and shall include any direct or indirect
participation in such enterprise as a consultant, licensor of
technology or otherwise. Notwithstanding the foregoing, the provisions
of this Section 4.9 shall not prohibit the direct or indirect
acquisition by the Seller or any of its Affiliates of less than 5% of
the outstanding voting securities of any publicly-traded corporation.
Seller agrees that this covenant is reasonably designed to protect
Buyer's substantial investment and is reasonable with respect to its
duration, geographical area and scope. Notwithstanding the foregoing,
Buyer and Seller acknowledge that Seller is in the business of
manufacturing and distributing throughout the world farm buildings and
other commercial structures with wooden or structural steel frames
which may be used and are used for the "flat storage" and handling of
grain or other materials and that such activities are not intended to
be prohibited by this Section 4.9. Buyer also agrees that no business
activity of Seller as described in its 1996 Annual Report to
Stockholders and in its Form 10-K for the year ended December 31, 1996,
involves any activity proscribed by this Section 4.9 other than the
activities of the Business and that following the Closing Seller may
continue to engage in all of its other businesses as now conducted.
Buyer also acknowledges that Seller distributes farm buildings with
wooden or structural steel frames used for grain storage and other
products not included within the Business through dealers and other
agents that also market, distribute and erect grain bins and grain
drying and handling equipment for the Business and that this covenant
is not intended to cause Seller to terminate its relationships with any
such dealers or agents, to preclude such dealers or agents from
continuing to use the Butler name and trademark (other than in
connection with the sale of Relevant Products which are labelled with a
trademark or tradename subject to the Trademark License Agreement or
which otherwise purport to be Seller's products) or to otherwise cease
the conduct of such activity.
(b) Notwithstanding the foregoing, if at any time a court
holds that the restrictions stated in this section are unreasonable or
otherwise unenforceable under circumstances then existing, Buyer and
Seller agree that the maximum period, scope or geographic area
determined to be reasonable under such circumstances by such court will
be substituted for the stated period, scope or area. Buyer and Seller
agree that money damages will be an inadequate remedy for any breach of
the agreements described in this section. In the event of a breach or
threatened breach of the agreements described in this section, the
Buyer or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive relief in order
to enforce, or prevent any violations of, the provisions hereof
(without the posting of a bond or other security).
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4.10 TERMINATION OF AFFILIATE TRANSACTIONS. Except as disclosed on
Schedule 4.10, all agreements, arrangements, undertakings or other transactions
set forth in Schedule 3.l(x) shall be terminated on or prior to the Closing Date
at no cost to the Business or Buyer.
4.11 CUSTOMER CLAIMS ON PRODUCT WARRANTIES AND PURCHASE OF PAST DUE
ACCOUNTS RECEIVABLE.
(a) In furtherance of the administrative convenience of the
parties and subject to the next sentence and the procedures outlined on
Schedule 4.11, Buyer shall, after the Closing Date, satisfy Product
Warranty claims made by customers or purchaser of products of the
Business which arise under the express warranties of the Business as
delivered to Buyer under Section 3.1(o). Anything in this Agreement to
the contrary notwithstanding, Seller shall, in accordance with Section
8 indemnify and hold Buyer harmless, on a dollar for dollar basis, from
and against all obligations or liabilities of the nature described in
this Section 4.11. Anything in this Agreement or generally accepted
accounting principles to the contrary notwithstanding, the Final
Closing Balance Sheet shall not include any reserve for liabilities or
obligations of the nature contemplated by this Section 4.11.
(b) Anything in this Agreement to the contrary
notwithstanding, Seller shall, in accordance with Section 8, indemnify
and hold Buyer harmless, on a dollar for dollar basis, from and against
any contract back charges that are incurred by Buyer before the Closing
or for any items past due as of the Closing Date. Anything in this
Agreement or generally accepted accounting principles to the contrary
notwithstanding, the Final Closing Balance sheet shall not include any
reserve for contract back charges.
(c) The Accounts Receivable reflected on the Final Closing
Balance Sheet will not include as an Asset any reserve for uncollected
accounts receivable. As a consequence, Seller shall purchase from Buyer
each account receivable that has not been paid in full within 150 days
following the date of the of the original invoice or other initial
demand for payment. The amount of the purchase price shall be 100% of
the balance due plus interest but excluding late fees. Seller shall
remit the price to Buyer within thirty days following a tender of the
receivable. Upon such purchase, Seller shall have the right to require
Buyer to continue its routine collection efforts with respect to such
receivable for Seller in exchange for a collection fee equal to 5% of
the amount collected. Routine collection efforts shall not require the
filing of any suit or proceeding or the placement of the account with
an attorney or other professional collector.
4.12 CONFIDENTIALITY. Buyer confirms that it is bound by the terms of
the confidentiality agreement between Seller and American Securities Capital
Partners, L.P., dated January 23, 1997, as if it were a signatory thereto and
that, subject to Section 9.1 hereto, it will keep and treat the evaluation
material and all other items of confidential information provided by Seller to
Buyer hereunder and under the Letter of Intent dated February 21, 1997, in
accordance with the terms of that confidentiality agreement.
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4.13 RIGHT TO CHALLENGE. Seller acknowledges that although Buyer has
agreed to pay for KPMG Peat Marwick's audit of the Business's financial
statements, Buyer in no way takes responsibility therefor.
4.14 CERTAIN LOSSES. Seller agrees that in the event of any property or
casualty losses or damage prior to the Closing to any of the Assets included in
the Balance Sheet, Seller shall make any necessary repairs or replacement or pay
to Buyer any payment necessary so that the Buyer receives such Assets (or a
comparable replacement thereof) in the same condition as such Assets were in on
December 31, 1996 (other than for normal wear and tear subsequent to such date).
4.15 TITLE COMMITMENT AND SURVEY.
(a) TITLE COMMITMENT. Seller agrees, at Seller's sole expense,
to use commercially reasonable efforts to cause to be furnished and
delivered to Buyer on or before June 13, 1997 a current title
commitment (the "TITLE COMMITMENT"), for an Owner's Title Insurance
Policy (1992 form ALTA policy) to be issued by Chicago Title Insurance
Company or, at Seller's option, by such other company as Buyer may
approve (the "TITLE INSURER"), setting forth the status of title of the
owned real property listed on Schedule 1.1(c) (the "OWNED REAL
PROPERTY") and all other exceptions, including rights-of-way,
easements, restrictions, covenants, reservations, and other conditions,
if any, affecting the Owned Real Property which would appear in an
owner's title policy, if issued, together with copies of all
instruments referred to in the Title Commitment affecting the title to
the Owned Real Property.
(b) SURVEY. Seller shall cause to be prepared, at Seller's
sole expense, a current as-built survey of the Owned Real Property and
to use commercially reasonably efforts to cause the same to be
furnished to Buyer and the Title Insurer on or before June 18, 1997
(the "SURVEY"). The Survey shall be made in accordance with the 1992
Minimum Standard Detail Requirements for Land Title Surveys as jointly
established and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping, certified to Buyer and the
Title Insurer in a manner reasonably satisfactory to Buyer and the
Title Insurer and prepared by Blue Valley Engineers and Surveyors, Inc.
or, at Seller's option, such other independent professional licensed
land surveyor as may be reasonably satisfactory to Buyer and the Title
Insurer.
(c) REVIEW OF TITLE AND SURVEY. Buyer shall have a period (the
"REVIEW PERIOD") ending five (5) days after the date on which Buyer
receives the last to be received of the following: (i) the Title
Commitment, (ii) copies of all instruments referred to in the Title
Commitment which affect title to the Owned Real Property and (iii) the
Survey required in paragraph (b) above, in which to notify Seller of
any objections Buyer has to any matter shown or referred to on the
Survey or in the Title Commitment which are reasonably unacceptable to
Buyer. Any matters to which Buyer does not object by written notice
delivered to Seller prior to the end of the Review Period, as well as
utility easements and other easements, rights of way, covenants,
reservations and restrictions of record which, individually or in the
aggregate, do not
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interfere with the ordinary conduct of the Business or the use of any
such real property for its current uses, diminish the value of such
real property shall be considered Permitted Liens. Liens of an
ascertainable amount shall not be considered to be matters rendering
title unmarketable, and shall be paid and discharged by Seller at or
before the Closing, except for liens for taxes and assessments which
shall be accrued on the Final Closing Balance Sheet. In the event Buyer
notifies Seller in writing prior to the end of the Review Period of any
objections to any matters shown or referred to in the Title Commitment
or the Survey, Seller shall eliminate or modify the conditions giving
rise to such objections to the reasonable satisfaction of Buyer prior
to the Closing. Without limiting the foregoing, any matter will be
reasonably objectionable by Buyer if it reflects that the Buyer will
not receive good and marketable title to all real property currently
used by the Seller in the conduct of the Business other than the leased
Real Property and the Excluded Assets.
4.16 OTHER AGREEMENTS. Buyer and Seller shall negotiate in good faith
to agree to a form of Supply Purchase Agreement satisfying the requirements of
this Section 4.16 on or prior to May 30, 1997. Buyer and Seller shall negotiate
in good faith to agree to a form of lease agreement with Bucon, d.b.a. Butler
Construction ("BUCON"), on or prior to May 30, 1997. Said lease agreement will
govern the lease by Buyer to Bucon of that portion of the Real Property to be
occupied by Bucon following Closing. The Supply Purchase Agreement will contain
terms and conditions satisfactory to both Buyer and Seller providing Buyer the
option for a period of four years after the Closing Date to purchase steel for
the Business and for any other storage bins manufactured by Buyer and on the
same terms and conditions as Seller purchases steel. To the extent so
negotiated, the Supply Purchase Agreement will also contain terms and conditions
relating to the purchase of steel for all the business and operations of Buyer.
4.17 ENVIRONMENTAL REVIEW. Buyer and Seller shall use commercially
reasonable efforts to complete their environmental "due diligence" review of the
Real Property by June 30, 1997.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES. The respective
obligations of the parties hereto to consummate the Acquisition shall be subject
to the satisfaction at or prior to the Closing Date of the following conditions:
(a) NO INJUNCTION, ETC. No preliminary or permanent injunction
or other order issued by any federal or state court of competent
jurisdiction in the United States or by any United States federal or
state governmental or regulatory body nor any statute, rule, regulation
or executive order promulgated or enacted by any United States federal
or state governmental authority which restrains, enjoins or otherwise
prohibits any of the transactions contemplated hereby shall be in
effect;
(b) HSR ACT. The waiting periods (and any extensions thereof)
applicable to the transactions contemplated by this Agreement under the
HSR Act shall have been terminated or shall have expired;
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(c) GOVERNMENT ACTIONS. No action shall have been taken, and
no statute, rule or regulation shall have been enacted, by any state or
Federal government or governmental agency which would prevent the
consummation of the transactions contemplated by this Agreement or
impose material conditions with respect thereto;
(d) PENSION BENEFIT GUARANTY CORPORATION. No action shall have
been taken or threatened by the Pension Benefit Guaranty Corporation to
terminate any defined benefit pension plan maintained by Seller or its
Affiliates with respect to the Business which has not been resolved or
discontinued without material conditions with respect thereto; and
(e) SUPPLY PURCHASE AGREEMENT. The Seller and the Buyer shall
have agreed to the form of Supply Purchase Agreement as contemplated by
Section 4.16.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations of
Buyer to consummate the Acquisition are subject to the satisfaction (or waiver
by Buyer) at or prior to the Closing Date of each of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Seller contained herein or in any
certificate, instrument or other document delivered to Buyer pursuant
hereto shall be true and correct in all material respects on and as of
the Closing Date, with the same force and effect as though such
representations and warranties had been made on and as of the Closing
Date, except to the extent that any such representation and warranty is
made as of a specified date, in which case such representation and
warranty shall have been true and correct as of such date;
(b) PERFORMANCE OF OBLIGATIONS. Seller shall have performed in
all material respects all obligations and agreements, and complied in
all material respects with all covenants contained in this Agreement to
be performed or complied with by it prior to the Closing Date;
(c) OFFICER'S CERTIFICATE. Buyer shall have received a
certificate, dated the Closing Date, of the President of Seller to the
effect that the conditions specified in paragraphs (a) and (b) above
have been fulfilled;
(d) OPINIONS. Buyer shall have received an opinion dated the
Closing Date from Richard O. Ballentine, General Counsel to Seller, in
substantially the form attached hereto as Exhibit C;
(e) CONSENTS, ETC. All licenses, permits, consents, approvals,
authorizations and orders of governmental authorities and other third
parties necessary for the consummation of the transactions contemplated
hereby and the transfer to the Buyer of all rights, title and interest
of the Seller in and to all of the Assets and the conduct of the
Business by Buyer after the Closing shall have been obtained or
otherwise adequately provided for pursuant to Section 4.3;
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(f) ADDITIONAL ACQUISITION AGREEMENTS. Seller shall have
executed and delivered to Buyer each of the Additional Acquisition
Agreements to the reasonable satisfaction of Buyer;
(g) TITLE INSURANCE; SURVEYS. Buyer shall have received, with
respect to each parcel of real property listed on Schedule 1.1(c), a
1992 form ALTA policy of title insurance (collectively, the "TITLE
POLICIES") issued by the Title Insurer dated as of the Closing Date in
an amount equal to the value of such parcel of real property, as
reasonably agreed to by the parties prior to the Closing Date. The
Title Policies shall be issued at ordinary rates and shall insure fee
simple title to such real property to be vested in the Buyer or its
nominee subject only to the Permitted Liens. The Buyer shall have
received the Title Commitment and the Survey as provided in Section
4.15 and the obligations of Seller under Section 4.15(c) shall have
been satisfied in a manner that does not preclude Buyer from receiving
the financing contemplated by Section 3.2(f) on the terms contemplated
by the commitment letter of KeyBank, N.A. (it being understood that the
Real Property will be mortgaged to secure such financing). Seller shall
have resolved in a manner reasonably satisfactory to Buyer the matters
referenced in the memorandum dated March 10, 1997 by Patricia L. Wilson
described in Schedule 1.1 (c) and in the memorandum dated November 15,
1993 by An Bergstrom attached thereto; and
(h) ENVIRONMENTAL MATTERS. Buyer shall have completed its
environmental "due diligence" review of the Business and, based upon
such review, shall not in good faith believe that the aggregate cost of
any necessary or appropriate remediation of Materials of Environmental
Concern or other environmental-related expenditures is likely to cost
in excess of $3,000,000, it being understood and agreed that Seller
will under all circumstances be responsible for the cost of such
remediation.
5.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The obligations
of Seller to consummate the Acquisition are subject to the satisfaction (or
waiver by Seller) at or prior to the Closing Date of each of the following
conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Buyer contained herein, or in any
certificate, instrument or other document delivered to Seller pursuant
hereto shall be true and correct in all material respects on and as of
the Closing Date, with the same force and effect as though such
representations and warranties had been made on and as of the Closing
Date, except to the extent that any such representation and warranty is
made as of a specified date, in which case such representation and
warranty shall have been true and correct as of such date;
(b) PERFORMANCE OF OBLIGATIONS. Buyer shall have performed all
obligations in all material respects and agreements, and complied in
all material respects with all covenants, contained in this Agreement
to be performed or complied with by each of them prior to the Closing
Date;
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(c) OFFICER'S CERTIFICATE. Seller shall have received a
certificate, dated the Closing Date, of the President of Buyer to the
effect that the conditions specified in paragraphs (a) and (b) above
have been fulfilled;
(d) OPINIONS. Seller shall have received an opinion dated the
Closing Date from Michael J. Kissane, General Counsel of Buyer, in
substantially the form attached hereto as Exhibit D;
(e) ADDITIONAL ACQUISITION AGREEMENTS. Buyer shall have
executed and delivered to Seller each of the Additional Acquisition
Agreements; and
(f) ENVIRONMENTAL ISSUES. Buyer shall have completed its
environmental "due diligence" review of the Business and Seller shall
have completed its own due diligence review of any environmental issues
raised by Buyer's review, and Seller shall not in good faith believe
that the aggregate cost of any necessary or appropriate remediation of
Materials of Environmental Concern or other environmental-related
expenditures relating to the Business and identified in such reviews is
likely to cost in excess of $2,000,000.
SECTION 6. EMPLOYEES AND EMPLOYEE BENEFITS
6.1 EMPLOYMENT AGREEMENTS. Except as provided on Schedule 6.1, Seller
has no employment agreements with the employees of the Business and all such
employees are employed on an "at will" basis. Seller intends to terminate all of
the employees of the Business ("Seller's Employees" or an "Employee") at
Closing. Except for liabilities assumed by Buyer hereunder pursuant to this
Section 6 and Section 1.5 above, Seller is responsible for, and shall indemnify
and hold harmless Buyer from and against any and all claims of Seller's
employees with respect to employment prior to the Closing, and Seller shall
retain sole responsibility for and fully and timely pay all salaries, wages, and
benefits that have accrued to its employees through the Closing Date, whether or
not such amounts are payable prior to the Closing Date. Except for liabilities
retained by Seller hereunder pursuant to this Section 6 and Section 1.5 above,
Buyer is responsible for, and shall indemnify and hold harmless Seller from and
against any and all claims of Seller's employees with respect to (a) employment
of such employees by Buyer subsequent to the Closing, (b) matters covered by the
CBA based on facts that arise after the Closing Date, (c) claims for accrued
vacation pay or vacation benefits and (d) any claims by employees of the
Business (i) under WARN, (ii) for severance benefits under the CBA, or Seller's
severance guidelines for Salaried Employees as shown on Schedule 3.1(r), due to
the termination of an employee of the Business by Seller at the Closing whether
or not rehired by Buyer, (iii) due to any termination of any new employment
relationship between Buyer and an employee of the Business following the
Closing, (iv) only to the extent expressly agreed to by Buyer, for any amount or
the cost of any benefit that Seller may provide to any Hourly Employees
following the Closing due to agreements made by Seller in order to satisfy its
obligations under Section 6.2 and (v) for any other claim of a Salaried or
Hourly Employee due to Seller's termination of any such Employee in connection
with the Closing, including any claim arising out of Seller's termination of the
CBA or Seller's termination of its employment relationship with any Salaried
Employee (with (i) through (v) referred to as "SEVERANCE CLAIMS").
Notwithstanding the foregoing, Seller shall be responsible for, and shall
indemnify
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and hold harmless Buyer from and against any and all claims of Salaried
Employees for severance benefits under Seller's severance guidelines for
Salaried Employees and any other claim of a Salaried Employee due to Seller's
termination of any such Employee in connection with the Closing, if such
Salaried Employee is offered employment by Buyer at a position and level of
compensation comparable to the position and level of compensation at which such
Salaried Employee was employed by Seller immediately prior to Closing (all such
claims retained by Buyer shall not constitute Severance Claims).
6.2 COLLECTIVE BARGAINING AGREEMENTS. Seller shall be solely liable and
responsible for any liability under the National Labor Relations Act arising
from any failure by Seller to satisfy its obligations to notify (other than as
to WARN obligations) and/or bargain with any union prior to the Closing. Seller
agrees to indemnify and hold Buyer and its Affiliates harmless against any loss,
damage, claim, obligation or liability arising out of or relating to Seller's
failure to satisfy such obligations, subject to Buyer's obligations under
6.1(d).
6.3 OFFER OF EMPLOYMENT TO OTHER EMPLOYEES. Buyer or its designated
Affiliate may, but shall not be required to, extend an offer of employment to
some or all of the employees employed by the Business. Buyer shall have the
exclusive right to set the initial levels of wages, benefits, and other terms
and conditions of employment for any such employees. Those employees not covered
by a CBA are referred to as "SALARIED EMPLOYEES" and those employees covered by
a CBA are referred to as "HOURLY EMPLOYEES". Buyer may interview Seller's
Salaried and Hourly Employees for purposes of determining whether to extend an
offer of employment to such employees.
6.4 COMPLIANCE WITH "WARN". Buyer covenants and agrees that it shall,
in connection with succeeding Seller as an employer in accordance with this
Section 6, comply fully with the Worker Adjustment and Retraining Notification
Act ("WARN"), taking into account all relevant employment activities of Seller
disclosed on Schedule 6.4 which Seller represents and warrants to Buyer fully
describes for purposes of evaluating potential liabilities under WARN all
hirings, recalls, terminations and lay-offs of employees of the Business during
the one year period preceding the Closing Date.
6.5 NON-SOLICITATION OF EMPLOYEES; NO TRANSFERS. Seller agrees that
neither it nor any of its Affiliates will, for a period commencing on the date
hereof and ending on the 18 month anniversary of the Closing Date, without the
prior written consent of Buyer, whether directly or indirectly, solicit the
employment of any person who is at that time an employee, representative or
officer of the Business and who was prior to the Closing an employee of Seller
at the Business and had a salary in excess of $50,000 per year. Prior to the
Closing Date, Seller shall not transfer the employment of any employee of the
Business to any other business or operation of Seller or to any Affiliate of
Seller.
6.6 EMPLOYEE BENEFITS AND COMPENSATION.
(a) HOURLY EMPLOYEES--HOURLY EMPLOYEES' PENSION PLAN AND
RETIREE MEDICAL BENEFITS. Subject to the provisions of this Section 6,
effective as of the Closing Date Seller shall freeze or make other
lawful provision for the merger, termination,
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cessation or other disposition of Seller's existing Pension Plan for
Hourly Employees of the Kansas City Plant of the Business (the "PENSION
PLAN") unless, on or prior to the Closing, Buyer in its sole discretion
assumes all of Seller's obligations under the Pension Plan and receives
all Pension Plan assets, whether arising before or after the Closing,
and agrees to indemnify and hold Seller harmless against any loss,
damage, claim, obligation or liability arising out of or relating to
Buyer's failure to satisfy any of Seller's obligations under or with
respect to the Pension Plan, subject to Seller's representations and
warranties pursuant to Section 3.1(r)(viii) and Seller's
indemnification of Buyer, pursuant to Section 8.1, with respect to the
design, operation and funding of the Pension Plan through the Closing
Date. Seller and Buyer shall take all steps reasonably necessary to
facilitate Buyer's assumption of the Pension Plan if Buyer in its sole
discretion elects to assume the Plan. If Buyer does not assume the
Pension Plan, Seller shall retain all obligations and liability with
respect to the Pension Plan, including the payment of benefits to
Hourly Employees attributable to their service prior to the Closing
Date. Seller shall retain any liability to provide retiree medical
benefits with respect to Hourly Employees of Seller who retire before
or on the Closing Date.
(b) TRANSFERRED EMPLOYEES - BENEFITS AFTER THE CLOSING. Hourly
and Salaried Employees that are hired by Buyer after the Closing
("TRANSFERRED EMPLOYEES") will be provided such employee benefits and
compensation, after the Closing Date, as Buyer, in its sole discretion,
may determine or otherwise negotiate with the Union; provided, however,
and notwithstanding any other provision contained herein to the
contrary, Transferred Employees shall be given credit for past service
with Seller for purposes of service eligibility requirements as to any
retiree medical benefit plan or vacation plan provided by Buyer for
such Employees. Subject to Section 6.1(a) and the preceding sentence,
after the Closing Date, nothing herein shall, with respect to
Transferred Employees who are Salaried Employees, (i) require Buyer to
maintain any particular plan or arrangement, (ii) prevent or preclude
Buyer from continuing any requirements for employee contributions under
any employee benefit plans in the same proportions as the employee-paid
portion under such plans constituted prior to the Closing Date, (iii)
prevent the amendment or termination of any plan, program or
arrangement established or maintained by Buyer, or (iv) interfere with
Buyer's right or obligation to take any action or refrain from taking
any action which Seller could take or refrain from taking prior to the
Closing Date. In addition, in administering any plans, programs or
arrangements established or maintained by the Buyer, the Buyer may
cause a reduction of benefits under any such plans, programs or
arrangements, specifically including any vacation plan, to the extent
Buyer deems necessary to avoid duplication of benefits with respect to
the same covered matter or years of service or otherwise. Seller and
Buyer shall agree on the responsibilities for payroll taxes with
respect to Transferred Employees.
(c) EMPLOYEES-OBLIGATIONS WITH RESPECT TO RETIREE AND OTHER
BENEFITS PRE CLOSING AND SEVERANCE CLAIMS. Seller shall retain any
liability to provide retiree medical benefits with respect to retired
Employees of the Business who qualify for such coverage as of the
Closing Date. Seller shall also remain responsible for any benefits to
Salaried Employees under stock option or cash bonus plans, commission
agreements, automobile allowances, tuition reimbursement plans,
vacation pay plans, welfare or
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pension benefits, Sellers' 401(k) plan, Sellers' Employee Stock
Ownership Plan, life insurance, death benefits and health supplement
benefits with respect to Salaried Employees in relation to their
service prior to the Closing Date. With respect to Salaried Employees,
Buyer shall not assume any employment contracts, wage rates, work
practices, health, welfare or pension benefit plans, or any other
employment arrangements or understanding to which Seller is or has been
a party, except to the extent required by law, except for any benefits
arising out of Severance Claims or as set forth on Schedule 6.1.
(d) COBRA COVERAGE. Seller shall be responsible for satisfying
"continuation coverage" requirements for all plans under Section 4980B
of the Code or Part 6 of Title I of ERISA (COBRA) for all Employees for
qualifying events occurring on or before the Closing Date. Seller shall
offer "continuation coverage" under its plans to all employees and
shall comply with all notice and other requirements under COBRA or
similar state statutes as a result of qualifying events occurring prior
to the Closing Date or as a result of the transactions contemplated
under this agreement to the Employees or any of their respective
beneficiaries. Buyer shall assume all liability for satisfying the
obligations under COBRA to provide continuation coverage to or with
respect to any Transferred Employee in accordance with law with respect
to any "qualifying event" occurring after the Closing Date and shall
waive pre-existing conditions and any eligibility waiting period.
(e) WORKERS' COMPENSATION, DISABILITY AND UNEMPLOYMENT
COMPENSATION CLAIMS. Seller shall be responsible for any and all
liabilities arising in connection with workers' compensation,
disability and unemployment compensation claims which are incurred
prior to the Closing Date with respect to all Employees (whether or not
such claims have been filed prior to the Closing Date). Buyer shall be
responsible for any and all liabilities arising in connection with
workers' compensation, disability and unemployment compensation claims
which are incurred on or after the Closing Date with respect to any
Hourly Employee and with respect to any Transferred Employee who is a
Salaried Employee. Seller shall be responsible for any and all long
term disability benefits (and all other disability-related welfare
benefits for Salaried Employees) which become payable after the Closing
Date to any Salaried Employee who met the plan requirements for long
term disability as of the Closing Date.
(f) RECORD KEEPING. To the extent that service with Seller or
Buyer is relevant for purposes of providing benefits to Employees,
Buyer and Seller shall keep and provide each other with reasonable
records and notification of such information as may be necessary to
provide benefits to such Employees.
(g) PAYMENT OF REGULAR PAYROLL ACCRUED AS OF THE CLOSING DATE
AND VACATION. Seller shall pay according to its normal business
schedule or the provisions of the Plans (i) all liabilities,
obligations and commitments relating to all regular wages, salaries,
commissions and other forms of regular monthly payroll and related
expenses with respect to Employees, including without limitation,
obligations for all applicable payroll taxes, attributable to the
period ending on the close of business on the day prior
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to the Closing Date and (ii) all employee benefits under any and all
plans, programs or arrangements maintained or contributed to by Seller
on behalf of the Transferred Employees for all claims incurred during
the period ending on the close of business on the day prior to the
Closing Date (whether or not a claim for such benefits has been filed
prior to the Closing Date). Notwithstanding the foregoing, Buyer shall
assume Seller's liability to Salaried Employees of the Business with
respect to any accrued vacation and Severance Claims.
(h) NO THIRD PARTY BENEFICIARIES. No employee of Seller or the
Business, whether or not hired by Buyer, shall be construed as a third
party beneficiary under this Agreement, and no provision in this
Agreement shall create any right in any such employee (or his or her
beneficiary or dependent) for any reason, including, without
limitation, in respect of employment, continued employment, or resumed
employment with Seller or Buyer (or any of their Affiliates) or in
respect of any benefits that may be provided, directly or indirectly,
under any plan or arrangement maintained by Seller or Buyer (or any of
their Affiliates).
SECTION 7. TERMINATION
7.1 GENERAL. This Agreement may be terminated and the transactions
contemplated herein abandoned (a) by mutual consent of Buyer and Seller, (b) by
Buyer, if there has been a material breach of Seller's representations,
covenants or agreements hereunder, (c) by Seller, if there has been a material
breach of Buyer's representations, covenants or agreements hereunder, (d) by any
party by notice to the other parties in the event that the Closing Date, as
extended by agreement of the parties, shall not have occurred on or before June
30, 1997, or (e) by Buyer or Seller if the Form of Supply Purchase Agreement has
not been agreed to in writing by June 1, 1997.
7.2 NO LIABILITIES IN EVENT OF TERMINATION. In the event of any
termination of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become null and void and of no further force or effect and there shall
be no liability on the part of Buyer or Seller, except that Sections 4.12, 8 and
9 of this Agreement shall remain in full force and effect and that termination
shall not preclude any party from suing any other party for breach of this
Agreement.
SECTION 8. INDEMNIFICATION
8.1 SELLER INDEMNITY. Seller agrees to indemnify and hold harmless
Buyer, its Affiliates, each of their respective directors, officers, employees
and agents, and each of the heirs, executors, successors and assigns of any of
the foregoing (collectively, "BUYER INDEMNIFIED PERSONS") from and against (i)
all Excluded Liabilities, (ii) any claim, cost, loss, liability or damage
incurred or sustained by any Buyer Indemnified Person as a result of any
misrepresentation or breach of warranty by Seller or a breach by Seller of any
covenant or other agreement contained herein or under any other agreement or
certificate executed and delivered by the parties in furtherance of the
transactions described herein, (iii) any and all liabilities for sales, use,
income and other Taxes arising at any time out of the operation of the Business
prior to the opening of business on the Closing Date to the extent not included
in the Assumed
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Liabilities, (iv) any claim, cost, loss, liability or damage arising out of or
relating to any governmental or other third party claim or action against any
Buyer Indemnified Person to the extent arising out of or relating to the
ownership or operation of the Business or Assets by Seller or any other person
prior to the Closing Date other than an Assumed Liability, (v) any claim,
liability or obligation arising out of or relating to any Materials of
Environmental Concern existing on, at or under any Asset before the Closing
Date, or otherwise arising from, or in connection with, the conduct of the
Business or the ownership of the Assets by the Seller or any other person prior
to the Closing Date and (vi) all reasonable costs and expenses (including
reasonable attorneys' fees and disbursements) incurred by any Buyer Indemnified
Party in connection with any action, suit, proceeding, demand, assessment or
judgment incident to any of the matters indemnified against in this Section 8.1.
Seller shall have no obligation to indemnify any Buyer Indemnified Person with
respect to any claim, liability or obligation relating to Real Property found
not to be in compliance with the ADA.
8.2 BUYER INDEMNITY. Buyer agrees to indemnify and hold harmless Seller
and its Affiliates, each of their respective directors, officers, employees and
agents, and each of the heirs, executors, successors and assigns of any of the
foregoing (collectively, the "SELLER INDEMNIFIED PERSONS" and each a "SELLER
INDEMNIFIED PERSON") from and against (i) any claim, cost, loss, liability or
damage arising out of or relating to any Assumed Liabilities, (ii) any claim,
cost, loss, liability or damage incurred or sustained by any Seller Indemnified
Person as a result of any misrepresentation or breach of warranty by Buyer or a
breach by Buyer of any covenant or other agreement contained herein, or under
any other agreement executed and delivered by the parties in furtherance of the
transactions described herein, (iii) any claim, cost, loss, liability or damage
arising out of or relating to any governmental or other third party claim or
action against any Seller Indemnified Person to the extent arising out of or
relating to the ownership or operation of the Business or Assets by Buyer or any
other person following the Closing Date, other than any Excluded Liability, (iv)
any claim, liability or obligation arising out of or relating to any Materials
of Environmental Concern existing on, at or under any Asset after the Closing
Date or otherwise arising from, or in connection with, the conduct of the
Business by the Buyer or any other person after the Closing Date, in each case
except for any Excluded Liability set forth in Section 1.5(b)(xi) and (v) all
reasonable costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by any Seller Indemnified Person in connection with any
action, suit, proceeding, demand, assessment or judgment incident to any of the
matters indemnified against in this Section 8.2.
8.3 THIRD PARTY CLAIMS. If a claim by a third party is made against an
indemnified person hereunder, and if such indemnified person intends to seek
indemnity with respect thereto under this Article, such indemnified person shall
promptly notify the indemnifying person in writing of such claims setting forth
such claims in reasonable detail, provided that failure of such indemnified
person to give prompt notice as provided herein shall not relieve the
indemnifying person of any of its obligations hereunder, except to the extent
that the indemnifying person is materially prejudiced by such failure. With
respect to any such claim relating solely to the payment of money damages and
which will not result in the indemnified party's becoming subject to injunctive
or other equitable relief and as to which the indemnifying party shall have
acknowledged in writing its obligation to indemnify the indemnified party
hereunder, the indemnifying person shall have twenty (20) days after receipt of
such notice to undertake,
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through counsel of its own choosing, subject to the reasonable approval of such
indemnified person, and at its own expense, the settlement or defense thereof,
and the indemnified person shall cooperate with it in connection therewith;
provided, however, that the indemnified person may participate in such
settlement or defense through counsel chosen by such indemnified person,
provided that the fees and expenses of such counsel shall be borne by such
indemnified person. If the indemnifying person shall assume the defense of a
claim, it shall not settle or compromise such claim without the prior written
consent of the indemnified person, (i) unless such settlement or compromise
includes as an unconditional term thereof the giving by the claimant of a
release of the indemnified person from all liability with respect to such claim
or (ii) if such settlement or compromise involves the imposition of equitable
remedies or the imposition of any material obligations on such indemnified party
will be indemnified hereunder. If the indemnifying person shall assume the
defense of a claim, the fees of any separate counsel retained by the indemnified
person shall be borne by such indemnified person unless there exists a conflict
between them as to their respective legal defenses (other than one that is of a
monetary nature), in which case the indemnified person shall be entitled to
retain separate counsel, the reasonable fees and expenses of which shall be
reimbursed by the indemnifying person. If the indemnifying person does not
notify the indemnified person within twenty (20) days after the receipt of the
indemnified person's notice of a claim of indemnity hereunder that it elects to
undertake the defense thereof and acknowledges its obligation to indemnify the
indemnified person hereunder, or if the claim does not relate solely to the
payment of money damages, the indemnified person shall have the right to
contest, settle or compromise the claim but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement.
8.4 ADDITIONAL AGREEMENTS.
(a) The obligations to indemnify and hold harmless a party
hereto, pursuant to Section 8.1(ii) and 8.2(ii) with respect to any
misrepresentation or breach of warranty shall terminate when the
applicable representation or warranty terminates pursuant to Section
3.3; provided, however, that such obligation to indemnify and hold
harmless shall not terminate with respect to any item as to which the
person to be indemnified shall have, before the expiration of the
applicable period, previously made a claim by delivering a notice
(stating in reasonable detail the basis of such claim) to the
indemnifying party.
(b) The parties agree that any indemnification payments made
pursuant to this Agreement shall be treated for tax purposes as an
adjustment to the Purchase Price, unless otherwise required by
applicable law.
(c) Whenever any claim for indemnification shall arise under
this Section 8, other than a Third Party Claim as defined in Section
8.3 (each, a "CLAIM"), the party seeking indemnification (the
"INDEMNITEE") shall notify in writing the party from which
indemnification is sought (the "INDEMNITOR") of the Claim within sixty
(60) days after the Indemnitee becomes aware of the Claim's existence,
with such notice to contain the factual basis for the Claim and the
amount or an estimate (if known or reasonably determinable) of the
liability that may arise therefrom, provided that the failure to
provide
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such notice shall not affect the Indemnitor's right to indemnification
hereunder except to the extent that the Indemnitor is actually
prejudiced by such failure.
(d) Anything in this Agreement to the contrary
notwithstanding, Seller shall have no obligation to indemnify Buyer
with respect to any claim arising from or relating to (a) Seller's
breach of the representations and warranties in Section 3.1 hereto or
(b) Seller's breach of its covenants and agreements in Section 4 that
are required to be performed prior to the Closing other than a Tax
Claim, Environmental Claim, Customer Claim or "Section 3.1(v) Claim"
(all of which shall not be subject to this Section 8.1(d)) until such
time as, and to the extent that, all such claims exceed $300,000. A
"CUSTOMER CLAIM" means any claim for indemnification by Buyer in
connection with any liability or obligation (including any contract
back charge) imposed upon Buyer with respect to the matters
contemplated in Section 4.11. A "TAX CLAIM" means any claim under
Section 3.1(w). An "ENVIRONMENTAL CLAIM", means any claim for breach of
representation or warranty under Section 3.1(u). A "SECTION 3.1(V)
CLAIM" means any claim for breach of representation or warranty under
Section 3.1(v).
(e) In the event that Seller has in Buyer's judgment failed or
refused to pay an amount properly demanded by Buyer as due under this
Section 8 within 30 days of Buyer's written demand for indemnification
hereunder, Buyer may, to the extent of the Escrow Amount, satisfy such
claim from the Escrow Amount pursuant to the Escrow Agreement, provided
that the exhaustion or release of the Escrow Amount shall not limit or
otherwise affect any rights of a Buyer Indemnified Person hereunder.
Anything in this Agreement to the contrary notwithstanding, Buyer's
satisfaction of any claim from the Escrow Amount shall not mean Buyer
is entitled to indemnification hereunder and in the event Seller
contests such indemnification claim, following any arbitration judgment
pursuant to Section 9.13 the Buyer will deposit promptly (and in any
event within three business days) with the Escrow Agent (or return to
the Seller if the Escrow Amount has been released) any amount withdrawn
from the Escrow Amount in respect of a claim for which the arbitrator
rules the Buyer was not entitled to indemnification.
SECTION 9. MISCELLANEOUS
9.1 PUBLIC ANNOUNCEMENTS. No news release or other public announcement
pertaining in any way to the transactions contemplated by this Agreement will be
made by any party without the prior written consent of the other parties, unless
in the opinion of counsel to such party (after consultation with counsel to the
other parties) such release or announcement is required by law. Notwithstanding
the foregoing, Buyer shall be entitled (a) to include in any registration
statement filed with the Securities and Exchange Commission such information
relating to the transactions contemplated hereby as the Buyer shall deem
necessary or appropriate and that does not constitute trade secrets or other
than information that could reasonably be expected to have a Material Adverse
Effect which has not previously been disclosed to the public by Seller
("CONFIDENTIAL INFORMATION") and (b) to disclose such information that is not
Confidential Information as it shall deem necessary or appropriate in connection
with the sale or solicitation of offers to purchase any securities being
registered pursuant to any such registration statement. For purposes of any
registration statement filed by Buyer with the Securities and
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Exchange Commission prior to the Closing, Confidential Information shall not be
deemed to include the Financial Statements, any Closing Balance Sheet and such
other information about the Business as Seller agrees does not reveal trade
secrets of the Business.
9.2 EXPENSES. Subject to Section 9.3, whether or not the transactions
contemplated by this Agreement are completed, each of the parties hereto shall
pay the fees and expenses incurred by it in connection with the negotiation,
preparation, execution and performance of this Agreement, including, without
limitation, attorneys' and accountants' fees, and, in no event, shall any such
fees and expenses of Seller constitute Assumed Liabilities under this Agreement.
The foregoing shall not affect the legal right, if any, that any party hereto
may have to recover expenses from any other party that breaches its obligations
hereunder.
9.3 TRANSFER TAXES AND RECORDING EXPENSES. Seller and Buyer shall share
equally all sales, motor vehicle, transfer and similar taxes and recording
expenses, if any, required to be paid in connection with the transfer of the
Assets.
9.4 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly giver if delivered personally or mailed, first
class mail, postage prepaid, return receipt requested, as follows:
(a) If to Seller:
Butler Manufacturing Company
BMA Tower, Penn Valley Park
Post Office Box 419917
Kansas City, MO 64141-0917
Telephone No.: 816-968-3206
Telecopy No.: 816-968-3211
Attention: Vice President and General Counsel
(b) If to Buyer:
CTB, Inc.
State Road 15 North
P.O. Box 2000
Milford, Indiana 46542-2000
Telephone No.:
Telecopy No.:
Attention: General Counsel
with a copy to (which shall not constitute notice to
Buyer):
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Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telephone No.: (212) 455-2000
Telecopy No.: (212) 455-2502
Attention: Richard Capelouto, Esq.
or to such other address or to the attention of such other person as any party
shall have specified by notice in writing to the other parties. All such
notices, requests, demands and communications shall be deemed to have been
received on the date of personal delivery or on the third business day after the
mailing thereof.
9.5 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules hereto) constitutes the entire agreement between the parties hereto
and supersedes all prior agreements and understandings, oral and written,
between the parties hereto with respect to the subject matter hereof including,
without limitation, the letter of intent, dated February 21, 1997, between Buyer
and Seller.
9.6 BINDING EFFECT; BENEFIT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
on any person other than the parties hereto or their respective successors and
assigns and any person entitled to indemnification under Section 8.1 or 8.2, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.7 BULK SALES LAW. The parties agree to waive compliance with the
provisions of the bulk sales laws of any jurisdiction. Seller agrees to
indemnify and hold harmless Buyer from and against any and all liabilities
(including any liability in respect of Taxes) which may be asserted by third
parties against Buyer as a result of such noncompliance other than the Assumed
Liabilities.
9.8 ASSIGNABILITY. This Agreement shall not be assignable, in whole or
in part, by any party hereto without the prior written consent of the other
party hereto except that Buyer may assign its rights hereunder at any time to
any of its Affiliates without the consent of the Seller, provided that no such
assignment shall relieve the Buyer of its obligations hereunder.
9.9 AMENDMENT; WAIVER. This Agreement may be amended, supplemented or
otherwise modified only by a written instrument executed by the parties hereto.
No waiver by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. Except as
provided in the preceding sentence, no action taken pursuant to this Agreement,
including without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants, or agreements
contained herein, or in any documents delivered or to be delivered pursuant to
this Agreement or in connection with the Closing hereunder. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach.
46
<PAGE> 56
9.10 SECTION HEADINGS; TABLE OF CONTENTS. The section headings
contained in this Agreement and the Table of Contents to this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
9.11 SEVERABILITY. If any provision of this Agreement shall be declared
by any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
9.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
9.13 ARBITRATION. Any dispute (including without limitation, a dispute
as to the validity of this Agreement or the enforceability of this Section of
this Agreement) arising under or pertaining to this Agreement (including any
subsequent verbal or written modifications thereof, all of which shall
hereinafter in this Section be collectively referred to as the "Agreement"), or
arising with respect to any performance of any of the parties under this
Agreement, whether sounding in tort, contract, violation of statute or
otherwise, shall be settled by arbitration by a single arbitrator pursuant to
the Commercial Arbitration Rules of the American Arbitration Association. Such
arbitration proceeding shall be held in Chicago, Illinois. The arbitrator shall
be required to be an attorney licensed to practice law in Illinois and shall
have been in practice for more than five years. A judgment on the award of the
arbitrator shall be binding on the parties and may be entered in any court of
competent jurisdiction.
9.14 APPLICABLE LAW; JURISDICTION; VENUE. THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF INDIANA WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
THEREOF.
EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND ANY
RELATED DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION
AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE
NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATES
OF INDIANA AND MISSOURI, THE COURTS OF THE UNITED STATES OF
AMERICA FOR THE NORTHERN DISTRICT OF INDIANA AND THE WESTERN
DISTRICT OF MISSOURI, AND APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY
BE BROUGHT IN SUCH COURTS, AND WAIVES TRIAL BY JURY AND ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH
ACTION OR PROCEEDING WAS BROUGHT IN
47
<PAGE> 57
AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION
OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR
FORM OF MAIL), POSTAGE PREPAID, TO THE PARTY AT ITS ADDRESS
SET FORTH IN SUBSECTION 9.4 OR AT SUCH OTHER ADDRESS OR TO THE
ATTENTION OF SUCH OTHER PERSON AS ANY PARTY SHALL HAVE
SPECIFIED BY NOTICE IN WRITING TO THE OTHER PARTIES;
(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE
RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER
JURISDICTION; AND
(v) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING REFERRED TO IN PARAGRAPH (i) ABOVE.
9.15 KNOWLEDGE. As used herein, the "knowledge" of a party is deemed to
be the knowledge of any (a) officer or director of the party, (b) officer of the
Grain Systems Division of Seller or (c) manager or other executive of a Party or
of the Grain Systems Division that has compliance responsibility for the matter
in question.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH
MAY BE ENFORCED BY THE PARTIES
BUTLER MANUFACTURING COMPANY
By: /s/Donald H. Pratt
-----------------------------------------
Name: Donald H. Pratt
---------------------------------------
Title: President
--------------------------------------
CTB, INC.
By: /s/ J. Christopher Chocola
----------------------------------------
Name: J. Christopher Chocola
--------------------------------------
Title: President & CEO
-------------------------------------
48
<PAGE> 1
EXHIBIT 10.04
SHARE PURCHASE AGREEMENT
by and among
CHORE-TIME BROCK HOLDING B.V.
as "Buyer"
and
HALDER INVESTMENTS III B.V.
HALDER INVESTMENTS III C.V.
STICHTING FONDSBEHEER FINCON
BELDOR B.V.
V. BERGER
A. FABER
J. PAQUES
J.H.M. CREMERS
H.W. GOOTZEN
as "Selling Shareholders"
and
FANCOM HOLDING B.V.
(The "Company")
Dated as of May 1, 1997
<PAGE> 2
-2-
This SHARE PURCHASE AGREEMENT (this "Agreement") dated as of May 1,
1997 is made and entered into by and among Chore-Time Brock Holding B.V., a
Netherlands corporation and each of the Selling Shareholders identified on the
first page hereof (individually, a "Selling Shareholder" and collectively, the
"Selling Shareholders") and Fancom Holding B.V., a Netherlands corporation (the
"Company") with respect to the issued shares of the Company.
W I T N E S S E T H :
WHEREAS, the Selling Shareholders own all of the issued shares (the
"Shares" in the share capital of the Company; and
WHEREAS, the Selling Shareholders desire to transfer the ownership of
the shares to the Buyer for the consideration specified herein;
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants, agreements, terms and conditions
contained herein, and in order to set forth the terms and conditions of the
purchase and sale of the Shares, the parties hereto do hereby agree as follows:
ARTICLE I
CLOSING
1.1 The Closing. The closing (the "Closing") of the transactions
provided for in this Agreement shall be held at the offices of Trenite Van
Doorne, 133 De Lairessestraat, 1075 HJ Amsterdam on the Closing Date. The
"Closing Date" shall mean May 1, 1997 or such other date as mutually agreed upon
by the Buyer and Selling Shareholders.
1.2. Transfer of Shares. On the Closing Date and subject to the terms
and conditions set forth in this Agreement, the Selling Shareholders will
transfer to Buyer, and Buyer will accept transfer of the Shares, free and clear
of all options, pledges, security interests, liens or other encumbrances or
restrictions of any kind through the execution by the parties of a Dutch
notarial deed of share transfer in the form attached hereto as Exhibit B, which
deed will be executed before M.D. van Waateringe, a civil law notary, in
Amsterdam or his deputy or successor, at the offices of Trenite Van Doorne, 133
De Lairessestraat, 1075 HJ Amsterdam.
1.3 Consideration. On the Closing Date and subject to the terms and
conditions set forth in this Agreement, in reliance on the representations,
warranties, covenants and agreements of the parties contained herein and in
consideration of the sale and transfer of the Shares, the Buyer agrees to
purchase from the Selling Shareholders the Shares for the considerations
specified below in this Article 1.
<PAGE> 3
-3-
1.4 Purchase Price. The Selling Shareholders shall cause the Company
to prepare and deliver to Buyer five business days prior to the Closing Date an
audited balance sheet of the Company and its subsidiaries as of February 28,
1997 (the "February Balance Sheet"), which shall be prepared as if February 28,
1997 was the Company's normal year end, in accordance with Dutch generally
accepted accounting practices ("Netherlands GAAP") applied on a basis consistent
with the audited Financial Statements (as defined in Section 2.2 (h). Reserves,
liabilities, allowances and similar items shall be made on the February Balance
Sheet for all liabilities (whether contingent or otherwise) and to appropriately
value the assets of the Company and its subsidiaries. On the Closing Date, the
Buyer shall pay the Selling Shareholders an aggregate amount equal to (i) NLG
34,500,000 plus (ii) the amount of Cash (as defined in Section 1.5) on the
February Balance Sheet minus (iii) the amount of the Debt (as defined in Section
1.5) on the February Balance Sheet plus (iv) an amount, not to exceed NLG
330,000, equivalent to the cash received by the Company prior to Closing in
consideration for the exercise of all stock options held by Mr. J.H.M. Cremers
minus (v) 1% of the said consideration to account for capital tax due by the
Company over such consideration minus (vi) an amount of NLG 247,887 representing
a tax refund which the Company must return to the tax receiver. An amount equal
to NLG 3,450,000 is to be delivered to ABN AMRO Bank N.V., as escrow agent (the
"Escrow Agent") at Closing to be held pursuant to an Escrow Agreement
substantially in the form attached as Exhibit C hereto, and the balance is to be
paid to the Selling Shareholders at Closing by bank transfer to one account
designated by the Selling Shareholders; amounts so held by the Escrow Agent are
to be referred to therein as the "Escrow Fund").
1.5 Purchase Price Adjustment.(a) As soon as practicable, but in no
event later than 45 days following the last days of March 1997 and April 1997
respectively, the Company shall prepare and deliver to Buyer and the Selling
Shareholders financial statements of the Company and its subsidiaries as of
March 31, 1997 and as of April 30, 1997 (the "March Financial Statements" and
the "April Financial Statements"), together also the "Post February Financial
Statements", together with the workpapers used in the preparation thereof. The
Post February Financial Statements shall present the amounts of Net Income of
the Company and its subsidiaries as of the closing of business on March 31, 1997
and April 30, 1997 respectively. The Post February Financial Statements shall be
prepared as if the Closing Date was the Company's normal year end, in accordance
with Netherlands GAAP applied on a basis consistent with the audited Financial
Statements (as defined in Section 2.2(h)). Reserves, liabilities, allowances and
similar items shall be made on the Post February Financial Statements for all
liabilities (whether contingent or otherwise) and to appropriately value the
assets of the Company and its subsidiaries. As used herein and throughout this
Agreement, the following terms shall have the following meanings:
"Cash" means cash and cash equivalents (without duplication, net of
outstanding checks) of the Company and of its subsidiaries.
<PAGE> 4
-4-
"Debt" means, without duplication, "long term debt" including the
current portion of any long term debt, as well as any other funded
indebtedness including, without limitation, any bank revolving line of
credit or overdraft mechanism, and any capitalized leases, including any of
the foregoing reflected as current liabilities, of the Company and its
subsidiaries. Debt does not include trade accounts payable, accrued
liabilities, deferred income taxes, provisions or reserves under
Netherlands GAAP and other liabilities not defined as debt herein.
"Net Income", means results of operations after consideration for
interest expense, interest income, taxes and minority interest of the
Company and its subsidiaries.
(b) Buyer and the Selling Shareholders shall have 30 days to review
the Post February Financial Statements after receipt thereof or each of them. If
either party so notifies the other party of its objection to the Post February
Financial Statements, Buyer and the Selling Shareholders shall, within 30 days
following such notice (the "Resolution Period"), attempt to resolve their
differences and any resolution in writing by them as to any disputed amounts
shall be final, binding and conclusive. If, at the conclusion of the Resolution
Period, any amounts remain in dispute, then all amounts remaining in dispute
shall be submitted to arbitration pursuant to Section 8.7 hereof.
(c) Within 5 days after the lapse of the term for review under the
preceding paragraph or within 5 days after the date when the respective Post
February Financial Statements shall have been agreed or established as outcome
of arbitration, the Buyer shall pay to the Selling Shareholders the Net Income
shown on each Post February Financial Statements as earned during the month of
March 1997 or April 1997 respectively, provided that the initial payment of such
Net Income earned for March 1997 shall not exceed NLG 300,000, with the balance
thereof in excess of NLG 300,000, if any, to be paid along with the payment of
Net Income earned for April 1997, and provided further that the aggregate
adjustment under this section will not exceed NLG 600,000.
ARTICLE II
2.1 Representations and Warranties by Buyer. Buyer represents and
warrants to, and agrees with, the Selling Shareholders as follows:
a. Organization, etc. Buyer is a corporation duly organized and
validly existing under the laws of the jurisdiction of its incorporation, with
full corporate power and authority to own all of its property and assets and to
carry an its business as it is now being conducted. Buyer is duly qualified or
licensed to do business and is in good standing or validly existing in each
jurisdiction in which the nature of its business or the character of its
property makes such qualification necessary. The copies of the
<PAGE> 5
-5-
Certificate of Incorporation and By-laws of Buyer, which have been delivered to
the Selling Shareholders are complete and correct, and such instruments, as so
amended, are in full force and effect.
b. Authority Relative to Agreement. Buyer has the power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by Buyer of this Agreement and
the consummation by Buyer of the transactions contemplated hereby have been duly
authorized by all necessary corporate action or proceedings. This Agreement has
been duly executed and delivered by Buyer and is a valid and binding agreement
of Buyer, enforceable in accordance with its terms.
c. Non-Contravention. The execution and delivery of this Agreement by
Buyer does not, and the consummation by Buyer of the transactions contemplated
hereby will not, conflict with, violate any provision of the Certificate of
Incorporation or By-Laws of Buyer, or conflict with, violate, or result with the
giving of notice or the lapse of time or both in a violation of, any provision
of any mortgage, lien, lease, agreement, license, instrument, law, ordinance,
regulation, order, arbitration award, judgment or decree to which Buyer or any
of its properties or assets (real, personal or mixed, tangible or intangible)
are bound.
d. Consents, etc. As of the Closing Date, Buyer shall have obtained
all licenses, permits, consents, authorizations, orders or approvals of any
governmental commission, board or regulatory body necessary for their execution
and delivery of this Agreement and its concummation of the transactions
contemplated hereby.
e. Brokers. Except for American Securities Capital Partners L.P.,
whose fees, commissions and expenses are the sole responsibility of the Buyer,
and Broadview Associates, whose fees, commissions and expenses are the sole
responsibility of the Selling Shareholders, no financial advisor, broker or
finder is entitled to any financial advisory, brokerage or finder's fee or other
similar payment from the Buyer, the Selling Shareholders, the Company or any of
their subsidiaries or affiliates.
2.2 Representations and Warranties by the Selling Shareholders. Except
as set forth in the Disclosure Schedule dated as of the date of this Agreement
prepared by the Selling Shareholders and accepted by the Buyer and made a part
of this Agreement (the "Disclosure Schedule" attached as Annex D), the Selling
Shareholders represent and warrant to, and agree with, Buyer as follows:
a. Organization. The Company is a corporation duly incorporated and a
validly existing limited liability company ("besloten vennootschap met beperkte
aansprakelijkheid") under the laws of The Netherlands, With full corporate power
and authority to own all of its properties and assets and to carry on its
business as it is now
<PAGE> 6
-6-
being conducted. The copies of the certificate of incorporation and articles of
association, as amended, of the Company, which have been delivered to Buyer, are
complete and correct, and such instruments are in full force and effect. The
Company is registered at the Commercial Register of the Chamber of Commerce in
Roermond, the Netherlands, under number 34658 in accordance with law and the
information contained in the extract of said registration attached hereto as
Exhibit E is complete and correct. All documents required to be filed with the
Commercial Register with respect to the Company have been properly and timely
filed.
b. Share Capital and Securities. The authorized share capital of the
Company consists of 2,000,000 shares with a par value of NLG 10.-. As of the
Closing Date, 1,257,000 shares will be issued and outstanding, numbered 1
through 1,257,000, all of which will be owned, beneficially and of record, by
the Selling Shareholders in the amounts and numbers set forth in Exhibit F
attached hereto. Each share in the share capital of the Company is owned by the
Selling Shareholders free and clear of any and all liens, charges, pledges,
security interests or other encumbrances of any kind. Each issued share in the
share capital of the Company is and shall be duly authorized, validly issued and
fully paid up. As Mr Cremers has exercised an option held by him to purchase an
aggregate of 33,000 shares in the authorized share capital of the Company
("Maatschappelijk kapitaal") before signature of this Agreement the Company
does not have any outstanding commitments to issue or sell any shares in its
share capital, or any securities or obligations convertible into or exchangeable
for, or giving any person any right to subscribe for or acquire from the Company
any shares in its share capital, and no securities or obligations evidencing any
such right are outstanding. The Company does not have outstanding any other debt
or equity securities other than its issued shares and existing indebtedness,
which, including the terms thereof, are fully described in the Disclosure
Schedule.
c. Subsidiaries. Set forth on the Disclosure Schedule is a correct and
complete list of the Company's subsidiaries, showing as to each, its name, its
corporate, partnership or joint venture form, the jurisdiction of its
incorporation or formation, the number of shares of stock of each class of each
subsidiary which is outstanding and the number of such outstanding shares owned
by each of the Company and its subsidiaries. For the purpose of this Agreement
the term subsidiaries includes the subsidiaries and the sub-subsidiaries of the
Company. Each subsidiary is a corporation duly organized, validly existing under
the laws of its jurisdiction of incorporation. Each subsidiary has the corporate
or other power and authority to carry on its business as now being conducted and
to own and lease its properties and is duly qualified to do business as a
foreign corporation in each jurisdiction in which the nature of its business or
properties makes such qualification necessary. All of the outstanding shares of
capital stock of each subsidiary have been validly issued, are fully paid and
non-assessable with no personal liability attaching to the ownership thereof and
are free and clear of all liens. Except for Wolters WX B.V., in which the
Company indirectly owns 160 common shares out of
<PAGE> 7
-7-
400 common shares and owns all priority shares which are fully paid and are free
and clear of all liens. The Company is the legal and sole beneficial owner of
all the outstanding shares of each subsidiary which is a corporation and there
are no other securities of any subsidiary which is a corporation other than such
outstanding shares. There are no outstanding rights, warrants, options or
agreements with respect to any such outstanding shares. There are no outstanding
rights, warrants, options or agreements with respect to any such outstanding
shares of the Company's subsidiaries including, without limitation, agreements
granting to any person rights to acquire any capital stock or agreements with
respect to the voting thereof. Neither the Company nor any of its subsidiaries
has any investment (whether equity, debt or other) in any other person. The
copies of the Certificate of Incorporation and By-laws, as amended, of each
subsidiary, which have been delivered to Buyer, are complete and correct, and
such instruments are in full force and effect.
d. Status. Neither the Company nor any subsidiary is or has been
involved in proceedings for its winding-up, liquidation, bankruptcy, moratorium
or debt relief or for the appointment of a receiver, administrator or liquidator
and no shareholders' decision to such effect has been made with respect to the
Company or any subsidiary.
e. Authority Relative to Agreement. Each Selling Shareholder has the
power and authority to execute this Agreement and the Escrow Agreement and to
consummate the transactions contemplated hereby and thereby. The execution by
each Selling Shareholder of this Agreement and the Escrow Agreement and the
consummation by such parties of the transactions contemplated hereby and thereby
have been duly authorized by each such party. No other proceedings on the part
of the Company or any Selling Shareholder are necessary to authorize the
execution of this Agreement and the Escrow Agreement and the consummation of the
transactions contemplated hereby and thereby. This Agreement has been and the
Escrow Agreement will be duly executed by each Selling Shareholder and this
Agreement is and the Escrow Agreement will be a valid and binding agreement of
each such party, enforceable in accordance with its terms.
f. Non-Contravention. The consummation of the transactions
contemplated hereby and by the Escrow Agreement will not violate any provision
of the Articles of Association of the Company or any of its subsidiaries, or
violate, or result with the giving of notice or the lapse of time or both in a
violation of, any provision of any mortgage, lien, lease agreement, license,
instrument, law, ordinance, regulation, order, arbitration award, judgment or
decree to which the Company, any of its subsidiaries or any of their properties
or assets (real, personal or mixed, tangible or intangible) are bound.
g. Consents, etc. No consent, approval or action of, filing with or
notice to any governmental or regulatory authority is required in connection
with the execution and
<PAGE> 8
-8-
delivery of this Agreement and the Escrow Agreement and the consummation of the
transactions contemplated hereby and thereby.
h. Financial Statements. The Selling Shareholders have heretofore
delivered to Buyer the audited consolidated financial statements of the Company
and its subsidiaries for the fiscal years ended December 31, 1994, 1995 and 1996
including their consolidated balance sheets as of each such date and the related
consolidated statements of income, and shareholders' equity for each of the
respective periods then ended (the "Financial Statements"). The Selling
Shareholders have also delivered to Buyer the audited consolidated balance sheet
of the Company and its subsidiaries as of February 28, 1997 (the "February
Balance Sheet"). Such Financial Statements and February Balance Sheet are
attached hereto as Exhibit G, (i) and have been prepared from the books and
records of the Company and its subsidiaries, (ii) are in accordance with
Netherlands GAAP consistently applied and fairly present the financial condition
and results of operations of the Company and its subsidiaries as of the
respective dates and for the respective periods thereof.
i. Governmental Authorizations and Compliance with Laws. The
Disclosure Schedule contains a complete and accurate list of all permits held by
the Company or any of its subsidiaries or for which the Company or any
subsidiary has applied, which are the only material permits necessary for or
used by the Company and its subsidiaries to carry on their business as presently
conducted. To the Selling Shareholders' knowledge after due inquiry the business
of the Company and its subsidiaries has been operated in material compliance
with all laws, ordinances, regulations and orders, of all governmental entities,
domestic or foreign. To the Selling Shareholders' knowledge after due inquiry
the Company and its subsidiaries have all material permits, certificates,
licenses, approvals and other authorization required in connection with the
operation of their business. There are no orders outstanding against the Company
or any of its subsidiaries. No notice has been received by the Company or any of
its subsidiaries and, to the Selling Shareholders' knowledge after due inquiry,
no investigation or review is pending or threatened by any governmental entity
with respect to (i) any alleged violation by the Company or any of its
subsidiaries of any law, ordinance, regulation, order, policy or guideline of
any governmental entity, or (ii) any alleged failure to have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of the business of the Company and its
subsidiaries. As used in this Agreement, "Selling Shareholders' knowledge after
due inquiry" shall refer to matters within the knowledge of the Selling
Shareholders and matters which should have been known by such persons, in each
case after reasonable inquiry by them of the Company's management.
j. Tax matters and Social Security Charges. (i) All taxes, whether
direct or indirect, and all social security charges including all municipal
taxes, water board charges (waterschapsheffingen), penalties and further
assessments with respect thereto for which
<PAGE> 9
-9-
the Company or any subsidiary has been or may be assessed have been withheld as
legally required, and either paid in full or adequate provision therefor has
been made in the Financial Statements.
(ii) There are no notices of tax or social security charge
deficiencies and no litigation or dispute with the relevant authorities with
respect thereto.
(iii) All reports required to be filed by the Company or any
subsidiary in respect to taxes or social security charges have been timely and
properly filed and all information supplied to the relevant authorities is
correct and complete.
(iv) The execution and performance by the Selling Shareholders of
their obligations under this Agreement will not give rise to any adverse tax
consequences for the Company or any subsidiary.
k. Title to Properties; Absence of Liens and Encumbrances, etc. To the
Selling Shareholders' knowledge after due inquiry the Company and its
subsidiaries have full and legal title to all of the properties and other assets
(real, personal and mixed, tangible and intangible) reflected in the Balance
Sheet or acquired after the date thereof (except for properties and assets sold
or otherwise disposed of since December 31, 1996 In the ordinary and usual
course of business) free and clear of any and all liens, charges, pledges,
mortgages, retention of title, security interest or other encumbrances of any
kind ("Lien"). Except for those properties or assets acquired since December 31,
1996, all properties and assets (real, personal and mixed, tangible and
intangible) used in the business of the Company and its subsidiaries are
reflected in the Balance Sheet in the manner and to the extent required by
Netherlands GAAP.
1. Real Estate. (i) The Disclosure Schedule specifies all the land and
buildings owned, used or occupied by the Company and each of the subsidiaries
(the "Properties"), the rights vested of each company in each of the Properties,
and the respective durations of such rights.
(ii) Insofar as freehold property ("eigendom") identified in the
Disclosure Schedule ("Freehold Properties") is concerned, the relevant company
has good and marketable title to its listed Freehold Properties free from all
mortgages, any leases, tenancies, or options, or any license, agreement, claims
of right or easement of any kind in respect thereto.
(iii) With respect to any Properties leased by the Company or any
subsidiary ("Leased Properties") as identified in the Disclosure Schedule, there
are no circumstances which would entitle a lessor or any other person to
exercise my power of entry upon or take possession of any of the Leased
Properties or which would otherwise restrict the continued possession of any of
such Properties or which could prevent the development
<PAGE> 10
-10-
of any of the Properties for which planning permission has been or is expected
to be obtained. No notice of breach of any terms of any lease has been received
by the company or any subsidiary.
(iv) To the Selling Shareholders' knowledge after due inquiry the use
to which each of the Properties is put is not subject to any restriction or
condition and conforms to all laws and regulations, permits, licences and orders
of the relevant authorities and in the case of Leased Properties the use to
which each of the Properties is put complies with the terms of the lease and all
necessary consents to such existing use have been obtained. No notice or warning
of violation of any law or regulation, permit or licences has been received by
the Company or any subsidiary.
(v) All requisite permits, licences and approvals have been obtained
for all development or alteration of the Properties and all conditions imposed
therein have been complied with.
(vi) The market value of each of the Properties is not materially
below the value at which the same is included in the Balance Sheet.
m. Material Agreements. The Disclosure Schedule lists every material
agreement to which the Company or any of its subsidiaries is a party or by which
it or any of their properties or assets (real, personal or mixed, tangible or
intangible) is bound which is to be performed in whole or in part after the
Closing Date. Solely for the purpose of this Section 2.2(m), the term "material
agreement" shall mean any single agreement or lease (in each case, whether oral
or written), including agreements with respect to notes receivable, pursuant to
which any party thereto is obligated after the date hereof to make payments
aggregating more than USD 75,000 except for agreements which the Company or its
Subsidiaries can terminate at will without a penalty; agreements (in each case,
whether oral or written) relating to the declaration or payment of dividends or
distributions, the incurrence of indebtedness or the sale or purchase of assets
out of the ordinary course of business; employment contracts or severance
agreements with annual salary payments of USD 75,000 gross per year or more;
agreements (in each case, whether oral or written) restricting the Company's or
any of its subsidiaries' ability to compete or engage in any type of business or
otherwise containing restrictive covenants; and agreements (in each case,
whether oral or written) with "change in control" provisions. There is no
default, nor will any default occur hereafter, as a result of the consummation
of the transactions contemplated hereby, by the Escrow Agreement or otherwise,
in any obligation to be performed by any party to any material agreement to
which the Company or any of its subsidiaries is a party or by which it or any
of its properties or assets (real, personal or mixed, tangible or intangible) is
bound. Each agreement listed in the Disclosure Schedule is valid and binding in
accordance with its terms. Other than this Agreement, there are no agreements or
options to sell or lease any of the properties or assets (real, personal or
mixed, tangible
<PAGE> 11
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or intangible) of the Company or any of its subsidiaries except in the ordinary
and usual course of its business. The Company has delivered or made available to
Buyer true and complete copies of all agreements listed in the Disclosure
Schedule including supporting documentation.
n. Litigation. (i) There is no claim, action, suit or proceeding
pending or, to the Selling Shareholders' knowledge after due inquiry, threatened
against the Selling Shareholders, the Company, any of its subsidiaries or any of
their properties or assets (real, personal or mixed, tangible or intangible) or
which seeks to prohibit, restrict or delay consummation of the transactions
contemplated by this Agreement or the Escrow Agreement or any of the conditions
to consummation of the transactions contemplated by this Agreement, nor is there
any judgement, decree, injunction, ruling, award or order of any, court,
governmental department, commission, agency or instrumentality or arbitrator
outstanding or, to the Selling Shareholders' knowledge after due inquiry,
threatened against the Company, any of its subsidiaries or any of their
properties or assets (real, personal or mixed, tangible or intangible); or (ii)
to the Selling Shareholders' knowledge after due inquiry neither the Company,
any of its subsidiaries nor any of their officers or employees is currently
charged with, or is currently under investigation with respect to, any
violation of any provision of any federal, state, foreign or other applicable
law or administrative regulation in respect of the business of the Company and
its subsidiaries.
o. Employees. (i) To the Selling Shareholders' knowledge after due inquiry
the Disclosure Schedule sets forth a list of all of the current employees
of the Company and its subsidiaries, their dates of birth and their dates
of hire, their base salary and any bonuses and premiums to which they are
entitled. The employees of the Company and its subsidiaries are not
entitled to receive any indemnities (such as termination indemnities,
retirement indemnities or end of work indemnities) which exceed the
indemnities required by the laws which apply to the Company and its
subsidiaries, and no employees are entitled to participate in the
Company's or its subsidiaries' profits or any other results which apply to
the Company and its subsidiaries.
(ii) To the Selling Shareholders' knowledge after due inquiry the
Company and its subsidiaries have not contracted any obligation nor are bound by
any obligation towards any former managing director, officer or employee or the
heirs of any former managing director, officer or employee, in particular
pursuant to a pension or complementary retirement scheme.
(iii) To the Selling Shareholders' knowledge after due inquiry no
present or former managing director, officer or employee has any claim against
the Company or any subsidiary arising out of notice of termination of employment
or office prior to the Closing Date.
<PAGE> 12
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(iv) To the Selling Shareholders' knowledge after due inquiry licenses
have been obtained from the Director of the appropriate District Labour Office
("Regional Bureau der Arbeidsvoorzieningen" or "Inspection du Travail") in
respect of every employee whose employment has been terminated by the Company
where such license is required. There are not outstanding applications before
any District Labour Office.
(v) To the Selling Shareholders' knowledge after due inquiry the
Disclosure Schedule contains a true and correct list of all employee benefit
plans. Each compulsory or voluntary employee benefit plan is in good standing
under all applicable legislation and all required employer contributions under
any such plans have been made or reserved in the books and records maintained by
the Company and the applicable funds have been funded in accordance with the
terms of the plans. No liabilities exist thereunder which have not been paid
when due.
p. Labor Matters. There are no controversies pending between the
Company and its subsidiaries and any of their employees or officers.
q. Absence of Certain Changes on Events. Since February 28, 1997 there
has not been (i) any change, or any development involving a prospective change,
which, individually or in the aggregate, has had or could have a material
adverse effect ("Material Adverse Effect") on the financial condition, business,
operations, or prospects of the Company and its subsidiaries taken as a whole;
(ii) any damage, destruction or other loss with respect to property owned by the
Company or any of its subsidiaries, whether or not covered by insurance, or any
strike, work stoppage or slowdown or other labor trouble involving the Company
or any of its subsidiaries; (iii) any direct or indirect redemption, purchase or
other acquisition by the Company or any of its subsidiaries of any shares of the
capital stock of the Company or any of its subsidiaries; (iv) any declaration,
setting aside or payment of any dividend or distribution (whether in cash,
capital stock or property); (v) any investment made in the debt or equity of
another entity; (vi) the entry by the Company or any of its subsidiaries into
any commitment or transaction which is not in the ordinary course of business;
(vii) any material (x) change in any investment, accounting, tax accounting,
financial reporting, inventory, credit, allowance or tax practice, election or
policy of the Company or any subsidiary; (y) change in any method of calculating
any bad debt, contingency or other reserve of the Company or any subsidiary for
accounting, financial reporting or tax purposes, or any change in the fiscal
year of the Company or any subsidiary or (z) decrease in selling prices or
increase of purchase prices; (viii) to the Selling Shareholders' knowledge after
due inquiry any hiring of any new employees (other than in the ordinary course
of business consistent with past practice); or (ix) any increase in any manner
of the compensation, remuneration or fringe benefits of any of the managing
directors or employees of the Company or its subsidiaries or payment or
agreement to pay any pension retirement allowance, or other benefit not required
by any existing employee benefit plan with or for the benefit of any officers or
employees of the
<PAGE> 13
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Company or its subsidiaries or any other person, or alteration, amendment,
termination in whole or in part, or curtailment or permanent discontinuance of
distributions to, any pension plan or any other employee benefit plan.
r. Intellectual Property Rights. (i) The Disclosure Schedule sets
forth a complete and accurate list of: (a) all patents, trademarks,
service-marks, tradenames, copyrights, registered designs and other intellectual
property rights (the "Intel1ectual Property Rights") used or planned to be
used by the Company or any subsidiary in connection with its business; (b) all
written agreements relating to the Intellectual Property Rights which the
Company or any subsidiary has licensed from or to a third party.
(ii) The Intellectual Property Rights are registered in the name of,
are legally and beneficially vested in and are the property of the stated
Company or subsidiary except as disclosed in the Disclosure Schedule, the
Intellectual Property Rights are valid and continuing, have been properly
maintained and (where necessary) renewed, are not being infringed, and will not
be altered or impaired by the consummation of the transactions contemplated by
this Agreement.
(iii) All pending applications for Intellectual Property Rights
initiated with respect by the Company or any subsidiary have been properly
pursued.
(iv) To the Selling Shareholders' knowledge after due inquiry no
tradename, trademark and/or service-mark registered or applied for in the name
of the Company or any subsidiary is being used by any person in the same or
similar business as that of the Company or any subsidiary except as disclosed in
the Disclosure Schedule.
(v) To the Selling Shareholders' knowledge after due inquiry no
further Intellectual Property Rights or licenses are required by the Company or
any subsidiary to conduct its business as now conducted or as currently planned
in order to avoid conflicts with or infringements upon the rights of others and
no such conflict or infringement currently exists.
(vi) No claim has been asserted and to the Selling Shareholders
knowledge after due inquiry, none is anticipated, challenging either the
ownership or the use by the Company or any subsidiary of any Intellectual
Property Rights, technology, know-how or process, or the validity of any licence
therefor.
s. Absence of Undisclosed Liabilities and Agreements. Except as
specifically provided for in the Financial Statements and February Balance
Sheet, the Company and its subsidiaries (i) did not have, as of December 31,
1996 or February 28, 1997 any debts, liabilities or obligations, whether accrued
absolute, contingent or otherwise and whether due or to become due (including,
without limitation, any liabilities resulting from the failure to comply with
any law applicable to the Company, any of its subsidiaries or to
<PAGE> 14
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the conduct of their business) except as disclosed the Financial Statements and
February Balance Sheet, (ii) have not incurred, since December 31, 1996 any such
debts, liabilities or obligations other than in the ordinary and usual course of
their business consistent with past practice and which would be reflected on a
balance Sheet prepared in the ordinary course of business.
t. Insurance. To the Selling Shareholders' knowledge after due inquiry
the Company and its subsidiaries have adequate insurance policies in full force
and effect which provide for coverages which are customary in both amount and
scope for the business conducted by the Company and its subsidiaries. The
current insurance coverage of the Company and its subsidiaries is as described
in the Disclosure Schedule. All material claims have been filed in timely
fashion and are mentioned in the Disclosure Schedule under 2.2(n). There are no
present circumstances giving rise to a claim under any policy of insurance.
u. Payments. To the Selling Shareholders' knowledge after due inquiry
the Company and its subsidiaries have not, directly or indirectly, paid or
delivered any fees, commissions or other sums of money or items of property
however characterized to any finders, agents, customers, government officials or
other parties, in the United States or in any other country, which in any manner
are related to the business or operations of the Company and its subsidiaries,
and which have been illegal under any federal, state or local laws of the United
States or any other country or territory having jurisdiction over the Company or
any of its subsidiaries. The Company and its subsidiaries have not participated,
directly or indirectly, in any illegal boycotts or similar practices.
v. Subsidies and Governmental Assistance. To the Selling Shareholders'
knowledge after due inquiry the Disclosure Schedule enumerates the governmental
subsidies and assistance, as well as the licenses, contracts and preferential
conditions consented to by a Governmental or Regulatory Authority, which have
been transmitted to the Company or to which any of the subsidiaries is a party
or beneficiary. The Company and the subsidiaries will in no event be required to
reimburse for any reason whatsoever the subsidies already received. Neither the
Company nor any subsidiary is liable or will in the future be liable to repay
any material investment premiums as a result of the transfer contemplated in
this Agreement or any event occurring prior thereto. Solely for the purpose of
this section 2.2.v the term "material investment premiums" shall mean any
repayment of an investment premium of more than USD 25,000.
w. Inventories. All inventories carried by the Company and its
subsidiaries as of December 31, 1996 and February 28, 1997 and reflected in the
Financial Statements and the February Balance Sheet, are valued consistent with
Netherlands GAAP. The Company has adequate obsolescence reserves to cover
inventory items which have a market value lower than cost. Except to the extent
of inventory reserves reflected in the
<PAGE> 15
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Balance Sheet, the items included in said inventories are normal items of
inventory carried by the Company and its subsidiaries, and are current, suitable
and merchantable at customary prices of the filling of orders in the normal
course of business, and are not obsolete damaged, defective or slow moving.
x. Products Liability. Except as disclosed in the Disclosure Schedule
2.2(n), to the Selling Shareholders' knowledge after due inquiry, there are no
facts or events which have occurred forming the basis for any claim against the
Company or any of its subsidiaries for products liability, whether in tort or
strict liability or on account of any express or implied warranty, and all
reserves thereon for on the Balance Sheet are adequate.
y. Notes and Accounts Receivable and Liabilities. Each of the
material liabilities of the Company and its subsidiaries as of December 31,
1996 and February 28, 1997 is reflected or reserved for in the Financial
Statements and February Balance Sheet and the amounts so reflected or reserved
are true and correct according to Netherlands GAAP. Notes and accounts
receivable will be fully collectible, except to the extent of reserves for
doubtful accounts reflected in the Balance Sheet.
z. Proprietary Rights. The proprietary rights listed in the Disclosure
Schedule are all those used in the business of the Company and its subsidiaries.
The Company's and its subsidiaries' use of such proprietary rights is not
infringing upon or otherwise violating the rights of any third party in or to
such proprietary rights, and no proceedings have been instituted against or
notices received by the Company or any of its subsidiaries that are presently
outstanding alleging that the Company's or any subsidiary's use of such
proprietary rights infringes upon or otherwise violates any rights of a third
party in or to such proprietary rights.
aa. Books of Account. The books of account of the Company and its
subsidiaries have been fully, properly and accurately kept, and have and will
adequately reflect all of their respective items of income and expense and all
of their assets, liabilities and accruals, in accordance with Netherlands GAAP.
ab. Purchase Commitments and Outstanding Bids. As of the Closing Date
there are no claims against the Company or any of its subsidiaries to return in
excess of an aggregate of USD 50,000 by reason of alleged over-shipments,
defective merchandise or otherwise, or of merchandise in the hands of customers
under an understanding that such merchandise would be returnable. The Disclosure
Schedule lists all capital expenditures committed for but not paid for by the
Company. No outstanding purchase or outstanding lease commitment of the Company
or any of its subsidiaries presently is in excess of the normal, ordinary and
usual requirements of its business or contains terms and conditions more onerous
than those usual and customary in the business of the Company and its
subsidiaries.
<PAGE> 16
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ac. Customers and Suppliers. To the Selling Shareholders' knowledge
after due inquiry the Disclosure Schedule contains a complete and accurate list
of (i) the 10 largest customers of the Company and its subsidiaries in terms of
revenues during each of the Company's and its subsidiaries last two fiscal
years, showing the approximate total sales to each such customer during such
period; and (ii) the 10 largest suppliers of the Company and its subsidiaries in
terms of purchases during each of the Company's last two fiscal years, showing
the approximate total purchases from each such supplier during such period.
Since December 31, 1996, to the Selling Shareholders' knowledge after due
inquiry, there has been no material adverse change in the business relationship
of the Company and its subsidiaries with any customer or supplier named in the
Disclosure Schedule.
ad. Intentionally deleted.
ae. Environmental Matters. (1) The Company and each of its subsidiaries
are in compliance in all material respects with all applicable Environmental
Laws (as defined below), and for the past five years have been in such
compliance; without prejudice to and without limiting their obligations
hereunder, the Selling Shareholders state that they have reviewed: (1) the
report made by Oranjewoud (the "Oranjewoud Report") dated March 20, 1997, of
which a copy in the English language has been provided to by the Buyer, (2) the
report dated December 21, 1995 referring to the Masterfan location in Wierden
(the "Masterfan Report"), of which a copy has been disclosed to the Buyer; (3)
two reports that are being made with respect to the Company's Properties in
France, copies of which will be provided to the Buyer as soon as they have
become available (the "French Reports"); to the Selling Shareholders' knowledge
there is no reason to believe that circumstances exist which could prevent or
interfere with continued compliance in all material respects by the Company and
each of its subsidiaries with all applicable Environmental Laws that are
reasonably likely to become applicable to the Company or any of its subsidiaries
after the Closing Date and that could individually or in the aggregate, have a
Material Adverse Effect after the Closing Date if adopted.
(2) The Company and Its subsidiaries hold all material Environmental
Permits (as defined below) necessary to conduct their operations as they are
currently conducted; the Disclosure Schedule includes a true and complete list
of all such Environmental Permits and their expiration dates, and the Company
has no reason to believe that such permits will not be renewed.
(3) There are not Materials of Environmental Concern (as defined below)
present at, and no Materials of Environmental Concern are or have been in any
way released or threatened to be released from, any Fancom Property (as defined
below), or to the best of the Selling Shareholders knowledge after due inquiry,
former Fancom Property, or as a result of present or former operations of the
Company or any of its subsidiaries or any predecessor entity (including without
limitation the disposal of
<PAGE> 17
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Materials of Environmental Concern at any location other than a Fancom Property
or former Fancom Property), that could reasonably be expected to be in material
violation of or otherwise to give rise to material liability of the Company or
any of its subsidiaries under any Environmental Law.
(4) No reports of any kind have been made to or required by any
governmental authority pursuant to any Environmental Law concerning spills or
any other releases of any kind at, or in any way from, any Fancom Property,
former Fancom Property (as defined below), or as a result of present or former
operations of the Company or any of its subsidiaries or any predecessor entity,
for which spills, releases, or reports thereof the Company or any of its
subsidiaries may be liable under any Environmental Law; true and complete copies
of all written reports concerning such spills and other releases have been
provided or made available to Buyer.
(5) None of the following are or have been on, under, in or at any
Fancom Property, or to the Selling Shareholders' knowledge after due inquiry,
any former Fancom Property: (A) underground or aboveground storage tanks
containing Materials of Environmental Concern; (B) polychlorinated biphenyls;
(C) asbestos or asbestos-containing materials; (D) septic tanks, septic fields,
drywalls, or similar Structures; (E) lagoons or impoundments; or other bodies of
water to which Materials of Environmental Concern may have been discharged; (F)
landfills or dumping areas; or similar locations where Materials of
Environmental Concern may have been placed.
(6) Neither the Company nor any of its subsidiaries has received any
Environmental Claim (as defined below), and to the Selling Shareholders'
knowledge after due inquiry, no Environmental Claim has been threatened against
the Company or any of its subsidiaries by any person.
(7) Neither the Company nor any of its subsidiaries has entered into,
agreed to, nor is the Company or any of its subsidiaries otherwise subject to
any judgment, decree, order or similar requirement under any Environmental Law,
nor to the Selling Shareholders' knowledge is any such judgment, decree, order
or requirement being negotiated that may obligate or affect the Company or any
of its subsidiaries.
(8) Neither the Company nor any of its subsidiaries has assumed or
retained, contractually or by operation of law, any liabilities or obligations
of other persons, contingent or otherwise, in connection with any Environmental
Law.
(9) There are no past or present actions, activities, events,
conditions or circumstances, including without limitation the release,
threatened release, emission, discharge, generation, treatment, storage or
disposal of Materials of Environmental Concern, that could reasonably be
expected to give rise to any material liability or obligation of the Company or
any of its subsidiaries under any Environmental Laws.
<PAGE> 18
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None of the matters set forth on the Disclosure Schedule, or any aggregation
thereof, could reasonably be expected to have a Material Adverse Effect.
(10) True and complete copies of all reports, studies, assessments,
audits, and similar documents in the possession or control of the Company, any
of its subsidiaries or any Selling Shareholder that address any issues of actual
or potential noncompliance in any material respect with, or actual or potential
material liability under, any Environmental Laws that may affect the Company or
any of its subsidiaries have been provided to Buyer prior to the signing hereof.
(11) As used in this Section 2.2(ae):
"Environmental Claim" means any written or oral notice, claim, demand,
action, suit, complaint, proceeding or other communication by any person
alleging liability or potential liability (including without limitation
liability or potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damage, personal
injury, fines or penalties) arising out of, relating to, based on or resulting
from (i) the presence, discharge, emission, release or threatened release of any
Materials of Environmental Concern at any location, (ii) circumstances forming
the basis of any violation or alleged violation of any Environmental Law or
Environmental Permit, or (iii) otherwise relating to obligations or liabilities
under any Environmental Law.
"Environmental Laws" means all federal, state, provincial and local
statutes, rules, regulation, ordinances, orders, judgments, decrees and common
law relating in any manner to contaminated, polluting, or protection of human
health or the environment.
"Environmental Permits" means all permits, licenses, registrations
and other governmental authorizations or exemptions required under
Environmental Laws.
"Fancom Property" means all real property in which the Company or any
of its subsidiaries have any legal interest, including without limitation a
leasehold interest, and any equipment or other property owned or leased by the
Company or any of its subsidiaries.
"Materials of Environmental Concern" refers to any waste, pollutant,
contaminant or other substance of any kind (including without limitation orders,
radioactivity, and electromagnetic fields) regulated by or under, or which may
otherwise give rise to liability under, any Environmental Law.
af. Transactions with Certain Persons. No officer, director,
shareholder or employee of the Company and its subsidiaries nor any member of
any such person's
<PAGE> 19
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immediate family is presently a party to any material transaction with the
Company or any of its subsidiaries relating to the business of the Company and
its subsidiaries, including without limitation, any contract, agreement or other
arrangement (i) providing for the furnishing of material services by (other than
for services as officers, directors or employees of the Company and its
subsidiaries), (ii) providing for the rental of material real or personal
property from, or (iii) otherwise requiring material payments to (other than for
services as officers, directors or employees of the Company and its
subsidiaries) any such person or corporation, partnership, trust or other entity
in which any such person has a substantial interest as a shareholder, officer,
director, trustee or partner.
ag. Bank Accounts, Signing Authority, Power of Attorney. The Disclosure
Schedule lists all accounts with and safety deposit boxes held by or in the name
of the Company or any subsidiary in any bank or other financial institution as
well as the names of all persons who have any power, whether individually or
jointly, to sign an order on behalf of the Company or any subsidiary to withdraw
money or other property from any bank or other account, or who are authorized to
borrow money or sign notes on behalf of the Company or any subsidiary.
ah. Brokers. Except for American Securities Capital Partners L.P.,
whose fees, commissions and expenses are the sole responsibility of the Buyer,
and Broadview Associates, whose fees, commissions and expenses are the sole
responsibility of the Selling Shareholders, no financial advisor, broker or
finder is entitled to any financial advisory, brokerage or finder's fee or other
similar payment from the Buyer, the Selling Shareholders, the Company or any of
their subsidiaries or affiliates.
ai. Investment Assets. The Disclosure Schedule contains a true and
complete list of all investments in debt or equity of other entities outstanding
as of the date hereof made by the Company or any of its subsidiaries.
aj. Information. To the Selling Shareholders' knowledge after due
inquiry the Company has furnished and will continue up and until the Closing to
furnish to Buyer all information with respect to the assets, earnings, and
business of the Company and its subsidiaries, material for disclosure to an
intending purchaser of the Company and acknowledge that Buyer has relied and
will rely thereon in entering into this Agreement and consummating the
transactions contemplated by this Agreement and the Escrow Agreement. To the
Selling Shareholders' knowledge after due inquiry no such information contains
an untrue statement of material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made not misleading.
<PAGE> 20
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ARTICLE III
ACTIONS PRIOR TO THE CLOSING
3.1 Consents, Authorizations, etc. Each party hereto will use its
commercially reasonable efforts to obtain all consents, authorizations, orders
and approvals of, and make all filings and registrations with, any governmental
commission, board or other regulatory body or any other person required for or
in connection with the consummation on of the transactions contemplated hereby
and will cooperate fully with the other parties in assisting them to obtain such
approvals and to make such filings and registrations. No party hereto will take
or omit to take any action for the purpose of delaying, impairing or impeding
the receipt of any required consent, authorization, order or approval or the
making of any required filing or registration.
3.2 Expenses. Intentionally deleted.
3.3 Conduct of the Company.
a. Operations in the Ordinary Course of Business. The Selling
Shareholders warrant and represent that during the period as from March 1, 1997
inclusive to the Closing Date the Company and its subsidiaries have conducted
their business operations according to the ordinary and usual course of business
and have used their reasonable best efforts (i) to preserve intact their
business organization; (ii) to maintain their books and records in accordance
with past practices; (iii) to keep available the services of their managing
directors (directeuren) and employees; and (iv) to maintain satisfactory
relationships with licensors, suppliers, distributors, customers and others
having business relationships with them.
b. Except as contemplated by this Agreement, the Company and its
subsidiaries have not during the period from March 1, 1997 inclusive to the
Closing Date:
(1) incurred any new debt, liability or obligation, direct or indirect,
whether accrued, absolute, contingent or otherwise (other than short-term
indebtedness in the ordinary course of business consistent with past
practice in an amount not exceeding USD 50,000;
(2) assumed, guaranteed, endorsed or otherwise become responsible for
the obligations of, or made any loans or advances to, any other individual,
firm or corporation (other than the Company or any Of its subsidiaries);
(3) made any direct or indirect redemption, purchase or other
acquisition of any shares of its capital stock or declare, set aside or pay
any dividend or distribution
<PAGE> 21
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(whether in cash, capital stock or property), other than any dividends to the
Company from any of its subsidiaries;
(4) mortgaged, pledged or otherwise encumbered any of its properties or
assets other than in the ordinary course of business consistent with past
practice;
(5) sold, leased, transferred or disposed of any of its properties or
assets, waived or released any rights of material value, or cancelled,
compromised, released or assigned any indebtedness owed to it or any claims held
by it except for sales of inventory in the ordinary and usual course of business
and consistent with past practice;
(6) except for capital expenditures not exceeding USD 10,000
individually, made any investment or expenditure of a capital nature either by
purchase of stock or securities, contributions to capital, property transfers or
otherwise, or by the purchase of any property or assets of any other individual,
firm or corporation;
(7) entered into any transaction other than in the ordinary and usual
course of its business and consistent with past practice;
(8) entered into or terminated any agreement, plan or lease, or made
any change in any of its agreements, plans or leases other than in the ordinary
course of business consistent with past practice;
(9) permitted any insurance policy naming it as a beneficiary or a loss
may be payee to be cancelled or terminated or any of the coverage thereunder to
lapse;
(10) entered into any collective bargaining agreements;
(11) hired any new employees (other than in the ordinary course of
business consistent with past practice) or increased in any manner the
compensation, remuneration or fringe benefits of any of its officers or
employees or pay or agree to of pay any pension, retirement allowance, or other
benefit not required by any existing employee benefit plan to any such officers
or employees, commit itself to any employment agreement or employee benefit plan
with or for the benefit of any of its officers or employees or any other person,
or altered, amended, terminated in whole or in part or curtailed or permanently
discontinued distributions to, any pension plan or any other employee benefit
plan;
(12) except for an issue in the month April 1997 of 33.000 shares with
a nominal value of NLG 10 each issued to J.H.M. Cremers and for which a
consideration of NLG 330,000 was received, issued any shares of capital stock or
<PAGE> 22
-22-
issued any warrants, options, calls, subscriptions, or other agreements or
commitments obligating it to issue shares of capital stock;
(13) entered into an agreement to do any of the things described in
clause (1) through (12) of this Section 3.3: or
(14) taken any action which would render inaccurate any representation
and warranty made herein.
ARTICLE IV
CONDITIONS TO THE CLOSING
4.1 Conditions to the Closing Relating to Buyer. Consummation of the
transactions contemplated hereby is subject to the fulfilment to the reasonable
satisfaction of Buyer, prior to or at the Closing Date, of each of the following
conditions:
a. Escrow Agreement. The Escrow Agreement, attached hereto, shall be
executed and delivered substantially in the form of Exhibit C.
b. Legal Opinion. Buyer shall have received a legal opinion, dated as
of the Closing Date, from Caron & Stevens/Baker & McKenzie, special counsel to
the Company, substantially in the form of Exhibit H hereto.
c. Resignations of Supervisory Directors. All members of the boards of
supervisory directors of the Company and its subsidiaries shall have tendered,
effective at the Closing, their resignations as supervisory directors and
General Meeting of Shareholders of the Company or the Subsidiaries, as the case
may be, shall have accepted such resignations thereby limiting any releases to
the conduct of the Supervisory Directors as appearing from the Financial
Statements, and the Buyer shall have received releases, in form and substance
satisfactory to the Buyer, by each of them of any claims they may have against
the Company and its subsidiaries.
4.2 Conditions to the Closing Related to the Company and the Selling
Shareholders. Consummation of the transaction contemplated hereby is subject to
the fulfilment to the reasonable satisfaction of the Company and the Selling
Shareholders, prior to or at the Closing Date, of the following condition:
a. Escrow Agreement. The Escrow Agreement attached hereto, shall be
executed and delivered substantially in the form of Exhibit C.
<PAGE> 23
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ARTICLE V
TERMINATION
5.1 Termination. This Agreement may be terminated by:
(1) By mutual action of the Selling Shareholders Representative and
Buyer,
(2) By the Selling Shareholders Representative, if any of the
conditions set forth in Section 4.2(a) noncompliance or nonperformance
shall have not been cured or eliminated (or by its nature cannot be cured
or eliminated by Buyer on or before the Closing Date: or
(3) By Buyer, if any of the conditions set forth in Section 4.1 shall
not have been complied with or performed and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature
cannot be cured or eliminated) by the Company and the Selling Shareholders
on or before the Closing Date or (Y) waived by the Buyer; or
(4) At any time after 30 days, by either Buyer or the Selling
Shareholders Representative if the Closing shall not have occurred on or
before such date and such failure is not caused by a breach of this
Agreement by the terminating party.
5.2 Termination Fee. In the event of the termination of this
Agreement, the Selling Shareholders agree to reimburse the Buyer for fifty
percent (50%) of the Buyer's out-of-pocket costs related to the transaction
which are incurred within the first 30-day period after complete execution
and delivery of the Letter of Intent, up to a maximum reimbursement of USD
50,000.--.
5.3 Effects of Termination. In the event of the termination of
this Agreement, this Agreement shall thereafter become void and have no
effect, and no party hereto shall have any liability to the other parties
hereto or their respective stockholders or directors or officers in respect
thereof, except for the obligations of the parties hereto in Section 5.2
and except that nothing herein will relieve any party from liability for
any breach of this Agreement prior to such termination.
5.4 After the Closing of this Agreement neither party shall be
entitled to rescind this Agreement on account of breach of performance by
the other party.
<PAGE> 24
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ARTICLE VI
INDEMNITY
6.1 Survival of Representations and Warranties. The representations and
warranties by the Selling Shareholders inclusive those made in section 3.3
hereof shall survive until and including June 30, 1998, except that the
representations and warranties of the Selling Shareholders contained in Sections
2.2(j) shall survive three months after the date when the assessments for
corporate income tax (vennootschapsbelasting) for the fiscal years up to and
including 1997 have become final and in respect of those years
"navorderingsaanslagen" can no longer be imposed and such representations and
warranties as are contained in section 2.2(b) shall survive until the end of the
statutory limitation period for obligations under such representations and
warranties. Such representations and warranties as contained in section 2.2(ae)
shall survive until and including April 30, 2002.
6.2 Indemnity. The Selling Shareholders agree to indemnify Buyer and
the Company for any and all claims, losses, costs, charges, expenses,
obligations, liabilities, actions, suits, damages, judgments, and
deficiencies, including interest and penalties, reasonable counsels' fees and
all amounts paid in settlement of any claim, action, or suit (collectively
referred to as "Claims") which may be sustained, suffered or incurred by any of
them and arising out of or relating to any breaches of the representations,
warranties, covenants and agreements of the Company or the Selling Shareholders
contained herein; provided, that with respect to any breach of a representation
or warranty the Selling Shareholder Representative receives notice of such
breach prior to the expiration of the relevant representation or warranty
pursuant to Section 6.1; provided, further, that the obligations of the Selling
Shareholders under this Section 6.2 (other than obligations relating to Sections
2.2(b), 2.2j) and 2.2(ae)) shall be limited to the aggregate of (i) the amounts
initially in the Escrow Fund (ii) a percentage equivalent to the statutory
interest over the amounts which from time to time are in the Escrow Fund.
Notwithstanding anything herein to the contrary, regardless of whether or not
the Escrow Agreement is then in effect or the amount of Escrowed Funds are then
sufficient, the parties hereto agree that there shall be no limit as to the
Selling Shareholders' obligations with respect to claims relating to Sections
2.2(b), 2.2(j) and 2.2(ae). The Escrow Agreement shall in all respects be
subject to this Section 6.2.
6.3 Cooperation. In the event a Claim is asserted by any third party
against Buyer and/or the Company for which indemnification may be sought, it
shall notify the Selling Shareholders Representative of such Claim by giving to
the Selling Shareholders Representative written notice, and shall give
Shareholders and their counsel access to any and all such files, records and
other documents as may be necessary to enable the Selling Shareholders to
investigate or participate in the defence against such Claim (but at the cost
and expense of such Selling Shareholders) and Buyer shall otherwise
<PAGE> 25
-25-
cooperate in connection therewith and shall nor unreasonably assume a position
contrary to that of Shareholders with respect to all such third party Claims.
6.4 Severalty. If and when any indemnification would become due under
this Article VI, the Selling Shareholders will be liable on a basis in
proportion to their respective shareholdings in the Company, to be calculated on
the basis of the aggregate nominal value of the shares held by each of them.
6.5 Threshold. The Buyer is not entitled to receive an indemnification
for breach of the representations and warranties of the Selling Shareholders
contained in section 2.2 paragraphs (a) to (i) inclusive, (l), (n) to (p)
inclusive, (r) to (ad) inclusive and (af) to (aj) inclusive unless the aggregate
of any claims in respect of breach of these warranties and representation is an
amount in excess of NLG 100,000.
ARTICLE VII
CERTAIN POST-CLOSING AGREEMENTS
7.1 Noncompete. Each of the Selling Shareholders agrees on behalf of
itself and its affiliates that he, she or it will not at any time for five years
after the date hereof, except with the express prior written consent of the
Buyer; (a) directly or indirectly, engage in any Competitive Business (meaning,
any current business engaged in the businesses of the Company and its
subsidiaries, or any natural extensions of such business), whether such
engagement shall be as an owner, partner, agent, employee, consultant or
shareholder (except as the holder of not more than five percent (5%) of the
outstanding shares of a corporation whose stock is publicly traded); (b)
directly or indirectly solicit, divert or accept business from or otherwise take
away or interfere with any customer of the Buyer, the Company or their
Affiliates engaged in any Competitive Business, including without limitation any
person who was a customer or whose business was being pursued by the Buyer, the
Company of their Affiliates prior to the date hereof; or (c) directly or
indirectly, accept employment with, be employed or be a principal of any
business or enterprise which then employs or has as a principal or holder of any
interest therein (except as the holder of not more than one percent (1%) of the
outstanding shares of a corporation whose shares are publicly traded) any
individual who was previously employed in a managerial or consultant position
with Buyer, the Company or any of their Affiliates.
7.2 Nondisclosure. Each of the Selling Shareholders, agrees that, at
all times from and after the date hereof, except as required by law or by the
order of any court or government agency, it shall keep secret and retain in
strictest confidence and shall not, except with the express prior written
consent of Buyer, directly or indirectly disclose, communicate or divulge to any
person, or use for the benefit of any person, any Proprietary Information
(meaning, all information or data with respect to the conduct
<PAGE> 26
-26-
or details of the business of the Company including, without limitation, methods
of operation, customers and customer lists, details of contracts with customers,
consultants, suppliers or employees, products, proposed products, former
products, proposed, pending or completed acquisitions of any company, division,
product line or other business unit, prices and pricing policies, fees, costs,
plans, designs, technology, inventions, trade secrets, know-how, software,
marketing methods, policies, plans, personnel, suppliers, competitors, markets
or other specialized information or proprietary matters of the business of the
Company). The restriction contained in the preceding sentence shall not apply to
any Proprietary Information that (i) is a matter of public knowledge on the date
of this Agreement or (ii) becomes a matter of public knowledge after the date of
this Agreement from another source which is under no known obligation of
confidentiality to Buyer or its affiliates.
ARTICLE VIII
MISCELLANEOUS
8.1 Notices. Except as otherwise required by law, all announcements,
notices, summons and other communications pursuant to this Agreement shall be
delivered to the addresses stated hereunder (or to such address as a party or
Company has communicated to the other party or parties in accordance with this
Article) by registered mail with return receipt, by courier or by telegram,
telex or telefax:
if to Buyer or the Company:
Chore-Time Brock Holding B.V.
De Boelelaan 7
1083 HJ Amsterdam
P.O. Box 71744
1008 DE Amsterdam
Attn: Equity Trust Co. N.V.
Telephone: 31 (0)20 64 66 111
Telecopy: 31 (0)20 64 27 675
with copies to:
CTB, Inc.
State Road 15 North
P.O. Box 2000
Milford, Indiana 46542-2000
Attn: J. Christopher Chocola, President
Telephone: 1 (219) 658 4101
Telecopy: 1 (219) 658 3472
<PAGE> 27
-27-
Trenite Van Doorne
De Lairessestraat 133
1075 HJ Amsterdam
Attn: J. Berkvens
Telephone: 31 (0)20 6789 123
Telecopy: 31 (0)20 6789 589
if to the Selling Shareholders:
Halder Investments III B.V.
9 Lange Voorhout
2514 EA 's-Gravenhage
Telephone: 31 (0)70 361 8618
Telecopy: 31 (0)70 361 8616
with a copy to:
Caron & Stevens/Baker & McKenzie
Attn. M. van Bremen
29 Leidseplein
1000 CS Amsterdam
Telephone: 31 (0)20 551 7174
Telecopy: 31 (0)20 627 3458
Notices sent as follows shall be deemed to have been received at the following
times:
(a) if sent by courier: at the moment of delivery by the courier to
the addressee;
(b) if sent by registered letter: on the date noted on the return
receipt;
(c) if sent by telegram, telex or telefax: on the date on which the
notice is sent.
8.2 Counterparts. This Agreement shall be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.3 Exhibits, Schedules and Disclosure Schedule. The Exhibits,
Schedules and Disclosure Schedule are integral parts of this Agreement.
<PAGE> 28
-28-
8.4 Headings and Table of Definitions. The headings herein are for
convenience only, do not constitute a part of this Agreement, and shall not be
deemed to limit or affect any of the provisions hereof.
8.5 Power of Attorney. Each of the undersigned Selling Shareholders
hereby irrevocably makes, constitutes and appoints Halder Investments III B.V. ,
as his, her or its attorney-in-fact (the "Selling Shareholders Representative")
with full power to act in his, her or its place and stead to compromise any
claim or take any other action, including without limitation pursuant to Section
6.3, with respect to this Agreement.
8.6 Miscellaneous. This Agreement (including the Schedule and Exhibits
hereto and the Disclosure Schedule) (a) constitutes the entire Agreement and
understanding and supersedes all prior agreements and understandings, both
written and oral, among the parties hereto with respect to the subject matter
hereof, including the Letter of Intent dated February 25, 1997 between the
Company and the Buyer and (b) shall not be assigned, by operation of law or
otherwise.
8.7 Arbitration. Any disputes arising that relate to the calculations
made pursuant to Section 1.5 of this Agreement shall be settled by arbitration.
The parties hereto shall submit such dispute to neutral binding arbitration in
the City of Amsterdam, by a partner of a "Big 6" Accounting Firm, other than
Deloitte & Touche and Coopers & Lybrand to be appointed to this end by the
president of the NIVRA. In the event of such arbitration, the matter shall be
heard by such partner as a single arbitrator. Any party requesting arbitration
shall give notice to the other party stating the issue to be resolved. The
decision of the arbitrator shall be final and binding on both parties. Any
arbitration shall be conducted in the English language. The arbitrator shall set
the order of the proceedings. All fees and expenses relating to the work, if
any, to be performed by the arbitrator shall be borne entirely by the
non-prevailing party (i.e. the party whose claim is furthest from the
arbitrator's award), who shall be determined by the arbitrator. Each party
hereby consents to the entry of a judgment in any court of competent
jurisdiction enforcing any arbitration decision made in accordance herewith.
8.8 Injunctive Relief. Notwithstanding anything to the contrary herein
and without prejudice to any remedies given to the parties by law, each of the
Selling Shareholders agrees only for the purpose of Buyer obtaining an
injunction hereunder that any breach of the covenants contained in Article VII
would irreparably injure the Company and the Buyer. Accordingly, each of the
Selling Shareholders agrees that the Company or the Buyer may, in addition to
pursuing any other remedies it may have in law, obtain an injunction against
each Selling Shareholder from any court having jurisdiction over the matter
restraining any further violation of this Agreement by the Selling Shareholder.
<PAGE> 29
-29-
8.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of The Netherlands.
8.10 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Article VI.
8.11 U.S. Internal Revenue Service
The Buyer has entered into this Agreement in contemplation of its U.S. parent
company filing an Internal Revenue Code Section 338 election (the "Election")
with the Internal Revenue Service with respect to the transaction. The Selling
Shareholders hereby agree to cooperate with the Buyer with respect to the
preparation of the Election and agrees to give its consent to the filing as may
be reasonably requested.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
duly executed in Amsterdam as of the date first above written:
CHORE-TIME BROCK HOLDING B.V.
By: CTB, Inc.
By /s/ J. Christopher Chocola
--------------------------------------
Name: J. Christopher Chocola
Title: President & CEO
HALDER INVESTMENTS III B.V.
By /s/ Michael Van Bremen
--------------------------------------
Name: Michael Van Bremen
Title: Attorney in Fact
<PAGE> 30
-30-
HALDER INVESTMENTS III C.V.
By /s/ Michael Van Bremen
--------------------------------------
Name: Michael Van Bremen
Title: Attorney in fact
STICHTING FONDSBEHEER FINCON
By /s/ Michael Van Bremen
--------------------------------------
Name: Michael Van Bremen
Title: Attorney in fact
BELDOR B.V.
By /s/ Michael Van Bremen
--------------------------------------
Name: Michael Van Bremen
Title: Attorney in fact
/s/ Michael Van Bremen
-----------------------------------------
V. BERGER
/s/ Michael Van Bremen
-----------------------------------------
A. FABER
/s/ Michael Van Bremen
-----------------------------------------
J. PAQUES
<PAGE> 31
-31-
/s/ Michael Van Bremen
-----------------------------------------
J.H.M. CREMERS
/s/ Michael Van Bremen
-----------------------------------------
H.W. GOOTZEN
/s/ Michael Van Bremen
-----------------------------------------
FANCOM HOLDING B.V.
By /s/ Michael Van Bremen
--------------------------------------
Name:
Title:
<PAGE> 32
-32-
CTB, Inc. An Indiana corporation, hereby guarantees to the Selling Shareholders
the prompt fulfillment by the Buyer of all and any obligations assumed by it
under this Agreement.
Amsterdam, May 1, 1997.
CTB, Inc.
By: /s/ J. Christopher Chocola By: /s/ Michael J. Kissane
------------------------------ ------------------------------
Name: J. Christopher Chocola Name: Michael J. Kissane
Title: President & CEO Title: V.P. & Secretary
<PAGE> 1
EXHIBIT 10.05
ASSET PURCHASE AGREEMENT
BETWEEN
CTB, INC.,
AND
ROYAL CROWN LIMITED
May 29, 1997
<PAGE> 2
TABLE OF CONTENTS
1. SALE AND PURCHASE OF ASSETS.......................................... 1
(a) Assets of the Business.......................................... 1
(b) Excluded Assets................................................. 2
2. RELATED TRANSACTIONS................................................. 3
(a) Use of Facility: Shared Services................................ 3
(b) Operating Agreement............................................. 3
3. PURCHASE PRICE....................................................... 3
(a) Purchase Price.................................................. 3
(b) Post-Closing Adjustments to Purchase Price...................... 4
(c) Inventory Count and Determination of Adjustments................ 5
(d) Allocation of the Purchase Price................................ 5
4. LIABILITIES AND OBLIGATIONS.......................................... 5
(a) Assumed Obligations............................................. 5
(b) No Other Obligations Assumed.................................... 6
5. DOCUMENTS OF TRANSFER AND ASSIGNMENT................................. 7
6. CLOSING.............................................................. 7
7. ADDITIONAL AGREEMENTS................................................ 7
(a) Consummation of Agreement....................................... 7
(b) Employees....................................................... 8
(c) Warranty Claims................................................. 9
(d) Accounts Receivable............................................. 9
(e) Customers of the Business....................................... 9
(f) IDEM Permit..................................................... 9
(g) Walker-Williams License......................................... 10
8. CONDITIONS TO OBLIGATION OF BUYER.................................... 10
(a) Performance of Agreement........................................ 10
(b) Closing Conditions.............................................. 10
(c) Litigation; Injunctions......................................... 10
(d) Consents and Approvals.......................................... 10
(e) Lien Releases................................................... 11
(f) Related Transactions............................................ 11
i
<PAGE> 3
(g) Noncompetition Agreements ....................................... 11
(h) Assumed Contracts ............................................... 11
(I) CTB International Guaranty ...................................... 11
(j) Corporate Certificates .......................................... 11
(k) Legal Opinion ................................................... 12
9. CONDITIONS TO OBLIGATION OF SELLER ................................... 12
(a) Performance of Agreement ........................................ 12
(b) Closing Conditions .............................................. 13
(c) Litigation; Injunctions ......................................... 13
(d) Consents and Approvals .......................................... 13
(e) Related Transactions ............................................ 13
(f) Royal Guaranty .................................................. 13
(g) Corporate Certificates .......................................... 13
(h) Legal Opinion ................................................... 13
10. REPRESENTATIONS AND WARRANTIES OF SELLER ............................. 14
(a) Organization .................................................... 14
(b) Execution, Delivery and Validity ................................ 14
(c) Noncontravention ................................................ 14
(d) EBITDA Statements ............................................... 15
(e) Undisclosed Liabilities ......................................... 15
(f) Adverse Changes ................................................. 15
(g) Taxes ........................................................... 16
(h) Litigation ...................................................... 16
(I) Compliance with Laws ............................................ 16
(j) Environment, Health and Safety .................................. 16
(k) Assumed Contracts ............................................... 18
(l) Customer Orders and Deposits .................................... 19
(m) Intellectual Property ........................................... 19
(n) Title to Assets ................................................. 21
(o) Condition of Tangible Assets .................................... 21
(p) Assets of the Business .......................................... 22
(q) Product Warranty ................................................ 22
(r) Product Liability ............................................... 22
(s) Labor Relations ................................................. 22
(t) Employee Benefit Plans .......................................... 22
(u) Brokers ......................................................... 23
(v) Disclosure ...................................................... 23
ii
<PAGE> 4
11. REPRESENTATIONS AND WARRANTIES OF BUYER .............................. 23
(a) Organization .................................................... 23
(b) Execution, Delivery and Validity ................................ 23
(c) Noncontravention ................................................ 24
(d) Broker .......................................................... 24
12. INDEMNIFICATION ...................................................... 24
(a) By Seller ....................................................... 24
(b) By Buyer ........................................................ 25
(c) Conditions of Indemnification of Third Party Claims ............. 25
(d) Limitation on Indemnification Obligations ....................... 26
(e) Payment of Losses ............................................... 27
(f) Indemnification Basket .......................................... 27
13. GENERAL PROVISIONS ................................................... 27
(a) Taxes and Prorations ............................................ 27
(b) Survival ........................................................ 27
(c) Expenses ........................................................ 28
(d) Remedies Cumulative ............................................. 28
(e) Governing Law ................................................... 28
(f) Assignment; Binding Effect ...................................... 28
(g) Entire Agreement; Amendment...................................... 28
(h) Counterparts .................................................... 29
(I) No Waiver ....................................................... 29
(j) Notices ......................................................... 29
(k) Severability .................................................... 30
EXHIBITS:
- --------
Exhibit A: Form of Facilities Agreement
Exhibit B: Form of Shared Services Agreement
Exhibit C: Form of Operating Agreement
Exhibit D: Form of Escrow Agreement
Exhibit E: Form of CTB Noncompete
Exhibit F: Form of Chocola Noncompete
Exhibit G: Form of Dawes Noncompete
Exhibit H: Form of CTB International Guaranty
Exhibit I: Form of Royal Guaranty
iii
<PAGE> 5
SCHEDULES:
- ---------
Schedule 1(a)(i): Equipment
Schedule 1(a)(iv): Intellectual Property
Schedule 1(a)(v): Assumed Contracts
Schedule 3(d): Allocation of Purchase Price
Schedule 4(a)(ii): Employee Vacation Obligations
Schedule 10(d): EBITDA Statements
Schedule 10(e): Undisclosed Liabilities
Schedule 10(f): Adverse Changes
Schedule 10(h): Litigation
Schedule 10(i): Compliance with Laws
Schedule 10(j): Environment, Health and Safety
Schedule 10(k): Other Contracts
Schedule 10(n): Title to Assets
Schedule 10(q): Product Warranties
Schedule 10(s): Employees/Employee Benefit Programs
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is made and entered into as of the 29th
day of May, 1997 by and between CTB, INC., an Indiana corporation ("Seller"),
and ROYAL CROWN LIMITED, an Indiana corporation ("Buyer").
RECITALS
A. Seller is the owner of certain assets used in connection with its
Brock Manufacturing Division polyvinyl chloride ("PVC") extrusion operations
for the manufacture and sale of plastic and vinyl fences, decks, docks and
related non-agricultural products (the "Business") at Seller's facility located
in Milford, Indiana (the "Facility").
B. Seller desires to sell certain of the assets and rights relating to
the Business to Buyer, and Buyer desires to purchase those assets and rights
from Seller, all on and subject to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and subject to the terms and conditions hereof, the parties hereby
agree as follows:
1. SALE AND PURCHASE OF ASSETS.
(a) Assets of the Business. On the terms and subject to the
conditions set forth in this Agreement, on the Closing Date (as hereafter
defined), Seller shall sell, assign, convey, transfer and deliver to Buyer, and
Buyer shall purchase from Seller, the following property and rights (the
"Assets") owned by Seller and used in the operation of the Business:
(i) All machinery, equipment, tools, dies, molds and related
ancillary improvements and other tangible personal property, including
all useful spare and replacement parts, materials and supplies used in
the Business and listed on SCHEDULE 1(a)(i) attached hereto
(collectively, the "Equipment");
(ii) All of Seller's saleable inventory of raw materials, work
in process and finished goods used in the operation of the Business and
included in the physical inventory count conducted pursuant to SECTION
3(c) (collectively, the "Inventory");
(iii) to the extent transferable, all of Seller's rights, title
and interest in and to all purchase orders from customers and any
unfilled customer orders relating to the Business (the "Customer
Orders") and all customer deposits or advance payments made to Seller
relating thereto (the "Customer Deposits");
<PAGE> 7
(iv) All of Seller's rights, title and interest in and to all
Intellectual Property (as defined in SECTION 10(m) hereof) used in
connection with the Business, including, but not limited to, the
patents, trademarks, applications for patents and trademarks, and
licenses listed on SCHEDULE 1(a)(iv) attached hereto;
(v) All of Seller's rights, title and interest in and to those
dealer or distributor agreements, employee agreements and other
contracts set forth on SCHEDULE 1(a)(v) attached hereto (collectively,
the "Assumed Contracts");
(vi) All of Seller's rights, title and interest in and to all
rights and warranties from vendors or suppliers of any of the Assets;
(vii) All of Seller's records relating to (A) present, former
and prospective customers of the Business (including all dealers,
distributors and independent sales representatives), including customer
lists, contacts, pricing information, sales records, payment terms and
history, dealer policies, manuals and guidelines and other related
records; (B) present, former and prospective suppliers for the
Business, including supplier lists, contacts, pricing information,
supply history and other related records; (C) the Intellectual
Property; and (D) copies of such other records relating to the
Business as may be necessary or advisable for the operation of the
Business by Buyer after Closing, as reasonably designated by Buyer;
(viii) To the extent transferable, all of Seller's rights, title
and interest in and to any certificates, licenses, permits or franchises
relating to the Business to the fullest extent that the same are
transferable or assignable; and
(ix) All other assets used primarily in the operation of the
Business, except for the assets excluded under SECTION 1(b) below.
(b) Excluded Assets. The parties hereto expressly acknowledge and
agree that the Assets to be acquired by Buyer at the Closing (as hereafter
defined) hereunder,and the operations of Seller included within the term
"Business" as used in this Agreement, include only those related to and used
primarily in the manufacture and sale of extruded vinyl and plastic fences,
decks, docks and related non-agricultural products and expressly do not include
any properties or rights relating to and used primarily in Seller's plastic or
vinyl agricultural products business. In addition, no assets, rights or
properties of Seller other than the Assets of the Business as listed above are
subject to this Agreement. Without limiting the generality of the foregoing,
specifically excluded from this Agreement are: (I) all of Seller's cash, cash
equivalents, accounts receivable (whether or not relating to the Business),
2
<PAGE> 8
and insurance benefits; and (ii) all assets of Seller not primarily used or
useful in the operation of the Business, including, without limitation, all
Intellectual Property used in Seller's operations other than the Business and,
more specifically, the trademarks or trade names "CTB," "Chore-Time," and the
word "Brock," except to the extent used in the trademarks "Brock Dock" and
"Brock Deck" which are to be sold and transferred to Buyer pursuant to SECTION
1(a)(iv) above or are otherwise used in connection with the words "dock" or
"deck."
2. RELATED TRANSACTIONS.
(a) Use of Facility; Shared Services.
(i) At Closing, Buyer and Seller shall enter into an
agreement substantially in the form attached hereto as EXHIBIT A (the
"Facilities Agreement").
(ii) At Closing, Buyer and Seller shall also enter into
an agreement substantially in the form attached hereto as EXHIBIT B (the
"Shared Services Agreement").
(b) Operating Agreement. At Closing, Buyer and Seller shall
enter into an agreement substantially in the form attached hereto as EXHIBIT C
(the "Operating Agreement").
3. PURCHASE PRICE.
(a) Purchase Price. Subject to SECTION 3(b), the purchase
price for the Assets (the "Purchase Price") shall be Eight Million Two Hundred
Fifty Thousand Dollars ($8,250,000), which shall be payable to Seller as
follows:
(i) At Closing, Four Hundred Thousand Dollars ($400,000)
(the "Escrow Amount") shall be deposited into escrow with such
individual, bank or other financial institution (the "Escrow Agent") as
may be selected by the mutual agreement of Buyer and Seller, in
accordance with the terms of an agreement substantially in the form
attached hereto as EXHIBIT D (the "Escrow Agreement"), to provide
security to Buyer for any amounts due for breach by Seller of any of the
representations, warranties, covenants or agreements contained in or
made pursuant to this Agreement;
(ii) Seller hereby acknowledges receipt of a deposit
against the Purchase Price in the amount of One Hundred Thousand
Dollars ($100,000)
3
<PAGE> 9
(the "Deposit"), which Deposit shall be applied against the Purchase
Price at Closing; and
(iii) The remaining balance of the Purchase Price shall
be paid by Buyer at the Closing by wire transfer or in other immediately
available funds; provided, that such remaining balance shall be reduced
by the aggregate amount of Employee Vacation Obligations (as hereafter
defined) which are set forth on SCHEDULE 4(a)(ii) attached hereto.
(b) Post-Closing Adjustments to Purchase Price.
(i) The amount of the Purchase Price shall be increased
or decreased, as the case may be, after Closing as follows:
(A) Increased or decreased to the extent that
the value of the Inventory at Closing, as determined in
accordance with SECTION 3(c), is more or less than One Million
Dollars ($1,000,000); provided, that the maximum amount by
which the Purchase Price may be increased hereunder shall be
Three Hundred Thousand Dollars ($300,000);
(B) Decreased by the aggregate amount of the
Customer Deposits, if such Customer Deposits are not physically
transferred by Seller to Buyer at Closing;
(C) Increased by an amount equal to the
aggregate amount of wages paid by Seller to employees of the
Business who are hired by Buyer at or immediately after the
Closing for the period from the effective time of Closing
through the payroll period ending May 31, 1997; and
(D) Increased or decreased to the extent that
the aggregate amount of Employee Vacation Obligations set forth
on the final SCHEDULE 4(a)(ii) delivered after Closing in
accordance with SECTION 4(a)(ii) is less than or more than the
aggregate amount of such Obligations as set forth on SCHEDULE
4(a)(ii) attached hereto.
(ii) Within five (5) business days after the Purchase
Price has been finally determined in accordance with SECTION 3(b)(i)
above and not later than sixty (60) days after Closing, Buyer shall pay
any increase, or Seller shall
4
<PAGE> 10
refund any decrease, in the Purchase Price to the other party in cash
or other immediately available funds.
(c) Inventory Count and Determination of Adjustments. Beginning at
3:00 a.m. on the Closing Date, Seller will conduct a normal-course maintenance
program on all of the Assets, and Buyer and Seller shall jointly determine the
Customer Deposits and the respective payroll obligations of the parties and
shall jointly conduct a physical count of the Inventory using such procedures
as are generally accepted in the industry and agreed to by the parties. For
purposes of this SECTION 3(c), all items of Inventory which are not obsolete,
are usable or saleable in the ordinary course of the Business and, as to
finished items, are in merchantable condition and suitable for resale by Buyer
shall be valued at the lower of cost or market value. Any items of Inventory
not meeting the foregoing requirements shall be deemed to have no value and
shall not be purchased by Buyer.
(d) Allocation of the Purchase Price. The Purchase Price shall be
allocated among the Assets as set forth on SCHEDULE 3(d) attached hereto. The
parties agree to furnish each other and the Internal Revenue Service with such
applicable information as may be required under Section 1060 of the Internal
Revenue Code, as amended, and to cooperate in the completion and timely filing
of IRS Form 8594 (Asset Acquisition Statement). A party may change the
agreed-upon allocations only in order to be consistent with any
finally-adjudicated adjustments made to the returns of the other party.
4. LIABILITIES AND OBLIGATIONS.
(a) Assumed Obligations. At Closing, Buyer shall assume and agree
to pay and perform, as and when due, the following liabilities and obligations
of Seller (collectively, the "Assumed Obligations");
(i) All liabilities and obligations of Seller accruing and
arising under the Assumed Contracts and the Customer Orders from and
after Closing; and
(ii) All liabilities and obligations of Seller listed on
SCHEDULE 4(a)(ii) attached hereto for unused vacation time of those
employees listed on SCHEDULE 4(a)(ii) who are hired by Buyer at or
immediately after the Closing (collectively, the "Employee Vacation
Obligations"); provided, that, within thirty (30) days after Closing,
Seller shall deliver to Buyer an accounting of all unused vacation time
of such employees as of the time of Closing on a final SCHEDULE
4(a)(ii), which shall replace and supersede the Schedule attached
hereto.
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(b) No Other Obligations Assumed. Except for the Assumed
Obligations, Buyer shall not assume or be responsible for any debts,
liabilities, obligations, or commitments of Seller whatsoever, whether actual,
absolute, accrued, fixed, contingent, asserted or unasserted. Without in any way
limiting the generality of the foregoing, Buyer shall not assume, nor shall
Buyer be responsible for: (i) any liability based upon or arising out of any
action, suit or proceeding to which Seller is a party or to which Seller may be
named as a party which arises out of, related to or is based upon any set of
circumstances or facts existing on or before the Closing Date, including such
liabilities in any way related to Seller's sale or distribution of products or
services on, before or subsequent to the Closing Date; (ii) any liability of
Seller, fixed or contingent, asserted or unasserted, arising out of or based
upon incidents occurring on, prior or subsequent to the Closing Date with
respect to any claim for breach of any express or implied product or service
warranty or any similar claim which relates to any product or service sold by
Seller on or before the Closing Date, including without limitation, liabilities
for defects in workmanship or materials or non-compliance with laws or
regulations relating to consumer protection, truth-in-advertising or the sale,
distribution, operation or safety of Seller's products or services; (iii) any of
Seller's liabilities relating to any federal, state, local or other governmental
taxes, fees or related charges,including but not limited to, gross income,
adjusted gross income, supplemental net income, intangibles, income, use, sales,
franchise, business, intangibles, inventory, accumulated earnings, employee
withholding, social security, unemployment, or other taxes or contributions of
any kind and whether relating to any year or period (or portion thereof) ended
on, prior or subsequent to the Closing Date; (iv) any liabilities or obligations
arising under any contract or agreement to which Seller is a party or relating
to any violation or breach of any thereof; (v) any Seller's trade payables or
other accounts payable, whether arising out of or relating to transactions
occurring on, prior or subsequent to the Closing Date; (vi) any liabilities of
Seller arising in connection with any agents or employees of Seller as a result
of Seller's employment or discharge of any such persons (including, but not
limited to any liabilities for accrued compensation, bonuses, health or other
insurance claims [including any claims pending or known as of Closing Date] or
benefits, vacation pay or severance pay other than the Employee Vacation
Obligations); (vii) any liabilities arising from the failure of Seller to comply
with required governmental funding standards for any employee pension plans for
any year in which such plans have been in existence and any obligation of Seller
to the Pension Benefit Guaranty Corporation or to plan participants or
beneficiaries in connection with such underfunding, if any; (viii) any fines,
civil penalties or other liabilities based upon or arising out of a violation of
any law or regulation by Seller, including, without limitation, any
environmental liabilities; (ix) any liability for federal, state or other
governmental taxes, documentary stamps, conveyance taxes or other similar
charges incurred by Seller in connection with the transfer of the Assets to
Buyer; (x) any liability for fees and expenses of any person for financial
services or services as a finder or broker rendered to Seller in connection with
the transactions contemplated by this Agreement; (xi) any liabilities for fees
and expenses of auditors, accountants or legal counsel retained by Seller for
services rendered to Seller in connection with the transactions contemplated by
this
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Agreement, and (xii) any other fees, charges, expenses, taxes, liabilities or
obligations of Seller, whether accruing or arising on, prior or subsequent to
the Closing Date. Seller agrees that, after Closing, it shall pay and perform,
as and when due, all liabilities and obligations of Seller relating to the
Business prior to Closing, including, but not limited to, all continuation
coverage under any group health plan or plans pursuant to the relevant
provisions of the federal Consolidated Omnibus Budget Reconciliation Act
(COBRA) and all costs associated with any employee pension, profit sharing,
401(k) or similar retirement plans.
5. DOCUMENTS OF TRANSFER AND ASSIGNMENT. Before the Closing the
parties shall cause to be prepared and approved by counsel for each of the
parties all documents and instruments necessary or advisable to effect the
transfers and assignments contemplated by this Agreement. At Closing, Seller
will execute and deliver such bills of sale and other documents or instruments
of transfer or assignment as may be necessary or appropriate to vest in or
confirm to Buyer full and complete title to all of the Assets, free and clear
of all liens, claims, security interests, encumbrances and liabilities, and
Buyer will execute and deliver such instruments of assumption and other
documents as are required hereby. All deliveries made at Closing shall be
deemed to be simultaneously made, and no party shall be obligated to consummate
the transactions contemplated by this Agreement unless and until all deliveries
required hereunder have been fully made.
6. CLOSING. Unless the parties otherwise agree, the consummation of
the transactions contemplated by this Agreement (the "Closing") shall commence
at 2:00 p.m. on May 28, 1997 at Seller's offices at State Road 15 North,
Milford, Indiana and shall be deemed effective at 3:00 a.m. (local time) on May
29, 1997 (the "Closing Date").
7. ADDITIONAL AGREEMENTS.
(a) Consummation of Agreement. Subject to the terms and
conditions herein provided, each of the parties agrees to use their best
efforts to do all things necessary, proper or advisable in order to consummate
and make effective, as soon as reasonably practicable, the transactions
contemplated by this Agreement. Nothing contained in this Agreement shall be
construed as an attempt to agree to assign any contract which is in law
non-assignable without the consent of the other party or parties to such
contract, and each of the parties hereto agrees to use its best efforts to
obtain all consents, authorizations, orders and approvals of any governmental
commission, board or other regulatory body, or any other person required in
connection herewith. At any time after the Closing Date, if any further action
is necessary, proper or advisable to carry out the purposes of this Agreement,
then, as soon as is reasonably practicable, each party to this Agreement shall
take, or cause to be taken, such action.
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(b) Employees.
(i) At or immediately after Closing, Buyer will offer to employ all
employees of the Business on such terms as Buyer may deem appropriate.
At or immediately after Closing, Seller will: (A) take such action as
may be required to terminate its employment of each employee hired by
Buyer (without any liability to Buyer), to amend Seller's Internal
Revenue Code Section 401 qualified retirement plan (copies of which
amendment shall be provided to Buyer) to 100% vest the entire account
balance of each such employee under Seller's Profit-Sharing/401(k) Plan
as of the Closing Date, subject to approval from the Internal Revenue
Service (which request for approval shall be filed with the IRS by
Seller within sixty [60] days after Closing and a copy of which shall be
provided to Buyer), and to make all required employer contributions
allocable to each such employee under any such plans for all periods
through the Closing Date; and (B) pay to each employee of the Business
who is hired by Buyer all wages and other benefits legally owed by
Seller in connection with the termination of such employee's employment
with Seller, excluding the Employee Vacation Obligations being assumed
by Buyer pursuant to SECTION 4(a)(ii) hereof.
(ii) For a period of four (4) months from and after Closing, Seller
shall make reasonably available to Buyer at the Facility, at no cost:
(A) the services of Mr. Brian Dawes, as Buyer may reasonably request, to
assist Buyer's management team in the transition of the Business; and
(B) the services of such other employees of Seller as may be reasonably
requested by Buyer to assist in the accounting and administrative
aspects of the Business as continued by Buyer.
(iii) On or before December 31, 1997, Seller shall pay to each
employee of the Business who is hired by Buyer at or immediately after
Closing and is still employed by Buyer on and as of November 30, 1997 an
amount equal to 5% of the gross salary earned by such employee during
the period from December 1, 1996 through the Closing Date, as a
pro-rated portion of the 5% holiday bonus that would have been payable
to such employee under the terms of the bonus program had he or she
remained employed by Seller through November 30, 1997.
(iv) Seller further agrees that, in the event and to the extent
bonuses are awarded under Seller's Management Bonus Plan for calendar
year 1997, each employee of the Business who is hired by Buyer at or
immediately after Closing, who is still employed by Buyer as of December
31, 1997, and
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who, immediately prior to Closing, is covered by Seller's Management
Bonus Plan will be paid such bonus on the same basis and at the same
time as other participants, but pro-rated to reflect such employee's
service with Seller and the operations of the Business for the period
prior to Closing.
(c) Warranty Claims. From and after Closing, Buyer shall use reasonable
commercial efforts to assist Seller in resolving any warranty claims relating to
the products of the Business which were sold by Seller prior to Closing to the
extent such claims are filed with Buyer. Buyer agrees to process such claims on
Seller's behalf as Seller shall reasonably direct, and Seller shall reimburse
Buyer for all out-of-pocket/third-party expenses and Buyer's direct
personnel/labor costs, materials and overhead, together with a reasonable
allocation of indirect costs and expenses (specifically excluding any charge for
general and administrative costs related thereto) which are incurred by Buyer in
processing such claims. No warranty claim shall be processed by Buyer or charged
to Seller without Seller's prior approval of the processing and cost thereof,
such approval not to be unreasonably withheld; provided, that if Seller has not
responded within thirty (30) days after a warranty claim has been submitted for
approval by Buyer, then Seller shall be deemed to have approved the same.
Nothing contained herein shall be deemed to constitute an agreement by Buyer to
assume or be responsible for any claims arising out of or relating to products
sold by Seller prior to Closing, and Seller shall remain fully liable therefor.
(d) Accounts Receivable. Except to the extent otherwise governed by the
terms of the Shared Services Agreement, from and after Closing, Buyer shall use
reasonable commercial efforts to assist Seller in collecting its accounts
receivable for products of the Business which were sold by Seller prior to
Closing.
(e) Customers of the Business. From and after Closing, Seller will
cooperate with and assist Buyer in effecting, to the fullest extent practicable,
the orderly transfer of all customers of the Business to Buyer on a timely and
efficient basis.
(f) IDEM Permit. After Closing, Seller and Buyer will cooperate and take
any and all steps that may be necessary or advisable in order to obtain all
permits or other approvals from the Indiana Department of Environmental
Management ("IDEM") that may be required for operation of the Business at the
Facility, including, without limitation, any construction or other permit
legally required under the Title V or any other program. Seller hereby agrees to
pay any and all application fees, fines, penalties, interest, legal fees or
other costs incurred in connection with obtaining such permits or approvals or
arising out of or relating to Buyer's operation of the Business after Closing
without such permits or approvals. Notwithstanding anything to the contrary
contained in this Agreement: (1) Buyer agrees that Seller shall not be liable to
Buyer, nor shall Seller be obligated to indemnify Buyer, for any operating
losses or consequential damages that may be incurred by Buyer in the event IDEM
orders Buyer to cease, reduce or change the operations of the Business after
Closing due to
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Seller's failure to obtain any such permits or approvals prior to Closing; and
(ii) Seller agrees that Buyer shall not be liable to Seller, nor shall Buyer be
obligated to indemnify Seller, for any losses, fees, fines, penalties,
interest, legal fees or other costs or expenses incurred by Seller and arising
out of or relating to Buyer's operation of the Business without such permits or
approvals after Closing.
(g) Walker-Williams License. Seller agrees to work diligently after
Closing to cause that certain Agreement Including Nonexclusive Patent License
with Walker-Williams Lumber Company ("Walker-Williams") dated March 31, 1997 to
be amended to reflect the parties' intent that the license granted to
Walker-Williams by Seller pursuant thereto is limited to use with wood
products, which amendment shall be subject to approval by Buyer as Seller's
assignee of such agreement.
8. CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to purchase
the Assets from Seller under this Agreement is subject to the satisfaction on or
before the Closing Date of the following conditions (unless any such condition
shall be waived in writing in whole or in part by Buyer):
(a) Performance of Agreement. Seller shall have performed, observed and
complied with all the obligations and conditions required by this Agreement to
be performed, observed or complied with by Seller on the Closing Date,
including, but not limited to, the execution and delivery of all documents or
instruments required to be delivered at Closing.
(b) Closing Conditions. Seller shall have delivered to Buyer a
certificate, signed and dated the Closing Date, stating that to the best of
Seller's knowledge and belief the conditions specified in this Section 8 have
been fulfilled as of the Closing Date.
(c) Litigation; Injunctions. No order of any court or administrative
agency shall be in effect which restrains or prohibits the transactions
contemplated hereby or which would limit or affect Buyer's ownership or control
of the Assets or the Business, or its use of the Facility, and there shall not
have been threatened, nor shall there be pending, any action or proceeding by
or before any court or governmental agency or other regulatory or
administrative agency or commission challenging any of the transactions
contemplated by this Agreement.
(d) Consents and Approvals. All consents, approvals, licenses and
permits, the granting of which are reasonably necessary for the consummation of
the transactions contemplated hereby.
(e) Lien Releases. Seller shall have delivered to Buyer written
releases from the holders of any and all security interests, liens or other
encumbrances on the Assets.
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(f) Related Transactions. Seller shall have executed and delivered to
Buyer the Facilities Agreement, the Shared Services Agreement and the Operating
Agreement, and shall have performed all obligations required to be performed
thereunder on and as of the Closing Date under this Agreement.
(g) Noncompetition Agreements.
(i) Seller and CTB International Corp. ("CTB International") shall
have executed and delivered to Buyer an agreement substantially in the
form attached hereto as EXHIBIT E (the "CTB Noncompete"), pursuant to
which such companies shall agree not to compete with the Business for a
period of five (5) years from and after the Closing.
(ii) J. Christopher Chocola, chief executive officer of Seller,
shall have executed and delivered to Buyer an agreement substantially in
the form attached hereto as EXHIBIT F (the "Chocola Noncompete"),
pursuant to which Mr. Chocola shall agree not to compete with the
Business for a period of five (5) years from and after the Closing.
(iii) Brian Dawes, vice president of Seller, shall have entered into
agreement with Buyer substantially in the form attached hereto as
EXHIBIT G (the "Dawes Noncompete"), pursuant to which Mr. Dawes shall
agree not to compete with the Business for a period of three (3) years
from and after the Closing.
(h) Assumed Contracts. Seller shall have delivered to Buyer true,
correct and complete copies of the Assumed Contracts and the Customer Orders,
including any amendments or changes thereto.
(i) CTB International Guaranty. CTB International shall have executed
and delivered to Buyer a guaranty in the form attached hereto as EXHIBIT H (the
"CTB International Guaranty").
(j) Corporate Certificates. Seller shall have delivered to Buyer: (I) a
copy of Seller's Articles of Incorporation, certified by the Indiana Secretary
of State as of a current date; (ii) a certificate of existence of Seller issued
as of a current date by the Indiana Secretary of State; and (iii) copies of
resolutions of the shareholders and Board of Directors of Seller, certified by
Seller's secretary, authorizing (A) the execution and delivery of this
Agreement and the other agreements contemplated hereby and (B) the taking of
all steps necessary to consummate the transactions and fulfill Seller's
obligations under this Agreement.
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(k) Legal Opinion. Seller shall have delivered to Buyer an
opinion of counsel to Seller, dated the Closing Date, to the effect that: (I)
Seller is a corporation duly organized and validly existing under the laws of
the State of Indiana and has the necessary corporate power and authority to own
and operate its properties, to conduct its business as currently conducted, and
to execute, deliver and perform this Agreement and all agreements contemplated
hereby; (ii) Seller has duly authorized the execution, delivery and performance
of this Agreement and all agreements contemplated hereby by all necessary
corporate action; (iii) this Agreement and all agreements contemplated hereby
have been duly and validly executed and delivered by Seller, and each
constitutes the legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms; (iv) the CTB Noncompete and the CTB
International Guaranty have been duly and validly executed and delivered by CTB
International, and each constitutes the legal, valid and binding obligation of
CTB International, enforceable against CTB International in accordance with its
terms; (v) the execution, delivery and performance by Seller of this Agreement
and all agreements contemplated hereby do not violate (A) any provision of the
Articles of Incorporation or By-Laws of Seller or (B) to such counsel's
knowledge, any statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other governmental or judicial restriction applicable to
Seller; (vi) to such counsel's knowledge, no consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
entity by Seller is required in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby; and
(vii) to such counsel's knowledge, except as set forth on the Schedules attached
to this Agreement, there are no actions, suits or proceedings pending or
threatened against Seller, nor is Seller subject to any judgment, decree or
order, relating to or affecting the Assets or the Business.
9. CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
sell and transfer the Assets to Buyer under this Agreement is subject to the
satisfaction on or before the Closing Date of the following conditions (unless
any such condition shall be waived in writing in whole or in part by Sellers):
(a) Performance of Agreement. Buyer shall have performed,
observed and complied with all the obligations and conditions required by this
Agreement to be performed, observed or complied with by Buyer on the Closing
Date, including, but not limited to, the execution and delivery of all
documents or instruments required to be delivered at Closing.
(b) Closing Conditions. Buyer shall have delivered to
Seller a certificate, signed and dated the Closing Date, stating that to the
best of Buyer's knowledge and belief the conditions specified in this SECTION 9
have been fulfilled as of the Closing Date.
(c) Litigation; Injunctions. No order of any court or
administrative agency shall be in effect which restrains or prohibits the
transactions contemplated hereby, and there
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shall not have been threatened, nor shall there be pending, any action or
proceeding by or before any court or governmental agency or other regulatory or
administrative agency or commission, challenging any of the transactions
contemplated by this Agreement.
(d) Consents and Approvals. All consents, approvals, licenses
and permits, the granting of which are reasonably necessary for the
consummation of the transactions contemplated hereby, shall have been obtained.
(e) Related Transactions. Buyer shall have executed and
delivered to Seller the Facilities Agreement, the Shared Services Agreement and
the Operating Agreement, and shall have performed all obligations required to
be performed thereunder on and as of the Closing Date under this Agreement.
(f) Royal Guaranty. Royal Group Technologies Limited, a Canadian
corporation and the ultimate parent corporation of Buyer ("Royal"), shall have
executed and delivered to Seller a guaranty in the form attached hereto as
EXHIBIT I (the "Royal Guaranty").
(g) Corporate Certificates. Buyer shall have delivered to
Seller: (I) a copy of Buyer's Articles of Incorporation certified as of a
current date by the Indiana Secretary of State; (ii) a certificate of existence
of Buyer issued as of a current date by the Indiana Secretary of State; (iii)
copies of resolutions of the Board of Directors of Buyer, certified by Buyer's
secretary, authorizing (A) the execution and delivery of this Agreement and the
other agreements contemplated hereby and (B) the taking of all steps necessary
to consummate the transactions and fulfill Buyer's obligations under this
Agreement; and (iv) a certificate of an officer of Royal regarding the
corporate approvals required in connection with Royal's execution and delivery
of this Agreement and the Royal Guaranty.
(h) Legal Opinion. Buyer shall have delivered to Seller an
opinion of counsel to Buyer, dated the Closing Date, to the effect that: (I)
Buyer is a corporation duly organized and validly existing under the laws of
the State of Indiana and has the necessary corporate power and authority to
execute, deliver and perform this Agreement and the other agreements
contemplated hereby; (ii) Buyer has duly authorized the execution, delivery and
performance of this Agreement and all agreements contemplated hereby by all
requisite corporate action; and (iii) this Agreement and all agreements
contemplated hereby have been duly and validly executed and delivered by Buyer,
and each constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
10. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby
represents and warrants to Buyer that:
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(a) Organization. Seller is a corporation duly organized and validly
existing under the laws of the State of Indiana. Seller is duly qualified to
do business and in good standing under the laws of all jurisdictions in which
its ownership or use of property or the conduct of its business requires it to
qualify, except where failure to qualify would not have a material adverse
effect on the financial condition or business of Seller. Seller has all
necessary corporate power and authority to own all of its properties and
assets, to conduct its business as now being conducted, and to make, execute,
deliver, and perform this Agreement and the other documents and instruments
contemplated hereby. CTB International is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, owns all
of the issued and outstanding capital stock of Seller and has all necessary
corporate power and authority to make, execute, deliver and perform the CTB
Noncompete. Seller and CTB International have full right, power and authority
to cause each legal entity which is controlled by Seller or CTB International
or is under common control with Seller through 10% or more common ownership (an
"Affiliate") to comply with the terms of the CTB Noncompete.
(b) Execution, Delivery and Validity. The execution, delivery and
performance of this Agreement by Seller and CTB International have been duly
authorized by all requisite corporate action. This Agreement and all other
agreements contemplated hereby have been duly and validly executed and delivered
by Seller, and each constitutes the legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms. The CTB
Noncompete and the CTB International Guaranty have been duly and validly
executed and delivered by CTB International, and each constitutes the legal,
valid and binding obligation of CTB International, enforceable against CTB
International in accordance with its terms.
(c) Noncontravention. The execution, delivery and performance of this
Agreement and the other agreements contemplated hereby and the consummation of
the transactions contemplated hereby or thereby or compliance with or
fulfillment of the terms and provisions hereof or of any other agreement or
instrument contemplated hereby or thereby, do not and will not: (i) conflict
with or result in a breach of any of the provisions of the Articles of
Incorporation or By-Laws of Seller; (ii) contravene any law, rule or regulation
or any order, writ, award, judgment, decree or other determination which affects
or binds Seller or any of its properties; (iii) conflict with, result in a
breach of, constitute a default under, or give rise to a right of acceleration,
termination or the imposition of penalties under any contract, deed of trust,
mortgage, trust, lease, governmental or other license, permit or other
authorization, contract, agreement, note or any other agreement, instrument or
restriction to which Seller is a party or by which any of its properties may be
affected or bound; or (iv) require the approval, consent or authorization of, or
the making of any declaration, filing or registration with, any third party or
any foreign, federal, state or local court, governmental authority or regulatory
body.
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(d) EBITDA Statements. Attached hereto as SCHEDULE 10(d) are
internally-prepared statements of earnings before interest, taxes, depreciation
and amortization ("EBITDA") for the Business for each of the twelve-month
periods ending December 31, 1996, 1995, 1994, 1993 and 1992 which have been
furnished by Seller to Buyer (collectively, the "EBITDA Statements"). The
EBITDA Statements accurately reflect the revenues and expenses of the Business
in all material respects and present accurately the EBITDA of the Business for
the periods indicated. The revenues and expenses of the Business have been
properly recorded in all material respects in accordance with, and the EBITDA
Statements were prepared in conformity with, generally accepted accounting
principles applied on a consistent basis except that they were prepared without
notes to financial statements and without inclusion of provisions for interest,
depreciation, taxes and amortization.
(e) Undisclosed Liabilities. Seller has no material liabilities or
obligations relating to the Business or the Assets of any type, nature or
description, known or unknown, asserted or unasserted, direct or indirect,
absolute or contingent, including without limitation, unfunded allocations for
or under any employee benefit plans or arrangements, liabilities with respect
to labor or environmental matters, liabilities relating to products and
warranties of the Business, or liabilities for federal, state, local, foreign
or other taxes or assessments, except as set forth on SCHEDULE 10(e) attached
hereto.
(f) Adverse Changes. Except as set forth in SCHEDULE 10(f), since
December 31, 1996; (i) the Business has been operated in the ordinary course
and there have been no material adverse changes to the financial condition,
results of operations, assets, liabilities, business, and prospects of the
Business; (ii) there have been no liabilities or obligations of any nature
incurred in connection with the Business other than in the regular, ordinary
and customary course of business; (iii) there have been no material alterations
in the manner of keeping the books, accounts or records of the Business, or in
the accounting practices therein reflected; (iv) there have been no sales or
transfers of any assets of the Business, nor has Seller entered into any other
transaction relating to the Business, other than in the ordinary and customary
course of business; (v) no action has been taken that has resulted or reasonably
could be expected to result in any of the Assets being mortgaged, pledged or
subjected to any lien or encumbrance of any nature; (vi) there have been no
increases in the salary, bonus or other compensation arrangements payable or to
become payable to employees of the Business since December 31, 1996 other than
increases in the ordinary course of business in accordance with past practices;
and (vii) there have been no adverse changes in the relationships between the
Business and its customers, suppliers or employees.
(g) Taxes. Seller has duly and timely filed or caused to be filed
all tax returns and information returns (including, without limitation, income,
business or
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occupation, sales or use, employment, or franchise tax returns) relating to the
Business and the Assets and has paid all taxes and any other governmental
charges, duties, penalties, interest or fines which are due and payable with
respect to the Business or the Assets through the Closing Date, except where
failure to file such returns or pay such taxes would not have a material
adverse effect on the Business. Seller has withheld or collected from each
payment made to employees or agents of the Business all taxes (including, but
not limited to, federal income taxes, Federal Insurance Contribution Act taxes,
and federal, state and local income, unemployment, payroll and wage taxes)
required to be withheld or collected and, if due, has paid the same to the
proper tax receiving officers. Seller has collected sales and use taxes for all
sales made to customers making purchases from the Business as required by law
to be collected and, if due, has paid the same to the proper tax receiving
officers.
(h) Litigation. Except as set forth on SCHEDULE 10(h) attached
hereto, there are no actions, suits, claims, orders, audits, investigations,
inquiries or proceedings (judicial, administrative or arbitration) pending or
threatened, nor have any events occurred prior to the date hereof which could
give rise to any actions, suits, claims, investigations or proceedings, against
or affecting the Assets or the Business, whether at law or in equity and
whether civil or criminal in nature, or before or by any court, arbitration
panel, governmental department, commission, board, bureau, agency or
instrumentality.
(i) Compliance with Laws. Except as set forth on SCHEDULE 10(i):
(I) the Business is, and at all times prior to the date hereof has been, in
compliance in all material respects with all applicable statutes, laws,
ordinances, rules, regulations and orders of governments and governmental
bodies; and (ii) Seller owns, holds, possesses and is in compliance with all
franchises, permits, licenses, certificates, privileges, immunities, approvals
and other authorizations necessary to own or lease,operate and use the Assets
and to carry on and conduct the Business as now conducted.
(j) Environment, Health and Safety.
(i) Except as set forth on SCHEDULE 10(i), the Business and the
Assets are, and at all times prior hereto have been, in compliance with
any and all Environmental Laws and Health and Safety Laws, and no Claim
relating to a violation of any such Laws has been made with respect to
the Business or the Assets.
(ii) Except as set forth on SCHEDULE 10(i), there is no
Environmental or Health and Safety Circumstance related to past or
present operations of the Business or the Assets at the Facility or on
or off any other properties, facilities or premises on which the
Business or the Assets have
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been operated. Neither the Facility nor the real property adjacent
thereto which is owned, operated or used in connection with the
Business or the Assets contains any underground storage tank, asbestos
containing material, polychlorinated biphenyls, or landfills, surface
impoundments or disposal area.
(iii) Except as set forth on SCHEDULE 10(j), Seller has not,
either expressly or by operation of law, assumed or undertaken any
liability, including without limitation, any obligation for corrective
or remedial action, of any other person or entity with respect to any
Environmental Law, nor has Seller caused, permitted or allowed any
"release" (as defined in 42 U.S.C. Section 9601(22)) of any Hazardous
Substance, Pollutant or Contaminant on any real property owned,
operated or used by Seller in connection with the Business.
(iv) Seller has obtained (or has pending timely filed
applications for) any and all environmental permits legally required
to operate the Facility, the Business and the Assets as they are
presently being operated.
(v) For purposes of this SECTION 10(j):
(A) "Environmental Law" means any federal, state or
local statute, rule, regulation or ordinance having as its
primary purpose the protection of the environment or the
protection of human health from the effects of environmental
pollutants and any permit, license or authorization required
thereunder, as well as common law.
(B) "Health and Safety Law" means any federal, state
or local statute, rule, regulation or ordinance having as its
primary purpose the protection of worker safety or health in
the workplace.
(C) "Hazardous Substance, Pollutant or Contaminant"
means any "hazardous substance" as defined in 42 U.S.C. Section
9601(14), any "pollutant or contaminant" as defined in 42 U.S.C.
Section 9601(33), and petroleum, including crude oil or any
fraction thereof.
(D) "Claim" means and includes any claim, action, suit,
demand, administrative proceeding, notice of violation, notice
of deficiency, or general notice of potential liability alleging
any failure to comply with or any liability
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under any Environmental Law or Health and Safety Law, including, without
limitation, any liability under common law for damages or injury to
person or property.
(E) "Environmental or Health and Safety Circumstance" means
any fact, circumstance, activity, practice, incident, action, plan or
condition which would constitute a failure to comply with any
Environmental Law or Health and Safety Law, or would give rise to
potential liability under any such Law.
(k) Assumed Contracts.
(i) Seller has delivered to Buyer true and complete copies of the
Assumed Contracts as in effect on the date hereof. The Assumed Contracts
constitute the legal, valid and binding obligations of the parties thereto and
are in full force and effect, enforceable in accordance with their respective
terms. Seller has performed all material obligations required to be performed by
it under the Assumed Contracts on and prior to the date hereof. No party to any
of the Assumed Contracts is in breach or default thereunder (as to payments due
or otherwise) nor has any event occurred which, with notice or the passage of
time, or both, could constitute a breach or default thereunder. Except as set
forth on SCHEDULE 10(k). Seller is not a party to any agreements, personal
property leases or contracts other than the Assumed Contracts which are
necessary or advisable to operate the Business as currently conducted.
(ii) Seller has delivered to Buyer true and complete copies of all
policies, manuals, handbooks or other guidelines or materials currently in
effect relating to the dealer or distributor agreements that are included within
the Assumed Contracts. Except for that certain Distributor Agreement with
Farm'Trol Equipment dated November 1, 1986 and that certain Brock Manufacturing
Dealership Agreement with Dura Dock, Inc. (d/b/a/"Durable Docks") date December
13, 1991, all dealer, distributor and independent sales representative
agreements being assumed by Buyer pursuant hereto grant the dealer, distributor
or independent sales representative only a non-exclusive right to market and
sell the products of the Business except as otherwise provided by law. Further,
except for that certain Agreement for Independent Sales Representation with
Weymiller Associates Corporation dated March 1, 1994, all such agreements are
terminable at will on not more than ninety (90) days' written notice except as
otherwise provided by law.
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<PAGE> 24
(l) Customer Orders and Deposits. At Closing, Seller will have
delivered to Buyer true and complete copies of the Customer Orders and will
have furnished to Buyer a true, complete and detailed accounting of all
Customer Deposits held by Seller with respect to such Customer Orders. The
Customer Orders constitute the legal, valid and binding obligations of the
parties thereto and are in full force and effect, enforceable in accordance with
their respective terms. Seller has performed all obligations required to be
performed by it under the Customer Orders on and prior to the date hereof. No
party to any of the Customer Orders is in breach or default thereunder (as to
payments due or otherwise) nor has any event occurred which, with notice or the
passage of time, or both, could constitute a breach or default thereunder.
(m) Intellectual Property.
(i) For purposes of this Agreement, the term "Intellectual
Property" means all: (A) patents, patent applications and invention disclosures;
(B) trademarks, service marks, trade dress, logos, trade names and
registrations and applications for registration thereof, together with all
goodwill associated therewith; (C) copyrights and registrations and
applications for registrations thereof; (D) mask works and registrations and
applications for registrations thereof; (E) trade secrets and confidential
business information and know-how, including without limitation, business and
marketing plans, customer and supplier lists, specifications, designs and
technical data; and (F) all licenses, agreements or permissions to use any of
the foregoing Intellectual Property.
(ii) Seller owns or has the right to use pursuant to
license, agreement, permission or otherwise all Intellectual Property relating
to the operation of the Business as now conducted. Each item of Intellectual
Property owned or used by Seller immediately prior to the Closing hereunder
will be owned or available for use on identical terms and conditions
immediately subsequent to the Closing hereunder. Seller has taken and will
continue to take until the time of Closing, all necessary or desirable action
to protect and maintain each item of Intellectual Property that it owns or
currently uses. The products, activities and operations of Seller relating to
the Business do not infringe upon, or involve, any intellectual property rights
of any other person, corporation or other entity, and no proceedings are
pending or threatened which challenge the rights of Seller with respect
thereto, nor do any facts exist which could form the basis for any such claim.
(iii) Paragraph A of SCHEDULE 1(a)(iv) lists all Intellectual
Property that Seller owns and uses in connection with the Business. Except
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as otherwise specified thereon, with respect to each item of Intellectual
Property listed under Paragraph A on SCHEDULE 1(a)(iv): (A) Seller owns and
possesses all rights, title and interest in and to such item; right, title
or interest in or to such item; (C) no proceedings or claims
have been instituted, are pending or are threatened which challenge the
validity, enforceability, use or ownership thereof; (D) the item does not
infringe, misappropriate or otherwise conflict with the rights of others, is not
being infringed or misappropriated by others and is not subject to any
outstanding order, decree, judgment, stipulation or charge; (E) Seller has
received no notice or charge of interference, infringement, misappropriation or
other conflict with respect to the item nor is Seller aware of any facts which
indicate a likelihood of such an infringement, misappropriation or other
conflict; (F) no explicit license, agreement or permission pertaining to the
item has been granted to any other party by Seller; (G) Seller has never
explicitly agreed to indemnify any person or entity for or against any
infringement or misappropriation or other conflict with respect to the item,
excluding any such indemnity implied by operation of law; and (H) Seller has
made available to Buyer correct and complete copies of all written documentation
evidencing ownership and prosecution of the items listed under Paragraph A on
SCHEDULE 1(a)(iv).
(iv) Paragraph B of SCHEDULE 1 (a)(iv) lists each item of Intellectual
Property that any third party owns and that Seller uses in connection with the
Business pursuant to license, agreement or permission. Seller has supplied Buyer
with true and complete copies of all such licenses, agreements and permissions.
Except as otherwise specified thereon, with respect to each item of Intellectual
Property listed under Paragraph B on SCHEDULE 1(a)(iv): (A) the license,
agreement or permission covering the item is currently legal, valid, binding,
enforceable and in full force and effect; (B) the license, agreement or
permission will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms immediately following the Closing; (C) no
party to the license, agreement or permission is in material breach or default,
and no event has occurred which, with notice or lapse of time, or both, would
constitute a material breach or default or permit termination, modification or
acceleration thereunder; (D) no proceedings have been instituted, are pending or
are threatened which challenge the legality, the validity or enforceability of
the license, agreement of permission or the Intellectual Property which is the
subject matter thereof; (E) the activities conducted by Seller pursuant to the
license, agreement of permission do not infringe, misappropriate or otherwise
violate the rights of others, nor is Seller
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<PAGE> 26
aware that any third party is infringing, misappropriating or violating the
rights granted to Seller pursuant thereto; (F) the license, agreement or
permission is not subject to any outstanding, order, decree, judgment,
stipulation or charge; and (G) Seller has received no notice or charge of
interference, infringement or misappropriation with respect to the license,
agreement or permission or the subject matter thereof, nor is Seller aware of
any facts which indicate a likelihood of such an infringement, misappropriation
or other conflict.
(v) Except as forth on SCHEDULE 1(a)(iv), Seller does not own or
have any interest in any Intellectual Property used or useful in the Business,
and the Intellectual Property listed on SCHEDULE 1(a)(iv) constitutes all
Intellectual Property necessary or useful to the conduct of the Business.
(n) Title to Assets. Except as set forth on SCHEDULE 10(n) attached
hereto, Seller has good and marketable title to all of the Assets, free and
clear of any and all security interests, pledges, liens, conditional sales
agreements, claims, encumbrances or charges or restraints on transfer. No
person, firm or corporation other than Seller has any right to the use or
possession of any of the Assets. Except as set forth on SCHEDULE 10(n): (I) no
currently effective financing statement under the Uniform Commercial Code with
respect to any of the Assets has been filed in any jurisdiction; (ii) no
currently effective lien or encumbrance with respect to any of the Assets has
been filed with the United States Patent and Trademark Office; and (iii) no
agent of Seller has signed any financing statement or security agreement
authorizing anyone to file any financing statement, lien or other encumbrance.
During the five (5) year period preceding the date of this Agreement, Seller has
conducted the Business only under its corporate name and under the trade names
Brock Deck, Brock Dock, Triple Crown Fence and CTB Vinyl Products.
(o) Condition of Tangible Assets. All of the tangible property included
in the Assets is located at the Facility. The Inventory of the Business is not
obsolete, is in merchantable condition, consists of items usable or salable in
the ordinary course of business, and those items that are finished goods are
suitable for resale by Buyer. The Equipment is in a good state of repair (normal
wear and tear excepted) and in good working order, free from any material
defect and suitable for the ordinary and regular conduct and operation of the
Business.
(p) Assets of the Business. Except for the properties and rights
excluded under SECTION 1(b) hereof, the Assets to be transferred and conveyed
to Buyer at the Closing hereunder constitute all of the properties and rights
used by Seller in connection with the Business, and such Assets are sufficient
to permit Buyer to operate the Business as currently conducted by Seller.
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(q) Product Warranty. Seller has no liability (whether known or
unknown and whether absolute or contingent) for the replacement or repair of
products manufactured, sold, leased or delivered by the Business or other
damages in connection therewith, which is materially different from the past
liabilities of that nature experienced by the Business. No product manufactured,
sold, leased or delivered by Seller and relating to the Business is subject to
any guaranty, express warranty or other indemnity other than those set forth on
SCHEDULE 10(q).
(r) Product Liability. Seller has no material liability (whether
known or unknown and whether absolute or contingent) arising out of any injury
to person or property as a result of the ownership, possession or use of any
product manufactured, sold, leased or delivered by Seller in connection with the
Business.
(s) Labor Relations. During the twelve (12) months preceding the
date of this Agreement, there have been no material or adverse changes in the
relationship between the Business and its employees, there has not been any
strike, labor disturbance or union organizational activities involving such
employees, and no strikes, labor disturbances or union organizational activities
are threatened against the Business. The Business has no union employees, nor
does Seller have any defined benefit pension plans for employees of the
Business. Except as set forth on SCHEDULE 10(s), Seller has none of the
following relating to the Business: (i) contracts with labor organizations or
individual employees; (ii) "employee benefit plans" as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA");
(iii) other profit sharing, deferred compensation, bonus, stock option, stock
purchase, welfare, vacation, holiday, sick pay, or other plans or arrangements
which are maintained or contributed to by Seller; or (iv) employee regulations
or handbooks. All employees of the Business are terminable at will with no cost
to the Business.
(t) Employee Benefit Plans. With respect to any employee benefit
plan for employees of the Business: (i) there have been no "prohibited
transactions", within the meaning of Section 4975 of the Internal Revenue Code
of 1986 ("Code") or Section 406 of ERISA; (ii) Seller has not contributed on
behalf of its employees to any "multi-employer plan", as defined in Sections
3(37) and 4001(a)(3) of ERISA; (iii) no excise tax is due or owing from Seller
with respect to any "prohibited transactions"; (iv) none of the plans, nor the
trusts related to those plans, has been terminated since September 2, 1974, nor
have there been any "reportable events" within the meaning of Section 4043(b) of
ERISA since such date except for such events which might be caused by general
extensions of reporting dates or similar general exceptions granted by the U.S.
Department of Labor; and (v) none of the plans, nor the trusts related to those
plans, has incurred any "accumulated funding deficiency", as such term is
defined in Section 412 of the Code, since the effective date of
<PAGE> 28
such Code section. There are no unasserted claims pursuant to ERISA with
respect to any actions taken by Seller under any employee benefit plans.
(u) Brokers. Seller has not employed any broker, agent or finder in
connection with the transactions contemplated by this Agreement, and any
obligation in respect of fees, commissions and expenses due any broker, agent or
finder who may have been employed in this transaction by Seller is an obligation
solely of Seller.
(v) Disclosure. None of the statements or information contained in any
of the representations, warranties, covenants or agreements of Seller set forth
in this Agreement or any information or documents delivered or to be delivered
to Buyer pursuant to the terms of this Agreement, or delivered to Buyer or to
Royal prior to the execution of this Agreement, contains any untrue statement of
a material fact or omits a material fact necessary to make the statements
contained in this Agreement or in any Exhibit or Schedule to this Agreement or
in any of the other information provided or the documents delivered to Buyer or
Royal in connection with the transactions contemplated by this Agreement, in
light of the circumstances in which those statements were made, not misleading.
Seller has fully disclosed to Buyer and Royal all relevant material facts
affecting the Business and the Assets to be sold and conveyed in accordance with
this Agreement.
11. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to Seller as follows:
(a) Organization. Buyer is a corporation duly organized and validly
existing under the laws of the State of Indiana. Buyer has all necessary
corporate power and authority to own all of its property and assets and to make,
execute, deliver, and perform this Agreement and the other documents and
instruments contemplated hereby. Royal is a corporation duly organized and
validly existing under the laws of Canada and has all necessary corporate power
and authority to make, execute, deliver and perform its obligations under this
Agreement and the Royal Guaranty.
(b) Execution, Delivery and Validity. The execution, delivery and
performance of this Agreement by Buyer and Royal have been duly authorized by
all requisite corporate action. This Agreement and all other agreements
contemplated hereby have been duly and validly executed and delivered by Buyer,
and each constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms. The Royal Guaranty has
been duly and validly executed and delivered by Royal and constitutes the legal,
valid and binding obligation of Royal, enforceable against Royal in accordance
with its terms.
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(c) Noncontravention. The execution, delivery and performance of
this Agreement and the other agreements contemplated hereby and the consummation
of the transactions contemplated hereby or thereby or compliance with or
fulfillment of the terms and provisions hereof or of any other agreement or
instrument contemplated hereby or thereby, do not and will not: (I) conflict
with or result in a breach of any of the provisions of the Articles of
Incorporation or Code By-Laws of Buyer; (ii) contravene any law, rule or
regulation or any order, writ, award, judgment, decree or other determination
which affects or binds Buyer or any of its properties; (iii) conflict with,
result in a breach of, constitute a default under, or give rise to a right of
acceleration, termination or the imposition of penalties under any contract,
deed of trust, mortgage, trust, lease, governmental or other license, permit or
other authorization, contract, agreement, note or any other agreement,
instrument or restriction to which Buyer is a party or by which any of its
properties may be affected or bound; or (iv) require the approval, consent or
authorization of, or the making of any declaration, filing or registration
with, any third party or any foreign, federal, state or local court,
governmental authority or regulatory body.
(d) Broker. Buyer has not employed any broker, agent or finder in
connection with the transactions contemplated by this Agreement, and any
obligation in respect of fees, commissions and expenses due to any broker, agent
or finder who may have been employed in this transaction by Buyer is an
obligation solely of Buyer.
12. INDEMNIFICATION.
(a) By Seller. Except to the extent otherwise expressly provided
under SECTION 7(f) hereof, from and after Closing, Seller shall indemnify,
defend and hold Buyer and its successors, owners, officers and directors
(collectively, "Buyers' Indemnitees") harmless of and from any and all damages,
liabilities, losses, costs and expenses (including reasonable attorneys' and
paralegals' fees and disbursements, court costs or costs incurred in
investigation) (collectively "Losses") incurred or suffered by Buyers'
Indemnitees which arise out of, result from or relate to: (I) any
misrepresentation of Seller or any breach by Seller or failure by Seller to
perform, any representation, warranty or covenant contained in this Agreement;
(ii) any liabilities and obligations of Seller not expressly assumed by Buyer
pursuant to SECTION 4(a) of this Agreement; (iii) the operation of any business
of Seller other than the Business prior to, on or after the Closing Date; and
(iv) the operation of the Business by Seller prior to the Closing.
(b) By Buyer. Except to the extent otherwise expressly provided
under SECTION 7(f) hereof, from and after Closing, Buyer shall indemnify, defend
and hold Seller and its successors, owners, officers and directors
(collectively, "Sellers' Indemnitees") harmless of and from any Losses incurred
or suffered by Sellers' Indemnitees which arise out of, result from or relate
to: (I) the Assumed Obligations; (ii) any misrepresentation of Buyer
<PAGE> 30
or any breach by Buyer or failure by Buyer to perform, any representation,
warranty or covenant contained in this Agreement; and (iii) Buyer's operation of
the Business from and after Closing.
(c) Conditions of Indemnification of Third Party Claims. The respective
obligations and liabilities of the Seller or Buyer (the "Indemnifying Party") to
the Buyers' Indemnitees or the Sellers' Indemnitees, as the case may be, as
indemnified parties (the "Indemnified Party") under SECTIONS 12(a) and 12(b)
hereof with respect to claims resulting from the assertion of liability by
third parties shall be subject to the following terms and conditions:
(i) Within twenty (20) days (or such earlier time as might be
required to avoid prejudicing the Indemnifying Party's position) after
receipt of notice of commencement of any action evidenced by service of
process or other legal pleading, or with reasonable promptness after the
assertion of any claim by a third party, the Indemnified Party shall
give the Indemnifying Party written notice thereof together with a copy
of such claim, process or other legal pleading, and the Indemnifying
Party shall have the right to undertake the defense thereof by
representatives of its own choosing and at its own expense; provided
that the Indemnified Party may participate in the defense with counsel
of its own choice and at its own expense (provided that the Indemnifying
Party will bear the expense of counsel for the Indemnified Party if
counsel for the Indemnified Party could have an inconsistent or
conflicting interest from that of the Indemnifying Party or one or more
legal defenses that are different from or additional to those available
to the Indemnifying Party).
(ii) If the Indemnifying Party, by the thirtieth (30th) day
after receipt of notice of any such claim (or, if earlier, by the tenth
(10th) day preceding the day on which an answer or other pleading must
be served in order to prevent judgment by default in favor of the person
asserting such claim), does not elect to defend against such claim, the
Indemnified Party, upon further notice to the Indemnifying Party, will
have the right to undertake the defense, compromise or settlement of
such claim on behalf of or for the account and risk of the Indemnifying
Party and at the Indemnifying Party's expense, subject to the right of
the Indemnifying Party to assume the defense of such claims at any time
prior to settlement, compromise or final determination thereof.
(iii) Anything in this SECTION 12(c) to the contrary
notwithstanding, the Indemnifying Party shall not settle any claim
without the consent of the Indemnified Party unless such settlement
involves only the
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payment of money and the claimant provides to the Indemnified Party a release
from all liability in respect of such claim. If the settlement of the claim
involves more than the payment of money, the Indemnifying Party shall not
settle the claim without the prior consent of the Indemnified Party, which
consent shall not be unreasonably withheld.
(iv) The Indemnified Party and the Indemnifying Party will each
cooperate with all reasonable requests of the other for the purpose of
defending against any claims.
(d) Limitation on Indemnification Obligations.
(i) Notwithstanding anything to the contrary contained in this
Agreement except as set forth in this SECTION 12(d), except for Losses arising
out of or relating to intentional misrepresentation or fraud by Seller,
Seller's duty to indemnify Buyers' Indemnitees for Losses incurred by them
under this Agreement with respect to the Business or the Assets sold to Buyer
at the Closing hereunder shall not exceed the amount remaining in escrow
pursuant to the Escrow Agreement at the time Buyers' Indemnitees deliver written
notice of claim for indemnification hereunder. There shall be no monetary limit
to Seller's duty to indemnify Buyer's Indemnitees for Losses arising from or
related to Seller's intentional misrepresentation or fraud under this Agreement;
provided, that Seller shall have no obligation to indemnify Buyer's Indemnitees
for Losses arising out of or relating to intentional misrepresentation or fraud
by Seller under this Agreement unless notice of claim for such indemnification
is given to Seller within eighteen (18) month after Closing. Likewise, the
foregoing limitations on indemnification shall not be applicable to any
activities of Seller relating to any other business or assets of Seller or under
any other agreements between Buyer and Seller, including the agreements to be
entered into by the parties at the Closing hereunder.
(ii) Buyer shall not have obligation to indemnify Sellers'
Indemnitees hereunder unless the Sellers' Indemnitees have given Buyer notice
of claim for indemnification within eighteen (18) months after Closing;
provided, that the foregoing limitation on indemnification shall not be
applicable to any activities of Buyer under any other agreements between Buyer
and Seller, including the agreements to be entered into by the parties at the
Closing hereunder.
(iii) Notwithstanding anything in this Agreement to the
contrary, the foregoing limitations on indemnification shall not apply to any
breach by
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<PAGE> 32
Seller or Buyer, as the case may be, of the covenants contained in
SECTION 7(f) of this Agreement.
(e) Payment of Losses. The Indemnifying Party shall make all
payments pursuant to the indemnification provisions contained in this SECTION
12 within ten (10) business days after delivery of the notice of claim therefor
by the Indemnified Party. In addition to any other rights Buyer may have at law
or in equity, Seller hereby expressly grants Buyer the right to have any claim
for indemnification paid by the Escrow Agent in accordance with the terms of
the Escrow Agreement.
(f) Indemnification Basket. Notwithstanding anything in this
Agreement to the contrary, no indemnification claim shall be allowed by either
party until the total of such claims by such party equals or exceeds Ten
Thousand Dollars ($10,000). Once such claims equal or exceed Ten Thousand
Dollars ($10,000), payment of all such claims will be made pursuant to the
terms hereof from the first dollar of such claims.
13. GENERAL PROVISIONS.
(a) Taxes and Prorations. Buyer and Seller agree that any
sales or transfer tax, charge or fee in the nature of a tax, imposed by any
governmental authority in connection with or resulting from the sale or
conveyance of the Assets will be the obligation of the party responsible for
payment of such tax under the applicable statute or, if neither party is
directly responsible for payment of such tax under the applicable statute, then
Buyer and Seller shall split such tax on a 50-50 basis. All current personal
property taxes relating to the Assets shall be prorated as of the Closing Date
based upon the latest official tax rate, assessment and credits; provided, that
in the event the latest assessment is for a year in which the tax rate has not
yet been officially established, the assessment for the last year in which the
official tax rate was established shall be used. All taxes and assessments which
are payable prior to or as of Closing shall be paid by Seller prior to or at
Closing. If any applicable prorations have not been determined at the date of
the Closing, Seller or Buyer, as the case may be, shall pay to the other party
the amount of such prorated charges promptly upon the determination of same.
(b) Survival. Except as otherwise expressly limited in this
Agreement, all representations and warranties contained in or made pursuant to
this Agreement shall survive the Closing, shall be continuing warranties, and
shall not be merged. No investigation by the parties made heretofore or
hereafter shall affect the representations and warranties of the parties
contained in or made pursuant hereto; provided, that the right of Buyer or
Seller to recover Losses from the other party shall be limited as provided
under SECTION 12(d) of this Agreement.
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(c) Expenses. Except as otherwise specifically provided in this
Agreement, each party to this Agreement shall bear its own expenses, including
the fees of any attorneys, accountants or others engaged by such party in
connection with this Agreement and the transactions contemplated hereby;
provided, that Seller shall bear all costs and expenses, including reasonable
attorneys' and accountants' fees, incurred by Buyer, and Buyer shall bear all
costs and expenses, including reasonable attorneys' and accountants' fees
incurred by Seller, in successfully: (i) enforcing any of the terms of this
Agreement against the other party; or (ii) proving that the other party
breached any of the representations, warranties or covenants contained in this
Agreement or any other agreement, instrument or document made pursuant hereto.
(d) Remedies Cumulative. All rights and remedies provided by this
Agreement or existing at law or in equity shall be cumulative of all other
rights and remedies, and the pursuit of one right or remedy shall in no way
operate as an exclusive election or otherwise preclude or limit any party from
pursuing any other or additional right or remedy.
(e) Governing Law. This Agreement and all documents delivered or to
be delivered in accordance with this Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Indiana, disregarding any conflict of laws rules.
(f) Assignment; Binding Effect. No party to this Agreement may assign
this Agreement or such party's rights, duties and obligations hereunder without
the prior written consent of the other parties hereto; provided, that after
Closing, Buyer shall have the right to assign its rights hereunder to Royal or
any entity which controls, is controlled by or is under common control with
Buyer or Royal; and provided, further, that any such assignment shall not
relieve Buyer of its obligations hereunder without the written consent of
Seller. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their legal
representatives, successors and assigns.
(g) Entire Agreement; Amendment. This Agreement, including the
Exhibits and Schedules hereto, sets forth the entire understanding of the
parties, there being no oral or written agreements or understandings between
them affecting the subject matter of this Agreement, and supersedes all
previous agreements and letters of intent between the parties with regard to
the subject matter of this Agreement, including that letter of intent between
Seller and Royal dated April 18, 1997 and, to the extent applicable to the
Assets and the Business, that certain Nondisclosure Agreement between Seller
and Royal dated February 10, 1997, the terms of which Nondisclosure Agreement
shall survive and continue to be effective until May 29, 1999 with respect to
any information disclosed by Seller to Royal or Buyer not relating to the
Assets and the Business. No modification, amendment, waiver or release of any
provision of this Agreement or of any right, obligation, claim or cause of
28
<PAGE> 34
action arising under this Agreement shall be valid or binding for any purpose
unless in writing and duly executed by the party against whom the same is
sought to be asserted.
(h) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. In addition, this Agreement may contain
more than one counterpart of the signature page, and this Agreement may be
executed by the affixing of the signatures of each of the parties hereto to one
of such counterpart signature pages; all of such signature pages shall be read
as though one, and they shall have the same force and effect as though all of
the signers had signed a single signature page.
(i) No Waiver. The failure of any party to enforce at any time or for
any period of time any of the provisions of this Agreement shall not be
construed as a waiver of such provision or of the right of the party to enforce
such provision. The waiver of any default or the failure to exercise any right
shall not be deemed a waiver of any subsequent default or waiver of the right
to exercise any other right.
(j) Notices. All notices and other communications must be in writing
and shall be deemed given if delivered personally or by overnight courier, or
transmitted by facsimile or mailed by registered or certified mail, postage
pre-paid, return receipt requested, to the persons at the addresses set forth
below (or such other address for a party as shall be specified by like notice).
Notice given personally or by overnight courier service, or transmitted by
facsimile, shall be deemed delivered when received by the addressee. Notice
given by mail shall be deemed delivered on the third business day following the
date on which it is so mailed. For purposes of notice, the addresses of the
parties shall be:
If to Seller: CTB, Inc.
State Road 15 North
P.O. Box 2000
Milford, Indiana, USA 46542
Attention: J. Christopher Chocola
with a copy to: Yoder, Ainlay, Ulmer & Buckingham
130 North Main
P.O. Box 575
Goshen, Indiana 46527
Attention: R. Gordon Lord, Esq.
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<PAGE> 35
If to Buyer: Royal Crown Limited
c/o Royal Group Technologies Limited
1 Royal Gate Boulevard
Woodbridge, Ontario, Canada L4L 8Z7
Attention: President
with a copy to: Barnes & Thornburg
600 1st Source Bank Center
100 North Michigan
South Bend, Indiana 46601
Attention: Brian J. Lake, Esq.
(k) Severability. If any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction or as a result
of legislative or administrative action, such holding or action shall be
strictly construed and shall not affect the validity or affect any other
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase
Agreement on the date or dates set forth below, effective as of the day and
year first above written.
SELLER: BUYER:
CTB, INC. ROYAL CROWN LIMITED
By: /s/ J. Christopher Chocola By: /s/ Vic De Zen
--------------------------------- ----------------------------
J. Christopher Chocola, President Vic De Zen,
and Chief Executive Officer Chairman of the Board
Date: May 29, 1997 Date: May 29, 1997
--------------------------------- ----------------------------
<PAGE> 36
GUARANTIES
Royal Group Technologies Limited hereby unconditionally guarantees the
payment and performance of all obligations of Royal Crown Limited as the "Buyer"
under the foregoing Asset Purchase Agreement. CTB International Corp. hereby
unconditionally guarantees the payment and performance of all obligations of
CTB, Inc. as the "Seller" under the foregoing Asset Purchase Agreement.
CTB INTERNATIONAL CORP. ROYAL GROUP TECHNOLOGIES
LIMITED
By: /s/ J. Christopher Chocola By: /s/ Vic De Zen
--------------------------------- -----------------------------
J. Christopher Chocola, President Vic De Zen,
and Chief Executive Officer Chairman Executive Officer
Date: May 29, 1997 Date: May 29, 1997
--------------------------------- -----------------------------
<PAGE> 1
EXHIBIT 10.06
STOCK PURCHASE AGREEMENT
CTB, INC.
Dated as of November 29, 1995
<PAGE> 2
Table of Definitions
<TABLE>
<CAPTION>
Page
----
<S> <C>
accumulated funding deficiency...................................... 14
Adjusted Closing Date Statement..................................... 3
Adjusted Net Asset Value............................................ 3
Adjustment Amount................................................... 4
ASCP Affiliates..................................................... 27
Balance Sheet....................................................... 10
Buyer............................................................... 1
Cash................................................................ 3
Claims.............................................................. 31
Closing............................................................. 1
Closing Date........................................................ 1
Closing Date Statement.............................................. 2
Code................................................................ 13
common control...................................................... 13
Common Control Entity............................................... 14
Common Stock........................................................ 1
Company............................................................. 1
Company's knowledge after due inquiry............................... 10
complete withdrawal................................................. 15
controlled group of corporations.................................... 13
CTB Property........................................................ 21
Cumulative EBITDA................................................... 4
Debt................................................................ 3
Disclosure Schedule................................................. 7
Earn-out Amount..................................................... 4
EBITDA Target....................................................... 4
employee pension benefit plan....................................... 14
Environmental Claim................................................. 21
Environmental Laws.................................................. 21
Environmental Permits............................................... 22
ERISA............................................................... 13
Escrow Agent........................................................ 2
Escrow Fund......................................................... 2
Estimated Balance Sheet............................................. 2
Estimated Purchase Price............................................ 2
excess parachute payment............................................ 12
Financial Statements................................................ 9
Interim Balance Sheet............................................... 10
Liens............................................................... 12
material agreement.................................................. 12
Material Adverse Effect............................................. 16
Materials of Environmental Concern.................................. 22
multi-employer pension plan......................................... 13
Multi-employer Plan................................................. 14
Net Cash Surrender Value............................................ 3
other assets........................................................ 3
Parent.............................................................. 1
Parent Investment................................................... 27
partial withdrawal.................................................. 15
PBGC................................................................ 14
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Pension Plan........................................................ 14
Plans............................................................... 13
prohibited transaction.............................................. 15
reportable event.................................................... 14
Resolution Period................................................... 5
Resolution Period................................................... 3
Selling Shareholder................................................. 1
Selling Shareholders................................................ 1
Shares.............................................................. 1
tax................................................................. 12
Welfare Plan........................................................ 13
</TABLE>
<PAGE> 4
This STOCK PURCHASE AGREEMENT (this "Agreement") dated as of November
29, 1995 is made and entered into by and among CTB Holdings, Inc., a Delaware
corporation ("Parent"), CTB Ventures, Inc., an Indiana corporation and a wholly
owned subsidiary of Parent ("Buyer"), CTB, Inc., an Indiana corporation (the
"Company"), and each of the persons identified on Schedule I hereto
(individually, a "Selling Shareholder" and collectively, the "Selling
Shareholders") with respect to all of the issued and outstanding common stock of
the Company.
W I T N E S S E T H :
WHEREAS, the Selling Shareholders own all of the issued and
outstanding shares (the "Shares") of common stock, no par value (the "Common
Stock"), and all of the options, warrants and other equity interests, of the
Company; and
WHEREAS, the Buyer and certain of the Selling Shareholders
desire to effect the Parent Investment (as defined herein) with respect to their
Shares, and the other Selling Shareholders desire to transfer the ownership of
the remaining Shares to the Buyer for the consideration specified herein;
NOW THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants, agreements, terms and conditions
contained herein, and in order to set forth the terms and conditions of the
purchase and sale of the Shares, the parties hereto do hereby agree as follows:
ARTICLE I
CLOSING
1.1 The Closing. The closing (the "Closing") of the
transactions provided for in this Agreement shall be held at the offices of
Yoder, Ainlay, Ulmer & Buckingham, Goshen, Indiana (or such other place Buyer
shall indicate to the Selling Shareholders in writing) on the Closing Date. The
"Closing Date" shall mean any date not later than January 5, 1996 mutually
agreed upon by the Buyer and Selling Shareholders.
1.2 Transfer of Stock. On the Closing Date and subject to the
terms and conditions set forth in this Agreement, the Selling Shareholders will
sell, assign, transfer and deliver to Buyer the Shares (other than Shares
subject to the Parent Investment), free and clear of all options, pledges,
security interests, liens or other encumbrances or restrictions of any kind.
<PAGE> 5
1.3 Consideration. On the Closing Date and subject to the
terms and conditions set forth in this Agreement, in reliance on the
representations, warranties, covenants and agreements of the parties contained
herein and in consideration of the sale, assignment, transfer and delivery of
the Shares (other than Shares subject to the Parent Investment), the Buyer
agrees to purchase from the Selling Shareholders such Shares for the
consideration specified below in this Article I.
1.4 Base Purchase Price. The Selling Shareholders shall cause
the Company to prepare and deliver to Buyer three business days prior to the
Closing Date an estimated balance sheet of the Company as of the close of
business on such date (the "Estimated Balance Sheet"), which shall be prepared
on a basis consistent with the basis to be used for the Closing Date Statement
(as defined below) referred to in Section 1.5. On the Closing Date, the Buyer
shall pay the Selling Shareholders an aggregate amount (adjusted on a pro-rata
basis for Shares subject to the Parent Investment) equal to (i) $106,500,000
plus (ii) the amount of Cash (as defined in Section 1.5) on the Estimated
Balance Sheet minus (iii) the amount of Debt (as defined in Section 1.5) on the
Estimated Balance Sheet minus (iv) the positive amount, if any, of the excess of
$31,554,000 over the Adjusted Net Asset Value (as defined in Section 1.5) on the
Estimated Balance Sheet (the "Estimated Purchase Price"), which will be
allocated among the Selling Shareholders in proportion to their respective share
holdings. Of the Estimated Purchase Price, $5,000,000 is to be delivered to an
escrow agent which shall be mutually and reasonably selected by Buyer and the
Shareholders Representative prior to the Closing ("Escrow Agent") to be held
pursuant to an Escrow Agreement substantially in the form attached as Exhibit
1.4 hereto, and the balance is to be paid to the Selling Shareholders at Closing
by delivery of cash by wire transfer or delivery of other immediate funds to one
account designated by the Selling Shareholders; amounts so held by the Escrow
Agent are to be referred to therein as the "Escrow Fund".
1.5 Purchase Price Adjustment. (a) As soon as practicable, but
in no event later than 75 days following the Closing Date, the Company shall
prepare and deliver to Buyer and the Selling Shareholders a Statement of
Adjusted Net Asset Value (as defined below) as of the close of business on the
Closing Date (including the notes thereto, the "Closing Date Statement")
together with the workpapers used in the preparation thereof. The Closing Date
Statement shall present the amounts of Cash and Debt and the Adjusted Net Asset
Value of the Company and its subsidiaries as of the close of business on the
Closing Date. The Closing Date Statement shall be prepared as if the Closing
Date was the Company's normal year end, in accordance with GAAP applied on a
basis consistent with the Financial Statements (as
2
<PAGE> 6
defined in Section 2.2(g)) except that life insurance policies shall be
reflected at their net cash surrender value reduced by expenses to convert such
policies to cash, including, without limitation, any taxes payable as a result
of such conversion ("Net Cash Surrender Value"); provided that the full
portfolio of the common stock included as "other assets" on the Interim Balance
Sheet shall have been converted to their net cash values prior to the Closing
and appropriate tax accruals therefor shall have been made on the Closing Date
Statement. Reserves, liabilities, allowances and similar items shall be made on
the Closing Date Statement for all liabilities (whether contingent or otherwise)
and to appropriately value the assets of the Company and its subsidiaries. As
used herein, the following terms shall have the following meanings:
"Adjusted Net Asset Value" means shareholders' equity minus
Cash plus Debt.
"Cash" means cash and cash equivalents (without duplication,
net of outstanding checks), and includes Net Cash Surrender Value
included in other assets.
"Debt" means, without duplication, "long-term debt", other
funded indebtedness (whether short-term or long-term), capitalized
leases, including any of the foregoing reflected as current
liabilities. Debt does not include deferred income taxes.
(b) Buyer and the Selling Shareholders shall have 30 days to
review the Closing Date Statement after receipt thereof. If either party so
notifies the other party of its objection to the Closing Date Statement, Buyer
and the Selling Shareholders shall, within 30 days following such notice (the
"Resolution Period"), attempt to resolve their differences and any resolution by
them as to any disputed amounts shall be final, binding and conclusive. If, at
the conclusion of the Resolution Period, any amounts remain in dispute, then all
amounts remaining in dispute shall be submitted to arbitration pursuant to
Section 8.8 hereof. All fees and expenses relating to the work, if any, to be
performed by the arbitrator shall be borne entirely by the non-prevailing party
(i.e. the party whose claim is furthest from the arbitrator's award), who shall
be determined by the arbitrator. The arbitrator shall determine, based solely on
presentations by the Selling Shareholders and Buyer, and not by independent
review, only those issues still in dispute. The arbitrator's determination shall
be made within 30 days of submission as provided above, whether or not such
presentations by the Selling Shareholders and Buyer have been made within such
period, and shall be set forth in a written statement delivered to the Selling
Shareholders and Buyer and shall be final, binding and conclusive. The term
"Adjusted Closing Date Statement," as hereinafter used, shall mean the
definitive Closing Date Statement agreed to by Buyer and the Selling
Shareholders or the
3
<PAGE> 7
definitive Closing Date Statement resulting from the determinations made by the
arbitrator (in addition to those items theretofore agreed to by the Selling
Shareholders and Buyer).
(c) The difference of (A) the Estimated Purchase Price over
(B) the amount equal to (i) $106,500,000 plus (ii) the amount of Cash on the
Adjusted Closing Date Statement minus (iii) the amount of Debt on the Adjusted
Closing Date Statement minus (iv) the positive amount, if any, of the excess of
$31,554,000 over the Adjusted Net Asset Value on the Adjusted Closing Date
Statement shall herein be referred to as the "Adjustment Amount". Within five
business days after the Adjusted Closing Date Statement is agreed to or any
remaining disputed items are ultimately resolved pursuant to Section 1.5(b): (x)
if the Adjustment Amount is a positive number, the Selling Shareholders shall
pay Buyer the Adjustment Amount (plus interest accrued thereon from the Closing
Date to the date of payment at a rate equal to the prime rate of the Company's
senior lender) by wire transfer in immediately available funds to the account
specified by Buyer and (y) if the Adjustment Amount is a negative number, Buyer
and Parent shall jointly and severally pay the Selling Shareholders the absolute
value of the Adjustment Amount (plus interest accrued thereon from the Closing
Date to the date of payment at a rate equal to the prime rate of the Company's
senior lender) by wire transfer in immediately available funds to the account
specified by the Selling Shareholders.
1.6 Contingent Earn-Out Payments. (a) If the Cumulative EBITDA
(as defined below) equals or exceeds $89,500,000 (the "EBITDA Target"), the
Buyer and Parent shall jointly and severally pay the Selling Shareholders an
aggregate amount equal to $13,500,000; if the Cumulative EBITDA equals 85% of
the EBITDA Target, the Buyer and Parent shall jointly and severally pay the
Selling Shareholders an aggregate amount equal to $6,750,000; or, if the
Cumulative EBITDA is between 85% and 100% of the EBITDA Target, the aggregate
amount jointly and severally payable by the Buyer and Parent to the Selling
Shareholders shall be adjusted on a linear basis between $6,750,000 and
$13,500,000 (e.g. the aggregate amount payable would be $10,125,000 if 92.5% of
the EBITDA Target is achieved) (such aggregate amount, the "Earn-out Amount").
If the Cumulative EBITDA is less than 85% of the EBITDA Target, no payments
shall be made under this Section 1.6. "Cumulative EBITDA" shall mean total
earnings of the Company's operations as of the Closing Date for the three year
period ended December 31, 1998 before, without duplication, interest expense,
amortization of deferred financing fees and acquisition related bank/financing
fees, income taxes, depreciation, amortization (including amortization of
increases in inventory arising from application of APB 16), and any management
fees owed to Buyer or its affiliates and after all bonus and profit sharing
expenses of the Company of any kind (other than expenses relating to
performance-based stock option plans). In the event the Company makes any
4
<PAGE> 8
capital expenditures not contemplated by the projections on which the Cumulative
EBITDA and EBITDA target are based or consummates any mergers or acquisitions or
divestitures (whether of assets, or stock or other interests) or other
extraordinary transaction, the Parent will determine in good faith appropriate
adjustments to the Cumulative EBITDA and EBITDA target, which adjustments shall
be final and binding. Calculations of Cumulative EBITDA shall be prepared in
accordance with GAAP applied on a basis consistent with the Financial
Statements.
(b) The Earn-out Amount shall be calculated by the Company and
delivered to the Shareholders Representative (as defined in Section 8.6) within
30 days of the delivery of the 1998 audited financial statements of the Company
and shall be paid in four installments allocated pro-rata among the Selling
Shareholders in accordance with their Share ownership on the Closing Date. The
installment dates shall be August 31, 1998, February 28, 1999, July 1, 1999 and
January 1, 2000. The first installment shall be equal to 25% of the Company's
reasonable estimate of the Earn-out Amount, and the Company shall give notice of
the amount of such estimate (along with a reasonably detailed computation
thereof) to the Shareholder Representative on or prior to August 20, 1998. The
second installment shall be equal to (i) an amount equal to 50% of the actual
Earn-out Amount minus (ii) the amount of the first installment. The third and
fourth installments shall each be equal to 25% of the actual Earn-out Amount.
Accrued interest from January 1, 1999 at the prime rate quoted in the Wall
Street Journal on the last business day of 1998 shall be payable on the third
and fourth installments, provided that the Company shall be credited with
interest at such interest rate on the first installment from August 31, 1998 to
December 31, 1998.
(c) The Selling Shareholders shall have 30 days to review
calculation of the Earn-out Amount after receipt thereof. If the Selling
Shareholders notifies the Company of its objection to such calculation, the
Company and the Selling Shareholders shall, within 30 days following such notice
(the "Resolution Period"), attempt to resolve their differences and any
resolution by them as to any disputed amounts shall be final, binding and
conclusive. If, at the conclusion of the Resolution Period, any amounts remain
in dispute, then all amounts remaining in dispute shall be submitted to
arbitration pursuant to Section 8.8. All fees and expenses relating to the work,
if any, to be performed by the arbitrator shall be borne entirely by the
non-prevailing party (i.e. the party whose claim is furthest from the
arbitrator's award), who will be determined by the arbitrator. The arbitrator
shall determine, based solely on presentations by the Selling Shareholders and
the Company, and not by independent review, only those issues still in dispute.
The arbitrator's determination shall be made within 30 days of submission as
provided above, whether or not such presentations by the Selling Shareholders
and the Company have been made within such period,
5
<PAGE> 9
and shall be set forth in a written statement delivered to the Selling
Shareholders and the Company and shall be final, binding and conclusive.
(d) No Selling Shareholder shall have any right to assign,
hypothecate, convey, pledge or otherwise transfer any of his rights or interests
under this Section to any person except to the Company or its successors and
assigns or by will, living trust, estate planning documentation or the laws of
intestate succession. The Company shall not recognize any assignments,
hypothecations, conveyances, pledges or other transfers in contravention of this
Agreement.
(e) Notwithstanding the other provisions of this Section, the
Company, Buyer and/or Parent shall not be required to make any payments under
this Section to the extent the same would cause a breach of any of the
agreements or undertakings in the senior credit agreements of the Company, Buyer
or Parent; provided, however, that interest shall accrue on the unpaid amount of
any such payment at a rate equal to the prime rate of the Company's senior
lender plus 2% per annum; provided, further, the Company, Buyer and/or Parent
shall be obligated to make such payments as soon as practicable when the same
would not cause a breach of any of the agreements or undertakings in such senior
credit agreements. Any refinancing of the senior credit agreement of the Company
shall make provision for any payments required under this Section 1.6.
ARTICLE II
2.1 Representations and Warranties by Buyer. Buyer and Parent
represent and warrant to, and agree with, the Selling Shareholders as follows:
a. Organization, etc. Each of Buyer and Parent is a
corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority to
own all of its property and assets and to carry on its business as it is now
being conducted. Each of Buyer and Parent is duly qualified or licensed to do
business and is in good standing or validly existing in each jurisdiction in
which the nature of its business or the character of its property makes such
qualification necessary. The copies of the Certificate of Incorporation and
By-laws of each of Buyer and Parent, which have been delivered to the Selling
Shareholders are complete and correct, and such instruments, as so amended, are
in full force and effect.
b. Authority Relative To Agreement. Each of Buyer and
Parent has the power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery by
each of Buyer
6
<PAGE> 10
and Parent of this Agreement and the consummation by Buyer and Parent of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action or proceedings. This Agreement has been duly executed and
delivered by each of Buyer and Parent and is a valid and binding agreement of
Buyer and Parent, enforceable in accordance with its terms.
c. Non-Contravention. The execution and delivery of
this Agreement by Buyer and Parent does not, and the consummation by Buyer and
Parent of the transactions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or By-Laws of either Buyer or Parent, or
violate, or result with the giving of notice or the lapse of time or both in a
violation of, any provision of any mortgage, lien, lease, agreement, license,
instrument, law, ordinance, regulation, order, arbitration award, judgment or
decree to which Buyer or Parent or any of their properties or assets (real,
personal or mixed, tangible or intangible) are bound.
d. Consents, etc. As of the Closing Date, Buyer and
Parent shall have obtained all licenses, permits, consents, authorizations,
orders or approvals of any governmental commission, board or regulatory body
necessary for their execution and delivery of this Agreement and its
consummation of the transactions contemplated hereby.
2.2 Representations and Warranties by the Company and the
Selling Shareholders. Except as set forth by Article, Section or Subsection
numbers in the Disclosure Schedule dated as of the date of this Agreement
prepared by the Company and made a part of this Agreement (the "Disclosure
Schedule"), the Company and the Selling Shareholders represent and warrant to,
and agree with, Buyer and Parent as follows:
a. Organization. The Company is a corporation duly
organized and validly existing under the laws of the State of Indiana, with full
corporate power and authority to own all of its properties and assets and to
carry on its business as it is now being conducted. The Company is duly
qualified or licensed to do business and is in good standing or validly existing
in the states in which it has facilities and each other jurisdiction in which
the nature of its business or the character of its properties requires such
qualification. The copies of the Certificate of Incorporation and By-laws, as
amended, of the Company, which have been delivered to Buyer, are complete and
correct, and such instruments are in full force and effect.
b. Capital Stock and Securities. The authorized
capital stock of the Company consists of 200,000 shares of Common Stock. As of
the Closing Date and prior to the Parent Investment, 62,490 shares of Common
Stock will be issued and outstanding, all of which will be owned, beneficially
and of record, by the Selling Shareholders in the amounts set forth on
7
<PAGE> 11
Schedule I attached hereto. Each share of capital stock of the Company is owned
by the Selling Shareholders free and clear of any and all liens, charges,
pledges, security interests or other encumbrances of any kind. Each outstanding
share of capital stock of the Company is and shall be duly authorized, validly
issued, fully paid and nonassessable. The Company does not have any outstanding
commitments to issue or sell any shares of its capital stock, or any securities
or obligations convertible into or exchangeable for, or giving any person any
right to subscribe for or acquire from the Company any shares of its capital
stock, and no securities or obligations evidencing any such right are
outstanding. The Company does not have outstanding any other debt or equity
securities other than its Common Stock and existing indebtedness, which,
including the terms thereof, are fully described in the Disclosure Schedule.
c. Subsidiaries. Set forth on the Disclosure Schedule
is a correct and complete list of the Company's Subsidiaries, showing as to
each, its name, its corporate, partnership or joint venture form, the
jurisdiction of its incorporation or formation, the number of shares of stock of
each class of each Subsidiary which is outstanding and the number of such
outstanding shares owned by each of the Company and its Subsidiaries. Each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each Subsidiary
has the corporate or other power and authority to carry on its business as now
being conducted and to own and lease its properties and is duly qualified to do
business as a foreign corporation in each jurisdiction in which the nature of
its business or properties makes such qualification necessary. All of the
outstanding shares of capital stock of each Subsidiary have been validly issued,
are fully paid and non-assessable with no personal liability attaching to the
ownership thereof and are free and clear of all liens. The Company is the sole
beneficial owner of all the outstanding shares of each Subsidiary which is a
corporation and there are no other securities of any Subsidiary which is a
corporation other than such outstanding shares. There are no outstanding rights,
warrants, options or agreements with respect to any such outstanding shares of
Subsidiaries including, without limitation, agreements granting to any person
rights to acquire any capital stock or agreements with respect to the voting
thereof. Neither the Company nor any of its Subsidiaries has any investment
(whether equity, debt or other) in any other person. The copies of the
Certificate of Incorporation and By-laws, as amended, of each Subsidiary, which
have been delivered to Buyer, are complete and correct, and such instruments are
in full force and effect.
d. Authority Relative to Agreement. The Company and
each Selling Shareholder has the power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery by
8
<PAGE> 12
the Company and each Selling Shareholder of this Agreement and the consummation
by such parties of the transactions contemplated hereby have been duly
authorized by each such party. No other proceedings on the part of the Company
or any Selling Shareholder are necessary, and no vote or consent by the
shareholders of the Company is necessary, to authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and
each Selling Shareholder and is a valid and binding agreement of each such
party, enforceable in accordance with its terms.
e. Non-Contravention. The consummation of the
transactions contemplated hereby will not violate any provision of the
Certificate of Incorporation or By-Laws of the Company or any of its
Subsidiaries, or violate, or result with the giving of notice or the lapse of
time or both in a violation of, any provision of any mortgage, lien, lease,
agreement, license, instrument, law, ordinance, regulation, order, arbitration
award, judgment or decree to which the Company, any of its Subsidiaries or any
of their properties or assets (real, personal or mixed, tangible or intangible)
are bound.
f. Consents, etc. As of the Closing Date, the Company
and the Selling Shareholders shall have obtained all licenses, permits,
consents, authorizations, orders or approvals of any governmental commission,
board or regulatory body, if any, necessary for the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby.
g. Financial Statements. The Company and the Selling
Shareholders have heretofore delivered to Buyer the audited consolidated
financial statements of the Company and its subsidiaries for the fiscal years
ended December 31, 1993 and 1994 and the unaudited consolidated financial
statements of the Company and its subsidiaries for the 7 month period ended July
31, 1995 including their consolidated balance sheets as of each such date and
the related consolidated statements of income, cash flow, and shareholders'
equity for each of the respective periods then ended (the "Financial
Statements"). Such Financial Statements are attached hereto as Exhibit 2.2(g)
and have been prepared from the books and records of the Company and its
subsidiaries, and are in accordance with generally accepted accounting
principles consistently applied and fairly present the financial condition,
results of operations, and cash flows of the Company and its subsidiaries as of
the respective dates and for the respective periods thereof except in the case
of the July 31, 1995 Financial Statements footnotes have been omitted and it is
subject to normal year-end adjustments (which adjustments (with exception to the
inventory count and adjustment arising therefrom), individually or in the
aggregate, will not be material).
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The December 31, 1994 balance sheet delivered as part of the
Financial Statements is referred to as the "Balance Sheet" and the July 31, 1995
balance sheet delivered as part of the Financial Statements is referred to as
the "Interim Balance Sheet".
h. Government Authorizations and Compliance with
Laws. The business of the Company and its Subsidiaries has been operated in
material compliance with all laws, ordinances, regulations and orders, of all
governmental entities, domestic or foreign. The Company and its Subsidiaries
have all material permits, certificates, licenses, approvals and other
authorizations required in connection with the operation of their business. No
notice has been received by the Company or any of its Subsidiaries and, to the
Company's knowledge after due inquiry, no investigation or review is pending or
threatened by any governmental entity with respect to (i) any alleged violation
by the Company or any of its Subsidiaries of any law, ordinance, regulation,
order, policy or guideline of any governmental entity, or (ii) any alleged
failure to have all permits, certificates, licenses, approvals and other
authorizations required in connection with the operation of the business of the
Company and its Subsidiaries. As used in this Agreement, "Company's knowledge
after due inquiry" shall refer to matters within the knowledge of the Selling
Shareholders who will receive Parent stock options at Closing as contemplated in
Section 4.2(d) and matters which should have been known by such persons in the
course of their duties in respect of the Company, in each case after reasonable
inquiry by them of the Company's employees having responsibility for matters in
the subject area of the statement made and review of the Company's records with
respect to such subject matter.
i. Tax Matters. All federal, state, local and foreign
tax returns and tax reports required to be filed by or with respect to the
Company or its Subsidiaries have been duly filed. All taxes (including interest,
penalties and related costs) with respect to the Company and its Subsidiaries
for all taxable periods ending on or prior to the Closing Date have been paid,
except (a) to the extent of reserves for taxes (other than deferred taxes)
reflected on the Interim Balance Sheet less payments of such taxes on or prior
to the Closing Date and (b) for such taxes (other than deferred taxes) that are
provided for in the books and records of the Company and its Subsidiaries for
the period beginning immediately following the date of the Interim Balance Sheet
and ending on the Closing Date but only to the extent that such taxes arise from
taxable income resulting from the day to day sales and operations of the Company
and its Subsidiaries occurring during such period and not taxes arising from
other transactions or events, including, without limitation, any taxes on income
resulting from transactions contemplated by this Agreement and any taxes
relating to prior periods; provided, however, that the reserve set forth in
clause (a) above and the
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provision for taxes set forth in clause (b) above shall be reduced for the tax
effect of any deductions relating to the exercise or cancellation of any stock
options. No issues have been raised, either orally or in writing, (and are
currently pending) by any foreign, federal, state or local taxing authority in
connection with any of the returns or reports referred to in this Section
2.2(i). No waivers of statutes of limitations as to any tax matters are
currently in effect with respect to the Company or its Subsidiaries.
All tax returns filed by the Company and its Subsidiaries were
true and correct in all material respects as of the date on which they were
filed. Complete copies of all federal, state and local income tax returns for
the Company and its Subsidiaries that have been filed with respect to taxable
periods for which the statute of limitations period has not run have been
delivered to Buyer. The Company has provided to Buyer all revenue agent's
reports and other written assertions by governmental authorities of deficiencies
or other liabilities for taxes of the Company and its Subsidiaries with respect
to past periods for which the statute of limitations period has not run. All
amounts required to be collected or withheld by the Company and its Subsidiaries
with respect to taxes have been duly collected or withheld and any such amounts
that are required to be remitted to any taxing authority have been duly
remitted.
No extension of time within which to file any tax return that
related to the Company and its Subsidiaries has been requested, which return has
not since been filed. There are no tax rulings, requests for rulings, or closing
agreements to which the Company or its Subsidiaries is a party or is subject
which could affect the liability for taxes for any period after the Closing
Date. All federal income tax returns of the Company and its Subsidiaries with
respect to taxable periods through the year ended December 31, 1989, have been
examined and closed or are returns with respect to which the applicable statute
of limitations period has expired without extension or waiver. No power of
attorney has been granted by the Company or its Subsidiaries with respect to any
matter relating to taxes of the Company and its Subsidiaries which is currently
in force.
The Company and its Subsidiaries have not filed a consent
under Section 341(f) of the Code or any comparable provision of state revenue
statutes. The Company and its Subsidiaries have made all payments of estimated
taxes required to be make under Section 6655 of the Code and any comparable
provisions of state, local or foreign law. Any adjustment of taxes of the
Company and its Subsidiaries made by the Internal Revenue Service in any
examination which is required to be reported to the appropriate state, local or
foreign taxing authorities has been reported, and any additional taxes due with
respect thereto have been paid.
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The Company and its Subsidiaries have not agreed or are not
required to include in income any adjustment pursuant to Section 481(a) of the
Code (or similar provisions of other law or regulations) by reason of a change
in accounting method. No excess loss accounts exist with respect to the Company
or any Subsidiary. There is no deferred gain or loss arising from deferred
intercompany transactions between the Company and its Subsidiaries. The Company
or its Subsidiaries are not a party to any agreement that would result by its
terms in the payment of a non-deductible "excess parachute payment" within the
meaning of Section 280G of the Code. The amount of deferred tax assets and
liabilities reflected on the Balance Sheet and the Interim Balance Sheet are
determined in accordance with GAAP (subject, in the case of the Interim Balance
Sheet, to normal year-end adjustments consistent with past practice).
For the purpose of this Agreement, any federal, state, local
or foreign income, franchise, sales, use, transfer, payroll, unemployment,
Social Security, personal property, occupancy or other tax, levy, impost,
imposition, assessment or similar charge, together with any related addition to
tax, interest or penalty thereon, is referred to as a "tax."
j. Title to Properties; Absence of Liens and
Encumbrances, etc. The Company and its Subsidiaries have good and marketable
title to all of the properties and other assets (real, personal and mixed,
tangible and intangible) reflected in the Balance Sheet or acquired after the
date thereof (except for properties and assets sold or otherwise disposed of
since December 31, 1994 in the ordinary and usual course of business, free and
clear of any and all liens, charges, pledges, mortgages, security interests or
other encumbrances of any kind ("Liens"). Except for those properties or assets
acquired since December 31, 1994, all properties and assets (real, personal and
mixed, tangible and intangible) used in the business of the Company and its
Subsidiaries are reflected in the Balance Sheet in the manner and to the extent
required by generally accepted accounting principles.
k. Material Agreements. The Disclosure Schedule lists
every material agreement to which the Company or any of its Subsidiaries is a
party or by which it or any of their properties or assets (real, personal or
mixed, tangible or intangible) is bound which is to be performed in whole or in
part after the Closing Date. Solely for the purpose of this Section 2.2(k), the
term "material agreement" shall mean any single agreement or lease, including
agreements with respect to notes receivable, pursuant to which any party thereto
is obligated after the date hereof to make payments aggregating more than
$50,000. There is no default, nor will any default occur hereafter, as a result
of the consummation of the transactions contemplated hereby or otherwise, in any
obligation to be performed by any party to any material agreement to which the
Company or any of its
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Subsidiaries is a party or by which it or any of its properties or assets (real,
personal or mixed, tangible or intangible) is bound. Each agreement listed in
the Disclosure Schedule is valid and binding in accordance with its terms. Other
than this Agreement, there are no agreements or options to sell or lease any of
the properties or assets (real, personal or mixed, tangible or intangible) of
the Company or any of its Subsidiaries except in the ordinary and usual course
of its business. The Company has delivered to Buyer true and complete copies of
all agreements listed in the Disclosure Schedule, including supporting
documentation.
l. Litigation. (i) There is no claim, action, suit or
proceeding pending or, to the Company's knowledge after due inquiry, threatened
against the Company, any of its Subsidiaries or any of their properties or
assets (real, personal or mixed, tangible or intangible) or which seeks to
prohibit, restrict or delay consummation of the transactions contemplated by
this Agreement or any of the conditions to consummation of the transactions
contemplated by this Agreement, nor is there any judgement, decree, injunction,
ruling, award or order of any court, governmental department, commission, agency
or instrumentality or arbitrator outstanding or, to the Company's knowledge
after due inquiry, threatened against the Company, any of its Subsidiaries or
any of their properties or assets (real, personal or mixed, tangible or
intangible); or (ii) neither the Company, any of its Subsidiaries nor any of
their officers or, to the Company's knowledge after due inquiry, employees is
currently charged with, or is currently under investigation with respect to, any
violation of any provision of any federal, state, foreign or other applicable
law or administrative regulation in respect of the business of the Company and
its Subsidiaries.
m. Employee Benefit Plans. The Disclosure Schedule
contains a complete list of "Plans" consisting of each:
(1) "employee welfare benefit plan", as
defined in Section 3(1) of the Employee Retirement Income
Security Act of 1974 ("ERISA"), to which the Company or any of
its Subsidiaries contributes or is required to contribute,
including each multi-employer welfare plan ("Welfare Plan"),
and sets forth the amount of any liability of the Company or
its Subsidiaries for payments more than thirty days past due
with respect to each Welfare Plan as of the Closing Date;
(2) "multi-employer pension plan," as
defined in Section 3(37) of ERISA, to which the Company (or
any entity which is a member of a "controlled group of
corporations" with or is under "common control" with the
Company as defined in Section 414(b) or (c) of the Internal
Revenue Code of 1986 as amended ("Code")
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("Common Control Entity")) has contributed or been obligated
to contribute at any time after September 25, 1980
("Multi-employer Plan").
(3) "employee pension benefit plan," as
defined in Section 3(2) of ERISA, (other than a Multi-employer
Plan) to which the Company or any Common Control Equity
contributes or is required to contribute ("Pension Plan"); and
(4) deferred compensation plan, bonus plan,
stock option plan, employee stock purchase plan and any other
employee benefit plan, agreement, arrangement or commitment,
other than normal payroll practices and policies concerning
holidays, vacations and salary continuation during short
absences for illness or other reasons, maintained by the
Company or its Subsidiaries.
n. Pension Plans. The funding method used in
connection with each Pension Plan which is subject to the minimum funding
requirements of ERISA is acceptable and the actuarial assumptions used in
connection with funding each such plan, in the aggregate, are reasonable. The
assets of each Pension Plan are sufficient to discharge all liabilities under
such plan, on an ongoing basis and on a termination basis, and there is no
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA, with
respect to any plan year of any such plan. Neither the Company nor any Common
Control Entity has any liability for unpaid contributions with respect to any
Pension Plan.
(1) Each Pension Plan and each related trust
agreement, annuity contract or other funding instrument is
qualified and tax-exempt under the provisions of Code Sections
401(a) (or 403(a) as appropriate) and 501(a).
(2) Each Pension Plan and each related trust
agreement, annuity contract or other funding instrument
complies currently, and has complied at all times in the past,
both as to form and in operation, with the provisions of
applicable Federal law, including the Code and ERISA.
(3) The Company have paid all premiums (and
interest charges and penalties for late payment, if
applicable) due the Pension Benefit Guaranty Corporation
("PBGC") with respect to each Pension Plan for each plan year
thereof for which such premiums are required. There has been
no "reportable event" (as defined in Section 4043(b) of ERISA
and the PBGC regulations under such Section) with respect to
any Pension Plan. No liability to the PBGC has been
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incurred by the Company or any Common Control Entity on
account of the termination of any Pension Plan. No filing has
been made by the Company or any Common Control Entity with
PBGC, and no proceeding has been commenced by the PBGC, to
terminate any Pension Plan. Neither the Company nor any Common
Control Entity has, at any time, (a) ceased operations at a
facility so as to become subject to the provisions of Section
4062(e) of ERISA, (b) withdrawn as a substantial employer so
as to become subject to the provisions of Section 4063 of
ERISA, or (c) ceased making contributions on or before the
Closing Date to any Pension Plan subject to Section 4064(a) of
ERISA to which the Company or any Common Control Entity made
contributions during the five years prior to the Closing Date.
o. Multi-employer Plans. Neither the Company nor any
Common Control Entity has, at any time, withdrawn from a Multi-employer Plan in
a "complete withdrawal" or a "partial withdrawal" as defined in ERISA Sections
4203 and 4205, respectively.
p. Prohibited Transactions. Neither the Company, any
of its Subsidiaries nor, to the Company's knowledge after due inquiry, any plan
fiduciary of any Welfare Plan or Pension Plan has engaged in any transaction in
violation of Section 406(a) or (b) of ERISA or any "prohibited transaction," as
defined in Section 4975(c)(1) of the Code, for which no exemption exists under
Section 4975(c)(2) or 4975(d) of the Code.
q. Copies of Relevant Plan Documents. True and
complete copies of each of the following documents have been delivered by the
Company to Buyer: (i) each Welfare Plan and each Pension Plan, related trust
agreements, annuity contracts or other funding instruments, (ii) each plan,
agreement, arrangement and commitment referred to in Sections 2.2(m) and (n),
and complete descriptions of any such plan which is not in writing, (iii) the
most recent determination letter issued by the Internal Revenue Service with
respect to each Pension Plan, (iv) Annual Reports on Form 5500 Series required
to be filed with any governmental agency for each Welfare Plan and each Pension
Plan for the two most recent plan years and (v) all actuarial reports prepared
for the last three years for each Pension Plan.
r. Validity and Enforceability of Plans. Each Welfare
Plan, Pension Plan, related trust agreement, annuity contract or other funding
instrument and each plan, agreement, arrangement and commitment referred to in
Sections 2.2(m) and (n) is legally valid and binding and in full force and
effect.
s. Payments to Retirees. Neither the Company, any of
its Subsidiaries nor any Welfare Plan has any obligation to make any payment to
or with respect to any former or current
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employee of the Company pursuant to any retiree medical benefit or other Welfare
Plan.
t. Litigation Under Plans. Neither the Company, any
of Subsidiaries nor any Plan is a party to any litigation relating to, or
seeking benefits under, any Plan.
u. Employment Agreements. Neither the Company nor any
of its Subsidiaries is a party to any employment, severance or similar
agreements.
v. Change in Control Provisions. Neither the Company
nor any of its Subsidiaries is a party to any agreement which contains any
provision pursuant to which the Company or any of its Subsidiaries will be
obligated to make any payment as a result of the transactions contemplated
hereby.
w. Labor Matters. There are no controversies pending
between the Company and its Subsidiaries and any of their employees or officers.
Neither the Company nor any of its Subsidiaries is subject to any collective
agreements and, to the Company's knowledge after due inquiry, there is no
current prospect for any union election.
x. Absence of Certain Changes or Events. Since
December 31, 1994 there has not been (i) any change, or any development
involving a prospective change, which, individually or in the aggregate, has had
or could have a material adverse effect ("Material Adverse Effect") on the
financial condition, business, operations, or prospects of the Company and its
Subsidiaries taken as a whole; (ii) any damage, destruction or other loss with
respect to property owned by the Company or any of its Subsidiaries, whether or
not covered by insurance, or any strike, work stoppage or slowdown or other
labor trouble involving the Company or any of its Subsidiaries; (iii) any direct
or indirect redemption, purchase or other acquisition by the Company or any of
its Subsidiaries of any shares of the capital stock of the Company or any of its
Subsidiaries; (iv) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, capital stock or property); or (v) the entry by
the Company or any of its Subsidiaries into any commitment or transaction which
is not in the ordinary course of business.
y. Absence of Undisclosed Liabilities and Agreements.
Except as specifically provided for in the Balance Sheet, the Company and its
Subsidiaries (i) did not have, as of December 31, 1994, any material debts,
liabilities or obligations, whether accrued, absolute, contingent or otherwise
and whether due or to become due (including, without limitation, any liabilities
resulting from the failure to comply with any law applicable to the Company, any
of its Subsidiaries or to the conduct of their business) (ii) have not incurred,
since December
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31, 1994, any such debts, liabilities or obligations other than in the ordinary
and usual course of their business, or (iii) except in connection with the
transactions contemplated in this Agreement, have not, since December 31, 1994,
conducted their business otherwise than in the ordinary and usual course.
z. Insurance. The Company and its Subsidiaries have
insurance policies in full force and effect which provide for coverages which
are normal in both amount and scope for the business conducted by the Company
and its Subsidiaries. The current insurance coverage of the Company and its
Subsidiaries is as described in the Disclosure Schedule.
aa. Payments. The Company and its Subsidiaries have
not, directly or indirectly, paid or delivered any fees, commissions or other
sums of money or items of property however characterized to any finders, agents,
customers, government officials or other parties, in the United States or in any
other country, which in any manner are related to the business or operations of
the Company and its Subsidiaries, and which have been illegal under any federal,
state or local laws of the United States or any other country or territory
having jurisdiction over the Company or any of its Subsidiaries. The Company and
its Subsidiaries have not participated, directly or indirectly, in any boycotts
or similar practices.
ab. Renegotiation. The Company and its Subsidiaries
are not subject to renegotiation, redetermination or excess profit recovery with
respect to any fiscal year by reason of U.S. Government contracts performed by
them.
ac. Inventories. All inventories carried by the
Company and its Subsidiaries as of July 31, 1995 and reflected on the Interim
Balance Sheet, are valued at the lower of cost or market on a last-in-first-out
basis consistent with generally accepted accounting principles. The Company has
adequate obsolescence reserves to cover inventory items which have a market
value lower than cost. Except to the extent of inventory reserves reflected in
the Interim Balance Sheet, the items included in said inventories are normal
items of inventory carried by the Company and its Subsidiaries, and are current,
suitable and merchantable at customary prices for the filling of orders in the
normal course of business, and are not obsolete, damaged, defective or slow
moving.
ad. Products Liability. There are no facts or the
occurrence of any event known or which reasonably should be known to the Company
forming the basis for any claim against the Company or any of its Subsidiaries
for products liability, whether in tort or strict liability or on account of any
express or implied warranty, and all reserves therefor on the Balance Sheet are
adequate.
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ae. Notes and Accounts Receivable and Liabilities.
Each of the material liabilities of the Company and its Subsidiaries as of
December 31, 1994 and July 31, 1995 is reflected or reserved for on the Balance
Sheet and the Interim Balance Sheet, respectively, and the amounts so reflected
or reserved are true and correct according to GAAP. Notes and accounts
receivable will be fully collectible, except to the extent of reserves for
doubtful accounts reflected in the Interim Balance Sheet.
af. Proprietary Rights. The proprietary rights listed
in the Disclosure Schedule are all those used in the business of the Company and
its Subsidiaries. The Company's and its Subsidiaries' use of such proprietary
rights is not infringing upon or otherwise violating the rights of any third
party in or to such proprietary rights, and no proceedings have been instituted
against or notices received by the Company or any of its Subsidiaries that are
presently outstanding alleging that the Company's or any Subsidiary's use of
such proprietary rights infringes upon or otherwise violates any rights of a
third party in or to such proprietary rights.
ag. Books of Account. The books of account of the
Company and its Subsidiaries have and will adequately reflect all of their
respective items of income and expense and all of their assets, liabilities and
accruals, in accordance with generally accepted accounting principles.
ah. Purchase Commitments and Outstanding Bids. As of
the date of this Agreement and as of the Closing Date, there are no claims
against the Company or any of its Subsidiaries to return in excess of an
aggregate of $50,000 by reason of alleged over-shipments, defective merchandise
or otherwise, or of merchandise in the hands of customers under an understanding
that such merchandise would be returnable. The Disclosure Schedule lists all
capital expenditures committed for but not paid for by the Company. No
outstanding purchase or outstanding lease commitment of the Company or any of
its Subsidiaries presently is in excess of the normal, ordinary and usual
requirements of its business or contains terms and conditions more onerous than
those usual and customary in the business of the Company and its Subsidiaries.
ai. Customers and Suppliers. The Disclosure Schedule
contains a complete and accurate list of (i) the 10 largest customers of the
Company and its Subsidiaries in terms of revenues during each of the Company's
last fiscal year and current fiscal year (through October 31, 1995), showing the
approximate total sales to each such customer during such period; and (ii) the
10 largest suppliers of the Company and its Subsidiaries in terms of purchases
during each of the Company's last fiscal year and current fiscal year (through
October 31, 1995), showing the approximate total purchases from each such
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supplier during such period. Since December 31, 1994, to the Company's knowledge
after due inquiry, there has been no material adverse change in the business
relationship of the Company and its Subsidiaries with any customer or supplier
named in the Disclosure Schedule.
aj. Permits. The Disclosure Schedule contains a
complete and accurate list of all permits held by the Company or any of its
Subsidiaries or for which the Company or any Subsidiary has applied, which are
the only material permits necessary for or used by the Company and its
Subsidiaries to carry on their business as presently conducted.
ak. Environmental Matters. (1) The Company and each
of its Subsidiaries is in compliance in all material respects with all
applicable Environmental Laws, and for the past five years has been in
such compliance; and the Company and each Selling Shareholder have no
reason to believe that circumstances exist which could prevent or
interfere with (A) continued compliance in all material respects by the
Company and each of its Subsidiaries with all applicable Environmental
Laws after the Closing Date, or (B) Environmental Laws that the Company
or any Selling Shareholder has reason to believe are likely to become
applicable to the Company or any of its Subsidiaries after the Closing
Date and that could individually or in the aggregate, have a Material
Adverse Effect after the Closing Date if adopted.
(2) The Company and its Subsidiaries hold all material
Environmental Permits necessary to conduct their operations as they are
currently conducted; the Disclosure Schedule includes a true and
complete list of all such Environmental Permits and their expiration
dates, and the Company has no reason to believe that such permits (A)
will not be renewed, or (B) will be renewed under terms that could
reasonably be expected to have an adverse effect on the Company and its
Subsidiaries.
(3) There are no Materials of Environmental Concern present
at, and no Materials of Environmental Concern are or have been in any
way released or threatened to be released from, any CTB Property,
former CTB Property, or as a result of present or former operations of
the Company or any of its Subsidiaries or any predecessor entity
(including without limitation the disposal of Materials of
Environmental Concern at any location other than a CTB Property or
former CTB Property), that could reasonably be expected to be in
material violation of or otherwise to give rise to material liability
of the Company or any of its Subsidiaries under any Environmental Law.
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(4) No reports of any kind have been made to or required by
any Governmental Authority pursuant to any Environmental Law concerning
spills or any other releases of any kind at, or in any way from, any
CTB Property, former CTB Property, or as a result of present or former
operations of the Company or any of its Subsidiaries or any predecessor
entity, for which spills, releases, or reports thereof the Company or
any of its Subsidiaries may be liable under any Environmental Law; true
and complete copies of all written reports concerning such spills and
other releases have been provided or made available to Buyer.
(5) None of the following are or have been on, under, in or at
any CTB Property, or to the Company's knowledge after due inquiry, any
former CTB Property: (A) underground or aboveground storage tanks
containing Materials of Environmental Concern; (B) polychlorinated
biphenyls; (C) asbestos or asbestos-containing materials; (D) septic
tanks, septic fields, dry-wells, or similar structures; (E) lagoons or
impoundments; or other bodies of water to which Materials of
Environmental Concern may have been discharged; (F) landfills or
dumping areas; or similar locations where Materials of Environmental
Concern may have been placed.
(6) Neither the Company nor any of its Subsidiaries has
received any Environmental Claim, and to Company's knowledge after due
inquiry, no Environmental Claim has been threatened against the Company
or any of its Subsidiaries by any person.
(7) Neither the Company nor any of its Subsidiaries has
entered into, agreed to, nor is the Company or any of its Subsidiaries
otherwise subject to any judgment, decree, order or similar requirement
under any Environmental Law, nor to the Company's knowledge after due
inquiry is any such judgment, decree, order or requirement being
negotiated that may obligate or affect the Company or any of its
Subsidiaries.
(8) Neither the Company nor any of its Subsidiaries has
assumed or retained, contractually or by operation of law, any
liabilities or obligations of other persons, contingent or otherwise,
in connection with any Environmental Law.
(9) There are no past or present actions, activities, events,
conditions or circumstances, including without limitation the release,
threatened release, emission, discharge, generation, treatment, storage
or disposal of Materials of Environmental Concern, that could
reasonably be expected to give rise to any material liability or
obligation of the Company or any of its Subsidiaries under any
Environmental Laws. None of the matters set forth on
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the Disclosure Schedule, or any aggregation thereof, could reasonably
be expected to have a Material Adverse Effect.
(10) True and complete copies of all reports, studies,
assessments, audits, and similar documents in the possession or control
of the Company, any of its Subsidiaries or any Selling Shareholder that
address any issues of actual or potential noncompliance in any material
respect with, or actual or potential material liability under, any
Environmental Laws that may affect the Company or any of its
Subsidiaries have been provided to Buyer prior to the signing hereof.
(11) As used in this Section 2.2(ak):
"CTB Property" means all real property in which the Company or
any of its Subsidiaries have any legal interest, including without
limitation a leasehold interest, and any equipment or other property
owned or leased by the Company or any of its Subsidiaries.
"Environmental Claim" means any written or oral notice, claim,
demand, action, suit, complaint, proceeding or other communication by
any person alleging liability or potential liability (including without
limitation liability or potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resource damages,
property damage, personal injury, fines or penalties) arising out of,
relating to, based on or resulting from (i) the presence, discharge,
emission, release or threatened release of any Materials of
Environmental Concern at any location, (ii) circumstances forming the
basis of any violation or alleged violation of any Environmental Law or
Environmental Permit, or (iii) otherwise relating to obligations or
liabilities under any Environmental Law.
"Environmental Laws" means all foreign (to the extent
applicable), federal, state and local statutes, rules, regulations,
ordinances, orders, judgments, decrees and common law relating in any
manner to contamination, pollution, or protection of human health or
the environment, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, the Solid Waste
Disposal Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Endangered Species Act, the National
Environmental Protection Act, the Occupational Safety and Health Act,
the Emergency Planning and Community-Right-to-Know Act, the Safe
Drinking Water Act, all as amended, and similar laws of any other
Governmental Authority.
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"Environmental Permits" means all permits, licenses,
registrations and other governmental authorizations or exemptions
required under Environmental Laws.
"Materials of Environmental Concern" refers to any waste,
pollutant, contaminant or other substance of any kind (including
without limitation odors, radioactivity, and electromagnetic fields)
regulated by or under, or which may otherwise give rise to liability
under, any Environmental Law.
al. Transactions with Certain Persons. Neither
any officer, director, shareholder or employee of the Company and its
Subsidiaries nor any member of any such person's immediate family is presently a
party to any material transaction with the Company or any of its Subsidiaries
relating to the business of the Company and its Subsidiaries, including without
limitation, any contract, agreement or other arrangement (i) providing for the
furnishing of material services by (other than for services as officers,
directors or employees of the Company and its Subsidiaries), (ii) providing for
the rental of material real or personal property from, or (iii) otherwise
requiring material payments to (other than for services as officers, directors
or employees of the Company and its Subsidiaries) any such person or
corporation, partnership, trust or other entity in which any such person has a
substantial interest as a shareholder, officer, director, trustee or partner.
am. Information. The Company and the Selling
Shareholders have furnished and will continue to furnish to Buyer detailed
information with respect to the assets, earnings, and business of the Company
and its Subsidiaries, and acknowledge that Buyer has relied and will rely
thereon in entering into this Agreement and consummating the transaction
contemplated by this Agreement. No such information, the preparation of which
was under the Company's and any Selling Shareholder's direct control, as it has
been corrected from time to time by the Company or Selling Shareholders,
contains an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made not misleading.
ARTICLE III
ACTIONS PRIOR TO THE CLOSING
3.1 Conduct of the Company. During the period from
the date hereof to the Closing Date:
a. Operations in the Ordinary Course of Busi-
ness. Except as contemplated by this Agreement, the Company and
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its Subsidiaries shall, and the Selling Shareholders shall cause the Company and
its Subsidiaries to, conduct their business operations according to the ordinary
and usual course of business and will use their reasonable best efforts (i) to
preserve intact their business organization; (ii) to maintain their books and
records in accordance with past practices; (iii) to keep available the services
of their officers and employees; and (iv) to maintain satisfactory relationships
with licensors, suppliers, distributors, customers and others having business
relationships with them. The Company and the Selling Shareholders shall confer
with Buyer or its representatives to keep it informed with respect to
operational matters of a material nature and to report the general status of the
ongoing operations of the business of the Company and its Subsidiaries.
b. Forbearances by the Company. Except as con-
templated by this Agreement, the Company and its Subsidiaries will not, and the
Selling Shareholders will not permit the Company and its Subsidiaries to,
without the prior written consent of Buyer:
(1) incur any new debt, liability or
obligation, direct or indirect, whether accrued, absolute,
contingent or otherwise (other than short-term indebtedness in
the ordinary course of business consistent with past practice
in an amount not to exceed $50,000);
(2) assume, guarantee, endorse or otherwise
become responsible for the obligations of, or make any loans
or advances to, any other individual, firm or corporation
(other than the Company or any of its subsidiaries);
(3) make any direct or indirect redemption,
purchase or other acquisition of any shares of its capital
stock or declare, set aside or pay any dividend or
distribution (whether in cash, capital stock or property),
other than any dividends to the Company from any of its
Subsidiaries;
(4) mortgage, pledge or otherwise encumber
any of its properties or assets other than in the ordinary
course of business consistent with past practice;
(5) sell, lease, transfer or dispose of any
of its properties or assets, waive or release any rights of
material value, or cancel, compromise, release or assign any
indebtedness owed to it or any claims held by it except for
sales of inventory in the
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ordinary and usual course of business and consistent
with past practice;
(6) except for capital expenditures not to
exceed $10,000 in the aggregate or items included in the
capital budget included in the Disclosure Schedule, make any
investment or expenditure of a capital nature either by
purchase of stock or securities, contributions to capital,
property transfers or otherwise, or by the purchase of any
property or assets of any other individual, firm or
corporation;
(7) enter into any transaction other than in
the ordinary and usual course of its business and consistent
with past practice;
(8) enter into or terminate any agreement,
plan or lease, or make any change in any of its agreements,
plans or leases other than in the ordinary course of business
consistent with past practice;
(9) permit any insurance policy naming it as
a beneficiary or a loss payable payee to be cancelled or
terminated or any of the coverage thereunder to lapse;
(10) enter into any collective bargaining
agreements;
(11) hire any new employees (other than in
the ordinary course of business consistent with past practice)
or increase in any manner the compensation, remuneration or
fringe benefits of any of its officers or employees or pay or
agree to pay any pension, retirement allowance, or other
benefit not required by any existing employee benefit plan to
any such officers or employees, commit itself to any
employment agreement or employee benefit plan with or for the
benefit of any of its officers or employees or any other
person, or alter, amend, terminate in whole or in part, or
curtail or permanently discontinue distributions to, any
pension plan or any other employee benefit plan;
(12) issue any shares of capital stock or
issue any warrants, options, calls, subscriptions, or other
agreements or commitments obligating it to issue shares of
capital stock;
(13) enter into an agreement to do any of
the things described in clauses (1) through (12) of this
Section 3.1; or
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(14) take any action which would render
inaccurate any representation and warranty made herein.
3.2 Regulatory Consents, Authorizations, etc. Each party
hereto will use its best efforts to obtain all consents, authorizations, orders
and approvals of, and make all filings and registrations with, any governmental
commission, board or other regulatory body or any other person required for or
in connection with the consummation of the transactions contemplated hereby and
will cooperate fully with the other parties in assisting them to obtain such
approvals and to make such filings and registrations. No party hereto will take
or omit to take any action for the purpose of delaying, impairing or impeding
the receipt of any required consent, authorization, order or approval or the
making of any required filing or registration.
3.3 Investigation by Buyer. Prior to the Closing Date, Buyer
and its lenders and advisors may make or cause to be made such investigation of
the business, properties, assets and liabilities of the Company and its
financial and legal conditions as they deem necessary or advisable to
familiarize themselves therewith, provided that such investigation shall not
unreasonably interfere with the normal operations of the Company. Such
investigation may include, without limitation, an examination and valuation of
inventory by Buyer's accountants and an appraisal of all assets of the Company.
Prior to the Closing Date, upon reasonable prior notice, the Company and the
Selling Shareholders agree to permit Buyer and its authorized representatives
(including its lenders and advisors), or cause them to be permitted, to have
full access to the premises, books and records, officers, employees, and
independent accountants (including the independent accountant's work-papers) of
the Company at reasonable hours, and prior to the Closing Date the officers of
the Company shall furnish Buyer and its lenders and advisors with such financial
and operating data and other information with respect to the business,
properties and assets of the Company as they shall from time to time reasonably
request. Prior to the Closing Date, or in the event this Agreement is
terminated, Buyer shall not use any information relating to the Company obtained
by it from the Company or the Selling Shareholders pursuant to this Section 3.3,
which is not otherwise publicly available, for any purpose unrelated to the
consummation of the transactions contemplated hereby, and prior to such Closing
Date, Buyer will not disclose any such information to any person, unless and
until such time as such information is otherwise publicly available or as Buyer
is advised by counsel that such information is required by law to be disclosed.
In the event this Agreement is terminated, Buyer agrees to keep confidential all
information it has obtained concerning the Company under the terms of this
Agreement for a 30-month period and to return promptly, if so requested by the
Company, every document furnished to Buyer by the Company and the
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<PAGE> 29
Selling Shareholders, in connection with the transactions contemplated hereby,
and any copies thereof Buyer may have made, and to use its best efforts to cause
its representatives to whom such documents were furnished promptly to return
such documents, and any copies thereof any of them may have made.
3.4 Expenses. The Company agrees to pay all of the fees, costs
and expenses of the Company and the Selling Shareholders, and Buyer agrees to
pay all of the fees, costs and expenses of Buyer (including, without limitation,
those of all advisors, including financial advisors, lawyers or accountants)
incurred in connection with the negotiation, preparation, execution, delivery
and performance of this Agreement and the transactions contemplated hereby. The
Company and the Selling Shareholders agree that such fees and costs of the
Company and the Selling Shareholders will be paid or 100% accrued as a liability
and, in each case, expensed on the books of the Company on the Closing Date.
3.5 Negotiations with Others. During the period from the date
of this Agreement to the Closing Date, or until this Agreement is terminated in
accordance with the provisions of Article V, if it is so terminated, the
Company, the Selling Shareholders and their agents shall not, directly or
indirectly, solicit or initiate discussions or engage in negotiations with, or
provide any information to, or authorize any financial advisor or other person
to solicit or initiate discussions or engage in negotiations with, or provide
any information to, any corporation, partnership, person or other entity or
group (other than Buyer) concerning any possible proposal regarding a sale of
shares of capital stock of, or a merger, consolidation, sale of assets or other
similar transaction involving the Company, and the Company and the Selling
Shareholders will promptly notify Buyer if any such discussions or negotiations
are sought to be initiated with, any such information is requested from, or any
such proposal or possible proposal is received by the Company, the Selling
Shareholders and/or their agents (except if the disclosure of such information
is prohibited by the terms of any confidentiality agreement binding upon the
Company or its agents). The Selling Shareholders shall use their reasonable
efforts to obtain the return or destruction of all documents provided to
prospective buyers of the Company and a letter from each such prospective buyer
confirming the same.
3.6 Publicity. From the date hereof to the Closing Date, each
party hereto agrees not to issue any press release or to otherwise make any
public statement with respect to the transactions contemplated hereby without
the consent, which shall not be unreasonably withheld, of the Company (in the
case of releases or statements issued or made by Buyer) or Buyer (in the case of
releases or statements issued or made by the Company or the Selling
Shareholders).
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<PAGE> 30
3.7 Parent Capitalization. Immediately prior to the Closing,
the relevant parties hereto agree to capitalize Parent with at least $30,000,000
in equity as follows: (i) J. Christopher Chocola and Caryl M. Chocola (the
"Chocolas") shall invest as contemplated in the Stockholders Agreement at the
same per share consideration as, and simultaneously with, the ASCP Affiliates
(as defined below) in shares of capital stock of Parent equivalent to one-third
(subject to the investment by the management shareholders referred to below) of
Parent's equity; (ii) the remaining $20,000,000 or two-thirds (subject to the
investment by the management shareholders referred to below) of the equity shall
be contributed to Parent by one or more affiliates of American Securities
Capital Partners, L.P. ("ASCP Affiliates"); and (iii) the Company's management
shareholders shall have been permitted to make an investment in the Parent on
the same terms as, and simultaneously with, the Chocolas and/or invest
additional equity in Parent on the same terms as, and simultaneously with, the
ASCP Affiliates. Any such investment in Parent by the management shareholders
shall dilute the equity interest of the Chocolas and the ASCP Affiliates on a
pro-rata basis, unless otherwise agreed to by the Chocolas and the ASCP
Affiliates. The investment in Parent by the Chocolas and the management
shareholders is herein referred to as the "Parent Investment".
3.8 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby as soon as
reasonably practicable hereinafter.
ARTICLE IV
CONDITIONS TO THE CLOSING
4.1 Conditions to the Closing Relating to Buyer. Consummation
of the transaction contemplated hereby is subject to the fulfillment to the
reasonable satisfaction of Buyer, prior to or at the Closing Date, of each of
the following conditions:
a. Regulatory Consents, Authorizations, etc. All
consents, authorizations, orders and approvals of, and filings and registrations
with any governmental commission, board or other regulatory body or any other
person which are required, prior to the Closing Date, for or in connection with
the execution and delivery of this Agreement and the consummation by each party
hereto and the Company of the transactions contemplated hereby, or which are
required in order to avoid
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violation or termination of any agreement listed in the Disclosure Schedule,
shall have been obtained or made.
b. Representations and Warranties. The
representations and warranties of the Company contained in this Agreement are
true and correct in all material respects at and as of the Closing Date, except
for changes contemplated by this Agreement, with the same force and effect as if
made at and as of the Closing Date; and the Selling Shareholders and the Company
shall have performed or complied in all material aspects with all agreements and
covenants required by this Agreement to be performed or complied with by them at
or prior to the Closing Date.
c. Litigation; Other Events. No action, suit or
proceeding shall have been instituted by any person which seeks to prohibit,
restrict or delay consummation of the transaction contemplated herein or any of
the conditions to the transactions contemplated herein, or seeks damages as a
result of the consummation of the transactions contemplated herein, or speaks to
the conduct of the business of the Company after the Closing Date.
d. Financing. Buyer shall have completed
arrangements, on terms and conditions no less favorable to Buyer than the terms
and conditions set forth in the commitment letter attached hereto as Exhibit
4.1(d) (or alternative arrangements with a financial institution reasonably
acceptable to Buyer and J. Christopher Chocola on terms and conditions
reasonably available in the commercial lending market for transactions of this
nature), for the financing of a portion of the purchase price and the ongoing
working capital requirements of the Company.
e. Escrow Agreement. The Escrow Agreement,
attached hereto, shall be executed and delivered substantially in the form of
Exhibit 1.4.
f. Environmental Audit. Buyer shall have
completed the Environmental Audit and the results of such audit shall be
satisfactory to it.
g. Existing Indebtedness. The holder of any
outstanding indebtedness for borrowed money of the Company shall have released
and discharged the same and its lien securing the same against payment by the
Buyer of the outstanding balance of such indebtedness without premium or
penalty.
h. Legal Opinion. Buyer shall have received a
legal opinion, dated as of the Closing Date, from Yoder, Ainlay, Ulmer &
Buckingham, special counsel to the Company, substantially in the form of Exhibit
4.1(h) hereto.
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i. Due Diligence. Buyer shall have completed its
due diligence investigation of the Company and shall be reasonably satisfied
with the results thereof.
j. Parent Investment. Buyer shall be reasonably
satisfied with the with the equity investment in Parent by the Chocolas and the
management shareholders contemplated in Section 3.7.
k. Related Agreements. The Stockholders Agreement
substantially in the form of Exhibit 4.1(k)(i) shall have been executed and
delivered by the stockholders named therein. The Management Consulting
Agreement in the form of Exhibit 4.1(k)(ii) shall have been executed and
delivered by the parties named therein.
4.2 Conditions to the Closing Related to the Company and the
Selling Shareholders. Consummation of the transaction contemplated hereby is
subject to the fulfillment to the reasonable satisfaction of the Company and the
Selling Shareholders, prior to or at the Closing Date, of each of the following
conditions:
a. Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement are true and
correct in all material respects on the date hereof and shall also be true and
correct in all material respects at and as of the Closing Date, except for
changes contemplated by this Agreement, with the same force and effect as if
made at and as of the Closing Date; and Buyer shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date.
b. No Injunctions. No injunction or restraining
order shall be in effect prohibiting the transactions contemplated herein.
c. Escrow Agreement. The Escrow Agreement attached
hereto, shall be executed and delivered substantially in the form of Exhibit
1.4.
d. Management Options. A management stock option
program for approximately 10% of the equity in Parent will have been implemented
pursuant to Non-Qualified Stock Option Agreements substantially in the form of
Exhibit 4.2(d) hereto.
e. Financing. Unless J. Christopher Chocola shall
have waived this condition, Buyer shall have completed arrangements, on terms
and conditions no less favorable to Buyer than the terms and conditions set
forth in the commitment letter attached hereto as Exhibit 4.1(d) (or
alternative arrangements
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<PAGE> 33
with a financial institution reasonably acceptable to Buyer and J. Christopher
Chocola on terms and conditions reasonably available in the commercial lending
market for transactions of this nature), for the financing of a portion of the
purchase price and the ongoing working capital requirements of the Company.
ARTICLE V
TERMINATION
5.1 Termination. This Agreement may be terminated by:
(1) By mutual action of the Selling Shareholders
and Buyer;
(2) By the Selling Shareholders, if any of the
conditions set forth in Section 4.2 shall not have been complied with
or performed and such noncompliance or nonperformance shall not have
been cured or eliminated (or by its nature cannot be cured or
eliminated) by Buyer on or before the Closing Date; or
(3) By Buyer, if any of the conditions set forth in
Section 4.1 shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminated
(or by its nature cannot be cured or eliminated) by the Company and the
Selling Shareholders on or before the Closing Date.
5.2. Effects of Termination. In the event of the termination
of this Agreement, this Agreement shall thereafter become void and have no
effect, and no party hereto shall have any liability to the other parties hereto
or their respective stockholders or directors or officers in respect thereof,
except for the obligations of the parties hereto in the last two sentences of
Section 3.3, and except that nothing herein will relieve any party from
liability for any breach of this Agreement prior to such termination.
ARTICLE VI
INDEMNITY
6.1 Survival of Representations and Warranties Indemnity. The
representations, warranties, covenants and agreements by the Selling
Shareholders shall survive until one month after the Company's audit of the year
ended December 31, 1996 is completed, except that the representations,
warranties, covenants and agreements of the Company and the Selling
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Shareholders contained in (i) Sections 2.2(ak) and 6.2(ii) shall survive until
June 30, 2000 and (ii) Section 2.2(i) shall survive indefinitely.
6.2 Indemnity. Within said applicable survival periods, the
Selling Shareholders agree to indemnify Buyer, Parent and/or the Company for any
and all claims, demands, losses, costs, charges, expenses, obligations,
liabilities, actions, suits, damages, judgments, and deficiencies, including
interest and penalties, reasonable counsels' fees and all reasonable amounts
paid in settlement of any claim, action, or suit (collectively referred to as
"Claims") which may be sustained, suffered or incurred by Buyer, Parent, the
Company and/or their affiliates and arising out of or by reason of (i) any
breaches of the representations, warranties, covenants and agreements of the
Company or the Selling Shareholders contained herein or (ii) any Materials of
Environmental Concern arising before the Closing Date (whether or not disclosed
in the Disclosure Schedule); provided, that, the Buyer, Parent and/or the
Company shall not be entitled to recover under any Claim under this Section 6.2
until the total amount of all Claims exceeds $200,000 and then only for the
amount by which all Claims exceed such amount; provided, further, that the
obligations of the Selling Shareholders under this Section (other than
obligations relating to Sections 2.2(i), 2.2(ak) and 6.2(ii)) shall be limited
to the Escrowed Funds. Notwithstanding anything to the contrary in the foregoing
sentence, regardless of whether or not the Escrow Agreement is then in effect or
the amount of Escrowed Funds are then sufficient, the parties hereto agree that
there shall be no limit (subject to the first proviso of the preceding sentence)
as to the Selling Shareholders' obligations with respect to Claims relating to
Sections 2.2(i), 2.2(ak) and 6.2(ii); provided, however, that, the Buyer, Parent
and/or the Company shall not be entitled to recover under any Claim under this
Section 6.2 relating to Sections 2.2(i), 2.2(ak) and 6.2(ii) in excess of the
amount of Escrowed Funds then available until the total amount of such Claims in
excess of the amount of Escrowed Funds then available exceeds $300,000 and then
only for the amount by which such Claims in excess of the amount of Escrowed
Funds then available exceed $100,000. The Escrow Agreement shall in all respects
be subject to this Section 6.2 and the threshold amounts herein stated.
6.3 Cooperation. The term "Claims" as used in this Article is
not limited to matters asserted by third parties against Buyer and/or the
Company. Claims does not include any damages for which the Company receives
insurance reimbursement. In the event a Claim is asserted by any third party
against Buyer and/or the Company, it shall notify Shareholders of such Claim by
giving to Shareholders written notice, and shall give Shareholders and their
counsel access to any and all such files, records and other documents as may be
necessary to enable
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<PAGE> 35
Shareholders to investigate or participate in the defense against such Claim
(but at the cost and expense of such Shareholders) and Buyer shall otherwise
cooperate in connection therewith and shall not unreasonably assume a position
contrary to that of Shareholders with respect to all such third party Claims.
ARTICLE VII
CERTAIN POST-CLOSING AGREEMENTS
7.1 Noncompete. Each of the Selling Shareholders who is an
adult member of the Chocola or Brembeck family agrees on behalf of himself or
herself and his or her Affiliates that he or she will not at any time for five
years after the date hereof, except with the express prior written consent of
Parent: (a) directly or indirectly, engage in any Competitive Business (meaning,
any business engaged in the businesses of the Company as of the Closing Date),
whether such engagement shall be as an owner, partner, agent, consultant or
shareholder (except as the holder of not more than five percent (5%) of the
outstanding shares of a corporation whose stock is listed on any national or
regional securities exchange or reported by the National Association of
Securities Dealers Automated Quotations System or any successor thereto); (b)
directly or indirectly solicit, divert or accept business from or otherwise take
away or interfere with any customer of Parent, Buyer, the Company or their
Affiliates engaged in any Competitive Business, including without limitation any
person who was a customer or whose business was being pursued by Parent, Buyer,
the Company or their Affiliates prior to the date hereof; or (c) directly or
indirectly, accept employment with, be employed by or be a principal of any
business or enterprise operating within the United States of America which then
employs or has as a principal or holder of any interest therein (except as the
holder of not more than one percent (1%) of the outstanding shares of a
corporation whose shares are publicly traded) any individual who was previously
employed in a managerial or consultant position with Parent, Buyer, the Company
or any of their Affiliates, provided however, that this prohibition shall not be
applicable if such business or enterprise is not a Competitive Business.
7.2 Nondisclosure. Each of the Selling Shareholders, agree
that, at all times from and after the date hereof, except as required by law or
by the order of any court or government agency or in the performance of his
duties as an employee of the Company or its Subsidiaries, he shall keep secret
and retain in strictest confidence and shall not, except with the express prior
written consent of Buyer, directly or indirectly disclose, communicate or
divulge to any person, or use for the benefit of any person, any Proprietary
Information (meaning, all information or data with respect to the conduct or
details of the business of
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the Company including, without limitation, methods of operation, customers and
customer lists, details of contracts with customers, consultants, suppliers or
employees, products, proposed products, former products, proposed, pending or
completed acquisitions of any company, division, product line or other business
unit, prices and pricing policies, fees, costs, plans, designs, technology,
inventions, trade secrets, know-how, software, marketing methods, policies,
plans, personnel, suppliers, competitors, markets or other specialized
information or proprietary matters of the business of the Company). The
restriction contained in the preceding sentence shall not apply to any
Proprietary Information that (i) is a matter of public knowledge on the date of
this Agreement or (ii) becomes a matter of public knowledge after the date of
this Agreement from another source which is under no known obligation of
confidentiality to Buyer or its Affiliates.
ARTICLE VIII
MISCELLANEOUS
8.1 Notices. Any notice or other communication required or
permitted hereunder shall be sufficiently given if delivered personally or sent
by telecopy (receipt confirmed by telephone) or by registered or certified mail,
postage prepaid, addressed:
if to Buyer or Parent:
CTB Holdings, Inc.
c/o American Securities Capital Partners, L.P.
122 East 42nd Street
New York, NY 10168
Attn: Michael G. Fisch
Telephone: (212) 476-8051
Telecopy: (212) 697-5524
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attn: Richard C. Weisberg, Esq.
Telephone: (212) 455-3240
Telecopy: (212) 455-2502
if to the Company or the Selling Shareholders:
CTB, Inc.
State Road 15 North
P.O. Box 2000
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<PAGE> 37
Milford, IN 46542
Attn: J. Christopher Chocola
Telephone: (219) 658-4191
Telecopy: (219) 658-4133
with a copy to:
Yoder, Ainlay, Ulmer & Buckingham
P.O. Box 575
Goshen, IN 46527
Attn: Gordon Lord
Telephone: (219) 533-1171
Telecopy: (219) 534-4174
or such other person or address as shall be furnished in writing by any party to
the other parties prior to the giving of the applicable notice or communication,
and such notice or communication shall be deemed to have been given ten (10)
days after mailed, or in the case of personal delivery or telecopy, upon receipt
of transmission.
8.2 Financial Advisors and Brokers. Other than Price
Waterhouse L.L.P., the Company and the Selling Shareholders represent and
warrant, jointly and severally, that no investment banker, broker or finder is
entitled to any financial advisory, brokerage or finder's fee or other similar
payment from the Company based on agreements, arrangements or undertakings made
by it or any of its respective directors, officers or employees in connection
with the transactions contemplated hereby.
8.3 Counterparts. This Agreement shall be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.4 Exhibits, Schedules and Disclosure Schedule. The
Exhibits, Schedules and Disclosure Schedule are integral parts of
this Agreement.
8.5 Headings and Table of Definitions. The headings herein and
the Table of Definition are for convenience only, do not constitute a part of
this Agreement, and shall not be deemed to limit or affect any of the provisions
hereof.
8.6 Power of Attorney. Each of the undersigned Selling
Shareholders hereby irrevocably makes, constitutes and appoints J. Christopher
Chocola as his, her or its attorney-in-fact (the "Shareholders Representative")
with full power to act in his, her or its place and stead to compromise any
claim or take any other action, including without limitation pursuant to Section
6.3, with respect to this Agreement.
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8.7 Miscellaneous. This Agreement (including the Schedule and
Exhibits hereto and the Disclosure Schedule) (a) constitutes the entire
Agreement and understanding and supersedes all prior agreements and
understandings, both written and oral, among the parties hereto with respect to
the subject matter hereof, (b) is not intended to confer upon any other person
any rights or remedies hereunder, (c) shall not be assigned, by operation of law
or otherwise, and (d) shall be governed in all respects, including validity,
interpretation and effect, by the internal laws of the State of Indiana.
8.8 Arbitration. Any party shall have the right to submit any
dispute, controversy or claim arising out of this Agreement (including, without
limitation, Sections 1.5 and 1.6) to neutral binding arbitration in the City of
Chicago, by a partner of Arthur Andersen or Ernst & Young or KPMG or Coopers
Lybrand. In the event of arbitration, the matter shall be heard before a single
arbitrator. Any party requesting arbitration shall give notice to the other
party stating the issue to be resolved. The decision of the arbitrator shall be
based solely upon the written submissions to such partner and shall be final and
binding on both parties, with the non-prevailing party (who shall be determined
by the arbitrator) bearing all costs and expenses of each of the parties with
respect to the dispute. Each party hereby consents to the entry of a judgment in
any court of competent jurisdiction enforcing any arbitration decision made in
accordance herewith.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written:
CTB HOLDINGS, INC.
Attest /s/David Horing By /s/
-------------------------- ----------------------------------
Name:
Title:
CTB VENTURES, INC.
Attest /s/David Horing By /s/Michael G. Fisch
-------------------------- ----------------------------------
Name:
Title:
CTB, INC.
Attest By /s/ J. Christopher Chocola
-------------------------- ----------------------------------
Name: J. Christopher Chocola
Title:
Witness /s/Howard S. Brembeck
-----------------------------
Name: Howard S. Brembeck
Witness /s/Myra K. Brembeck
-----------------------------
Name: Myra K. Brembeck
Witness /s/J. Byrib Chocola
-----------------------------
Name: J. Byron Chocola
Witness /s/Caryl M. Chocola
-----------------------------
Name: Caryl M. Chocola
Witness /s/J. Christopher Chocola
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Name: J. Christopher Chocola
<PAGE> 40
Witness s/Sarah P. Chocola
-----------------------------
Name: Sarah P. Chocola
Key Trust Co. of Indiana
Witness /s/John J. Gordon
-----------------------------
Name: John H. Gordon, Vice
President
for Caroline P. Chocola Trust
Key Trust Co. of Indiana
Witness /s/John H Gordon
-----------------------------
Name: John H. Gordon, Vice
President
for J. Colin Chocola Trust
Witness /s/Kelly Chocola Logan
-----------------------------
Name: Kelly Chocola Logan
Key Trust co. of Indiana
Witness /s/John H. Gordon
-----------------------------
Name: John H. Gordon, Vice
President
for Kaitlin E. Logan Trust
Witness /s/Mark Alan Lantz
-----------------------------
Name: Mark Alan Lantz
Witness /s/Richard S. Gentry, Jr.
-----------------------------
Name: Richard S. Gentry, Jr.
Witness /s/Roger W. Townsend
-----------------------------
Name: Roger W. Townsend
Witness /s/Billie Sue Bodley
-----------------------------
Name: Billie Sue Bodley
Witness /s/James Coble
-----------------------------
Name: James Coble
Witness /s/Patricia G. Earleywine
-----------------------------
Name: Patricia G. Earleywine
Witness /s/Hal Easely
-----------------------------
Name: Hal Easely
Witness /s/Jacques P. Frocheur
-----------------------------
Name: Jacques P. Frocheur
Witness /s/Robert Geiger
-----------------------------
Name: Robert Geiger
<PAGE> 41
Witness /s/Joseph A. Gerencser
-----------------------------
Name: Joseph A. Gerencser
Witness /s/Alvin Haab
-----------------------------
Name: Alvin Haab
Witness /s/Carol C. Haab
-----------------------------
Name: Carol C. Haab
Witness /s/John L. Haugh, Jr.
-----------------------------
Name: John L. Haugh, Jr.
Witness /s/Roger W. Hollinger
-----------------------------
Name: Roger W. Hollinger
Witness /s/Michael J. Kissane
-----------------------------
Name: Michael J. Kissane
Witness /s/Michael E. Krehl
-----------------------------
Name: Michael E. Krehl
Witness /s/Dennis Manning
-----------------------------
Name: Dennis Manning
Witness /s/Richard Mundy
-----------------------------
Name: Richard Mundy
Witness /s/Wallace Newman
-----------------------------
Name: Wallace Newman
Witness /s/Charles E. Piatt III
-----------------------------
Name: Charles E. Piatt III
Witness /s/Kerry Price
-----------------------------
Name: Kerry Price
Witness /s/Geraldine Rensberger
-----------------------------
Name: Geraldine Rensberger
Witness /s/James Rose
-----------------------------
Name: James Rose
Witness /s/Stephen R. Schermerhorn
-----------------------------
Name: Stephen R. Schermerhorn
Witness /s/Peter M. Smith
-----------------------------
Name: Peter M. Smith
Witness /s/Denis Snyder
-----------------------------
Name: Denis Snyder
<PAGE> 42
Witness /s/Don J. Steinhilber
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Name: Don J. Steinhilber
Witness /s/George Strohschein
-----------------------------
Name: George Strohschein
MENNONITE BOARD OF MENNONITE BOARD OF EDUCATION, INC.
EDUCATION, INC.
By: /s/Thomas L. Stuckey By: /s/Victor Stoltzfus
----------------------------- -----------------------------
Name: Thomas L. Stuckey Name: Victor Stoltzfus
Title: Vice President Title: Goshen College,
President
UNITED METHODIST FOUNDATION FOR
ADULT CHRISTIAN MINISTRIES, INC.
By: /s/Paul Eppely
-----------------------------
Name: Paul Eppely
Title: Treasurer
FOURTH FREEDOM FORUM
By: /s/David B. Cortright
-----------------------------
Name: David B. Cortright
Title: President
<PAGE> 1
EXHIBIT 10.07
STOCKHOLDERS AGREEMENT
CTB HOLDINGS, INC.
STOCKHOLDERS AGREEMENT dated as of January 4, 1996 by and
among the persons who become Individual Stockholders (as defined below) and
execute this Agreement and CTB Holdings, Inc., a Delaware corporation (the
"Company").
WHEREAS, the Individual Stockholders desire to become owners
of certain shares of the Common Stock, par value $.01 per share ("Common
Stock"), and/or Preferred Stock, par value $.01 per share ("Preferred Stock"),
of the Company; and
WHEREAS, ASCP (as defined herein) and certain of the
Individual Stockholders have agreed to contribute to the capital of the Company
prior to the closing under the Stock Purchase Agreement (the "Closing") an
aggregate of $20,077,025.60 in exchange for shares of Common Stock and shares of
Preferred Stock as set forth on Annex I hereto (such contribution, the "Cash
Investment"); and
WHEREAS, certain of the Individual Stockholders also have
agreed to contribute to the capital of the Company simultaneously with the Cash
Investment and prior to the Closing an aggregate of 5,648.39 shares of common
stock of CTB, Inc. ("CTB Stock") in exchange for shares of Common Stock and
shares of Preferred Stock as set forth on Annex I hereto (such stock,
collectively, the "Parent Investment Stock"); and
WHEREAS, in addition, the Company will grant to certain of the
Individual Stockholders at the Closing options to purchase Common Stock at an
exercise price of $10 per share of Common Stock ("Options");
WHEREAS, the Individual Stockholders and the Company wish to
agree upon certain matters with respect to the shares of Common Stock and
Preferred Stock and the Options that may be owned from time to time by the
Individual Stockholders;
NOW, THEREFORE, it is agreed by and among the parties as
follows:
<PAGE> 2
2
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate", when used with reference to any Person, shall
mean any other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Person specified. For purposes of this definition, "control" shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. "Affiliates" of ASCP
shall not include corporations conducting an active trade or business or their
parent corporations.
"Approved Sale" shall have the meaning specified in
Section 4.1 hereof.
"ASCP" shall mean (i) American Securities Capital Partners,
L.P., a Delaware limited partnership and/or (ii) any other general or limited
partnership, corporation or limited liability company having as a general
partner or controlling equity holder (whether directly or indirectly) a Person
who is a general or limited partner of American Securities Capital Partners,
L.P. or an Affiliate of any such Person.
"Authorization Date" shall have the meaning specified
in Section 3.5 hereof.
"Available Shares" shall have the meaning specified in
Section 5.1 hereof.
"Board of Directors" shall mean the Board of Directors
of the Company.
"Cause" shall mean action by an Individual Stockholder that
constitutes misconduct, dishonesty, the failure to comply with specific
directions of the Board of Directors or any senior executive officer of the
Company (after having been given a reasonably detailed written notice of, and a
period of 20 days to cure, such misconduct or failure), a deliberate and
premeditated act against the Company or its Affiliates or the commission of a
felony. Any voluntary termination of employment by an Individual Stockholder in
anticipation of an involuntary termination of such Individual Stockholder's
employment for Cause shall be deemed to be a termination for Cause.
"Commission" shall have the meaning specified in
Section 6.1.
<PAGE> 3
3
"Fair Value Per Share" shall mean, with respect to any Stock,
as of any date of determination, the fair value of one share of such Stock,
determined as provided herein (without regard in respect of such determination
for any discount for the fact that such share is held by a minority stockholder
of the Company but taking account of the fact that there is no public market for
such Stock nor ability to create a liquidity event through a merger, sale of
stock or assets or an initial public offering of the Company). At any time that
the Fair Value Per Share of any Stock shall be required to be determined
hereunder, the Board of Directors shall make a good faith determination (the
"Board's Determination") of the fair value of one share of such Stock and shall
provide to the Individual Stockholder with respect to whose Stock such
determination is being made a written notice thereof, which notice shall set
forth such supporting data in respect of such determination as the Board of
Directors feels appropriate under the circumstances (the "Determination
Notice"). Such Individual Stockholder shall have twenty (20) days following
receipt of the Determination Notice within which to deliver to the Company a
written notice (the "Objection Notice") of his or her objection, if any, to the
Board's Determination, which Objection Notice shall set forth such Individual
Stockholder's good faith determination (the "Stockholder's Determination") of
the fair value of a share of such Stock. The failure of such Individual
Stockholder to deliver the Objection Notice within such 20 day period shall
constitute such Individual Stockholder's acceptance of the Board's Determination
as conclusive. In the event of the timely delivery of an Objection Notice, the
Company and the Individual Stockholder shall attempt diligently and in good
faith to arrive at an agreement with respect to the Fair Value Per Share of the
Stock in question. If the Company and such Individual Stockholder are unable to
reach an agreement within 30 days after such Individual Stockholder delivers the
Objection Notice, the Fair Value Per Share shall be determined by a nationally
recognized accounting or other valuation firm (the "Valuer") reasonably
acceptable to the Company and such Individual Stockholder. The Company and such
Individual Stockholder will cooperate with each other in good faith to select
such Valuer. The Valuer shall determine the Fair Value Per Share and the
Valuer's decision will be furnished to the Company and such Individual
Stockholder in writing and shall be conclusive and binding upon the Company (for
purposes of such Individual Stockholder only) and upon such Individual
Stockholder. The fees and expenses of the Valuer shall be paid by the
non-prevailing party (i.e. the party whose submission of the Fair Value Per
Share is furthest from the Valuer's determination).
"Individual Shares" shall mean all shares of Stock issued to,
or held by, any Individual Stockholder, including, without limitation, all
shares of Common Stock and/or Preferred Stock purchased by an Individual
Stockholder for cash or issued upon conversion of convertible securities, upon
exercise of stock options, by way of a stock dividend or stock split or in
<PAGE> 4
4
connection with any conversion, merger, consolidation or recapitalization or
other reorganization affecting the Common Stock or Preferred Stock. Individual
Shares will continue to be Individual Shares in the hands of any transferee
other than the Company or ASCP (or any partner therein).
"Individual Stockholders" shall mean (i) any individuals who
are or become holders of shares of Stock and who execute this Agreement and (ii)
any transferees of Individual Shares from any such Individual Stockholder (other
than the Company or ASCP or any partner therein).
"Person" shall mean any natural person or any corporation,
partnership, trust or other legal entity.
"Piggyback Notice" shall have the meaning specified in
Section 6.1 hereof.
"Proposed Transferee" shall have the meaning specified
in Section 3.5 hereof.
"Registration Statement" shall have the meaning
specified in Section 6.1.
"Related Person" shall mean, with respect to any natural
person, (i) such person's spouse or estate or (ii) such person's children or
(iii) any partnership, trust, corporation or other legal entity in which 100% of
the beneficial ownership or interest is directly or indirectly held by such
person or any other person described in clauses (i) or (ii) of this sentence.
"Repurchase Notice" shall have the meaning specified in
Section 5.1 hereof.
"Repurchase Option" shall have the meaning specified in
Section 5.1 hereof.
"Sale of the Company" shall mean (i) the sale of all, or
substantially all, of the Company's consolidated assets in any single
transaction or series or related transactions; (ii) the sale of a majority of
the outstanding shares of capital stock; or (iii) any merger or consolidation of
the Company with or into another corporation unless, after giving effect to such
merger or consolidation, the holders of the Company's voting securities (on a
fully-diluted basis) immediately prior to the merger or consolidation own voting
securities (on a fully-diluted basis) of the surviving or resulting corporation
representing a majority of the ordinary voting power to elect directors of the
surviving or resulting corporation.
"Sale Notice" shall have the meaning specified in
Section 3.5 hereof.
<PAGE> 5
5
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Holder" shall have the meaning specified in Section
3.5 hereof.
"Stock" shall mean the Common Stock and the Preferred Stock.
"Supplemental Repurchase Notice" shall have the meaning
specified in Section 5.1 hereof.
"Termination Date" shall have the meaning specified in Section
5.1 hereof.
"Third Party Transferee" shall mean any transferee of
Individual Shares (other than (i) any Related Person of the transferor, (ii)
ASCP or any partner therein or (iii) the Company).
"Transfer" shall mean any event constituting a sale, bequest,
exchange, distribution, assignment, gift, pledge, hypothecation, foreclosure
upon, or creation of any security interest in, lien upon, or other encumbrance
with respect to, or other disposition of, any Individual Shares held by any
Individual Stockholder, including, without limitation, any transfer by marital
property division and any other transfer or disposition of any kind, whether
voluntary or involuntary, or by operation of law, affecting record or beneficial
ownership in or possession of any Individual Shares held by any Individual
Stockholder.
ARTICLE 2
Contribution of CTB Stock and Issuance of Company Stock
SECTION 2.1 General. On the date of, and immediately prior to,
the Closing, the Company will deliver the shares of the Parent Investment Stock
to the Individual Stockholders identified on Annex I hereto and such Individual
Stockholders will deliver to the Company cash and the shares of CTB Stock, in
each case in such amounts and number as allocated among such Individual
Stockholders in accordance with Annex I.
ARTICLE 3
Transfer of Individual Shares by Individual Stockholders
SECTION 3.1 General. Until the termination of this Agreement
in accordance with Section 5.4 hereof, all Individual Shares at any time and
from time to time outstanding and held by any Individual Stockholder shall be
held subject to the terms,
<PAGE> 6
6
conditions and restrictions set forth in this Agreement, the provisions of which
shall apply equally to the Individual Stockholders and their respective
transferees (other than ASCP, any partner therein or the Company). Each
Individual Stockholder, by executing this Agreement or by accepting a stock
certificate or other evidence of ownership thereof from the Company, agrees with
the Company and the other Individual Stockholders to comply with all terms,
conditions and restrictions set forth herein.
SECTION 3.2 Restrictions on Transfer of Individual Shares by
Individual Stockholders. (a) No Individual Stockholder shall Transfer any
Individual Shares except (i) in a transaction permitted by Section 3.3, 3.4 or
3.5 of this Agreement and then only in full compliance with the requirements of
Section 3.6 of this Agreement or (ii) in accordance with Article 4 or 5 of this
Agreement.
(b) Notwithstanding any other provision of this Agreement, no
Transfer of Individual Shares by any Individual Stockholder may be made unless,
in the judgment of the Board of Directors, such Transfer is in accordance with
the Securities Act and other applicable federal and state securities laws.
(c) Any purported Transfer of any Individual Shares by an
Individual Stockholder in violation of this Section 3.2 shall be void and shall
not be recognized by the Company and the purported transferee shall not be
entitled to vote or receive any distributions with respect to such Individual
Shares. The Company is authorized to refuse to honor any Transfer of Individual
Shares unless and until it is satisfied that such Transfer is in compliance with
the provisions of this Agreement.
SECTION 3.3 Permitted Transfers of Individual Shares to
Related Persons. Subject to Section 3.2(b) hereof, an Individual Stockholder may
Transfer any Individual Shares to a Related Person of such Individual
Stockholder, so long as (i) at least 10 days prior to effecting such Transfer,
such Individual Stockholder delivers written notice to the Company identifying
the Related Person (specifying the Related Person's relationship to such
Individual Stockholder) and describing in reasonable detail the proposed
transfer, (ii) prior to such Transfer, the Related Person proposing to acquire
such Individual Shares executes and delivers to the Company a counterpart of
this Agreement, and (iii) such Transfer complies with the provisions of Section
3.6 hereof. From and after the settlement date for such Transfer, the transferor
Individual Stockholder shall cease to be an Individual Stockholder for purposes
of this Agreement with respect to the Individual Shares so transferred, and the
transferee Related Person shall be deemed to be an Individual Stockholder for
purposes of this Agreement with respect to such Individual Shares.
<PAGE> 7
7
SECTION 3.4 Permitted Transfers to the Company and ASCP. (a)
Subject to Section 3.2(b) hereof, Individual Shares held by an Individual
Stockholder may be Transferred to the Company (i) under the circumstances
described in Section 3.5 of this Agreement, (ii) in accordance with the terms of
Article 5 of this Agreement or (iii) in accordance with the terms of a written
agreement entered into by such Individual Stockholder and the Company with the
approval of a majority of the members of the Board of Directors (acting in their
sole discretion).
(b) Subject to Section 3.2(b) hereof, an Individual
Stockholder may Transfer any Individual Shares to ASCP (or any partner therein)
at any time (i) upon mutual agreement of such Individual Stockholder and ASCP
(or such partner) or (ii) in accordance with the terms of Article 5 of this
Agreement. Individual Shares transferred to ASCP (or any partner therein) shall
cease to be Individual Shares for purposes of this Agreement and such transferee
shall not be bound by the terms of this Agreement.
SECTION 3.5 Permitted Sales to Third Party Transferees. (a)
Subject to Section 3.2(b) hereof, an Individual Stockholder may sell any
Individual Shares to a Third Party Transferee (i) pursuant to a bona fide offer
from such Third Party Transferee, so long as such sale complies with the
provisions of this Section 3.5 and Section 3.6, or (ii) pursuant to Article 4 of
this Agreement.
(b) Subject to paragraph (e) below, after the seventh
anniversary of the date of this Agreement, in the event that any Individual
Stockholder (a "Selling Holder") proposes to sell any Individual Shares to a
Third Party Transferee (other than pursuant to a transfer in accordance with
Article 4 hereof), such Selling Holder shall deliver a written notice (a "Sale
Notice") to the Company and ASCP at least 30 days prior to making any such sale.
The Sale Notice shall specifically identify the proposed transferee(s) (the
"Proposed Transferee") and shall describe in reasonable detail such Proposed
Transferee and all material terms and conditions of the proposed sale. The
Selling Holder agrees not to consummate any such sale until 30 days after the
Sale Notice has been delivered to the Company and ASCP. (The last day of such
30-day period is referred to herein as the "Authorization Date").
(c) Upon receipt of a Sale Notice from the Selling Holder, the
Company may elect to purchase all (but not less than all) the Individual Shares
proposed to be sold, upon the same terms and conditions as those set forth in
the Sale Notice, by delivering written notice of such election to the Selling
Holder within 30 days after receipt of the Sale Notice by the Company; provided,
however, that the Company may exercise its purchase option for a portion of the
Individual Shares proposed to be sold if conditioned upon the purchase of the
remainder of such Individual Shares by ASCP (and/or one or more partners
therein)
<PAGE> 8
8
pursuant to the next sentence. If the Company does not elect to purchase all the
Individual Shares proposed to be sold, ASCP (together with one or more of the
partners therein, to the extent ASCP itself does not fully exercise such right)
may elect to purchase (or to designate one or more third parties who are
prepared to purchase) all (but not less than all) of the Individual Shares
proposed to be sold (or the portion of such Individual Shares which the Company
has declined to purchase pursuant to the preceding sentence), upon the same
terms and conditions as those set forth in the Sale Notice, by delivering
written notice of such election to the Selling Holder within 30 days after the
receipt of the Sale Notice by ASCP. If more than one of the partners in ASCP
elects to exercise such purchase option with respect to any Individual Shares
not purchased by the Company or ASCP, the electing partners shall be entitled to
purchase such Individual Shares in such proportion as they may agree between or
among themselves. Settlement of the purchase of Individual Shares from a Selling
Holder by the Company or ASCP (or partners therein) pursuant to this Section 3.5
shall take place on a date fixed by the Company within 10 days after the
Authorization Date.
(d) Subject to paragraph (e) of this Section 3.5, if the
Company and/or ASCP (or one or more of the partners therein), individually or
collectively, do not elect to purchase (or to designate one or more third
parties who are prepared to purchase) all the Individual Shares offered pursuant
to the Sale Notice, the Selling Holder may sell to the Proposed Transferee all
(but not less than all) the shares specified in the Sale Notice at any time
during the 30-day period immediately following the Authorization Date in a bona
fide transaction at a price and on other terms no more favorable to the Proposed
Transferee than those specified in the Sale Notice, so long as (i) the Company
and ASCP shall have notified the Selling Holder that such Proposed Transferee is
acceptable to the Company and ASCP, respectively, which notifications shall not
be unreasonably withheld (provided that, any such proposed transfer to a
Proposed Transferee who is already an Individual Stockholder shall be acceptable
to the Company and ASCP), and (ii) the provisions of Section 3.6 are complied
with. If all such Individual Shares are not sold to the Proposed Transferee
within such 30-day period, the sale of such Individual Shares shall thereupon
again become subject to compliance with this Section 3.5, and any future sale of
such Individual Shares pursuant to this Section 3.5 shall require delivery of a
new Sale Notice.
(e) Notwithstanding the foregoing provisions of this Section
3.5, each Individual Stockholder acknowledges that such Individual Stockholder
shall not be entitled to sell any Individual Shares to a Third Party Transferee
pursuant to this Section 3.5 until after the expiration of the 30-day period
following such Individual Stockholder's Termination Date.
<PAGE> 9
9
SECTION 3.6 Settlement. The settlement of any Transfer of
Individual Shares permitted by Section 3.3, 3.4 or 3.5 hereof shall take place
at the principal office of the Company at 10:00 A.M. on a date fixed by the
Company in accordance with any applicable requirements of such Section. At the
time of such settlement, (i) the transferor of such Individual Shares (or the
transferor's estate or legal representative, if applicable) shall deliver to the
transferee the certificate or certificates representing the Individual Shares to
be transferred, endorsed in blank, or accompanied by appropriate stock powers
endorsed in blank, together with funds for any required stock transfer tax
stamps, (ii) in the case of a Transfer for value, the transferee shall pay the
consideration for such Transfer, (iii) the transferor shall represent in writing
to the transferee (and to the Company, if the Company is not the transferee)
that such Individual Shares are owned of record and beneficially by such
transferor, free and clear of all liens, security interests, claims,
restrictions and encumbrances of any kind, (iv) if required by the Company, the
transferor shall deliver to the Company (x) a written representation from the
transferee that such transferee is acquiring such Individual Shares for such
transferee's own account, for investment only and not with a view towards the
resale or distribution thereof, and/or (y) a satisfactory opinion of counsel
which (to the Company's reasonable satisfaction) is experienced in securities
law matters to the effect that such Transfer is permitted by the Securities Act
and other applicable federal and state securities laws without registration
under the Securities Act, and (v) the transferee (if other than the Company,
ASCP or any partner therein) shall execute and deliver to the Company a
counterpart of this Agreement. Compliance with all applicable provisions of the
preceding sentence shall be a condition precedent to the consummation of such
Transfer.
ARTICLE 4
Sale of the Company
SECTION 4.1 Participation in Approved Sale. (a) If the Board
of Directors and the holder(s) of a majority of the Company's Common Stock then
outstanding approve a Sale of the Company to an independent third party or a
Sale of a majority of the Company's Common Stock in an initial public offering
(in either such case, an "Approved Sale"), Individual Stockholders -------------
who are holders of Individual Shares will consent to, and raise no objections
against, the Approved Sale, and if the Approved Sale is structured as a sale of
stock, Individual Stockholders who are holders of Individual Shares will agree
to sell all of their shares of Stock and rights or options to acquire shares of
Stock on the terms and conditions approved by the Board of Directors and the
holder(s) of a majority of the Common Stock then outstanding. The Individual
Stockholders will take all necessary and desirable actions in connection with
the
<PAGE> 10
10
consummation of the Approved Sale of the Company. For purposes of this Section
4.1, an "independent third party" is any person who does not own in excess of 5%
of the Company's Common Stock on a fully-diluted basis, who is not controlling,
controlled by or under common control with any such 5% owner of the Company's
Common Stock and who is not a Related Person or Affiliate of any such 5% owner
of the Company's Common Stock. In addition to the foregoing obligations,
Individual Stockholders shall have the right to participate in an Approved Sale
pro rata, on the same basis as the other holders of the Company's capital stock.
(b) The obligations of the Individual Stockholders under this
Section 4.1 with respect to an Approved Sale of the Company are subject to the
satisfaction of the following conditions: (i) upon the consummation of the
Approved Sale, all of the holders of Common Stock will receive the same form and
amount of consideration per share of Common Stock, or if any holders are given
an option as to the form and amount of consideration to be received, all holders
will be given the same option; (ii) upon the consummation of the Approved Sale,
all of the holders of Preferred Stock will receive the same form and amount of
consideration per share of Preferred Stock, or if any holders are given an
option as to the form and amount of consideration to be received, all holders
will be given the same option; and (iii) all holders of rights or options to
acquire Individual Shares which have vested prior to or will vest upon the
consummation of the Approved Sale will be given either (A) an opportunity to
exercise such rights or options prior to the consummation of the Approved Sale
and participate in such sale as holders of Common Stock or (B) subject to
approval by the Board of Directors in its sole and absolute discretion, an
opportunity to receive, upon the consummation of the Approved Sale, in exchange
for such rights or options, consideration equal to the amount determined by
multiplying (1) the same amount of consideration per share of Common Stock which
would have been received by the holders of Common Stock in connection with the
Approved Sale if all such rights or options had been exercised prior to the
Approved Sale less the exercise price (per share of Common Stock) of such rights
or options to acquire Individual Shares by (2) the number of Individual Shares
represented by such rights or options.
SECTION 4.2 Purchaser Representative. If the Company or the
holders of the Company's securities enter into any negotiation or transaction
for which Rule 506 under the Securities Act (or any similar rule then in effect)
promulgated by the Securities Exchange Commission may be available with respect
to such negotiation or transaction (including a merger, consolidation or other
reorganization), the Individual Stockholder will, at the request of the Company,
appoint a "purchaser representative" (as such term is defined in Rule 501 under
the Securities Act) reasonably acceptable to the Company. If any Individual
Stockholder appoints the purchaser representative designated by the Company, the
Company will pay
<PAGE> 11
11
the fees and expenses of such purchaser representative, but if any Individual
Stockholder declines to appoint the purchaser representative selected by the
Company, such Individual Stockholder will promptly appoint a purchaser
representative acceptable to the Company, and such Individual Stockholder will
be responsible for the fees and expenses of the purchaser representative so
appointed.
ARTICLE 5
Purchase of Individual Shares Upon Termination Date
SECTION 5.1 Purchase of Individual Shares Upon Termination of
Employment. (a) If the employment with the Company of any Individual Stockholder
(other than J. Christopher Chocola or Caryl Chocola, as to whom the "Repurchase
Option" defined below shall not apply) (or any officer of the Company who
Transferred such officer's Individual Shares to a Related Person who has become
an Individual Stockholder) shall terminate for any reason whatsoever, including
death, disability, resignation, or termination with or without cause (the date
on which such termination occurs being referred to as the "Termination Date"),
then the Company shall have the option (the "Repurchase Option") to repurchase
all, but not less than all, of the Individual Shares held by such Individual
Stockholder (and by any Individual Stockholder who acquired such shares as a
Related Person from an employee of the Company), at the price and on the other
terms specified in Section 5.2. The Company may exercise the Repurchase Option
by delivery of written notice (the "Repurchase Notice") to the holder or holders
of the Individual Shares within 30 days after the Termination Date. The
Repurchase Notice shall set forth the number of the Individual Shares to be
acquired from such holder(s), the aggregate consideration to be paid for such
shares and the time and place for the closing of the transaction.
(b) If for any reason the Company does not elect to purchase
all of the Individual Shares pursuant to the Repurchase Option, then ASCP (or
one or more of the partners therein) shall be entitled to exercise the Company's
Repurchase Option in the manner set forth in the preceding paragraph (a) for
all, but not less than all, of the Individual Shares (the "Available Shares").
As soon as practicable after the Company has determined that there will be
Available Shares, but in any event within 15 days after the Termination Date,
the Company shall deliver written notice (the "Option Notice") to ASCP setting
forth the number of Available Shares and the price for each Available Share.
ASCP (or one or more of the partners therein) may elect to purchase all of the
Available Shares by delivering written notice to the Company within 10 days
after receipt of the Option Notice by ASCP. As soon as practicable, and in any
event within 5 days after the expiration of such 10-day period, the Company
shall notify the holder(s) of Individual Shares as to the number of Individual
Shares being purchased from such holder by ASCP (or
<PAGE> 12
12
one or more of the partners therein). If more than one of the partners in ASCP
elects to exercise such purchase option with respect to the Individual Shares
not purchased by the Company or ASCP, the electing partners shall be entitled to
purchase such Individual Shares in such proportion as they may agree between or
among themselves.
(c) If for any reason neither the Company nor ASCP elects to
purchase all of the Individual Shares pursuant to Section 5.1(a) or (b), then J.
Christopher Chocola or Caryl Chocola (the "Chocolas") shall be entitled to
exercise the Company's Repurchase Option in the manner set forth in the
preceding paragraph (a) for all, but not less than all, of the Available Shares.
As soon as practicable after the Company has determined that ASCP will not elect
to purchase the Available Shares, the Company shall deliver written notice to
the Chocolas setting forth the number of Available Shares and the price for each
Available Share. The Chocolas may elect to purchase all of the Available Shares
by delivering written notice to the Company within 10 days after receipt of such
notice from the Company. As soon as practicable, and in any event within 5 days
after the expiration of such 10-day period, the Company shall notify the
holder(s) of Individual Shares as to the number of Individual Shares being
purchased from such holder by the Chocolas.
(d) Settlement of the purchase of Individual Shares pursuant
to this Section 5.1 will occur at the Company's principal office on a business
day to be fixed by the Company within 15 days after the expiration of the 30-day
period referred to in paragraph (a) above. At the time of such settlement, (i)
the purchaser or purchasers shall pay the purchase price in the manner specified
in Section 5.2, (ii) the holders of the Individual Shares being purchased shall
deliver the certificate or certificates representing such shares to the
purchaser or purchasers or their nominees, endorsed in blank, or accompanied by
appropriate stock powers executed in blank, together with funds for any required
stock transfer tax stamps, and (iii) the transferor shall represent in writing
to the transferee (and to the Company, if the Company is not the transferee)
that such Individual Shares are owned of record and beneficially by such
transferor, free and clear of all liens, security interests, claims,
restrictions and encumbrances of any kind.
(e) Each Individual Stockholder acknowledges that the
Individual Shares which the Company, ASCP (or any partner therein) or the
Chocolas may elect to purchase pursuant to the Repurchase Option include any
Individual Shares issued upon exercise of any stock option (regardless of
whether such option is exercised before or after the Termination Date).
SECTION 5.2 Purchase Price for Individual Shares. The purchase
price per share to be paid for any Individual Shares purchased by the Company,
ASCP (or any partner therein) and/or the Chocolas shall be equal to (i) if the
termination of
<PAGE> 13
13
employment giving rise to the Repurchase Option arose out of a termination for
Cause, the cost incurred by the terminated Individual Stockholder (or the
officer of the Company who Transferred such Individual Shares to such Individual
Stockholder) in connection with the issuance of the Individual Shares being
repurchased (it being agreed that in the case of shares acquired upon the
exercise of options to purchase Stock, the cost incurred shall be deemed to be
the exercise price); and (ii) if the termination of employment giving rise to
the Repurchase Option arose for any other reason, the Fair Value Per Share as of
the Termination Date. Such purchase price may be paid (a) in the case of a
purchase by the Company, at the option of the Company, either in cash or by
delivery of a subordinated promissory note having the terms described in the
next sentence, or in any combination thereof, with not less than 25% of the
purchase price to be paid in cash in any event, or (b) in the case of a purchase
by ASCP (or any partner therein) or the Chocolas, in cash. Any subordinated
promissory note issued by the Company in payment of all or a portion of such
purchase price shall (w) provide that 20% of the principal amount thereof shall
payable on each anniversary of the date thereof (until and including the fifth
anniversary), (x) bear interest at the rate of 8% per annum, payable
semi-annually and (y) be subordinated on terms and conditions satisfactory to
any holders of indebtedness for borrowed money of the Company and its
subsidiaries.
ARTICLE 6
Registration Rights
SECTION 6.1 Piggyback Registration. If the Company at any time
proposes to file with the Securities and Exchange Commission (the "Commission")
a registration statement under the Securities Act on any form for the general
registration of securities to be sold for cash (a "Registration Statement") with
respect to any shares of Common Stock owned by ASCP (or one or more of the
partners therein), it will give written notice (a "Piggyback Notice") to all
Individual Stockholders who are holders of shares of Common Stock at least 30
days before the initial filing of such Registration Statement, which notice
shall set forth the intended method of disposition of the securities proposed to
be registered. The notice shall offer to include in such filing such aggregate
number of shares of Common Stock held by the Individual Stockholders as the
Individual Stockholders may request. Each Individual Stockholder holding shares
of Common Stock and desiring to have such shares registered under this Section
6.1 shall advise the Company in writing within 10 days after the date of receipt
of such offer from the Company, setting forth the number of such Individual
Stockholder's shares of Common Stock for which registration is requested. The
Company shall thereupon include in such filing the aggregate number of shares of
Common Stock held by the Individual Stockholders for which registration is so
requested, subject to the next sentence.
<PAGE> 14
14
If the managing underwriter of a proposed public offering shall advise the
Company in writing that, in its opinion, the distribution of the shares of
Common Stock held by the Individual Stockholders which have been requested to be
included in the Registration Statement concurrently with the Common Stock being
registered for ASCP (or the partners therein) would adversely affect the
distribution of such securities, then the number of shares of Common Stock which
such Individual Stockholder and ASCP shall be permitted to include in the
Registration Statement shall be limited to the number of shares of Common Stock
held by each such Individual Stockholder and ASCP immediately prior to the
filing of the Registration Statement multiplied by a fraction, the numerator of
which is the total number of shares of Common Stock held by such Individual
Stockholders and ASCP which the managing underwriter shall advise the Company
can be included in the Registration Statement without adversely affecting the
sale of securities pursuant to the Registration Statement and the denominator of
which is the total number of shares of Common Stock held by such Individual
Stockholders and ASCP immediately prior to the filing of the Registration
Statement. In the event that any Individual Stockholder requests inclusion in a
Registration Statement of a number of shares of Common Stock which exceeds the
number of shares of Common Stock such holder is entitled to include in such
Registration Statement in accordance with the preceding sentence, such holder
will take all actions which the Company reasonably requires to withdraw such
holder's request to include such excess shares in the Registration Statement.
All expenses of such registration shall be borne by the Company.
SECTION 6.2 Indemnification. (a) Each Individual Stockholder
holding any shares of Common Stock included in any registration pursuant to
Section 6.1, by such participation, agrees to indemnify and hold harmless the
Company, its directors and officers, each other Person, if any, who controls the
Company within the meaning of the Securities Act, each other Person (including
each underwriter) who participated in the offering of such securities and each
other Person, if any, who controls such participating Person against any losses,
claims, damages or liabilities, joint or several, to which the Company or any
such director or officer or any such Person may become subject under the
Securities Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon information in writing provided to the Company by such Individual
Stockholder specifically for use in any Registration Statement under which such
shares of Common Stock were registered under the Securities Act at the request
of such holder, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto. Notwithstanding the foregoing,
in no event shall any Individual Stockholder's liability hereunder exceed the
net proceeds received by such holder in respect of the sale of Common Stock
pursuant to such registration.
<PAGE> 15
15
(b) The Company agrees to indemnify and hold harmless each
Individual Stockholder holding any shares of Common Stock included in any
registration pursuant to Section 6.1 against any losses, claims, damages or
liabilities, joint or several, to which any such Individual Stockholder may
become subject under the Securities Act or any other statute or at common law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to the
extent that such loss, claim, damage or liability arises out of or is based upon
written information provided to the Company by such Individual Stockholder
specifically for use in any Registration Statement under which such shares of
Common Stock were registered under the Securities Act at the request of such
holder, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto.
(c) Each Individual Stockholder holding shares of Common Stock
included in any registration pursuant to Section 6.1 shall, if requested by the
Company, enter into an underwriting agreement or similar agreement containing
customary indemnification provisions substantially similar to those in this
Section 6.2.
SECTION 6.3 Holdback. Except as expressly permitted by this
Article 6, no holder of Individual Shares may effect any public sale or
distribution of any Individual Shares during the period commencing upon the
earlier of (i) the receipt of a Piggyback Notice relating to an underwritten
offering of shares of Common Stock owned by ASCP (or one or more of the partners
therein) or (ii) the filing of a Registration Statement with the Commission
relating to an underwritten offering for the account of the Company of any of
the Company's equity securities and ending on the earliest of (x) 180 days after
receipt of such Piggyback Notice, (y) 90 days after the effective date of the
Registration Statement relating to such offering, or (z) the date, if any, on
which such Registration Statement is withdrawn, unless the underwriters managing
such offering shall otherwise consent thereto, or unless ASCP and its partners
are not similarly bound.
ARTICLE 7
Legend on Certificates
SECTION 7.1 Legend. All certificates representing Individual
Shares held by Individual Stockholders shall have endorsed thereon a conspicuous
legend as follows:
<PAGE> 16
16
"The shares representing this certificate are subject to
the terms and conditions of a certain Individual Stockholders
Agreement dated as of January 4, 1996, by and among various
individuals signatory thereto and the Company, a copy of which
is available at the principal office of the Company. The sale,
transfer or other disposition of such shares by the holder
thereof is subject to the terms of such Individual
Stockholders Agreement, which also provides that under certain
circumstances the Company and certain other persons have the
right to purchase such shares from the holder thereof."
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under any state securities laws, and may not be sold or
transferred in the absence of an effective registration
statement under the Securities Act of 1933, as amended, and
applicable state securities laws or an exemption from
registration thereunder."
Each Individual Stockholder consents to the placement of such legend on the
certificate or certificates representing the Individual Shares owned by such
Individual Stockholder.
ARTICLE 8
Miscellaneous
SECTION 8.1 After-Acquired Individual Shares. All of the
provisions of this Agreement shall apply to all Individual Shares held by an
Individual Stockholder on the date hereof, and all Individual Shares which may
at any time be issued by the Company to an Individual Stockholder after the date
hereof (including, without limitation, upon exercise of an option or warrant) or
which may be acquired by an Individual Stockholder in any other manner (all of
which shall be deemed "Individual Shares" hereunder).
SECTION 8.2 Other Capital Stock. Each of the Individual
Stockholders understands that, in addition to the Common Stock and the Preferred
Stock, the Company may, from time to time, have shares of one or more other
classes of capital stock outstanding. Any reference to "Common Stock, in Article
6 or elsewhere in this Agreement shall be deemed to refer only to the Common
Stock (as defined herein) and shall not be read to include shares of Preferred
Stock or any other class of capital stock. Any reference to "Stock" in this
Agreement shall be deemed to refer only to the Common Stock and the Preferred
Stock (each as defined herein) and shall not be read to include shares of any
other class of capital stock.
<PAGE> 17
17
SECTION 8.3 Disclosure of this Agreement. Each of the
Individual Stockholders shall ensure that each person or entity that proposes to
acquire Individual Shares from such Individual Stockholder is furnished with a
copy of this Agreement prior to such acquisition of Individual Shares. The
Company shall cause a copy of this Agreement to be attached to, and filed with,
the Bylaws of the Company and to be made available for examination at the
Company's principal office.
SECTION 8.4 Specific Performance. The parties hereto
acknowledge that irreparable damage would result if this Agreement is not
specifically enforced and that, therefore, the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction, and appropriate injunctive relief
may be applied for and granted in connection therewith. Such remedies shall be
cumulative and not exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
SECTION 8.5 Term of Agreement. The rights and obligations of
each Individual Stockholder under this Agreement shall become effective on the
date hereof and shall terminate upon the earliest to occur of (i) the
liquidation and dissolution of the Company and (ii) the twelfth anniversary of
the date hereof.
SECTION 8.6 Successors and Assigns. All of the terms and
provisions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns (except as
otherwise expressly provided in Section 3.4(b) hereof); provided, however, that
no Individual Stockholder may assign this Agreement or its rights or obligations
hereunder except in connection with a permitted Transfer of Individual Shares
pursuant to the provisions hereof.
SECTION 8.7 Entire Agreement. This Agreement constitutes the
complete understanding and agreement among the parties hereto with respect to
the subject matter hereof.
SECTION 8.8 Amendments. This Agreement may be amended,
supplemented or changed, and any provision hereof can be waived, only by a
written instrument making specific reference to this Agreement executed by the
Company and the holders of at least 66 2/3% of the Individual Shares then owned
by all Individual Stockholders and consented to by ASCP.
SECTION 8.9 Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy,
telex or similar writing) and shall be given:
(i) if to the Company or to ASCP, to each of
them at the following address:
<PAGE> 18
18
c/o American Securities Capital Partners, L.P.
122 East 42nd Street
New York, New York 10168
Telecopy: (212) 697-5524
Attention: Michael G. Fisch
(ii) if to an Individual Stockholder, at such
Individual Stockholder's address as most recently supplied to
the Company and set forth in the Company's records;
or such other address or telecopy number as such party may hereafter specify for
the purposes by notice to the other parties hereto. Each such notice, request or
other communication shall be deemed to have been duly given when delivered
personally or three days after being mailed by certified or registered mail,
return receipt requested, postage prepaid, or if given by telex or telecopy,
when received by the recipient.
SECTION 8.10 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware applicable
to agreements made and to be performed in Delaware.
SECTION 8.11 Third Party Beneficiary. The Company and the
Individual Stockholders acknowledge that ASCP and the partners therein are
third-party beneficiaries under this Agreement and will have the right to seek
specific performance hereof, as well as all other remedies available at law or
in equity.
SECTION 8.12 Severability. If any provision of this Agreement
or the application of any such provision to any person or circumstances shall be
held invalid by a court of competent jurisdiction, the remainder of this
Agreement, including the portion of such provision not held to be invalid, or
the application of such provision to persons or circumstances other than those
as to which it is held invalid, shall not be affected thereby.
SECTION 8.13 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original, but
all or which together shall constitute one and the same instrument.
SECTION 8.14 Headings. All section headings herein are for
convenience of reference only and are not part of this Agreement, and no
construction or inference shall be derived therefrom.
<PAGE> 19
19
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands as of the date first set forth above.
CTB HOLDINGS, INC.
By: /s/Michael G. Fisch
--------------------------
Title:
Individual Stockholders:
/s/J. Christopher Chocola
--------------------------
Name: J. Christopher Chocola
/s/Caryl Chocola
--------------------------
Name: Caryl Chocola
/s/John L. Haugh, Jr.
--------------------------
Name: John L. Haugh, Jr.
/s/Michael J. Kissane
--------------------------
Name: Michael J. Kissane
/s/Mark A. Lantz
--------------------------
Name: Mark A. Lantz
/s/Dennis C. Manning
--------------------------
Name: Dennis C. Manning
/s/Peter M. Smith
--------------------------
Name: Peter M. Smith
/s/Don J. Steinhilber
--------------------------
Name: Don J. Steinhilber
/s/Steve E. Bryant
--------------------------
Name: Steve E. Bryant
/s/Brian Dawes
--------------------------
Name: Brian Dawes
/s/Mark A. Kleinsmith
--------------------------
Name: Mark A. Kleinsmith
/s/Roger W. Townsend
--------------------------
Name: Roger W. Townsend
/s/Richard A. VanPuffelen
--------------------------
Name: Richard A. VanPuffelen
<PAGE> 20
Annex I
Investment in the Company at Closing
<TABLE>
<CAPTION>
Shares of Shares of
--------- ---------
Shares of Common Preferred
--------- ------ ---------
Name Cash CTB Stock Stock Stock
- ---- ---- --------- ----- -----
<S> <C> <C> <C> <C>
J. Christopher Chocola
Caryl Chocola
John L. Haugh, Jr.
Michael J. Kissane
Mark A. Lantz
Dennis C. Manning
Peter M. Smith
Don J. Steinhilber
</TABLE>
<PAGE> 1
EXHIBIT 10.08
BOARD REPRESENTATION AGREEMENT
BOARD REPRESENTATION AGREEMENT, dated as of January 4, 1996
(this "Agreement") among AMERICAN SECURITIES CAPITAL PARTNERS, L.P., a Delaware
limited partnership ("ASCP"), J. CHRISTOPHER CHOCOLA, an individual ("Chris
Chocola"), CARYL CHOCOLA, an individual ("Caryl Chocola"; together with Chris
Chocola, the "Chocolas"), and CTB Holdings, Inc., a Delaware corporation (the
"Corporation").
RECITALS
WHEREAS, on the date hereof, 388,000 shares of the common
stock of the Corporation ("Shares") are owned of record and beneficially by
entities controlled by ASCP ("ASCP Affiliates") and 190,519 Shares are owned of
record and beneficially by the Chocolas; and
WHEREAS, it is in the best interests of the parties hereto
that certain aspects of ASCP's and the Chocolas' relationship with regard to the
Corporation be set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual terms, conditions and agreements set forth herein, the parties hereto
hereby agree as follows:
ARTICLE I
BOARD OF DIRECTORS
SECTION 1.1 Board of Directors. The board of directors of the
Corporation (the "Board") shall initially be composed of five directors. Each
director shall have one vote. A quorum will be present if at least three
directors are present at a meeting. At any meeting at which a quorum is present,
the affirmative vote of a majority of the Board will be required in order for
the Corporation to take any action.
SECTION 1.2 Election of Directors. (a) Upon each election of
directors of the Board (except in the case of replacement directors, which is
governed by paragraph (b) below), so long as the Chocolas beneficially own at
least 20% of the outstanding Shares, the Chocolas will have the right to
nominate two directors, of which one shall be Chris Chocola. For so long as the
Chocolas are entitled to nominate directors to the Board pursuant to this
Section 1.2, ASCP shall cause the ASCP Affiliates to vote all Shares owned by
them in favor of the Chocolas' nominees and take all other action to cause the
Chocolas' nominees to be elected to the Board.
(b) Each director shall hold office until death, resignation,
retirement or removal by the party that nominated such director. Notwithstanding
anything contained in this Section 1.2(b) to the contrary, immediately upon the
Chocolas no
<PAGE> 2
2
longer having the right to nominate directors to the Board, ASCP shall have the
right to remove any directors from the Board and to designate his or her
successor by giving written notice thereof to the Board.
ARTICLE II
TERMINATION
SECTION 2.1 Termination. This Agreement shall terminate on the
earliest to occur of any of the following events: (i) when ASCP (or partners of
ASCP) or ASCP Affiliates no longer own at least 20% of the outstanding Shares;
or (ii) when the Chocolas no longer have the right to nominate directors to the
Board.
ARTICLE III
MISCELLANEOUS
SECTION 3.1 Entire Agreement. This Agreement sets forth the
entire agreement and understanding between the parties as to the subject matter
hereof. Except as otherwise provided expressly herein, no modification,
amendment or supplement to this Agreement shall be effective for any purpose
unless in writing and signed by the parties hereto.
SECTION 3.2 Binding Effect; Assignments.(a) This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns.
(b) The Chocolas hereby acknowledge that: (i) neither this
Agreement nor the rights granted or obligations assumed hereunder shall be
assigned or transferred, by operation of law or otherwise, by them, without the
prior written consent of ASCP, and any purported assignment or transfer by them
in contravention of this Section 3.2 shall be void and without effect; and (ii)
ASCP may assign or transfer, by operation of law or otherwise, this Agreement
and the rights granted and obligations assumed hereunder.
SECTION 3.3 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware.
SECTION 3.4 No Waiver; Remedies. No failure on the part of any
party hereto to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or future exercise thereof or the exercise of any
other right. The remedies herein are cumulative and not exclusive of any
remedies provided by law.
<PAGE> 3
3
SECTION 3.5 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopy) and
shall be given:
(a) if to ASCP or the Corporation to:
c/o American Securities Capital Partners, L.P,
122 East 42nd Street
New York, New York 10168
Attention: Michael G. Fisch
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard C. Weisberg, Esq.
(b) if to the Chocolas:
c/o J. Christopher Chocola
CTB, Inc.
State Road 15 North
Post Office Box 2000
Milford, Indiana 46542
With a copy to:
Yoder, Ainlay, Ulmer a Buckingham
P.O. Box 575
Goshen, Indiana 46527
Attention; Gordon Lord
or at such other address as any party shall have specified by notice in writing
to the others.
SECTION 3.6 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 3.7 Counterparts. This Agreement may be executed in
counterparts, each of which when executed and delivered shall be an original and
all of which when taken together shall constitute one and the same instrument.
<PAGE> 4
4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective, duly authorized officers, as of
the day and year first above written.
AMERICAN SECURITIES CAPITAL
PARTNERS, L.P.
By its General Partner
AMERICAN SECURITIES CAPITAL
PARTNER GP CORP.
By: /s/ David Horing
--------------------------------
Name: David Horing
Title: Principal
/s/ J. Christopher Chocola
----------------------------------------
J. CHRISTOPHER CHOCOLA
/s/ Caryl Chocola
----------------------------------------
CARYL CHOCOLA
CTB HOLDINGS, INC.
By: /s/ David Horing
-------------------------------------
Name: David Horing
Title: Principal
<PAGE> 1
EXHIBIT 10.09
NON-QUALIFIED STOCK OPTION AGREEMENT
AGREEMENT, dated as of January 4, 1996, between CTB Holdings,
Inc., a Delaware corporation (the "Company"), and (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company, acting through its Board of Directors
(the "Board") has granted to the Optionee, effective as of the date of this
Agreement, an option to purchase shares of common stock, $.01 par value per
share, of the Company (the "Common Stock"), on the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, the Optionee is a party to a certain Stockholders
Agreement dated as of January 4, 1994 among the Company, the Optionee and the
other individuals named therein;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements contained in this Agreement, the parties hereto agree as
follows:
SECTION 1. Definitions. As used in this Agreement, the
following terms have the meanings set forth below:
"Affiliate" of any Person means any other Person directly or
indirectly controlled by, controlling, or under common control with
such Person.
"Board" means the Board of Directors of the Company.
"Cause" means action by the Optionee that constitutes
misconduct, dishonesty, the failure to comply with specific directions
of the Board of Directors or any senior executive officer of the
Company (after having been given a reasonably detailed written notice
of, and a period of 20 days to cure, such misconduct or failure), a
deliberate and premeditated act against the Company or its Affiliates
or the commission of a felony. Any voluntary termination of employment
by the Optionee in anticipation of an involuntary termination of the
Optionee's employment for Cause shall be deemed to be a termination for
Cause.
"Cumulative EBITDA" means, with respect to any fiscal year of
the Company set forth on Annex I to this Agreement, the actual
aggregate amount OF EBITDA of the Company and its consolidated
subsidiaries for the period commencing on January 1, 1996, and ending
on the last day of such fiscal year (with such period being treated as
one accounting period for such purposes).
<PAGE> 2
2
"Cumulative EBITDA Target" means, with respect to any fiscal
year of the Company set forth on Annex I to this Agreement, the applicable
amount set forth opposite such fiscal year on Annex 1.
"EBITDA" means the earnings of the Company's operations as of
the date hereof before, without duplication, interest expense, amortization of
deferred financing fees and acquisition related bank/financing fees, income
taxes, depreciation, amortization (including amortization of increases in
inventory arising from application of APB 16), and any management fees owed to
ASCP or its affiliates and after all bonus and profit sharing expenses of the
Company of any kind (other than expenses relating to performance-based stock
option plans).
"EBITDA Target" means, with respect to any fiscal year of the
Company set forth on Annex I to this Agreement, the applicable amount set forth
opposite such fiscal year on Annex I.
"Fair Market Value" of a share of Common Stock on any date
shall be, if the Common Stock is listed on a national stock exchange, the
officially quoted closing price on such stock exchange, or if the Common Stock
is listed on the NASDAQ National Market, the officially quoted closing price on
NASDAQ, or, if the Common Stock is listed on NASDAQ but not on the National
Market, the average of the closing bid and asked prices reported by NASDAQ, in
each case on the date as of which the value is to be determined (or if such date
is not a trading day, as of the preceding trading day), or if the Common Stock
is not so listed, the fair market value determined in good faith by the Board.
"Option" has the meaning ascribed to such term in Section 2 of
this Agreement.
"Option Shares" has the meaning ascribed to such term in
Section 2 of this Agreement.
"Person" means any individual, partnership, corporation,
group, trust or other legal entity.
"Shares" means, collectively, the shares of Common Stock
subject to the Option, whether such shares are Option Shares or Vested Shares.
"Transaction" means (a) any consolidation or merger of the
Company in which the Company is not the surviving corporation other than a
merger solely to effect a reincorporation or a merger of the Company as to which
stockholder approval is not required pursuant to Sections 251(f) or 253 of the
Delaware General Corporation Law, or (b) any sale, lease, exchange or other
transfer (other than
<PAGE> 3
3
dividends) (in one transaction or a series of related transactions) of all or
substantially all of the assets or earning power of the Company, or (c) the
adoption of any plan or proposal for the liquidation or dissolution of the
Company.
"Vested Shares" means the Option Shares with respect to which
the Option is exercisable at any particular time.
SECTION 2. Option; Option Price. On the terms and subject to
the conditions of this Agreement, the Optionee shall have the option (the
"Option") to purchase up to shares (the "Option Shares") of Common Stock
at the price of $10 per option Share (the "Option Price").
SECTION 3. Term. The term of the Option (the "Option Term")
shall commence on the date hereof and expire on the tenth anniversary of the
date hereof, unless the Option shall theretofore have been terminated in
accordance with the terms of this Agreement.
SECTION 4. Time of Exercise.
(a) Unless accelerated as otherwise provided in Sections 4(b)
or 4(c) of this Agreement, the Option shall become exercisable as to 100% of the
Option Shares on the seventh anniversary of the date hereof.
(b) (i) On the last day of each of the Company's fiscal years
beginning with the fiscal year ending December 31, 1996 through the fiscal year
ended December 31, 2000, (each, an "Accelerated Vesting Date"), if the Company's
EBITDA for the fiscal year ending on such Accelerated Vesting Date is equal to
or exceeds the EBITDA Target for such fiscal year, then the Option shall
immediately become exercisable as to 20% of the Option Shares.
(ii) Notwithstanding any failure by the Company to meet the
EBITDA Target for any fiscal year, the portion of the Option which would have
become exercisable pursuant to subsection (i) above on the applicable
Accelerated Vesting Date shall become exercisable on a subsequent Accelerated
Vesting Date if, with respect to such subsequent Accelerated Vesting Date, the
Company's Cumulative EBITDA for the fiscal year ending on such Accelerated
Vesting Date is equal to or greater than the Cumulative EBITDA Target for such
fiscal year.
(c) In the event that American Securities Capital Partners,
L.P. and its Affiliates no longer hold any shares of capital stock of the
Company nor have any other ownership interest in the Company, any Affiliate of
the Company, any sucessor or surviving entity to the Company or any of the
<PAGE> 4
4
Company's substantial assets, the Option shall immediately become exercisable
as to 100% of the Option Shares.
(d) In the event the Company makes any capital expenditures
not contemplated by the projections upon which the EBITDA and Cumulative EBITDA
Targets are based, or consummates any mergers or acquisitions or divestitures
(whether of assets or stock or other interests) or other extraordinary
transactions, the Board will determine in good faith appropriate adjustments to
the EBITDA and Cumulative EBITDA Targets, which adjustments shall he final and
binding).
(e) Except as otherwise provided in Section 6, the Option
shall remain exercisable as to all such Vested Shares until the expiration of
the Option Term.
SECTION 5. Procedure for Exercise.
(a) The Option may be exercised with respect to Vested Shares,
from time to time, in whole or in part (but for the purchase of whole shares
only), by delivery of a written notice (the "Exercise Notice") from the Optionee
to the Company, which Exercise Notice shall:
(i) state that the Optionee elects to exercise the Option;
(ii) state the number of Vested Shares with respect to which
the Optionee is exercising the Option;
(iii) include any representations of the Optionee required
under Section 8 hereof;
(iv) in the event that the Option shall be exercised by the
representative of the Optionee's estate pursuant to Section 6, include
appropriate proof of the right of such Person to exercise the Option;
(v) state the date upon which the Optionee desires to
consummate the purchase of such Vested Shares (which date must be prior
to the termination of the Option); and
(vi) comply with such further provisions as the Company may
reasonably require.
(b) Payment of the Option Price for the Vested Shares to be
purchased on the exercise of the Option shall be made by certified or bank
cashier's check payable to the order of the Company, delivery of shares of
Common Stock, valued at their Fair Market Value as of the trading day
immediately prior to the date of exercise (including shares of Common Stock
acquired upon exercise of this Option) or by a combination of any of the
foregoing means of payment.
<PAGE> 5
5
(c) As a condition to the exercise of the Option and prior to
the issuance of any Vested Shares, the Optionee (or the representative of his
estate) shall be required to execute a Stockholders' Agreement (the
"Stockholders' Agreement") among the Company, the Optionee (or representative)
and the other stockholders of the Company, in the form attached hereto as Annex
II.
(d) The Company shall be entitled to require as a condition of
delivery of the Vested Shares that the Optionee agree to remit when due an
amount in cash sufficient to satisfy all current or estimated future federal,
state and local withholding and employment taxes relating thereto.
SECTION 6. Termination of Employment. All or any part of the
Option, to the extent unexercised, shall terminate immediately upon the
Optionee's termination of employment with the Company or any of its Affiliates,
except that the Optionee shall have until the end of the third month following
the date of such termination of employment to exercise any portion of the
Option that he could have exercised an the date of such termination of
employment; provided, however, that such exercise must be accomplished prior to
the expiration of the Option Term. Notwithstanding the foregoing, if the
Optionee's termination of employment is due to his Retirement, total and
permanent disability (as determined by the Board) or death, the Optionee, or the
representative of the estate of the Optionee, as the case may be, may exercise
any portion of the Option which the Optionee could have exercised on the date of
such termination of employment for a period of six months thereafter; provided,
however, that such exercise must be accomplished prior to the expiration of the
Option Term. Notwithstanding the foregoing, in the event of a termination of the
Optionee's employment with the Company or any of its Affiliates for Cause, the
unexercised portion of the Option shall terminate immediately and the Optionee
shall have no right thereafter to exercise any part of the Option.
SECTION 7. No Rights as a Stockholder. The Optionee shall not
have any rights or privileges of a stockholder with respect to any Shares until
the date of acceptance by the Company of payment for such Shares pursuant to the
exercise of the Option.
SECTION 8. Additional Provisions Related to Exercise. In the
event of the exercise of the Option at a time when there is not in effect a
registration statement under the Securities Act of 1933, as amended, relating to
the Shares, the Optionee hereby represents and warrants, and by virtue of such
exercise shall be deemed to represent and warrant, to the Company that the
Option Shares are being acquired for investment only and not with a view to the
distribution thereof, and the Optionee shall provide the Company with such
further representations and warranties as the Board may reasonably require in
order to ensure
<PAGE> 6
6
compliance with applicable federal and state securities, "blue sky" and other
laws. No Shares shall be purchased upon the exercise of the Option unless and
until the Company and/or the Optionee shall have complied with all applicable
federal or state registration, listing and/or qualification requirements and all
other requirements of law or of any regulatory agencies having jurisdiction.
SECTION 9. Restriction on Transfer.
(a) The Option may not be transferred, pledged, assigned,
hypothecated or otherwise disposed of in any way by the Optionee and may be
exercised during the lifetime of the Optionee only by the Optionee. If the
Optionee dies, the Option shall thereafter be exercisable, during the period
specified in Section 6, by the representative of his estate to the full extent
to which the option was exercisable by the Optionee at the time of his death.
The Option shall not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
the Option contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the Option, shall be null and void and
without effect.
(b) Any shares issued to the Optionee upon exercise of the
Option shall be subject to the restrictions contained in the Stockholders'
Agreement and shall be deemed Stock (as defined in the Stockholders' Agreement)
for all purposes thereunder.
SECTION 10. Restrictive Legend. All stock certificates
representing shares issued upon exercise of the Option shall, unless otherwise
determined by the Board, have affixed thereto a legend substantially in the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT OR AN OPINION OF
COUNSEL TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED PURSUANT TO THE TERMS OF A STOCKHOLDERS' AGREEMENT AMONG THE
ISSUER, THE ORIGINAL HOLDER OF SUCH SHARES AND THE OTHER PARTIES NAMED
THEREIN. COPIES OF THE STOCKHOLDERS' AGREEMENT MAY BE OBTAINED WITHOUT
CHARGE FROM THE SECRETARY OF THE ISSUER."
SECTION 11. Optionee's Employment. Nothing in the Option shall
confer upon the Optionee any right to continue in the employ of the Company or
any of its Affiliates or interfere in any way with the right of the Company or
its Affiliates or stockholders, as the case may be, to terminate the Optionee's
<PAGE> 7
7
employment or to increase or decrease the optionee's compensation at any time.
SECTION 12. Adjustment.
(a) Subject to Section 9(b), if the Common Stock is changed by
reason of a stock split, reverse stock split, stock dividend or
recapitalization, or converted into or exchanged for other securities as a
result of a merger, consolidation or reorganization, the Board shall make such
adjustments in the number and class of shares of stock subject to the Option,
and such adjustments to the Option Price, as shall be equitable and appropriate
in its good faith judgment under the circumstances.
(b) The following rules shall apply in connection with the
occurrence of any Transaction:
(i) the Optionee shall be given (A) written notice of such
Transaction at least 20 days prior to its proposed effective date (as specified
in such notice) and (B) an opportunity, during the period commencing with
delivery of such notice and ending 10 days prior to such proposed effective
date, to exercise the option in full; provided, however, that upon the
occurrence of a Transaction, the Option, to the extent not so exercised, shall
automatically terminate; and
(ii) notwithstanding anything contained in Section 12(b)(i),
Section 12(b)(i) shall not be applicable if provision shall be made in
connection with such Transaction for the assumption of the Option by, or the
substitution for the Option of new options covering the stock of, the surviving,
successor or purchasing corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number, kind and option price of shares
subject to the Option.
(c) The following rules shall apply in connection with Section
12(a) and (b) above:
(i) no fractional shares shall be issued as a result of any
such adjustment, and any fractional shares resulting from the computations
pursuant to Section 12(a) or (b) shall be eliminated without consideration from
the Option;
(ii) no adjustment shall be made for the issuance to
stockholders of rights to subscribe for additional shares at Common Stock or
other securities; and
(iii) any adjustments referred to in Section 12(a) or (b)
shall be made by the Board in its sole discretion and shall be conclusive and
binding on the Optionee.
SECTION 13. Notices. All notices, claims, certificates,
requests, demands and other communications hereunder shall be in writing and
shall be deemed to have been duly given and
<PAGE> 8
8
delivered if personally delivered or if sent by nationally recognized overnight
courier by telecopy or by registered or certified mail, return receipt requested
and postage prepaid, addressed as follows:
(a) if to the Company, to it at:
CTB Holdings, Inc.
c/o American Securities Capital Partners, L.P.
122 East 42nd Street,
Suite 2400
New York, New York 10168
Attention: Michael G. Fisch
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard Weisberg
(b) if to the Optionee, to him at such Optionee's
address as most recently supplied to the Company
and set forth in the Company's records
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such notice
or communication shall be deemed to have been received (i) in the case of
personal delivery, on the date of such delivery (or if such date is not a
business day, on the next business after the date sent), (ii) in the case of
nationally-recognized overnight courier, on the next business day after the date
sent, (iii) in the case of telecopy transmission, when received (or if not sent
on a business day, on the next business day after the date sent), and (iv) in
the case of mailing, on the third business day following the date on which the
piece of mail containing such communication is posted.
SECTION 14. Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement must be in writing and shall not
operate or be construed as a waiver of any other or subsequent breach.
SECTION 15. Optionee's Undertaking. The Optionee hereby agrees
to take whatever additional actions and execute whatever additional documents
the Company may in its reasonable judgment deem necessary or advisable in order
to carry out or effect one or more of the obligations or restrictions imposed on
the Optionee pursuant to the provisions of this Agreement.
SECTION 16. Amendment. This Agreement may not be amended,
terminated, suspended or otherwise modified except in a written instrument, duly
executed by both parties.
<PAGE> 9
9
SECTION 17. Governinq Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware (without
giving effect to principles of conflicts of laws).
SECTION 18. Counterparts. This Agreement may be executed in
one or more counterparts, and each such counterpart shall be deemed to be an
original, but all such counterparts together shall constitute but one agreement.
SECTION 19. Entire Agreement. This Agreement (and the other
writings incorporated by reference herein) constitute the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior written or oral negotiations, commitments, representations and agreements
with respect thereto.
SECTION 20. Severability. In the event any one or more of the
provisions of this Agreement should be held invalid, illegal or unenforceable in
any respect in any jurisdiction, such provision or provisions shall be
automatically deemed amended, but only to the extent necessary to render such
provision or provisions valid, legal and enforceable in such jurisdiction, and
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this
Non-Qualified Stock Option Agreement as of the date first written above.
CTB Holdings, Inc.
By:_____________________________________
Name:
Title:
________________________________________
Name:
<PAGE> 10
10
ANNEX I
Performance Targets
(in millions of $)
<TABLE>
<CAPTION>
For Fiscal Cumulative
Year ending EBITDA EBITDA
December 31 Target Target
----------- ------ ------
<S> <C> <C> <C>
1996 $21.6 N/A
1997 $24.6 $46.2
1998 $24.5 $70.7
1999 $26.8 $97.5
2000 $29.5 $127.0
</TABLE>
<PAGE> 1
EXHIBIT 10.12
ESCROW AGREEMENT
THIS INDEMNIFICATION AND ESCROW AGREEMENT, dated as of January
4, 1996 (this "Agreement") , by and among CTB-Ventures, Inc., an Indiana
corporation ("Buyer"), each of the persons listed on Exhibit A attached hereto
(collectively the "Shareholders"), and NBD Bank, N.A., as Escrow Agent (the
"Escrow Agent").
WHEREAS, Buyer and the Shareholders are parties to the Stock
Purchase Agreement dated as of November 29, 1995 (the "Stock Purchase
Agreement");
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants contained herein, the parties hereto agree as follows:
1. Appointment of Escrow Agent.
The Shareholders and Buyer hereby appoint NBD Bank, N.A. to
act as Escrow Agent hereunder, and NBD Bank, N.A. hereby accepts such
appointment and agrees to act as Escrow Agent on the terms and conditions
hereinafter set forth.
2. Escrowed Funds.
(a) Simultaneously herewith there has been delivered to the
Escrow Agent (by wire transfer to account number 80-94684-00 of the Escrow
Agent) an behalf of the Shareholders $5,000,000 in immediately available funds.
The Escrow Agent hereby acknowledges receipt of said funds.
(b) The Escrowed Funds are to provide security for the
obligation of the Shareholders to Buyer and its affiliates pursuant to Section
6.2 of the Stock Purchase Agreement.
3. Cooperation.
In the event a Claim (as defined below) is asserted by any
third party against Buyer, it shall notify Shareholders of such Claim by giving
to Shareholders written notice, and shall give Shareholders and their counsel
access to any and all such files, records and other documents as may be
necessary to enable Shareholders to investigate or participate in the defense
against such Claim (but at the cost and expense of Shareholders) and Buyer shall
otherwise cooperate in connection therewith and shall not unreasonably assume a
position contrary to that of Shareholders with respect to all such third party
claims.
<PAGE> 2
2
4. Third Party Claims. Whenever Buyer shall learn after the
date hereof of a claim that, if allowed (whether voluntarily or by judicial or
quasi-judicial tribunal or agency), would constitute a breach of, or give rise
to an obligation of indemnification under, any one or more of the warranties,
representations, covenants or agreements of the Company or any of the
Shareholders as set forth in the Stock Purchase Agreement, before paying the
same or agreeing thereto, Buyer shall promptly notify the Shareholders'
Representative identified on the signature page hereof (the "Shareholders'
Representative") in writing of all such material facts within Buyer's knowledge
with respect to such claim and the amount thereof. If, prior to the expiration
of ten (10) business days from the receipt of such notice, the Shareholders'
Representative shall request, in writing, that the Shareholders' wish to
participate in the defense of such claim, the Shareholders' shall be permitted
to so participate through one counsel of its choosing and at their sole expense,
provided that, Buyer under all circumstances shall retain full control of the
defense of such claim. Counsel for Buyer shall be instructed to periodically
report in writing to the Shareholder Representative the status of such defense.
The Shareholders shall cooperate with Buyer in such defense and make available
to Buyer all such records, materials and other information in their possession
or under their reasonable control relating thereto as is reasonably required by
Buyer. Buyer shall not pay, settle or compromise any such third party claim
without the consent of the Shareholder Representative, which consent shall not
be unreasonably withheld; provided that, Buyer shall not be required to refrain
from paying any claim which has matured by a court judgment or decree, unless an
appeal is duly taken therefrom and execution thereof has been stayed, nor shall
Buyer be required to refrain from paying any claim where the delay in paying or
settling such claim, in the reasonable judgment of Buyer, would result in the
foreclosure of a lien upon any of the property or assets then held by Buyer or
any of its subsidiaries (including the Company) or where any delay in payment
would cause Buyer or any of its subsidiaries a material economic loss; provided
further that, Buyer shall not be required to notify the Shareholders'
Representative prior to paying, settling or compromising any claim of less than
$5,000. The failure to provide notice as provided in this paragraph shall not
excuse the Shareholders from their continuing obligations hereunder; however,
the claim shall be reduced by any damages to the Shareholders resulting from
Buyer's delay or failure to provide notice as provided in this paragraph.
5. Deposit of Escrowed Funds.
On or prior to the Closing Date, Buyer will deliver to the
Escrow Agent the amount specified in Section 2(a) hereof (the "Escrow Amount")
by wire transfer payable to the Escrow Agent,
<PAGE> 3
3
the receipt of which is hereby acknowledged by the Escrow Agent. The Escrow
Agent shall invest the Escrow Amount in an account identified as being
established pursuant to this Agreement (the "Escrow Account"). The Escrow Agent
will hold said Escrow Amount together with all investments thereof and all
interest accumulated thereon and proceeds therefrom (the "Escrowed Funds") in
escrow upon the terms and conditions set forth in this Agreement and shall not
withdraw the Escrowed Funds from the Escrow Account except as provided herein.
6. Investments.
(a) The Escrow Agent shall invest and reinvest from time to
time the Escrowed Funds (i) in any obligation of, or guaranteed as to principal
and interest by, the United States or any agency or instrumentality thereof
(provided that the full faith and credit of the United States supports the
obligation or guarantee of such agency or instrumentality), (ii) in any money
market fund that invests solely in such obligations or types described in clause
(i), (iii) bank deposit account or, (iv) in any other investment directed in
writing by Buyer and the Shareholders' Representative. Investments may be
executed by the Escrow Agent's own Bond Department. To the extent the Escrow
Agent invests any funds in the manner provided for in this Section, no party
hereto shall be liable for any loss which may be incurred by reason of any such
investment. No investment shall exceed the term of this Agreement.
(b) The Escrow Agent shall have the power to reduce, sell or
liquidate the foregoing investments whenever the Escrow Agent shall be required
to release all or any portion of the Escrowed Funds pursuant to Section 7
hereof. The Escrow Agent shall have no liability for any investment losses
resulting from the investment, reinvestment, sale or liquidation of any portion
of the Escrowed Funds, except in the case of the gross negligence or willful
misconduct of the Escrow Agent.
7. Escrowed Funds.
(a) At any time and from time to time, during the period from
the Closing Date through the Escrow Expiration Date (as defined in Section 9
hereof), Buyer may give to the Escrow Agent one or more notices (each, a "Claims
Notice") containing the applicable information set forth in subparagraph (b)
below and stating that, pursuant to the Stock Purchase Agreement and this
Agreement, Buyer is asserting against the Shareholders a right of indemnity
pursuant to Section 6.2 of the Stock Purchase Agreement with respect to a claim
(a "Claim"). In the case of any Claim, the amount of which is not reasonably
ascertainable by Buyer at the time the Claims Notice of such Claim is given,
Buyer agrees to promptly give written notice to the Escrow Agent and
<PAGE> 4
4
the Shareholders' Representative of the amount of such Claim promptly after such
amount becomes reasonably ascertainable by Buyer.
(b) A Claims Notice given to the Escrow Agent shall set forth
the nature and details of such Claim, the Section of the Stock Purchase
Agreement or this Agreement pursuant to which the Claim is made, the amount
thereof if reasonably ascertainable by Buyer (or a statement that the amount
thereof is not then reasonably ascertainable by Buyer and the basis for such
statement) and whether or not such Claim arises from the assertion of liability
by a third party. The Escrow Agent shall promptly forward such Claims Notice to
the Shareholders' Representative.
(c) For the purpose of this Agreement, a "Determination" shall
mean (A) a written compromise or settlement signed by Buyer and the
Shareholders' Representative or (B) a binding arbitration award or a judgment of
a court of competent jurisdiction in the United States of America or elsewhere
(the time for appeal having expired and no appeal having been perfected) in
favor of Buyer and against the Shareholders and based on a Claim under this
Agreement.
(d) within ten (10) business days following notice of a
Determination, the Escrow Agent shall disburse to Buyer from the Escrow Amount,
the amount set forth in such Determination. if any amount is in dispute, the
Escrow Agent shall release the amount which is not in dispute, if any, and shall
hold the amount in dispute until such dispute is resolved in accordance with the
provisions of Section 8 hereof.
8. Settlement of Disputes.
Any dispute which may arise under the Escrow Agreement with
respect to the delivery and/or ownership or right of possession of the Escrowed
Funds or any part thereof, or the duties of the Escrow Agent hereunder, shall be
settled either by mutual agreement of Buyer and the Shareholders' Representative
(evidenced by appropriate instructions in writing to the Escrow Agent, signed by
such parties) or, failing such agreement, either Buyer or the Shareholders'
Representative shall have the right to submit the dispute to neutral binding
arbitration pursuant to the provisions of Section 8.8 of the Stock Purchase
Agreement. The Escrow Agent shall be under no duty whatsoever to institute or
defend any such proceedings. Prior to the settlement of any such dispute, the
Escrow Agent is authorized and directed to retain in its possession, without
liability to anyone, that portion of the Escrowed Funds which is the subject of
such dispute.
<PAGE> 5
5
9. Termination of Escrow Agreement
(a) This Agreement shall terminate upon the earlier to occur
of; (i) the date which is thirty days after the Company's audit of the year
ended December 31, 1996 is completed (the "Scheduled Expiration Date") (or at
the time of the final resolution of any unresolved or unsettled Claims then
outstanding); and (ii) the distribution of all of the Escrowed Funds by the
Escrow Agent pursuant to this Agreement (the earliest to occur of (i) and (ii)
above being hereinafter referred to as the "Escrow Expiration Date"); provided,
however, that if there are any unresolved or unsettled Claims then outstanding
on the Scheduled Expiration Date this Agreement will not terminate until the
resolution of all such Claims.
(b) As soon as practicable after the Escrow Expiration Date,
the Escrow Agent shall promptly deliver to the Shareholders out of the Escrow
Fund the excess, if any, of the total amount remaining in the Escrowed Funds
over the sum of all amounts under unresolved or unsettled Claims then
outstanding, and the Escrow Agent shall continue to retain in the Escrow Fund
all such amounts under unresolved or unsettled Claims then outstanding, subject
to the terms of this Agreement until resolution of such Claims. Payments from
the Escrow Fund to the Shareholders shall be made among the Shareholders in
accordance with Exhibit A hereto.
10. Concerning the Escrow Agent.
(a) The Escrow Agent shall have no duties or responsibilities
except those expressly set forth herein. The Escrow Agent may consult with
counsel and shall have no liability hereunder except for its own negligence or
willful misconduct. It may rely on any notice, instruction, certificate,
statement, request, consent, confirmation, agreement or other instrument which
it reasonably believes to be genuine and to have been signed or presented by a
proper person or persons.
(b) The Escrow Agent shall have no duties with respect to any
agreement or agreements with respect to any or all of the Escrowed Funds other
than as provided in this Agreement. In the event that any of the terms and
provisions of any other agreement between any of the parties hereto conflict or
are inconsistent with any of the terms and provisions of this Agreement, the
terms and provisions of this Agreement shall govern and control in all respects.
Notwithstanding any provision to the contrary contained in any other agreement,
the Escrow Agent shall have no interest in the Escrowed Funds except as provided
in this Agreement.
<PAGE> 6
6
(c) so long as the Escrow Agent shall have any obligation to
pay any amount to the Shareholders and/or Buyer from the Escrowed Funds
hereunder, the Escrow Agent shall keep proper books of record and account, in
which full and correct entries shall be made of all receipts, disbursements and
investment activity in the Escrow Account.
(d) The Escrow Agent shall not be bound by any modification of
this Agreement affecting the rights, duties and obligations of the Escrow Agent,
unless such modification shall be in writing and signed by the other parties
hereto, and the Escrow Agent shall have given its prior written consent thereto.
The Escrow Agent shall not be bound by any other modification of this Agreement
unless the Escrow Agent shall have received written notice thereof.
(e) The Escrow Agent may resign as escrow agent at any time by
giving thirty (30) days written notice by registered or certified mail to Buyer
and the Shareholders' Representative and such resignation shall take effect at
the end of such 30 days or upon earlier appointment of a successor. A successor
escrow agent hereunder may be appointed by designation in writing signed by
Buyer and the Shareholders' Representative. Buyer and the Shareholders'
Representative shall undertake to utilize their best efforts to arrange for the
appointment of a successor escrow agent. If any instrument of acceptance by a
successor escrow agent shall not have been delivered to the Escrow Agent within
sixty (60) days after the giving of such notice of resignation, the resigning
Escrow Agent may at the expense of Buyer and the Shareholders petition any court
of competent jurisdiction for the appointment of a successor escrow agent.
(f) If at any time hereafter the Escrow Agent shall resign, be
removed, be dissolved or otherwise become incapable of acting, or the bank or
trust company acting as the Escrow Agent shall be taken over by any government
official, agency, department or board, or the position of the Escrow Agent shall
become vacant for any of the foregoing reasons or for any other reason, the
Shareholders' Representative and Buyer shall appoint a successor escrow agent to
fill such vacancy.
(g) Every successor escrow agent appointed hereunder shall
execute, acknowledge and deliver to its predecessor, and also to Buyer and the
Shareholders' Representative, an instrument in writing accepting such
appointment hereunder, and thereupon such successor escrow agent, without any
further act, shall become fully vested with all the rights, immunities and
powers and shall be subject to all of the duties and obligations, of its
predecessor; and every predecessor escrow agent shall deliver all property and
moneys held by it hereunder to its successor.
<PAGE> 7
7
(h) The fee charged by the Escrow Agent for performing its
services hereunder, any reasonable out of pocket costs incurred by the Escrow
Agent in performing its duties hereunder and any other amounts payable to the
Escrow Agent pursuant hereto shall be paid one-half by the Buyer and one-half
from the Escrowed Funds.
(i) Buyer and the Shareholders shall indemnify and hold the
Escrow Agent harmless from and against any and all expenses (including
reasonable attorneys' fees), liabilities, claims, damages, actions, suits or
other charges ("Agent Claims") incurred by or assessed against the Escrow Agent
for anything done or omitted by the Escrow Agent in the performance of the
Escrow Agent's duties hereunder, except such which result from the Escrow
Agent's bad faith, gross negligence or willful misconduct.
(j) The Escrow Agent's fees shall be in the amounts set forth
on Exhibit B hereto.
11. Miscellaneous.
(a) This Agreement shall be construed by and governed in
accordance with the laws of the State of Indiana, without regard to such
jurisdiction's conflicts of laws principles.
(b) This Agreement shall be binding upon and shall inure to
the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties hereto.
(c) This Agreement may be executed in one or more counterparts
which taken together shall constitute but one and the same instrument.
(d) Section headings contained herein have been inserted for
reference purposes only and shall not be construed as part of this Agreement.
(e) This Agreement may be modified or amended only by a
written instrument duly executed by all parties hereto or their respective
successors or assigns.
(f) All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given
(unless otherwise specifically provided for herein) if delivered personally
(including by courier), telecopied (which is confirmed) or mailed (registered or
certified mail), postage prepaid to:
<PAGE> 8
8
If to Buyer:
c/o American Securities Captial Partners, L.P.
122 East 42nd Street, Suite 2400
New York, New York 10168-0002
Attention: Michael G. Fisch
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard C. Weisberg, Esquire
If to the Shareholders:
c/o CTB, Inc.
State Road 15 North
P.O. Box 2000
Milford, Indiana 46520-2000
Attn: J. Christopher Chocola
with a copy to:
Yoder, Ainlay, Ulmer &
Buckingham
130 North Main Street
P.O. Box 575
Gashen, Indiana 46527
Attn: Gordon Lord, Esq.
If to the Escrow Agent:
NBD Bank, N.A.
P.O. Box 1686
Elkhart, Indiana 46515
Attn: David Beaverson
or to such other addresses or persons as any party may have furnished to the
other parties in writing, in accordance herewith, provided, however, that
notices to the Escrow Agent shall be deemed effective only upon receipt.
(g) The Escrow Agent shall not be liable to pay any tax on any
interest earned on the Escrow Amount, it being the understanding of the parties
that such tax shall be the responsibility of the Shareholders. The tax
identification numbers for the Shareholders are set forth on Exhibit A.
(h) The Shareholders have irrevocably and unconditionally
appointed J. Christopher Chocola as their
<PAGE> 9
9
Shareholders' Representative to take any and all action on the Shareholders'
behalf in connection with this Agreement.
(i) if any party hereto refuses to comply with, or at any time
violates or attempts to violate, any term, covenant or agreement contained in
this Agreement, any other party hereto may, by injunctive action, compel the
defaulting party to comply with, or refrain from violating, such term, covenant
or agreement, and may, by injunctive action, compel specific performance of the
obligations of the defaulting party.
(j) Except as provided herein, the rights and obligations of
the parties under this Agreement shall not be assigned to any person or entity,
without the written consent of the other parties. The parties hereto acknowledge
that the right of the Buyer to receive payments from the Escrowed Funds may be
pledged to its senior lender. This Agreement shall not confer any benefits on
any persons other than the parties hereto.
(k) Any terms which are capitalized herein but not otherwise
defined shall have the meanings ascribed to them in the Stock Purchase
Agreement.
<PAGE> 10
10
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered on the date first above written.
NBD BANK, N.A., as Escrow
Agent
By: /s/ David G. Beaverson
-------------------------------------
Title: Second Vice
President
David G. Beaverson
CTB VENTURES, INC.
By: /s/ David Horing
-------------------------------------
Title: Vice President
/s/ J. Christopher Chocola
----------------------------------------
J. Christopher Chocola,
individually and as
Shareholder Representative
<PAGE> 11
11
EXHIBIT A
TO ESCROW
AGREEMENT
<TABLE>
<CAPTION>
Shareholder Name/Tax ID Number Percentage
- ------------------------------ ----------
<S> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.13
MANAGEMENT CONSULTING AGREEMENT dated
as of January 4, 1996 between CTB, Inc., an
Indiana corporation (the "Company"), and
American Securities Capital Partners, L.P., a
Delaware limited partnership (the
"Consultant")
The Company desires to avail itself of the Consultant's
expertise and consequently has requested the Consultant to provide such
expertise, from time to time, in rendering certain management consulting and
advisory services related to the business and affairs of the Company and its
subsidiaries and the review and analysis of certain financial and other
transactions. The Consultant and the Company agree that it is in their
respective interests to enter into this Agreement whereby, for the consideration
specified herein, the Consultant shall provide such services as an independent
consultant to the Company.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the Company and the Consultant agree as follows;
SECTION 1. Retention of Consultant. The Company retains the
Consultant, and the Consultant accepts such retention, upon the terms and
conditions set forth in this Agreement.
SECTION 2. Term. This Agreement shall commence on January 4,
1996 and shall terminate on the earlier of (i) December 31, 2000 (the "Initial
Term") or (ii) the date upon which entities affiliated with the Consultant cease
to control on a fully-diluted basis directly or indirectly at least 20% of the
voting power of the Company. Upon the termination of the Initial Term and each
additional year thereafter, if any, for which this Agreement shall be extended
pursuant to this sentence, this Agreement shall automatically be extended for an
additional year unless notice to the contrary is given by either party at least
30 but no more than 60 days prior to such termination (the Initial Term and all
extensions thereof are collectively referred to as the "Term").
SECTION 3. Management Consulting Services. (a) The Consultant
shall advise the Company and its subsidiaries concerning such management matters
as relate to proposed financial transactions, acquisitions and other senior
management matters related to the Company's and its subsidiaries' business,
administration and policies, in each case as the Company shall reasonably and
specifically request by way of written notice to the Consultant, which notice
shall specify the services required of the Consultant and shall include all
background material necessary for the Consultant to complete such services. The
Consultant shall not be required to devote any specified amount
<PAGE> 2
2
of time to any such written request and shall be required to devote only so much
time to any such written request as the Consultant shall, in its reasonable
discretion, deem necessary to complete such services. Such consulting services
shall, in the Consultant's reasonable discretion, be rendered in person or by
telephone or other communication. The Consultant shall be free of domination or
control by the Company over the manner and time of rendering its services
hereunder, and the Company shall have no right to dictate or direct the details
of the services rendered hereunder. The Consultant shall (i) use its reasonable
effects to deal effectively with all subjects submitted to it hereunder and (ii)
endeavor to further, by performance of its services hereunder, the policies and
objectives of the Company.
(b) The Consultant shall perform all such services as an
independent contractor to the Company. The Consultant is not an employee, agent
or representative of the Company and has no authority to act for or to bind the
Company without its prior written consent.
(c) This Agreement shall in no way prohibit the Consultant or
any partner or employee thereof from engaging in other activities, whether or
not competitive with any business of the Company.
SECTION 4. Compensation. (a) As consideration for the
Consultant's agreement to render the management consulting services set forth in
Section 3 of this Agreement and as compensation for any such services rendered
by the Consultant, the Company shall pay the Consultant an annual fee of
$300,000 in equal quarterly installments of $75,000 payable in advance on the
first day of each fiscal quarter (January 1, April 1, July 1 and October 1) (or,
if such date is not a business day in New York City, on the next business day in
New York City), with the first such installment to be payable on January 4,
1996.
(b) The Company (or, at the Company's option, any subsidiary
or affiliate thereof) shall, upon presentation by the Consultant to the Company
of such appropriate documentation as may be required by the Company, reimburse
the Consultant for all reasonable and necessary expenses and other disbursements
incurred by any and all partners, directors, officers, employees or agents of
the Consultant in the performance of its obligations hereunder.
(c) Nothing in this Agreement shall have the effect of
prohibiting the Consultant from receiving from the Company or its subsidiaries,
additional incentive or performance based compensation or, on a
transaction-by-transaction basis, a fee for financial advisory and consulting
services rendered by the Consultant to the Company or its subsidiaries in
connection with future acquisitions or dispositions by the Company or its
subsidiaries when so requested by the Company. As long as Caryl Chocola and J.
Christopher Chocola (together, the "Chocolas")
<PAGE> 3
3
collectively own at least 20% of the Company's outstanding common stock, the
Company shall not pay such compensation or fee without the Consent of one of the
Chocolas.
SECTION 5. Indemnification. The Company shall indemnify and
hold harmless the Consultant and its partners, directors, officers, employees,
agents and affiliates from and against any and all liabilities, costs, expenses
and disbursements (collectively, "Claims") of any kind with respect to or
arising from this Agreement or the performance by the Consultant of any services
in connection herewith. Notwithstanding the foregoing provision, the Company
shall not be liable for any Claim arising from the gross negligence or willful
misconduct of the Consultant.
SECTION 6. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed sufficient if
personally delivered, or sent by nationally-recognized overnight courier, by
telecopy, or by registered or certified mail, return receipt requested and
postage prepaid, addressed as follows:
if to the Consultant:
American Securities Capital Partners, L.P.
122 East 42nd Street
Suite 2400
New York, New York 10168
Attention: Mr. Michael G. Fisch
Telecopier: (212) 697-5524
Telephone: (212) 476-8051
if to the Company:
CTB, Inc.
State Road 15 North
Post Office Box 2000
Milford, Indiana 46542-2000
Attention: J. Christopher Chocola
Telecopier: (219) 658-4171
Telephone: (219) 658-4101
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such notice
or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the third business day following that on which the piece
of mail containing such communication is posted.
<PAGE> 4
4
SECTION 7. Benefits of Agreement. This Agreement shall bind
and inure to the benefit of any successors to or assigns of the Consultant and
the Company; provided, however, that this Agreement may not be assigned by
either party hereto without the prior written consent of the other party.
SECTION 8. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Indiana
(without giving effect to principles of conflicts of laws).
SECTION 9. Headings. Section headings are used for convenience
only and shall in no way affect the construction of this Agreement.
SECTION 10. Entire Agreement; Amendments. This Agreement
contains the entire understanding of the parties with respect to its subject
matter and neither it nor any part of it may in any way be altered, amended,
extended, waived, discharged or terminated except by a written agreement signed
by each of the parties hereto.
SECTION 11. Counterparts. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 12. Waivers. Any party to this Agreement may, by
written notice to the other party, waive any provision of this Agreement. The
waiver by any party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
<PAGE> 5
5
IN WITNESS WHEREOF, the parties have duly executed this
Management Consulting Agreement as of the date first above written.
CTB, INC.
By: /s/ J. Christopher Chocola
-------------------------------------
Name: J. Christopher Chocola
Title: President and Chief Executive
Officer
AMERICAN SECURITIES CAPITAL
PARTNERS, L.P.
By its General Partner
AMERICAN SECURITIES CAPITAL
PARTNER GP CORP.
By: /s/ Michael G. Fisch
-------------------------------------
Name: Michael C. Fisch
Title: President
CTB VENTURES, INC., as holder of all outstanding shares of
Common Stock of the Company, hereby consent to the execution and delivery by the
Company of the foregoing Agreement.
CTB VENTURES, INC.
By: /s/ David Horing
------------------------
Name: David Horing
Title: Vice President
<PAGE> 1
EXHIBIT 10.14
AGREEMENT FOR PARTIAL RELEASE OF ESCROWED FUNDS
THIS AGREEMENT FOR PARTIAL RELEASE OF ESCROWED FUNDS dated and deemed
effective as of March 11, 1997, (this "Agreement"), by and among CTB, Inc.
(formerly CTB Ventures, Inc.), an Indiana corporation ("Buyer"), and each of
the persons listed on Exhibit A attached hereto (collectively the
"Shareholders").
WHEREAS, Buyer and the Shareholders are parties to the Escrow
Agreement, along with NBD Bank, N.A., as Escrow Agent (the "Escrow Agent"),
dated as of January 4, 1996 (the "Escrow Agreement"); and
WHEREAS, Section 9 of the Escrow Agreement provides, in part, that the
Escrow Agreement will terminate on the earlier of (i) thirty (30) days after
completion of the Buyer's audit for the year ended December 31, 1996, or (ii)
the distribution of all Escrowed Funds pursuant to the Escrow Agreement;
provided further, that if there are any unresolved or unsettled claims then
outstanding, the Escrow Agreement will not terminate until the resolution of
all such claims; and further provided that as soon as practicable after such
termination of the Escrow Agreement, the Escrow Agent will promptly deliver all
excess funds to the Shareholders; and
WHEREAS, the Buyer's audit for the year ended December 31, 1996, has
been finalized as of March 28, 1997, and results communicated to the Buyer; and
WHEREAS, certain potential claims against the Escrowed Funds have been
identified by Buyer; and
WHEREAS, Buyer and the Shareholders desire to arrange for a partial
distribution of the Escrowed Funds in consideration of the anticipated results
of the audit and the potential claims against the Escrowed Funds which have
been identified.
NOW, THEREFORE, the parties hereby agree as follows:
1. Buyer and the Shareholders hereby agree, and shall instruct the
Escrow Agent, to release from the Escrowed Funds to the Shareholders, pursuant
to terms of the Escrow Agreement, the principal sum of $4,500,000.00 plus
interest earned as of March 7, 1997, in the amount of $177,825.90, for a total
distribution to the shareholders of $4,677,825.90.
2. Buyer and the Shareholders acknowledge that Buyer has asserted a
potential, but as yet not readily ascertainable claim, relating to potential
environmental clean-up costs, which costs may be in a total sum qualifying for
payment from the Escrowed Funds. Therefore, Buyer and the Shareholders agree
that the principal sum of $500,000.00, plus interest from and after March 7,
1997, shall be retained in the
1
<PAGE> 2
Escrow Account as Escrowed Funds for the possible payments of such claims,
until such claims are finally resolved or released by Buyer.
3. Buyer and the Shareholders shall execute appropriate instructions
to the Escrow Agent with regard to this Agreement and obtain Escrow Agent's
written acknowledgment and consent to the partial release of the Escrowed Funds
provided for in this Agreement.
CTB, INC. (formerly CTB Ventures, Inc.)
By: /s/ Don J. Steinhilber
--------------------------------
Don J. Steinhilber
Title: Vice President & CFO
-----------------------------
SHAREHOLDERS
By: /s/ J. Christopher Chocola
--------------------------------
J. Christopher Chocola,
individually and as
Shareholder Representative
2
<PAGE> 1
EXHIBIT 10.15
TRANSACTION CONSULTING AGREEMENT
THIS TRANSACTION CONSULTING AGREEMENT (the "Agreement") is entered into
by and between CTB Holdings, Inc., a Delaware corporation (the "Company"), and
American Securities Capital Partners, L.P., a Delaware limited partnership (the
"Consultant"), dated and effective as of April 30, 1997.
WHEREAS, the Company desires to have access to the Consultant's
expertise and to obtain assistance and advice from the Consultant with regard
to the potential initial public offering of the common stock of the Company; and
WHEREAS, the Company and the Consultant agree that it is in their
respective interests to enter into this Agreement whereby, for the
consideration specified herein, the Consultant shall provide the aforesaid
services as an independent consultant to the Company.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the Company and the Consultant agree as follows:
1. Retention of Consultant. The Company hereby retains the
Consultant, and the Consultant accepts such retention, upon the terms and
conditions set forth in this Agreement.
2. Consulting Services. The Consultant shall advise and assist the
Company with regard to the development, promotion, negotiation, structure,
drafting of registration statements and related documents and any other matters
related to or necessary for the proposed initial public offering of the
Company's common stock. The Consultant shall devote such time and effort as it
determines in its reasonable discretion to be necessary to complete such
services. Such consulting services shall, in Consultant's reasonable
discretion, be rendered in person or by telephone or other communication. The
Consultant shall be free of domination or control by the Company over the
manner and time of rendering its services hereunder, and the Company shall have
no right to dictate or direct the details of the services rendered hereunder.
The Consultant shall perform all such services as an independent contractor to
the Company. The Consultant is not an employee, agent or representative of the
Company and has no authority to act for or to bind the Company without the
Company's prior written consent.
3. Compensation. As consideration for the Consultant's agreement
to render the consulting services set forth in Section 2 of this Agreement the
Company shall pay the Consultant the following fee:
(a) one-half of one percent (0.5%) of the gross proceeds
received from an initial public offering of the Company's common stock, before
deduction of underwriters' fees and other transaction costs, payable on the
closing date of the offering, but after the closing, or on such later date as
may be agreed to in writing by the parties.
1
<PAGE> 2
4. Non-Duplication. The Company and the Consultant expressly
acknowledge and agree that all services and any resulting fees provided under
this Agreement are in addition to, and not a duplication of, any services or
fees provided for under the Management Consulting Agreement between the Company
and the Consultant dated January 4, 1996, and nothing herein is intended to or
shall diminish or adversely affect any fees payable under such Management
Consulting Agreement nor the services to be provided by Consultant thereunder.
5. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed sufficient if
personally delivered, or sent by nationally-recognized overnight courier, by
telecopy, or by registered or certified mail, return receipt requested and
postage prepaid, addressed as follows:
if to the Consultant:
American Securities Capital Partners, L.P.
122 East 42nd Street
Suite 2400
New York, New York 10168
Attention: Mr. Michael G. Fisch
Telecopier: (212) 697-5524
Telephone: (212) 476-8051
if to the Company:
CTB Holdings, Inc.
c/o CTB, Inc.
State Road 15 North
Post Office Box 2000
Milford, Indiana 46542-2000
Attention: J. Christopher Chocola
Telecopier: (219) 658-4171
Telephone: (219) 658-4101
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case
of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the
date when sent, (c) in the case of telecopy transmission, when received, and
(d) in the case of mailing, on the third business day following that on which
the piece of mail containing such communication is posted.
6. Benefits of Agreement. This Agreement shall bind and inure to
the benefit of any successors to or assigns of the Company and the Consultant;
provided, however, that this Agreement may not be assigned by either party
hereto without the prior written consent of the other party.
2
<PAGE> 3
7. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Indiana (without
giving effect to principles of conflicts of laws).
8. Headings. Section headings are used for convenience only and shall
in no way affect the construction of this Agreement.
9. Entire Agreement; Amendments. This Agreement contains the entire
understanding of the parties with respect to its subject matter and neither it
nor any part of it may in any way be altered, amended, extended, waived,
discharged or terminated except by a written agreement signed by each of the
parties hereto.
10. Counterparts. This Agreement may be executed in counterparts, and
each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
11. Facsimile Binding. The parties agree that an executed facsimile
copy of this Agreement shall be deemed an original, and, therefore, shall be
binding upon the parties.
12. Waivers. Any party of this Agreement may, be written notice to
the other party, waive any provision of this Agreement. The waiver by any party
of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
IN WITNESS WHEREOF, the parties have duly executed this Transaction
Consulting Agreement as of the date first above written.
CTB HOLDINGS, INC.
By: /s/ J. Christopher Chocola
---------------------------------
Name: J. Christopher Chocola
Title: President
AMERICAN SECURITIES CAPITAL
PARTNERS, L.P.
By its General Partner
AMERICAN SECURITIES CAPITAL
PARTNER GP CORP.
By: /s/ Michael G. Fisch
---------------------------------
Name: Michael G. Fisch
Title:
3
<PAGE> 1
EXHIBIT 10.16
TRANSACTION CONSULTING AGREEMENT
THIS TRANSACTION CONSULTING AGREEMENT (the "Agreement") is entered into
by and between CTB, Inc., an Indiana corporation (the "Company"), and American
Securities Capital Partners, L.P., a Delaware limited partnership (the
"Consultant"), dated and effective as of April 30, 1997.
WHEREAS, the Company desires to have access to the Consultant's
expertise and to obtain assistance and advice from the Consultant with regard to
the negotiation, structure and financing for certain business acquisitions
which the Company is considering; and
WHEREAS, the Company and the Consultant agree that it is in their
respective interests to enter into this Agreement whereby, for the
consideration specified herein, the Consultant shall provide the aforesaid
services as an independent consultant to the Company.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the Company and the Consultant agree as follows:
1. Retention of Consultant. The Company hereby retains the
Consultant, and the Consultant accepts such retention, upon the terms and
conditions set forth in this Agreement.
2. Acquisition Consulting Services. The Consultant shall advise and
assist the Company concerning the negotiation, structure, financing, contract
terms and any other matters relating to the following two proposed acquisition
transactions:
(a) The acquisition of certain specified assets and assumption of
liabilities of the Grain Systems Division of Butler Manufacturing Company,
Kansas City, Missouri (the "Butler Transaction"), for an estimated purchase
price of $32,500,000.
(b) The acquisition of all capital shares of Fancom Holding, B.V.,
a Netherlands corporation (the "Fancom Transaction"), for an estimated purchase
price of NLG 34,000,000.
The Consultant shall devote such time and effort as it determines in its
reasonable discretion to be necessary to complete such services. Such
consulting services shall, in Consultant's reasonable discretion, be rendered
in person or by telephone or other communication. The Consultant shall be free
of domination or control by the Company over the manner and time of rendering
its services hereunder, and the Company shall have no right to dictate or
direct the details of the services rendered hereunder. The Consultant shall
perform all such services as an independent contractor to the Company. The
Consultant is not an employee, agent or representative of the
1
<PAGE> 2
Company and has no authority to act for or to bind the Company without the
Company's prior written consent.
3. COMPENSATION. As consideration for the Consultant's agreement to
render the consulting services set forth in Section 2 of this Agreement the
Company shall pay the Consultant the following fees for each of the proposed
transactions which are successfully completed by the Company:
(a) Upon closing, an amount equal to one percent (1%) of the
purchase price, before adjustment, paid for the assets acquired and liabilities
assumed of the Grain Systems Division of Butler Manufacturing Company.
(b) Upon closing, an amount equal to one percent (1%) of the
purchase price, before adjustment, paid for the capital shares of Fancom
Holding, B.V.
Any fee which becomes payable for the Butler Transaction shall be paid on the
closing date of such transaction, or on such later date as may be agreed to in
writing by the parties. Any fee which becomes payable for the Fancom
Transaction shall be paid on the later of (i) the closing of the Fancom
Transaction, or (ii) the closing of the Butler Transaction. Should the Company
close an initial public offering of its common stock prior to closing of the
later of the Butler Transaction or Fancom Transaction, such fee will become due
and payable immediately following closing of such initial public offering or on
such later date as may be agreed to in writing by the parties.
4. NON-DUPLICATION. The Company and the Consultant expressly
acknowledge and agree that all services and any resulting fees provided under
this Agreement are in addition to, and not a duplication of, any services or
fees provided for under the Management Consulting Agreement between the Company
and the Consultant date January 4, 1996, and nothing herein is intended to or
shall diminish or adversely affect any fees payable under such Management
Consulting Agreement nor the services to be provided by Consultant thereunder.
5. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed sufficient if personally
delivered, or sent by nationally-recognized overnight courier, by telecopy, or
by registered or certified mail, return receipt requested and postage prepaid,
addressed as follows:
2
<PAGE> 3
if to the Consultant:
American Securities Capital Partners, L.P.
122 East 42nd Street
Suite 2400
New York, New York 10168
Attention: Mr. Michael G. Fisch
Telecopier: (212) 697-5524
Telephone: (212) 476-8051
if to the Company:
CTB, Inc.
State Road 15 North
Post Office Box 2000
Milford, Indiana 46542-2000
Attention: J. Christopher Chocola
Telecopier: (219) 658-4171
Telephone: (219) 658-4101
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case
of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the
date when sent, (c) in the case of telecopy transmission, when received, and
(d) in the case of mailing, on the third business day following that on which
the piece of mail containing such communication is posted.
6. BENEFITS OF AGREEMENT. This Agreement shall bind and inure to the
benefit of any successors to or assigns of the Company and the Consultant;
provided, however, that this Agreement may not be assigned by either party
hereto without the prior written consent of the other party.
7. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Indiana (without
giving effect to principles of conflicts of laws).
8. HEADINGS. Section headings are used for convenience only and shall
in no way affect the construction of this Agreement.
9. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
understanding of the parties with respect to its subject matter and neither it
nor any
3
<PAGE> 4
part of it may in any way be altered, amended, extended, waived, discharged or
terminated except by a written agreement signed by each of the parties hereto.
10. Counterparts. This Agreement may be executed in counterparts, and
each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
11. Facsimile Binding. The parties agree that an executed facsimile
copy of this Agreement shall be deemed an original, and, therefore, shall be
binding upon the parties.
12. Waivers. Any party to this Agreement may, by written notice to
the other party, waive any provision of this Agreement. The waiver by any party
of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
IN WITNESS WHEREOF, the parties have duly executed this Transaction
Consulting Agreement as of the date first above written.
CTB, INC.
By: /s/ J. Christopher Chocola
--------------------------------
Name: J. Christopher Chocola
Title: President and Chief
Executive Officer
AMERICAN SECURITIES CAPITAL
PARTNERS, L.P.
By its General Partner
AMERICAN SECURITIES CAPITAL
PARTNER GP CORP.
By: /s/ Michael G. Fisch
--------------------------------
Name: Michael G. Fisch
Title:
4
<PAGE> 1
EXHIBIT 16.1
June 24, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
CTB INTERNATIONAL CORP.
We have read the second paragraph of "Change in Independent Accountants" on
page 59 of the Registration Statement on Form S-1 of CTB International Corp.
dated June 24, 1997 and are in agreement with the first, second, fourth and
fifth sentences of such paragraph.
Yours very truly,
Price Waterhouse LLP
South Bend, Indiana
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF CTB INTERNATIONAL CORP.
<TABLE>
<CAPTION>
STATE OR
JURISDICTION OF NATURE OF PRINCIPAL
NAME OF SUBSIDIARY INCORPORATION BUSINESS CONDUCTED
- ---------------------------------------------------- ------------------ -------------------
<S> <C> <C>
CTB, Inc.*.......................................... Indiana Manufacturing
CTB Credit Corporation.............................. Indiana Inactive
CTB Sales Corporation............................... St. Thomas Foreign Sales Corp.
Virgin Islands
Chore-Time Texas, Inc............................... Texas Sales/Marketing
Chore-Time Brock B.V................................ The Netherlands Sales/Marketing
Chore-Time Brock Ltda............................... Brazil Sales/Marketing/
Manufacturing
Chore-Time Brock Holding B.V........................ The Netherlands Holding Co.
Fancom Holding B.V.* ............................... The Netherlands Holding Co.
Fancom B.V.* ....................................... The Netherlands Manufacturing
Masterform Ventilatte B.V. ......................... The Netherlands Manufacturing
E.U.R.L. Fancom..................................... France Sales/Marketing
Wolters WX B.V.**................................... The Netherlands Manufacturing
</TABLE>
- ------------------------------
* Significant subsidiary
** 40% ownership of common stock and 100% ownership of priority stock
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Registration Statement of CTB International
Corp. on Form S-1 of our report dated February 5, 1997, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
Deloitte & Touche LLP
June 24, 1997
Chicago, Illinois
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 16, 1996
relating to the financial statements of CTB, Inc., which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
Price Waterhouse LLP
South Bend, Indiana
June 24, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use of our report included herein dated March 13, 1997,
on our audits of the financial statements of Grain Systems Division of Butler
Manufacturing Company as of December 31, 1995 and 1996 and for each of the years
in the three year period ended December 31, 1996 and to the reference to our
firm under the heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
Kansas City, Missouri
June 24, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
Fancom Holding B.V. on Form S-1 (File No. 333- ) of our report dated June
10, 1997 on our audits of the consolidated financial statements and financial
statement schedules of Fancom Holding B.V. as of December 31, 1995 and 1996, and
for each of the years in the three year period ended December 31, 1996, which
report is included in this Registration Statement.
We also consent to the reference to Coopers & Lybrand N.V., the Netherlands,
under the caption "Experts".
Eindhoven, June 10, 1997
Coopers & Lybrand N.V.
