SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended June 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from
_______________________ to __________________
Commission File No. 0-3366
BRYAN STEAM CORPORATION
(Exact name of registrant as specified in its charter)
NEW MEXICO 35-0202050
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. BOX 27, PERU, INDIANA 46970
(Address of principal executive offices) (Zip Code)
(765) 473-6651 Registrant's telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:NONE
Securities registered pursuant to Section 12(g) of the Act:
BRYAN STEAM CORPORATION
CAPITAL STOCK, PAR VALUE $10 PER SHARE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].
The aggregate market value of the 91,042 shares of the registrant's
common stock held by non-affiliates on September 23, 1998 (based on the last
price at which the common stock was sold on July 20, 1998) was $7,283,360.00.
There were 191,284 shares of the registrant's common stock outstanding
on September 23, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference into the Part of
this report indicated: NONE.
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<PAGE>
PART I
Item 1. Business
Bryan Steam Corporation ("Bryan" and, together with its direct and
indirect wholly-owned subsidiaries, the "Company"), Burnham Corporation, a New
York corporation ("Burnham") and Burnham Acquisition Corporation, a New Mexico
corporation and a wholly-owned subsidiary of Burnham ("Purchaser") entered into
an Agreement and Plan of Merger dated as of September 23, 1998 (the "Merger
Agreement"), among the Company, Burnham and Purchaser. The Merger Agreement
provides, among other things, for the making of an offer by Purchaser to
purchase all outstanding shares of the Common Stock, par value $10.00 per share
(the "Shares"), of the Company, at a purchase price of $152 per Share (the
"Offer Price"), net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in an Offer to Purchase and in the
related Letter of Transmittal (which, together with any supplements or
amendments thereto, collectively constitute the "Offer"). The Merger Agreement
further provides that, following the completion of the Offer and subject to the
satisfaction or waiver of certain conditions, Purchaser will be merged with and
into the Company (the "Merger"), with the Company surviving the Merger as a
wholly-owned subsidiary of Burnham with the name "Bryan Steam Corporation". As a
result of the Merger, each outstanding Share (other than Shares held by Burnham,
Purchaser or any subsidiary of Burnham, Purchaser or the Company, Shares held in
the treasury of the Company and Shares held by stockholders who have properly
exercised their rights to fair value appraisal rights under the New Mexico
Business Corporation Act) will be converted at the effective time of the Merger
into the right to receive in cash the price per Share paid in the Offer without
interest.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn at the expiration of the Offer at least sixty-six and
two-thirds percent (66-2/3%) plus one of the outstanding Shares on a fully
diluted basis on the date of purchase. The Offer is also subject to certain
other conditions.
Bryan was incorporated under the laws of New Mexico in 1916. The
Company has only one industry segment, the manufacture of boilers, tanks and
heat exchangers. All of the revenue, operating profit or loss, and identifiable
assets of the Company are attributable to that industry segment. See the
Financial Statements filed under Item 8 in Part II of this Report.
Bryan manufactures and sells oil, gas and electrically fired boilers,
commercial water heaters and swimming pool heaters. Bryan also manufactures and
sells a limited number of storage tanks and other equipment for use in
connection with boilers. Wendland Manufacturing Corp., Bryan's wholly-owned
subsidiary ("Wendland"), began manufacturing storage tanks effective July 3,
1995, upon the consummation of an asset purchase transaction pursuant to which
Wendland purchased substantially all of the operating assets of a tank
manufacturer in San Angelo, Texas (the "Wendland Transaction"). The assets
purchased by Wendland in the Wendland Transaction totaled approximately $1.1
million, and the Wendland Transaction was funded primarily through a $1.0
million loan. On December 6, 1995, Wendland also acquired substantially all of
the assets of a discontinued heat exchanger business in Monticello, Indiana for
$215,000. Wendland operated these assets and the heat exchanger business as a
division until March 15, 1996, at which time Wendland organized Monticello
Exchanger and Manufacturing Co. ("MEMCO") as a wholly-owned subsidiary and
transferred assets and liabilities relating to the heat exchanger business with
a net value of approximately $450,000 in exchange for all of MEMCO's issued and
outstanding capital stock. MEMCO has operated the heat exchanger business since
March 15, 1996.
Most boilers manufactured by Bryan are sold directly to contractors for
installation in new apartment, commercial, industrial and institutional
buildings. A limited number of boilers are sold for replacement purposes. Most
tanks manufactured by Wendland are sold directly to contractors for installation
in new commercial and industrial applications. A limited number of tanks are
sold for replacement purposes. Most heat exchangers manufactured by MEMCO are
sold directly to the end-users for installation in new industrial applications.
A limited number are also sold for replacement purposes.
Sales of Bryan's boilers are made through approximately 70 independent
manufacturers' representatives located throughout the United States and Canada.
Bryan sold boilers to approximately 500 different purchasers during its fiscal
year ended June 30, 1998. No single customer accounts for any material part of
Bryan's sales. Sales of Wendland's tanks are made through approximately 45
independent manufacturer's representatives located throughout the United States.
Wendland sold tanks to approximately 400 different purchasers during its fiscal
year ended June 30, 1998. No single customer accounts for any material part of
Wendland's sales. Sales of MEMCO's heat exchangers are made through 8
independent representatives. MEMCO sold products to 50 customers during its
fiscal year ended June 30, 1998.
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<PAGE>
For the fiscal year ended June 30, 1998, fossil fuel hot water and
steam boilers contributed approximately $18,479,000, or 83%, of total
consolidated revenue. Fossil fuel hot water and steam boilers contributed
approximately $18,759,000, or 84%, and $16,639,000, or 84%, of total
consolidated revenue for the fiscal years ended June 30, 1997 and 1996,
respectively.
The dollar amount of Bryan's backlog of orders believed to be firm as
of the close of its fiscal year ended June 30, 1998, was approximately
$6,576,073. Bryan's backlog at the close of its preceding fiscal year ended June
30, 1997, was approximately $5,484,214. Wendland's backlog of orders believed to
be firm as of the close of its fiscal year ended June 30, 1998, was
approximately $498,812. Wendland's backlog at the close of its preceding fiscal
year ended June 30, 1997, was approximately $251,810. MEMCO's backlog of orders
believed to be firm as of the close of its fiscal year ended June 30, 1998, was
approximately $550,020. MEMCO's backlog at the close of its preceding fiscal
year ended June 30, 1997, was approximately $206,968.
Bryan's Canadian sales amounted to approximately $1,191,414 during its
fiscal year ended June 30, 1998. Canadian sales were approximately $555,239 and
$472,300 for its fiscal years ended June 30, 1997 and 1996, respectively. Its
other foreign sales were not material. Foreign sales by Wendland and MEMCO
during the year ended June 30, 1998 were not material.
The Company operates in a highly competitive industry. Bryan is one of
the smaller boiler manufacturers, but holds a relatively significant share of
its market. Wendland holds a relatively insignificant share of its market.
Because MEMCO represents the start-up of a previously discontinued business,
MEMCO had not developed a core customer base as of June 30, 1998 and remains one
of the smallest manufacturer of heat exchangers in the industry.
The Company, to obtain sales in its industry, ordinarily must have a
competitive price. The Company believes competition in the industry has
intensified in recent years. In addition, reputation for quality, service
capabilities and local sales representation are all important factors in
securing sales.
Bryan's boilers are manufactured from steel and copper tubing, steel
plate, sheet metal, finished components (including burners, controls, and
gauges) and insulation and refractory materials, substantially all of which are
available from several sources. Wendland's tanks are manufactured from carbon
steel and stainless steel, steel plate and insulation. Substantially all of the
materials used to manufacture tanks are available from several sources. MEMCO's
heat exchangers are manufactured from steel plate, pipe and various types of
metal tubing, substantially all of which are available from several sources.
The Company's expenditures for research and development of new products
and improvement of existing products during its fiscal years ended June 30,
1998, and June 30, 1997, were approximately $135,760 and $141,923, respectively,
all of which were incurred by Bryan. Bryan employs 4 persons on a full-time
basis for such activities. Neither Wendland nor MEMCO employ any full-time
employees solely for research and development purposes.
The Company has no patents, trademarks, licenses, franchises or
concessions that are material to its business.
To meet quick demand, Bryan stocks approximately 80 boilers that are
substantially complete. Bryan also stocks approximately 175 boiler frames to
facilitate delivery. Bryan allows extended payment terms to customer, permitting
customers, who are primarily contractors, to pay Bryan after receiving payment
from general contractors or owners.
Bryan employs approximately 217 persons, all of whom are full time
employees. Its production employees are represented by Local 357 of the
International Brotherhood of Boilermakers. Wendland employs approximately 40
employees, all of whom are full time employees, and none of whom are represented
by a union. MEMCO employs approximately 20 employees, all of whom are full time
employees, and none of whom are represented by a union.
Item 2. Properties
Bryan operates a manufacturing plant located in Peru, Indiana. The
plant and the 27-acre site upon which it is located are owned by Bryan. The
plant consists of several adjacent structures of brick, masonry and steel
construction varying in age, all of which are in satisfactory condition. Bryan's
Plant contains an aggregate of approximately 153,000
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square feet on one level. Bryan's executive and administrative offices are
located in a separate masonry building located on the same 27-acre site.
Wendland operates its tank manufacturing plant on a 4.225 acre tract of
land in San Angelo, Texas. The Wendland plant contains approximately 55,000
square feet on one level. Wendland is also currently leasing certain real
property located adjacent to the Wendland plant.
MEMCO operates its manufacturing plant on a 3.884 acre tract of land in
Monticello, Indiana. MEMCO's plant contains approximately 17,400 square feet on
one level.
Item 3. Legal Proceedings
The Company is a party to ordinary routine litigation incidental to its
business. The Company does not presently expect the outcome of any pending legal
proceedings to have a material adverse effect on its financial condition or
results of operations.
Item 4. Submission of Matters to a Vote of Securities Holders.
There were no items submitted to a vote of security holders during the
fourth quarter of the Company's fiscal year ended June 30, 1998.
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<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
There are approximately 1,065 record holders of the Company's shares of
common stock as of September 23, 1998. There is no established trading market
for the Company's shares and the Company is not normally informed of the terms
of transactions in its shares.
The Company's shares are traded sporadically over-the-counter. Set
forth below are the range of high and low bid quotations as reported on
Bloomberg L.P. for each quarter during the last two fiscal years. These
quotations may reflect inter-dealer transactions, without retail mark-up,
mark-down, or commission. They do not necessarily represent actual transactions
and management does not have knowledge of the volume of trading, if any, at any
of such bid prices.
QUARTER ENDED HIGH ASK LOW BID
================================== =================== =====================
September 30, 1996 40 1/2 37
December 31, 1996 38 37
- ---------------------------------- ------------------- ---------------------
March 31, 1997 39 1/2 38
June 30, 1997 50 39 1/2
September 30, 1997 50 50
December 31, 1997 63 1/2 53
- ---------------------------------- ------------------- ---------------------
March 31, 1998 65 7/16 63 1/2
June 30, 1998 67 1/4 65 7/16
================================== =================== =====================
The Company has paid dividends for the last several years on an annual
basis. The annual dividends per share declared for its 1998 and 1997 fiscal
years and the dates of payment are:
$2.00 September 15, 1998
$2.00 September 15, 1997
$1.50 September 13, 1996
Item 6. Selected Financial Data.
BRYAN STEAM CORPORATION AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL DATA
(All except per share amounts are in thousands)
BRYAN STEAM CORPORATION AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL DATA
(All except per share amounts are in thousands)
<TABLE>
<CAPTION>
Year end
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS 18,562 17,366 16,217 15,091 13,247
LONG-TERM OBLIGATIONS
Notes payable -- -- -- 800 --
Capital lease obligations 40 45 -- -- --
Long-term debt 29 45 238 -- --
Deferred income taxes 457 424 380 323 296
Dividends payable 13 12 10 9 12
TOTAL LONG-TERM OBLIGATIONS 539 526 628 1,132 308
SALES 26,178 26,233 22,477 17,480 17,036
COST OF GOODS SOLD 21,241 20,212 17,887 13,914 13,708
GROSS PROFIT ON SALES 4,937 6,021 4,590 3,566 3,328
TOTAL EXPENSES 3,513 3,674 2,921 2,338 2,346
OPERATING PROFIT 1,424 2,347 1,669 1,228 982
OTHER INCOME 355 234 174 247 143
INCOME BEFORE INCOME TAXES 1,779 2,581 1,843 1,475 1,125
PROVISION FOR INCOME TAXES 682 972 694 548 410
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 1,097 1,609 1,149 927 715
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 109 -- -- -- (196)
NET INCOME 988 1,609 1,149 927 519
EARNINGS PER SHARE --
COMMON STOCK
(191,284 shares in 1998; 191,284
shares in 1997; 191,284 shares in
1996; 191,284 shares in 1995;
191,284 shares in 1994) 5.17 8.41 6.01 4.85 3.74
OPERATING PROFIT PER SHARE --
COMMON STOCK
(191,284 shares in 1998; 191,284
shares in 1997; 191,284 shares in
1996; 191,284 shares in 1995;
191,284 shares in 1994) 7.44 12.27 8.72 6.42 5.13
DIVIDENDS PER SHARE -- COMMON STOCK
(191,284 shares in 1998; 191,284
shares in 1997; 191,284 shares in
1996; 191,284 shares in 1995;
191,284 shares in 1994) 2.00 1.50 1.40 1.30 1.30
</TABLE>
The accompanying notes to financial statements are an integral part of this
selected consolidated financial data.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL DATA (CONT.)
(All except per share amounts are in thousands)
<TABLE>
<CAPTION>
Year ended June 30,
1998 1997 1996
EARNINGS PER SHARE-COMMON STOCK
(191,284 shares in 1998; 191,284 shares
<S> <C> <C> <C>
in 1997; 191,284 shares in 1996) $ 5.71 $ 8.41 $ 6.01
OPERATING PROFIT PER SHARE-
COMMON STOCK
(191,284 shares in 1998; 191,284 shares
in 1997; 191,284 shares in 1996) $ 7.44 $ 12.27 $ 8.72
DIVIDENDS PER SHARE-COMMON STOCK
(191,284 shares in 1998; 191,284 shares
in 1997; 191,284 shares in 1996) $ 2.00 $ 1.50 $ 1.40
</TABLE>
For a discussion of business combinations and accounting changes
materially affecting the comparability of the information reflected in this Item
6, see Notes 19 and 21, respectively, to Consolidated Financial Statements filed
under Item 8 in Part II of this Report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
Results of Operations
The Company's consolidated net income before the cumulative effect of
the accounting change for the year ended June 30, 1998 was $1,097,359, compared
to $1,609,015 and $1,148,934 for the years ended June 30, 1997 and 1996,
respectively. The Company's consolidated earnings per share before the
cumulative effect of the accounting totaled $5.74 for the year ended June 30,
1998, compared to $8.41 and $6.01 for the years ended June 30, 1998 and 1996,
respectively. The Company's consolidated net income for the year ended June 30,
1998 was $987,651, compared to $1,609,015 and $1,148,934 for the year ended June
30, 1997 and 1996, respectively, The Company's consolidated earnings per share
totaled $5.17 for the year ended June 30, 1998, compared to $8.41 and $6.01 for
the years ended June 30, 1997 and 1996,
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respectively. The decrease in net income (before the effect of the net
accounting change) of $511,656, or 32%, was primarily attributable to the
cumulative effect of accounting change for vacation pay on years prior to July
1, 1997 of $109,708 and Bryan Boilers' operations, which generated a net income
of $970,393 for the year ended June 30, 1998, compared to a net income of
$1,614,268 for the year ended June 30, 1997. Wendland also generated net income
of $116,796 for the year ended June 30, 1998, as compared to net income $117,140
for the year ended June 30, 1997. MEMCO generated a loss of $79,542 for the year
ended June 30, 1998, compared to a loss of $121,905 for the year ended June 30,
1997. Operating profit totaled $1,423,828, or 5.44% of sales, in 1998 compared
to 2,346,494, or 8.94% of sales and $1,668,590, or 7.42% of sales, in 1997 and
1996, respectively. The sum of the income and losses of the three companies does
not equal the Company's consolidated after-tax profit because of tax
considerations from the losses at MEMCO.
The Company's combined revenues of $26,178,214 for the year ended June
30, 1998 represent a decrease of less than 1% over the revenues of $26,232,883
for the year ended June 30, 1997. Bryan Boilers' revenues for 1998 were down
$232,508. The revenues of MEMCO were down $126,110. However, Wendland's revenues
increased $303,949. The revenues of Bryan Boilers remained relatively at the
same amount as the prior year level despite a price increase of approximately 3%
that was placed in effect on September 1, 1997. The effect of the price increase
was offset by Bryan Boilers' inability to maintain the same shipping levels in
the final quarter of its current fiscal year as it achieved in the same quarter
of the previous fiscal year. Wendland's increase in revenues reflects the
results of management's effort to achieve its goal to reach the $3,000,000 sales
level. MEMCO's decrease in revenues is primarily attributable to the
difficulties encountered by the subsidiary as it attempts to increase is market
share and develop new products to supplement its existing product lines.
The Company's cost of goods sold for the year ended June 30, 1998 was
$21,241,354, compared to $21,212,160 and $17,887,043 for the years ended June
30, 1997 and 1996, respectively. The Company's cost of goods sold as a
percentage of sales was 81.14% in 1998, which increased when compared to 77.05%
in 1997. Management believes that this increase in cost of goods sold reflects
the increase in labor costs incurred during the year. This increase results from
increased wage rates and the inability to sustain the labor efficiency of the
prior year. Bryan Boilers negotiated a new collective bargaining agreement in
May, 1998, which runs through May, 2001. This collective bargaining agreement
provided for an increase in wages for Bryan Boilers' bargaining unit of 5% in
May, 1998 and 3% in each of the subsequent two years covered by the contract.
Total expenses for the year ended June 30, 1998 totaled $3,513,032
compared to $3,674,229 for the year ended June 30, 1997. Total expenses for the
year ended June 30, 1997. Total expenses for the year ended June 30, 1998 were
approximately 13% of sales, as compared to 14% for the year ended June 30, 1997.
Total other income (expense) totaled $355,221 in 1998 compared to
$234,474 and $173,960 in 1997 and 1996, respectively. The increase in other
income (expense) in 1998 over 1997 resulted from a decrease in interest expense,
an increase in freight income and an increase in other income. These were offset
somewhat by a decrease in interest and dividend income. Interest expense
decreased to $24,181 in 1998 from $88,281 in 1997. Freight income increased by
$32,907 over this same period in 1997. Other income increased to $118,676 in
1998 from $52,353 in 1997. Interest and dividend income decreased by $53,052
over the same period in 1997, and is approximately equal to 1996.
Financial Condition
The Company's total assets at June 30, 1998 were $18.6 million compared
to $17.4 million and $16.2 million at June 30, 1997 and 1996, respectively. The
increase in total assets resulted primarily from the approximately $1.3 million
increase in current assets. The majority of this increase is attributable to an
increase in accounts receivable, inventory and prepaid expenses as compared to
June 30, 1997. Total current liabilities at June 30, 1998 were approximately $3
million, which is an increase as compared to $2.4 million and $2.5 million at
June 30, 1997 and 1996, respectively. The Company's net worth at June 30, 1998
was $15 million, compared to $14.4 million and $13.1 at June 30, 1997 and 1996,
respectively.
Liquidity and Capital Resources
Total cash and cash equivalents and investments at June 30, 1998 were
$1,561,657, compared to $1,835,565 and $1,921,293 at June 30, 1997 and 1996,
respectively. This decrease resulted primarily from the increase in inventory,
accounts receivables and prepaid expenses between 1998 and 1997, offset by an
increase in short-term borrowings between 1998 and 1997. The combined working
capital ratio of current assets to current liabilities was 4.23:1 at June 30,
1998, compared to 4.67:1 and 4.61:1 at June 30, 1997 and 1996, respectively.
Management estimates that capital expenditures
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<PAGE>
for fiscal year 1999 will total approximately $400,000, which includes $200,000
for a new machining center to facilitate the drilling of holes in pipes.
Management anticipates that internal sources of funds and available sources of
financing will be adequate to cover the planned capital expenditures and
maintain the Company's current level of operations.
Year 2000
Management and the Board of Directors recognize and understand Year
2000 ("Y2K") risk and do not believe that the consequences of Y2K issues would
have a material effect on the Company's business, results of operations, or
financial condition. Neither the products that the Company manufactures nor the
manufacturing equipment used by the Company have computer chip components
affected by the Y2K problem. Management is in the process of assessing whether
its suppliers or customers are Y2K compliant; however, the Company is not
dependent on any single supplier and generally believes that the components and
materials used in its products are available from multiple suppliers. Likewise,
no single customer accounts for a material portion of the Company's sales.
Management is aware of the need for some minor equipment or software
changes to achieve Y2K compliance with respect to its internal systems. Although
the full cost of modifications is not yet known, management does not anticipate
a need to invest heavily in system improvements to achieve Y2K compliance. At
this time, it is estimated that costs associated with Y2K issues will be less
than $5,000 for fiscal year 1999.
General
Management considers Bryan Boilers' performance for the last fiscal
year to be satisfactory, considering the competitive nature of this industry.
Management considers the performance of Wendland to be very satisfactory,
considering the regionality of its markets. Management considers the MEMCO
performance to be acceptable, considering that it is still a start-up company.
Management is concerned with continued losses shown by MEMCO and will continue
to assess the ability of MEMCO to compete in its market.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Long-term debt is the only type of market risk-sensitive instrument
held by the Company. Details regarding long-term debt instruments are described
in the Summary of Significant Accounting Policies, Long-Term Debt and Fair Value
of Financial Instruments Notes to Consolidated Financial Statements filed under
Item 8 in Part II of this Report. The Company believes its exposure to market
risk fluctuations for the aforementioned instruments is not material at June 30,
1998.
Item 8. Financial Statements and Supplementary Data.
CASSEN COMPANY LLC
Certified Public Accountants
3845 NORTH MERIDIAN STREET
INDIANAPOLIS, INDIANA 46208-4018
PHONE (317) 923-3324
FAX (317) 923-5247
DONALD L. TEKULVE, C.P.A. LOUIS J. BUERGLER, C.P.A.
DENNIS E. REEVES, C.P.A. EDGARD E. HOWARD, C.P.A.
ROBERT E. DAVIS, C.P.A. EDWIN L. STAGE, C.P.A.
FRANK L. MUZZILLO III, C.P.A.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors and Stockholders
of Bryan Steam Corporation
We have audited the accompanying consolidated balance sheets of Bryan Steam
Corporation (a New Mexico Corporation) and subsidiary as of June 30, 1998,
1997,and 1996, and the related consolidated statements of income, retained
earnings and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Bryan
Steam Corporation and subsidiary as of June 30, 1998, 1997, and 1996, and the
results of their consolidated operations, consolidated retained earnings and
consolidated cash flows for the years then ended, in conformity with generally
accepted accounting principles.
As discussed in Note 21 to the financial statements, effective July 1, 1997, the
Bryan Steam Corporation (Bryan Boiler Division) changed its method of accounting
for vacation pay.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Selected Consolidated Financial Data
is presented for the purposes of additional analysis and is not a required part
of the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ CASSEN COMPANY LLC
CASSEN COMPANY LLC
Indianapolis, Indiana
July 22, 1998
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30,
-------------------------------------
CURRENT ASSETS: 1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash & cash equivalents $ 864,411 $ 368,879 $ 304,739
Investment securities 697,246 1,466,686 1,616,554
Accounts receivable, net 5,104,987 4,814,745 4,793,663
Inventory 5,082,731 4,479,203 4,202,010
Prepaid federal income taxes 377,621 27,528 84,414
Deferred income taxes 90,751 6,547 5,208
Prepaid expenses 518,011 282,644 335,183
----------- ----------- -----------
TOTAL CURRENT ASSETS $12,735,758 $11,446,232 $11,341,771
----------- ----------- -----------
PROPERTY, PLANT & EQUIPMENT
(Cost, less accumulated depreciation) $ 5,478,722 $ 5,576,122 $ 4,568,220
----------- ----------- -----------
OTHER ASSETS
Intangible assets, net $ 135,522 $ 201,791 $ 268,058
Deferred income taxes 206,487 136,646 34,028
Deposits 5,171 5,171 5,171
----------- ----------- -----------
TOTAL OTHER ASSETS $ 347,180 $ 343,608 $ 307,257
----------- ----------- -----------
TOTAL ASSETS $18,561,660 $17,365,962 $16,217,248
=========== =========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 722,198 $ 851,512 $ 553,079
Capital lease obligations 12,786 8,632 -
Short-term debt 754,900 45,400 322,620
Accrued liabilities 1,372,652 1,427,492 1,168,974
Current portion of long-term debt 8,045 24,300 341,673
State income taxes payable - 4,837 -
Deferred income taxes 136,760 86,156 113,877
----------- ----------- -----------
TOTAL CURRENT LIABILITIES $ 3,007,341 $ 2,448,329 $ 2,500,223
----------- ----------- -----------
LONG-TERM LIABILITIES
Capital lease obligations $ 40,023 $ 45,272 $ -
Long-term debt 28,736 44,968 238,207
Deferred income taxes 457,134 423,728 379,661
Dividends payable 13,275 11,834 10,016
----------- ----------- -----------
TOTAL LONG-TERM LIABILITIES $ 539,168 $ 525,802 $ 627,884
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common capital stock, without par value,
200,000 shares - authorized & issued $ 810,272 $ 810,272 $ 810,272
Retained earnings 14,233,606 13,610,286 12,307,596
Treasury stock, at cost, 8,716 shares (28,727) (28,727) (28,727)
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY $15,015,151 $14,391,831 $13,089,141
----------- ----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $18,561,660 $17,365,962 $16,217,248
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated balance sheets.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
June 30,
-----------------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
SALES $26,178,214 $26,232,883 $22,476,628
----------- ----------- -----------
COST OF GOODS SOLD
Inventory - beginning $ 4,479,203 $ 4,202,010 $ 4,181,513
Purchases and freight 11,982,391 11,530,216 10,178,216
Labor 5,969,390 5,436,966 4,581,203
Other costs 3,893,101 3,522,171 3,148,121
----------- ----------- -----------
TOTAL $26,324,085 $24,691,363 $22,089,053
Less: Inventory - ending 5,082,731 4,479,203 4,202,010
----------- ----------- -----------
COST OF GOODS SOLD $21,241,354 $20,212,160 $17,887,043
----------- ----------- -----------
GROSS PROFIT $ 4,936,860 $ 6,020,723 $ 4,589,585
----------- ----------- -----------
EXPENSES
Salaries and wages - officers $ 174,842 $ 244,015 $ 278,261
Salaries and wages - other 1,038,044 910,276 772,170
Depreciation expense 210,036 207,935 119,184
Pension plan 134,933 268,658 115,523
Taxes - payroll & local 139,719 166,422 117,387
Provision for bad debts 15,938 77 15,207
Repairs & maintenance 84,879 130,564 78,141
General & administrative 1,714,641 1,746,282 1,425,122
----------- ----------- -----------
TOTAL EXPENSES $ 3,513,032 $ 3,674,229 $ 2,920,995
----------- ----------- -----------
OPERATING INCOME $ 1,423,828 $ 2,346,494 $ 1,668,590
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest and dividend income $ 105,623 $ 158,675 $ 103,984
Interest expense (24,181) (88,281) (82,830)
Net gain (loss) on investment securities 6,597 (3,872) (1,589)
Freight income 148,506 115,599 86,613
Other income & expense 118,676 52,353 67,782
----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSE) $ 355,221 $ 234,474 $ 173,960
----------- ----------- -----------
INCOME BEFORE INCOME TAXES $ 1,779,049 $ 2,580,968 $ 1,842,550
PROVISION FOR INCOME TAXES 681,690 971,953 693,616
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $ 1,097,359 $ 1,609,015 $ 1,148,934
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE FOR VACATION PAY ON YEARS
PRIOR TO JULY 1, 1997 (NET OF INCOME
TAX BENEFIT OF $78,794) (109,708) - -
----------- ----------- -----------
INCOME $ 987,651 $ 1,609,015 $ 1,148,934
=========== =========== ===========
EARNINGS PER SHARE
Income before cumulative effect of accounting change $ 5.74 $ 8.41 6.01
Cumulative effect of accounting change (0.57) - -
----------- ----------- -----------
INCOME $ 5.17 $ 8.41 $ 6.01
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated statements of income.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
June 30,
--------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $13,610,286 $12,307,596 $11,426,422
Net income 987,651 1,609,015 1,148,934
Unrealized gain on available-for-sale
securities 18,187 - -
Dividends paid (382,518) (286,885) (267,760)
Adjustment to prior year
income tax expense - (19,440) -
----------- ----------- -----------
BALANCE AT END OF YEAR $14,233,606 $13,610,286 $12,307,596
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated statements of retained earnings.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------------
1998 1997 1996
------------ ------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Cash received from customers $ 26,149,110 $ 26,392,669 $ 20,876,838
Cash paid to suppliers and employees (25,344,684) (22,990,668) (20,083,591)
Interest and dividends received 108,472 158,675 129,783
Interest paid (28,962) (90,437) (80,674)
Income taxes paid (1,040,924) (1,017,281) (850,672)
------------ ------------ -------------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $ (156,988) $ 2,452,958 $ (8,316)
------------ ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of plant and equipment $ (460,875) $ (1,466,181) $ (1,493,997)
Proceeds from sale of plant & equipment 11,263 5,346 -
Purchases of investment securities (320,520) (222,916) (520,008)
Proceeds from sale of investment securities 1,127,807 368,912 817,019
Deposits with utilities - - (5,171)
Purchase of non-compete agreements - - (300,000)
Purchase of goodwill - - (13,627)
------------ ------------ -------------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES $ 357,675 $ (1,314,839) $ (1,515,784)
------------ ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings $ 726,398 $ - $ 322,620
Principal payments on short-term borrowings (17,983) (277,220) -
Principal payments on capital lease obligations (8,493) (1,080) -
Principal payments on long-term debt (24,000) (566,612) (464,484)
Proceeds from long-term debt - 56,000 44,364
Dividends paid (381,077) (285,067) (266,607)
------------ ------------ -------------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES $ 294,845 $ (1,073,979) $ (364,107)
------------ ------------ -------------
NET INCREASE (DECREASE) IN CASH
AND EQUIVALENTS $ 495,532 $ 64,140 $ (1,888,207)
CASH AND EQUIVALENTS AT BEGINNING
OF YEAR $ 368,879 $ 304,739 $ 2,192,946
------------ ------------ -------------
CASH AND EQUIVALENTS AT END
OF YEAR $ 864,411 $ 368,879 $ 304,739
============ ============ =============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
Non-cash investing transactions included trading
used equipment having a fair
market value for new equipment,
in addition to boot given, and the
recording of capital lease obligations.
Fair value of used equipment given $ - $ - $ 14,150
============ ============ =============
Capital lease obligations recorded $ - $ 54,984 $ -
============ ============ =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated statements of cash flows.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Corporation manufactures boilers and boiler accessories at its
Bryan Steam Corporation (Bryan Steam) plant in Peru, Indiana. Bryan
Steam's wholly-owned subsidiary, Wendland Manufacturing Corp.
(Wendland), operates a tank manufacturing facility in San Angelo,
Texas. Wendland's wholly-owned subsidiary, Monticello Exchanger and
Manufacturing Co. (Monticello), manufactures heat exchangers at its
plant in Monticello, Indiana. The Corporation sells its products
through independent sales representatives. North America is the
principal market for the Corporation's products.
Bryan Steam's sales were 83.5% of total consolidated sales, while
Wendland's and Monticello's sales were 11.4% and 5.1% of the total,
respectively.
1a. CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, cash equivalents
include cash on hand, deposits in banks, certificates of
deposit, money funds and all highly liquid debt instruments
with original maturities of three months or less.
1b. INVESTMENT SECURITIES
Management determines the appropriate classification of its
investments in debt and equity securities at the time of
purchase and reevaluates such determinations at each balance
sheet date. Debt securities are classified as held to maturity
when the Corporation has the positive intent and ability to
hold the securities to maturity. Held to maturity securities
are stated at amortized cost. Debt securities for which the
Corporation does not have the intent or ability to hold to
maturity are classified as available for sale, along with any
investments in equity securities. Securities available for
sale are carried at fair value, with the unrealized gains and
losses, net of income taxes, reported as a separate component
of Stockholders' Equity. The Corporation had had no
investments that qualify as trading.
The amortized cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to
maturity or, in the case of asset-backed securities, over the
estimated life of the security. Such amortization and interest
are included in Other Income (Expense), in the Statement of
Income. The cost of securities sold is based on the specific
identification method.
The Corporation's investments in debt and equity securities
are diversified among high credit quality securities in
accordance with the Corporation's investment policy.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1c. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation
of buildings, equipment, fixtures and vehicles is computed
using the straight-line method over estimated useful lives.
Estimated useful lives are:
Years
Buildings & improvements 10 - 40
Machinery & equipment 10
Furniture & fixtures 5 - 10
Vehicles 4 - 10
Expenditures for equipment repair and maintenance and for
replacements and renewals of portions of structures which are
not considered as lengthening the life of the structures are
expensed as incurred. Additions, replacements and renewals of
equipment are capitalized.
When property or equipment is retired, sold or otherwise
disposed of, the cost and related accumulated depreciation are
removed from the accounts and gains and losses resulting from
such transactions are reflected in income.
1d. RESEARCH & DEVELOPMENT
Research and development costs are charged to operations when
incurred and are included in operating expenses. The amounts
charged for the years ended June 30, 1998, 1997, and 1996 were
$135,760, $141,923, and $92,063, respectively.
1e. INVENTORY
The Corporation's inventory of raw materials is valued at
lower of cost, using the FIFO method, or market. The
Corporation's inventories of work-in-process and finished
goods are valued at cost per unit.
1f. SUPPLEMENTAL INCOME INFORMATION
The amounts of depreciation and maintenance are set forth in
the statement of income. There were no management or service
contract fees or royalties paid during the years ended June
30, 1998, 1997 and 1996. Advertising costs are expensed as
incurred.
1g. INCOME TAXES
The Corporation adopted Statement of Financial Accounting
Standards (SFAS) 109- "Accounting for Income Taxes", July 1,
1993. This Statement supercedes SFAS 96- "Accounting for
Income Taxes". Deferred income taxes reflect the future
federal and state tax consequences of differences between the
tax basis of assets and liabilities and their financial
reporting amounts at each year-end.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1h. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Corporation and of its wholly-owned
subsidiary. Intercompany transactions and balances have been
eliminated in consolidation.
1i. INDUSTRY SEGMENT
During the year ended June 30, 1998 the Corporation operated
exclusively in one industry segment, the manufacture of
boilers, tanks, and heat exchangers.
1j. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Accounting Standards No. 107 "Disclosures about
Fair Value of Financial Instruments," requires disclosures of
fair value information about financial instruments, whether or
not recognized in the statement of financial condition. In
cases where quoted market prices are not available, fair
values are based on estimates using present value or other
valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate
and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the instruments.
Statement No. 107 excludes certain financial instruments and
all nonfinancial instruments from its disclosure requirements.
For most of its covered financial instruments, the
Corporation's carrying value closely approximates the fair
value of the financial instruments to the Corporation.
1k. USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could
differ from the estimates.
2. INVENTORY
Inventories are stated at the lower of cost or market. Cost
approximates market. Such cost includes raw materials, direct labor,
other direct costs and production overhead. The inventories are valued
on the first-in, first-out (FIFO) method.
Inventories at June 30 are as follows:
1998 1997 1996
---------- ---------- ----------
Finished goods & work in process $1,611,174 $1,165,334 $1,136,608
Raw materials 3,471,557 3,313,869 3,065,402
---------- ---------- ----------
TOTALS $5,082,731 $4,479,203 $4,202,010
========== ========== ==========
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
3. INCOME TAXES
As discussed in Note 1g, on July 1, 1993, the Corporation adopted
Statement of Financial Accounting Standards No. 109-"Accounting for
Income Taxes" (SFAS 109). SFAS 109 is an asset and liability approach
that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been
recognized in the Corporation's financial statements or tax returns. In
estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law
or rates.
The Corporation and its subsidiary file separate income tax returns.
The provision for income taxes consists of the following:
For the years ended June 30,
----------------------------------
1998 1997 1996
-------- ---------- --------
Current taxes:
Federal $544,571 $ 847,472 $483,412
State 141,422 212,093 127,663
-------- ---------- --------
Total $685,993 $1,059,565 $611,075
-------- ---------- --------
Deferred taxes:
Federal $ (1,740) $ (69,359) $ 67,105
State (2,563) (18,253) 15,436
-------- ---------- --------
Total $ (4,303) $ (87,612) $ 82,541
-------- ---------- --------
Provision (benefit) for
income taxes $681,690 $ 971,953 $693,616
======== ========== ========
Reconciliation of total provision for income tax with the expected
provision obtained by applying statutory rates to pretax income:
For the years ended June 30,
--------------------------------
1998 1997 1996
-------- -------- --------
Expected tax provision $743,642 $990,165 $606,802
Nondeductible expenses/
(nontaxable income) (61,952) (15,760) 86,814
Other - (2,452) -
-------- -------- --------
Total Provision for
Income Tax $681,690 $971,953 $693,616
======== ======== ========
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
3. INCOME TAXES (CONT.)
The sources of the temporary differences for deferred income taxes as
of June 30, are summarized as follows:
1998 1997 1996
---------- ---------- ----------
Depreciation $1,105,854 $1,021,060 $ 908,281
Pension 295,925 206,118 272,434
Net operating loss (494,615) (327,321) -
Other (186,563) (17,372) (12,460)
---------- ---------- ----------
$ 720,601 $ 882,485 $1,168,255
========== ========== ==========
Deferred Income
Tax Liabilities $ 296,656 $ 366,691 $ 454,302
========== ========== ==========
Deferred tax liabilities (assets) are comprised of the following:
For the years ended June 30,
----------------------------------
1998 1997 1996
--------- --------- --------
Depreciation $ 457,134 $ 423,728 $379,661
Pension 123,697 86,156 113,877
Other 13,063 - -
--------- --------- --------
Gross deferred tax liability $ 593,894 $ 509,884 $493,538
--------- --------- --------
Allowance for bad debts $ (5,121) $ (6,547) $ (5,208)
Net operating loss carryforward,
expires June 30, 2011 and 2012 (206,487) (136,646) (34,028)
Vacation pay (85,630) - -
--------- --------- --------
Gross deferred tax assets $(297,238) $(143,193) $(39,236)
--------- --------- --------
Deferred tax assets
valuation allowance $ - $ - $ -
--------- --------- --------
Deferred tax liabilities (assets) $ 296,656 $ 366,691 $454,302
========= ========= ========
4. PENSION PLANS
The Corporation has non-contributory pension plans for substantially
all employees at its Peru, Indiana facility. The initial pension plan
was established on or about July 1, 1966. Plan assets consist of
government and corporate bonds, mutual funds, guaranteed investment
contracts, and cash equivalent investments. Pension benefits are based
on taxable earnings and years of service. The Corporation's policy is
to fund at least the minimum amounts required by Federal law and
regulation.
Pension expense includes the following components:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Service cost-benefits earned during the year $ 223,599 $ 226,998 $ 175,553
Interest cost on projected benefit obligation 286,822 266,026 278,403
Actual return on assets (493,079) (151,097) (346,036)
Net of other components 131,139 (62,339) (42,720)
--------- --------- ---------
Net periodic pension cost $ 148,481 $ 279,588 $ 65,200
========= ========= =========
<PAGE>
The reconciliation of the funded status
of the plans is as follows:
Year Ended 6/30/98 6/30/97 6/30/96
--------- --------- ---------
Measurement Date 3/31/98 3/31/97 3/31/96
--------- --------- ---------
Actuarial present value of benefit obligations:
Vested benefit obligation $(3,498,505) $(2,798,339) $(3,490,452)
----------- ----------- -----------
Accumulated benefit obligation $(3,911,156) $(3,102,787) $(3,826,817)
----------- ----------- -----------
Projected benefit obligation $(4,970,451) $(3,878,041) $(4,627,297)
Plan assets at fair value 4,727,838 4,100,016 4,637,004
----------- ----------- -----------
Plan assets greater (less) than projected
benefit obligation $ (242,613) $ 221,975 $ 9,707
Unrecognized net (gain) loss 705,092 177,968 536,257
Prior service cost not yet recognized in net
periodic pension cost 27,205 29,369 31,533
Unrecognized transition obligation (assets) (193,759) (223,197) (305,063)
----------- ----------- -----------
Prepaid (accrued) pension expense $ 295,925 $ 206,115 $ 272,434
=========== =========== ===========
The assumptions used in determining pension
expense and funded status information
shown above were as follows:
6/30/98 6/30/97 6/30/96
----------- ----------- -----------
Discount rate 6.75% 7.50% 7.00%
Rate of salary progression 4.00% 4.00% 4.00%
Long-term rate of return on assets 7.00-8.50% 7.00-8.50% 7.00%
</TABLE>
The discount rates for June 30, 1998, and 1997 are based upon the
Moody's AA Corporate Bond Index.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
4. PENSION PLANS (CONT.)
Contributions to a union sponsored defined contribution pension plan
for years ended June 30, 1998, 1997 and 1996 were $279,355, $224,750
and $171,238, respectively. This plan covers all bargaining unit
employees. This plan is not administered by the Corporation and
contributions are determined in accordance with provisions of a
negotiated labor contract.
The Corporation maintains a defined contribution money-purchase plan
for qualified employees at its San Angelo, Texas facility. The
Corporation's contribution to this retirement plan is determined by the
voluntary contributions made by the employees. The Corporation matches
employee contributions up to 3% of the individual employee's earnings.
During the years ended June 30, 1998 and 1997, the Corporation incurred
expenses of $22,419 and $20,230, respectively, for this retirement
plan, all of which was charged to operations.
5. PLANT, PROPERTY & EQUIPMENT
June 30,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
Land $ 197,326 $ 197,326 $ 183,526
Buildings 4,030,168 3,809,322 2,883,870
Machinery & equipment 3,659,707 3,488,412 3,131,250
Equipment under capital lease 50,145 54,984 -
Patterns - Hoppes 30,000 30,000 30,000
Furniture & fixtures 1,090,832 1,020,343 958,293
Vehicles 352,155 376,247 311,718
----------- ----------- -----------
$ 9,410,333 $ 8,976,634 $ 7,498,657
Less: Accumulated depreciation (3,931,611) (3,400,512) (2,930,437)
----------- ----------- -----------
TOTALS $ 5,478,722 $ 5,576,122 $ 4,568,220
=========== =========== ===========
6. CONTINGENT LIABILITIES
The Corporation is involved in litigation arising from the normal
course of business. In the opinion of management, based on advice of
legal counsel, this litigation will not have any material adverse
effect on the financial position of the Corporation.
7. RELATED PARTY TRANSACTIONS
The Corporation paid approximately $792,315 in the fiscal year 1998,
and $613,253 in the fiscal year ended 1997 to cover premiums for
various property, casualty and workers compensation insurance policies
on which an insurance agency owned by G. N. Summers, a director of the
Corporation, received commissions. There are no other reportable
related party transactions between the Corporation and its directors,
executive officers, 5% beneficial shareholders or immediate family
members of the foregoing persons.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
7. RELATED PARTY TRANSACTIONS (CONT.)
The Corporation paid freight charges totalling $12,800 to Western
Express through January 31, 1997, at which time Wendland Manufacturing
Corp. (Wendland) purchased all of the business assets of Western
Express. Prior to February 1, 1997, an officer of Wendland had an
ownership interest in Western Express.
8. INTANGIBLES
Amortization is recorded under the "straight line method." Goodwill and
non-compete agreements are being amortized over five years.
Expenditures to acquire a patent are capitalized and amortized over 17
years.
9. OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
In 1990, the Corporation adopted Statement of Financial Accounting
Standard No. 105 which requires disclosure of information about
financial instruments with off-balance sheet risk and about
concentrations of credit risk for all financial instruments.
OFF-BALANCE SHEET RISK
As of June 30, 1998, 1997 and 1996, the Corporation had no significant
off-balance sheet risk.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Corporation to
significant concentrations of credit risk consist principally of
temporary cash investments and trade receivables.
The Corporation places its cash and temporary investments with various
high quality financial institutions. Cash accounts, on deposit at a
local bank, sometimes exceeded the $100,000 limit established by the
Federal Deposit Insurance Corporation. The Corporation maintains
accounts with several stock brokerage firms. The accounts contain cash
and various securities. Cash balances, which are generally not
significant, are insured up to $100,000 by the Securities Investor
Protection Corporation (SIPC). Investment securities balances, as
reported in the balance sheet are insured by SIPC up to various limits,
depending on the brokerage firm.
Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers comprising the
Corporation's customer base, and their dispersion across many different
industries and geographical areas. No individual customer balance
exceeded 10% of the Corporation's trade receivables at the balance
sheet date.
In management's opinion, as of June 30, 1998 and 1997, the Corporation
had no other significant concentrations of credit risk.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
10. COMPARATIVE STATEMENT OF CASH FLOWS
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES
<TABLE>
<CAPTION>
June 30,
--------------------------------------
1998 1997 1996
--------- ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 987,651 $1,609,015 $ 1,148,934
Non-cash items included in net income:
Adjustment to prior year tax expense - (19,440) -
Amortization 63,725 66,267 79,517
Depreciation 555,388 495,001 447,072
(Gain) loss on disposal of equipment (5,832) 12,916 3,121
(Gain) loss on sale of securities (6,597) 3,872 1,589
Cumulative effect of accounting change 109,708 - -
Deferred income taxes (4,304) (87,612) 82,541
Changes in:
Accounts receivable (218,068) (21,082) (1,741,809)
Inventory (603,528) (277,193) (20,497)
Prepaid income taxes (354,930) 56,886 (84,414)
Prepaid expense (235,367) 52,539 (144,344)
Other assets (72,067) - -
Accounts payable - trade (129,425) 298,434 233,007
Accrued expenses (238,505) 258,518 142,150
Accrued income taxes (4,837) 4,837 (155,183)
--------- ---------- -----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES $(156,988) $2,452,958 $ (8,316)
========= ========== ===========
</TABLE>
11. OPERATING LEASES
The Corporation has entered into noncancelable operating leases for two
vehicles, a computer, a software license and office equipment expiring
in various years through 2002. Remaining minimum lease payments, by
year, are as follows:
Year Ended June 30,
1999 $ 42,070
2000 42,570
2001 34,644
2002 22,867
2003 -
--------
TOTAL $142,151
Rental expense totalled $30,710 during the fiscal year ended June 30,
1998.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
12. CAPITAL LEASES
The Corporation is a lessee of a phone system, automobile and hydraulic
shear under capital leases, both expiring in 2002. The assets and
liabilities under capital leases are recorded at the lower of the
present value of the minimum lease payments or the fair value of the
asset. The assets are amortized over the estimated productive life of
the asset. Amortization of the assets under capital leases is included
in depreciation expense for the current year.
Following is a summary of the property held under capital lease:
New Lucent Partner Phone System $ 4,839
Ford Escort Wagon 11,865
New Atlantic Hydraulic Shear 50,145
-------
$66,849
Less: Accumulated amortization (9,009)
-------
$57,840
-------
Amortization of assets under capital leases charged to expense in 1998
was $8,478.
Mimimum future lease payments under the capital leases as of June 30,
1998 for each of the next five years and in the aggregate are:
1999 $17,188
2000 17,188
2001 16,625
2002 11,573
2003 -
-------
Total minimum lease payments $62,574
Less: Amount representing interest (9,765)
-------
Present value of minimum lease payments $52,809
=======
13. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
June 30,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
Trade receivables $5,095,869 $4,822,885 $4,774,684
Other receivables 22,074 9,232 31,439
Allowance for doubtful accounts (12,956) (17,372) (12,460)
---------- ---------- ----------
$5,104,987 $4,814,745 $4,793,663
========== ========== ==========
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
14. INTANGIBLE ASSETS
Intangible assets consist of the following:
June 30,
-----------------------------------
1998 1997 1996
---------- --------- --------
Organization expense $ 5,000 $ 5,000 $ 5,000
Noncompetition agreements 300,000 300,000 300,000
Patents 9,214 9,214 9,214
Goodwill - Wendland 13,627 13,627 13,627
Goodwill - Hoppes 10,000 10,000 10,000
---------- --------- --------
$ 337,841 $ 337,841 $337,841
Less: accumulated amortization (202,319) (136,050) (69,783)
---------- --------- --------
$ 135,522 $ 201,791 $268,058
========== ========= ========
15. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
June 30,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
Commissions $ 709,548 $ 807,617 $ 621,882
County property taxes 290,656 254,251 224,006
Insurance 9,492 21,440 -
Interest 3,712 - 2,156
Payroll 29,320 165,239 125,784
Vacation pay 204,856 - -
Pension & 401(k) - - 23,051
Payroll taxes & withholdings 94,789 148,977 129,351
Other - 2,836 861
Vacation and sick pay 5,933 10,488 41,883
Sales taxes 12,543 3,463 -
Ad valorem taxes 11,803 13,181 -
---------- ---------- ----------
$1,372,652 $1,427,492 $1,168,974
========== ========== ==========
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
16. LONG-TERM DEBT
Long-term debt consists of the following:
Note payable to Norwest Bank for equipment, matures
June 30, 2002. Note is secured by same equipment.
Principal and interest are currently being made in monthly
installments. The interest rate is 10.22%. $36,781
-------
Total $ 6,781
=======
Maturities of long-term debt are as follows:
Year Ending
June 30, Amount
-------
1999 $ 8,045
2000 8,907
2001 9,862
2002 9,967
2003 -
-------
Total $36,781
=======
17. OTHER COMMITMENTS
The Corporation has $300,000 available on its $1,000,000 line of credit
from First of America Bank, N.A. Outstanding advances at June 30, 1998
totaled $700,000. The line of credit expires October 31, 1998. This
line of credit is unsecured and the interest rate is subject to change
based on "National Prime Rate." As of June 30, 1998, the rate was 8.5%
and the accrued interest was $2,492.
The Corporation is liable to Norwest Bank Indiana, N.A. in the amount
of $54,900 on a $100,000 revolving commercial loan. This obligation is
collateralized by a security interest in the Corporation's inventory,
equipment, accounts receivable and intangibles. Norwest Bank Indiana,
N.A. also holds an unsecured guaranty by Bryan Steam Corporation on
this obligation. The outstanding balance is due December 30, 1998 with
interest at a current rate of 9.50% due monthly.
Production employees at the Corporation's Peru, Indiana facility are
covered by a collective bargaining agreement which will expire in May,
2001.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
18. INVESTMENT SECURITIES
On July 1, 1994, the Corporation adopted Statement of Financial
Accounting Standards No. 115 - "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS 115). The Corporation's policy has
been, historically, to classify its investment securities as current
assets, even though management has set a precedent, evidencing its
intent, by holding its investment securities to maturity. Prior to July
1, 1997, the Corporation had considered its investment securities as
held to maturity. The Corporation has now reclassed its investment
securities as available-for-sale.
The following is a summary of investment securities classified as held
to maturity:
June 30, 1997
------------------------
Fair Amortized
Value Cost
---------- ----------
Equity securities $ 194,161 $ 184,461
U.S. government obligations - -
Obligations of individual states and
political subdivisions 1,095,081 1,100,725
Obligations of foreign governments - -
Corporate obligations 156,375 155,500
Mortgage-backed securities 25,250 26,000
Other - -
---------- ----------
$1,470,867 $1,466,686
========== ==========
The following is a summary of investment securities classified as
available-for-sale:
June 30, 1998
---------------------
Fair Amortized
Value Cost
-------- --------
Equity securities $154,742 $126,895
U.S. government obligations - -
Obligations of individual states and
political subdivisions 296,718 297,992
Obligations of foreign governments - -
Corporate obligations 220,661 215,109
Mortgage-backed securities 25,125 26,000
Other - -
-------- --------
$697,246 $665,996
======== ========
At June 30, 1997 investment in debt securities, classified as held to
maturity, mature as follows:
Fair
Cost Value
---------- ----------
Within 1 year $ 822,020 $ 818,900
1-5 years 215,350 214,533
5-10 years 10,955 10,914
After 10 years 207,900 207,109
---------- ----------
$1,256,225 $1,251,456
========== ==========
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
18. INVESTMENT SECURITIES ( CONT.)
At June 30, 1998 investment in debt securities, classified as
available-for-sale, mature as follows:
Fair
Cost Value
-------- --------
Within 1 year $204,394 $204,574
1-5 years 106,546 107,968
5-10 years 86,281 86,583
After 10 years 115,880 $118,254
-------- --------
$513,101 $517,379
======== ========
The following is a summary of gross unrealized holding gains and losses
for investment securities classified as held to maturity:
<TABLE>
<CAPTION>
June 30, 1997
----------------------------------
Gross Gross
Unrealized Unrealized
Holding Gains Holding Losses
------------- --------------
<S> <C> <C>
Equity securities $ 9,876 $ 176
U. S. Government obligations - -
Obligations of individual states &
political subdivisions 13,115 18,759
Obligations of foreign governments - -
Corporate obligations 1,500 625
Mortgage-backed securities - 750
Other - -
------ ------
24,491 20,310
====== ======
</TABLE>
The following is a summary of gross unrealized holding gains and losses
for investment securities classified as available for sale:
June 30, 1998
------------------------------
Gross Gross
Unrealized Unrealized
Holding Gains Holding Losses
------------- --------------
Equity securities $27,847 $ -
U. S. Government obligations - -
Obligations of individual states &
political subdivisions 9,990 11,264
Obligations of foreign governments - -
Corporate obligations 5,739 187
Mortgage-backed securities - 875
Other - -
------ ------
43,576 12,326
====== ======
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
18. INVESTMENT SECURITIES ( CONT.)
Realized gains and losses were determined on the basis of specific
identification during the years ended June 30, 1997. Gross proceeds and
gross realized gains and losses on securities classified as held to
maturity were as follows:
June 30,
1997
--------
Sale proceeds $308,912
========
Redemption proceeds $ 60,000
========
Amortized cost of sales & redemptions $372,784
========
Gross realized gains $ -
========
Gross realized losses $ 3,872
========
Realized gains and losses were determined on the basis of specific
identification during the years ended June 30, 1998. Gross proceeds and
gross realized gains and losses on securities classified as
available-for-sale were as follows:
June 30,
1998
----------
Sale proceeds $1,082,807
==========
Redemption proceeds $ 45,000
==========
Amortized cost of sales & redemptions $1,121,210
==========
Gross realized gains $ 13,149
==========
Gross realized losses $ 6,552
==========
The Corporation sold investment securities during the fiscal year ended
June 30, 1997, and used the proceeds to partially fund construction of
a new building in Peru, Indiana.
The Corporation sold investment securities during the fiscal year ended
June 30, 1996, and used the proceeds to purchase the business assets of
Monticello Tank Company.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
19. BUSINESS COMBINATIONS
On July 3, 1995, Wendland Manufacturing Corp. (Wendland), the
Corporation's wholly-owned subsidiary, acquired substantially all the
tank manufacturing business assets of a Texas corporation for
$1,115,000. Results of operations from July 3, 1995 through June 30,
1996 are included in this report.
Wendland also acquired substantially all the heat exchanger
manufacturing business assets of an Indiana corporation on December 6,
1995 for $215,000. Wendland operated this business as a division, from
acquisition date through June 30, 1996.
On March 15, 1996, Wendland exchanged $447,952 of the net assets of the
heat exchanger manufacturing business for 100% of the outstanding
common stock of its wholly-owned subsidiary, Monticello Exchanger and
Manufacturing Co. (Monticello). Monticello's results of operations from
March 15 through June 30, 1996 are included in this report.
On January 31, 1997, Wendland purchased all the business assets of
Western Express Company, a Texas Corporation, which operates as a
common carrier for transporting goods in the United States. The
purchase price was $38,000. Results of operations from January 31,
through June 30, 1997 are included in this report.
20. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values and fair values for the Corporation's financial
instruments are as follows:
June 30, 1998
------------------------
Carrying Fair
Financial Instrument Value Value
-------------------- ----- -----
Cash and cash equivalents $ 864,411 $ 864,411
Investment securities
(available-for-sale) 697,246 697,246
Accounts receivable 5,104,987 5,104,987
Deposits with utilities 5,171 5,171
Accounts payable 722,198 722,198
Accrued expenses 1,372,652 1,372,652
Short-term debt 754,900 754,900
Capital lease obligations 52,809 52,809
Long-term debt 36,781 36,781
Dividends payable 13,275 13,275
The fair value of investment securities is an estimate based on quoted
market prices. The fair value of long-term debt is based on current
rates at which the Corporation could borrow funds with similar
remaining maturities.
<PAGE>
BRYAN STEAM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
21. ACCOUNTING CHANGE
Effective July 1, 1997, the Bryan Steam Corporaiton (Bryan Boiler
Division) changed its method of accounting for vacation pay from
expensing the payments in the year paid to accruing the liability in
the year earned by the employee. This accrual meets all the conditions
set forth in FAS-43 (1) The employee's right to receive the
compensation for future absences is attributable to services already
performed by the employee. (2) The employee's right to receive the
compensation for future absences is vested. (3) It is probable that the
compensation will be paid. and (4) The amount of compensation is
reasonably estimable. The cumulative effect of adopting this change was
a charge to income of $109.708 ($.57 per share), net of a tax benefit
of $78,794. The Corporation has omitted the information about the pro
forma retroactive effect of the change on net income and per share
amounts for all prior periods presented. In the Corporation's
judgement, the effect would not be material.
<PAGE>
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable.
-6-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
<TABLE>
<CAPTION>
Shares
Beneficially
Owned as of
Principal Operation and Director September 23, Percent of
Name Age Prior Business Experience Since 1998 Class
- ---- --- ------------------------- ----- ---- -----
<S> <C> <C> <C> <C>
Albert J. Bishop 1,2 67 Retired in June 1996; theretofore, 1986 2,380 1.2%
President and General Manager of the
Company since prior to 1993
H. Jesse McVay 3 57 President of the Company since July 1994 328 Less than
1996; theretofore, Vice President of 1%
Operations of the Company since prior
to 1993
Harold V. Koch 1,4 76 Retired in June 1996; theretofore, 1954 5,168 2.7%
Chairman of the Board since prior to
1993
G. N. Summers 5 67 Owner of Insurance Agency since prior 1976 13 Less than
to 1993 1%
Jack B. Jackson 69 Retired in 1993; theretofore bank 1979 30 Less than
Chairman, Peru office, First of America 1%
Bank - Central Indiana since prior to
1993
James R. Lockhart, 44 Vice President of Incom Roofing 1985 3,085 1.6%
Jr. 6 Services, Inc.; theretofore Vice President
& General Manager of Residential
Business Development for GAF
Materials Corp.; theretofore, Vice
President of Sales, Firestone Building
Products Company since prior to 1993
Bryan D. Herd 3 55 Design consultant, Partridge Home 1991 17,706 9.3%
Furnishings since 1996; theretofore
owner and President of Furniture and
Decorating business since prior to 1993
Kurt J. Krauskopf 44 Secretary of the Company since prior to N/A 257 Less than
1993 1%
Paul D. Donaldson 35 Treasurer of the Company since prior to N/A 0 0%
1993
All Directors and Officers as a group (9 persons) 28,735 15.0%
</TABLE>
- ------------------
1 Member of Executive Committee.
2 Includes 501 shares held directly by Mr. Bishop's spouse and 1,879
shares held jointly with his spouse.
3 Shares held jointly with spouse.
4 Includes 5 shares held directly by Mr. Koch's spouse and 5,163 shares
held jointly with his spouse. 5The Company paid approximately $792,315
in fiscal year 1998 to cover premiums for various property, casualty,
and workers' compensation insurance policies on which Mr. Summers'
insurance agency received commissions.
6 Includes 3,060 shares held by Mr. Lockhart's spouse.
7 Shares held by Mr. Krauskopf's spouse.
-7-
<PAGE>
During the fiscal year ended June 30, 1998 all filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
with respect to Section 16(a) of the 1934 Act were complied with.
Item 11. Executive Compensation.
Compensation
The following table shows the compensation paid by the Company for the
services of H. Jesse McVay, the Company's chief executive officer. Non-monetary
compensation of the chief executive officer did not exceed 10% of his aggregate
cash compensation for the year.
Name and Annual Compensation
Principal Position Year Salary Bonus
------------------ ---- ------ -----
H. Jesse McVay, 1998 $75,400 $48,428
President
1997 $66,325 $32,500
1996 $52,900 $12,200
Pension Plan
The Bryan Steam Corporation Non-Bargaining Unit Employees' Pension Plan
(the "Pension Plan") provides retirement benefits for employees of Bryan who are
not members of the collective bargaining unit. Benefits are based on length of
service and average monthly earnings and are[ subject to certain deductions for
social security benefits]. Contributions to the Pension Plan are computed on an
actuarial basis.
The average annual retirement benefits payable under the Pension Plan to
employees who retire at the normal retirement age of sixty-five (65) are shown
in the table below.
Average Annual
Compensation over Years of Service
Five-Year Period At Age 65
10 20 30 40
-- -- -- --
$ 50,000 $ 9,878 $19,756 $29,634 $ 39,512
$ 75,000 $15,078 $30,156 $45,234 $ 60,312
$100,000 $20,278 $40,556 $60,834 $ 81,112
$125,000 $25,478 $50,956 $76,434 $101,912
Compensation covered by the Pension Plan for a calendar year includes
total taxable wages or salary (including overtime or bonuses) for that year,
plus any contributions the employee makes under the Company's cafeteria plan or
401(k) plan during the calendar year.
Estimated credited years of service for H. Jesse McVay: 28 years
Director Remuneration
Each non-employee director is paid $500 for each meeting of the Board of
Directors, whether or not he attends.
Employment Agreements
-8-
<PAGE>
Bryan has an Employment Agreement, dated April 1, 1998, with H. Jesse
McVay. Such agreement provides for an initial term of three (3) years,
automatically extended for an additional year on each anniversary of the date of
such agreement unless either party gives written notice not to so extend within
ninety (90) days prior to an annual anniversary, in which case no further
extension shall occur and the term shall end two years subsequent to the annual
anniversary immediately following the anniversary prior to which the notice not
to extend for an additional year is given. Such agreement provides for an
initial annual salary of $77,200 which may be increased from time to time by
Bryan. Pursuant to such agreement, if Bryan terminates the employment of Mr.
McVay without cause, or if Mr. McVay terminates his employment by reason of a
material breach of any term, condition or covenant of Bryan under the Employment
Agreement, Bryan must pay to Mr. McVay a lump sum equal to one hundred percent
(100%) of his total salary and bonus (excluding the Transaction Bonus described
below) for the preceding calendar year, plus costs of engaging a placement firm
to find alternative employment, and for one year following termination Bryan
must maintain, for a period of one year after the date of termination, each
employee medical and life benefit plan in which Mr. McVay was entitled to
participate immediately prior to the date of termination, unless an essentially
equivalent benefit is provided by another source. Such agreement also provides
for the payment of a transaction bonus (the "Transaction Bonus") in the amount
of $30,000 in the event of a change of control (as defined in the agreement),
payable one half on the date of the change of control and one half on the date
six months after the change in control. The Merger Agreement provides that such
Transaction Bonus will be triggered by the Offer.
Compensation Committee Interlocks and Insider Participation
Compensation decisions for the fiscal year ended June 30, 1998, with
respect to the compensation of H. Jesse McVay were made and ratified by the
Board of Directors, without the participation of Mr. McVay.
-9-
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of September 23, 1998, the Company has outstanding 191,284 shares, all
of one class. No person to the knowledge of Management is the beneficial owner
of more than 5 percent of the outstanding voting stock of the Company, except as
shown in the following table.
Amount Percent
Name and Address of Beneficially of
Beneficial Owner Owned Class
---------------- ----- -----
Ina Mae Bryan Miller 12,199 6.4%
R. R. #2
Peru, IN 46970
Robert Miller 12,198 6.4%
R. R. #2
Peru, IN 46970
Bryan D. and Sharon L. Herd 1 17,706 9.3%
1208 Glenwick Drive
Logansport, IN 46947
Marilyn J. and Paul J. Malott 1 17,829 9.3%
1500 Liberty Street
Logansport, IN 46947
Victor L. and Kristine S. Herd 1 17,690 9.3%
4083 S.E. Honey Hill Lane
Stuart, FL 34997
Beverly Jo Bryan 2 11,591 6.1%
6299 Valley View Drive
Fishers, IN 46038
- ----------------
1 Shares held jointly with rights of survivorship.
2 Shares held jointly with children with rights of survivorship.
See Item 9 of this Report for information with respect to shares owned by
the directors and executive officers of the Company.
The Company, Burnham Corporation, a New York corporation ("Burnham") and
Burnham Acquisition Corporation, a New Mexico corporation and a wholly-owned
subsidiary of Burnham ("Purchaser") entered into an Agreement and Plan of Merger
dated as of September 23, 1998 (the "Merger Agreement"), among the Company,
Burnham and Purchaser. The Merger Agreement provides, among other things, for
the making of an offer by Purchaser to purchase all outstanding shares of the
Common Stock, par value $10.00 per share (the "Shares"), of the Company, at a
purchase price of $152 per Share (the "Offer Price"), net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in an Offer to Purchase and in the related Letter of Transmittal (which,
together with any supplements or amendments thereto, collectively constitute the
"Offer"). The Merger Agreement further provides that, following the completion
of the Offer and subject to the satisfaction or waiver of certain conditions,
Purchaser will be merged with and into the Company (the "Merger"), with the
Company surviving the Merger as a wholly-owned subsidiary of Burnham with the
name "Bryan Steam Corporation". As a result of the Merger, each outstanding
Share (other than Shares held by Burnham, Purchaser or any subsidiary of
Burnham, Purchaser or the Company, Shares held in the treasury of the Company
and Shares held by stockholders who have properly exercised their rights to fair
value appraisal rights under the New Mexico Business Corporation Act) will be
converted at the effective time of the Merger into the right to receive in cash
the price per Share paid in the Offer without interest.
-10-
<PAGE>
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn at the expiration of the Offer at least sixty-six and
two-thirds percent (66-2/3%) plus one of the outstanding Shares on a fully
diluted basis on the date of purchase. The Offer is also subject to certain
other conditions.
Item 13. Certain Relationships and Related Transactions.
The Company paid approximately $792,315 in the fiscal year ended June 30,
1998, and $613,253 in the fiscal year ended June 30, 1997, to cover premiums for
various property, casualty and workers compensation insurance policies on which
an insurance agency owned by G. N. Summers, a Director of Bryan, received
commissions. There are no other reportable relationships or related transactions
between the Company and its Directors, Executive Officers, 5% beneficial
shareholders, or immediate family members of the foregoing persons.
-11-
<PAGE>
PART IV
Item 14. Exhibits and Reports on Form 8-K.
(a) The following financial statements are filed as part of this
Report:
Comparative Balance Sheets (June 30, 1998, 1997 and 1996)
Comparative Statements of Income (Years ended June 30, 1998,
1997, and 1996)
Comparative Statements of Retained Earnings
(Years ended June 30, 1998, 1997, and 1996)
Comparative Statements of Cash Flows
(Years ended June 30, 1998, 1997, and 1996)
Notes to Financial Statements (June 30, 1998)
(b) The following exhibits are filed as a part of this Report:
2. Agreement and Plan of Merger, dated September 23,
1998, between the Company, Burnham Corporation and
Burnham Acquisition Corporation.
3(a). The Registrant's Articles of Incorporation were filed
as Exhibit 3 to the Registrant's Annual Report on
Form 10-K for the year ended June 30, 1981, which is
incorporated herein by this reference.
3(b). The Registrant's Code of By-Laws was filed as Exhibit
19(i) to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1986, which was
sent to the Commission on February 4, 1987, and which
is incorporated herein by this reference.
10(a). Employment Agreement between Bryan and H. Jesse
McVay, dated April 1, 1998.
10(b). Employment Agreement between Bryan and Albert J.
Bishop, dated April 1, 1998.
10(c). Employment Agreement between Bryan and Kurt J.
Krauskopf, dated April 1, 1998.
10(d). Employment Agreement between Bryan and Sandra A.
Mitting, dated April 1, 1998.
10(e). Employment Agreement between Bryan and Michael D.
Sturch, dated April 1, 1998.
10(f). Employment Agreement between Bryan and Richard D.
Holmquist, dated April 1, 1998.
10(g). Employment Agreement between Bryan and Gregory A.
Minard, dated April 1, 1998.
10(h). Employment Agreement between Bryan and Terrence D.
Kubly, dated April 1, 1998.
10(i). Employment Agreement between Wendland and P. Wayne
McCune, dated April 1, 1998.
21. The Registrant has one wholly-owned subsidiary
incorporated under the laws of the State of Indiana,
Wendland Manufacturing Corp. ("Wendland"). Wendland
has one wholly-owned subsidiary incorporated under
the laws of the State of Indiana, Monticello
Exchanger and Manufacturing Co.
27. Financial Data Schedule.
99. Press Release dated September 23, 1998.
(c) A report on Form 8-K was filed on June 23, 1998 , reporting
that certain significant shareholders had expressed a desire
to liquidate their interests and that the directors had
solicited expressions of interest regarding a possible
purchase transaction.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant, in the capacities and on the dates indicated.
Signature Title Date
(1) Principal Executive Officer ) September 28, 1998
)
/s/ H. Jesse McVay President )
- ------------------------------------ )
H. Jesse McVay )
)
)
(2) Principal Financial Officer )
)
/s/ Kurt J. Krauskopf Controller )
- ------------------------------------ )
Kurt J. Krauskopf )
(3) A majority of the Board of Directors ) September 28, 1998
)
Director )
- ------------------------------------ )
Harold V. Koch )
)
/s/ Albert J. Bishop Director )
- ------------------------------------ )
Albert J. Bishop )
)
Director )
- ------------------------------------ )
Bryan D. Herd )
)
/s/ H. Jesse McVay Director )
- ------------------------------------ )
H. Jesse McVay )
)
/s/ G.N. Summers Director )
- ------------------------------------ )
G.N. Summers )
)
/s/ Jack B. Jackson Director )
- ------------------------------------ )
Jack B. Jackson )
)
Director )
- ------------------------------------ )
James R. Lockhart, Jr. )
-13-
AGREEMENT AND PLAN OF MERGER
dated as of September 23, 1998
by and among
BURNHAM CORPORATION,
BURNHAM ACQUISITION CORPORATION
and
BRYAN STEAM CORPORATION
<PAGE>
TABLE OF CONTENTS
ARTICLE A
THE OFFER
A-1.01 The Offer......................................2
A-1.02 Bryan Actions..................................3
A-1.03 Stockholder Lists..............................3
ARTICLE I
PLAN OF MERGER
1.01 The Merger.......................................4
1.02 Effective Time...................................4
1.03 Closing..........................................4
1.04 Articles of Incorporation; By-laws of the
Surviving Corporation; Location of
Principal Office.................................4
1.05 Directors and Officers of the Surviving
Corporation......................................5
1.06 Effects of the Merger............................5
1.07 Further Assurances...............................5
1.08 Shareholders' Approval...........................5
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock......................6
2.02 Exchange of Certificates.........................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01 Organization and Qualification...................9
3.02 Capital Stock...................................10
3.03 Authority Relative to this Agreement............11
3.04 Non-Contravention: Approvals and Consents.......12
3.05 SEC Reports and Financial Statements............13
3.06 Absence of Certain Changes or Events............13
3.07 Absence of Undisclosed Liabilities..............14
3.08 Legal Proceedings...............................14
3.09 Information Supplied; Schedule 14D-9; Offer
Documents and Proxy Statement...................14
3.10 Compliance with Laws and Orders.................15
3.11 Compliance with Agreements; Certain Agreements..15
3.12 Taxes...........................................16
3.13 Benefit Plans; ERISA............................17
3.14 Insurance.......................................19
i
<PAGE>
3.15 Labor Matters...................................20
3.16 Environmental Matters...........................21
3.17 Tangible Property and Assets....................23
3.18 Intellectual Property Rights....................23
3.19 Vote Required...................................25
3.20 Disclosure......................................25
3.21 Effect of Transactions on Manufacturer's
Representatives and Customers...................25
3.22 Bryan's Transaction Costs.......................25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER
SUB
4.01 Organization and Qualification..................25
4.02 Authority Relative to this Agreement............26
4.03 Non-Contravention; Approvals and Consents.......26
4.04 Legal Proceedings...............................27
4.05 Information Supplied............................27
4.06 Financing.......................................28
ARTICLE V
COVENANTS OF THE COMPANY
5.01 Conduct of Business.............................28
5.02 No Solicitations................................31
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information; Confidentiality..........32
6.02 Preparation of Proxy Statement..................32
6.03 Approval of Shareholders........................33
6.04 Regulatory and Other Approvals..................34
6.05 Employees.......................................34
6.06 Expenses........................................35
6.07 Brokers or Finders..............................35
6.08 Notice and Cure.................................35
6.09 Fulfillment of Conditions.......................36
6.10 Indemnification; Directors' and Officers'
Insurance.......................................36
6.11 Retention of Bryan Name.........................37
6.12 Takeover Laws...................................38
6.13 Subsequent Financial Statements.................38
6.14 Termination Fee; Expenses.......................38
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ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to
Effect the Merger...............................39
7.02 Conditions to Obligation of Buyer and Merger
Sub to Effect the Merger........................40
7.03 Conditions to Obligation of Bryan to Effect
the Merger......................................41
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination.....................................42
8.02 Effect of Termination...........................43
8.03 Amendment.......................................43
8.04 Waiver..........................................43
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations; Warranties;
Covenants and Agreements........................44
9.02 Knowledge.......................................44
9.03 Notices.........................................44
9.04 Entire Agreement................................45
9.05 Public Announcements............................45
9.06 No Third Party Beneficiaries....................46
9.07 No Assignment, Binding Effect...................46
9.08 Headings........................................46
9.09 Invalid Provisions..............................46
9.10 Governing Law...................................46
9.11 Counterparts....................................46
9.12 Interpretation..................................47
9.13 Incorporation of Exhibits.......................47
9.14 Enforcement of Agreement; Injunctive Relief.....47
9.15 Joint and Several Obligations...................48
ANNEXES:
Annex A -- Conditions of Offer and List of Encumbrances
EXHIBITS:
Exhibit A - Form of Stockholders Agreement
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SCHEDULES:
Schedule 3.01 - Jurisdictions of Qualification
Schedule 3.04 - Bryan Consents and Approvals
Schedule 3.06 - Material Adverse Changes, etc.
Schedule 3.07 - Undisclosed Liabilities
Schedule 3.08 - Legal Proceedings
Schedule 3.10 - Permits; Legal Compliance
Schedule 3.11 - Contracts and Contract Compliance
Schedule 3.12 - Tax Matters
Schedule 3.13 - Benefit Plans
Schedule 3.14 - Insurance
Schedule 3.15 - Labor Matters
Schedule 3.16 - Environmental Matters
Schedule 3.17 - Exceptions to Title to Personal Property
Schedule 3.18 - Intellectual Property
Schedule 3.21 - Relationships with Representatives and Customers
Schedule 3.22 - Bryan's Transaction Costs
Schedule 7.02 - Encumbrances
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This AGREEMENT AND PLAN OF MERGER dated as of September 23, 1998 (this
"Agreement"), is made and entered into by and among ("BURNHAM CORPORATION"), a
New York corporation ("Buyer" or "Burnham"), BURNHAM ACQUISITION CORPORATION, a
New Mexico corporation wholly owned by Buyer ("Merger Sub"), and BRYAN STEAM
CORPORATION, a New Mexico corporation (prior to the Merger referred to as
"Bryan", and after the Merger referred to as the "Surviving Corporation").
WHEREAS, the Boards of Directors of Buyer, Merger Sub and Bryan have each
determined that it is advisable and in the best interests of their respective
shareholders to consummate and have approved the transactions contemplated
hereby (in which Merger Sub will make a tender offer (the "Offer") for all
outstanding shares of Bryan, Merger Sub will subsequently merge with and into
Bryan, and Bryan will thereupon become a wholly-owned subsidiary of Buyer (the
"Merger"));
WHEREAS, the Board of Directors of Bryan has unanimously adopted a
resolution approving the Offer, the Merger, this Agreement and the transactions
contemplated hereby and recommending that the holders of Bryan Common Stock (as
defined below) tender their shares of Bryan Common Stock in the Offer and
approve the Merger;
WHEREAS, concurrently with the execution hereof and in order to induce
Buyer and Merger Sub to enter into this Agreement, Buyer and Merger Sub are
entering into a Stockholders' Agreement with ten holders of Bryan Common Stock
who collectively own beneficially and of record 55.6% of the issued and
outstanding shares of common stock of Bryan; and such holders have, in
accordance with Rule 14a-2(b)(2) of the rules promulgated under the Securities
Exchange Act of 1934, as amended, executed and delivered such Stockholders'
Agreement substantially in form of Exhibit A hereto wherein each such holder (i)
has agreed to tender his shares of Bryan Common Stock pursuant to the Offer and
(ii) has granted to Buyer the right to vote such holder's shares of common stock
of Bryan in favor of the adoption and approval of the Merger;
WHEREAS, Buyer, Merger Sub and Bryan desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements and representations and warranties set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
ARTICLE A
THE OFFER
A-1.01 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.01 hereof and subject to the provisions hereof, Buyer
shall cause Merger Sub promptly (but in no event later than five business days
following the public announcement of the terms of this Agreement) to commence
(within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) an offer to purchase all outstanding shares of
common stock of Bryan, par value $10.00 per share (the "Bryan Common Stock" or
the "Shares"), at a price of $152.00 per Share, net to the seller in cash (the
"Offer"). Subject to the satisfaction of the Offer Conditions (as defined below)
and the terms and conditions of this Agreement, Merger Sub shall accept for
payment and pay for Shares validly tendered and not withdrawn pursuant to the
Offer as soon as practicable under applicable law. The obligation of Merger Sub
to consummate the Offer and to accept for payment and to pay for any Shares
tendered pursuant thereto shall be subject to only those conditions set forth in
Annex A hereto (the "Offer Conditions"), which are for the sole benefit of Buyer
and Merger Sub and may be asserted by Buyer or Merger Sub or waived by Buyer or
Merger Sub, in whole or in part, at any time and from time to time in their sole
discretion. Bryan agrees that no Shares held by Bryan or any of its subsidiaries
will be tendered to Merger Sub pursuant to the Offer. Merger Sub will not,
without the prior written consent of Bryan, (i) decrease or change the amount or
form of the consideration payable in the Offer, (ii) decrease the number of
Shares sought pursuant to the Offer, (iii) impose additional conditions to the
Offer, (iv) change the conditions to the Offer (provided, that Buyer or Merger
Sub in their sole discretion may waive any of the conditions to the Offer) or
(v) make any change to any other provision of the Offer that is materially
adverse to the holders of the Shares. Merger Sub shall be entitled to extend the
Offer in accordance with applicable law, but if the conditions set forth in
Annex A are satisfied as of any scheduled expiration date of the Offer, the
Offer may not be extended by more than ten business days in the aggregate,
except with the prior written consent of the Company or as required by law. If
the conditions set forth in Annex A are not satisfied or waived by Merger Sub as
of any scheduled expiration date, Merger Sub may extend the Offer from time to
time until the earlier of the consummation of the Offer or twenty business days
following the original expiration date of the Offer.
(b) On the date of commencement of the Offer, Buyer and Merger Sub
shall file or cause to be filed with the Securities and Exchange Commission (the
"SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer
(together with all amendments and supplements thereto, the "Schedule 14D-1"),
which shall contain the offer to purchase and related letter of transmittal and
other ancillary Offer documents and instruments pursuant to which the Offer will
be made (collectively with any supplements or amendments thereto, the "Offer
Documents"). Bryan and its counsel shall be given a reasonable opportunity to
review and comment on the Offer Documents prior to their filing with the SEC.
Buyer and Merger Sub agree to provide Bryan with, and to consult with Bryan
regarding, any comments that may be received from the SEC or its staff with
respect to the Offer Documents promptly after receipt thereof.
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A-1.02 Bryan Actions. (a) Bryan hereby consents to the Offer and
represents and warrants that (i) the making of the Offer and the other
transactions contemplated by this Agreement have been approved and consented to
by the Board of Directors of Bryan in accordance with applicable law, (ii)
Bryan's Board of Directors (at meetings duly called and held) has unanimously
(x) determined that the Offer and the Merger are fair to and in the best
interests of the stockholders of Bryan, (y) resolved to recommend acceptance of
the Offer and approval of the plan of merger contained in this Agreement by such
stockholders of Bryan, and (z) resolved to elect, to the extent permitted by
law, not to be subject to any "moratorium", "control share acquisition",
"business combination", "fair price" or other form of antitakeover laws and
regulations (collectively, "Takeover Laws") of any jurisdiction that may purport
to be applicable to this Agreement, and (iii) McDonald & Company Securities,
Inc., Bryan's independent financial advisor, has advised Bryan's Board of
Directors that, in its opinion, the consideration to be paid in the Offer and
the Merger to Bryan's stockholders is fair, from a financial point of view, to
such stockholders.
(b) Upon commencement of the Offer, Bryan shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing the
recommendations of its Board of Directors described in Section A-1.02(a) and
hereby consents to the inclusion of such recommendations in the Offer Documents
and to the inclusion of a copy of the Schedule 14D-9 with the Offer Documents
mailed or furnished to Bryan's stockholders. Buyer, Merger Sub and their counsel
shall be given a reasonable opportunity to review and comment on the Schedule
14D-9 prior to its filing with the SEC. Bryan agrees to provide Buyer and Merger
Sub with, and to consult with Buyer and Merger Sub regarding, any comments that
may be received from the SEC or its staff with respect to the Schedule 14D-9
promptly after receipt thereof.
(c) Bryan hereby agrees that, subject to the terms and conditions of
this Agreement, in the event there shall occur a change in law or in a binding
judicial interpretation of existing law which would, in the absence of action by
Bryan or the Board of Directors of Bryan specified in such law or
interpretation, prevent Merger Sub, were it to acquire two-thirds of the Shares
then outstanding, from approving and adopting this Agreement without the
affirmative vote of any other holder of Shares, Bryan will use its best efforts
promptly to take such action or cause such action to be taken.
A-1.03 Stockholder Lists. In connection with the Offer, Bryan shall
promptly furnish Buyer and Merger Sub with mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of the Shares as of the latest practicable date
and shall furnish Buyer and Merger Sub with such information and assistance
(including periodic updates of such information) as Buyer or Merger Sub or their
agents may reasonably request in communicating the Offer to the record and
beneficial holders of the Shares.
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<PAGE>
ARTICLE I
PLAN OF MERGER
1.01 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.02), Merger Sub shall
be merged with and into Bryan and the separate corporate existence of Merger Sub
shall thereupon cease. Bryan shall be the surviving corporation in the Merger
(the "Surviving Corporation"). Merger Sub and Bryan are sometimes referred to
herein as the "Constituent Corporations." As a result of the Merger, the
outstanding shares of capital stock of the Constituent Corporations shall be
converted or canceled in the manner provided in Article II.
1.02 Effective Time. At the Closing (as defined in Section 1.03), such
articles of merger or other appropriate documents (in each case, "Articles of
Merger") shall be duly prepared and executed by the Constituent Corporations and
thereafter delivered to the Corporation Commission of the State of New Mexico or
its successor (the "New Mexico Corporation Commission") for filing, as provided
in Section 53-14-4 of the New Mexico Business Corporation Act (the "NMBCA"), on,
or as soon as practicable after, the Closing Date (as defined in Section 1.03)
and shall make all other filings, recordings and publications as required by the
NMBCA. The Merger shall become effective on the date the Articles of Merger are
filed (such date being referred to herein as the "Effective Time").
1.03 Closing. The closing of the Merger (the "Closing") will take place at
the offices of Barnes & Thornburg, 11 South Meridian Street, Indianapolis,
Indiana 46204, or at such other place as the parties hereto mutually agree, on a
date and at a time to be specified by the parties, which shall in no event be
later than 10:00 a.m., local time, on the 5th business day following the day on
which the last to be satisfied or waived of the conditions set forth in Article
VII shall be satisfied or, if permissible, waived in accordance with this
Agreement, or on such other date and time as the parties hereto mutually agree.
The date on which the Closing occurs is hereinafter referred to as the "Closing
Date." At the Closing, Buyer, Merger Sub and Bryan shall deliver to each other
the certificates and other documents and instruments required to be delivered
under Article VII and take such other actions as may be necessary to consummate
the transactions contemplated by this Agreement.
1.04 Articles of Incorporation; By-laws of the Surviving
Corporation; Location of Principal Office.
(a) Articles of Incorporation. The Articles of
Incorporation of Merger Sub in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided by law
and such Articles of Incorporation; provided, however, that
Article I of the Articles of Incorporation of the Surviving
Corporation shall be amended to read in its entirety as follows:
"The name of the Corporation is Bryan Steam Corporation."
(b) By-laws. The By-laws of Merger Sub in effect immediately prior to
the Effective Time shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by law, the Articles of Incorporation of the
Surviving Corporation and such By-laws.
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(c) Location of Principal Office. The location of the principal
office of the Surviving Corporation shall be State Road 19 North, Post Office
Box 27, Peru, Indiana 46970.
1.05 Directors and Officers of the Surviving Corporation.
(a) Directors. The individuals listed below shall be the directors of
the Surviving Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Articles of Incorporation and By-laws of the Surviving
Corporation:
H. Jesse McVay
Albert Morrison, III
Ronald L. Griffith
(b) Officers. The individuals listed below shall be the officers of
the Surviving Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Articles of Incorporation and By-laws of the Surviving
Corporation, and the Board of Directors of Bryan will confirm by resolution the
appointment of such officers effective as of the Effective Time:
H. Jesse McVay, President
Ronald L. Griffith, Vice President
Kurt J. Krauskopf, Treasurer,
Comptroller and Secretary
Robert Berardi, Assistant Treasurer
Tammy McEwen, Assistant Secretary
1.06 Effects of the Merger. Subject to the foregoing, the Merger shall
have the effects specified in accordance with Section 53-14-6 of the NMBCA.
1.07 Further Assurances. Each party hereto will execute such further
documents and instruments and take such further actions as may reasonably be
requested by one or more of the others to consummate the Merger, to vest the
Surviving Corporation with full title to all assets, properties, rights,
approvals, immunities and franchises of either of the Constituent Corporations
or to effect the other purposes of this Agreement.
1.08 Shareholders' Approval. In order to consummate the Merger, Bryan,
acting through its Board of Directors, shall pursuant to Section 6.03 as soon as
practicable and in accordance with (but only if required under) applicable law,
promptly and duly call, give notice of, convene and hold a special shareholder
meeting or its 1998 Annual Meeting of shareholders for the purpose of
considering and taking action upon the Merger and adopting and approving this
Agreement (the "Shareholder Meeting").
5
<PAGE>
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock.
(a) Conversion of Capital Stock and Dissenting Shares.
At the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof:
(i) Capital Stock of Merger Sub. All of the issued and
outstanding shares of the common stock, with no par value, of Merger Sub
("Merger Sub Common Stock") issued and outstanding immediately prior to the
Effective Time shall remain outstanding and unchanged after the Merger and shall
thereafter constitute all of the issued and outstanding shares of the capital
stock of the Surviving Corporation ("Surviving Corporation Common Stock").
Immediately after the Merger, all of the issued and outstanding shares of common
stock of the Surviving Corporation shall be owned by Buyer.
(ii) Cancellation of Treasury Stock. All shares of common stock,
of Bryan, par value $10.00 per share ("Bryan Common Stock"), that are owned by
Bryan as treasury stock shall be canceled and retired and shall cease to exist
and no stock of Buyer or other consideration shall be delivered in exchange
therefor.
(iii) Exchange Price for Bryan Common Stock. Each share of Bryan
Common Stock (other than shares to be canceled in accordance with Section
2.01(a)(ii) and other than Dissenting Shares (as defined in Section 2.01(b)))
issued and outstanding immediately prior to the Effective Time shall be
converted into and represent the right to receive $152.00 in cash per share (the
"Merger Price"). The Merger Price shall be payable in cash without interest
thereon, upon surrender of the corresponding Certificate (as defined in Section
2.02(b)) in accordance with Section 2.02. As of the Effective Time, all shares
of Bryan Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a Certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Price per share as provided
herein.
(b) Dissenting Shares.
(i) To the extent applicable, each outstanding share of Bryan
Common Stock the holder of which has not voted in favor of the Merger, has
perfected such holder's right to fair value of such holder's shares in
accordance with the applicable provisions of the NMBCA and has not effectively
withdrawn or lost such right (a "Dissenting Share"), shall not be converted into
or represent a right to receive the Merger Price pursuant to Section 2.01
(a)(iii), but the holder thereof (sometimes referred to herein as a "Dissenting
Shareholder") shall be entitled only to such rights as are granted by the
applicable provisions of the NMBCA; provided, however, that any Dissenting Share
held by a person at the Effective Time who shall, after the Effective Time,
withdraw the demand for fair value or lose the right to fair value, in either
case pursuant to the NMBCA, shall be deemed to be converted into, as of the
Effective Time, the right to receive the Merger Price pursuant to Section
2.01(a)(iii).
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(ii) Bryan shall give Buyer (x) prompt notice of any written
objection to the proposed adoption and approval of this Agreement, any written
demand for payment of the fair value of shares, any withdrawals of such demands
and any other instruments received by Bryan served pursuant to the applicable
provisions of the NMBCA relating to dissenting shareholders and (y) the
opportunity to direct all negotiations and proceedings with respect to demands
by dissenting shareholders under the NMBCA. Bryan will not voluntarily make any
payment with respect to any demands by dissenting shareholders and will not,
except with the prior written consent of Buyer, settle or offer to settle any
such demands.
2.02 Exchange of Certificates.
(a) Exchange Agent.
(i) At the Closing or immediately prior to the Effective Time,
Buyer (x) shall appoint as exchange agent reasonably satisfactory to Bryan (the
"Exchange Agent") in accordance with an exchange agreement reasonably
satisfactory to Bryan, and (y) shall make available to the Surviving
Corporation, and shall cause to be deposited with the Exchange Agent, the
aggregate amount due to holders of shares of Bryan Common Stock under Section
2.01(a)(iii) (the "Purchase Price"), to be held for the benefit of and to be
distributed to, holders of shares of Bryan Common Stock in accordance with this
Section 2.02. The Exchange Agent shall agree to hold such funds (such funds,
together with earnings thereon, being referred to herein as the "Exchange Fund")
for delivery as contemplated by this Section 2.02 and upon such additional terms
as may be agreed upon by the Exchange Agent, Bryan and Buyer.
(ii) The deposit shall be made on the following terms: (a) the
Exchange Agent will be given irrevocable instructions that monies deposited in
the Exchange Fund pursuant to this Section 2.02 will be applied by the Exchange
Agent to making the cash payments to the former Bryan shareholders provided for
herein; (b) the Exchange Agent, upon the direction of Buyer or, after the
Effective Time, the Surviving Corporation, may invest in direct obligations of
the United States of America or obligations for which the full faith and credit
of the United States is pledged to provide for the payment of principal and
interest, certificates of deposit issued by commercial banks having capital and
surplus in excess of One Hundred Million Dollars ($100,000,000), or commercial
paper rated A-1 or better by Standard & Poor's corporation or P-1 by Moody's
Investors Service, Inc.; (c) any net profit resulting from, or interest or
income produced by, such investments will be payable as directed by the
Surviving Corporation (including, if so directed, to it); provided, that Buyer
shall replace any monies lost through any investments made as contemplated by
this Section 2.02, if required to make payments to former shareholders of Bryan
pursuant to this Agreement, and shall reimburse the Exchange Agent for all
expenses incurred in connection with the acquisition or liquidation of any such
investment; (d) all expenses of the Exchange Agent will be paid by Buyer or the
Surviving Corporation; and (e) any portion of the Exchange Fund deposited with
the Exchange Agent pursuant to this Section 2.02, which remains unclaimed by the
former shareholders of Bryan for six (6) months after the Effective Time, will
be repaid to the Surviving Corporation upon demand. If certain Bryan
shareholders, such as shareholders who cannot be located, have not received the
cash to which they are entitled under the terms of this Agreement within six (6)
months after the Effective Time, the Surviving Corporation will thereafter hold
the amount of
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cash to which such shareholders are entitled, subject to applicable law and to
the extent that the same has not yet been paid to a public official pursuant to
abandoned property laws, for their benefit and will act and serve as their agent
for the purpose of holding such funds. To the extent that any former
shareholders of Bryan exercise their rights as Dissenting Shareholders, payments
to them required or authorized by the NMBCA may be made from the Exchange Fund,
but not in excess of the Merger Price for each share of Bryan Common Stock
formerly owned.
(b) Exchange Procedures.
(i) The record date for the purposes of the transactions
contemplated hereby shall be the Closing Date. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall cause the Exchange
Agent to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of Bryan
Common Stock (the "Certificates") converted pursuant to Section 2.01(a)(iii)
into the right to receive the Merger Price (x) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as the Surviving
Corporation may reasonably specify) and (y) instructions for use in effecting
the surrender of the Certificates in exchange for the Merger Price. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal duly executed and completed in accordance with its
terms, the holder of such Certificate shall be entitled to receive in exchange
therefor an amount equal to the Merger Price per share of Bryan Common Stock
represented thereby, which such holder has the right to receive pursuant to the
provisions of this Article II (in accordance with applicable law), and the
Certificate so surrendered shall forthwith be canceled. In no event shall the
holder of any Certificate be entitled to receive interest on any funds to be
received in the Merger. In the event of a transfer of ownership of Bryan Common
Stock which is not registered in the transfer records of Bryan, the Merger Price
may be issued to a transferee if the Certificate representing such Bryan Common
Stock is presented to the Exchange Agent accompanied by all documents required
to evidence, to the satisfaction of the Surviving Corporation, that such
transfer had properly occurred and that any applicable stock transfer taxes had
been properly paid.
(ii) Until surrendered as contemplated by this Section 2.02(b),
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger Price per
share of Bryan Common Stock represented thereby as contemplated by this Article
II, and shall not entitle the holder thereof to any rights of shareholders of
the Surviving Corporation.
(iii) The Surviving Corporation shall pay all charges and
expenses incurred by the Surviving Corporation or the Exchange Agent in
connection with the exchange of Certificates for cash.
(iv) The parties acknowledge that the Exchange Agent may require
each holder of record of outstanding shares of Bryan Common Stock to execute and
deliver such documents and instruments as the Exchange Agent may reasonably
require to effectuate the surrender of such shares in exchange for the Merger
Price, including any appropriate affidavits and tax forms.
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(c) No Further Ownership Rights in Bryan Common Stock. All cash paid
upon the surrender of shares of Bryan Common Stock in accordance with the terms
hereof shall be deemed to have been paid in full satisfaction of all rights
pertaining to such shares of Bryan Common Stock. From and after the Effective
Time, Bryan's stock transfer books shall be closed and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Bryan Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II. If any
Certificates shall not have been surrendered prior to two years after the
Effective Time, unclaimed funds payable with respect to such Certificates shall,
to the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(d) No Further Ownership Rights in Merger Sub Common Stock. All
shares of common stock of the Surviving Corporation (the "Surviving Corporation
Common Stock") issued upon the surrender of shares of Merger Sub Common Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Merger Sub Common Stock,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Merger Sub Common Stock that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing Merger Sub Common Stock are presented
to the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in Article II.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to the shareholders of Bryan six (6) months after the
Effective Time shall be delivered to the Surviving Corporation, upon demand, and
any shareholders of Bryan who have not theretofore complied with this Article II
shall thereafter look only to the Surviving Corporation (subject to abandoned
property, escheat and other similar laws) as general creditors for payment of
their claims for the Merger Price per share. Neither Buyer nor the Surviving
Corporation shall be liable to any holder of shares of Bryan Common Stock for
cash representing the Merger Price delivered from the Exchange Fund or otherwise
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Bryan represents and warrants to Buyer and Merger Sub as follows:
3.01 Organization and Qualification. (a) Bryan is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties. Bryan is duly qualified, licensed or admitted
to do business and is in good standing in each jurisdiction listed on Schedule
3.01 hereto in which the ownership, use or leasing of its assets and properties,
or the conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for such failures to be so
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qualified, licensed or admitted and in good standing which, individually or in
the aggregate, (i) are not having and could not be reasonably expected to have a
material adverse effect on Bryan, and (ii) could not be reasonably expected to
have a material adverse effect on the validity or enforceability of this
Agreement or on the ability of Bryan to perform its obligations hereunder. As
used in this Agreement, any reference to any event, change or effect being
"material" or "materially adverse" or having a "material adverse effect" on or
with respect to an entity (or group of entities taken as a whole) means such
event, change or effect is material or materially adverse, as the case may be,
to the business, condition (financial or otherwise), properties, assets
(including intangible assets), liabilities (including contingent liabilities),
prospects or results of operations of such entity (or, if with respect thereto,
of such group of entities taken as a whole). Bryan has previously delivered to
Buyer accurate and complete copies of the Articles of Incorporation and the
By-laws of Bryan and each of its subsidiaries as currently in effect.
(b) Except for Monticello Exchanger and Manufacturing Co., Inc. ("Memco")
and Wendland Manufacturing Co., Inc. ("Wendland"), Bryan does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
All outstanding shares of capital stock of each of Memco and Wendland are duly
authorized, validly issued, fully paid, non-assessable and owned, directly or
indirectly, by Bryan free and clear of any liens, claims or encumbrances. Each
of Memco and Wendland is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has full
corporate power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties. Each of Memco and
Wendland is duly qualified, licensed or admitted to do business and is in good
standing in each jurisdiction listed on Schedule 3.01 hereto in which the
ownership, use or leasing of its assets and properties, or the conduct or nature
of its business, makes such qualification, licensing or admission necessary,
except for such failures to be so qualified, licensed or admitted and in good
standing which, individually or in the aggregate, (i) are not having and could
not be reasonably expected to have a material adverse effect on either Memco or
Wendland as the case may be, and (ii) could not be reasonably expected to have a
material adverse effect on the validity or enforceability of this Agreement or
on the ability of Bryan to perform its obligations hereunder.
3.02 Capital Stock, etc.. (a) The authorized capital stock of Bryan
consists solely of 200,000 shares of common stock, par value $10.00 per share
(previously defined as "Bryan Common Stock"), and 2,500 shares of preferred
stock (the "Preferred Stock"). As of the date hereof, 191,284 shares of Bryan
Common Stock are issued and outstanding, 8,716 shares of Bryan Common Stock are
held in the treasury of Bryan; and no shares of Preferred Stock are issued or
outstanding. All of the issued and outstanding shares of Bryan Common Stock are
duly authorized, validly issued, fully paid and nonassessable. Except pursuant
to this Agreement, there are no outstanding subscriptions, options, warrants,
rights (including "phantom" stock rights), preemptive rights or other contracts,
commitments, understandings or arrangements, including any right of conversion
or exchange under any outstanding security, instrument or agreement (together,
"Options"), obligating Bryan to issue or sell any shares of capital stock of
Bryan or to grant, extend or enter into any Option with respect thereto.
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(b) There are no outstanding contractual obligations of Bryan to
repurchase, redeem or otherwise acquire any shares of Bryan Common Stock or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in any other person.
(c) There are no obligations to issue or to make any payments in
respect of any shares of Preferred Stock; no person or entity has any right to
make any claim in any manner whatsoever as a holder or a prior holder of any
Preferred Stock or any rights related in any way to any shares of Preferred
Stock; and no person or entity has any right to claim to be a holder of any
rights related in any way to the Preferred Stock.
(d) Except as expressly provided herein or in the Schedules hereto,
no notice to obtain approval of the Merger is required to be sent to any person
or entity, whether or not entitled to vote, other than the holders of record of
Bryan Common Stock.
(e) There are no outstanding subscriptions, options, warrants, rights
(including "phantom" stock rights), preemptive rights or other contracts,
commitments, understandings or arrangements, including any right of conversion
or exchange under any outstanding security, instrument or agreement, obligating
either Wendland or Memco to issue or sell any shares of its capital stock (each,
a "Subsidiary Option") or to grant, extend or enter into any Subsidiary Option
with respect thereto. There are no outstanding contractual obligations of either
Wendland or Memco to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any other person or entity.
3.03 Authority Relative to this Agreement. Bryan has full corporate power
and authority to enter into this Agreement and, subject to obtaining
Shareholders' Approval (as defined in Section 6.03) with respect to the Merger,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Bryan and the consummation by Bryan of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of Bryan, the
Board of Directors of Bryan has recommended adoption of this Agreement by the
shareholders of Bryan and directed that this Agreement be submitted to the
shareholders of Bryan for their consideration, and no other corporate
proceedings on the part of Bryan or its shareholders are necessary to authorize
the execution, delivery and performance of this Agreement by Bryan and the
consummation by Bryan of the transactions contemplated hereby other than
obtaining Shareholders' Approval (as defined in Section 6.03). This Agreement
has been duly and validly executed and delivered by Bryan and constitutes a
legal, valid and binding obligation of Bryan enforceable against Bryan in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
3.04 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by Bryan does not,
and the performance by Bryan of its obligations hereunder and the consummation
of the transactions contemplated hereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or lapse of time or
both) a default under, or result in the creation or imposition of
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any liens, mortgages, encumbrances, pledges or security interests of any kind
(each a "Lien') upon any of the assets or properties of Bryan under any of the
terms, conditions or provisions of (i) the Articles of Incorporation or By-laws
of Bryan, or (ii) subject to the obtaining of Shareholders' Approval and the
taking of the actions described in paragraph (b) of this Section, (x) any
statute, law, rule, regulation, requirement, code or ordinance (together,
"Laws"), or any judgment, decree, binding agreement or order (together,
"Orders"), of or with any court, tribunal, arbitrator, authority, agency,
commission, official or other instrumentality of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision (a "Governmental or Regulatory Authority"), applicable to Bryan or
any of its assets or properties, or (y) any note, bond, mortgage, security
agreement, indenture, license, franchise, permit, concession, contract, lease or
other instrument, obligation or agreement of any kind (each a "Contract", and
together, "Contracts") to which Bryan or any of its Subsidiaries is a party or
by which Bryan or any of its Subsidiaries or any of its assets or properties is
bound, excluding from the foregoing clauses (x) and (y) conflicts, violations,
breaches, defaults, terminations, modifications, accelerations and creations and
impositions of Liens which, individually or in the aggregate, could not be
reasonably expected to have a material adverse effect on the business or a
material product line of Bryan and its Subsidiaries or on the ability of Bryan
to consummate the transactions contemplated by this Agreement. As used in this
Agreement, "Subsidiary" means, with respect to any party, any corporation or
other organization, whether incorporated or unincorporated, of which more than
fifty percent (50%) of either the equity interests in, or the voting control of,
such corporation or other organization is, directly or indirectly through
Subsidiaries or otherwise, beneficially owned by such party.
(b) Except (i) for the filing of a premerger notification report by
Bryan under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (ii) for the
filing of the Proxy Statement (as defined in Section 3.09) with the Securities
and Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the "Exchange Act")
and clearance of any SEC comments thereon, (iii) for the filing of the Articles
of Merger required by the NMBCA with the New Mexico Corporate Commission and
appropriate documents with the relevant authorities of other states in which the
Constituent Corporations are qualified to do business, (iv) for the filing of
Schedule 14D-1 and Schedule 14D-9, and (v) as disclosed in Schedule 3.04 hereto,
no consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority or other public or private third party is necessary or
required under any of the terms, conditions or provisions of any Law or Order of
any Governmental or Regulatory Authority or any Contract to which Bryan is a
party or by which Bryan or any of its assets or properties is bound for the
execution and delivery of this Agreement by Bryan, the performance by Bryan of
its obligations hereunder or the consummation of the transactions contemplated
hereby, other than such consents, approvals, actions, filings and notices which
the failure to make or obtain, as the case may be, individually or in the
aggregate, could not be reasonably expected to have a material adverse effect on
Bryan or on the ability of Bryan to consummate the transactions contemplated by
this Agreement.
3.05 SEC Reports and Financial Statements. (a) Bryan delivered to Buyer
prior to the execution of this Agreement a true and complete copy of each form,
report, schedule, registration statement, definitive proxy statement and other
document, including any financial statements,
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exhibits or schedules included or incorporated by reference (together with all
amendments thereof and supplements thereto) filed by Bryan with the SEC since
July 1, 1995 whether or not the same was required to have been filed under
applicable law (as such documents have since the time of their filing been
amended or supplemented, the "Bryan SEC Reports"), which includes all the
documents (other than preliminary material) that Bryan was required to file with
the SEC since such date. As of their respective dates, each of the Bryan SEC
Reports (i) complied as to form in all material respects with the requirements
of the Securities Act of 1933, as amended, and the rules and regulations
thereunder (the "Securities Act"), or the Exchange Act, as the case may be, (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (iii) was timely filed pursuant
to the Securities Act and the Exchange Act.
(b) The audited consolidated financial statements and unaudited interim
financial statements (including, in each case, the notes, if any, thereto)
included in Bryan SEC Reports (the "Bryan Financial Statements") or contained in
filings subsequent to the date hereof complied or will comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, were or will be prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
(except as may be indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by Form 10-Q of the SEC) and fairly
present (subject, in the case of the unaudited interim financial statements, to
normal, recurring year-end audit adjustments which are not expected to be,
individually or in the aggregate, materially adverse to Bryan) the consolidated
financial position of Bryan and its Subsidiaries as at the respective dates
thereof and the results of their consolidated operations and cash flows for the
respective periods then ended.
3.06 Absence of Certain Changes or Events. Except as disclosed in Schedule
3.06 hereto, (a) since June 30, 1998 there has not been any change, event or
development having, or that could be reasonably expected to have (individually
or when aggregated with other such changes, events and developments) a material
adverse effect on Bryan, other than those occurring as a result of general
economic or financial conditions and other than developments which are not
unique to Bryan but also generally affect other persons who participate or are
engaged in the lines of business in which Bryan participates or is engaged, and
(b) except as disclosed in Schedule 3.06 hereto, between such date and the date
hereof (i) Bryan has conducted its business only in the ordinary course
consistent with past practice and (ii) Bryan has not taken any action which, if
taken after the date hereof, would constitute a breach of any provision of
clause (ii) of Section 5.01(b).
3.07 Absence of Undisclosed Liabilities. Except for matters reflected or
reserved against in the balance sheet dated June 30, 1998 included in Bryan
Financial Statements or as disclosed in Schedule 3.07 hereto, neither Bryan nor
any of its Subsidiaries has at such date, or has incurred since that date, any
liabilities or obligations of any nature, whether accrued, absolute, contingent
or otherwise, that would be required by GAAP to be reflected on a consolidated
balance sheet of Bryan and its Subsidiaries (including the notes thereto),
except liabilities or obligations (i) which were incurred in the ordinary course
of business consistent with past practice and (ii) which have not been, and
could not be reasonably expected to be, individually or in the aggregate,
materially adverse to Bryan and its Subsidiaries.
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3.08 Legal Proceedings. Except as disclosed in Schedule 3.08 hereto, (i)
there are no claims, actions, suits, arbitrations, proceedings or any
Governmental or Regulatory Authority investigations or audits pending, or to the
knowledge of Bryan threatened, against, relating to or affecting Bryan,
Wendland, Memco or any of their respective assets or properties, and there are
no facts or circumstances known to Bryan that could be reasonably expected to
give rise to any such claim, action, suit, arbitration, proceeding,
investigation or audit (other than threatened claims, actions and suits which,
individually or in the aggregate, cannot reasonably be expected to have an
adverse effect on Bryan or on the ability of Bryan to consummate the Merger);
provided, however, that Bryan has been named as a defendant in litigation
involving claims relating to exposure to asbestos disclosed on Schedule 3.08
("Asbestos Suits") and Bryan is likely to be named as defendant in additional
Asbestos Suits prior to the Closing Date, and (ii) neither Bryan, Wendland nor
Memco is subject to any Order of any Governmental or Regulatory Authority.
3.09 Information Supplied; Schedule 14D-9; Offer Documents
and Proxy Statement.
(a) None of the information supplied or to be supplied by or on
behalf of Bryan or any affiliate of Bryan for inclusion in the Offer Documents
and any other schedule or document required to be filed with the SEC in
connection with the Offer and the Merger will, at the times such documents are
filed with the SEC and are mailed to stockholders of Bryan, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, or to correct any
statement made in any communication with respect to the Offer previously filed
with the SEC or disseminated to the stockholders of Bryan. The Schedule 14D-9
will not, at the time the Schedule 14D-9 is filed with the SEC and at all times
prior to the purchase of Shares by Merger Sub pursuant to the Offer, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading, except that no
representation or warranty is made by Bryan with respect to information supplied
in writing by Buyer, Merger Sub or an affiliate of Buyer or Merger Sub expressly
for inclusion therein. The Schedule 14D-9 will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
of the SEC thereunder.
(b) The proxy statement relating to the Shareholder Meeting, including the
letter to stockholders, notice of meeting, proxy statement and form of proxy,
the information statement and any other information that may be provided in
writing to holders of Bryan Common Stock in connection with the Merger, and any
schedules required to be filed with the SEC in connection therewith, each as
amended or supplemented from time to time (as so amended and supplemented, the
"Proxy Statement"), and any other documents to be filed by Bryan with any other
Governmental or Regulatory Authority in connection with the Merger and the other
transactions contemplated hereby will not, on the date of its filing or, in the
case of the Proxy Statement, at the date it is mailed to shareholders, at the
time of the Shareholder Meeting and at the Effective Time, contain any untrue
statement of a material fact, omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or omit to state any
material fact
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required to correct any statement made in any earlier communication with respect
to the solicitation of any proxy or approval for the Merger, except that no
representation is made by Bryan with respect to information supplied in writing
by or on behalf of Buyer and Merger Sub expressly for inclusion therein and
information incorporated by reference therein from documents filed by Buyer or
any of its Subsidiaries with the SEC. The Proxy Statement and any such other
documents filed by Bryan with the SEC under the Exchange Act will comply as to
form in all material respects with the requirements of the Exchange Act, to the
extent applicable.
(c) Neither the information supplied or to be supplied in writing by or on
behalf of Bryan for inclusion in any document to be filed by Buyer or Merger Sub
with the SEC nor any other Governmental or Regulatory Authority in connection
with the Merger and the other transactions contemplated hereby will, on the date
of its filing, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
3.10 Compliance with Laws and Orders. Set forth on Schedule 3.10 are all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental and Regulatory Authorities that are currently held by Bryan,
Wendland or Memco or for which Bryan, Wendland or Memco has applied. Bryan and
its subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental and Regulatory Authorities necessary for the
lawful conduct of their respective businesses ("Permits"), except for failures
to hold such permits, licenses, variances, exemptions, orders and approvals
which, individually or in the aggregate, are not having and could not be
reasonably expected to have a material adverse effect on Bryan and its
subsidiaries taken as a whole. Bryan and its subsidiaries are in compliance with
the terms of the Permits, except failures so to comply which, individually or in
the aggregate, are not having and could not be reasonably expected to have a
material adverse effect on Bryan and its subsidiaries taken as a whole. Except
as set forth in detail on Schedule 3.10, Bryan and its subsidiaries are not in
violation of or default under any Law or Order of any Governmental or Regulatory
Authority, except for violations which, individually or in the aggregate, are
not having and could not be reasonably expected to have a material adverse
effect on Bryan and its subsidiaries taken as a whole.
3.11 Compliance with Agreements; Certain Agreements. Set forth on Schedule
3.11 are all Contracts under which either Bryan, Wendland or Memco have any
rights, entitlements, duties or obligations, other than (i) manufacturer's
representative contracts written on one of the two standard forms disclosed to
Buyer, (ii) contracts for the purchase of materials, supplies or services in the
ordinary course of business consistent with past practice, no one of which (and
no group of related contracts of which) involves an aggregate purchase price in
excess of $250,000 and each of which contracts is to be fully performed within
90 days after its commencement, and (iii) contracts for the sale of finished
goods in the ordinary course of business consistent with past practice, no one
of which contracts (and no group of related contracts of which) involves an
aggregate selling price in excess of $150,000 and no one of which (other than
contracts with aggregate selling prices of not more than $500,000) has been in
effect, without being fully performed, for more than 150 days. Except as
disclosed in Schedule 3.11 hereto, neither Bryan, its Subsidiaries nor, to the
knowledge of Bryan, any other party thereto, is in breach or violation of, or in
default in the performance or observance of any term or provision of, and no
event has occurred which, with notice or lapse of time or both, could be
reasonably expected to result in a
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default under, (i) the Articles of Incorporation or By-laws of Bryan or (ii) any
Contract to which Bryan is a party or by which Bryan or any of its assets or
properties is bound, except in the case of clause (ii) for breaches, violations
and defaults which, individually or in the aggregate, are not having and could
not be reasonably expected to have a material adverse effect on Bryan.
3.12 Taxes.
(a) Each of Bryan and its Subsidiaries has filed all federal and all
material foreign, state and local tax reports and returns required to be filed
and except as disclosed on Schedule 3.12, has duly paid all taxes shown as due
thereon, including, without limitation, income, capital stock, gross receipts,
net proceeds, ad valorem, value added, turnover, sales, use, real estate
transfer, property, personal property (tangible and intangible), stamp, leasing,
lease, user, excise, franchise, transfer, fuel, vehicle sales, excess profits,
occupational and interest equalization, unitary, severance, withholding, social
security, employment and other taxes, duties, assessments and charges
(including, without limitation, the recapture of any tax items such as
investment tax credits), together with all interest, penalties and additions
imposed with respect to such amounts, which are due on or before the date hereof
or claimed to be due by federal, state, or local taxing authorities or which are
payable on or before the date hereof with respect to the business and operations
of Bryan and its Subsidiaries (collectively, "Taxes"). All such returns are
accurate and complete in all material respects. There are no tax liens upon any
property or assets of Bryan and its Subsidiaries, except liens for Taxes not yet
due and payable. All Taxes (including interest and penalties) applicable for all
periods prior to the Closing or other governmental charges upon Bryan and its
Subsidiaries or their assets, income or revenues have been or will be paid (if
due) or, if not currently payable, reserved against in accordance with GAAP.
Bryan and its Subsidiaries have not executed any waivers of the statute of
limitations on the right of the Internal Revenue Service (the "IRS") or any
state or local taxing authority to assess additional Taxes or to contest the
income or loss with respect to any tax return. The basis of any depreciable
assets, and the methods used in determining allowable depreciation (including
cost recovery), held by Bryan and its Subsidiaries, are substantially correct
and in compliance with the Internal Revenue Code of 1986, as amended (the
"Code"), and all regulations thereunder.
(b) No issues have been raised that are currently pending by any
taxing authority in connection with any of the aforesaid tax returns or reports.
No issues have been raised in any examination by any taxing authority with
respect to Bryan and its Subsidiaries which, by application of similar
principles, reasonably could be expected to result in a material proposed
deficiency for any other period not so examined. The items of income and
deductions reflected on the federal income tax returns and comparable state and
local returns filed by or on behalf of Bryan and its Subsidiaries for all
taxable years (including the supporting schedules filed therewith), available
copies of which have been supplied (or will be promptly supplied upon request)
to Buyer, state accurately in all material respects the receipts and
expenditures of Bryan and its Subsidiaries, and the same were derived from the
books and records of Bryan.
(c) Bryan and its Subsidiaries have not entered into any joint
venture, partnership, or other arrangement or contract which is treated as a
partnership for federal income tax purposes.
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(d) None of Bryan or any of its Subsidiaries has ever been a
"consenting corporation," within the meaning of Section 341(f)(l) of the Code,
or comparable provisions of any state statutes, and none of the assets of Bryan
and its Subsidiaries is subject to an election under Section 341(f) of the Code
or comparable provisions of any state statutes.
(e) No property of Bryan and its Subsidiaries is property which Bryan
or Buyer is or will be required to treat as being owned by another person
pursuant to the provisions of Section 168(f)(8) of the Code, as in effect prior
to the Tax Reform Act of 1986.
(f) No property of Bryan and its Subsidiaries is "tax exempt use
property" as such term is defined in Section 168(h) of the Code.
(g) None of the properties or assets of Bryan and its Subsidiaries is
tax-exempt bond financed property within the meaning of Section 168(g)(5) of the
Code.
(h) None of Bryan nor any of its Subsidiaries nor any predecessor
thereof is or has been, or has filed a tax return claiming that it is or has
been, an Electing Small Business Corporation pursuant to the provisions of
Subchapter S of the Code.
(i) None of Bryan or its Subsidiaries (i) has been a
member of an affiliated group filing a consolidated federal
income tax return (other than a group the common parent of which
was Bryan) or (ii) has any liability for the Taxes of any person
(other than any of Bryan and its Subsidiaries) under Treas. Reg.
ss. 1.1502-6 (or any provision of state, local or foreign law),
as a transferor or successor, by contract or otherwise.
3.13 Benefit Plans; ERISA.
(a) All Benefit Plans (as defined below) are listed in Schedule 3.13,
and copies of all documentation relating to such Benefit Plans have been
delivered or made available to Buyer (including copies of written Benefit Plans,
written descriptions of oral Benefit Plans, summary plan descriptions, trust
agreements, the three most recent annual returns IRS Forms 5500 and IRS
determination letters). Except as disclosed in Schedule 3.13 hereto:
(i) each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and with the
requirements of all applicable law, including ERISA (as defined below) and the
Code, and each Benefit Plan intended to qualify under Section 401(a) of the Code
has at all times since its adoption been so qualified, and each trust which
forms a part of any such plan has at all times since its adoption been
tax-exempt under Section 501(a) of the Code whether or not waived;
(ii) no Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
Code;
(iii) no "reportable event" (within the meaning of Section 4043
of ERISA) has occurred with respect to any Benefit Plan or any Plan (as defined
below) maintained by an ERISA Affiliate (as defined below) since the effective
date of Section 4043;
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(iv) with respect to each Multiemployer Plan (as defined below)
(i) no withdrawal liability has been incurred by Bryan or any ERISA Affiliate,
and Bryan has no reason to believe that any such liability will be incurred,
prior to the Closing Date, (ii) no such plan is in "reorganization" (within the
meaning of Section 4241 of ERISA), (iii) no notice has been received that
increased contributions may be required to avoid a reduction in plan benefits or
the imposition of an excise tax, or that the plan is or may become "insolvent"
(within the meaning of Section 4241 of ERISA), and (iv) no proceedings have been
instituted by the Pension Benefit Guaranty Corporation against the plan;
(v) no direct, contingent or secondary liability has been
incurred or is expected to be incurred by Bryan under Title IV of ERISA to any
party with respect to any Benefit Plan or Multiemployer Plan presently or
heretofore maintained or contributed to by any ERISA Affiliate;
(vi) neither Bryan nor any ERISA Affiliate has incurred any
liability for any tax imposed under Section 4971 through 4980B of the Code or
civil liability under Section 502(i) or (1) of ERISA;
(vii) no benefit under any Benefit Plan (except as may be set
forth in the Senior Management Agreements as defined in Section 6.05(a)),
including, without limitation, any severance or parachute payment plan or
agreement, will increase the amount of compensation due any employee or will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement;
(viii) no tax has been incurred under Section 511 of the Code
with respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto);
(ix) no Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by Part 6
of Subtitle B of Title I of ERISA or Section 4980B of the Code or any State laws
requiring continuation of benefits coverage following termination of employment
and there has been no communication to any employee that would reasonably be
expected to promise or guarantee any such employee retiree health or life
insurance or other retiree death benefits on a permanent basis;
(x) no suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been brought
or, to the knowledge of Bryan, threatened against or with respect to any Benefit
Plan and there are no facts or circumstances known to Bryan that could
reasonably be expected to give rise to any such suit, action or other
litigation; and
(xi) all contributions to Benefit Plans and Multiemployer Plans
that were required to be made under such Benefit Plans as of the Closing Date
have been made, and all benefits accrued under any unfunded Benefit Plan have
been paid, accrued or otherwise adequately reserved in accordance with GAAP, all
of which accruals under unfunded Benefit Plans are as reflected in Bryan SEC
Reports or disclosed in Schedule 3.13, and Bryan has performed all material
obligations required to be performed under all Benefit Plans.
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(b) Except as set forth in Schedule 3.13 hereto or as provided in
Section 6.05, neither the execution and delivery of this Agreement nor the
consummation of the transaction contemplated hereby will entitle any former or
current employee of Bryan or any Affiliate or any group of such employees to any
payment, increase the amount of compensation due to any such employees or cause
acceleration of benefits under any Benefit Plan.
(c) As used herein:
(i) "Benefit Plan" means any Plan, existing at the Closing Date
or prior thereto, established or to which contributions have at any time been
made by Bryan or its Subsidiaries, or under which any employee, former employee
or director of Bryan or its Subsidiaries or any beneficiary thereof is covered,
is eligible for coverage or has benefit rights.
(ii) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder.
(iii) "ERISA Affiliate" means any business entity which is, or
at any time was, a member of a controlled group (within the meaning of Section
412(n)(6) of the Code) that includes, or at any time included, Bryan or its
Subsidiaries.
(iv) "Multiemployer Plan" means a multiemployer plan within the
meaning of Section 4001(a)(3) of ERISA with respect to which Bryan or any ERISA
Affiliate has an obligation to contribute or has or could have withdrawal
liability under Section 4201 of ERISA.
(v) "Plan" means any employment, consulting, termination, bonus,
incentive compensation, deferred compensation, pension, profit sharing,
retirement stock purchase, stock option, stock ownership, stock appreciation
rights, phantom stock, savings, leave of absence, layoff, vacation, day or
dependent care, legal services, cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy, agreement or arrangement of any kind,
whether written or oral, or whether for the benefit of a single individual or
more than one individual including, but not limited to, any "employee benefit
plan" within the meaning of Section 3(3) of ERISA.
3.14 Insurance. Schedule 3.14 identifies all insurance policies of Bryan
and its Subsidiaries currently in force, inclusive of the name and address of
the insurer, the policy number and the year or years of coverage (the "Insurance
Policies"). To the best of Bryan's knowledge, Schedule 3.14 lists all claims
made against or under the Insurance Policies and under any prior insurance
policies in effect at any time during the past five years with respect to Bryan,
Wendland and Memco, including claims related to product liability, third-party
property damage, bodily injury and third-party environmental impairment. To the
best of the knowledge of Bryan, Schedule 3.14 also identifies all insurance
policies of Bryan under which asbestos-related claims against Bryan are or would
be covered. Wendland will promptly (and in any event within 10 days from the
date hereof) reinstate product liability insurance coverage with a scope
equivalent to that under the product liability insurance policy of Wendland most
recently expired, and Wendland will promptly deliver to Buyer reasonable
evidence of such reinstatement.
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3.15 Labor Matters.
(a) Except as set forth in Schedule 3.15, (i) no employees of Bryan
or any of its Subsidiaries are represented by a labor union or organization, no
labor union or organization has been certified or recognized as a representative
of any such employees, and neither Bryan nor any of its Subsidiaries is a party
to or has any obligation under any collective bargaining agreement or other
labor union contract with any labor union or organization, or has any obligation
to recognize or deal with any labor union or organization, and there are no such
contracts pertaining to or which determine the terms or conditions of employment
of any employee of Bryan or any of its Subsidiaries; (ii) there are no pending
or threatened representation campaigns, elections or proceedings or questions
concerning union representation involving any employees of Bryan or any of its
Subsidiaries; (iii) neither Bryan nor any of its Subsidiaries has any knowledge
of any activities or efforts of any labor union or organization (or
representatives thereof) to organize any employees of Bryan or any of its
Subsidiaries, nor of any demands for recognition or collective bargaining, nor
of any strikes, slowdowns, work stoppages or lock-outs of any kind, or threats
thereof, by or with respect to any employees of Bryan or any of its Subsidiaries
or any actual or claimed representatives thereof, and no such activities,
efforts, demands, strikes, slowdowns, work stoppages or lock-outs occurred
during the 48-month period preceding the date hereof; (iv) neither Bryan nor any
of its Subsidiaries has engaged in, admitted committing or been held in any
administrative or judicial proceeding to have committed any unfair labor
practice under the National Labor Relations Act, as amended; (v) neither Bryan
nor any of its Subsidiaries is involved in any industrial or trade dispute or
any dispute or negotiations regarding a claim of material importance with any
labor union or organization; and (vi) there are no controversies, claims,
demands or grievances of material importance pending or, so far as Bryan or any
of its Subsidiaries is aware, threatened, between Bryan or any of its
Subsidiaries and any of their respective employees or any actual or claimed
representative thereof.
(b) Schedule 3.15 (and the exhibits thereto) set forth all contracts
and agreements, including, without limitation, employment agreements, consulting
agreements, change in control agreements, independent contractor agreements,
retainers and severance agreements under which Bryan or any of its Subsidiaries
has any obligation to provide wages, salary, commissions or other compensation
or remuneration (other than obligations to make current wage or salary payments
terminable at will without notice) to or on behalf of any employee, former
employee, consultant or contractor (or any designee, assignee or beneficiary
thereof). A complete and correct copy of each written (and a complete and
correct written description of each such oral) contract or agreement, has been
delivered or made available to Buyer.
(c) A true and correct statement of the names, current rates of base
compensation and description of the formula for computing bonus compensation of
all officers, directors and salaried non-union employees of Bryan and its
Subsidiaries as of the date hereof, is set forth in Schedule 3.15. Except as set
forth in Schedule 3.15, (i) Bryan and its Subsidiaries have no obligation
(including an obligation for the payment of any fee, extraordinary bonus or
"golden parachute" based upon the successful completion of the transactions
contemplated hereunder) under any employment contract, severance agreement or
other change in control plan, agreement or arrangement, or any other similar
agreements, employment policies (including vacation and severance pay policies)
or retirement or employee benefit plans, arrangements or
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understandings, written or otherwise, with any officer, director, employee or
agent of Bryan or any Subsidiary and (ii) since January 1, 1998, Bryan and its
Subsidiaries have (A) not paid or agreed to pay any bonuses or made or agreed to
make any increase in the rate of wages, salaries or other compensation or
remuneration of any of its officers, directors, consultants or employees (except
for increases in accordance with written binding commitments, true, correct and
complete copies of which have been previously delivered to Buyer, or in
accordance with a past practice described in Schedule 3.15), or (B) become a
party to any employment contract or arrangement with any of its officers or
employees providing for any new or additional bonuses, profit sharing payments,
severance pay or retirement benefits or any other form of employee compensation
or benefits.
(d) Bryan and each of its Subsidiaries has at all times complied in
all material respects and is in material compliance with all applicable federal,
state and local laws, rules and regulations respecting employment, wages, hours,
occupational health and safety, and payment and withholding of taxes in
connection with employment. Except as set forth in Schedule 3.15, there are no
claims, complaints or legal or administrative proceedings pending or, so far as
Bryan is aware, threatened, against Bryan or any of its Subsidiaries before any
federal, state or municipal court or governmental agency, or any federal, state
or municipal taxing authority involving or relating to any past or present
employee(s) or applicant(s) for employment of Bryan or any of its Subsidiaries,
or relating to any acts, omissions or practices of Bryan or any of its
Subsidiaries relating to employment practices or occupational health and safety.
Neither Bryan nor any of its Subsidiaries are party to or bound by any court or
administrative order, judgment, decree or ruling of any kind respecting the
employment practices or occupational health and safety of any employees or
prospective employees of Bryan or any of its Subsidiaries.
3.16 Environmental Matters. Except as disclosed in
Schedule 3.16 hereto:
(a) To the best of Bryan's knowledge, Bryan and its Subsidiaries are
and have been consistently in compliance with applicable Environmental Law (as
defined below) and have obtained all licenses, permits, authorizations,
approvals and consents from Governmental and Regulatory Authorities that are
required in respect of the business, operations, assets or properties of each
under any applicable Environmental Law. Bryan and its Subsidiaries are in
material compliance with the terms and conditions of all such licenses, permits,
authorizations, approvals and consents.
(b) No Order or notice has been issued, no demand or claim (including
any for personal injury, property or natural resources damage) has been
asserted, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or, to the knowledge of Bryan and its
Subsidiaries, threatened by any third party (including any Governmental or
Regulatory Authority) with respect to any alleged failure by Bryan or any of its
Subsidiaries to comply with applicable Environmental Law or to have any license,
permit, authorization, approval or consent from Governmental or Regulatory
Authorities required under any applicable Environmental Law in connection with
the conduct of the business or operations of Bryan or any of its Subsidiaries or
with respect to any treatment, storage, recycling, transportation, disposal or
"release" as defined in 42 U.S.C. ss. 9601(22) ("Release"), of any Hazardous
Material (as defined below).
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(c) Bryan and its Subsidiaries have not handled any Hazardous
Material on any property owned or leased by Bryan or any of its Subsidiaries;
and, without limiting the foregoing, at any property owned or leased by Bryan or
any of its Subsidiaries, (i) there are no underground storage tanks, active or
abandoned; (ii) no Hazardous Material has been Released in a quantity reportable
under, or in violation of, any Environmental Law; (iii) no interim status or
hazardous waste permit is or has been required; and (iv) there has been no
disposal of any Hazardous Material.
(d) Bryan and its Subsidiaries have not transported or arranged for
the transportation of any Hazardous Material to any location that, to the
knowledge of Bryan and its Subsidiaries, is not consistently in compliance with
applicable Environmental Law or which is the subject of any investigation,
action, suit, arbitration or proceeding that could be reasonably expected to
lead to claims against Bryan or any of its Subsidiaries for clean-up costs,
remedial work, damages to natural resources or personal injury claims, which
could be reasonably expected to have a material adverse impact on Bryan or any
of its Subsidiaries including, but not limited to, claims under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, and the rules and regulations promulgated thereunder ("CERCLA").
(e) No oral or written notification of a Release of a Hazardous
Material has been or was required to be filed by or on behalf of Bryan or any of
its Subsidiaries and no property owned or leased by Bryan or any of its
Subsidiaries is listed or proposed for listing on the National Priorities List
promulgated pursuant to CERCLA or on any similar state list of sites requiring
investigation or clean-up.
(f) There are no Liens arising under or pursuant to any Environmental
Law with respect to any real property owned or leased by Bryan or any of its
Subsidiaries, and no action of any Governmental or Regulatory Authority has been
taken or is in process which could subject any of such properties to such Liens,
and Bryan or any of its Subsidiaries would not be required to place any notice
or restriction relating to the presence of Hazardous Material at any such
property owned by it in any deed to such property.
(g) Bryan has delivered, or made available, to Buyer all
environmental (including asbestos) investigations, studies, audits, tests,
reviews or other analyses conducted during the prior three years by, or which
are in the possession of, Bryan in relation to any property or facility owned or
leased by Bryan or any of its Subsidiaries, including Phase 1 environmental
reports for all properties owned, leased or controlled, indirectly or directly,
by Bryan or any of its Subsidiaries.
As used herein:
(x) "Environmental Law" means any Law or Order relating to human
health, safety or protection of the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants or Hazardous
Materials in the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata), or otherwise
relating to the treatment, storage, disposal, transport, use or handling of any
Hazardous Material; and
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(y) "Hazardous Material" means (A) any chemicals, materials,
substances or wastes which are now or hereafter become defined as or included in
the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," "pollutants," "contaminants" or words of
similar import, under any Environmental Law; and (B) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, and polychlorinated biphenyls (PCBs).
3.17 Tangible Property and Assets. Except as disclosed in Schedule 3.17
hereto, Bryan has good and marketable title to, or has valid leasehold interests
in or valid rights under contract to use, all tangible property and assets used
in and, individually or in the aggregate, material to the conduct of the
businesses of Bryan free and clear of all Liens other than (i) any statutory
Lien arising in the ordinary course of business by operation of law with respect
to a liability that is not yet due or delinquent and (ii) any minor imperfection
of title or similar Lien which individually or in the aggregate with other such
Liens does not materially impair the value of the property or asset subject to
such Lien or the use of such property or asset in the conduct of the business of
Bryan. All such property and assets are, in all material respects, in good
working order and condition, ordinary wear and tear excepted, and adequate and
suitable for the purposes for which they are presently being used.
3.18 Intellectual Property Rights. Schedule 3.18 sets forth a true,
correct and complete list of all Intellectual Property (as defined below) owned
or held by Bryan or any of its Subsidiaries (or otherwise used in the business
of Bryan and its Subsidiaries) on the date hereof and all license agreements
(including all amendments or supplements thereto or continuing thereunder) in
effect on the date hereof pursuant to which any such Intellectual Property is
licensed to or by Bryan or its Subsidiaries, in each case, which have been, are,
or may reasonably be expected in the future to be, material to Bryan and its
Subsidiaries taken as a whole. Except as set forth in Schedule 3.18, Bryan and
its Subsidiaries own all right, title and interest in and to all Intellectual
Property used in their respective businesses (other than Intellectual Property
which, individually or in the aggregate, is not material to the conduct of the
businesses of Bryan and its Subsidiaries), free and clear of any royalty or
other payment obligation, lien or charge. Bryan and its Subsidiaries are not in
default (and with the giving of notice or lapse of time or both, would not be in
default) in any material respect under any license to use any Intellectual
Property. The Intellectual Property is not being infringed by any third party,
and Bryan is not infringing any intellectual property rights of any third party,
except for such defaults and infringements which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on Bryan. Except as indicated in Schedule 3.18, all
maintenance taxes, annuities and renewal fees have been paid and all other
necessary actions to maintain the Intellectual Property have been taken through
the date hereof and will continue to be paid or taken by Bryan and its
Subsidiaries through the Effective Time. To the best of Bryan's knowledge, no
claims or controversies currently exist regarding any infringement of or by or
violation of or by any of the Intellectual Property. For purposes of this
Agreement, "Intellectual Property" includes
(i) all trademarks, service marks, trademark registrations, service
mark registrations, trade names and applications for registration
of trademarks and service marks;
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(ii) all licenses which create rights in or to the trademark, service
mark or trade name properties described in clause (i) above;
(iii) all copyrights, copyright registrations and
applications for registration of copyrights;
(iv) all renewals, modifications and extensions of any
items referred to in clauses (i) through (iii)
above;
(v) all patents, design patents and utility patents, all applications
for grant of any such patents pending as of the date hereof or as
of the Effective Time or filed within five years prior to the date
hereof, and all reissues, divisions, continuations-in-part and
extensions thereof;
(vi) all technical documentation, trade secrets,
designs, inventions, processes, formula, know-how,
operating manuals and guides, plans, new product
development, technical and marketing surveys,
material specifications, product specifications,
invention records, research records, labor
routings, inspection processes, equipment lists,
engineering reports and drawing, architectural or
engineering plans, know-how agreements and other
know- how;
(vii) all marketing and licensing records, sales literature, customer
lists, trade lists, sales forces and distributor networks lists,
advertising and promotional materials, service and parts records,
warranty records, maintenance records and similar records;
(viii) all rights arising under, and rights to develop,
use and sell under, any of the foregoing and all
licenses with respect thereto; and
(ix) all rights and incidents of interest in and to all
non-competition or confidentiality agreements.
3.19 Vote Required. The affirmative vote of the holders of record of at
least two-thirds of the outstanding shares of Bryan Common Stock with respect to
the adoption of this Agreement is the only vote of the holders of any class or
series of the capital stock of Bryan required to adopt this Agreement and
approve the Merger and the other transactions contemplated hereby.
3.20 Disclosure. The information heretofore delivered or made available by
Bryan with respect to Bryan and its Subsidiaries, when such information is taken
as a whole, does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading.
3.21 Effect of Transactions on Manufacturer's
Representatives and Customers. Except as listed on Schedule 3.21,
to the best of the knowledge of Bryan, the execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby (a) will not
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adversely affect the relationship of Bryan with any of its manufacturer's
representatives or customers, (b) will not adversely affect the relationship of
Bryan with any of its suppliers, and (c) will not result in any breach or
default, or trigger any "change in control" provision, under any material
Contract.
3.22 Bryan's Transaction Costs. To the best of the knowledge of Bryan,
Schedule 3.22 sets forth an accurate estimate of Bryan's Transaction Costs (as
defined in Section 6.06) through consummation of the Merger, and Bryan has
furnished Buyer with true and complete copies of all currently-existing
agreements (and written summaries of all currently-existing oral agreements)
under which Bryan's Transaction Costs are likely to become payable. After the
date hereof, neither Bryan nor any of its subsidiaries will materially amend any
such agreement, or enter into any new such agreement, without the prior approval
of Buyer (such approval not to be unreasonably withheld).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Buyer and Merger Sub represent and warrant to Bryan as follows:
4.01 Organization and Qualification. Each of Buyer and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated hereby. Each of Buyer and Merger Sub is duly qualified, licensed or
admitted to do business and is in good standing in each jurisdiction in which
the ownership, use or leasing of its assets and properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary, except for such failures to be so qualified, licensed or admitted and
in good standing which, individually or in the aggregate, could not be
reasonably expected to have a material adverse effect on the validity or
enforceability of this Agreement or on the ability of Buyer or Merger Sub to
perform its obligations hereunder.
4.02 Authority Relative to this Agreement. Each of Buyer and Merger Sub
has full corporate power and authority to enter into this Agreement, and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by each of Buyer and Merger Sub and the consummation by each of Buyer and Merger
Sub of the transactions contemplated hereby have been duly and validly approved
by their respective Boards of Directors and by Buyer in its capacity as the sole
shareholder of Merger Sub and no other corporate proceedings on the part of
Buyer, Merger Sub or their shareholders are necessary to authorize the
execution, delivery and performance of this Agreement by Buyer or Merger Sub and
the consummation by Buyer or Merger Sub of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Buyer and
Merger Sub and constitutes a legal, valid and binding obligation of Buyer and
Merger Sub enforceable against Buyer and Merger Sub in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency,
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reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
4.03 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by Buyer and Merger
Sub does not and the performance by Buyer and Merger Sub of their obligations
hereunder and the consummation of the transactions contemplated hereby will not,
conflict with, result in a violation or breach of, constitute (with or without
notice or lapse of time or both) a default under, result in or give to any
person any right of termination, cancellation, modification or acceleration of,
or result in the creation or imposition of any Lien upon any of the assets or
properties of Buyer, or any of its Subsidiaries, under any of the terms,
conditions or provisions of (i) the certificates or articles of incorporation or
By-laws (or other comparable charter documents) of Buyer or any of its
Subsidiaries, or (ii) subject to the taking of the actions described in
paragraph (b) of this Section, (x) any Law or Order of any Governmental or
Regulatory Authority applicable to Buyer or any of its Subsidiaries or any of
their respective assets or properties, or (y) any Contract to which Buyer or any
of its Subsidiaries is a party or by which Buyer or any of its Subsidiaries or
any of their respective assets or properties is bound, excluding from the
foregoing clauses (x) and (y) conflicts, violations, breaches, defaults,
terminations, modifications, accelerations and creations and impositions of
Liens which, individually or in the aggregate, could not be reasonably expected
to have a material adverse effect on the ability of Buyer and Merger Sub to
consummate the transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger notification report by
Buyer under the HSR Act, (ii) for the filing of the Articles of Merger required
by the NMBCA with the New Mexico Corporation Commission and appropriate
documents with the relevant authorities of other states in which the Constituent
Corporations are qualified to do business, and (iii) for the filing of Schedule
14D-1 and Schedule 14D-9, no consent approval or action of, filing with or
notice to any Governmental or Regulatory Authority or other public or private
third party is necessary or required under any of the terms, conditions or
provisions of any Law or Order of any Governmental or Regulatory Authority or
any Contract to which Buyer or any of its Subsidiaries is a party or by which
Buyer or any of its Subsidiaries or any of their respective assets or properties
is bound by the execution and delivery of this Agreement by Buyer and Merger
Sub, the performance by Buyer and Merger Sub of their obligations hereunder or
the consummation of the transactions contemplated hereby, other than such
consents, approvals, actions, filings and notices which the failure to make or
obtain, as the case may be, individually or in the aggregate, could not be
reasonably expected to have a material adverse effect on the ability of Buyer
and Merger Sub to consummate the transactions contemplated by this Agreement.
4.04 Legal Proceedings. There are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of Buyer and its Subsidiaries,
threatened against, relating to or affecting, nor to the knowledge of Buyer and
its Subsidiaries are there any Governmental or Regulatory Authority
investigations or audits pending or threatened against, relating to or
affecting, Buyer or any of its Subsidiaries or any of their respective assets
and properties which, if determined adversely to Buyer or any of its
Subsidiaries, individually or in the aggregate,
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could be reasonably expected to have a material adverse effect on the ability of
Buyer and Merger Sub to consummate the transactions contemplated by this
Agreement. Neither Buyer nor any of its Subsidiaries is subject to any Order of
any Governmental or Regulatory Authority which, individually or in the
aggregate, could be reasonably expected to have a material adverse effect on the
ability of Buyer and Merger Sub to consummate the transactions contemplated by
this Agreement.
4.05 Information Supplied.
(a) None of the Offer Documents will, at the times such documents are
filed with the SEC and are mailed to the stockholders of Bryan, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading, except
that no representation is made by Buyer or Merger Sub with respect to
information supplied in writing by Bryan or an affiliate of Bryan expressly for
inclusion therein. The Offer Documents will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
of the SEC thereunder.
(b) None of the information supplied by Buyer, Merger Sub or any affiliate
of Buyer or Merger Sub specifically for inclusion in the Proxy Statement or the
Schedule 14D-9 will, at the date of filing with the SEC, and, in the case of the
Proxy Statement, at the time the Proxy Statement is mailed and at the time of
the Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(c) Neither the information supplied or to be supplied in writing by or on
behalf of Buyer or Merger Sub for inclusion, nor the information incorporated by
reference from documents filed by Buyer or any of its Subsidiaries with the SEC,
in the Proxy Statement or any other documents to be filed by Buyer, Merger Sub
or Bryan with the SEC or any other Governmental or Regulatory Authority in
connection with the Merger and the other transactions contemplated hereby will
on the date of its filing or, in the case of the Proxy Statement, at the date it
is mailed to shareholders, and at the time of the Shareholder Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. All such documents filed by Buyer or Merger Sub with the SEC under
the Exchange Act will comply as to form in all material respects with the
requirements of the Exchange Act.
4.06 Financing. Buyer has sufficient cash and/or credit facilities on hand
or immediately available to consummate the Offer and the Merger in accordance
with this Agreement and to make all other necessary payments of fees and
expenses in connection with the transactions contemplated by this Agreement.
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ARTICLE V
COVENANTS OF THE COMPANY
5.01 Conduct of Business. At all times from and after the date hereof
until the Effective Time, Bryan covenants and agrees that (except as expressly
contemplated or permitted by this Agreement, or to the extent that Buyer may
otherwise grant prior consent in writing, which consent shall not be
unreasonably withheld):
(a) Bryan shall conduct its business only in, and Bryan shall cause
its Subsidiaries not to take any action except in, the ordinary course
consistent with past practice (subject to the further limitations specified in
this Article).
(b) Without limiting the generality of paragraph (a) of this Section,
Bryan shall, and shall cause its Subsidiaries to, use all commercially
reasonable efforts to preserve intact in all material respects its present
business organization and reputation, to keep available the services of its key
officers and employees, to maintain its assets and properties in good working
order and condition (ordinary wear and tear excepted), to preserve its
relationships with customers and suppliers and others having significant
business dealings with them, to comply in all material respects with all Laws
and Orders of all Governmental or Regulatory Authorities applicable to them, and
to maintain (subject to Section 5.01(b)(xx)) insurance, including, without
limitation, product liability insurance, in such amounts and against such risks
and losses as was in effect on June 30, 1998 (subject to Section 3.14). Also
without limiting the generality of paragraph (a) of this Section, Bryan shall
not, and shall cause its Subsidiaries not to:
(i) amend or propose to amend its or their Articles of
Incorporation or By-laws;
(ii) (w) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock other than the
dividend of $2.00 per share declared on Bryan Common Stock on August 26,
1998 and payable on September 15, 1998; (x) split, combine, reclassify or
take similar action with respect to any of its capital stock or issue or
authorize or propose the issuance of any other securities or Option in
respect of, in lieu of or in substitution for shares of its capital stock,
(y) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization or
(z) directly or indirectly redeem, repurchase or otherwise acquire any
shares of its capital stock or any Option with respect thereto;
(iii) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any Option with
respect thereto, or modify or amend any right of any holder of outstanding
shares of capital stock or Options with respect thereto;
(iv) acquire (by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of,
or by any other manner) any business or any corporation, partnership,
association or other business
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organization or division thereof or otherwise acquire or agree to acquire
any assets other than raw materials and supplies acquired in the ordinary
course of its business consistent with past practice in amounts in any one
instance (or group of related instances) not in excess of $250,000 and in
each case pursuant to an order or agreement requiring delivery of such raw
materials and supplies within 120 days after the creation of such order or
agreement;
(v) sell, lease, grant any security interest in or otherwise dispose
of or encumber any of its assets or properties other than finished goods
in the ordinary course of business consistent with past practice pursuant
to orders as to which (x) no one order (or group of related orders)
involves an aggregate selling price in excess of $150,000, and (y)(i) each
order is to be fully performed within 150 days after its creation or (ii)
in the case of orders for which there is no definite date by which the
orders must be fully performed, the aggregate selling price for all such
orders that are more than 150 days old shall not exceed $500,000;
(vi) except to the extent required by applicable law or GAAP, (x)
permit any material change in (A) any pricing, marketing, purchasing,
investment, accounting, financial reporting, inventory, receivable,
credit, allowance or tax practice or policy or (B) any method of
calculating any bad debt, contingency or other reserve for accounting,
financial reporting or tax purposes or (y) make any material tax election
or settle or compromise any material income tax liability with any
Governmental or Regulatory Authority;
(vii) (x) other than working capital borrowings of up to $300,000
under Bryan's existing bank line of credit, incur any indebtedness for
borrowed money (which shall be deemed for this purpose to include entering
into credit agreements, lines of credit or similar arrangements, whether
or not amounts are borrowed thereunder) or guarantee any such
indebtedness, or (y) voluntarily purchase, cancel, prepay or otherwise
provide for a complete or partial discharge in advance of a scheduled
repayment date with respect to, or waive any right under, any indebtedness
for borrowed money;
(viii) (x) enter into, adopt, amend in any material respect (except
as may be required by applicable law) or terminate any Bryan Benefit Plan
or other agreement between Bryan (or any of its Subsidiaries) and one or
more of its directors, officers or employees, or (y) increase in any
manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan or arrangement in
effect as of the date hereof (except that Bryan shall comply with the
union contract and except for normal increases approved by Buyer);
(ix) enter into any new Contract or amend, modify or terminate any
existing Contract, or engage in any new transaction (x) not in the
ordinary course of business consistent with past practice, (y) not on an
arm's length basis, or (z) with any shareholder or affiliate of Bryan;
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(x) make any capital expenditure or any commitment to make a capital
expenditure or any commitment for additions to plant, property or
equipment constituting capital assets;
(xi) make any change in lines of business or any
material changes in prices, marketing plans or procedures;
(xii) make any changes to current levels of inventory, receivables or
payables, except as may occur in the ordinary course of business
consistent with past practice;
(xiii) grant any stock-related, performance or similar
awards or bonuses;
(xiv) forgive any loans to employees, officers or
directors or any of their respective affiliates or
associates;
(xv) make any deposits or contributions of cash or other property to,
or take any other action to fund or in any other way secure the payment of
compensation or benefits under, any Bryan Benefit Plan;
(xvi) enter into, amend, extend or waive any rights
under any collective bargaining or other labor agreement;
(xvii) commence, settle or agree to settle any
litigation, suit, action, claim, proceeding or
investigation;
(xviii) pay, discharge or satisfy or agree to pay, discharge or
satisfy any claim, liability or obligation (absolute accrued, asserted or
unasserted, contingent or otherwise) other than the payment, discharge or
satisfaction of liabilities reflected or reserved against in full in the
financial statements as at June 30, 1998 or incurred in the ordinary
course of business subsequent to June 30, 1998 or Bryan's Transaction
Costs;
(xix) enter into, modify, amend or terminate any Contract material to
the business of Bryan or any of its Subsidiaries which it may enter, amend
or terminate without violating clause (ix) above, or waive any rights
under any such Contract, unless in each instance Bryan first obtains the
consent of Buyer, which consent shall not be unreasonably withheld;
(xx) enter into or extend or renew any Contract (including without
limitation any insurance policy), which Contract, extension or renewal has
a term or is to be performed over a period of more than 60 days (and
before renewing any insurance policy, Bryan shall reasonably consult with
Buyer); or
(xxi) enter into any contract, agreement, commitment
or arrangement to do or engage in any of the foregoing.
(c) Advice of Changes. Bryan shall confer on a regular
and frequent basis with Buyer with respect to its businesses and
operations and other matters relevant to the Merger,
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and shall promptly advise Buyer, in writing, of any change or event, including,
without limitation, any complaint, investigation or hearing by any Governmental
or Regulatory Authority (or communication indicating the same may be
contemplated) or the institution or threat of litigation, having, or which,
insofar as can be reasonably foreseen, could have, a material adverse effect on
Bryan or on the ability of Bryan to consummate the transactions contemplated
hereby.
5.02 No Solicitations. (a) Bryan shall not, and it shall not authorize or
permit either of its Subsidiaries or any of its or their officers, directors,
employees, investment bankers, financial advisors, attorneys, accountants or
other agents or representatives (each, a "Representative") to directly or
indirectly, solicit, initiate or participate in any negotiations regarding,
furnish any confidential information in connection with, endorse or otherwise
cooperate with, or assist, participate in or facilitate (collectively,
"Solicitation Activities") the making of any proposal or offer for, or which may
reasonably be expected to lead to, a Potential Transaction (as defined below),
by any person, corporation, partnership or other entity or group, including a
current shareholder of Bryan Common Stock or a person acting on behalf of or who
has been in contact with such a shareholder (a "Potential Acquiror"); provided,
however, that to the extent the Board of Directors of Bryan believes, on the
basis of a written opinion furnished by independent legal counsel, that the
failure to take any such actions would constitute a breach of applicable
fiduciary duties of such Board of Directors, then Bryan and its Representatives
may participate in Solicitation Activities but only to the extent necessary to
comply with such duties; provided further, however, that such participation
shall only be in compliance with Section 5.02(b); provided further, however,
that nothing herein shall in any event prevent Bryan's Board of Directors from
taking and disclosing to Bryan's shareholders a position contemplated by Rule
14D-9 and 14e-2 promulgated under the Exchange Act with respect to any tender
offer or from making such other disclosures to Bryan's shareholders, which, in
either case, based upon the advice of independent legal counsel, the Board in
its good faith judgment determines is required by the fiduciary duties of the
Board of Directors under applicable law.
(b) Bryan shall promptly inform Buyer, in writing, of the material terms
and conditions of any proposal or offer for, or which may reasonably be expected
to lead to, a Potential Transaction that it receives and the identity of the
Potential Acquiror and Bryan shall keep Buyer fully apprised of all developments
regarding such Potential Transaction. Such full apprising of all developments
shall include providing Buyer with copies of all correspondence from or to Bryan
and the Potential Acquirer, including all attachments and enclosures.
(c) As of the date and time of this agreement Bryan and its
Representatives will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties other than Burnham and
Merger Sub conducted heretofore with respect to any Potential Transaction.
(d) As used in this Agreement, "Potential Transaction" means any potential
merger, consolidation or other business combination involving Bryan, or any
acquisition in any manner of all or a substantial portion of the equity of, or
all or a substantial portion of the assets of Bryan whether for cash, securities
or any other consideration or combination thereof other than pursuant to the
transactions contemplated by this Agreement.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information; Confidentiality.
(a) Bryan shall, throughout the period from the date hereof to the
Effective Time, (i) provide Buyer and its Representatives with full access, upon
reasonable prior notice and during normal business hours, to all officers,
employees, agents and accountants of Bryan and its assets, properties, books and
records, and (ii) furnish promptly to such persons (x) a copy of each report,
statement, schedule and other document filed or received by Bryan pursuant to
the requirements of federal or state securities or tax laws or filed with any
other Governmental or Regulatory Authority, and (y) all other information and
data (including, without limitation, copies of Contracts, Bryan Benefit Plans
and other books and records) concerning the business and operations of Bryan or
its Subsidiaries as Buyer or its Representatives reasonably may request. No
investigation pursuant to this paragraph or otherwise shall affect any
representation or warranty contained in this Agreement or any condition to the
obligations of the parties hereto.
(b) Non-public information obtained by Buyer pursuant to Section
6.01(a) shall be subject to the provisions of the confidentiality agreement
between Buyer and Bryan, dated June 18, 1998 (the "Confidentiality Agreement"),
the terms of which are incorporated herein by reference.
6.02 Preparation of Proxy Statement. Bryan shall prepare and file with the
SEC the Proxy Statement at the earliest practicable date after the Offer has
expired or terminated (unless 90% or more of outstanding Bryan Common Stock is
acquired by Merger Sub pursuant to the Offer or Bryan Common Stock ceases to be
registered under the Exchange Act in accordance with applicable law); and shall
use all reasonable efforts to have the Proxy Statement cleared by the SEC. If at
any time prior to the Effective Time any event shall occur that is required to
be set forth in an amendment of or a supplement to the Proxy Statement, Bryan
shall prepare and file with the SEC such amendment or supplement as soon
thereafter as is reasonably practicable. Buyer, Merger Sub and Bryan shall
cooperate with each other in the preparation of the Proxy Statement, and Bryan
shall promptly notify Buyer of the receipt of any comments of the SEC with
respect to the Proxy Statement and of any requests by the SEC for any amendment
or supplement thereto or for additional information, and shall promptly provide
to Buyer copies of all correspondence between Bryan or any representative of
Bryan and the SEC with respect to the Proxy Statement. Bryan shall give Buyer
and its counsel the opportunity to review the Proxy Statement and all responses
to requests for additional information by and replies to comments of the SEC
before their being filed with, or sent to, the SEC. If the Proxy Statement is
required to be filed with the SEC, each of Bryan, Buyer and Merger Sub agrees to
use all reasonable efforts, after consultation with the other parties hereto, to
respond promptly to all such comments of and requests by the SEC and to cause
the Proxy Statement to be mailed to the holders of Bryan Common Stock entitled
to vote at the Shareholder Meeting at the earliest practicable time.
6.03 Approval of Shareholders. (a) To the extent required by applicable
law, Bryan shall, through its Board of Directors, duly call, give notice of,
convene and hold the Shareholder Meeting for the purpose of voting on the
adoption of this Agreement (the "Shareholders'
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Approval") as soon as reasonably practicable after consummation of the Offer but
in any event prior to the 90th day after the date hereof (subject to unavoidable
delays in receiving comments from the SEC staff or in considering and preparing
responses to such comments). Except to the extent legally required for the
discharge of its fiduciary duties as reflected in a written opinion of
independent legal counsel, Bryan shall, through its Board of Directors, include
in the Proxy Statement the recommendation of the Board of Directors of Bryan
that the shareholders of Bryan adopt this Agreement and approve the Merger, and
shall use all reasonable efforts to obtain such adoption and approval, including
utilizing a proxy solicitation firm that is reasonably acceptable to Buyer and
obtaining the opinion of McDonald & Company Securities, Inc. to the effect that
the Merger Price is fair to the holders of Bryan Common Stock from a financial
point of view. At such meeting, Buyer shall, and shall cause its Subsidiaries
to, cause all shares of Bryan Common Stock, if any, then owned by Buyer or any
such Subsidiary to be voted in favor of the adoption of this Agreement.
(b) Not earlier than five days, and not later than three days, prior to
the day of the Shareholder Meeting (if such Shareholder Meeting is required
under applicable law), Bryan shall provide a notice to Buyer stating the number
of Bryan Common Shares for which valid, executed proxies have been received with
directions to vote such shares in favor of the Merger. Bryan shall thereupon
promptly consult with Buyer and, if after such consultation Buyer so requests,
Bryan shall cause the Shareholder Meeting to be adjourned for such period as
Buyer shall request not to exceed thirty (30) days (or postponed to such date as
Buyer shall request, which date shall not be more than thirty (30) days after
the original date of the meeting) to allow the proxy solicitation firm to
continue to solicit proxies in favor of the Merger. In such event, Bryan shall
cooperate with Buyer and the proxy solicitation firm to attempt to obtain
proxies sufficient to result in approval of the Merger by the shareholders of
Bryan.
(c) In the event that the approval and adoption of this Agreement and the
Merger at the Shareholder Meeting or any adjournment thereof receives the
affirmative vote of less than 66- 2/3% of all shares entitled to vote for such
approval, then Buyer may in its sole discretion (but subject to Section
8.01(b)(ii)) require Bryan to, and Bryan shall be obligated to, through its
Board of Directors, duly call, give notice of, convene and hold a second
Shareholder Meeting for the purpose of voting on the adoption of this Agreement.
Such second Shareholder Meeting shall be held as soon as reasonably practicable
after the date of the notice from Buyer to Bryan in which Buyer notifies Bryan
that Buyer desires Bryan to call a second Shareholder Meeting. In the event
Buyer determines a second Shareholder Meeting is appropriate, then all other
provisions in this Agreement relating to the Shareholder Meeting shall be read
mutatis mutandis as applying to such second Shareholder Meeting.
(d) If Buyer shall directly or indirectly acquire at least 90 percent of
the outstanding shares of Bryan Common Stock, each of Buyer, Merger Sub and
Bryan shall take all necessary and appropriate action as Buyer may reasonably
request to cause the Merger to become effective as promptly as practicable after
the consummation of the Offer without a meeting of holders of Bryan Common Stock
in accordance with Section 53-14-5 of the NMBCA.
6.04 Regulatory and Other Approvals. Subject to the terms
and conditions of this Agreement and without limiting the
provisions of Sections 6.02 and 6.03, each of Bryan and Buyer
will proceed diligently and in good faith and will use all
commercially reasonable efforts
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to do, or cause to be done, all things necessary, proper or advisable to, as
promptly as practicable, (a) obtain all consents, approvals or actions of, make
all filings with and give all notices to Governmental or Regulatory Authorities
or any other public or private third parties required of Buyer, Bryan or any of
their Subsidiaries to consummate the Merger and the other matters contemplated
hereby, and (b) provide such other information and communications to such
Governmental or Regulatory Authorities or other public or private third parties
as the other party or such Governmental or Regulatory Authorities or other
public or private third parties may reasonably request. In addition to and not
in limitation of the foregoing, (i) each of the parties will (x) take promptly
all actions necessary to make the filings required of Buyer and Bryan or their
affiliates under the HSR Act, (y) comply at the earliest practicable date with
any request for additional information received by such party or its affiliates
from the Federal Trade Commission (the "FTC") or the Antitrust Division of the
Department of Justice (the "Antitrust Division") pursuant to the HSR Act, and
(z) cooperate with the other party in connection with such party's filings under
the HSR Act and in connection with resolving any investigation or other inquiry
concerning the Merger or the other matters contemplated by this Agreement
commenced by either the FTC or the Antitrust Division or state attorneys
general.
6.05 Employees.
(a) Buyer confirms that the Surviving Corporation will honor in
accordance with their respective provisions the existing agreements between
Bryan and each of Messrs. Bishop, McVay, Holmquist, Krauskopf, Kubly, Minard,
Mitting, McCune and Sturch (collectively, "Senior Management Agreements"),
copies of which Bryan has heretofore delivered to Buyer. Further, Buyer confirms
that it will cause the Surviving Corporation to pay to each of such persons the
Transaction Bonus contemplated in the applicable Senior Management Agreement, in
the installments and at the times specified therein, irrespective of whether the
Merger is deemed to have been supported or sponsored by management or any
management group.
(b) The Surviving Corporation will honor all existing union contracts
and all other existing agreements between Bryan and its employees which have
heretofore been disclosed to Buyer.
6.06 Expenses. Subject to Section 6.14 and to remedies in respect of
breach of the provisions hereof, if the Merger is not consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such cost or expense.
If the Merger is consummated, Bryan's Transaction Costs (as defined below) shall
be paid by Bryan, by the Surviving Corporation and/or by Buyer without reduction
of the per-share amount payable to Bryan shareholders under Section
2.01(a)(iii). As used herein, "Bryan's Transaction Costs" means all
out-of-pocket costs reasonably incurred by Bryan or any of its Subsidiaries on
or after July 1, 1998 in connection with the potential and actual sale of Bryan
and its Subsidiaries, including without limitation (i) the fees and expenses of
McDonald & Company Securities, Inc., (ii) the fees and expenses of Goelzer & Co.
Inc., (iii) legal fees and expenses, (iv) expenses for environmental reports,
(v) expenses for title reports, (vi) expenses for proxy solicitation and fees
and expenses of the Exchange Agent, and (viii) filing fees in connection with
compliance with securities and antitrust laws. Bryan's Transaction Expenses
shall not include (a) any amounts payable or paid to senior managers of Bryan
under the Senior Management Agreements by virtue of the consummation of the
Merger
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(Buyer having agreed separately to cause the Surviving Corporation to pay such
amounts in addition to all other consideration for the Merger), or (b) any
expenses incurred by Buyer or Merger Sub with respect to the Offer.
6.07 Brokers or Finders. Each of Buyer and Bryan represents, as to itself
and its Affiliates, that no agent, broker, investment banker, financial advisor
or other firm or person is or will be entitled to any broker's or finder's fee
or any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement, except, in the case of Bryan, for
McDonald & Company Securities, Inc. and Goelzer & Co., Inc. True and complete
copies of Bryan's agreements with such firms have been delivered by Bryan to
Buyer prior to the execution of this Agreement.
6.08 Notice and Cure. Each of Buyer and Bryan will notify the other
promptly in writing of, and contemporaneously will provide the other with true
and complete copies of any and all information or documents relating to, and
will use all commercially reasonable efforts to cure before the Closing, any
event, transaction or circumstance occurring or not occurring after the date of
this Agreement that causes or will cause or is likely to cause any covenant or
agreement of Buyer or Bryan, as the case may be, under this Agreement to be
breached or that renders or will render untrue (disregarding any limitations as
to materiality as may be contained therein) any representation or warranty of
Buyer or Bryan, as the case may be, contained in this Agreement as if the same
were made on or as of the date of such event, transaction or circumstance. Each
of Buyer and Bryan also will notify the other promptly in writing of, and will
use all commercially reasonable efforts to cure before the Closing, any
violation or breach of any representation, warranty, covenant or agreement made
by Buyer or Bryan, as the case may be, in this Agreement, whether occurring or
arising prior to, on or after the date of this Agreement. No notice given
pursuant to this Section shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for purposes of
determining satisfaction of any condition contained herein and such notice shall
not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
6.09 Fulfillment of Conditions. Subject to the terms and conditions of
this Agreement, each of Buyer and Bryan will take or cause to be taken all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each condition to the other's obligations contained in
this Agreement and to consummate and make effective the transactions
contemplated by this Agreement, and neither Buyer nor Bryan will, nor will
either permit any of its Subsidiaries to, take or fail to take any action that
could be reasonably expected to result in the nonfulfillment of any such
condition.
6.10 Indemnification; Directors' and Officers' Insurance.
(a) Until the fourth anniversary of the Effective Time (and until
resolution of any claims asserted prior to such fourth anniversary), the
Surviving Corporation shall, to the extent allowed by law and to the extent
currently provided in the By-laws and Articles of Incorporation of Bryan,
indemnify, defend and hold harmless each person who is as of the date hereof, or
has been at any time prior to the date hereof, a director or officer of Bryan or
any of its Subsidiaries (the "Indemnified Parties") against (i) all losses,
claims, damages, costs, expenses, liabilities or judgments or amounts that are
paid in settlement of or in connection with any claim,
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action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director or officer of Bryan or any Subsidiary of Bryan, whether pertaining to
any matter existing or occurring at or prior to the Effective Time and whether
asserted or claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities") and (ii) all Indemnified Liabilities based in whole or in part on,
or arising in whole or in part out of, or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the full extent Bryan would
have been permitted under New Mexico law to indemnify such person (and subject
to the foregoing, the Surviving Corporation shall, in the event the Surviving
Corporation determines in its reasonable discretion that such person would be
entitled to indemnification hereunder, pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party;
provided, however, that the person to whom the expenses are advanced must
provide an undertaking (without delivering a bond or other security) to repay
such advance if it is ultimately determined that such person is not entitled to
indemnification as provided in Section 53-11-4.1 of the NMBCA). Without limiting
the foregoing, in the event any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Parties (whether arising before
or after the Effective Time), (i) any counsel retained by the Indemnified
Parties for any period after the Effective Time shall be reasonably satisfactory
to the Surviving Corporation; (ii) after the Effective Time, the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received as heretofore
provided; and (iii) after the Effective Time, the Surviving Corporation will use
all reasonable efforts to assist in the vigorous defense of such matter,
provided that the Surviving Corporation shall not be liable for any settlement
of any claim effected without its written consent, which consent, however, shall
not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 6.10, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Surviving
Corporation (but the failure so to notify the Surviving Corporation shall not
relieve it from any liability which it may have under this Section 6.10 except
to the extent such failure prejudices the Surviving Corporation), and shall
deliver to the Surviving Corporation the undertaking, if any, required by the
NMBCA or this Agreement. The Surviving Corporation shall be liable for the fees
and expenses hereunder with respect to only one law firm, in addition to local
counsel in each applicable jurisdiction, to represent the Indemnified Parties as
a group with respect to each such matter unless there is, under applicable
standards of professional conduct, a conflict between the positions of any two
or more Indemnified Parties that would preclude or render inadvisable joint or
multiple representation of such parties.
(b) For a period of four years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by Bryan
(provided that the Surviving Corporation may substitute therefor other policies
of at least the same coverage and amounts containing terms and conditions which
are no less advantageous) with respect to claims arising from facts or events
which occurred before or at the Effective Time; provided, however, that the
Surviving Corporation shall not be obligated to make annual premium payments for
such insurance to the extent such premiums exceed 125% of the premiums paid as
of the date hereof by Bryan for such insurance ("Bryan's Current Premium"), and
if such premiums for such insurance would at any time exceed 125% of Bryan's
Current Premium, then the Surviving Corporation shall cause to be maintained
policies of insurance which, in the Surviving Corporation's good faith
determination,
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provided the maximum coverage available at an annual premium equal to 125% of
Bryan's Current Premium. Notwithstanding anything to the contrary contained
elsewhere herein, the Surviving Corporation's indemnity agreement set forth
above in Section 6.10(a) shall be limited to cover claims only to the extent
that those claims are not covered under Bryan's current directors' and officers'
insurance policies and the continuation or maintenance thereof as required by
this Section 6.10(b) (or any substitute policies permitted by this Section
6.10(b)).
(c) In the event Buyer or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of Buyer assume the
obligations set forth in this section.
(d) The provisions of this Section 6.10 (i) are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his heirs
and his representatives and (ii) are in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such person
may have by contract or otherwise.
6.11 Retention of Bryan Name. Until the 10th anniversary of the Closing
Date, Buyer shall cause the name of the Surviving Corporation to continue to be
"Bryan Steam Corporation", unless, due to a change in circumstances after the
Closing, such continuation shall be, in the opinion of the Board of Directors of
the Surviving Corporation at any time, materially adverse to Buyer or the
Surviving Corporation.
6.12 Takeover Laws. Bryan shall, upon the request of Buyer, take all
reasonable steps to exclude the applicability of, or to assist in any challenge
by Buyer or the Merger Sub of the validity or applicability to the Merger of,
any Takeover Laws. As used herein, "Takeover Laws" shall mean any "moratorium",
"control share acquisition", "business combination", "fair price" or other form
of antitakeover laws and regulations of any jurisdiction that may purport to be
applicable to this Agreement or the Merger.
6.13 Subsequent Financial Statements. Until the Effective Time, Bryan will
timely file with the SEC each form, report and document required to be filed by
Bryan under the Exchange Act and will promptly deliver to Buyer copies of each
such report filed with the SEC. As of their respective dates, none of such
reports shall contain any untrue statement of a material fact or omit 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. The audited consolidated financial statements and unaudited interim
financial statements of Bryan included in such reports shall be prepared in
accordance with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto) and shall fairly present the financial position of Bryan
and its Subsidiaries as at the dates thereof and the results of their operations
and changes in financial position for the periods then ended.
6.14 Termination Fee; Expenses. (a) In the event that this
Agreement is terminated as a result of the occurrence of any
Trigger Event (as defined below), then Bryan shall pay to Buyer a
fee equal to 1.5% of the Purchase Price plus all Reimbursable
Expenses (as defined in Section
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6.14(d)); provided, however, that if such termination is solely attributable to
events described in clause (iii) or (iv) of the definition of Trigger Event,
then Bryan shall pay to Buyer all Reimbursable Expenses (but not the 1.5% fee).
Amounts due hereunder shall be payable in immediately available funds at the
time of such termination.
(b) As used herein, "Trigger Event" shall mean the
occurrence of any of the following:
(i) the Board of Directors of Bryan (or any committee thereof)
shall approve, recommend, authorize, propose or facilitate any potential
Acquisition Transaction (as defined below) other than the Offer and the Merger
pursuant to this Agreement, or such Board (or any such committee) shall engage
in discussions or negotiations with a potential counterparty concerning any such
potential Acquisition Transaction, or such Board (or any such committee) shall
publicly announce its intention to do any of the foregoing;
(ii) the Board of Directors of Bryan (or any committee thereof)
shall fail to recommend the Offer and the Merger to stockholders of Bryan in the
Schedule 14D-9 or proxy statement required by this Agreement or within two
business days following Buyer's request from time to time that Bryan so confirm
its recommendation of the Offer and the Merger, or such Board (or any such
committee) shall withdraw, modify or amend in any manner adverse to Buyer the
authorization, approval or recommendation given by such Board (or such
committee) to the Offer and the Merger, or shall publicly announce that it does
not favor the Offer or the Merger;
(iii) the shareholders of Bryan holding at least 66-2/3% of the
outstanding shares of Bryan Common Stock shall fail to approve the Merger in
accordance with applicable law at the Shareholder Meeting, or if the Shareholder
Meeting shall not be held on or prior to December 31, 1998; or
(iv) any person, entity or "group" (as that term is used in
Section 13(d)(e) of the Exchange Act), other than those shareholders who have
executed and delivered Irrevocable Proxy and Option Agreements as described in
the recitals to this Agreement, becomes the beneficial owner (as defined in Rule
13d-3 promulgated under the Exchange Act) of 15% or more of outstanding Bryan
Common Stock.
(c) As used herein, "Acquisition Transaction" shall mean any tender offer
or exchange offer, any merger, consolidation, liquidation, dissolution,
recapitalization, reorganization or other business combination, any acquisition,
sale or other disposition of a material amount of assets or securities or any
other similar transaction involving Bryan, its securities or any of its
Subsidiaries or divisions.
(d) As used herein, "Buyer Reimbursable Expenses" means all out-of-pocket
costs (including without limitation reasonable legal and accounting costs)
heretofore and hereafter incurred by Buyer in connection with the transactions
contemplated by this Agreement including, without limitation, costs and expenses
incurred in connection with (i) Buyer's due diligence investigations concerning
Bryan and its Subsidiaries, (ii) Buyer's preparation of preliminary and final
proposals relating to the acquisition of Bryan, (iii) Buyer's negotiation of
this Agreement, (iv) Buyer's assistance in the preparation of the proxy
statement relating to the Merger, (v) fees
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and expenses of the Exchange Agent, and (vi) fees and expenses reasonably
incurred so as to facilitate and promote consummation of the Merger.
ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
fulfillment, at or prior to the Closing, of each of the following conditions:
(a) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved by Bryan's shareholders in the
manner and to the extent required by applicable law and the Articles of
Incorporation and By-laws of Bryan.
(b) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(c) No Injunctions or Restraints. No action or proceeding before a
court of competent jurisdiction or other competent governmental body by any
Governmental or Regulatory Authority shall have been instituted or threatened to
make illegal or otherwise restrain or prohibit (whether temporarily, preliminary
or permanently) the Merger or the other transactions contemplated by this
Agreement or to obtain an amount of damages or other material relief in
connection with the execution of the Agreement or the consummation of the Merger
or other transactions contemplated by this Agreement; and no governmental agency
shall have given notice to any party hereto to the effect that consummation of
the Merger or the other transactions contemplated by this Agreement would
constitute a violation of any law or that it intends to commence proceedings to
restrain consummation of the Merger (each party hereto, however, agrees to use
reasonable efforts promptly to have such prohibition or notice lifted).
(d) Board Resolutions. Each of Merger Sub and Bryan shall have
received from the other appropriately certified copies of all resolutions
adopted by their respective Boards of Directors and shareholders in connection
with this Agreement and the transactions contemplated hereby.
7.02 Conditions to Obligation of Buyer and Merger Sub to Effect the
Merger. The obligation of Buyer and Merger Sub to effect the Merger is further
subject to the fulfillment, at or prior to the Closing, of each of the following
additional conditions (all or any of which may be waived in whole or in part by
Buyer and Merger Sub in their sole discretion):
(a) Bryan shall have performed and complied with, in all material
respects, each agreement, covenant and obligation required by this Agreement to
be so performed or complied with by Bryan at or prior to the Closing, and Bryan
shall have delivered to Buyer a certificate, dated the Closing Date and executed
on behalf of Bryan by its President, to such effect.
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(b) All proceedings to be taken on the part of Bryan in connection
with the transactions contemplated by this Agreement and all documents incident
thereto shall be reasonably satisfactory in form and substance to Buyer, and
Buyer shall have received copies of all such documents and other evidences as
Buyer may reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith. Such
documents shall include, but shall not be limited to:
(i) the certificates required by Section 7.02(a)
of this Agreement;
(ii) a certificate of existence or good standing regarding each
of Bryan and its Subsidiaries, certified in the case of Bryan by the New Mexico
Corporation Commission and certified in the case of Wendland and Memco by the
appropriate office of the jurisdiction of its respective incorporation, each
dated within ten (10) business days of the Closing Date; and
(iii) an incumbency certificate certifying the
identity of the officers of Bryan.
(iv) the resignations, effective the Closing Date, of such
directors and officers of Bryan, Wendland and Memco as Buyer shall specify
consistent with Section 1.05;
(c) Buyer shall have received a complete list of the signatories of
each account or safe deposit box of Bryan, Wendland and Memco;
(d) Bryan shall not have received written objections to the Merger
from holders who in the aggregate hold more than 10% of the outstanding shares
of Bryan Common Stock, and Bryan shall not have knowledge that holders of 10% or
more of the outstanding shares of Bryan Common Stock intend to file with Bryan
written objections to the Merger.
(e) Bryan shall have delivered to Buyer a final accounting of Bryan's
Transaction Expenses, in form reasonably satisfactory to Buyer, including copies
of applicable final invoices;
(f) Other than the filings provided for by Section 1.02, all
consents, approvals and actions of filings with and notices to any Governmental
or Regulatory Authority or any other public or private third party required of
Bryan or any of its Subsidiaries to consummate the Merger and the other
transactions contemplated hereby, the failure of which to be obtained or taken
could, individually or in the aggregate, be reasonably expected to have a
material adverse effect on Bryan and its Subsidiaries or on the ability of Bryan
to consummate the transactions contemplated hereby shall have been obtained, all
in form and substance reasonably satisfactory to Buyer and no such consent,
approval or action shall contain any term or condition which could be reasonably
expected to result in a material diminution of the benefits of the Merger to
Buyer.
7.03 Conditions to Obligation of Bryan to Effect the Merger. The
obligation of Bryan to effect the Merger is further subject to the fulfillment,
at or prior to the Closing, of each of the following additional conditions (all
or any of which may be waived in whole or in part by Bryan in its sole
discretion):
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(a) Each of the representations and warranties made by Buyer and
Merger Sub in this Agreement shall be true and correct in all material respects
as of the Closing Date as though made on and as of the Closing Date or, in the
case of representations and warranties made as of a specified date earlier than
the Closing Date, on and as of such earlier date, and Buyer and Merger Sub shall
each have delivered to Bryan a certificate, dated the Closing Date and executed
on behalf of Buyer by its President and on behalf of Merger Sub by its
President, to such effect.
(b) Buyer and Merger Sub shall have performed and complied with, in
all material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Buyer or Merger Sub at or prior
to the Closing, and Buyer and Merger Sub shall each have delivered to Bryan a
certificate, dated the Closing Date and executed on behalf of Buyer by its
President and on behalf of Merger Sub by its President, to such effect.
(c) Bryan shall have received a written opinion, dated as of the
Closing Date, from Krieg, Devault, Alexander & Capehart, Indiana counsel to
Buyer and Merger Sub, from Cleary, Gottlieb, Steen & Hamilton and/or from
Buyer's New Mexico counsel, as appropriate, in form and substance reasonably
satisfactory to Bryan, as to certain appropriate matters agreed upon by legal
counsel of Buyer and Merger Sub and of Bryan.
(d) All proceedings to be taken on the part of Buyer and Merger Sub
in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Bryan, and Bryan shall have received copies of all such documents
and other evidences as Bryan may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith. Such documents shall include, but shall not be limited to:
(i) the certificates required by Section 7.03(a)
and 7.03(b) of this Agreement;
(ii) certificates of existence or good standing regarding each
of Buyer and Merger Sub, certified by the New York Secretary of State and the
New Mexico State Corporation Commission, respectively, dated within ten (10)
business days of the Closing Date; and
(iii) incumbency certificates certifying the identity of the
officers of Buyer and Merger Sub, respectively.
(e) The Exchange Fund shall have been funded with the full amount of
the Merger Price for all outstanding shares of the Bryan Common Stock.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether prior to or after Shareholders' Approval:
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(a) by mutual written agreement of the parties hereto duly authorized
by action taken by or on behalf of their respective Boards of Directors;
(b) by either Bryan or Buyer upon notification to the
non-terminating party by the terminating party:
(i) at any time after January 31, 1999 if the Merger shall not
have been consummated on or prior to such date and such failure to consummate
the Merger is not caused by a breach of this Agreement by the terminating party;
provided, however, the date may be extended indefinitely by the mutual written
agreement of the parties;
(ii) if Shareholders' Approval shall not be
obtained by January 31, 1999;
(iii) if any Governmental or Regulatory Authority, the taking of
action by which is a condition to the obligations of either Bryan or Buyer to
consummate the transactions contemplated hereby, shall have determined not to
take such action and all appeals of such determination shall have been taken and
have been unsuccessful; or
(iv) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an Order making illegal
or otherwise restricting, preventing or prohibiting the Merger and such Order
shall have become final and nonappealable.
(c) by Bryan, if (1) Merger Sub fails to commence the Offer as
provided in Section A-1.01 or fails to purchase validly tendered Shares in
violation of the terms of the Offer or this Agreement; (2) there has been a
breach by Buyer or Merger Sub of any representation or warranty contained in
this Agreement, or (3) there has been a material breach of any of the covenants
or agreements set forth in this Agreement on the part of Buyer or Merger Sub,
which breach is not curable or, if curable, is not cured within ten (10) days
after written notice of such breach is given by Bryan to Buyer or Merger Sub.
(d) by Buyer, if (1) the Offer is terminated or withdrawn on account
of the failure to be fulfilled of a condition specified in Annex A hereto, (2)
there has been a breach by Bryan of any representation or warranty contained in
this Agreement or (3) there has been a material breach of any of the covenants
or agreements set forth in this Agreement on the part of Bryan, which breach is
not curable or, if curable, is not cured within ten (10) days after written
notice of such breach is given by Buyer to Bryan.
(e) by Buyer if a Trigger Event occurs.
8.02 Effect of Termination. If this Agreement is validly terminated by
either Bryan or Buyer pursuant to Section 8.01, this Agreement will forthwith
become null and void and there will be no liability or obligation on the part of
either Bryan or Buyer (or any of their respective Representatives or
affiliates), except (i) that the provisions of Sections 6.01(b), 6.06, 6.07 and
6.14 will continue to apply following any such termination, and (ii) that
nothing contained herein shall relieve any party hereto from liability for any
breach of its representations, warranties, covenants or agreements contained in
this Agreement; provided however, that no breach of this
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Agreement by Bryan shall be deemed to have occurred if such termination is
solely due to the occurrence of a Trigger Event described in paragraph
6.14(b)(i) or 6.14(b)(ii), to the extent that such Trigger Event arose because
action was taken by the Board of Directors of Bryan based upon the belief, and
supported by a written opinion furnished by independent legal counsel, that the
failure to take such action would constitute a breach of fiduciary duties of
such Board of Directors under applicable law.
8.03 Amendment. This Agreement may be amended, supplemented or modified by
the parties hereto at any time prior to the Effective Time, whether prior to or
after adoption of this Agreement at the Shareholder Meeting, but after such
adoption only to the extent permitted by applicable law. No such amendment,
supplement or modification shall be effective unless set forth in a written
instrument duly executed by or on behalf of each party hereto.
8.04 Waiver. At any time prior to the Effective Time any party hereto may
to the extent permitted by applicable law (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties of the other
parties hereto contained herein or in any document delivered pursuant hereto or
(iii) waive compliance with any of the covenants, agreements or conditions of
the other parties hereto contained herein. No such extension or waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party extending the time of performance or waiving any such inaccuracy or
noncompliance. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same or any other term or condition of this Agreement on any
future occasion.
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations, Warranties, Covenants and
Agreements. None of the representations, warranties, covenants and agreements in
this Agreement or in any instrument delivered pursuant to this Agreement,
including any rights arising out of any breach of such representations,
warranties, covenants, and agreements, shall survive the Effective Time, except
for those covenants and agreements contained herein and therein that by their
terms apply or are to be performed in whole or in part after the Effective Time.
9.02 Knowledge. An individual will be deemed to have "knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter. Whenever a provision of this Agreement is qualified as to
"the best knowledge of" or "to the knowledge of" Bryan or Buyer, or is qualified
with words of similar meaning, then the current officers, directors and senior
management of such entity shall be deemed to have conducted a reasonable inquiry
into the question at hand. The entity will be deemed to have "knowledge" of a
particular fact or other matter if (i) any individual who is serving, or who has
at any time served, as a director, officer, senior manager or trustee of such
person (or in any similar capacity) has, or at any time had, knowledge of such
fact or other matter, or (ii) such individual would have had such knowledge if
such a reasonable inquiry had been conducted.
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9.03 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Buyer or Merger Sub, to:
Burnham Corporation
1241 Harrisburg Pike
Lancaster, PA 17603
Attn: Albert Morrison III, President and CEO
Facsimile No.: (717) 293-5816
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attn: Donald A. Stern, Esquire
Facsimile No.: (212) 225-3999
If to Bryan, to:
Bryan Steam Corporation
Post Office Box 27
Peru, Indiana 46970
Facsimile No.: (765) 473-6651
Attn: Albert J. Bishop, Chairman
with a copy to:
Barnes & Thornburg
11 South Meridian Street
Indianapolis, Indiana 46204
Facsimile No.: (317) 231-7433
Attn: Eric R. Moy, Esquire
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
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9.04 Entire Agreement. Except for the Confidentiality Agreement (as
defined in Section 6.01(b)), which shall remain in full force and effect as
provided therein, this Agreement supersedes all prior discussions and agreements
among the parties hereto with respect to the subject matter hereof and thereof
and contains the sole and entire agreement among the parties hereto with respect
to the subject matter hereof and thereof.
9.05 Public Announcements. Except as otherwise required by law or the
rules of any applicable securities exchange or national market system, so long
as this Agreement is in effect (until the Closing), Buyer and Bryan will not,
and will not permit any of their respective Representatives to, issue or cause
the publication of any press release or make any other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld. Buyer and
Bryan will cooperate with each other in the development and distribution of all
press releases and other public announcements (including announcements made to
the employees, managers, customers, suppliers and sales representatives of Bryan
and its Subsidiaries and including any interested community members or
governmental officials) with respect to this Agreement and the transactions
contemplated hereby, and will furnish the other with drafts of any such releases
and announcements as far in advance as practicable.
9.06 No Third Party Beneficiaries. Other than the Indemnified Parties (as
defined in Section 6.10), 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.
9.07 No Assignment, Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other parties hereto and any attempt to do so will
be void, except that Buyer and Merger Sub may assign any or all of their rights,
interests and obligations hereunder to another direct or indirect wholly-owned
Subsidiary of Buyer, provided that any such Subsidiary agrees in writing to be
bound by all of the terms, conditions and provisions contained herein. Subject
to the preceding sentence, this Agreement is binding upon, inures to the benefit
of and is enforceable by the parties hereto and their respective successors and
assigns.
9.08 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
9.09 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions, of this Agreement will remain in full force and
effect and will not be affected by the legal, invalid or unenforceable provision
or by its severance herefrom and (iv) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
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9.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana applicable to a contract
executed and performed in such State without giving effect to the conflicts of
laws principles thereof, except to the extent that the NMBCA, the Securities Act
and the Exchange Act shall apply to the transactions contemplated herein.
9.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all of the parties hereto.
9.12 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa and the words "include," "including" and the like shall be deemed not to
be limiting.
9.13 Incorporation of Exhibits. The Exhibits and Schedules attached hereto
and referred to herein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
9.14 Enforcement of Agreement; Injunctive Relief. (a) Buyer, Merger Sub
and Bryan hereby irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the United States District Court for the Southern
District of Indiana, Indianapolis Division for federal jurisdiction (unless such
court has no jurisdiction, in which case Buyer, Merger Sub and Bryan consent to
the exclusive jurisdiction of the courts of the State of Indiana located in
Marion County) for any actions, suits or proceedings arising out of or relating
to this Agreement and the transactions contemplated hereby (and Buyer, Merger
Sub and Bryan agree not to commence any action, suit or proceeding relating
thereto or to this Agreement except in such courts), and further agree that
service of any process, summons, notice or document by U.S. registered mail to
the addresses set forth herein shall be effective service of process for any
such action, suit or proceedings brought against Buyer, Merger Sub or Bryan in
such court. Bryan, Buyer and Merger Sub hereby irrevocably and unconditionally
waive any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby, in such
federal court (unless such court has no jurisdiction, in which case Buyer,
Merger Sub and Bryan consent to the laying of venue in the courts of the State
of Indiana in the County of Marion). Buyer, Merger Sub and Bryan hereby further
irrevocably and unconditionally waive and agree not to plead or to claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum; and agree not to oppose a motion to
dismiss an improperly filed action. Buyer, Merger Sub and Bryan waive, to the
fullest extent permitted by law, any rights they may have to a jury trial on any
matter related in any way to this Agreement or the transactions contemplated
hereby.
(b) Each of Bryan on the one hand and Buyer and Merger Sub on the other
hand recognize and acknowledge that a breach by it of any covenants or
agreements contained in this Agreement will cause the other party to sustain
damages for which it would not have an adequate remedy at law for money damages,
and therefore each of the parties hereto agrees that in the
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event of any such breach, if the aggrieved party so desires, the aggrieved party
shall be entitled to the remedy of specific performance, injunctive and other
equitable relief (without the requirement or need for the posting of any bond)
in addition to any other remedy to which the aggrieved party may be entitled, at
law or in equity.
9.15 Joint and Several Obligations. The obligations of
Buyer and Merger Sub hereunder are joint and several.
[signature page follows]
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IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its officer thereunto duly authorized as of the date first above
written.
BURNHAM CORPORATION
By:/s/ Albert Morrison, III
---------------------------
Name: Albert Morrison, III
Title: President and Chief
Executive Officer
BURNHAM ACQUISITION CORPORATION
By:/s/ Albert Morrison, III
---------------------------
Name: Albert Morrison, III
Title: President
BRYAN STEAM CORPORATION
By:/s/ Albert J. Bishop
---------------------------
Name: Albert J. Bishop
Title: Chairman
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
Capitalized terms used in this Annex A and not otherwise defined
herein shall have the meanings assigned to them in the Agreement to which this
Annex is attached (the "Merger Agreement").
Notwithstanding any other provision of the Offer, the obligation of
Merger Sub to accept for payment, purchase or pay for any Shares tendered prior
to the scheduled expiration date of the Offer or any extension thereof (the
"Offer Date") is subject to the fulfillment, at or prior to the Offer Date, of
the following conditions (and upon the failure of any such condition to be
fulfilled, unless waived by Merger Sub, Merger Sub may terminate the Offer as to
any Shares not then accepted for payment, and Merger Sub shall not be required
to accept for payment, purchase or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, pay for
any Shares):
(a) The number of Shares validly tendered and not withdrawn shall
constitute at least a two-thirds majority plus one of the outstanding
Shares on a fully diluted basis (the "Minimum Condition").
(b) Any waiting period (and any extension thereof) applicable to the
consummation of the Offer under the HSR Act shall have expired or
been terminated.
(c) No action or proceeding before a court of competent
jurisdiction or other competent governmental body by
any Governmental or Regulatory Authority shall have
been instituted or threatened to make illegal or
otherwise restrain or prohibit (whether temporarily,
preliminary or permanently) the Offer or the Merger or
the other transactions contemplated by the Merger
Agreement or to obtain an amount of damages or other
material relief in connection with the execution of
the Merger Agreement or the consummation of the Offer
or other transactions contemplated by the Merger
Agreement; and no governmental agency shall have given
notice to any party hereto to the effect that
consummation of the Offer or the Merger or the other
transactions contemplated by the Merger Agreement
would constitute a violation of any law or that it
intends to commence proceedings to restrain
consummation of the Offer or the Merger.
(d) Merger Sub shall have received from Bryan appropriately certified
copies of all resolutions adopted by Bryan's Boards of Directors in
connection with the Offer, the Merger, the Merger Agreement and the
transactions contemplated thereby.
(e) Each of the representations and warranties made by Bryan in the
Merger Agreement shall be true and correct in all respects (subject
to limitations as to materiality as may be contained therein) as
though made on and as of the Offer Date or, in the case of
representations and warranties made as of a specified date
<PAGE>
earlier than the Offer Date, on and as of such earlier date, and
Bryan shall have delivered to Buyer a certificate, dated the Offer
Date and executed on behalf of Bryan by its President to such effect.
(f) Bryan shall have performed and complied with, in all material
respects, each agreement, covenant and obligation required by the
Merger Agreement to be so performed or complied with by Bryan at or
prior to the Offer Date, and Bryan shall have delivered to Buyer a
certificate, dated the Offer Date and executed on behalf of Bryan by
its President, to such effect.
(g) Buyer and Merger Sub shall have received a written opinion, dated as
of the Offer Date, from Barnes & Thornburg, counsel to Bryan, in form
and substance reasonably satisfactory to Buyer and Merger Sub, as to
certain appropriate matters agreed upon by legal counsel of Buyer and
Merger Sub and of Bryan.
(h) All proceedings to be taken on the part of Bryan on or
before the consummation of the Offer in connection
with the transactions contemplated by the Merger
Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to
Buyer, and Buyer shall have received copies of all
such documents and other evidences as Buyer may
reasonably request in order to establish the
consummation of such transactions and the taking of
all proceedings in connection therewith. Such
documents shall include, but shall not be limited to:
(i) the certificates required by clauses (e) and (f)
of this Annex; (ii) a certificate of existence or good
standing regarding each of Bryan and its Subsidiaries,
certified in the case of Bryan by the New Mexico
Corporation Commission and certified in the case of
Wendland and Memco by the appropriate office of the
jurisdiction of its respective incorporation, each
dated within ten (10) business days of the Offer Date;
and (iii) an incumbency certificate certifying the
identity of the officers of Bryan.
(i) Bryan and each of its Subsidiaries shall have good,
marketable and insurable title to their respective
real properties, subject only to those encumbrances
identified in Schedule 7.02 to the Merger Agreement,
and Bryan shall have obtained and delivered to Buyer
reasonable assurances from the relevant municipalities
to the effect that such real properties and their
current operations are in compliance with local zoning
ordinances without constituting non- conforming uses.
(j) Bryan shall have delivered to Buyer a current survey
of the real property and facilities of Bryan located
in Peru, Indiana, which survey (i) shall have been
prepared by a licensed Indiana land surveyor, (ii)
shall fulfill the Minimum Detail Requirements for
ALTA/ACSM Land Title Surveys (1992) for an Urban
Survey and Table A thereof, and (iii) shall have been
certified to the Surviving Corporation, Buyer and
Buyer's title insurance company in a manner reasonably
satisfactory to Buyer; and such survey shall not show
encroachments or other
2
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matters which, individually or in the aggregate, materially adversely
affect the value or use of such real property and facilities.
(k) There shall not have occurred (A) any general
suspension of, or limitation on prices for, trading in
the securities of a general nature on any national
securities exchange that lasts more than 24 hours, (B)
the declaration of any banking moratorium or any
suspension of payments in respect of banks or any
limitation (whether or not mandatory) on the extension
of credit by lending institutions in the United
States, (C) the commencement of a war, armed
hostilities or any other international or national
calamity involving the United States or a substantial
terrorist attack or the threat thereof on a target in
United States that leads to the declaration of a
national emergency, (D) a material adverse change in
the United States currency exchange rates or a
suspension of, or limitation on, the markets therefor,
or (E) the Dow Jones Index shall fall below 6448
(which was the value of such Index on December 31,
1996).
(l) A Trigger Event shall not have occurred.
(m) Other than the filings provided for by Section 1.02 of
the Merger Agreement, all consents, approvals and
actions of, filings with and notices to any
Governmental or Regulatory Authority or any other
public or private third party required of Bryan or any
of its Subsidiaries to consummate the Offer, the
failure of which to be obtained or taken could,
individually or in the aggregate, be reasonably
expected to have a material adverse effect on Bryan
and its Subsidiaries or on the ability of Buyer to
consummate the purchase of Shares pursuant to the
Offer, shall have been obtained, all in form and
substance reasonably satisfactory to Buyer and no such
consent, approval or action shall contain any term or
condition which could be reasonably expected to result
in a material diminution of the benefits of the Offer
to Buyer.
(n) The Merger Agreement shall not have been terminated pursuant to its
terms and shall not have been amended pursuant to its terms to
provide for its termination.
3
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EXHIBIT A
- ---------
Stockholders' Agreement
In order to induce Burnham Corporation, a New York corporation
("Buyer"), to execute and deliver the Agreement and Plan of Merger dated as of
the date hereof (as the same may hereafter be amended, the "Merger Agreement")
among Buyer, Burnham Acquisition Corporation, a New Mexico corporation ("Merger
Sub") and Bryan Steam Corporation, a New Mexico corporation (the "Company"),
each undersigned stockholder of the Company hereby (i) covenants as set forth in
the remainder of this Agreement (the "Agreement"), and (ii) irrevocably appoints
Burnham Corporation, as the exclusive attorney-in-fact and proxy of such
stockholder, with full power of substitution:
(a) to attend any and every meeting (whether annual or special or
both) of the stockholders of the Company, including any adjournment or
postponement thereof, on behalf of such stockholder, and at each such
meeting, with respect to all shares of common stock of the Company owned
by such stockholder on the date hereof or acquired hereafter that are
entitled to vote at each such meeting or over which such stockholder has
voting power (and any and all other shares of common or preferred stock of
the Company or other securities issued on or after the date hereof in
respect of any such shares), including, without limitation, the shares
indicated opposite such stockholder's signature at the end of this
Agreement:
(i) to vote in favor of the Merger (as such term is defined in
the Merger Agreement) and to vote in favor of the adjournment of any
meeting, which Buyer believes may facilitate the obtaining the
approval of the Merger; and otherwise to act with respect to such
shares as said attorney-in-fact and proxy (or his substitute) shall
deem necessary or appropriate to cause the approval of the Merger by
the necessary majority required under applicable law;
(ii) to vote and otherwise act with respect to such shares in
such a manner as said attorney-in-fact and proxy (or his substitute)
shall deem proper, with respect to (x) proposals or offers (other
than the Merger) relating to (1) any proposed sale, lease or other
disposition of all or a substantial amount of the assets of the
Company or any of its subsidiaries, (2) any proposed merger,
consolidation or other combination of the Company or any of its
subsidiaries with any other entity, (3) any sale, issuance,
disposition or granting of rights in respect of the shares of the
Company or of any subsidiary of the Company or (4) any other proposed
action of the Company or any of its subsidiaries requiring
stockholder approval that would conflict with or violate the
Company's representations, covenants or obligations under the Merger
Agreement, adversely affect the Company's ability to consummate the
Merger or the other transactions contemplated by the Merger Agreement
or otherwise impede, interfere with or discourage the Merger (each of
the actions described in (1) - (4) above, an "Acquisition Proposal"),
and (y) any procedural matters presented at any such meeting at which
any action is scheduled to be taken with respect to the Merger or any
Acquisition Proposal;
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(b) if no meeting of stockholders is scheduled in accordance with the
Merger Agreement or if any such meeting is canceled, postponed or
adjourned other than with Buyer's approval, to call a special stockholders
meeting of the Company for the purpose of (i) approving the Merger or any
action with respect thereto, or (ii) taking action with respect to any
Acquisition Proposal; and
(c) to waive, for the duration of this proxy and option, any and all
rights such stockholder may have to exercise any rights as dissenting
shareholder under Sections 53- 15-3 and 53-15-4 of the New Mexico Business
Corporation Act, subject to the right to receive the consideration as
specifically provided in the Merger Agreement.
Each undersigned stockholder agrees (a) not to deposit any of such
stockholder's shares of common stock of the Company into a voting trust or enter
into a voting agreement with respect to such shares; (b) not to sell, transfer
or otherwise dispose of or pledge or otherwise encumber, any shares of common
stock of the Company, or options or warrants to purchase such shares, unless the
purchaser or transferee of such shares or rights agrees in writing (a copy of
which shall be delivered by such stockholder to Buyer and Merger Sub) prior to
such sale, transfer or disposition to be bound by and subject to the provisions
contained in this Agreement; and (c) not, in his or her capacity as stockholder,
to solicit, initiate, encourage, endorse, support (including, by providing
information) or participate in any discussions regarding, any Acquisition
Proposal other than the Merger.
Each undersigned stockholder affirms that this proxy is issued in
connection with the Merger Agreement to facilitate the transactions contemplated
thereunder and in consideration of Buyer and Merger Sub entering into the Merger
Agreement and as such is coupled with an interest and is irrevocable. This proxy
will terminate upon the earlier to occur of (a) the Effective Time as defined in
the Merger Agreement and (b) the termination of the Merger Agreement in
accordance with its terms. For purposes of this proxy, any notice of any
stockholders' meeting shall be deemed delivered to the attorney-in-fact and
proxy and his substitutes when delivered to Buyer in accordance with the Merger
Agreement.
By execution and delivery of this Agreement, each undersigned
stockholder confirms that such stockholder has received a copy of a
substantially final form of the Merger Agreement, and that all other information
deemed necessary by such stockholder concerning the Merger, the Merger Agreement
and the transactions contemplated thereunder or any other matters considered by
such stockholder to be relevant to the stockholder's decision to execute this
Agreement has been made available to such stockholder.
All authority herein conferred or agreed to be conferred shall
survive the death, insolvency, or incapacity of any undersigned stockholder and
any obligation of any undersigned stockholder hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of such undersigned
stockholder.
This proxy revokes any and all other proxies heretofore granted by
each and every undersigned stockholder to vote or otherwise to act with respect
to any of the shares to which this proxy relates. No undersigned stockholder
will give any subsequent proxy or grant any option
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with respect to such shares (and such proxy or option if given will be deemed
not to be effective) with respect to such shares that purports to grant
authority within the scope of the authority hereby conferred.
In order further to induce Merger Sub and Buyer to enter into the
Merger Agreement, each undersigned stockholder hereby further agrees validly to
tender (or cause the record owner of such shares validly to tender), and not to
withdraw, pursuant to and in accordance with the terms of the Offer, not later
than the tenth business day after commencement of the Offer pursuant to Section
A-1.01 of the Merger Agreement and Rule 14d-2 under the Exchange Act, the number
of shares of Bryan Common Stock set forth opposite such stockholder's name below
(the "Existing Securities" and, together with any shares of Bryan Common Stock
acquired by such stockholder (whether beneficially or of record) after the date
hereof and prior to the termination of this Agreement by means of purchase,
dividend, distribution, transfer, issuance, or exercise of options or other
rights to acquire Bryan Common Stock (the "Securities")). If any undersigned
stockholder acquires Securities after the date hereof, such stockholder shall
tender (or cause the record holder to tender) such Securities on or before such
tenth business day or, if later, on or before the second business day after such
acquisition. Each undersigned stockholder hereby acknowledges and agrees that
Merger Sub's obligation to accept for payment, purchase and pay for the
Securities in the Offer, including the Securities beneficially owned by such
stockholder, is subject to the terms and conditions of the Offer.
Each undersigned stockholder hereby permits Merger Sub and Buyer to
disclose in the Offer documents (and in the proxy statement, if any, applicable
to the Merger) such stockholder's identity and ownership of the Securities and
the content of this Agreement.
Each undersigned stockholder acknowledges that money damages would be
both incalculable and an insufficient remedy for any breach of this Agreement by
it, and that any such breach would cause Buyer and Merger Sub irreparable harm.
Accordingly, each undersigned stockholder agrees that in the event of any breach
or threatened breach of this Agreement, Buyer and Merger Sub, in addition to any
other remedies at law or in equity they may have, shall be entitled, without the
requirement of posting a bond or other security, to equitable relief, including
injunctive relief and specific performance.
The invalidity or unenforceability of any provision of this Agreement
in any jurisdiction shall not affect the validity or enforceability of any other
provision of this Agreement in such jurisdiction, or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
Each undersigned stockholder represents and warrants that, as of the
date hereof, such stockholder (a) owns personally and directly the number of
shares of Bryan Common Stock (as defined in the Merger Agreement) set forth
following such stockholder's name below, (b) owns such stock free and clear of
all liens, security interests, encumbrances, options and other adverse interests
of every kind whatsoever, and (c) may execute and deliver this Agreement, and
perform its obligations hereunder, without the consent or agreement of any other
person or entity.
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<PAGE>
Each of the undersigned stockholders hereby irrevocably waives and
releases any and all claims such stockholder may have as a holder of shares of
the Company against any employee, officer or director of Bryan or any of its
subsidiaries in respect of the conduct of such employee, officer or director in
his or her capacity as such prior to consummation of the Merger.
For the convenience of the parties, this Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
This Agreement will only become effective upon the execution and
delivery of the Merger Agreement by Buyer, Merger Sub and the Company.
Capitalized terms used and not defined herein will have the respective meanings
set forth in the Merger Agreement.
This Agreement shall be governed by the laws of the State of Indiana
except that the provisions hereof with respect to the granting of proxies, the
exercise of the rights granted in respect of such proxies and the associated
appointment of attorneys-in-fact will be governed by the laws of the
jurisdiction of incorporation of the Company.
Dated: as of September 23, 1998
[signature pages follow]
4
EMPLOYMENT AGREEMENT
H. Jesse McVay
This Agreement, is made and dated as of April 1, 1998, by and between Bryan
Steam Corporation, a New Mexico corporation ("Employer"), and H. Jesse McVay, a
resident of Miami County, Indiana ("Employee").
WITNESSETH
WHEREAS, Employee has been employed by Employer and has made valuable
contributions to the profitability and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make
valuable contributions to Employer's business operations and not to seek or
accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure reasonable and
commensurate compensation from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee
on behalf of Employer on an objective and impartial basis and without
distraction or conflict of interest in the event of a change of control of
Employer;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and undertakings herein contained and the continued employment of
Employee by Employer, each intending to be legally bound, covenant and agree as
follows:
1 . Upon the terms and subject to the conditions set forth in
this Agreement, Employer employs Employee as Employer's
President, and Employee accepts such employment.
2. Employee agrees to serve as Employer's President, and to
perform such duties in that office as may be prescribed by the
Employer's Bylaws and as may reasonably be assigned to him by
Employer's Board of Directors and those generally associated
with the office held by Employee as determined by the Board of
Directors from time to time.
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Employer shall not, without the written consent of Employee,
relocate or transfer Employee to a location more than 30 miles
from his current employment location. While employed by
Employer, Employee shall devote substantially all his business
time and efforts to Employer's business and the business of
its subsidiaries.
3. The term of this Agreement shall be for an initial term of
three (3) years commencing on April 1, 1998 (the "Effective
Date"), and terminating March 31, 2001; provided, however,
that such term shall be extended for an additional year on
each annual anniversary of the Effective Date, unless either
party thereto gives written notice to the other party not to
so extend within the period of ninety (90) days prior to an
anniversary, in which case no further extension shall occur
and the term of this Agreement shall end two years subsequent
to the annual anniversary immediately following the
anniversary prior to which the notice not to extend for an
additional year is given (such term, including any extension
thereof shall herein be referred to as the "Term").
4. Employee shall receive an annual salary of $77,200 ("Base
Compensation"), payable at regular intervals in accordance
with Employer's normal payroll practices now or hereafter in
effect. Employer may consider and declare from time to time
increases in the salary it pays Employee and thereby increase
his Base Compensation.
5 . So long as Employee is employed by Employer pursuant to this
Agreement, he shall be included as a participant in all
present and future employee benefit, retirement, and
compensation plans generally available to employees of
Employer, consistent with his Base Compensation and his
position with Employer, including, without limitation, any
401(k) plan, stock incentive plan, employee stock purchase or
ownership plan, bonus plan, and group life and disability
insurance plans.
6. So long as Employee is employed by Employer pursuant to this
Agreement, Employee shall receive reimbursement, either
directly or through use of an Employer credit card, from
Employer for all reasonable business expenses incurred in the
course of his employment by Employer, upon submission to
Employer of written vouchers and statements for reimbursement.
So long as Employee is employed by Employer pursuant to the
terms of this Agreement, Employer shall continue in effect
vacation policies applicable to Employee no less favorable
from his point of view than those written vacation policies in
effect on the date hereof. So long as Employee is employed by
Employer pursuant to this Agreement, Employee shall be
entitled to office space and working conditions no less
favorable than those in effect for him on the date hereof.
7. Employee's employment with the Employer may be terminated
prior to the expiration of the Term as follows:
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<PAGE>
(A) The Employer may immediately upon written notice
terminate Employee for cause. "Cause" shall be
defined as (i) personal dishonesty, (ii) willful
misconduct, (iii) breach of fiduciary duty involving
personal profit, (iv) intentional failure to perform
stated duties, (v) conviction of a violation of any
law, rule, or regulation (other than traffic
violations or similar offenses) or cease-and-desist
order, (vi) moral turpitude reflecting adversely on
the reputation of the Employer, or (vii) any material
breach of any term, condition or covenant of this
Agreement. The Employer shall have no further
liability to Employee under this Agreement for any
period subsequent to the termination for Cause.
(B) Either party may terminate this Agreement during the
Term without Cause, upon thirty (30) days prior
written notice to the other party. If the Employer
terminates the Employee without Cause (as defined
above), or if Employee terminates his employment for
Good Reason (as defined below):
(i) Compensation provided for herein (including
Base Compensation) shall continue to be
paid, and Employee shall continue to
participate in the employee benefit,
retirement, and compensation plans and other
perquisites as provided in Sections 5 and 6
hereof, through the date of termination
specified in the notice of termination; and
any benefits payable under insurance,
health, retirement and bonus plans as a
result of Employee's participation in such
plans through such date shall be paid when
due under those plans;
(ii) In addition, the Employer shall pay the
Employee a lump sum severance payment equal
to Employee's total salary and bonus
compensation (excluding any transaction
bonus under Section 9) for the immediately
preceding full calendar year plus, if a
Change of Control has occurred, any unpaid
installment of any transaction bonus due
under Section 9 (or which would otherwise
later become due under Section 9); and
(iii) In addition, for one (1) year following
termination, Employer will maintain in full
force and effect for the continued benefit
of Employee and his dependents each employee
medical and life benefit plan (as such term
is defined in the Employee Retirement Income
Security Act of 1974, as amended) in which
Employee was entitled to participate
immediately prior to the date of his
termination, unless an essentially
equivalent benefit is provided by another
source. If the terms of any employee medical
and life benefit plan of Employer or
applicable laws do not permit continued
participation by Employee, Employer will
arrange to provide to Employee a benefit
substantially similar to, and
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<PAGE>
no less favorable than, the benefit he was
entitled to receive under such plan at the
end of the period of coverage. The right of
Employee to continued coverage under the
health and medical insurance plans of
Employer pursuant to Section 4980B of the
Internal Revenue Code of 1986, as amended
(the "Code") shall commence upon the
expiration of such period; and
(iv) Employer will engage at Employer's cost an
out placement firm to assist Employee to
locate an alternative position for Employee
for a period of one (1) year; provided, that
Employer may terminate such firm's
engagement if Employee fails to attend two
or more interviews arranged by such firm or
if Employee is offered any position that
would provide a base compensation of at
least 80% of Employee's Base Compensation on
the date of termination. Employer will make
available reasonable office space and
telephone usage for a period not to exceed
ninety (90) days after terminations.
For purposes of this Agreement, "Good Reason" for
Employee to terminate his employment with Employer
means: a material breach of any term, condition or
covenant of Employer under this Agreement.
(C) Employee's employment with Employer shall terminate
in the event of Employee's death or disability. For
purposes hereof, "disability" shall be defined as
Employee's inability by reason of illness or other
physical or mental incapacity to perform the duties
required by his employment for a consecutive 180 day
period, provided that notice of any termination by
Employer because of Employee's "disability" shall
have been given to Employee prior to the full
resumption by him of the performance of such duties.
8. To induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) Unless otherwise required to do so by law, including
the order of a court or governmental agency, Employee
shall not divulge or furnish any trade secrets (as
defined in IND. CODEss.24-2-3-2) of Employer or any
confidential information acquired by him while
employed by Employer concerning the policies, plans,
procedures or customers of Employer to any person,
firm, corporation or other entity , other than
Employer or upon its written request, or use any such
trade secrets or confidential information directly or
indirectly for Employee's own benefit or for the
benefit of any person, firm, corporation or other
entity other then Employer, because such trade
secrets and confidential information are confidential
and shall at all times remain the property of
Employer.
-5-
<PAGE>
(B) For a period of twelve (12) months after termination
of Employee's employment with Employer for any
reason, Employee shall not (a) compete, directly or
indirectly, in any state or province of the U.S. or
Canada where Employer has a sales representative or
sold products within the 12 months prior to
Employee's termination, with the business of Employer
as conducted during the term of this Agreement (which
business shall include the manufacture or sale of any
products manufactured or sold by Employer during the
12 months prior to Employee's termination), or have
any significant interest (including any interest or
association, including but not limited to, that of
owner, part owner, partner, shareholder, director,
officer, employee, agent, consultant, lender or
advisor) in any person, firm or entity which competes
with Employer's business in the area described above
(each such person, firm or entity is referred to as
"Competitor"); (b) solicit or accept business for or
on behalf of any Competitor; or (c) solicit, induce
or persuade, or attempt to solicit, induce or
persuade, any person to work for or provide services
to or provide financial assistance to, any
Competitor.
(C) If Employee's employment by Employer is terminated
for any reason, Employee will turn over immediately
thereafter to Employer all business correspondence,
letters, papers, reports, customers' lists, financial
statements, records, drawings, credit reports, credit
cards, or other confidential information or documents
of Employer or its affiliates in the possession or
control of Employee, all of which writings are and
will continue to be the sole and exclusive property
of Employer or its affiliates.
(D) Employee acknowledges that the covenants of this
Section 8 are reasonable in scope and duration and
reasonably necessary and appropriate to protect the
goodwill and other appropriate interests of Employer
following Employee's termination and that any
violation of such covenants by Employee would result
in irreparable harm to Employer, for which any remedy
at law would be inadequate. In addition to any other
remedy to which it may be entitled, Employer shall be
entitled to equitable relief, including specific
performance, for any violation of Section 8.
(E) Employee shall, and hereby authorizes Employer to,
inform any successor or prospective employer of
Employee of the terms of this Section 8. Any such
disclosure by Employer and any effort by Employer to
seek Employee's compliance with this covenant, even
if such effort shall require that Employee perform
different duties for such successor employer or delay
his employment by such employer, is hereby expressly
authorized by Employee and shall not be deemed a
violation of any "blacklisting" or similar law.
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<PAGE>
9. If there is a Change of Control of Employer as defined below,
Employee shall be paid a transaction bonus in the amount of
$30,000 payable one-half on the date of the Change of Control
and one-half on the date six (6) months after the Change of
Control, so long as Employer's Board of Directors shall not
have determined on a reasonable basis and in good faith (prior
to any installment date) that Employee has failed to comply
with the Bonus Conditions. "Bonus Conditions" means:
(A) Employee has cooperated fully with Employer and its
advisors and, to the extent directed by Employer, any
party who is engaged or may engage in negotiations
with Employer, regarding any proposed transaction
involving Employer or its shareholders;
(B) Employee shall not have engaged in any activity
intended to discourage any such interested party from
engaging in any such transaction or disparaging the
Employer, its condition, assets or prospects, in the
eyes of any such party;
(C) Employee shall have continued to perform his duties
for Employer with at least the same level of
diligence and performance as characterized Employee's
performance prior to the Effective Date; and
(D) Employee shall not be in breach of any provision of
this Agreement.
Disclosure or statements made by Employee in good faith in response to
appropriate requests from third parties or instructions by Employer that
Employee reasonably believes to be truthful shall not violate the Bonus
Conditions.
For purposes of this Agreement, a "Change of Control" shall mean the occurrence
of any of the following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger of consolidation), in one or a series
of related transactions, of all or substantially all of the assets of Employer
and it subsidiaries taken as a whole to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), (ii) the consummation of any transaction
(including, without limitation, any merger of consolidation) the result of which
is that any "person" as defined above, becomes the beneficial owner (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the voting stock of Employer or (iii) the
first day on which a majority of the members of the Board of Directors of
Employer are not Continuing Directors. Notwithstanding the foregoing, a "Change
of Control" shall not occur and no transaction bonus will be payable if the
person that acquires assets or stock of Employer under part (i) or (ii) of the
foregoing definition, is an Employer sponsored employee stock ownership plan, H.
Jesse McVay, a management group led by H. Jesse McVay or a person whose
participation in such transaction was supported or sponsored by such management
group. "Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Employer who (i) was a member of such Board of
Directors on the date hereof or (ii) was nominated for election or elected
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<PAGE>
to such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination.
10. Any termination of Employee's employment with Employer as
contemplated by Section 7 hereof, except in the circumstances
of Employee's death, shall be communicated by written "Notice
of Termination" by the terminating party to the other party
hereto. Any "Notice of Termination" pursuant to Section 7
based on Cause or Good Reason shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis
for such termination.
11. If a dispute arises regarding the termination of Employee
pursuant to Section 7 hereof or as to the interpretation or
enforcement of this Agreement, said dispute shall be resolved
by binding arbitration in Indianapolis, Indiana determined in
accordance with the rules of the American Arbitration
Association. Notwithstanding the foregoing, Employer shall be
entitled to seek any remedy in a proceeding at law or in
equity in any court having jurisdiction for any breach of
Section 8.
12. Should Employee die after termination of his employment with
Employer while any amounts are payable to him hereunder, this
Agreement shall inure to the benefit of and ben enforceable by
Employee's executors, administrators, heirs, distributees,
devisees and legatees and all amounts payable hereunder shall
be paid in accordance with the terms of this Agreement to
Employee's devisee, legatee or other designee or, if there is
no such designee, to his estate.
13. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee: H. Jesse McVay
205 Adams Avenue
Peru, IN 46970
If to Employer: Bryan Steam Corporation
P.O. Box 27
Peru, Indiana 46970
Attn: Chairman
or to such address as either party hereto may have furnished
to the other party in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt.
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<PAGE>
14. The validity, interpretation, and performance of this
Agreement shall be governed by the laws of the State of
Indiana, regardless of the principles of conflicts of laws.
15. Employer shall require any successor (whether direct or
indirect, by purchase, merger, or consolidation or otherwise)
to all or substantially all of the business or assets of
Employer, by agreement in form and substance reasonably
satisfactory to Employee to expressly assume and agree to
perform this Agreement in the same manner and same extent that
Employer would be required to perform it if no such succession
had taken place. As used in this Agreement, "Employer" shall
mean Employer as hereinbefore defined and any successor to its
business or assets as aforesaid.
16. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by Employee and Employer. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of dissimilar provisions or
conditions at the same or any prior subsequent time. No
agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement.
17. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in
full fore and effect. This is the entire agreement between
Employer and Employee concerning the subject matter hereof and
all prior agreements, written or oral, are superseded.
18. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
19. This Agreement is personal in nature and neither party hereto
shall, without consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder except as
provided in Section 12 and Section 15 above. Without limiting
the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other
than a transfer by his will or by the laws of descent or
distribution as set forth in Section 12 hereof, and in the
event of any attempted assignment or transfer contrary to this
paragraph, Employer shall have no liability to pay any amounts
so attempted to be assigned or transferred.
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed as of the date first written above.
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<PAGE>
"Employer"
Bryan Steam Corporation
By: /s/ Albert J. Bishop
Its: Chairman
"Employee"
/s/ H. Jesse McVay
H. Jesse McVay
EMPLOYMENT AGREEMENT
Albert J. Bishop
This Agreement, is made and dated as of April 1, 1998, by and between Bryan
Steam Corporation, a New Mexico corporation ("Employer"), and Albert J. Bishop,
a resident of Miami County, Indiana ("Employee").
WITNESSETH
WHEREAS, Employee has been employed by Employer and has made valuable
contributions to the profitability and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make
valuable contributions to Employer's business operations and not to seek or
accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure reasonable and
commensurate compensation from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee
on behalf of Employer on an objective and impartial basis and without
distraction or conflict of interest in the event of a change of control of
Employer;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and undertakings herein contained and the continued employment of
Employee by Employer, each intending to be legally bound, covenant and agree as
follows:
1. Upon the terms and subject to the conditions set forth in
this Agreement, Employer employs Employee as Employer's
Chairman or another position commensurate with Employee's
experience and ability, and Employee accepts such employment.
2. Employee agrees to serve as Employer's Chairman or such other
position, and to perform such duties in that office as may be
prescribed by the Employer's Bylaws and as may reasonably be
assigned to him by Employer's Board of Directors and those
generally associated with the office held by Employee as
determined by the Board of Directors from time to time.
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<PAGE>
Employer shall not, without the written consent of Employee,
relocate or transfer Employee to a location more than 30 miles
from his current employment location. While employed by
Employer, Employee shall devote his business time and efforts
to Employer's business and the business of its subsidiaries.
Employer shall not require Employee to work on a full-time
basis. Subject to special requirements of Employer's business
that may arise from time to time, Employee shall not generally
be required to devote more than 10 hours per week to
Employer's business.
3. The term of this Agreement shall be for an initial term of
five (5) years commencing on April 1, 1998 (the "Effective
Date"), (such term shall herein be referred to as the "Term").
4. Employee shall receive an annual salary of $12,000 ("Base
Compensation"), payable at regular intervals in accordance
with Employer's normal payroll practices now or hereafter in
effect. Employer may consider and declare from time to time
increases in the salary it pays Employee and thereby increase
his Base Compensation.
5. So long as Employee is employed by Employer pursuant to this
Agreement, he shall be included as a participant in all
present and future employee benefit, retirement, and
compensation plans generally available to employees of
Employer, consistent with his Base Compensation and his
position with Employer, including, without limitation, any
401(k) plan, stock incentive plan, employee stock purchase or
ownership plan, bonus plan, and group life and disability
insurance plans. Employer shall continue to provide Employee
with an automobile for his personal and business use,
consistent with past practice.
6. So long as Employee is employed by Employer pursuant to this
Agreement, Employee shall receive reimbursement, either
directly or through use of an Employer credit card, from
Employer for all reasonable business expenses incurred in the
course of his employment by Employer, upon submission to
Employer of written vouchers and statements for reimbursement.
So long as Employee is employed by Employer pursuant to the
terms of this Agreement, Employer shall continue in effect
vacation policies applicable to Employee no less favorable
from his point of view than those written vacation policies in
effect on the date hereof. So long as Employee is employed by
Employer pursuant to this Agreement, Employee shall be
entitled to office space and working conditions no less
favorable than those in effect for him on the date hereof.
7. Employee's employment with the Employer may be terminated
prior to the expiration of the Term as follows:
(A) The Employer may immediately upon written notice
terminate Employee for cause. "Cause" shall be
defined as (i) personal dishonesty, (ii) willful
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misconduct, (iii) breach of fiduciary duty involving
personal profit, (iv) intentional failure to perform
stated duties, (v) conviction of a violation of any
law, rule, or regulation (other than traffic
violations or similar offenses) or cease-and-desist
order, (vi) moral turpitude reflecting adversely on
the reputation of the Employer, or (vii) any material
breach of any term, condition or covenant of this
Agreement. The Employer shall have no further
liability to Employee under this Agreement for any
period subsequent to the termination for Cause.
(B) Either party may terminate this Agreement during the
Term without Cause, upon thirty (30) days prior
written notice to the other party. If the Employer
terminates the Employee without Cause (as defined
above):
(i) Compensation provided for herein (including
Base Compensation) shall continue to be
paid, and Employee shall continue to
participate in the employee benefit,
retirement, and compensation plans and other
perquisites as provided in Sections 5 and 6
hereof, through the date of termination
specified in the notice of termination; and
any benefits payable under insurance,
health, retirement and bonus plans as a
result of Employee's participation in such
plans through such date shall be paid when
due under those plans;
(ii) In addition, the Employer shall pay the
Employee as severance compensation monthly
payments equal to Employee's Base
Compensation for the full remainder of the
Term plus, if a Change of Control has
occurred, any unpaid installments of any
transaction bonus due under Section 9 at the
time such installments would otherwise
become due; and
(iii) In addition, for the full remainder of the
Term following termination, Employer will
maintain in full force and effect for the
continued benefit of Employee and his
dependents each employee medical and life
benefit plan (as such term is defined in the
Employee Retirement Income Security Act of
1974, as amended) in which Employee was
entitled to participate immediately prior to
the date of his termination, unless an
essentially equivalent benefit is provided
by another source. If the terms of any
employee medical and life benefit plan of
Employer or applicable laws do not permit
continued participation by Employee,
Employer will arrange to provide to
Employee, to the extent Employee is
eligible, a benefit substantially similar to
the benefit he was entitled to receive under
such plan at the end of the period of
coverage. Employee acknowledges that such
replacement coverage may consist of a
combination of Medicare and Medicare
Supplement
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<PAGE>
coverage, that such coverage may not provide
as complete coverage for prescription
medication, for example, and may depend,
among other things, upon timely elections on
the part of Employee and/or his spouse, and
Employee's eligibility for such coverage.
The right of Employee, if any, to continued
coverage under the health and medical
insurance plans of Employer pursuant to
Section 4980B of the Internal Revenue Code
of 1986, as amended (the "Code") shall
commence upon the expiration of such period;
and
(iv) On the date of termination, Employer shall
transfer and convey to Employee the
automobile then being provided for
Employee's use under Section 5.
(C) Employee's employment with Employer shall terminate
in the event of Employee's death or disability. For
purposes hereof, "disability" shall be defined as
Employee's inability by reason of illness or other
physical or mental incapacity to perform the duties
required by his employment for a consecutive 180 day
period, provided that notice of any termination by
Employer because of Employee's "disability" shall
have been given to Employee prior to the full
resumption by him of the performance of such duties.
8. To induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) Unless otherwise required to do so by law, including
the order of a court or governmental agency, Employee
shall not divulge or furnish any trade secrets (as
defined in IND. CODEss.24-2-3-2) of Employer or any
confidential information acquired by him while
employed by Employer concerning the policies, plans,
procedures or customers of Employer to any person,
firm, corporation or other entity , other than
Employer or upon its written request, or use any such
trade secrets or confidential information directly or
indirectly for Employee's own benefit or for the
benefit of any person, firm, corporation or other
entity other then Employer, because such trade
secrets and confidential information are confidential
and shall at all times remain the property of
Employer.
(B) For a period of twelve (12) months after termination
of Employee's employment with Employer for any
reason, Employee shall not (a) compete, directly or
indirectly, in any state or province of the U.S. or
Canada where Employer has a sales representative or
sold products within the 12 months prior to
Employee's termination, with the business of Employer
as conducted during the term of this Agreement (which
business shall include the manufacture or sale of any
products manufactured or sold by Employer during the
12 months prior to Employee's termination), or have
any significant
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<PAGE>
interest (including any interest or association,
including but not limited to, that of owner, part
owner, partner, shareholder, director, officer,
employee, agent, consultant, lender or advisor) in
any person, firm or entity which competes with
Employer's business in the area described above (each
such person, firm or entity is referred to as
"Competitor"); (b) solicit or accept business for or
on behalf of any Competitor; or (c) solicit, induce
or persuade, or attempt to solicit, induce or
persuade, any person to work for or provide services
to or provide financial assistance to, any
Competitor.
(C) If Employee's employment by Employer is terminated
for any reason, Employee will turn over immediately
thereafter to Employer all business correspondence,
letters, papers, reports, customers' lists, financial
statements, records, drawings, credit reports, credit
cards, or other confidential information or documents
of Employer or its affiliates in the possession or
control of Employee, all of which writings are and
will continue to be the sole and exclusive property
of Employer or its affiliates.
(D) Employee acknowledges that the covenants of this
Section 8 are reasonable in scope and duration and
reasonably necessary and appropriate to protect the
goodwill and other appropriate interests of Employer
following Employee's termination and that any
violation of such covenants by Employee would result
in irreparable harm to Employer, for which any remedy
at law would be inadequate. In addition to any other
remedy to which it may be entitled, Employer shall be
entitled to equitable relief, including specific
performance, for any violation of Section 8.
(E) Employee shall, and hereby authorizes Employer to,
inform any successor or prospective employer of
Employee of the terms of this Section 8. Any such
disclosure by Employer and any effort by Employer to
seek Employee's compliance with this covenant, even
if such effort shall require that Employee perform
different duties for such successor employer or delay
his employment by such employer, is hereby expressly
authorized by Employee and shall not be deemed a
violation of any "blacklisting" or similar law.
9. If there is a Change of Control of Employer as defined below,
Employee shall be paid a transaction bonus in the amount of
$50,000 payable immediately following the Change of Control,
unless Employee shall, prior to the Change of Control, deliver
to Employee an irrevocable written election to defer such
payment and determining the amounts and times (not more
frequently than monthly and not later than the end of the
Term) for deferred payment. In the case of deferral, Employer
shall pay the transaction bonus on the basis of Employee's
deferral election. Such transaction bonus shall not, however,
be paid if Employer's Board of Directors shall have determined
on a reasonable basis and in good faith (prior to such Change
of Control)
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<PAGE>
that Employee has failed to comply with the Bonus Conditions.
"Bonus Conditions" means:
(A) Employee has cooperated fully with Employer and its
advisors and, to the extent directed by Employer, any
party who is engaged or may engage in negotiations
with Employer, regarding any proposed transaction
involving Employer or its shareholders;
(B) Employee shall not have engaged in any activity
intended to discourage any such interested party from
engaging in any such transaction or disparaging the
Employer, its condition, assets or prospects, in the
eyes of any such party;
(C) Employee shall have continued to perform his duties
for Employer with at least the same level of
diligence and performance as characterized Employee's
performance prior to the Effective Date; and
(D) Employee shall not be in breach of any provision of
this Agreement.
Disclosure or statements made by Employee in good faith in response to
appropriate requests from third parties or instructions by Employer that
Employee reasonably believes to be truthful shall not violate the Bonus
Conditions.
For purposes of this Agreement, a "Change of Control" shall mean the occurrence
of any of the following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger of consolidation), in one or a series
of related transactions, of all or substantially all of the assets of Employer
and it subsidiaries taken as a whole to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), (ii) the consummation of any transaction
(including, without limitation, any merger of consolidation) the result of which
is that any "person" as defined above, becomes the beneficial owner (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the voting stock of Employer or (iii) the
first day on which a majority of the members of the Board of Directors of
Employer are not Continuing Directors. Notwithstanding the foregoing, a "Change
of Control" shall not occur and no transaction bonus will be payable if the
person that acquires assets or stock of Employer under part (i) or (ii) of the
foregoing definition, is an Employer sponsored employee stock ownership plan, H.
Jesse McVay, a management group led by H. Jesse McVay or a person whose
participation in such transaction was supported or sponsored by such management
group. "Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Employer who (i) was a member of such Board of
Directors on the date hereof or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination.
10. Any termination of Employee's employment with Employer as
contemplated by Section 7 hereof, except in the circumstances
of Employee's death, shall be
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<PAGE>
communicated by written "Notice of Termination" by the
terminating party to the other party hereto. Any "Notice of
Termination" pursuant to Section 7 based on Cause shall set
forth in reasonable detail the facts and circumstances claimed
to provide a basis for such termination.
11. If a dispute arises regarding the termination of Employee
pursuant to Section 7 hereof or as to the interpretation or
enforcement of this Agreement, said dispute shall be resolved
by binding arbitration in Indianapolis, Indiana determined in
accordance with the rules of the American Arbitration
Association. Notwithstanding the foregoing, Employer shall be
entitled to seek any remedy in a proceeding at law or in
equity in any court having jurisdiction for any breach of
Section 8.
12. Should Employee die after termination of his employment with
Employer while any amounts are payable to him hereunder, this
Agreement shall inure to the benefit of and ben enforceable by
Employee's executors, administrators, heirs, distributees,
devisees and legatees and all amounts payable hereunder shall
be paid in accordance with the terms of this Agreement to
Employee's devisee, legatee or other designee or, if there is
no such designee, to his estate.
13. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee: Albert J. Bishop
173 East Sixth Street
Peru, IN 46970
If to Employer: Bryan Steam Corporation
P.O. Box 27
Peru, Indiana 46970
Attn: President
or to such address as either party hereto may have furnished
to the other party in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt.
14. The validity, interpretation, and performance of this
Agreement shall be governed by the laws of the State of
Indiana, regardless of the principles of conflicts of laws.
15. Employer shall require any successor (whether direct or
indirect, by purchase, merger, or consolidation or otherwise)
to all or substantially all of the business or assets of
Employer, by agreement in form and substance reasonably
satisfactory to Employee
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<PAGE>
to expressly assume and agree to perform this Agreement in the
same manner and same extent that Employer would be required to
perform it if no such succession had taken place. As used in
this Agreement, "Employer" shall mean Employer as hereinbefore
defined and any successor to its business or assets as
aforesaid.
16. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by Employee and Employer. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of dissimilar provisions or
conditions at the same or any prior subsequent time. No
agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement.
17. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in
full fore and effect. This is the entire agreement between
Employer and Employee concerning the subject matter hereof and
all prior agreements, written or oral, are superseded.
18. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
19. This Agreement is personal in nature and neither party hereto
shall, without consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder except as
provided in Section 12 and Section 15 above. Without limiting
the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other
than a transfer by his will or by the laws of descent or
distribution as set forth in Section 12 hereof, and in the
event of any attempted assignment or transfer contrary to this
paragraph, Employer shall have no liability to pay any amounts
so attempted to be assigned or transferred.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed as of the date first written above.
"Employer"
Bryan Steam Corporation
By: /s/ Jesse McVay
---------------------------
Its: President
"Employee"
/s/ Albert J. Bishop
---------------------------
Albert J. Bishop
EMPLOYMENT AGREEMENT
Kurt J. Krauskopf
This Agreement, is made and dated as of April 1, 1998, by and between Bryan
Steam Corporation, a New Mexico corporation ("Employer"), and Kurt J. Krauskopf,
a resident of Miami County, Indiana ("Employee").
WITNESSETH
WHEREAS, Employee has been employed by Employer and has made valuable
contributions to the profitability and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make
valuable contributions to Employer's business operations and not to seek or
accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure reasonable and
commensurate compensation from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee
on behalf of Employer on an objective and impartial basis and without
distraction or conflict of interest in the event of a change of control of
Employer;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and undertakings herein contained and the continued employment of
Employee by Employer, each intending to be legally bound, covenant and agree as
follows:
1. Upon the terms and subject to the conditions set forth in
this Agreement, Employer employs Employee as Employer's
Comptroller or another position commensurate with Employee's
experience and ability, and Employee accepts such employment.
2. Employee agrees to serve as Employer's Comptroller or such
other position, and to perform such duties in that office as
may be prescribed by the Employer's Bylaws and as may
reasonably be assigned to him by Employer's President or Board
of Directors and those generally associated with the office
held by Employee as determined by the President or Board of
Directors from time to time.
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<PAGE>
Employer shall not, without the written consent of Employee,
relocate or transfer Employee to a location more than 30 miles
from his current employment location. While employed by
Employer, Employee shall devote substantially all his business
time and efforts to Employer's business and the business of
its subsidiaries.
3. The term of this Agreement shall be for an initial term of two
(2) years commencing on April 1, 1998 (the "Effective Date"),
(such term shall herein be referred to as the "Term").
4. Employee shall receive an annual salary of $40,560 ("Base
Compensation"), payable at regular intervals in accordance
with Employer's normal payroll practices now or hereafter in
effect. Employer may consider and declare from time to time
increases in the salary it pays Employee and thereby increase
his Base Compensation.
5. So long as Employee is employed by Employer pursuant to this
Agreement, he shall be included as a participant in all
present and future employee benefit, retirement, and
compensation plans generally available to employees of
Employer, consistent with his Base Compensation and his
position with Employer, including, without limitation, any
401(k) plan, stock incentive plan, employee stock purchase or
ownership plan, bonus plan, and group life and disability
insurance plans.
6. So long as Employee is employed by Employer pursuant to this
Agreement, Employee shall receive reimbursement, either
directly or through use of an Employer credit card, from
Employer for all reasonable business expenses incurred in the
course of his employment by Employer, upon submission to
Employer of written vouchers and statements for reimbursement.
So long as Employee is employed by Employer pursuant to the
terms of this Agreement, Employer shall continue in effect
vacation policies applicable to Employee no less favorable
from his point of view than those written vacation policies in
effect on the date hereof. So long as Employee is employed by
Employer pursuant to this Agreement, Employee shall be
entitled to office space and working conditions no less
favorable than those in effect for him on the date hereof.
7. Employee's employment with the Employer may be terminated
prior to the expiration of the Term as follows:
(A) The Employer may immediately upon written notice
terminate Employee for cause. "Cause" shall be
defined as (i) personal dishonesty, (ii) willful
misconduct, (iii) breach of fiduciary duty involving
personal profit, (iv) intentional failure to perform
stated duties, (v) conviction of a violation of any
law, rule, or regulation (other than traffic
violations or similar offenses) or cease-and-desist
order, (vi) moral turpitude reflecting adversely on
the reputation of the Employer, or (vii) any material
breach of any term, condition
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<PAGE>
or covenant of this Agreement. The Employer shall
have no further liability to Employee under this
Agreement for any period subsequent to the
termination for Cause.
(B) Either party may terminate this Agreement during the
Term without Cause, upon thirty (30) days prior
written notice to the other party. If the Employer
terminates the Employee without Cause (as defined
above), or if Employee terminates his employment for
Good Reason (as defined below):
(i) Compensation provided for herein (including
Base Compensation) shall continue to be
paid, and Employee shall continue to
participate in the employee benefit,
retirement, and compensation plans and other
perquisites as provided in Sections 5 and 6
hereof, through the date of termination
specified in the notice of termination; and
any benefits payable under insurance,
health, retirement and bonus plans as a
result of Employee's participation in such
plans through such date shall be paid when
due under those plans;
(ii) In addition, the Employer shall pay the
Employee a lump sum severance payment equal
to fifty percent (50%) of Employee's total
salary and bonus compensation (excluding any
transaction bonus under Section 9) for the
immediately preceding calendar year plus, if
a Change of Control has occurred, any unpaid
installment of any transaction bonus due
under Section 9 (or which would otherwise
later become due under Section 9); and
(iii) In addition, for one (1) year following
termination, Employer will maintain in full
force and effect for the continued benefit
of Employee and his dependents each employee
medical and life benefit plan (as such term
is defined in the Employee Retirement Income
Security Act of 1974, as amended) in which
Employee was entitled to participate
immediately prior to the date of his
termination, unless an essentially
equivalent benefit is provided by another
source. If the terms of any employee medical
and life benefit plan of Employer or
applicable laws do not permit continued
participation by Employee, Employer will
arrange to provide to Employee a benefit
substantially similar to, and no less
favorable than, the benefit he was entitled
to receive under such plan at the end of the
period of coverage. The right of Employee to
continued coverage under the health and
medical insurance plans of Employer pursuant
to Section 4980B of the Internal Revenue
Code of 1986, as amended (the "Code") shall
commence upon the expiration of such period;
and
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<PAGE>
(iv) Employer will engage at Employer's cost an
out placement firm to assist Employee to
locate an alternative position for Employee
for a period of one (1) year; provided, that
Employer may terminate such firm's
engagement if Employee fails to attend two
or more interviews arranged by such firm or
if Employee is offered any position that
would provide a base compensation of at
least 80% of Employee's Base Compensation on
the date of termination. Employer will make
available reasonable office space and
telephone usage for a period not to exceed
ninety (90) days after terminations.
For purposes of this Agreement, "Good Reason" for
Employee to terminate his employment with Employer
means: a material breach of any term, condition or
covenant of Employer under this Agreement.
(C) Employee's employment with Employer shall terminate
in the event of Employee's death or disability. For
purposes hereof, "disability" shall be defined as
Employee's inability by reason of illness or other
physical or mental incapacity to perform the duties
required by his employment for a consecutive 180 day
period, provided that notice of any termination by
Employer because of Employee's "disability" shall
have been given to Employee prior to the full
resumption by him of the performance of such duties.
8. To induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) Unless otherwise required to do so by law, including
the order of a court or governmental agency, Employee
shall not divulge or furnish any trade secrets (as
defined in IND. CODEss.24-2-3-2) of Employer or any
confidential information acquired by him while
employed by Employer concerning the policies, plans,
procedures or customers of Employer to any person,
firm, corporation or other entity , other than
Employer or upon its written request, or use any such
trade secrets or confidential information directly or
indirectly for Employee's own benefit or for the
benefit of any person, firm, corporation or other
entity other then Employer, because such trade
secrets and confidential information are confidential
and shall at all times remain the property of
Employer.
(B) For a period of six (6) months after termination of
Employee's employment with Employer for any reason,
Employee shall not (a) compete, directly or
indirectly, in any state or province of the U.S. or
Canada where Employer has a sales representative or
sold products within the 12 months prior to
Employee's termination, with the business of Employer
as conducted during the term of this Agreement (which
business shall include the manufacture or sale of any
products manufactured or sold by Employer during the
12 months
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<PAGE>
prior to Employee's termination), or have any
significant interest (including any interest or
association, including but not limited to, that of
owner, part owner, partner, shareholder, director,
officer, employee, agent, consultant, lender or
advisor) in any person, firm or entity which competes
with Employer's business in the area described above
(each such person, firm or entity is referred to as
"Competitor"); (b) solicit or accept business for or
on behalf of any Competitor; or (c) solicit, induce
or persuade, or attempt to solicit, induce or
persuade, any person to work for or provide services
to or provide financial assistance to, any
Competitor.
(C) If Employee's employment by Employer is terminated
for any reason, Employee will turn over immediately
thereafter to Employer all business correspondence,
letters, papers, reports, customers' lists, financial
statements, records, drawings, credit reports, credit
cards, or other confidential information or documents
of Employer or its affiliates in the possession or
control of Employee, all of which writings are and
will continue to be the sole and exclusive property
of Employer or its affiliates.
(D) Employee acknowledges that the covenants of this
Section 8 are reasonable in scope and duration and
reasonably necessary and appropriate to protect the
goodwill and other appropriate interests of Employer
following Employee's termination and that any
violation of such covenants by Employee would result
in irreparable harm to Employer, for which any remedy
at law would be inadequate. In addition to any other
remedy to which it may be entitled, Employer shall be
entitled to equitable relief, including specific
performance, for any violation of Section 8.
(E) Employee shall, and hereby authorizes Employer to,
inform any successor or prospective employer of
Employee of the terms of this Section 8. Any such
disclosure by Employer and any effort by Employer to
seek Employee's compliance with this covenant, even
if such effort shall require that Employee perform
different duties for such successor employer or delay
his employment by such employer, is hereby expressly
authorized by Employee and shall not be deemed a
violation of any "blacklisting" or similar law.
9. If there is a Change of Control of Employer as defined below,
Employee shall be paid a transaction bonus in the amount of
$8,000 payable one-half on the date of the Change of Control
and one-half on the date six (6) months after the Change of
Control, so long as Employer's Board of Directors shall not
have determined on a reasonable basis and in good faith (prior
to any installment date) that Employee has failed to comply
with the Bonus Conditions. "Bonus Conditions" means:
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<PAGE>
(A) Employee has cooperated fully with Employer and its
advisors and, to the extent directed by Employer, any
party who is engaged or may engage in negotiations
with Employer, regarding any proposed transaction
involving Employer or its shareholders;
(B) Employee shall not have engaged in any activity
intended to discourage any such interested party from
engaging in any such transaction or disparaging the
Employer, its condition, assets or prospects, in the
eyes of any such party;
(C) Employee shall have continued to perform his duties
for Employer with at least the same level of
diligence and performance as characterized Employee's
performance prior to the Effective Date; and
(D) Employee shall not be in breach of any provision of
this Agreement.
Disclosure or statements made by Employee in good faith in response to
appropriate requests from third parties or instructions by Employer that
Employee reasonably believes to be truthful shall not violate the Bonus
Conditions.
For purposes of this Agreement, a "Change of Control" shall mean the occurrence
of any of the following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger of consolidation), in one or a series
of related transactions, of all or substantially all of the assets of Employer
and it subsidiaries taken as a whole to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), (ii) the consummation of any transaction
(including, without limitation, any merger of consolidation) the result of which
is that any "person" as defined above, becomes the beneficial owner (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the voting stock of Employer or (iii) the
first day on which a majority of the members of the Board of Directors of
Employer are not Continuing Directors. Notwithstanding the foregoing, a "Change
of Control" shall not occur and no transaction bonus will be payable if the
person that acquires assets or stock of Employer under part (i) or (ii) of the
foregoing definition, is an Employer sponsored employee stock ownership plan, H.
Jesse McVay, a management group led by H. Jesse McVay or a person whose
participation in such transaction was supported or sponsored by such management
group. "Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Employer who (i) was a member of such Board of
Directors on the date hereof or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination.
10. Any termination of Employee's employment with Employer as
contemplated by Section 7 hereof, except in the circumstances
of Employee's death, shall be communicated by written "Notice
of Termination" by the terminating party to the other party
hereto. Any "Notice of Termination" pursuant to Section 7
based on
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<PAGE>
Cause or Good Reason shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for such
termination.
11. If a dispute arises regarding the termination of Employee
pursuant to Section 7 hereof or as to the interpretation or
enforcement of this Agreement, said dispute shall be resolved
by binding arbitration in Indianapolis, Indiana determined in
accordance with the rules of the American Arbitration
Association. Notwithstanding the foregoing, Employer shall be
entitled to seek any remedy in a proceeding at law or in
equity in any court having jurisdiction for any breach of
Section 8.
12. Should Employee die after termination of his employment with
Employer while any amounts are payable to him hereunder, this
Agreement shall inure to the benefit of and ben enforceable by
Employee's executors, administrators, heirs, distributees,
devisees and legatees and all amounts payable hereunder shall
be paid in accordance with the terms of this Agreement to
Employee's devisee, legatee or other designee or, if there is
no such designee, to his estate.
13. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee: Kurt J. Krauskopf
996 Orchid Place
Peru, IN 46970
If to Employer: Bryan Steam Corporation
P.O. Box 27
Peru, Indiana 46970
Attn: Chairman
or to such address as either party hereto may have furnished
to the other party in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt.
14. The validity, interpretation, and performance of this
Agreement shall be governed by the laws of the State of
Indiana, regardless of the principles of conflicts of laws.
15. Employer shall require any successor (whether direct or
indirect, by purchase, merger, or consolidation or otherwise)
to all or substantially all of the business or assets of
Employer, by agreement in form and substance reasonably
satisfactory to Employee to expressly assume and agree to
perform this Agreement in the same manner and same extent that
Employer would be required to perform it if no such succession
had
-7-
<PAGE>
taken place. As used in this Agreement, "Employer" shall mean
Employer as hereinbefore defined and any successor to its
business or assets as aforesaid.
16. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by Employee and Employer. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of dissimilar provisions or
conditions at the same or any prior subsequent time. No
agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement.
17. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in
full fore and effect. This is the entire agreement between
Employer and Employee concerning the subject matter hereof and
all prior agreements, written or oral, are superseded.
18. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
19. This Agreement is personal in nature and neither party hereto
shall, without consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder except as
provided in Section 12 and Section 15 above. Without limiting
the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other
than a transfer by his will or by the laws of descent or
distribution as set forth in Section 12 hereof, and in the
event of any attempted assignment or transfer contrary to this
paragraph, Employer shall have no liability to pay any amounts
so attempted to be assigned or transferred.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed as of the date first written above.
"Employer"
Bryan Steam Corporation
By: /s/ Jesse McVay
---------------------------
Its: President
"Employee"
/s/ Kurt J. Krauskopf
---------------------------
Kurt J. Krauskopf
-9-
EMPLOYMENT AGREEMENT
Sandra A. Mitting
This Agreement, is made and dated as of April 1, 1998, by and between Bryan
Steam Corporation, a New Mexico corporation ("Employer"), and Sandra A. Mitting,
a resident of Wabash County, Indiana ("Employee").
WITNESSETH
WHEREAS, Employee has been employed by Employer and has made valuable
contributions to the profitability and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make
valuable contributions to Employer's business operations and not to seek or
accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure reasonable and
commensurate compensation from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee
on behalf of Employer on an objective and impartial basis and without
distraction or conflict of interest in the event of a change of control of
Employer;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and undertakings herein contained and the continued employment of
Employee by Employer, each intending to be legally bound, covenant and agree as
follows:
1. Upon the terms and subject to the conditions set forth in this
Agreement, Employer employs Employee as Employer's Human
Resources Manager or another position commensurate with
Employee's experience and ability, and Employee accepts such
employment.
2. Employee agrees to serve as Employer's Human Resources Manager
or such other position, and to perform such duties in that
office as may be prescribed by the Employer's Bylaws and as
may reasonably be assigned to him by Employer's
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<PAGE>
President or Board of Directors and those generally associated
with the office held by Employee as determined by the
President or Board of Directors from time to time.
Employer shall not, without the written consent of Employee,
relocate or transfer Employee to a location more than 30 miles
from his current employment location. While employed by
Employer, Employee shall devote substantially all his business
time and efforts to Employer's business and the business of
its subsidiaries.
3. The term of this Agreement shall be for an initial term of two
(2) years commencing on April 1, 1998 (the "Effective Date"),
(such term shall herein be referred to as the "Term").
4. Employee shall receive an annual salary of $36,260 ("Base
Compensation"), payable at regular intervals in accordance
with Employer's normal payroll practices now or hereafter in
effect. Employer may consider and declare from time to time
increases in the salary it pays Employee and thereby increase
his Base Compensation.
5. So long as Employee is employed by Employer pursuant to this
Agreement, he shall be included as a participant in all
present and future employee benefit, retirement, and
compensation plans generally available to employees of
Employer, consistent with his Base Compensation and his
position with Employer, including, without limitation, any
401(k) plan, stock incentive plan, employee stock purchase or
ownership plan, bonus plan, and group life and disability
insurance plans.
6. So long as Employee is employed by Employer pursuant to this
Agreement, Employee shall receive reimbursement, either
directly or through use of an Employer credit card, from
Employer for all reasonable business expenses incurred in the
course of his employment by Employer, upon submission to
Employer of written vouchers and statements for reimbursement.
So long as Employee is employed by Employer pursuant to the
terms of this Agreement, Employer shall continue in effect
vacation policies applicable to Employee no less favorable
from his point of view than those written vacation policies in
effect on the date hereof. So long as Employee is employed by
Employer pursuant to this Agreement, Employee shall be
entitled to office space and working conditions no less
favorable than those in effect for him on the date hereof.
7. Employee's employment with the Employer may be terminated
prior to the expiration of the Term as follows:
(A) The Employer may immediately upon written notice
terminate Employee for cause. "Cause" shall be
defined as (i) personal dishonesty, (ii) willful
misconduct, (iii) breach of fiduciary duty involving
personal profit, (iv) intentional failure to perform
stated duties, (v) conviction of a violation of any
-2-
<PAGE>
law, rule, or regulation (other than traffic
violations or similar offenses) or cease-and-desist
order, (vi) moral turpitude reflecting adversely on
the reputation of the Employer, or (vii) any material
breach of any term, condition or covenant of this
Agreement. The Employer shall have no further
liability to Employee under this Agreement for any
period subsequent to the termination for Cause.
(B) Either party may terminate this Agreement during the
Term without Cause, upon thirty (30) days prior
written notice to the other party. If the Employer
terminates the Employee without Cause (as defined
above), or if Employee terminates his employment for
Good Reason (as defined below):
(i) Compensation provided for herein (including
Base Compensation) shall continue to be
paid, and Employee shall continue to
participate in the employee benefit,
retirement, and compensation plans and other
perquisites as provided in Sections 5 and 6
hereof, through the date of termination
specified in the notice of termination; and
any benefits payable under insurance,
health, retirement and bonus plans as a
result of Employee's participation in such
plans through such date shall be paid when
due under those plans;
(ii) In addition, the Employer shall pay the
Employee a lump sum severance payment equal
to fifty percent (50%) of Employee's total
salary and bonus compensation (excluding any
transaction bonus under Section 9) for the
immediately preceding calendar year plus, if
a Change of Control has occurred, any unpaid
installment of any transaction bonus due
under Section 9 (or which would otherwise
later become due under Section 9); and
(iii) In addition, for one (1) year following
termination, Employer will maintain in full
force and effect for the continued benefit
of Employee and his dependents each employee
medical and life benefit plan (as such term
is defined in the Employee Retirement Income
Security Act of 1974, as amended) in which
Employee was entitled to participate
immediately prior to the date of his
termination, unless an essentially
equivalent benefit is provided by another
source. If the terms of any employee medical
and life benefit plan of Employer or
applicable laws do not permit continued
participation by Employee, Employer will
arrange to provide to Employee a benefit
substantially similar to, and no less
favorable than, the benefit he was entitled
to receive under such plan at the end of the
period of coverage. The right of Employee to
continued coverage under the health and
medical insurance plans of Employer pursuant
to Section 4980B of the Internal Revenue
Code
-3-
<PAGE>
of 1986, as amended (the "Code") shall
commence upon the expiration of such period;
and
(iv) Employer will engage at Employer's cost an
out placement firm to assist Employee to
locate an alternative position for Employee
for a period of one (1) year; provided, that
Employer may terminate such firm's
engagement if Employee fails to attend two
or more interviews arranged by such firm or
if Employee is offered any position that
would provide a base compensation of at
least 80% of Employee's Base Compensation on
the date of termination. Employer will make
available reasonable office space and
telephone usage for a period not to exceed
ninety (90) days after terminations.
For purposes of this Agreement, "Good Reason" for
Employee to terminate his employment with Employer
means: a material breach of any term, condition or
covenant of Employer under this Agreement.
(C) Employee's employment with Employer shall terminate
in the event of Employee's death or disability. For
purposes hereof, "disability" shall be defined as
Employee's inability by reason of illness or other
physical or mental incapacity to perform the duties
required by his employment for a consecutive 180 day
period, provided that notice of any termination by
Employer because of Employee's "disability" shall
have been given to Employee prior to the full
resumption by him of the performance of such duties.
8. To induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) Unless otherwise required to do so by law, including
the order of a court or governmental agency, Employee
shall not divulge or furnish any trade secrets (as
defined in IND. CODEss.24-2-3-2) of Employer or any
confidential information acquired by him while
employed by Employer concerning the policies, plans,
procedures or customers of Employer to any person,
firm, corporation or other entity , other than
Employer or upon its written request, or use any such
trade secrets or confidential information directly or
indirectly for Employee's own benefit or for the
benefit of any person, firm, corporation or other
entity other then Employer, because such trade
secrets and confidential information are confidential
and shall at all times remain the property of
Employer.
(B) For a period of six (6) months after termination of
Employee's employment with Employer for any reason,
Employee shall not (a) compete, directly or
indirectly, in any state or province of the U.S. or
Canada where Employer has a sales representative or
sold products within the 12 months prior to
-4-
<PAGE>
Employee's termination, with the business of Employer
as conducted during the term of this Agreement (which
business shall include the manufacture or sale of any
products manufactured or sold by Employer during the
12 months prior to Employee's termination), or have
any significant interest (including any interest or
association, including but not limited to, that of
owner, part owner, partner, shareholder, director,
officer, employee, agent, consultant, lender or
advisor) in any person, firm or entity which competes
with Employer's business in the area described above
(each such person, firm or entity is referred to as
"Competitor"); (b) solicit or accept business for or
on behalf of any Competitor; or (c) solicit, induce
or persuade, or attempt to solicit, induce or
persuade, any person to work for or provide services
to or provide financial assistance to, any
Competitor.
(C) If Employee's employment by Employer is terminated
for any reason, Employee will turn over immediately
thereafter to Employer all business correspondence,
letters, papers, reports, customers' lists, financial
statements, records, drawings, credit reports, credit
cards, or other confidential information or documents
of Employer or its affiliates in the possession or
control of Employee, all of which writings are and
will continue to be the sole and exclusive property
of Employer or its affiliates.
(D) Employee acknowledges that the covenants of this
Section 8 are reasonable in scope and duration and
reasonably necessary and appropriate to protect the
goodwill and other appropriate interests of Employer
following Employee's termination and that any
violation of such covenants by Employee would result
in irreparable harm to Employer, for which any remedy
at law would be inadequate. In addition to any other
remedy to which it may be entitled, Employer shall be
entitled to equitable relief, including specific
performance, for any violation of Section 8.
(E) Employee shall, and hereby authorizes Employer to,
inform any successor or prospective employer of
Employee of the terms of this Section 8. Any such
disclosure by Employer and any effort by Employer to
seek Employee's compliance with this covenant, even
if such effort shall require that Employee perform
different duties for such successor employer or delay
his employment by such employer, is hereby expressly
authorized by Employee and shall not be deemed a
violation of any "blacklisting" or similar law.
9. If there is a Change of Control of Employer as defined below,
Employee shall be paid a transaction bonus in the amount of
$2,000 payable one-half on the date of the Change of Control
and one-half on the date six (6) months after the Change of
Control, so long as Employer's Board of Directors shall not
have determined on a
-5-
<PAGE>
reasonable basis and in good faith (prior to any installment
date) that Employee has failed to comply with the Bonus
Conditions. "Bonus Conditions" means:
(A) Employee has cooperated fully with Employer and its
advisors and, to the extent directed by Employer, any
party who is engaged or may engage in negotiations
with Employer, regarding any proposed transaction
involving Employer or its shareholders;
(B) Employee shall not have engaged in any activity
intended to discourage any such interested party from
engaging in any such transaction or disparaging the
Employer, its condition, assets or prospects, in the
eyes of any such party;
(C) Employee shall have continued to perform his duties
for Employer with at least the same level of
diligence and performance as characterized Employee's
performance prior to the Effective Date; and
(D) Employee shall not be in breach of any provision of
this Agreement.
Disclosure or statements made by Employee in good faith in response to
appropriate requests from third parties or instructions by Employer that
Employee reasonably believes to be truthful shall not violate the Bonus
Conditions.
For purposes of this Agreement, a "Change of Control" shall mean the occurrence
of any of the following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger of consolidation), in one or a series
of related transactions, of all or substantially all of the assets of Employer
and it subsidiaries taken as a whole to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), (ii) the consummation of any transaction
(including, without limitation, any merger of consolidation) the result of which
is that any "person" as defined above, becomes the beneficial owner (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the voting stock of Employer or (iii) the
first day on which a majority of the members of the Board of Directors of
Employer are not Continuing Directors. Notwithstanding the foregoing, a "Change
of Control" shall not occur and no transaction bonus will be payable if the
person that acquires assets or stock of Employer under part (i) or (ii) of the
foregoing definition, is an Employer sponsored employee stock ownership plan, H.
Jesse McVay, a management group led by H. Jesse McVay or a person whose
participation in such transaction was supported or sponsored by such management
group. "Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Employer who (i) was a member of such Board of
Directors on the date hereof or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination.
10. Any termination of Employee's employment with Employer as
contemplated by Section 7 hereof, except in the circumstances
of Employee's death, shall be
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<PAGE>
communicated by written "Notice of Termination" by the
terminating party to the other party hereto. Any "Notice of
Termination" pursuant to Section 7 based on Cause or Good
Reason shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination.
11. If a dispute arises regarding the termination of Employee
pursuant to Section 7 hereof or as to the interpretation or
enforcement of this Agreement, said dispute shall be resolved
by binding arbitration in Indianapolis, Indiana determined in
accordance with the rules of the American Arbitration
Association. Notwithstanding the foregoing, Employer shall be
entitled to seek any remedy in a proceeding at law or in
equity in any court having jurisdiction for any breach of
Section 8.
12. Should Employee die after termination of his employment with
Employer while any amounts are payable to him hereunder, this
Agreement shall inure to the benefit of and ben enforceable by
Employee's executors, administrators, heirs, distributees,
devisees and legatees and all amounts payable hereunder shall
be paid in accordance with the terms of this Agreement to
Employee's devisee, legatee or other designee or, if there is
no such designee, to his estate.
13. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee: Sandra A. Mitting
5802 S. Old State Road 15
Wabash, IN 46922
If to Employer: Bryan Steam Corporation
P.O. Box 27
Peru, Indiana 46970
Attn: Chairman
or to such address as either party hereto may have furnished
to the other party in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt.
14. The validity, interpretation, and performance of this
Agreement shall be governed by the laws of the State of
Indiana, regardless of the principles of conflicts of laws.
15. Employer shall require any successor (whether direct or
indirect, by purchase, merger, or consolidation or otherwise)
to all or substantially all of the business or assets of
Employer, by agreement in form and substance reasonably
satisfactory to Employee
-7-
<PAGE>
to expressly assume and agree to perform this Agreement in the
same manner and same extent that Employer would be required to
perform it if no such succession had taken place. As used in
this Agreement, "Employer" shall mean Employer as hereinbefore
defined and any successor to its business or assets as
aforesaid.
16. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by Employee and Employer. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of dissimilar provisions or
conditions at the same or any prior subsequent time. No
agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement.
17. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in
full fore and effect. This is the entire agreement between
Employer and Employee concerning the subject matter hereof and
all prior agreements, written or oral, are superseded.
18. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
19. This Agreement is personal in nature and neither party hereto
shall, without consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder except as
provided in Section 12 and Section 15 above. Without limiting
the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other
than a transfer by his will or by the laws of descent or
distribution as set forth in Section 12 hereof, and in the
event of any attempted assignment or transfer contrary to this
paragraph, Employer shall have no liability to pay any amounts
so attempted to be assigned or transferred.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed as of the date first written above.
"Employer"
Bryan Steam Corporation
By: /s/ Jesse McVay
---------------------------
Its: President
"Employee"
/s/ Sandra A. Mitting
---------------------------
Sandra A. Mitting
-9-
EMPLOYMENT AGREEMENT
Michael D. Sturch
This Agreement, is made and dated as of April 1, 1998, by and between Bryan
Steam Corporation, a New Mexico corporation ("Employer"), and Michael D. Sturch,
a resident of Miami County, Indiana ("Employee").
WITNESSETH
WHEREAS, Employee has been employed by Employer and has made valuable
contributions to the profitability and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make
valuable contributions to Employer's business operations and not to seek or
accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure reasonable and
commensurate compensation from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee
on behalf of Employer on an objective and impartial basis and without
distraction or conflict of interest in the event of a change of control of
Employer;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and undertakings herein contained and the continued employment of
Employee by Employer, each intending to be legally bound, covenant and agree as
follows:
1. Upon the terms and subject to the conditions set forth in this
Agreement, Employer employs Employee as Employer's Vice
President of Production or another position commensurate with
Employee's experience and ability, and Employee accepts such
employment.
2. Employee agrees to serve as Employer's Vice President of
Production or such other position, and to perform such duties
in that office as may be prescribed by the Employer's Bylaws
and as may reasonably be assigned to him by Employer's
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<PAGE>
President or Board of Directors and those generally associated
with the office held by Employee as determined by the
President or Board of Directors from time to time.
Employer shall not, without the written consent of Employee,
relocate or transfer Employee to a location more than 30 miles
from his current employment location. While employed by
Employer, Employee shall devote substantially all his business
time and efforts to Employer's business and the business of
its subsidiaries.
3. The term of this Agreement shall be for an initial term of two
(2) years commencing on April 1, 1998 (the "Effective Date"),
(such term shall herein be referred to as the "Term").
4. Employee shall receive an annual salary of $59,520 ("Base
Compensation"), payable at regular intervals in accordance
with Employer's normal payroll practices now or hereafter in
effect. Employer may consider and declare from time to time
increases in the salary it pays Employee and thereby increase
his Base Compensation.
5. So long as Employee is employed by Employer pursuant to this
Agreement, he shall be included as a participant in all
present and future employee benefit, retirement, and
compensation plans generally available to employees of
Employer, consistent with his Base Compensation and his
position with Employer, including, without limitation, any
401(k) plan, stock incentive plan, employee stock purchase or
ownership plan, bonus plan, and group life and disability
insurance plans.
6. So long as Employee is employed by Employer pursuant to this
Agreement, Employee shall receive reimbursement, either
directly or through use of an Employer credit card, from
Employer for all reasonable business expenses incurred in the
course of his employment by Employer, upon submission to
Employer of written vouchers and statements for reimbursement.
So long as Employee is employed by Employer pursuant to the
terms of this Agreement, Employer shall continue in effect
vacation policies applicable to Employee no less favorable
from his point of view than those written vacation policies in
effect on the date hereof. So long as Employee is employed by
Employer pursuant to this Agreement, Employee shall be
entitled to office space and working conditions no less
favorable than those in effect for him on the date hereof.
7. Employee's employment with the Employer may be terminated
prior to the expiration of the Term as follows:
(A) The Employer may immediately upon written notice
terminate Employee for cause. "Cause" shall be
defined as (i) personal dishonesty, (ii) willful
misconduct, (iii) breach of fiduciary duty involving
personal profit, (iv) intentional failure to perform
stated duties, (v) conviction of a violation of any
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<PAGE>
law, rule, or regulation (other than traffic
violations or similar offenses) or cease-and-desist
order, (vi) moral turpitude reflecting adversely on
the reputation of the Employer, or (vii) any material
breach of any term, condition or covenant of this
Agreement. The Employer shall have no further
liability to Employee under this Agreement for any
period subsequent to the termination for Cause.
(B) Either party may terminate this Agreement during the
Term without Cause, upon thirty (30) days prior
written notice to the other party. If the Employer
terminates the Employee without Cause (as defined
above), or if Employee terminates his employment for
Good Reason (as defined below):
(i) Compensation provided for herein (including
Base Compensation) shall continue to be
paid, and Employee shall continue to
participate in the employee benefit,
retirement, and compensation plans and other
perquisites as provided in Sections 5 and 6
hereof, through the date of termination
specified in the notice of termination; and
any benefits payable under insurance,
health, retirement and bonus plans as a
result of Employee's participation in such
plans through such date shall be paid when
due under those plans;
(ii) In addition, the Employer shall pay the
Employee a lump sum severance payment equal
to fifty percent (50%) of Employee's total
salary and bonus compensation (excluding any
transaction bonus under Section 9) for the
immediately preceding calendar year plus, if
a Change of Control has occurred, any unpaid
installment of any transaction bonus due
under Section 9 (or which would otherwise
later become due under Section 9); and
(iii) In addition, for one (1) year following
termination, Employer will maintain in full
force and effect for the continued benefit
of Employee and his dependents each employee
medical and life benefit plan (as such term
is defined in the Employee Retirement Income
Security Act of 1974, as amended) in which
Employee was entitled to participate
immediately prior to the date of his
termination, unless an essentially
equivalent benefit is provided by another
source. If the terms of any employee medical
and life benefit plan of Employer or
applicable laws do not permit continued
participation by Employee, Employer will
arrange to provide to Employee a benefit
substantially similar to, and no less
favorable than, the benefit he was entitled
to receive under such plan at the end of the
period of coverage. The right of Employee to
continued coverage under the health and
medical insurance plans of Employer pursuant
to Section 4980B of the Internal Revenue
Code
-3-
<PAGE>
of 1986, as amended (the "Code") shall
commence upon the expiration of such period;
and
(iv) Employer will engage at Employer's cost an
out placement firm to assist Employee to
locate an alternative position for Employee
for a period of one (1) year; provided, that
Employer may terminate such firm's
engagement if Employee fails to attend two
or more interviews arranged by such firm or
if Employee is offered any position that
would provide a base compensation of at
least 80% of Employee's Base Compensation on
the date of termination. Employer will make
available reasonable office space and
telephone usage for a period not to exceed
ninety (90) days after terminations.
For purposes of this Agreement, "Good Reason" for
Employee to terminate his employment with Employer
means: a material breach of any term, condition or
covenant of Employer under this Agreement.
(C) Employee's employment with Employer shall terminate
in the event of Employee's death or disability. For
purposes hereof, "disability" shall be defined as
Employee's inability by reason of illness or other
physical or mental incapacity to perform the duties
required by his employment for a consecutive 180 day
period, provided that notice of any termination by
Employer because of Employee's "disability" shall
have been given to Employee prior to the full
resumption by him of the performance of such duties.
8. To induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) Unless otherwise required to do so by law, including
the order of a court or governmental agency, Employee
shall not divulge or furnish any trade secrets (as
defined in IND. CODEss.24-2-3-2) of Employer or any
confidential information acquired by him while
employed by Employer concerning the policies, plans,
procedures or customers of Employer to any person,
firm, corporation or other entity , other than
Employer or upon its written request, or use any such
trade secrets or confidential information directly or
indirectly for Employee's own benefit or for the
benefit of any person, firm, corporation or other
entity other then Employer, because such trade
secrets and confidential information are confidential
and shall at all times remain the property of
Employer.
(B) For a period of six (6) months after termination of
Employee's employment with Employer for any reason,
Employee shall not (a) compete, directly or
indirectly, in any state or province of the U.S. or
Canada where Employer has a sales representative or
sold products within the 12 months prior to
-4-
<PAGE>
Employee's termination, with the business of Employer
as conducted during the term of this Agreement (which
business shall include the manufacture or sale of any
products manufactured or sold by Employer during the
12 months prior to Employee's termination), or have
any significant interest (including any interest or
association, including but not limited to, that of
owner, part owner, partner, shareholder, director,
officer, employee, agent, consultant, lender or
advisor) in any person, firm or entity which competes
with Employer's business in the area described above
(each such person, firm or entity is referred to as
"Competitor"); (b) solicit or accept business for or
on behalf of any Competitor; or (c) solicit, induce
or persuade, or attempt to solicit, induce or
persuade, any person to work for or provide services
to or provide financial assistance to, any
Competitor.
(C) If Employee's employment by Employer is terminated
for any reason, Employee will turn over immediately
thereafter to Employer all business correspondence,
letters, papers, reports, customers' lists, financial
statements, records, drawings, credit reports, credit
cards, or other confidential information or documents
of Employer or its affiliates in the possession or
control of Employee, all of which writings are and
will continue to be the sole and exclusive property
of Employer or its affiliates.
(D) Employee acknowledges that the covenants of this
Section 8 are reasonable in scope and duration and
reasonably necessary and appropriate to protect the
goodwill and other appropriate interests of Employer
following Employee's termination and that any
violation of such covenants by Employee would result
in irreparable harm to Employer, for which any remedy
at law would be inadequate. In addition to any other
remedy to which it may be entitled, Employer shall be
entitled to equitable relief, including specific
performance, for any violation of Section 8.
(E) Employee shall, and hereby authorizes Employer to,
inform any successor or prospective employer of
Employee of the terms of this Section 8. Any such
disclosure by Employer and any effort by Employer to
seek Employee's compliance with this covenant, even
if such effort shall require that Employee perform
different duties for such successor employer or delay
his employment by such employer, is hereby expressly
authorized by Employee and shall not be deemed a
violation of any "blacklisting" or similar law.
9. If there is a Change of Control of Employer as defined below,
Employee shall be paid a transaction bonus in the amount of
$4,000 payable one-half on the date of the Change of Control
and one-half on the date six (6) months after the Change of
Control, so long as Employer's Board of Directors shall not
have determined on a
-5-
<PAGE>
reasonable basis and in good faith (prior to any installment
date) that Employee has failed to comply with the Bonus
Conditions. "Bonus Conditions" means:
(A) Employee has cooperated fully with Employer and its
advisors and, to the extent directed by Employer, any
party who is engaged or may engage in negotiations
with Employer, regarding any proposed transaction
involving Employer or its shareholders;
(B) Employee shall not have engaged in any activity
intended to discourage any such interested party from
engaging in any such transaction or disparaging the
Employer, its condition, assets or prospects, in the
eyes of any such party;
(C) Employee shall have continued to perform his duties
for Employer with at least the same level of
diligence and performance as characterized Employee's
performance prior to the Effective Date; and
(D) Employee shall not be in breach of any provision of
this Agreement.
Disclosure or statements made by Employee in good faith in response to
appropriate requests from third parties or instructions by Employer that
Employee reasonably believes to be truthful shall not violate the Bonus
Conditions.
For purposes of this Agreement, a "Change of Control" shall mean the occurrence
of any of the following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger of consolidation), in one or a series
of related transactions, of all or substantially all of the assets of Employer
and it subsidiaries taken as a whole to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), (ii) the consummation of any transaction
(including, without limitation, any merger of consolidation) the result of which
is that any "person" as defined above, becomes the beneficial owner (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the voting stock of Employer or (iii) the
first day on which a majority of the members of the Board of Directors of
Employer are not Continuing Directors. Notwithstanding the foregoing, a "Change
of Control" shall not occur and no transaction bonus will be payable if the
person that acquires assets or stock of Employer under part (i) or (ii) of the
foregoing definition, is an Employer sponsored employee stock ownership plan, H.
Jesse McVay, a management group led by H. Jesse McVay or a person whose
participation in such transaction was supported or sponsored by such management
group. "Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Employer who (i) was a member of such Board of
Directors on the date hereof or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination.
10. Any termination of Employee's employment with Employer as
contemplated by Section 7 hereof, except in the circumstances
of Employee's death, shall be
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<PAGE>
communicated by written "Notice of Termination" by the
terminating party to the other party hereto. Any "Notice of
Termination" pursuant to Section 7 based on Cause or Good
Reason shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination.
11. If a dispute arises regarding the termination of Employee
pursuant to Section 7 hereof or as to the interpretation or
enforcement of this Agreement, said dispute shall be resolved
by binding arbitration in Indianapolis, Indiana determined in
accordance with the rules of the American Arbitration
Association. Notwithstanding the foregoing, Employer shall be
entitled to seek any remedy in a proceeding at law or in
equity in any court having jurisdiction for any breach of
Section 8.
12. Should Employee die after termination of his employment with
Employer while any amounts are payable to him hereunder, this
Agreement shall inure to the benefit of and ben enforceable by
Employee's executors, administrators, heirs, distributees,
devisees and legatees and all amounts payable hereunder shall
be paid in accordance with the terms of this Agreement to
Employee's devisee, legatee or other designee or, if there is
no such designee, to his estate.
13. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee: Michael D. Sturch
R.R. 3, Box 218A
Peru, IN 46970
If to Employer: Bryan Steam Corporation
P.O. Box 27
Peru, Indiana 46970
Attn: Chairman
or to such address as either party hereto may have furnished
to the other party in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt.
14. The validity, interpretation, and performance of this
Agreement shall be governed by the laws of the State of
Indiana, regardless of the principles of conflicts of laws.
15. Employer shall require any successor (whether direct or
indirect, by purchase, merger, or consolidation or otherwise)
to all or substantially all of the business or assets of
Employer, by agreement in form and substance reasonably
satisfactory to Employee
-7-
<PAGE>
to expressly assume and agree to perform this Agreement in the
same manner and same extent that Employer would be required to
perform it if no such succession had taken place. As used in
this Agreement, "Employer" shall mean Employer as hereinbefore
defined and any successor to its business or assets as
aforesaid.
16. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by Employee and Employer. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of dissimilar provisions or
conditions at the same or any prior subsequent time. No
agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement.
17. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in
full fore and effect. This is the entire agreement between
Employer and Employee concerning the subject matter hereof and
all prior agreements, written or oral, are superseded.
18. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
19. This Agreement is personal in nature and neither party hereto
shall, without consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder except as
provided in Section 12 and Section 15 above. Without limiting
the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other
than a transfer by his will or by the laws of descent or
distribution as set forth in Section 12 hereof, and in the
event of any attempted assignment or transfer contrary to this
paragraph, Employer shall have no liability to pay any amounts
so attempted to be assigned or transferred.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed as of the date first written above.
"Employer"
Bryan Steam Corporation
By: /s/ Jesse McVay
---------------------------
Its: President
"Employee"
/s/ Michael D. Sturch
---------------------------
Michael D. Sturch
-9-
EMPLOYMENT AGREEMENT
Richard D. Holmquist
This Agreement, is made and dated as of April 1, 1998, by and between Bryan
Steam Corporation, a New Mexico corporation ("Employer"), and Richard D.
Holmquist, a resident of Wabash County, Indiana ("Employee").
WITNESSETH
WHEREAS, Employee has been employed by Employer and has made valuable
contributions to the profitability and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make
valuable contributions to Employer's business operations and not to seek or
accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure reasonable and
commensurate compensation from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee
on behalf of Employer on an objective and impartial basis and without
distraction or conflict of interest in the event of a change of control of
Employer;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and undertakings herein contained and the continued employment of
Employee by Employer, each intending to be legally bound, covenant and agree as
follows:
1. Upon the terms and subject to the conditions set forth in this
Agreement, Employer employs Employee as Employer's Sales
Manager or another position commensurate with Employee's
experience and ability, and Employee accepts such employment.
2. Employee agrees to serve as Employer's Sales Manager or such
other position, and to perform such duties in that office as
may be prescribed by the Employer's Bylaws and as may
reasonably be assigned to him by Employer's President or Board
of Directors and those generally associated with the office
held by Employee as determined by the President or Board of
Directors from time to time.
-1-
<PAGE>
Employer shall not, without the written consent of Employee,
relocate or transfer Employee to a location more than 30 miles
from his current employment location. While employed by
Employer, Employee shall devote substantially all his business
time and efforts to Employer's business and the business of
its subsidiaries.
3. The term of this Agreement shall be for an initial term of two
(2) years commencing on April 1, 1998 (the "Effective Date"),
(such term shall herein be referred to as the "Term").
4. Employee shall receive an annual salary of $69,240 ("Base
Compensation"), payable at regular intervals in accordance
with Employer's normal payroll practices now or hereafter in
effect. Employer may consider and declare from time to time
increases in the salary it pays Employee and thereby increase
his Base Compensation.
5. So long as Employee is employed by Employer pursuant to this
Agreement, he shall be included as a participant in all
present and future employee benefit, retirement, and
compensation plans generally available to employees of
Employer, consistent with his Base Compensation and his
position with Employer, including, without limitation, any
401(k) plan, stock incentive plan, employee stock purchase or
ownership plan, bonus plan, and group life and disability
insurance plans.
6. So long as Employee is employed by Employer pursuant to this
Agreement, Employee shall receive reimbursement, either
directly or through use of an Employer credit card, from
Employer for all reasonable business expenses incurred in the
course of his employment by Employer, upon submission to
Employer of written vouchers and statements for reimbursement.
So long as Employee is employed by Employer pursuant to the
terms of this Agreement, Employer shall continue in effect
vacation policies applicable to Employee no less favorable
from his point of view than those written vacation policies in
effect on the date hereof. So long as Employee is employed by
Employer pursuant to this Agreement, Employee shall be
entitled to office space and working conditions no less
favorable than those in effect for him on the date hereof.
7. Employee's employment with the Employer may be terminated
prior to the expiration of the Term as follows:
(A) The Employer may immediately upon written notice
terminate Employee for cause. "Cause" shall be
defined as (i) personal dishonesty, (ii) willful
misconduct, (iii) breach of fiduciary duty involving
personal profit, (iv) intentional failure to perform
stated duties, (v) conviction of a violation of any
law, rule, or regulation (other than traffic
violations or similar offenses) or cease-and-desist
order, (vi) moral turpitude reflecting adversely on
the reputation of the Employer, or (vii) any material
breach of any term, condition
-2-
<PAGE>
or covenant of this Agreement. The Employer shall
have no further liability to Employee under this
Agreement for any period subsequent to the
termination for Cause.
(B) Either party may terminate this Agreement during the
Term without Cause, upon thirty (30) days prior
written notice to the other party. If the Employer
terminates the Employee without Cause (as defined
above), or if Employee terminates his employment for
Good Reason (as defined below):
(i) Compensation provided for herein (including
Base Compensation) shall continue to be
paid, and Employee shall continue to
participate in the employee benefit,
retirement, and compensation plans and other
perquisites as provided in Sections 5 and 6
hereof, through the date of termination
specified in the notice of termination; and
any benefits payable under insurance,
health, retirement and bonus plans as a
result of Employee's participation in such
plans through such date shall be paid when
due under those plans;
(ii) In addition, the Employer shall pay the
Employee a lump sum severance payment equal
to fifty percent (50%) of Employee's total
salary and bonus compensation (excluding any
transaction bonus under Section 9) for the
immediately calendar year plus, if a Change
of Control has occurred, any unpaid
installment of any transaction bonus due
under Section 9 (or which would otherwise
later become due under Section 9); and
(iii) In addition, for one (1) year following
termination, Employer will maintain in full
force and effect for the continued benefit
of Employee and his dependents each employee
medical and life benefit plan (as such term
is defined in the Employee Retirement Income
Security Act of 1974, as amended) in which
Employee was entitled to participate
immediately prior to the date of his
termination, unless an essentially
equivalent benefit is provided by another
source. If the terms of any employee medical
and life benefit plan of Employer or
applicable laws do not permit continued
participation by Employee, Employer will
arrange to provide to Employee a benefit
substantially similar to, and no less
favorable than, the benefit he was entitled
to receive under such plan at the end of the
period of coverage. The right of Employee to
continued coverage under the health and
medical insurance plans of Employer pursuant
to Section 4980B of the Internal Revenue
Code of 1986, as amended (the "Code") shall
commence upon the expiration of such period;
and
-3-
<PAGE>
(iv) Employer will engage at Employer's cost an
out placement firm to assist Employee to
locate an alternative position for Employee
for a period of one (1) year; provided, that
Employer may terminate such firm's
engagement if Employee fails to attend two
or more interviews arranged by such firm or
if Employee is offered any position that
would provide a base compensation of at
least 80% of Employee's Base Compensation on
the date of termination. Employer will make
available reasonable office space and
telephone usage for a period not to exceed
ninety (90) days after terminations.
For purposes of this Agreement, "Good Reason" for
Employee to terminate his employment with Employer
means: a material breach of any term, condition or
covenant of Employer under this Agreement.
(C) Employee's employment with Employer shall terminate
in the event of Employee's death or disability. For
purposes hereof, "disability" shall be defined as
Employee's inability by reason of illness or other
physical or mental incapacity to perform the duties
required by his employment for a consecutive 180 day
period, provided that notice of any termination by
Employer because of Employee's "disability" shall
have been given to Employee prior to the full
resumption by him of the performance of such duties.
8. To induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) Unless otherwise required to do so by law, including
the order of a court or governmental agency, Employee
shall not divulge or furnish any trade secrets (as
defined in IND. CODEss.24-2-3-2) of Employer or any
confidential information acquired by him while
employed by Employer concerning the policies, plans,
procedures or customers of Employer to any person,
firm, corporation or other entity , other than
Employer or upon its written request, or use any such
trade secrets or confidential information directly or
indirectly for Employee's own benefit or for the
benefit of any person, firm, corporation or other
entity other then Employer, because such trade
secrets and confidential information are confidential
and shall at all times remain the property of
Employer.
(B) For a period of six (6) months after termination of
Employee's employment with Employer for any reason,
Employee shall not (a) compete, directly or
indirectly, in any state or province of the U.S. or
Canada where Employer has a sales representative or
sold products within the 12 months prior to
Employee's termination, with the business of Employer
as conducted during the term of this Agreement (which
business shall include the manufacture or sale of any
products manufactured or sold by Employer during the
12 months
-4-
<PAGE>
prior to Employee's termination), or have any
significant interest (including any interest or
association, including but not limited to, that of
owner, part owner, partner, shareholder, director,
officer, employee, agent, consultant, lender or
advisor) in any person, firm or entity which competes
with Employer's business in the area described above
(each such person, firm or entity is referred to as
"Competitor"); (b) solicit or accept business for or
on behalf of any Competitor; or (c) solicit, induce
or persuade, or attempt to solicit, induce or
persuade, any person to work for or provide services
to or provide financial assistance to, any
Competitor.
(C) If Employee's employment by Employer is terminated
for any reason, Employee will turn over immediately
thereafter to Employer all business correspondence,
letters, papers, reports, customers' lists, financial
statements, records, drawings, credit reports, credit
cards, or other confidential information or documents
of Employer or its affiliates in the possession or
control of Employee, all of which writings are and
will continue to be the sole and exclusive property
of Employer or its affiliates.
(D) Employee acknowledges that the covenants of this
Section 8 are reasonable in scope and duration and
reasonably necessary and appropriate to protect the
goodwill and other appropriate interests of Employer
following Employee's termination and that any
violation of such covenants by Employee would result
in irreparable harm to Employer, for which any remedy
at law would be inadequate. In addition to any other
remedy to which it may be entitled, Employer shall be
entitled to equitable relief, including specific
performance, for any violation of Section 8.
(E) Employee shall, and hereby authorizes Employer to,
inform any successor or prospective employer of
Employee of the terms of this Section 8. Any such
disclosure by Employer and any effort by Employer to
seek Employee's compliance with this covenant, even
if such effort shall require that Employee perform
different duties for such successor employer or delay
his employment by such employer, is hereby expressly
authorized by Employee and shall not be deemed a
violation of any "blacklisting" or similar law.
9. If there is a Change of Control of Employer as defined below,
Employee shall be paid a transaction bonus in the amount of
$4,000 payable one-half on the date of the Change of Control
and one-half on the date six (6) months after the Change of
Control, so long as Employer's Board of Directors shall not
have determined on a reasonable basis and in good faith (prior
to any installment date) that Employee has failed to comply
with the Bonus Conditions. "Bonus Conditions" means:
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<PAGE>
(A) Employee has cooperated fully with Employer and its
advisors and, to the extent directed by Employer, any
party who is engaged or may engage in negotiations
with Employer, regarding any proposed transaction
involving Employer or its shareholders;
(B) Employee shall not have engaged in any activity
intended to discourage any such interested party from
engaging in any such transaction or disparaging the
Employer, its condition, assets or prospects, in the
eyes of any such party;
(C) Employee shall have continued to perform his duties
for Employer with at least the same level of
diligence and performance as characterized Employee's
performance prior to the Effective Date; and
(D) Employee shall not be in breach of any provision of
this Agreement.
Disclosure or statements made by Employee in good faith in response to
appropriate requests from third parties or instructions by Employer that
Employee reasonably believes to be truthful shall not violate the Bonus
Conditions.
For purposes of this Agreement, a "Change of Control" shall mean the occurrence
of any of the following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger of consolidation), in one or a series
of related transactions, of all or substantially all of the assets of Employer
and it subsidiaries taken as a whole to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), (ii) the consummation of any transaction
(including, without limitation, any merger of consolidation) the result of which
is that any "person" as defined above, becomes the beneficial owner (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the voting stock of Employer or (iii) the
first day on which a majority of the members of the Board of Directors of
Employer are not Continuing Directors. Notwithstanding the foregoing, a "Change
of Control" shall not occur and no transaction bonus will be payable if the
person that acquires assets or stock of Employer under part (i) or (ii) of the
foregoing definition, is an Employer sponsored employee stock ownership plan, H.
Jesse McVay, a management group led by H. Jesse McVay or a person whose
participation in such transaction was supported or sponsored by such management
group. "Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Employer who (i) was a member of such Board of
Directors on the date hereof or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination.
10. Any termination of Employee's employment with Employer as
contemplated by Section 7 hereof, except in the circumstances
of Employee's death, shall be communicated by written "Notice
of Termination" by the terminating party to the other party
hereto. Any "Notice of Termination" pursuant to Section 7
based on
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<PAGE>
Cause or Good Reason shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for such
termination.
11. If a dispute arises regarding the termination of Employee
pursuant to Section 7 hereof or as to the interpretation or
enforcement of this Agreement, said dispute shall be resolved
by binding arbitration in Indianapolis, Indiana determined in
accordance with the rules of the American Arbitration
Association. Notwithstanding the foregoing, Employer shall be
entitled to seek any remedy in a proceeding at law or in
equity in any court having jurisdiction for any breach of
Section 8.
12. Should Employee die after termination of his employment with
Employer while any amounts are payable to him hereunder, this
Agreement shall inure to the benefit of and ben enforceable by
Employee's executors, administrators, heirs, distributees,
devisees and legatees and all amounts payable hereunder shall
be paid in accordance with the terms of this Agreement to
Employee's devisee, legatee or other designee or, if there is
no such designee, to his estate.
13. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee: Richard D. Holmquist
686 Valley Brook Lane
Wabash, IN 46992
If to Employer: Bryan Steam Corporation
P.O. Box 27
Peru, Indiana 46970
Attn: Chairman
or to such address as either party hereto may have furnished
to the other party in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt.
14. The validity, interpretation, and performance of this
Agreement shall be governed by the laws of the State of
Indiana, regardless of the principles of conflicts of laws.
15. Employer shall require any successor (whether direct or
indirect, by purchase, merger, or consolidation or otherwise)
to all or substantially all of the business or assets of
Employer, by agreement in form and substance reasonably
satisfactory to Employee to expressly assume and agree to
perform this Agreement in the same manner and same extent that
Employer would be required to perform it if no such succession
had
-7-
<PAGE>
taken place. As used in this Agreement, "Employer" shall mean
Employer as hereinbefore defined and any successor to its
business or assets as aforesaid.
16. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by Employee and Employer. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of dissimilar provisions or
conditions at the same or any prior subsequent time. No
agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement.
17. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in
full fore and effect. This is the entire agreement between
Employer and Employee concerning the subject matter hereof and
all prior agreements, written or oral, are superseded.
18. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
19. This Agreement is personal in nature and neither party hereto
shall, without consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder except as
provided in Section 12 and Section 15 above. Without limiting
the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other
than a transfer by his will or by the laws of descent or
distribution as set forth in Section 12 hereof, and in the
event of any attempted assignment or transfer contrary to this
paragraph, Employer shall have no liability to pay any amounts
so attempted to be assigned or transferred.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed as of the date first written above.
"Employer"
Bryan Steam Corporation
By: /s/ Jesse McVay
---------------------------
Its: President
"Employee"
/s/ Richard D. Holmquist
---------------------------
Richard D. Holmquist
-9-
EMPLOYMENT AGREEMENT
Gregory A. Minard
This Agreement, is made and dated as of April 1, 1998, by and between Bryan
Steam Corporation, a New Mexico corporation ("Employer"), and Gregory A. Minard,
a resident of Miami County, Indiana ("Employee").
WITNESSETH
WHEREAS, Employee has been employed by Employer and has made valuable
contributions to the profitability and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make
valuable contributions to Employer's business operations and not to seek or
accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure reasonable and
commensurate compensation from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee
on behalf of Employer on an objective and impartial basis and without
distraction or conflict of interest in the event of a change of control of
Employer;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and undertakings herein contained and the continued employment of
Employee by Employer, each intending to be legally bound, covenant and agree as
follows:
1. Upon the terms and subject to the conditions set forth in this
Agreement, Employer employs Employee as Employer's Chief
Engineer or another position commensurate with Employee's
experience and ability, and Employee accepts such employment.
2. Employee agrees to serve as Employer's Chief Engineer or such
other position, and to perform such duties in that office as
may be prescribed by the Employer's Bylaws and as may
reasonably be assigned to him by Employer's President or Board
of Directors and those generally associated with the office
held by Employee as determined by the President or Board of
Directors from time to time.
-1-
<PAGE>
Employer shall not, without the written consent of Employee,
relocate or transfer Employee to a location more than 30 miles
from his current employment location. While employed by
Employer, Employee shall devote substantially all his business
time and efforts to Employer's business and the business of
its subsidiaries.
3. The term of this Agreement shall be for an initial term of two
(2) years commencing on April 1, 1998 (the "Effective Date"),
(such term shall herein be referred to as the "Term").
4. Employee shall receive an annual salary of $47,400 ("Base
Compensation"), payable at regular intervals in accordance
with Employer's normal payroll practices now or hereafter in
effect. Employer may consider and declare from time to time
increases in the salary it pays Employee and thereby increase
his Base Compensation.
5. So long as Employee is employed by Employer pursuant to this
Agreement, he shall be included as a participant in all
present and future employee benefit, retirement, and
compensation plans generally available to employees of
Employer, consistent with his Base Compensation and his
position with Employer, including, without limitation, any
401(k) plan, stock incentive plan, employee stock purchase or
ownership plan, bonus plan, and group life and disability
insurance plans.
6. So long as Employee is employed by Employer pursuant to this
Agreement, Employee shall receive reimbursement, either
directly or through use of an Employer credit card, from
Employer for all reasonable business expenses incurred in the
course of his employment by Employer, upon submission to
Employer of written vouchers and statements for reimbursement.
So long as Employee is employed by Employer pursuant to the
terms of this Agreement, Employer shall continue in effect
vacation policies applicable to Employee no less favorable
from his point of view than those written vacation policies in
effect on the date hereof. So long as Employee is employed by
Employer pursuant to this Agreement, Employee shall be
entitled to office space and working conditions no less
favorable than those in effect for him on the date hereof.
7. Employee's employment with the Employer may be terminated
prior to the expiration of the Term as follows:
(A) The Employer may immediately upon written notice
terminate Employee for cause. "Cause" shall be
defined as (i) personal dishonesty, (ii) willful
misconduct, (iii) breach of fiduciary duty involving
personal profit, (iv) intentional failure to perform
stated duties, (v) conviction of a violation of any
law, rule, or regulation (other than traffic
violations or similar offenses) or cease-and-desist
order, (vi) moral turpitude reflecting adversely on
the reputation of the Employer, or (vii) any material
breach of any term, condition
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<PAGE>
or covenant of this Agreement. The Employer shall
have no further liability to Employee under this
Agreement for any period subsequent to the
termination for Cause.
(B) Either party may terminate this Agreement during the
Term without Cause, upon thirty (30) days prior
written notice to the other party. If the Employer
terminates the Employee without Cause (as defined
above), or if Employee terminates his employment for
Good Reason (as defined below):
(i) Compensation provided for herein (including
Base Compensation) shall continue to be
paid, and Employee shall continue to
participate in the employee benefit,
retirement, and compensation plans and other
perquisites as provided in Sections 5 and 6
hereof, through the date of termination
specified in the notice of termination; and
any benefits payable under insurance,
health, retirement and bonus plans as a
result of Employee's participation in such
plans through such date shall be paid when
due under those plans;
(ii) In addition, the Employer shall pay the
Employee a lump sum severance payment equal
to fifty percent (50%) of Employee's total
salary and bonus compensation (excluding any
transaction bonus under Section 9) for the
immediately preceding calendar year plus, if
a Change of Control has occurred, any unpaid
installment of any transaction bonus due
under Section 9 (or which would otherwise
later become due under Section 9); and
(iii) In addition, for one (1) year following
termination, Employer will maintain in full
force and effect for the continued benefit
of Employee and his dependents each employee
medical and life benefit plan (as such term
is defined in the Employee Retirement Income
Security Act of 1974, as amended) in which
Employee was entitled to participate
immediately prior to the date of his
termination, unless an essentially
equivalent benefit is provided by another
source. If the terms of any employee medical
and life benefit plan of Employer or
applicable laws do not permit continued
participation by Employee, Employer will
arrange to provide to Employee a benefit
substantially similar to, and no less
favorable than, the benefit he was entitled
to receive under such plan at the end of the
period of coverage. The right of Employee to
continued coverage under the health and
medical insurance plans of Employer pursuant
to Section 4980B of the Internal Revenue
Code of 1986, as amended (the "Code") shall
commence upon the expiration of such period;
and
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<PAGE>
(iv) Employer will engage at Employer's cost an
out placement firm to assist Employee to
locate an alternative position for Employee
for a period of one (1) year; provided, that
Employer may terminate such firm's
engagement if Employee fails to attend two
or more interviews arranged by such firm or
if Employee is offered any position that
would provide a base compensation of at
least 80% of Employee's Base Compensation on
the date of termination. Employer will make
available reasonable office space and
telephone usage for a period not to exceed
ninety (90) days after terminations.
For purposes of this Agreement, "Good Reason" for
Employee to terminate his employment with Employer
means: a material breach of any term, condition or
covenant of Employer under this Agreement.
(C) Employee's employment with Employer shall terminate
in the event of Employee's death or disability. For
purposes hereof, "disability" shall be defined as
Employee's inability by reason of illness or other
physical or mental incapacity to perform the duties
required by his employment for a consecutive 180 day
period, provided that notice of any termination by
Employer because of Employee's "disability" shall
have been given to Employee prior to the full
resumption by him of the performance of such duties.
8. To induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) Unless otherwise required to do so by law, including
the order of a court or governmental agency, Employee
shall not divulge or furnish any trade secrets (as
defined in IND. CODEss.24-2-3-2) of Employer or any
confidential information acquired by him while
employed by Employer concerning the policies, plans,
procedures or customers of Employer to any person,
firm, corporation or other entity , other than
Employer or upon its written request, or use any such
trade secrets or confidential information directly or
indirectly for Employee's own benefit or for the
benefit of any person, firm, corporation or other
entity other then Employer, because such trade
secrets and confidential information are confidential
and shall at all times remain the property of
Employer.
(B) For a period of six (6) months after termination of
Employee's employment with Employer for any reason,
Employee shall not (a) compete, directly or
indirectly, in any state or province of the U.S. or
Canada where Employer has a sales representative or
sold products within the 12 months prior to
Employee's termination, with the business of Employer
as conducted during the term of this Agreement (which
business shall include the manufacture or sale of any
products manufactured or sold by Employer during the
12 months
-4-
<PAGE>
prior to Employee's termination), or have any
significant interest (including any interest or
association, including but not limited to, that of
owner, part owner, partner, shareholder, director,
officer, employee, agent, consultant, lender or
advisor) in any person, firm or entity which competes
with Employer's business in the area described above
(each such person, firm or entity is referred to as
"Competitor"); (b) solicit or accept business for or
on behalf of any Competitor; or (c) solicit, induce
or persuade, or attempt to solicit, induce or
persuade, any person to work for or provide services
to or provide financial assistance to, any
Competitor.
(C) If Employee's employment by Employer is terminated
for any reason, Employee will turn over immediately
thereafter to Employer all business correspondence,
letters, papers, reports, customers' lists, financial
statements, records, drawings, credit reports, credit
cards, or other confidential information or documents
of Employer or its affiliates in the possession or
control of Employee, all of which writings are and
will continue to be the sole and exclusive property
of Employer or its affiliates.
(D) Employee acknowledges that the covenants of this
Section 8 are reasonable in scope and duration and
reasonably necessary and appropriate to protect the
goodwill and other appropriate interests of Employer
following Employee's termination and that any
violation of such covenants by Employee would result
in irreparable harm to Employer, for which any remedy
at law would be inadequate. In addition to any other
remedy to which it may be entitled, Employer shall be
entitled to equitable relief, including specific
performance, for any violation of Section 8.
(E) Employee shall, and hereby authorizes Employer to,
inform any successor or prospective employer of
Employee of the terms of this Section 8. Any such
disclosure by Employer and any effort by Employer to
seek Employee's compliance with this covenant, even
if such effort shall require that Employee perform
different duties for such successor employer or delay
his employment by such employer, is hereby expressly
authorized by Employee and shall not be deemed a
violation of any "blacklisting" or similar law.
9. If there is a Change of Control of Employer as defined below,
Employee shall be paid a transaction bonus in the amount of
$4,000 payable one-half on the date of the Change of Control
and one-half on the date six (6) months after the Change of
Control, so long as Employer's Board of Directors shall not
have determined on a reasonable basis and in good faith (prior
to any installment date) that Employee has failed to comply
with the Bonus Conditions. "Bonus Conditions" means:
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<PAGE>
(A) Employee has cooperated fully with Employer and its
advisors and, to the extent directed by Employer, any
party who is engaged or may engage in negotiations
with Employer, regarding any proposed transaction
involving Employer or its shareholders;
(B) Employee shall not have engaged in any activity
intended to discourage any such interested party from
engaging in any such transaction or disparaging the
Employer, its condition, assets or prospects, in the
eyes of any such party;
(C) Employee shall have continued to perform his duties
for Employer with at least the same level of
diligence and performance as characterized Employee's
performance prior to the Effective Date; and
(D) Employee shall not be in breach of any provision of
this Agreement.
Disclosure or statements made by Employee in good faith in response to
appropriate requests from third parties or instructions by Employer that
Employee reasonably believes to be truthful shall not violate the Bonus
Conditions.
For purposes of this Agreement, a "Change of Control" shall mean the occurrence
of any of the following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger of consolidation), in one or a series
of related transactions, of all or substantially all of the assets of Employer
and it subsidiaries taken as a whole to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), (ii) the consummation of any transaction
(including, without limitation, any merger of consolidation) the result of which
is that any "person" as defined above, becomes the beneficial owner (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the voting stock of Employer or (iii) the
first day on which a majority of the members of the Board of Directors of
Employer are not Continuing Directors. Notwithstanding the foregoing, a "Change
of Control" shall not occur and no transaction bonus will be payable if the
person that acquires assets or stock of Employer under part (i) or (ii) of the
foregoing definition, is an Employer sponsored employee stock ownership plan, H.
Jesse McVay, a management group led by H. Jesse McVay or a person whose
participation in such transaction was supported or sponsored by such management
group. "Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Employer who (i) was a member of such Board of
Directors on the date hereof or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination.
10. Any termination of Employee's employment with Employer as
contemplated by Section 7 hereof, except in the circumstances
of Employee's death, shall be communicated by written "Notice
of Termination" by the terminating party to the other party
hereto. Any "Notice of Termination" pursuant to Section 7
based on
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<PAGE>
Cause or Good Reason shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for such
termination.
11. If a dispute arises regarding the termination of Employee
pursuant to Section 7 hereof or as to the interpretation or
enforcement of this Agreement, said dispute shall be resolved
by binding arbitration in Indianapolis, Indiana determined in
accordance with the rules of the American Arbitration
Association. Notwithstanding the foregoing, Employer shall be
entitled to seek any remedy in a proceeding at law or in
equity in any court having jurisdiction for any breach of
Section 8.
12. Should Employee die after termination of his employment with
Employer while any amounts are payable to him hereunder, this
Agreement shall inure to the benefit of and ben enforceable by
Employee's executors, administrators, heirs, distributees,
devisees and legatees and all amounts payable hereunder shall
be paid in accordance with the terms of this Agreement to
Employee's devisee, legatee or other designee or, if there is
no such designee, to his estate.
13. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee: Gregory A. Minard
R.R. 4, Box 299
Peru, IN 46970
If to Employer: Bryan Steam Corporation
P.O. Box 27
Peru, Indiana 46970
Attn: Chairman
or to such address as either party hereto may have furnished
to the other party in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt.
14. The validity, interpretation, and performance of this
Agreement shall be governed by the laws of the State of
Indiana, regardless of the principles of conflicts of laws.
15. Employer shall require any successor (whether direct or
indirect, by purchase, merger, or consolidation or otherwise)
to all or substantially all of the business or assets of
Employer, by agreement in form and substance reasonably
satisfactory to Employee to expressly assume and agree to
perform this Agreement in the same manner and same extent that
Employer would be required to perform it if no such succession
had
-7-
<PAGE>
taken place. As used in this Agreement, "Employer" shall mean
Employer as hereinbefore defined and any successor to its
business or assets as aforesaid.
16. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by Employee and Employer. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of dissimilar provisions or
conditions at the same or any prior subsequent time. No
agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement.
17. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in
full fore and effect. This is the entire agreement between
Employer and Employee concerning the subject matter hereof and
all prior agreements, written or oral, are superseded.
18. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
19. This Agreement is personal in nature and neither party hereto
shall, without consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder except as
provided in Section 12 and Section 15 above. Without limiting
the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other
than a transfer by his will or by the laws of descent or
distribution as set forth in Section 12 hereof, and in the
event of any attempted assignment or transfer contrary to this
paragraph, Employer shall have no liability to pay any amounts
so attempted to be assigned or transferred.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed as of the date first written above.
"Employer"
Bryan Steam Corporation
By: /s/ Jesse McVay
---------------------------
Its: President
"Employee"
/s/ Gregory A. Minard
---------------------------
Gregory A. Minard
-9-
EMPLOYMENT AGREEMENT
Terrence D. Kubly
This Agreement, is made and dated as of April 1, 1998, by and between Bryan
Steam Corporation, a New Mexico corporation ("Employer"), and Terrence D. Kubly,
a resident of Miami County, Indiana ("Employee").
WITNESSETH
WHEREAS, Employee has been employed by Employer and has made valuable
contributions to the profitability and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make
valuable contributions to Employer's business operations and not to seek or
accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure reasonable and
commensurate compensation from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee
on behalf of Employer on an objective and impartial basis and without
distraction or conflict of interest in the event of a change of control of
Employer;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and undertakings herein contained and the continued employment of
Employee by Employer, each intending to be legally bound, covenant and agree as
follows:
1. Upon the terms and subject to the conditions set forth in this
Agreement, Employer employs Employee as Employer's Manager of
Consulting or another position commensurate with Employee's
experience and ability, and Employee accepts such employment.
2. Employee agrees to serve as Employer's Manager of Consulting
or such other position, and to perform such duties in that
office as may be prescribed by the Employer's Bylaws and as
may reasonably be assigned to him by Employer's
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<PAGE>
President or Board of Directors and those generally associated
with the office held by Employee as determined by the
President or Board of Directors from time to time.
Employer shall not, without the written consent of Employee,
relocate or transfer Employee to a location more than 30 miles
from his current employment location. While employed by
Employer, Employee shall devote substantially all his business
time and efforts to Employer's business and the business of
its subsidiaries.
3. The term of this Agreement shall be for an initial term of
three (3) years commencing on April 1, 1998 (the "Effective
Date"), and terminating March 31, 2001; provided, however,
that such term shall be extended for an additional year on
each annual anniversary of the Effective Date, unless either
party thereto gives written notice to the other party not to
so extend within the period of ninety (90) days prior to an
anniversary, in which case no further extension shall occur
and the term of this Agreement shall end two years subsequent
to the annual anniversary immediately following the
anniversary prior to which the notice not to extend for an
additional year is given (such term, including any extension
thereof shall herein be referred to as the "Term").
4. Employee shall receive an annual salary of $66,500 ("Base
Compensation"), payable at regular intervals in accordance
with Employer's normal payroll practices now or hereafter in
effect. Employer may consider and declare from time to time
increases in the salary it pays Employee and thereby increase
his Base Compensation.
5. So long as Employee is employed by Employer pursuant to this
Agreement, he shall be included as a participant in all
present and future employee benefit, retirement, and
compensation plans generally available to employees of
Employer, consistent with his Base Compensation and his
position with Employer, including, without limitation, any
401(k) plan, stock incentive plan, employee stock purchase or
ownership plan, bonus plan, and group life and disability
insurance plans.
6. So long as Employee is employed by Employer pursuant to this
Agreement, Employee shall receive reimbursement, either
directly or through use of an Employer credit card, from
Employer for all reasonable business expenses incurred in the
course of his employment by Employer, upon submission to
Employer of written vouchers and statements for reimbursement.
So long as Employee is employed by Employer pursuant to the
terms of this Agreement, Employer shall continue in effect
vacation policies applicable to Employee no less favorable
from his point of view than those written vacation policies in
effect on the date hereof. So long as Employee is employed by
Employer pursuant to this Agreement, Employee shall be
entitled to office space and working conditions no less
favorable than those in effect for him on the date hereof.
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<PAGE>
7. Employee's employment with the Employer may be terminated
prior to the expiration of the Term as follows:
(A) The Employer may immediately upon written notice
terminate Employee for cause. "Cause" shall be
defined as (i) personal dishonesty, (ii) willful
misconduct, (iii) breach of fiduciary duty involving
personal profit, (iv) intentional failure to perform
stated duties, (v) conviction of a violation of any
law, rule, or regulation (other than traffic
violations or similar offenses) or cease-and-desist
order, (vi) moral turpitude reflecting adversely on
the reputation of the Employer, or (vii) any material
breach of any term, condition or covenant of this
Agreement. The Employer shall have no further
liability to Employee under this Agreement for any
period subsequent to the termination for Cause.
(B) Either party may terminate this Agreement during the
Term without Cause, upon thirty (30) days prior
written notice to the other party. If the Employer
terminates the Employee without Cause (as defined
above), or if Employee terminates his employment for
Good Reason (as defined below):
(i) Compensation provided for herein (including
Base Compensation) shall continue to be
paid, and Employee shall continue to
participate in the employee benefit,
retirement, and compensation plans and other
perquisites as provided in Sections 5 and 6
hereof, through the date of termination
specified in the notice of termination; and
any benefits payable under insurance,
health, retirement and bonus plans as a
result of Employee's participation in such
plans through such date shall be paid when
due under those plans;
(ii) In addition, the Employer shall pay the
Employee a lump sum severance payment equal
to fifty percent (50%) of Employee's total
salary and bonus compensation (excluding any
transaction bonus under Section 9) for the
immediately preceding calendar year plus, if
a Change of Control has occurred, any unpaid
installment of any transaction bonus due
under Section 9 (or which would otherwise
later become due under Section 9); and
(iii) In addition, for one (1) year following
termination, Employer will maintain in full
force and effect for the continued benefit
of Employee and his dependents each employee
medical and life benefit plan (as such term
is defined in the Employee Retirement Income
Security Act of 1974, as amended) in which
Employee was entitled to participate
immediately prior to the date of his
termination, unless an essentially
equivalent benefit is provided by another
source. If the terms of any
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<PAGE>
employee medical and life benefit plan of
Employer or applicable laws do not permit
continued participation by Employee,
Employer will arrange to provide to Employee
a benefit substantially similar to, and no
less favorable than, the benefit he was
entitled to receive under such plan at the
end of the period of coverage. The right of
Employee to continued coverage under the
health and medical insurance plans of
Employer pursuant to Section 4980B of the
Internal Revenue Code of 1986, as amended
(the "Code") shall commence upon the
expiration of such period; and
(iv) Employer will engage at Employer's cost an
out placement firm to assist Employee to
locate an alternative position for Employee
for a period of one (1) year; provided, that
Employer may terminate such firm's
engagement if Employee fails to attend two
or more interviews arranged by such firm or
if Employee is offered any position that
would provide a base compensation of at
least 80% of Employee's Base Compensation on
the date of termination. Employer will make
available reasonable office space and
telephone usage for a period not to exceed
ninety (90) days after terminations.
For purposes of this Agreement, "Good Reason" for
Employee to terminate his employment with Employer
means: a material breach of any term, condition or
covenant of Employer under this Agreement.
(C) Employee's employment with Employer shall terminate
in the event of Employee's death or disability. For
purposes hereof, "disability" shall be defined as
Employee's inability by reason of illness or other
physical or mental incapacity to perform the duties
required by his employment for a consecutive 180 day
period, provided that notice of any termination by
Employer because of Employee's "disability" shall
have been given to Employee prior to the full
resumption by him of the performance of such duties.
8. To induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) Unless otherwise required to do so by law, including
the order of a court or governmental agency, Employee
shall not divulge or furnish any trade secrets (as
defined in IND. CODEss.24-2-3-2) of Employer or any
confidential information acquired by him while
employed by Employer concerning the policies, plans,
procedures or customers of Employer to any person,
firm, corporation or other entity , other than
Employer or upon its written request, or use any such
trade secrets or confidential information directly or
indirectly for Employee's own benefit or for the
benefit of any person, firm, corporation or other
entity other then Employer, because such trade
secrets and
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<PAGE>
confidential information are confidential and shall
at all times remain the property of Employer.
(B) For a period of six (6) months after termination of
Employee's employment with Employer for any reason,
Employee shall not (a) compete, directly or
indirectly, in any state or province of the U.S. or
Canada where Employer has a sales representative or
sold products within the 12 months prior to
Employee's termination, with the business of Employer
as conducted during the term of this Agreement (which
business shall include the manufacture or sale of any
products manufactured or sold by Employer during the
12 months prior to Employee's termination), or have
any significant interest (including any interest or
association, including but not limited to, that of
owner, part owner, partner, shareholder, director,
officer, employee, agent, consultant, lender or
advisor) in any person, firm or entity which competes
with Employer's business in the area described above
(each such person, firm or entity is referred to as
"Competitor"); (b) solicit or accept business for or
on behalf of any Competitor; or (c) solicit, induce
or persuade, or attempt to solicit, induce or
persuade, any person to work for or provide services
to or provide financial assistance to, any
Competitor.
(C) If Employee's employment by Employer is terminated
for any reason, Employee will turn over immediately
thereafter to Employer all business correspondence,
letters, papers, reports, customers' lists, financial
statements, records, drawings, credit reports, credit
cards, or other confidential information or documents
of Employer or its affiliates in the possession or
control of Employee, all of which writings are and
will continue to be the sole and exclusive property
of Employer or its affiliates.
(D) Employee acknowledges that the covenants of this
Section 8 are reasonable in scope and duration and
reasonably necessary and appropriate to protect the
goodwill and other appropriate interests of Employer
following Employee's termination and that any
violation of such covenants by Employee would result
in irreparable harm to Employer, for which any remedy
at law would be inadequate. In addition to any other
remedy to which it may be entitled, Employer shall be
entitled to equitable relief, including specific
performance, for any violation of Section 8.
(E) Employee shall, and hereby authorizes Employer to,
inform any successor or prospective employer of
Employee of the terms of this Section 8. Any such
disclosure by Employer and any effort by Employer to
seek Employee's compliance with this covenant, even
if such effort shall require that Employee perform
different duties for such successor employer or delay
his employment
-5-
<PAGE>
by such employer, is hereby expressly authorized by
Employee and shall not be deemed a violation of any
"blacklisting" or similar law.
9. If there is a Change of Control of Employer as defined below,
Employee shall be paid a transaction bonus in the amount of
$8,000 payable one-half on the date of the Change of Control
and one-half on the date six (6) months after the Change of
Control, so long as Employer's Board of Directors shall not
have determined on a reasonable basis and in good faith (prior
to any installment date) that Employee has failed to comply
with the Bonus Conditions. "Bonus Conditions" means:
(A) Employee has cooperated fully with Employer and its
advisors and, to the extent directed by Employer, any
party who is engaged or may engage in negotiations
with Employer, regarding any proposed transaction
involving Employer or its shareholders;
(B) Employee shall not have engaged in any activity
intended to discourage any such interested party from
engaging in any such transaction or disparaging the
Employer, its condition, assets or prospects, in the
eyes of any such party;
(C) Employee shall have continued to perform his duties
for Employer with at least the same level of
diligence and performance as characterized Employee's
performance prior to the Effective Date; and
(D) Employee shall not be in breach of any provision of
this Agreement.
Disclosure or statements made by Employee in good faith in response to
appropriate requests from third parties or instructions by Employer that
Employee reasonably believes to be truthful shall not violate the Bonus
Conditions.
For purposes of this Agreement, a "Change of Control" shall mean the occurrence
of any of the following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger of consolidation), in one or a series
of related transactions, of all or substantially all of the assets of Employer
and it subsidiaries taken as a whole to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), (ii) the consummation of any transaction
(including, without limitation, any merger of consolidation) the result of which
is that any "person" as defined above, becomes the beneficial owner (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the voting stock of Employer or (iii) the
first day on which a majority of the members of the Board of Directors of
Employer are not Continuing Directors. Notwithstanding the foregoing, a "Change
of Control" shall not occur and no transaction bonus will be payable if the
person that acquires assets or stock of Employer under part (i) or (ii) of the
foregoing definition, is an Employer sponsored employee stock ownership plan, H.
Jesse McVay, a management group led by H. Jesse McVay or a person whose
participation in such transaction was supported or sponsored by such management
group. "Continuing Directors" means,
-6-
<PAGE>
as of any date of determination, any member of the Board of Directors of
Employer who (i) was a member of such Board of Directors on the date hereof or
(ii) was nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination.
10. Any termination of Employee's employment with Employer as
contemplated by Section 7 hereof, except in the circumstances
of Employee's death, shall be communicated by written "Notice
of Termination" by the terminating party to the other party
hereto. Any "Notice of Termination" pursuant to Section 7
based on Cause or Good Reason shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis
for such termination.
11. If a dispute arises regarding the termination of Employee
pursuant to Section 7 hereof or as to the interpretation or
enforcement of this Agreement, said dispute shall be resolved
by binding arbitration in Indianapolis, Indiana determined in
accordance with the rules of the American Arbitration
Association. Notwithstanding the foregoing, Employer shall be
entitled to seek any remedy in a proceeding at law or in
equity in any court having jurisdiction for any breach of
Section 8.
12. Should Employee die after termination of his employment with
Employer while any amounts are payable to him hereunder, this
Agreement shall inure to the benefit of and ben enforceable by
Employee's executors, administrators, heirs, distributees,
devisees and legatees and all amounts payable hereunder shall
be paid in accordance with the terms of this Agreement to
Employee's devisee, legatee or other designee or, if there is
no such designee, to his estate.
13. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee: Terrence D. Kubly
100 West Fifth Street
Peru, IN 46970
If to Employer: Bryan Steam Corporation
P.O. Box 27
Peru, Indiana 46970
Attn: Chairman
or to such address as either party hereto may have furnished
to the other party in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt.
-7-
<PAGE>
14. The validity, interpretation, and performance of this
Agreement shall be governed by the laws of the State of
Indiana, regardless of the principles of conflicts of laws.
15. Employer shall require any successor (whether direct or
indirect, by purchase, merger, or consolidation or otherwise)
to all or substantially all of the business or assets of
Employer, by agreement in form and substance reasonably
satisfactory to Employee to expressly assume and agree to
perform this Agreement in the same manner and same extent that
Employer would be required to perform it if no such succession
had taken place. As used in this Agreement, "Employer" shall
mean Employer as hereinbefore defined and any successor to its
business or assets as aforesaid.
16. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by Employee and Employer. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of dissimilar provisions or
conditions at the same or any prior subsequent time. No
agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement.
17. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in
full fore and effect. This is the entire agreement between
Employer and Employee concerning the subject matter hereof and
all prior agreements, written or oral, are superseded.
18. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
19. This Agreement is personal in nature and neither party hereto
shall, without consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder except as
provided in Section 12 and Section 15 above. Without limiting
the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other
than a transfer by his will or by the laws of descent or
distribution as set forth in Section 12 hereof, and in the
event of any attempted assignment or transfer contrary to this
paragraph, Employer shall have no liability to pay any amounts
so attempted to be assigned or transferred.
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed as of the date first written above.
-8-
<PAGE>
"Employer"
Bryan Steam Corporation
By: /s/ Albert J. Bishop
---------------------------
Its: Chairman
"Employee"
/s/ Terrence D. Kubly
---------------------------
Terrence D. Kubly
-9-
EMPLOYMENT AGREEMENT
P. Wayne McCune
This Agreement, is made and dated as of April 1, 1998, by and between Wendland
Manufacturing Corporation, an Indiana corporation ("Employer"), and P. Wayne
McCune, a resident of Tom Green County, Texas ("Employee").
WITNESSETH
WHEREAS, Employee has been employed by Employer and has made valuable
contributions to the profitability and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make
valuable contributions to Employer's business operations and not to seek or
accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure reasonable and
commensurate compensation from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee
on behalf of Employer on an objective and impartial basis and without
distraction or conflict of interest in the event of a change of control of
Employer;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and undertakings herein contained and the continued employment of
Employee by Employer, each intending to be legally bound, covenant and agree as
follows:
1. Upon the terms and subject to the conditions set forth in this
Agreement, Employer employs Employee as Employer's Executive
Vice President or another position commensurate with
Employee's experience and ability, and Employee accepts such
employment.
2. Employee agrees to serve as Employer's Executive Vice
President or such other position, and to perform such duties
in that office as may be prescribed by the Employer's Bylaws
and as may reasonably be assigned to him by Employer's
President or Board of Directors or by the President of
Employer's parent corporation
-1-
<PAGE>
and those generally associated with the office held by
Employee as determined by the President or Board of Directors
or by the President of Employer's parent corporation from time
to time.
Employer shall not, without the written consent of Employee,
relocate or transfer Employee to a location more than 30 miles
from his current employment location. While employed by
Employer, Employee shall devote substantially all his business
time and efforts to Employer's business and the business of
its subsidiaries.
3. The term of this Agreement shall be for an initial term of
three (3) years commencing on April 1, 1998 (the "Effective
Date"), and terminating March 31, 2001; provided, however,
that such term shall be extended for an additional year on
each annual anniversary of the Effective Date, unless either
party thereto gives written notice to the other party not to
so extend within the period of ninety (90) days prior to an
anniversary, in which case no further extension shall occur
and the term of this Agreement shall end two years subsequent
to the annual anniversary immediately following the
anniversary prior to which the notice not to extend for an
additional year is given (such term, including any extension
thereof shall herein be referred to as the "Term").
4. Employee shall receive an annual salary of $38,105.60 ("Base
Compensation"), payable at regular intervals in accordance
with Employer's normal payroll practices now or hereafter in
effect. Employer may consider and declare from time to time
increases in the salary it pays Employee and thereby increase
his Base Compensation.
5 . So long as Employee is employed by Employer pursuant to this
Agreement, he shall be included as a participant in all
present and future employee benefit, retirement, and
compensation plans generally available to employees of
Employer, consistent with his Base Compensation and his
position with Employer, including, without limitation, any
401(k) plan, stock incentive plan, employee stock purchase or
ownership plan, bonus plan, and group life and disability
insurance plans.
6. So long as Employee is employed by Employer pursuant to this
Agreement, Employee shall receive reimbursement, either
directly or through use of an Employer credit card, from
Employer for all reasonable business expenses incurred in the
course of his employment by Employer, upon submission to
Employer of written vouchers and statements for reimbursement.
So long as Employee is employed by Employer pursuant to the
terms of this Agreement, Employer shall continue in effect
vacation policies applicable to Employee no less favorable
from his point of view than those written vacation policies in
effect on the date hereof. So long as Employee is employed by
Employer pursuant to this Agreement, Employee shall be
entitled to office space and working conditions no less
favorable than those in effect for him on the date hereof.
-2-
<PAGE>
7. Employee's employment with the Employer may be terminated
prior to the expiration of the Term as follows:
(A) The Employer may immediately upon written notice
terminate Employee for cause. "Cause" shall be
defined as (i) personal dishonesty, (ii) willful
misconduct, (iii) breach of fiduciary duty involving
personal profit, (iv) intentional failure to perform
stated duties, (v) conviction of a violation of any
law, rule, or regulation (other than traffic
violations or similar offenses) or cease-and-desist
order, (vi) moral turpitude reflecting adversely on
the reputation of the Employer, or (vii) any material
breach of any term, condition or covenant of this
Agreement. The Employer shall have no further
liability to Employee under this Agreement for any
period subsequent to the termination for Cause.
(B) Either party may terminate this Agreement during the
Term without Cause, upon thirty (30) days prior
written notice to the other party. If the Employer
terminates the Employee without Cause (as defined
above), or if Employee terminates his employment for
Good Reason (as defined below):
(i) Compensation provided for herein (including
Base Compensation) shall continue to be
paid, and Employee shall continue to
participate in the employee benefit,
retirement, and compensation plans and other
perquisites as provided in Sections 5 and 6
hereof, through the date of termination
specified in the notice of termination; and
any benefits payable under insurance,
health, retirement and bonus plans as a
result of Employee's participation in such
plans through such date shall be paid when
due under those plans;
(ii) In addition, the Employer shall pay the
Employee a lump sum severance payment equal
to fifty percent (50%) of Employee's total
salary and bonus compensation (excluding any
transaction bonus under Section 9) for the
immediately preceding calendar year plus, if
a Change of Control has occurred, any unpaid
installment of any transaction bonus due
under Section 9 (or which would otherwise
later become due under Section 9); and
(iii) In addition, for one (1) year following
termination, Employer will maintain in full
force and effect for the continued benefit
of Employee and his dependents each employee
medical and life benefit plan (as such term
is defined in the Employee Retirement Income
Security Act of 1974, as amended) in which
Employee was entitled to participate
immediately prior to the date of his
termination, unless an essentially
equivalent benefit is provided by another
source. If the terms of any
-3-
<PAGE>
employee medical and life benefit plan of
Employer or applicable laws do not permit
continued participation by Employee,
Employer will arrange to provide to Employee
a benefit substantially similar to, and no
less favorable than, the benefit he was
entitled to receive under such plan at the
end of the period of coverage. The right of
Employee to continued coverage under the
health and medical insurance plans of
Employer pursuant to Section 4980B of the
Internal Revenue Code of 1986, as amended
(the "Code") shall commence upon the
expiration of such period; and
(iv) Employer will engage at Employer's cost an
out placement firm to assist Employee to
locate an alternative position for Employee
for a period of one (1) year; provided, that
Employer may terminate such firm's
engagement if Employee fails to attend two
or more interviews arranged by such firm or
if Employee is offered any position that
would provide a base compensation of at
least 80% of Employee's Base Compensation on
the date of termination. Employer will make
available reasonable office space and
telephone usage for a period not to exceed
ninety (90) days after terminations.
For purposes of this Agreement, "Good Reason" for
Employee to terminate his employment with Employer
means: a material breach of any term, condition or
covenant of Employer under this Agreement.
(C) Employee's employment with Employer shall terminate
in the event of Employee's death or disability. For
purposes hereof, "disability" shall be defined as
Employee's inability by reason of illness or other
physical or mental incapacity to perform the duties
required by his employment for a consecutive 180 day
period, provided that notice of any termination by
Employer because of Employee's "disability" shall
have been given to Employee prior to the full
resumption by him of the performance of such duties.
8. To induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) Unless otherwise required to do so by law, including
the order of a court or governmental agency, Employee
shall not divulge or furnish any trade secrets (as
defined in IND. CODEss.24-2-3-2) of Employer or any
confidential information acquired by him while
employed by Employer concerning the policies, plans,
procedures or customers of Employer to any person,
firm, corporation or other entity , other than
Employer or upon its written request, or use any such
trade secrets or confidential information directly or
indirectly for Employee's own benefit or for the
benefit of any person, firm, corporation or other
entity other then Employer, because such trade
secrets and
-4-
<PAGE>
confidential information are confidential and shall
at all times remain the property of Employer.
(B) For a period of six (6) months after termination of
Employee's employment with Employer for any reason,
Employee shall not (a) compete, directly or
indirectly, in any state or province of the U.S. or
Canada where Employer has a sales representative or
sold products within the 12 months prior to
Employee's termination, with the business of Employer
as conducted during the term of this Agreement (which
business shall include the manufacture or sale of any
products manufactured or sold by Employer during the
12 months prior to Employee's termination), or have
any significant interest (including any interest or
association, including but not limited to, that of
owner, part owner, partner, shareholder, director,
officer, employee, agent, consultant, lender or
advisor) in any person, firm or entity which competes
with Employer's business in the area described above
(each such person, firm or entity is referred to as
"Competitor"); (b) solicit or accept business for or
on behalf of any Competitor; or (c) solicit, induce
or persuade, or attempt to solicit, induce or
persuade, any person to work for or provide services
to or provide financial assistance to, any
Competitor.
(C) If Employee's employment by Employer is terminated
for any reason, Employee will turn over immediately
thereafter to Employer all business correspondence,
letters, papers, reports, customers' lists, financial
statements, records, drawings, credit reports, credit
cards, or other confidential information or documents
of Employer or its affiliates in the possession or
control of Employee, all of which writings are and
will continue to be the sole and exclusive property
of Employer or its affiliates.
(D) Employee acknowledges that the covenants of this
Section 8 are reasonable in scope and duration and
reasonably necessary and appropriate to protect the
goodwill and other appropriate interests of Employer
following Employee's termination and that any
violation of such covenants by Employee would result
in irreparable harm to Employer, for which any remedy
at law would be inadequate. In addition to any other
remedy to which it may be entitled, Employer shall be
entitled to equitable relief, including specific
performance, for any violation of Section 8.
(E) Employee shall, and hereby authorizes Employer to,
inform any successor or prospective employer of
Employee of the terms of this Section 8. Any such
disclosure by Employer and any effort by Employer to
seek Employee's compliance with this covenant, even
if such effort shall require that Employee perform
different duties for such successor employer or delay
his employment
-5-
<PAGE>
by such employer, is hereby expressly authorized by
Employee and shall not be deemed a violation of any
"blacklisting" or similar law.
9. If there is a Change of Control of Employer as defined below,
Employee shall be paid a transaction bonus in the amount of
$8,000 payable one-half on the date of the Change of Control
and one-half on the date six (6) months after the Change of
Control, so long as Employer's Board of Directors shall not
have determined on a reasonable basis and in good faith (prior
to any installment date) that Employee has failed to comply
with the Bonus Conditions. "Bonus Conditions" means:
(A) Employee has cooperated fully with Employer and its
advisors and, to the extent directed by Employer, any
party who is engaged or may engage in negotiations
with Employer, regarding any proposed transaction
involving Employer or its shareholders;
(B) Employee shall not have engaged in any activity
intended to discourage any such interested party from
engaging in any such transaction or disparaging the
Employer, its condition, assets or prospects, in the
eyes of any such party;
(C) Employee shall have continued to perform his duties
for Employer with at least the same level of
diligence and performance as characterized Employee's
performance prior to the Effective Date; and
(D) Employee shall not be in breach of any provision of
this Agreement.
Disclosure or statements made by Employee in good faith in response to
appropriate requests from third parties or instructions by Employer that
Employee reasonably believes to be truthful shall not violate the Bonus
Conditions.
For purposes of this Agreement, a "Change of Control" shall mean the occurrence
of any of the following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger of consolidation), in one or a series
of related transactions, of all or substantially all of the assets of Employer's
parent, Employer and it subsidiaries taken as a whole to any "person" (as such
term is used in Section 13(d)(3) of the Exchange Act), (ii) the consummation of
any transaction (including, without limitation, any merger of consolidation) the
result of which is that any "person" as defined above, becomes the beneficial
owner (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of more than 50% of the voting stock of Employer's
parent or Employer or (iii) the first day on which a majority of the members of
the Board of Directors of Employer's parent are not Continuing Directors.
Notwithstanding the foregoing, a "Change of Control" shall not occur and no
transaction bonus will be payable if the person that acquires assets or stock
under part (i) or (ii) of the foregoing definition, is an Employer or parent
sponsored employee stock ownership plan, H. Jesse McVay, a management group led
by H. Jesse McVay or a person whose participation in such transaction was
supported or sponsored by such management
-6-
<PAGE>
group. "Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Employer's parent who (i) was a member of such
Board of Directors on the date hereof or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination.
10. Any termination of Employee's employment with Employer as
contemplated by Section 7 hereof, except in the circumstances
of Employee's death, shall be communicated by written "Notice
of Termination" by the terminating party to the other party
hereto. Any "Notice of Termination" pursuant to Section 7
based on Cause or Good Reason shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis
for such termination.
11. If a dispute arises regarding the termination of Employee
pursuant to Section 7 hereof or as to the interpretation or
enforcement of this Agreement, said dispute shall be resolved
by binding arbitration in Indianapolis, Indiana determined in
accordance with the rules of the American Arbitration
Association. Notwithstanding the foregoing, Employer shall be
entitled to seek any remedy in a proceeding at law or in
equity in any court having jurisdiction for any breach of
Section 8.
12. Should Employee die after termination of his employment with
Employer while any amounts are payable to him hereunder, this
Agreement shall inure to the benefit of and ben enforceable by
Employee's executors, administrators, heirs, distributees,
devisees and legatees and all amounts payable hereunder shall
be paid in accordance with the terms of this Agreement to
Employee's devisee, legatee or other designee or, if there is
no such designee, to his estate.
13. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee: P. Wayne McCune
1809 St. Mary's Street
San Angelo, TX 76904
-7-
<PAGE>
If to Employer: Wendland Manufacturing Corporation
c/o Bryan Steam Corporation
P.O. Box 27
Peru, Indiana 46970
Attn: Chairman
or to such address as either party hereto may have furnished
to the other party in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt.
14. The validity, interpretation, and performance of this
Agreement shall be governed by the laws of the State of
Indiana, regardless of the principles of conflicts of laws.
15. Employer shall require any successor (whether direct or
indirect, by purchase, merger, or consolidation or otherwise)
to all or substantially all of the business or assets of
Employer, by agreement in form and substance reasonably
satisfactory to Employee to expressly assume and agree to
perform this Agreement in the same manner and same extent that
Employer would be required to perform it if no such succession
had taken place. As used in this Agreement, "Employer" shall
mean Employer as hereinbefore defined and any successor to its
business or assets as aforesaid.
16. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by Employee and Employer. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of dissimilar provisions or
conditions at the same or any prior subsequent time. No
agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement.
17. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in
full fore and effect. This is the entire agreement between
Employer and Employee concerning the subject matter hereof and
all prior agreements, written or oral, are superseded.
18. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
-8-
<PAGE>
19. This Agreement is personal in nature and neither party hereto
shall, without consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder except as
provided in Section 12 and Section 15 above. Without limiting
the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other
than a transfer by his will or by the laws of descent or
distribution as set forth in Section 12 hereof, and in the
event of any attempted assignment or transfer contrary to this
paragraph, Employer shall have no liability to pay any amounts
so attempted to be assigned or transferred.
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed as of the date first written above.
"Employer"
Wendland Manufacturing Corporation
By: /s/ Richard Salmon
-----------------------------------
Its: President
"Employee"
/s/ P. Wayne McCune
-----------------------------------
P. Wayne McCune
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of Bryan Steam Corporation and its subsidiaries as of
June 30, 1998, and the related consolidated condensed income statement for the
year then ended, and is qualified in its entirety by reference to such audited
financial statements.
</LEGEND>
<CIK> 0000014971
<NAME> Bryan Steam Corporation
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-1-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1.000
<CASH> 864,411
<SECURITIES> 697,247
<RECEIVABLES> 5,117,943
<ALLOWANCES> 12,956
<INVENTORY> 5,082,731
<CURRENT-ASSETS> 12,735,758
<PP&E> 9,410,333
<DEPRECIATION> 3,931,611
<TOTAL-ASSETS> 18,561,666
<CURRENT-LIABILITIES> 3,007,341
<BONDS> 791,681
<COMMON> 810,272
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,365,962
<SALES> 26,178,214
<TOTAL-REVENUES> 26,557,616
<CGS> 21,241,354
<TOTAL-COSTS> 3,513,032
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15,938
<INTEREST-EXPENSE> 24,181
<INCOME-PRETAX> 1,779,049
<INCOME-TAX> 681,690
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BURNHAM REACHES AGREEMENT TO ACQUIRE BRYAN STEAM
Lancaster, PA September 23, 1998
Peru, IN
Burnham Corporation and Bryan Steam Corporation announced today that they have
entered into a merger agreement pursuant to which Burnham will acquire all of
the outstanding common stock of Bryan Steam for $152.00 per share in cash.
Including transaction expenses of Bryan and certain other amounts that Burnham
has agreed to pay, the total value of the transaction is approximately $30.4
million. Bryan's Board of Directors unanimously approved the transaction after a
competitive auction process. The acquisition has the strong support of Bryan's
management.
In accordance with the merger agreement, a wholly owned subsidiary of Burnham
will make a cash tender offer, which is expected to commence on September 30,
1998, for all outstanding shares of Bryan at $152.00 per share. Any shares not
purchased in the tender offer will be acquired in a second-step merger for
$152.00 per share in cash. The transaction is subject to customary closing
conditions and regulatory approval.
Ten stockholders of Bryan Steam Corporation owning 55.6% of Bryan's outstanding
common stock in the aggregate have irrevocably agreed to tender their shares to
Burnham in the tender offer and have also granted Burnham an exclusive proxy to
vote their shares in favor of the merger.
Burnham has been a leader in the hydronics industry since producing its first
boiler in 1873. Burnham is a major U.S. manufacturer of boilers, furnaces,
radiators and related equipment, with sales of $174.6 minion in its fiscal year
ending December 31, 1997. Burnham's philosophy is to provide the safest, most
reliable products that are the best values available in the marketplace.
Bryan, a domestic manufacturer of watertube boilers, is located in Peru,
Indiana, with subsidiaries in Monticello, Indiana and San Angelo, Texas. Bryan
has been in business since 1916 and has developed a line of watertube boilers
that are unique in the industry. Bryan had sales of $26.3 million in its fiscal
year ending June 30, 1998. Bryan shares Burnham's, philosophy of safety,
reliability and value for its products.
After the acquisition, Bryan will operate as a wholly owned subsidiary of
Burnham. Jesse McVay, currently President of Bryan, will remain as President of
Bryan and will become part of Burnham's senior management. Bryan's products will
continue to be manufactured at its plants and will be marketed exclusively under
the Bryan label through its existing network of independent manufacturers'
representatives.
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<PAGE>
The addition of Bryan will, allow Burnham to participate in the domestic
watertube boiler market to complement its position in the firetube and castiron
boiler markets and to develop an international market for the watertube product.
As a result of this acquisition, Burnham will be more competitive in the
commercial and industrial hydronics market and Bryan will have access to the
resources it needs for continued growth.
AUTHORIZED BY
Ronald L Griffith
Sr. Vice President
Burnham Corporation
717-293-5811
