UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended Commission file number: 1-448
December 31, 1994
MESTEK, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0661650
(State or(I.R.S Employertion of
incorporation or organization) Identification No.)
260 North Elm Street
Westfield, Massachusetts 01085
(Address of principal executive offices)
Registrant's telephone number, including area code: 413-568-9571
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
Common Stock, No Par Value on which registered
New York Stock Exchange
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, 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/ /
The aggregate market value of voting common shares held by nonaffiliates of the
registrant as of March 31, 1995, based upon the closing price for registrant's
common stock as reported in The Wall Street Journal as of such date was
$31,592,995
The number of shares of the registrant's common stock issued and outstanding as
of March 31, 1995 was 9,022,346.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement relating to the annual meeting of shareholders
of the registrant to be held on May 24, 1995 are incorporated by reference into
Part III hereof and the exhibits to filings referenced on Pages 49 thru 51 of
Part IV hereof are incorporated by reference into Part IV hereof.
<PAGE>
PART I
Item 1 - BUSINESS
GENERAL
Mestek, Inc. ("Mestek" or the "Company") was incorporated in the
Commonwealth of Pennsylvania in 1898 as Mesta Machine Company. It changed its
name to Mestek, Inc. in October, 1984, and merged with Reed National Corp. on
July 31, 1986.
On November 13, 1989 the Company purchased the assets of Air Fan
Engineered Products, Inc., a small manufacturer of air conditioning, air moving
and heat transfer equipment located in Los Angeles, California. The assets were
subsequently moved to the Company's Dallas facility.
In March of 1990, the Company, through a wholly-owned subsidiary,
purchased a 48.6 percent interest in The H. B. Smith Company, Incorporated, a
Westfield, Massachusetts manufacturer of boilers.
In January, 1991, Keystone Environmental Resources, Inc. ("Keystone"),
a subsidiary of Chester Environmental Group, Inc., ("Chester"), formed
Environmental Technology Applications Company (ETA) in a joint venture with
Beazer Environmental Services, Inc., to market and apply environmental
technologies previously developed by Keystone. ETA was dissolved by mutual
agreement effective March 31, 1992. The Company subsequently sold a majority
interest in Chester, as more fully explained in the Notes to the Consolidated
Financial Statements.
In February 1991 the Company, through Chester acquired the assets of
two corporations: GeoSpatial Solutions, Inc. and NEA, Inc., ("NEA"). GeoSpatial
Solutions, Inc., of Colorado, a satellite imaging concern, sold its assets to
Chester for $120,000. The NEA assets were purchased for $2,600,000, net of
liabilities assumed. NEA's primary lines of business are consulting and
analytical services relative to air quality. The Company subsequently sold a
majority interest in Chester, as more fully explained in the Note to the
Consolidated Financial Statements.
On July 31, 1991 Mestek, through a wholly-owned subsidiary, purchased
substantially all of the assets of Hydrotherm, Inc., ("Hydrotherm"), located in
Northvale, New Jersey, and its wholly-owned subsidiary Hydrotherm (Canada) Inc.,
located in Toronto, Ontario. Hydrotherm is manufacturer of commercial and
residential gas and oil-fired boilers, residential baseboard heating equipment
and residential air conditioning equipment. Management consolidated the
manufacturing operations of Hydrotherm in 1992, closing the Northvale, New
Jersey plant. The Hydrotherm and Hydrotherm Canada assets acquired include
substantially all of Hydrotherm's inventory, receivables and fixed tangible and
intangible assets relating to the commercial and residential gas and oil-fired
boiler business and other product lines mentioned above. The purchase price for
the assets acquired, net of liabilities assumed, was $12,900,000.
<PAGE>
On August 9, 1991 Mestek purchased substantially all of the assets of
Dynaforce Corporation, a New York Corporation, and a leading manufacturer of air
curtains, make-up air equipment and related products. The purchase price paid
for the assets was $586,000. The Dynaforce assets were subsequently moved to the
Company's South Windsor facility.
On October 8, 1991 Mestek, through a newly formed Canadian subsidiary,
acquired substantially all of the operating assets of Temprite Industries, Ltd.,
an Ontario Corporation located in Orangeville, Ontario. Temprite manufactures
industrial, institutional, and commercial air handling equipment and make-up air
units. The purchase price for the assets acquired, net of liabilities assumed,
was $1,819,000.
On October 31, 1991 Chester acquired substantially all of the assets of
Kamber Engineering, Inc. (Kamber) of Gaithersburg, Maryland. Kamber's business
involves water and waste projects, federal environmental projects, and corporate
land development projects. The purchase price of the assets acquired, net of
liabilities assumed, was $1,200,000. The Company subsequently sold a majority
interest in Chester, as more fully explained in the Notes to the Consolidated
Financial Statements.
On August 21, 1992, pursuant to the Plan of Reorganization approved by
the United States Bankruptcy Court for the Eastern District of Pennsylvania, the
Company acquired substantially all of the inventory, accounts receivable, and
fixed tangible and intangible assets of Mechanical Specialties, Inc. (MSI), a
manufacturer of heating and ventilating equipment located in Philadelphia,
Pennsylvania. The purchase price for the assets acquired, net of liabilities
assumed, was $6,335,000.
On December 15, 1992, Mestek, through a wholly-owned subsidiary,
Westcast, Inc., purchased certain assets of The H. B. Smith Company,
Incorporated, (HBS), at public auction. Assets acquired included inventory, a
hydronics laboratory, certain foundry and machine-shop machinery and tooling,
certain office equipment, and furniture and certain notes and instruments
secured by other assets of HBS. The purchase price paid for these assets was
$3,115,000. The Company, through another wholly-owned subsidiary, owns 48.6% of
the outstanding common stock of HBS.
On December 22, 1992, Mestek, through a wholly-owned subsidiary,
Peritek, Inc., purchased certain assets of The Trane Company, ("Trane"), a
division of American Standard Inc. and an affiliate, for cash and notes which
totaled, after adjustment, approximately $10.1 million. The Company acquired a
manufacturing facility in Scranton, Pennsylvania and certain inventory and
equipment.
In April of 1993, the Company purchased a 46.8% interest in Eafco, Inc.
Eafco produces cast iron boiler sections for the boiler industry, including
Mestek's boiler subsidiaries. The Company accounts for its investment in Eafco
under the equity method.
<PAGE>
On August 17, 1993, the Company sold a 70% interest in its
Environmental Engineering Segment, Chester Environmental, Inc., ("Chester"), to
Duquesne Enterprises, Inc., a Pennsylvania corporation, headquartered in
Pittsburgh, Pennsylvania. The Company has accounted for this transaction as a
Disposal of a Discontinued Segment, as more fully explained in Note 7 to the
consolidated financial statements.
On November 1, 1994, pursuant to a motion approved by the United States
Bankruptcy Court for the District of New Mexico, the Company acquired
substantially all of the inventory, accounts receivable, and fixed tangible and
intangible assets of Aztec Sensible Cooling, Inc. (Aztec) a manufacturer of
evaporative cooling and other custom air handling equipment in Albuquerque, New
Mexico. The purchase price for the assets acquired, was $1,372,000. The
operations of Aztec were relocated to the Company's Dallas, Texas facility in
December of 1994.
The Company's executive offices are located at 260 North Elm Street,
Westfield, Massachusetts 01085. The Company's phone number is 413-568-9571.
OPERATIONS OF THE COMPANY
The Company operates in three continuing business segments: heating,
ventilating, air conditioning equipment ("HVAC") manufacturing; computer
software development and systems design; and coil handling equipment
manufacturing. Each of these segments is described below. The Company and its
subsidiaries together employed 1,962 persons as of December 31, 1994.
HEATING, VENTILATING AND AIR CONDITIONING EQUIPMENT
The Company, through Mestek, Inc. and its wholly-owned subsidiaries,
Pacific/Air Balance, Inc., ("Pacific Air"), The Hydrotherm Corporation, Mestek
Canada, Inc., and Westcast, Inc. (collectively, the "Reed Division")
manufactures and distributes products in the HVAC industry. These products
include residential, commercial and industrial hydronic heat distribution
products, gas- fired heating and ventilating equipment, louver and damper
equipment, commercial and residential gas and oil-fired boilers, air
conditioning units, and related products used in heating, ventilating and air
conditioning systems.
The Reed Division sells finned-tube and baseboard radiation equipment
under the names "Sterling", "Vulcan", "Heatrim", "Petite-7" and "Suntemp", and
other hydronic heat distribution products under the names "Sterling" and
"Beacon- Morris". The division sells gas-fired indoor and outdoor heaters under
the names "Alton", "Applied Air", "Wing", "Air Fan", and "Temprite". Cooling and
air conditioning equipment is sold under the "Alton", "Applied Air", "Space
Pak", "Aztec", and "Nesbitt" names, and gas and oil-fired boilers are sold
primarily under the names "Hydrotherm", "Multi-Pulse", and "Multi-Temp", and
distributed under the name "Smith Cast Iron Boilers" by Westcast, Inc. These
products may be used to heat and/or cool structures ranging in size from large
office buildings, industrial buildings, warehouses, stores and residences, down
to such small spaces as add-on rooms in residences. The Company's products are
manufactured at plants in Westfield, Massachusetts; South Windsor, Connecticut;
Farmville, North Carolina; Dallas, Texas; Orangeville, Ontario; Dundalk,
Maryland; Philadelphia, Pennsylvania; and Wrens, Georgia. The Company
consolidated its Northvale, New Jersey and Dundalk, Maryland plants in Dundalk
in 1992.
<PAGE>
The Reed Division sells its many types of fire, smoke, and air control
louvers and dampers, which are devices designed to control or seal off the
movement of air through building ductwork in the event of fire or smoke, under
the names "Air Balance", "Phillips Aire", "Terri", "American Warming and
Ventilating", and "Arrow". These products are manufactured at the Company's
plants in Wrens, Georgia; Los Angeles, California; Bradner, Ohio; Waldron,
Michigan; Springfield, Ohio, and Wyalusing, Pennsylvania. The Reed Division also
manufactures industrial and power plant dampers in Los Angeles, California under
the name "Pacific Air Products".
Through its design and application engineering groups, the Reed
Division custom designs and manufactures many HVAC products to meet unique
customer needs or specifications not met by existing products. Such custom
designs often represent improvements on existing technology and often are
incorporated into the Reed Division's standard line of products.
The Reed division sells its HVAC products primarily through
approximately 350 independent representatives throughout the United States and
Canada, many of whom sell several of Reed's products. These independent
representatives usually handle various HVAC products made by manufacturers other
than the Company. These representatives usually are granted an exclusive right
to solicit orders for specific Reed Division products from customers in a
specific geographic territory, subject to final acceptance of such orders by the
Reed Division. Because of the diversity of the Reed Division's product lines,
there is often more than one representative in a given territory.
Representatives work closely with the Reed Division's sales managers and its
technical personnel to meet customers' needs and specifications. The independent
representatives are compensated on a commission basis and generally they neither
stock Reed Division products nor purchase such products for resale.
The Reed Division, through its representatives, sells its HVAC products
primarily to contractors, installers, and end users in the construction
industry, wholesale distributors and original equipment manufacturers.
The Company sells gas-fired and hydronic heating and ventilating
products, boilers and coil handling equipment in Canada and also sells its
products in other foreign markets from time to time. Total export sales did not
exceed ten percent of consolidated total revenues, nor did foreign assets exceed
ten percent of total assets, in any of the most recent five years ending
December 31, 1994.
The Reed Division uses a wide variety of materials in the manufacture
of its products, such as copper, aluminum and steel, as well as electrical and
mechanical components, controls, motors and other products. Management believes
that it has adequate sources of supply for its raw materials and components and
has not had significant difficulty in obtaining the raw materials, component
parts or finished goods from it suppliers. No industry segment of the Company is
dependent on a single supplier, the loss of which would have a material adverse
effect on its business.
The businesses of the HVAC segment are highly competitive. The Company
believes that it is the largest manufacturer of hydronic baseboard heating for
residential and commercial purposes and is one of the three leading
manufacturers of gas-fired heaters and fire and smoke dampers. The Company has
established a substantial market position in the commercial and residential
cast-iron boiler business through its acquisitions in 1991 and 1992.
Nevertheless, in all of the
<PAGE>
industries in which it competes, the Company has competitors with substantially
greater manufacturing, sales, research and financial resources than the Company.
Competition in these industries is based mainly on merchandising capability,
service, quality, price and ability to meet customer specifications. The Reed
Division believes that it has achieved and maintained its position as a
substantial competitor in the HVAC industry largely through the strength of its
extensive distribution network, the breadth of it product line and its ability
to meet customer delivery and service requirements. Most of its competitors
offer their products in some but not all of the industries served by the Reed
Division.
The quarterly results of the HVAC segment are affected by the
construction industry's demand for heating equipment, which generally peaks in
the last four months of each year (the "heating season"). Accordingly, sales are
usually higher during the heating season, and such higher levels of sales may in
some years continue into the following calendar year. As a result of these
seasonal factors, the Company's inventories of finished goods reach higher
levels during the heating season and are generally lower during the balance of
the year.
Management does not believe that backlog figures relating to the HVAC
segment are material to an understanding of its business because most equipment
is shipped promptly after the receipt of orders.
The Company owns a number of United States and foreign patents.
Although the Company usually seeks to obtain patents where appropriate, it does
not consider any segment materially dependent upon any single patent or group of
related patents.
The Reed Division has a number of trademarks important to its business,
including those relating to its Sterling, Vulcan, Beacon-Morris, Heatrim, Wing,
Alton, Applied Air, Arrow, Air Fan, Aztec, Hydrotherm, Temprite and Dynaforce
product lines.
Expenditures for research and development for the HVAC segment in 1994,
1993 and 1992 were $469,000, $438,000, and $620,000, respectively. Product
development efforts are necessary and ongoing in all product markets.
The Company believes that compliance with environmental laws will not
have a financially material effect on its operations in 1995.
COMPUTER SOFTWARE DEVELOPMENT AND SYSTEM DESIGN
The business of Mestek's wholly-owned subsidiary, MCS, Inc. ("MCS") is
primarily related to computer processing and systems development. MCS develops
computer software applications to meet specific industry requirements. Services
to customers include preparation of computer programs and software to meet the
customer needs, providing proper computer hardware when required, installing the
system at the customer's business, and providing continuing support services.
MCS also provides computer processing services to customers on a time-sharing
basis.
<PAGE>
The most significant systems which MCS has developed and has available
for sale are MestaMed, a third-party billing, general ledger, accounting and
inventory control system for durable medical equipment suppliers, home health
providers and infusion therapy providers and Profit Works, a system utilized by
lumber, electrical, plumbing, and manufacturer's representatives to manage order
entry, inventory, purchasing, accounts receivable, and reporting. Support
includes software enhancements, diagnostic access, and training seminars. MCS
also has available a Telephone Usage System which analyses usage for
institutions with multiple telephones. The hardware for these and other systems
is supplied primarily by Digital Equipment Corp., for which MCS is an Authorized
Solution Provider.
New enhancements to its software products are continually being
developed by MCS. Recent examples include electronic reimbursement, and medical
records tracking. During 1994, 1993 and 1992 MCS spent approximately $910,000,
$702,000, and $695,000, respectively, for software development. These costs
related primarily to customer sponsored development and improvements to existing
products.
Because of the importance of systems development to MCS, programming
and sales personnel are a primary resource. MCS's main office is in the
Pittsburgh, Pennsylvania area and it has sales offices in other parts of the
country.
The markets for computer processing and systems development are diverse
and very competitive. MCS has many competitors in the markets in which it
operates, both on a regional and national basis. On December 31, 1994, MCS's
backlog was $2,266,000.
MCS's inventory consists primarily of computer hardware and related
equipment which is used in the computer systems sold. MCS attempts to maintain a
sixty-day supply so that delivery of completed systems can be made on a timely
basis.
COIL HANDLING EQUIPMENT
The Company, through its Cooper-Weymouth, Peterson Division,
manufactures various types and sizes of coil stock handling devices at its plant
in Clinton, Maine. These devices consist primarily of metal coil straighteners
and equipment used to feed metal from coils into punch presses and other metal
stamping or shaping equipment. The Company has improved its competitive position
in this industry by developing servo-driven feeders with microprocessor
controls, affording diagnostic and operational features. The Company believes
that its line of coil stock handling products is among the broadest in the
industry.
Certain coil handling products are custom designed and manufactured to
meet unique customer needs or specifications which are not currently met by
existing products. These products, developed by the Company's design and
application engineering groups, often represent improvements on existing
technology and are often then incorporated into the Division's standard product
line.
<PAGE>
The primary customers for such coil handling equipment include
manufacturers of large and small appliances, commercial and residential lighting
fixtures, automobile accessories, office equipment and HVAC products. The
Cooper-Weymouth, Peterson Division also acts as a supplier of coil handling
equipment to original equipment manufacturers of metal handling and metal
forming machinery.
The business of the Coil Handling Equipment segment is highly
competitive. The Company has become a substantial competitor in the manufacture
of coil handling equipment through its abilities to meet customer delivery and
service requirements and its extensive distribution network. The Coil Handling
Equipment segment has a number of trademarks important to its business,
including those relating to its Cooper-Weymouth, Peterson, Coil-Matic,
Dickerman, ServoMatic, and ServoMax product lines.
Management does not believe that backlog figures relating to the coil
handling equipment segment are material to an understanding of its business
because most equipment is shipped promptly after the receipt of orders.
Expenditures for research and development for the Coil Handling
Equipment segment in 1994, 1993 and 1992 were $68,000, $52,000, and $23,200,
respectively.
SEGMENT INFORMATION
Selected financial information regarding the operations of each of the
above segments is presented in Note 13 to the Consolidated Financial Statements.
Item 2 - PROPERTIES
The Reed Division of the Company manufactures HVAC equipment at plants
that the Company owns in Waldron, Michigan; Bradner, Ohio; Wyalusing,
Pennsylvania; Dundalk, Maryland, Springfield, Ohio; Wrens, Georgia, and Dallas,
Texas. It operates plants that it leases from entities owned directly or
indirectly by certain officers and directors of the Company in Westfield,
Massachusetts; Farmville, North Carolina; South Windsor, Connecticut and Los
Angeles, California. The Division leases manufacturing space from unrelated
parties in Dallas, Texas; Orangeville, Ontario, Canada; and Philadelphia,
Pennsylvania, as well as warehouse space in Mississauga, Ontario, Canada.
The Cooper-Weymouth, Peterson Division manufactures coil handling
products at a plant the Company owns in Clinton, Maine.
The Company's principal executive offices in Westfield, Massachusetts
are also leased from an entity owned by an officer and director of the Company.
The Company also owns an office building in Holland, Ohio.
MCS leases office space in Monroeville, Pennsylvania, which houses its
principal offices and computer facility used in the computer software
development and system design segments. MCS owns the computer equipment used in
the operations.
<PAGE>
In addition, the Company and certain of its subsidiaries lease other
office space in various cities around the country for use as sales offices.
Certain of the owned facilities are pledged as security for certain
long-term debt instruments. See Property and Equipment, Note 4 to the
Consolidated Financial Statements.
The Company relocated the operations of The Hydrotherm Corporation from
Northvale, New Jersey to Dundalk, Maryland in 1992. The Northvale property is
presently for sale. The Company also relocated the operations of its Scranton,
Pennsylvania facility in 1993. This property is also presently for sale.
Management regards the Company's remaining properties generally suitable for the
Company's needs.
Item 3 - LEGAL PROCEEDINGS
The Company is not presently involved in any litigation which it
believes will materially and adversely affect its financial condition or results
of operations.
Item 4 - SUBMISSION OF MATTER TO A VOTE OF THE SECURITY HOLDERS
No matters were submitted to the security holders of the Company for a vote
during the fourth quarter of 1994.
<PAGE>
PART II
Item 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange,
under the symbol MCC. The number of shareholders of record as of April 7, 1995
was 1,789. The price range of the Company's common stock between January 1, 1995
and April 7, 1995 was $9.50 to $10.375 and the closing price on April 7, 1995
was $9.75.
The quarterly price ranges of the Company's common stock during 1994
and 1993 as reported in the consolidated transaction reporting system were as
follows:
PRICE RANGE
1994 1993
---- ----
First Quarter $10-3/8 $ 9-1/2 $ 9-1/4 $ 8-1/2
Second Quarter $10 $ 9-1/4 $ 8-7/8 $ 8-1/4
Third Quarter $10-1/8 $ 9-1/4 $ 9 $ 8-1/2
Fourth Quarter $10 $ 9-3/8 $10-5/8 $ 8-3/8
Mestek is restricted, by the terms of its note agreement with Massachusetts
Mutual Life Insurance Company, from declaring or paying any dividends that would
exceed forty percent of consolidated net income from December 31, 1986 to the
date of such payment. The note agreement matures August 15, 1997. The Company
has not paid any dividends on its common stock since 1979.
No securities issued by the Company, other than common stock, are listed on
a stock exchange or are publicly traded.
Item 6 - SELECTED FINANCIAL DATA
Selected financial data for the Company for each of the last five fiscal years
is shown in the following table. Selected financial data reflecting the
operations of acquired businesses is shown only for periods following the
related acquisition. (Dollars stated in thousands except per share data.)
<TABLE>
SUMMARY OF FINANCIAL POSITION as of December 31,
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
Total assets $120,430 $126,625 $137,158 $120,865 $103,612
Working capital 36,628 37,238 58,279 52,644 44,566
Long-term debt, including
current portion 5,548 20,860 32,104 18,269 13,183
Redeemable Preferred
Stock - - - 765 765
Shareholders' equity 80,732 73,317 70,552 66,397 57,769
Common shareholders'
equity, per common
share (1) $ 8.93 $ 7.96 $ 7.59 $ 7.05 $ 6.14
====== ====== ====== ====== ======
</TABLE>
<PAGE>
<TABLE>
SUMMARY OF OPERATIONS - for the year ended December 31, (2)
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Total revenues from
continuing operations (3) $224,018 $231,386 $190,038 $173,852 $162,262
Income from continuing
operations 9,298 7,583 5,410 8,589 8,696
Income before cumulative
effect of change in
accounting method 9,298 4,265 5,393 8,995 10,631
Net income 9,298 4,265 5,823 8,995 10,631
Earnings per common share:
Income from continuing
operations $ 1.02 $ .82 $ .57 $ .91 $ .90
Income before cumulative
effect of change in
accounting method $ 1.02 $ 0.46 $ 0.57 $ 0.95 $ 1.11
Net income $ 1.02 $ 0.46 $ 0.62 $ 0.95 1.11
(1) Equity per common share amounts are computed using the common shares and
common stock equivalents outstanding as of December 31, 1994, 1993, 1992,
1991, and 1990.
(2) Includes the results of acquired companies or asset acquisitions from the
date of such acquisition, as follows:
Aztec Sensible Cooling, Inc. from November 1, 1994.
Mechanical Specialties, Inc. from August 21, 1992 and Westcast, In
from December 15, 1992.
* GeoSpatial Solutions, Inc. and NEA, Inc. from February 1991; Hydrotherm,
Inc., Hydrotherm (Canada), Inc., and Dynaforce Corporation from August
1991; Temprite Industries, Ltd. from October 1991, and Kamber Engineering
from November 1991.
(3) Revenues have been adjusted in 1993, 1992, 1991, and 1990 to reflect the
reclassification of revenues related to the Company's Environmental
Engineering Segment to Discontinued Operations, which are separately
reported in the accompanying financial statements. The Company sold a
70% interest in this segment on August 17, 1993, as more fully explained
in Note 7 to the Financial Statements.
</TABLE>
<PAGE>
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
On August 17, 1993 the Company sold a substantial portion of its
interest in its Engineering Segment, Chester Environmental, Inc. ("Chester"), to
Duquesne Enterprises, Inc., a Pennsylvania corporation, headquartered in
Pittsburgh Pennsylvania. The Company has accounted for the transaction as a
Disposal of a Discontinued Segment in accordance with APB 30, (reporting the
effects of Disposal of a Segment of a Business), since the Company does not have
the ability to exert significant influence over the operations or financial
policies of Chester. Accordingly, the operations of this Segment are separately
reported in the Company's statements of income for the years 1993 and 1992 under
the heading (Loss) from Operations of Discontinued Segment, and Management's
Discussion and Analysis of Financial Condition and Results of Operations is
therefore divided into Section I, Continuing Operations, and Section II,
Discontinued Operations. The Company accounts for its remaining investment in
Chester on the cost method of accounting.
SECTION I. CONTINUING OPERATIONS
RETURN ON AVERAGE NET ASSETS EMPLOYED - CONTINUING OPERATIONS
1994, 1993, 1992
The Company's Return on Average Net Assets Employed, defined as
operating profits from continuing operations before bonuses, interest expense,
taxes, and other income and (expense), over Average Net Assets Employed (Total
Assets less Current Liabilities other than Current Portion of Long-Term Debt,
averaged over 12 months) for the years 1994, 1993, and 1992 was as follows:
1994 1993 1992
Operating Profits (as defined) $21,538,000 $15,917,000 $11,698,000
Average Net Assets Employed (as
defined) $90,691,000 $90,267,000 $72,875,000
Return on Average Net Assets
Employed 23.8% 17.6% 16.0%
The 1994 return on Average Net Assets Employed improved markedly over
1993 due to strong performances from all three of the Company's remaining
Segments, together with the effect of only limited acquisition activity in 1994.
The Company's sole business acquisition in 1994 was the purchase on November 1,
1994 of substantially all of the assets of Aztec Sensible Cooling, Inc. for
$1,372,000, as more fully described in Note 2 to the Consolidated Financial
Statements.
<PAGE>
ANALYSIS: 1994 VS. 1993
The Company's core HVAC Segment benefitted in 1994 from a strong
cyclical recovery in the construction marketplace which allowed it to realize
some of the benefits of its many ongoing market development and new product
development programs.
In 1993 this segment generated $26,347,000 in "one-time" sales at a
very low margin to a major customer in connection with the acquisition of
certain product lines from that customer. Excluding the effect of these "one
time" sales, Total Revenues for this segment increased $13,686,000, or 7.3% in
1994 as indicated in the following table:
Total Total
Revenues Revenues Increase %
1994 1993 (Decrease) Change
$(000) $(000) $(000)
HVAC Segment:
"One Time" 1993 sales $ 0 $ 26,347 $(26,347)
All other Sales 200,445 186,759 13,686 7.3%
200,445 213,106 (12,661) ( 5.9%)
Computer Systems Segment 14,461 12,211 2,250 18.4%
Coil Handling Equipment 9,112 6,069 3,043 50.1%
$224,018 $231,386 $(7,368) ( 3.2%)
The Company's Computer Systems Segment reported substantially higher
revenues and operating profits in 1994 reflecting its very successful product
diversification efforts in the Durable Medical Equipment, Home Infusion Therapy
and Home Health Services markets.
The Company's Coil Handling Equipment Segment also reported
substantially higher revenues and operating profits due to the success of its
new product offerings in the area of "electronic feeds".
Consolidated operating profit from continuing operations increased in
1994 by $4,970,000, or 35.1%, reflecting the improved performances mentioned
above. The HVAC segment reported operating profit of $15,310,000 in 1994, up
24.1% from 1993, for the reasons mentioned above. The Company's Computer Systems
segment reported operating profit of $2,244,000, up 63.3% from 1993, on
relatively unchanged Average Net Assets Employed. The Coil Handling Equipment
segment reported operating profit of $1,583,000, up 345.6% from 1993, also on
relatively unchanged Average Net Assets Employed.
<PAGE>
Gross profit margins by segment for continuing operations for 1994 and
1993 were as follows:
Computer Coil Handling
HVAC Systems Equipment
Segment Segment Segment
1994 Gross Profit % 28.3% 38.3% 39.3%
1993 Gross Profit % 26.7% 36.1% 34.6%
Increase/Decrease 1.6% 2.2% 4.7%
The 1993 Gross profit margins for the HVAC segment were adversely
effected by the special "one-time" sales described above. But for these sales,
HVAC margins in 1993 would have been 29.4%, suggesting that HVAC margins, on a
true comparative basis, declined slightly in 1994 (from 29.4% to 28.3%). This
effect is traceable principally to price increases experienced in 1994 on basic
commodities (steel, copper and aluminum) used in the Company's manufacturing
processes.
Sales expense for continuing operations of the Company, as a percentage
of total revenues, was relatively unchanged at 12.6% despite the elimination of
$26,347,000 in "one time" 1993 sales, as described above. General and
Administrative expenses (excluding the effect of corporate and profit-center
bonuses which were increased by 37.1%), as a percentage of revenues decreased
from 5.5% in 1993 to 4.6% in 1994, principally due to the elimination of a
significant one time incremental general and administrative cost associated with
the operation of the Company's Scranton, Pennsylvania facility in 1993.
Engineering expense, as a percentage of total revenues, was unchanged at 2.6%.
Interest expense from continuing operations was reduced by approximately
$522,000 reflecting the effect of substantial reductions in interest bearing
debt during 1994.
Income tax expense for continuing operations for 1994, as a percentage of
pretax income, was 42.1% as compared with 40.2% for 1993, reflecting the effect
of certain subsidiary losses on state and foreign income tax obligations, as
more fully described in Note 9 to the Consolidated Financial Statements.
At December 31, 1994, the Company classified two of its manufacturing
facilities, Northvale, New Jersey and Scranton, Pennsylvania, as Property Held
for Sale. These properties are carried at cost which is less than estimated net
realizable value.
Other Expense increased substantially in 1994, principally due to the
effect of carrying costs related to the properties held for sale and the fact
that 1993's results included a non-recurring $606,000 gain on the disposition of
certain equipment.
<PAGE>
ANALYSIS: 1993 VS. 1992
HVAC Net Sales, exclusive of the effect of 1992 and 1993 acquisitions
(which for this purpose include the revenues generated in Scranton in 1993 on
sales to American Standard Inc.) increased $13,856,000, or 8.5%, reflecting the
economic recovery which began to affect the construction industry in 1993.
Total Revenues from continuing operations increased in 1993 by
$41,348,000, an increase of 21.7% as reflected in the following table:
Total Total
Revenues Revenues Increase
1993 1992 (Decrease) %
($000) ($000) ($000) Change
HVAC Segment:
1993 and 1992 Acquisitions $ 35,683 $ 9,336 $ 26,347
All other HVAC Divisions 177,423 163,567 13,856 + 8.5%
Computer Systems Segment 12,211 10,834 1,377 + 12.7%
Coil Handling Equipment 6,069 6,301 ( 232) - 3.7%
$ 231,386 $ 190,038 $ 41,348 + 21.7%
Consolidated operating profit from continuing operations increased in
1993 by $3,869,000, or 37.6%, reflecting the improved performances mentioned
above from the Company's historical HVAC product lines. The HVAC segment
reported increased operating profit, from $8,259,000 in 1992 to $12,335,000 in
1993, or 49.3%, for the reasons mentioned above. The Company's Computer Systems
segment reported operating profit of $1,374,000, down from $1,448,000 in 1992,
on approximately the same Average Net Assets Employed. The Coil Handling
Equipment segment reported operating profit of $458,000, down from $591,000 in
1992, on relatively unchanged Average Net Assets Employed.
Gross profit margins by segment for continuing operations for 1993 were
as follows:
Computer Coil Handling
HVAC Systems Equipment
Segment Segment Segment
1993 Gross Profit % 26.7% 36.1% 34.6%
1992 Gross Profit % 27.3% 39.0% 33.8%
Increase/Decrease 0.6% ( 2.9%) 0.8%
<PAGE>
The very slight decline in margins in the HVAC segment reflects the net
effect of improved margins in the Company's historical HVAC divisions, as well
as in Temprite and Hydrotherm, offset by relatively lower margin business
generated by the Company's Scranton, Pennsylvania location, which did not recur
in 1994.
Sales expense for continuing operations of the Company, as a percentage
of total revenues, was reduced from 14.1% in 1992 to 12.4% in 1993, principally
due to the effect of growth in the Company's private label (OEM) business, which
requires relatively less marketing expense per sales dollar, and the positive
economies of scale effect of expanded market shares in other HVAC product lines.
General and Administrative expenses (excluding the effect of corporate and
profit-center bonuses which were increased by 25%), as a percentage of revenues
increased from 5.2% in 1992 to 5.5% in 1993, principally due to the effect of
significant one time incremental general and administrative costs associated
with the operation of the Company's Scranton , Pennsylvania facility, and the
full year effect of MSI. Engineering expense, as a percentage of total revenues,
was reduced from 2.8% in 1992 to 2.6% in 1993, reflecting the same economies of
scale effects which affected sales expense in 1993. Interest expense from
continuing operations increased by approximately $200,000 reflecting the
combined effects of an increased investment in working capital, the investment
in Eafco on April 7, 1993, the investment in assets acquired from American
Standard Inc. on December 22, 1992, and the receipt of $12,000,000 in connection
with the sale of a controlling interest in the Company's Engineering Segment on
August 17, 1993.
Income tax expense for continuing operations for 1992, as a percentage of
pretax income, was 33.6% as compared to 40.2% for 1993, reflecting the effect of
FAS 109, which was adopted in 1992, as more fully described in Note 9 to the
Consolidated Financial Statements.
At December 31, 1993, the Company classified two of its manufacturing
facilities, Northvale, New Jersey and Scranton, Pennsylvania, as Property Held
for Sale. These properties are carried at cost which is less than estimated net
realizable value.
ANALYSIS: LIQUIDITY AND CAPITAL STRUCTURE
The Company's working capital was relatively unchanged in 1994 as
indicated in the following table:
12/31/94 Net Change 12/31/93 Net Change 12/31/92
$(000) $(000) $(000) $(000) $(000)
$ 36,628 $( 610) $ 37,238 $(21,041) $ 58,279
<PAGE>
The Company's long-term debt to equity ratio (including deferred
compensation as long-term debt) decreased from .09 at December 31,1993, to .003
at December 31, 1994, reflecting the effect of profitable operations in 1994 and
the resulting decline in long term debt (including deferred compensation as long
term debt) from $6,586,000 at December 31, 1993 to $236,000 at December 31,
1994. Total interest bearing debt was also substantially reduced, from
$20,892,000 at December 31, 1993 to $5,573,000 at December 31, 1994.
The Company's only significant additions to Net Assets Employed during
the year, other than ordinary growth in receivables and inventories, were plant
and equipment spending of $5,160,000, (which included the purchase of the
Company's formerly leased facility in Springfield, Ohio for $598,000), and the
acquisition of the assets of Aztec Sensible Cooling, Inc. for $1,372,000, as
more fully described in Note 2 to the Consolidated Financial Statements.
Management regards the Company's current capital structure and banking
relationships as fully adequate to meet foreseeable future needs. The Company
has not paid dividends on its common stock since 1979.
ENVIRONMENTAL DISCLOSURE
The Company is subject to numerous laws and regulations that govern the
discharge and disposal of materials into the environment. The Company is not
aware, at present, of any material administrative or judicial proceedings
against the Company arising under any federal, state or local environmental
protection laws or regulations ("Environmental Laws"). There are, however, a
number of activities in which the Company is engaged under the Environmental
Laws.
Permitting Activities
The Company is engaged in various matters with respect to obtaining,
amending or renewing permits required under the Environmental Laws to operate
each of its manufacturing facilities. Based on the information presently
available to it, management expects that all permit applications will be
routinely handled and management does not believe that the denial of any
currently pending permit application will have a material adverse effect on the
Company's financial position or the results of operations.
A facility of the Company has recently received a non-governmental demand
that it comply with its water discharge permit. The Company continues to
investigate the demand, but believes that it is currently in compliance with the
terms of its permit.
<PAGE>
Potentially Responsible Parties (PRP) Actions
The Company or various of its subsidiaries have been named or contacted
by state authorities and/or the Environmental Protection Agency (the "EPA")
regarding the Company's liability as a potentially responsible party ("PRP") for
the remediation of several sites, none of which actions represent a material
proceeding. The potential liability of the Company is based upon records that
show the Company or other corporations from whom the Company or its subsidiaries
acquired assets used the sites for the lawful disposal of hazardous waste
pursuant to third party agreements with the operators of such sites. Such PRP
actions generally arise when the operator of the site lacks the financial
ability to address compliance with Environmental Laws, decisions and orders
affecting the site in a timely and effective manner. The governmental authority
responsible for the site looks to the past users of the facility and their
successors to address the costs of remediation of the site.
In North Carolina, the company participated in a "de minimis settlement"
in which the Company contributed with numerous other entities to the payment of
funds for the surface remediation at a Superfund site, and for which the Company
received a release from federal and state authorities for all liability relating
to the surface contamination. The Company paid approximately $15,000 as its
share of clean-up costs pursuant to the settlement. State authorities continue
to investigate the extent of and remediation methods for groundwater
contamination at or near the site, and the Company recently joined a joint
defense group to help define and limit its liabilities whereby it may be
required to contribute additional non-material sums as part of the remediation
of groundwater contamination. The Company (along with many other corporations)
is involved in PRP actions for the remediation of two sites in Southington,
Connecticut, as a result of the EPA's preliminary assignments of derivative
responsibility for the presence of hazardous materials at the Southington sites
attributable to two other corporations from whom the Company purchased assets
after the hazardous materials had been disposed of at the Southington sites. As
a mitigation measure, the Company participated in "de minimis settlement"
proceedings at one of the Southington, Connecticut sites. The Company was
reimbursed by one company and has made demand of the other for reimbursement.
The Company is currently participating as part of a joint defense group in
discussions with the EPA for a "de minimis settlement" at the remaining
Southington, Connecticut site. Even if all attempts at reimbursement should
fail, the obligations of the Company in this matter are not expected to be
material to the Company's financial position or the results of operations.
Releases of Hazardous Materials
There have been releases of hazardous materials on a few parcels of
property which are presently owned, leased or operated by the Company. All of
such releases occurred prior to the acquisition or occupation of the properties
by the Company. All releases have been fully remediated or are in the process of
assessment or remediation. In most cases, other parties are responsible for the
costs of remediation and the Company is fully indemnified. Based on the
information presently available to it, management does not believe that the
costs of addressing any of the releases will have a material adverse effect on
the Company's financial position or the results of operations.
<PAGE>
Changes to Environmental Laws Affecting Operations and Product Design
The Company's operations and its HVAC products that involve combustion as
currently designed and applied entail the risk of future noncompliance with the
evolving landscape of Environmental Laws. The cost of complying with the various
Environmental Laws is likely to increase over time, and there can be no
assurance that the cost of compliance, including changes to manufacturing
processes and design changes to current HVAC product offerings that involve
atmospheric combustion, will not over the long-term and in the future have a
material adverse effect on the Company's results of operations.
Section II. Discontinued Operations
ENGINEERING SEGMENT
As described above, the Company's Engineering Segment reported pretax
(Loss) from Discontinued Operations, computed in accordance with APB 30, of
($2,323,000) and ($26,000), for the years 1993 (through August 17, 1993), and
1992, respectively, reflecting the increasing difficulties encountered by this
segment as the recessionary climate affecting the environmental services
(including laboratory services) market place worsened during these years.
Management's decision to sell a substantial portion of this segment to Duquesne
Enterprises, Inc. ("Duquesne") in return for $12,000,000, plus an option to sell
its remaining interest for $6,000,000 at a future date, together with other
contingent considerations, reflected management's judgement at that time that
its investment in this non-core segment could be best realized by aligning the
business with an enterprise more directly connected to the environmental
services market place.
<PAGE>
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders'
Mestek, Inc.
We have audited the accompanying consolidated balance sheet of Mestek,
Inc. and subsidiaries as of December 31, 1994, and the related consolidated
statements of income, shareholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Mestek,
Inc. and subsidiaries as of December 31, 1994, and the consolidated results of
their operations and their consolidated cash flows for the year then ended in
conformity with generally accepted accounting principles.
We have also audited Schedule II of Mestek, Inc. and subsidiaries as of
December 31, 1994 and for the year then ended. In our opinion, the schedule
presents fairly, in all material respects, the information required to be set
forth therein.
Grant Thornton LLP
GRANT THORNTON LLP
Boston, Massachusetts
March 31, 1995
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders'
Mestek, Inc.
We have audited the consolidated balance sheet as of December 31, 1993
and the related consolidated statements of income, shareholders' equity and cash
flows for each of the years in the two-year period ended December 31, 1993 of
Mestek, Inc. and subsidiaries. In connection with our audits of the consolidated
financial statements, we also have audited the financial statement schedules for
each of the years in a two-year period ended December 31, 1993, as listed in the
accompanying index. These consolidated financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
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 financial position of Mestek, Inc.
and subsidiaries at December 31, 1993, and the results of their operations and
their cash flows for each of the years in the two-year period ended December 31,
1993 in conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Springfield, Massachusetts
April 6, 1994
<PAGE>
MESTEK, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31,
1994 1993
(Dollars in thousands)
ASSETS
Current Assets
Cash and Cash Equivalents $ 4,201 $ 3,573
Accounts Receivable - less allowances of
$1,440 and $1,456 35,306 43,973
Unbilled Accounts Receivable 124 97
Inventories 32,102 30,175
Deferred Tax Benefit 1,088 1,355
Other Current Assets 3,269 4,787
Total Current Assets 76,090 83,960
Property and Equipment - net 18,483 17,299
Equity Investments 8,643 8,643
Property Held for Sale 5,870 6,418
Other Assets and Deferred Charges - net 11,344 10,305
Total Assets $ 120,430 $ 126,625
See Accompanying Notes to Consolidated Financial Statements
(Continued)
<PAGE>
MESTEK, INC.
CONSOLIDATED BALANCE SHEETS (continued)
As of December 31,
1994 1993
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current Portion of Long-Term Debt $ 5,337 $ 14,306
Accounts Payable 14,117 10,276
Accrued Salaries and Bonuses 3,008 3,787
Accrued Commissions 1,833 2,618
Progress Billings in Excess of Cost
and Estimated Earnings 2,721 2,108
Other Accrued Liabilities 12,446 13,627
Total Current Liabilities 39,462 46,722
Long-Term Debt 211 6,554
Deferred Compensation 25 32
Total Liabilities 39,698 53,308
Shareholders' Equity:
$5.00 Convertible Preferred Stock - 7,209
Common Stock - no par, stated value $0.05 per
share, 9,610,135 and 7,763,338 shares
issued, respectively 479 387
Paid in Capital 15,434 8,323
Retained Earnings 70,559 61,261
Treasury Shares, at cost (574,424 and
405,224 common shares, respectively) ( 4,808) ( 3,203)
Cumulative Translation Adjustment ( 932) ( 660)
Total Shareholders' Equity 80,732 73,317
Total Liabilities and Shareholders'
Equity $ 120,430 $ 126,625
See Accompanying Notes to Consolidated Financial Statements.
(Continued)
<PAGE>
MESTEK, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31,
1994 1993 1992
In thousands, except Earnings Per Common Share)
Net Sales $ 209,557 $ 219,175 $ 178,947
Net Service Revenues 14,461 12,211 11,091
Total Revenues 224,018 231,386 190,038
Cost of Goods Sold 149,180 160,234 129,746
Cost of Service Revenues 8,928 7,798 6,683
Gross Profit 65,910 63,354 53,609
Selling Expense 28,282 28,742 26,796
General and Administrative
Expense 12,757 14,441 11,187
Engineering Expense 5,734 6,004 5,328
Operating Profit 19,137 14,167 10,298
Interest Expense ( 839) ( 1,361) ( 1,177)
Amortization Expense ( 53) ( 55) ( 86)
Other Income (Expense), Net ( 2,197) ( 61) ( 882)
Income From Continuing Operations
Before Income Taxes 16,048 12,690 8,153
Income Taxes 6,750 5,107 2,743
Income From Continuing
Operations 9,298 7,583 5,410
Discontinued Operations
(Note 7):
(Loss) From Operations of
Discontinued Segment - ( 2,323) ( 26)
Applicable Income Tax Benefit - 793 9
- ( 1,530) ( 17)
Loss on Disposal of Discontinued
Segment - ( 2,425) -
Applicable Income Tax Benefit - 637 -
- ( 1,788) -
Income Before Cumulative
Effect of Change in Accounting
Method 9,298 4,265 5,393
Cumulative Effect of Change in
Accounting Method (Notes 1 and
9) - - 430
Net Income $ 9,298 $ 4,265 $ 5,823
See Accompanying Notes to Consolidated Financial Statements.
(Continued)
<PAGE>
MESTEK, INC.
CONSOLIDATED STATEMENTS OF INCOME (Continued)
For the years ended December 31,
1994 1993 1992
(Dollars in thousands)
Earnings (loss) per Common Share:
Income From Continuing Operations $ 1.02 $ .82 $ .57
(Loss) From Operations of
Discontinued Segment (Net of
Applicable Income Tax Benefit) - (.17) -
Loss on Disposal of Discontinued
Segment (Net of Applicable
Income Tax Benefit) - (.19) -
Income Before Cumulative Effect of
Change in Accounting Method 1.02 .46 .57
Cumulative Effect of Change in
Accounting Method (Notes 1 and 9) - - .05
Net Income $ 1.02 $ .46 $ .62
Weighted Average Shares Outstanding
(in thousands) 9,137 9,258 9,405
See Accompanying Notes to Consolidated Financial Statements.
(Continued)
<PAGE>
<TABLE>
MESTEK, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the years ended December 31,
1994, 1993, and 1992
<CAPTION>
$5.00
Cumulative
Convertible Cumulative
Preferred Common Paid In Retained Treasury Translation
Stock Stock Capital Earnings Shares Adjustment Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1991 $ 7,313 $ 386 $ 8,220 $ 51,900 $(1,422) $ - $ 66,397
Net Income 5,823 5,823
Cash Dividends:
Convertible Preferred ($5.00
per share) ( 366) ( 366)
Common Stock Repurchased ( 999) ( 999)
Conversion of $5.00 Convertible
Preferred ( 12) 12
Cumulative Translation Adjustment ( 303) ( 303)
Balance - December 31, 1992 $ 7,301 $ 386 $ 8,232 $ 57,357 $(2,421) $( 303) $ 70,552
Net Income 4,265 4,265
Cash Dividends:
Convertible Preferred ($5.00
per share) ( 361) ( 361)
Common Stock Repurchased ( 782) ( 782)
Conversion of $5.00 Convertible
Preferred ( 92) 1 91 -
Cumulative Translation Adjustment ( 357) ( 357)
Balance - December 31, 1993 $7,209 $ 387 $ 8,323 $ 61,261 $(3,203) $( 660) $ 73,317
Net Income 9,298 9,298
Common Stock Repurchase (1,605) (1,605)
Conversion of $5.00 Convertible
Preferred (7,203) 92 7,111
Redemption of $5.00 Convertible
Preferred ( 6) ( 6)
Cumulativ ation Adjustment ( 272) ( 272)
Balance - December 31, 1994 $ - $ 479 $15,434 $ 70,559 $(4,808) $( 932) $80,732
See Accompanying Notes to Consolidated Financial Statements
(Continued)
</TABLE>
<PAGE>
MESTEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
1994 1993 1992
(Dollars in thousands)
Cash Flows from Operating Activities:
Net Income $ 9,298 $ 4,265 $ 5,823
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation and Amortization 4,712 6,205 6,766
Provision for Losses on Accounts
Receivable, net of write offs ( 16} 462 532
Changes in assets and liabilities net
of effects of acquisitions and
dispositions:
Accounts Receivables 9,353 ( 4,765) 350
Unbilled Accounts Receivable ( 27 ( 590) 79
Inventory ( 1,464 4,416 242
Accounts Payable 3,841 ( 3,492) ( 550)
Other Current Liabilities ( 2,745) 6,102 ( 1,553)
Progress Billings 613 429 498
Deferred Compensation ( 7) ( 63) ( 417)
Other 797 ( 1,616) ( 940)
Net Cash Provided by Operating
Activities 24,355 11,353 10,830
Cash Flows from Investing Activities:
Capital Expenditures ( 5,160) ( 4,293) ( 3,833)
Disposition of Property & Equipment - 853 162
Acquisition of Businesses and Other
Assets Net of Cash Acquired ( 1,372) ( 7,449) ( 19,215)
Disposition of Business Segment - 12,000 -
Net Cash Provided by (Used in)
Investing Activities ( 6,532) 1,111 ( 22,886)
Cash Flows from Financing Activities:
Net Borrowings (Repayments) Under
Revolving Credit Agreement ( 5,866) ( 659) 4,810
Principal Payments Under Long
Term Debt Obligations ( 9,446) ( 13,535) ( 4,884)
Proceeds from Issuance of Long
Term Debt - 3,467 13,909
Redemption of Redeemable Preferred
Stock - - ( 765)
Redemption of $5.00 Convertible
Preferred Stock ( 6) - -
Redemption of Common Stock ( 1,605) ( 782) ( 999)
Dividends Paid - ( 361) ( 366)
Net Cash Provided by (Used in)
Financing Activities ( 16,923) ( 11,870) 11,705
Net Increase (Decrease) in Cash and
Cash Equivalents 900 594 ( 351)
Translation effect on Cash ( 272) ( 414) ( 303)
Cash and Cash Equivalents -
Beginning of Year 3,573 3,393 4,047
Cash and Cash Equivalents -
End of Year $ 4,201 $ 3,573 $ 3,393
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
MESTEK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements include the accounts of Mestek,
Inc. and its wholly-owned subsidiaries, collectively referred to as the Company.
All material intercompany accounts and transactions have been eliminated in
consolidation. As more fully described in Note 7, the Company sold a substantial
portion of its interest in its Environmental Engineering Segment during 1993.
Accordingly, the operations of this segment are separately presented, in
accordance with APB 30, in the accompanying Statements of Income for the years
1993 and 1992, under the heading, (Loss) from Operations of Discontinued
Segment.
Revenue recognition and unbilled receivables
Revenue from product sales is recognized at the time of shipment.
Revenue from the computer processing and software development business is
recognized on the basis of completed contracts.
Unbilled receivables represent revenue earned in the current period but
not billed to the customer until future dates, usually within one month.
Cash equivalents
Cash equivalents consisted principally of overnight investments in U.S.
Treasury securities with original maturities of three months or less.
Inventories
Inventories are valued at the lower of cost or market. Cost of
inventories is determined principally by the last-in, first-out (LIFO) method.
Property and equipment
Property and equipment is carried at cost. Depreciation, including
amortization of capitalized leases, is computed using the straight-line method
(for assets acquired before 1989) and accelerated methods (for assets acquired
after 1988) over the estimated useful lives of the assets or the life of the
lease, if shorter. When assets are retired or otherwise disposed of, the cost
and related accumulated depreciation are removed from the accounts and any
resulting gain or loss is reflected in income for the period. The cost of
maintenance and repairs is charged to income as incurred; significant
improvements are capitalized.
<PAGE>
Advertising Expense
Advertising costs are charged to operations as incurred, such charges
aggregated $2,426,000, $2,655,000 and $2,192,000 for the years ended December
31, 1994, 1993 and 1992 respectively.
Equity Investments
The Company's 48.6 percent interest in H. B. Smith Company, Incorporated
("HBS") and 46.8 percent interest in EAFCO, Inc., ("EAFCO"), are accounted for
under the equity method.
Research and Development Expense
Research and development expenses are charged to operations as
incurred. Such charges aggregated $537,000, $490,000, and $673,000, for the
years ended December 31, 1994, 1993 and 1992, respectively.
Software development Expenses
The Company's MCS, Inc. subsidiary is in the business of application
software and systems development. Statement of Financial Accounting Standards
No. 86 requires that development costs incurred subsequent to the establishment
of technological feasibility for the product be capitalized, however, the
Company does not believe that such amounts are material to the consolidated
financial statements. Accordingly, all development costs are charged to expense
as incurred. Such charges aggregated $910,000, $702,000, and $695,800, during
1994, 1993, and 1992, respectively.
Treasury shares
Common stock held in the Company's treasury has been recorded at cost.
Earnings per common share
Earnings per share have been computed based upon the average number of
common shares outstanding giving effect, where dilutive, to common shares which
would be issued upon conversion of the $5.00 Convertible Preferred Stock.
Postretirement and Postemployment benefits
In 1990, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions". The Statement is effective for
fiscal years beginning after December 15, 1992. The Company does not provide
significant postretirement benefits and adoption of the Statement in 1993 did
not have a material effect on the consolidated financial statements.
<PAGE>
In 1992, the FASB issued Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Post Employment Benefits". This Statement is
effective for fiscal years beginning after December 15, 1993. The Company does
not provide significant postemployment benefits and adoption of this Statement
on January 1, 1994 did not have a material effect on the consolidated financial
statements.
Currency Translation
Assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at exchange rates prevailing on the balance sheet date.
Results of operations denominated in foreign currencies are translated into U.S.
dollars at average exchange rates. Adjustments resulting from such translations
are excluded from the determination of income and are accumulated in a separate
component of shareholders' equity.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes", ("Statement 109"). Under the asset and liability method of Statement
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Effective January 1, 1992, the Company adopted Statement 109 and has
reported the cumulative effect of that change in the method of accounting for
income taxes in the 1992 consolidated statement of income.
Property Held for Sale
The consolidated financial statements include, under the heading
Property Held for Sale, manufacturing facilities in Northvale, New Jersey and
Scranton, Pennsylvania. These properties are carried at cost which is less than
estimated net realizable values.
<PAGE>
2. BUSINESS ACQUISITIONS
On November 1, 1994, pursuant to a motion approved by the United States
Bankruptcy Court for the District of New Mexico, the Company acquired
substantially all of the inventory, accounts receivable, and fixed tangible and
intangible assets of Aztec Sensible Cooling, Inc. (Aztec) a manufacturer of
evaporative cooling and other custom air handling equipment in Albuquerque, New
Mexico. The purchase price for the assets acquired, was $1,372,000.
This acquisition was accounted for as a purchase. Accordingly, the
Company has included the results of this acquired business in its consolidated
statement of operations for the period starting with the acquisition date.
Supplemental proforma information is not deemed meaningful in that the
transaction is not material to the financial statements of the Company taken as
a whole.
3. INVENTORIES
Inventories consisted of the following at December 31:
1994 1993
---- ----
Raw materials $ 17,524,000 $ 17,188,000
Work-in-progress 13,441,000 9,415,000
Finished goods 8,241,000 9,563,000
------------ ------------
39,206,000 36,166,000
Less provision for LIFO
method of valuation 7,104,000 5,991,000
------------ ------------
$ 32,102,000 $ 30,175,000
============ ============
Progress billings exceeded related contract costs by $2,721,000, and
$2,108,000 at December 31, 1994 and 1993, respectively. As such, these amounts
are reported as deferred income in the accompanying consolidated financial
statements.
<PAGE>
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31:
Depreciation
and Amortization
Estimated Useful
1994 1993 Lives
---- ---- -----------
Land $ 750,000 $ 750,000
Buildings 10,662,000 9,805,000 15 - 31 years
Leasehold Improvements 2,873,000 2,492,000 10 - 31 years
Equipment 34,442,000 30,456,000 3 - 10 years
------------ ------------
48,727,000 43,503,000
Accumulated Depreciation (30,244,000) (26,204,000)
------------ ------------
$ 18,483,000 $ 17,299,000
============ ============
The above amounts include $1,370,000, and $267,000 at December 31, 1994
and December 31, 1993, respectively, in assets that had not yet been placed in
service by the Company. No depreciation was recorded in the related periods for
these assets.
Of the long-term debt described in Note 6, approximately $2,148,000, and
$2,946,000 was secured by certain of the assets included above as of December
31, 1994 and December 31, 1993, respectively.
Depreciation and leasehold amortization expense for the years ended
December 31, 1994, 1993, and 1992 aggregated $4,669,000, (reduced due to the
effect of Discontinued Operations), $6,205,000, and $6,766,000, respectively.
5. EQUITY INVESTMENTS
H. B. Smith Company Incorporated (HBS)
As of December 31, 1992, the Company's investment in HBS was reduced to
zero reflecting the Company's equity in HBS' cumulative losses. The Company has
no obligation to fund future HBS operating losses.
<PAGE>
Eafco, Inc. (EAFCO)
On April 7, 1993, the Company acquired a 46.8% interest in EAFCO, Inc.,
(EAFCO), a Pennsylvania company, located in Boyertown, Pennsylvania in return
for cash, notes and certain items of foundry equipment valued in total at
$8,643,000.
EAFCO produces cast iron boiler sections for the boiler industry. EAFCO
used a portion of the proceeds to modernize its foundry facilities and equipment
and began supplying cast iron boiler sections for use in Mestek's boiler
subsidiaries in 1993. This investment is accounted for in accordance with the
equity method of accounting. The Company reported its share of EAFCO's operating
results, which were not material, in Other Income (Expense) in the consolidated
financial statements in 1994 and 1993.
The Company purchases approximately $18,000,000 on an annualized basis
from Eafco and HBS together. The Company's net receivable from Eafco and HBS
together as of December 31, 1994 was $1,474,000.
6. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
1994 1993
---- ----
Senior Notes $ 1,000,000 $ 3,000,000
Revolving Loan Agreement - 5,866,000
Note Payable Bank - 5,000,000
Notes Payable American Standard Inc. 1,903,000 4,273,000
Note Payable Eafco, Inc. 2,400,000 2,400,000
Other Bonds and Notes Payable 245,000 321,000
----------- ------------
5,548,000 20,860,000
Less Current Maturities 5,337,000 14,306,000
----------- ------------
$ 211,000 $ 6,554,000
=========== ============
Senior Notes - On July 1, 1987, the Company executed a Note Agreement
with a major insurance company under which the Company issued $10,000,000 of
9.75% unsecured Senior Notes. Interest is payable quarterly. Principal is
payable in ten annual installments of $1,000,000. These funds were used to pay
down the then outstanding balance under the Revolving Loan Agreement.
Revolving Loan Agreement - On January 1, 1992, the Company entered into a
Revolving Loan Agreement and Letter of Credit Facility (the "Agreement") with a
commercial bank. The Agreement, originally set to expire January 1, 1993, was
extended through April 30, 1995. For the period ending April 30, 1995, the
Agreement provides $38 million of unsecured revolving credit and standby letter
of credit capacity. Borrowings under the Agreement bear interest, at the
discretion of the borrower, at a floating rate based on the bank's prime rate
less .75%, or LIBOR plus a negotiated spread, and may be used for working
capital
<PAGE>
or acquisition purposes, or to retire previously incurred debt. No borrowings
were outstanding at December 31, 1994. Commitment fees on letters of credit are
3/4% annually. Outstanding letters of credit, principally related to the
Company's insurance programs, aggregated $3,827,000, at December 31, 1994.
Notes Payable American Standard Inc. - On December 22, 1992 the Company
executed several non-interest bearing notes in connection with the purchase of
certain assets from American Standard Inc. The notes, after giving effect to
certain adjustments contemplated there-in, are reflected in the Consolidated
Financial Statements net of imputed interest. The final installment on the notes
of $1,903,000 was paid on January 1, 1995.
The interest rate assumed in computing the imputed interest adjustment
was 5.25%, representing the Company's incremental cost of funds as of December
22, 1992.
Note Payable Eafco, Inc. - On April 7, 1993, the Company executed an
unsecured promissory note in the amount of $2,400,000 in connection with the
acquisition of a 46.8% interest in Eafco as more fully described in Note 5 to
the Consolidated Financial Statements. Borrowings under the note, which matured
and were paid on January 5, 1995, bore interest at the prime rate of interest on
a floating basis.
Other Bonds and Notes Payable - The Company is obligated under the terms
of an Industrial Revenue Bond (the Bond) secured by its facility in Wyalusing,
Pennsylvania. The Bond bears interest at 5% and matures on July 25, 2001. The
outstanding balance under the Bond at December 31, 1994 was $245,000.
The Company is also obligated under outstanding letters of credit at
December 31, 1994 issued by ABN Amro Bank related to the Company's insurance
programs totalling $1,444,178.
The loan agreements related to the Senior Notes, and the Revolving Loan
Agreement, contain financial covenants which require that the Company maintain
certain current ratios, working capital amounts, capital bases and leverage
ratios. These agreements also contain restrictions regarding the creation of
indebtedness, the occurrence of mergers or consolidations, the sale of
subsidiary stock, and the payment of dividends in excess of 50% of net income.
Cash paid for interest on borrowings during 1994, 1993 and 1992 amounted
to $839,000, $1,535,000, and $1,608,000, respectively.
Maturities of long-term debt in each of the next five years are as
follows:
1995 - $5,337,000
1996 - $ 36,000
1997 - $ 38,000
1998 - $ 40,000
1999 - $ 42,000
<PAGE>
It is management's intention, upon expiration of the Revolving Loan
Agreement on April 30, 1995 to extend or otherwise negotiate a similar financing
agreement for its future capital needs.
The fair value of the Company's long-term debt is estimated based on the
current interest rates offered to the Company for debt of the same remaining
maturities. Management believes the carrying value of the debt approximates its
fair value as of December 31, 1994.
7. DISCONTINUED OPERATIONS
On August 17, 1993, the Company completed the sale of 70% of the
outstanding common stock of its Chester Environmental, Inc. subsidiary (Chester)
to Duquesne Enterprises, Inc. (Duquesne), a Pennsylvania corporation
headquartered in Pittsburgh, Pennsylvania. The Company received $12,000,000 plus
certain "put" rights exercisable at various dates through 1999 which enable the
Company, at its option, to sell its remaining 30% interest for a minimum of
$6,000,000. The Company has accounted for the transaction as a disposal of a
business segment in accordance with APB 30. Accordingly, the Company recorded a
loss (Loss on Disposal of Discontinued Segment) on the sale which, together with
the effect of writing its remaining investment down to $6,000,000, amounted to
$1,788,000, net of a related tax benefit of $637,000. The operations of Chester
are separately reported in accordance with APB 30 in the accompanying
Consolidated Statements of Income for the years 1993 and 1992 under the heading
(Loss) from Operations of Discontinued Segment. For this purpose the operations
of Chester are included only through the date of sale, August 17, 1993.
Subsequent to this date, the Company accounts for its remaining investment in
Chester, which is included in Other Assets and Deferred Charges, under the cost
method of accounting, since the Company does not have the ability to exert
significant influence over the operations or financial policies of Chester. The
"put" rights received by the Company also allow the Company, under certain
circumstances, at its option, to sell its remaining interest for $8,000,000. No
value was assigned to this additional consideration in the computation of the
Loss on Disposal of Discontinued Segment. Also, under the terms of the Agreement
of Sale, Duquesne received a "call" right which enables it to purchase, at its
option, the Company's remaining interest for $12,000,000. Interest expense has
been allocated to the Loss from Discontinued Operations for the years 1993 and
1992 based upon the ratio of net assets (defined as average total assets less
average non-interest bearing indebtedness) of the discontinued segment to
consolidated net assets. Corporate general and administrative expenses
originally allocated to the Discontinued Segment totaling $310,000 and $523,000,
for the years 1993 and 1992 respectively, have been reallocated to the HVAC
Segment in the accompanying Consolidated Statements of Income in accordance with
APB 30. Revenues of the discontinued segment totaled $28,147,000 and $52,763,000
for 1993 (through August 17, 1993) and 1992, respectively.
<PAGE>
8. SHAREHOLDERS' EQUITY
The Company has authorized common stock of 20,000,000 shares with no par
value, and a stated value of $0.05 per share. As of December 31, 1994, John E.
Reed, Chairman, President and CEO of the Company and Stewart B. Reed, Executive
Vice President of the Company and son of John E. Reed, together beneficially own
a majority of the outstanding shares of the Company's common stock.
The Company has authorized 250,000 shares of $5.00 convertible
noncumulative, nonvoting preferred stock with a par value of $100 per share (the
"Convertible Preferred"). 73,260 shares of the Convertible Preferred were issued
on July 31, 1986. The Convertible Preferred was convertible into a total of
1,878,462 shares of Mestek common stock, subject to certain antidilution
provisions. As of December 31, 1993, 1,170 of the preferred shares had been
converted into 29,993 shares of Mestek common. The remaining Convertible
Preferred was redeemable at the option of the Company at par value plus any
declared but unpaid dividends, any time after July 31, 1993. Pursuant to a
notice of redemption dated April 22, 1994, all but 64 shares of the Convertible
Preferred were converted into 1,838,259 shares of Common Stock of the Company.
The remaining 64 shares of Convertible Preferred were redeemed on June 24, 1994.
9. INCOME TAXES
The Company adopted FAS 109, "Accounting for Income Taxes", as of January
1, 1992. The cumulative benefit of this change in accounting for income taxes,
$430,000, is determined as of January 1, 1992 and is reported separately in the
Consolidated Statements of Income for the year ended December 31, 1992. Income
before income taxes included foreign earnings (losses) of ($606,000), ($449,000)
and ($1,431,000) in 1994, 1993, and 1992, respectively. Income tax expense
(benefit) from continuing operations consisted of the following:
1994 1993 1992
---- ---- ----
Federal income tax:
Current $ 5,298,000 $ 4,052,000 $ 2,657,000
Deferred ( 89,000) ( 249,000) ( 127,000)
State income tax:
Current 1,534,000 1,306,000 937,000
Deferred ( 5,000) ( 36,000) ( 150,000)
Foreign income tax:
Current 12,000 - ( 255,000)
Deferred -0- 34,000 ( 319,000)
------------ ------------ ------------
Income taxes from
Continuing Operations$ 6,750,000 $ 5,107,000 $ 2,743,000
============ ============ ============
Total income tax expense for continuing operations differed from
"expected" income tax expense, computed by applying the U.S. federal income tax
rate of 35 percent (34 percent prior to 1994) to earnings before income tax, as
follows:
<PAGE>
1994 1993 1992
---- ---- ----
Computed "expected" income tax $ 5,617,000 $ 4,314,000 $ 2,772,000
State Income tax, net of
federal tax benefit 994,000 838,000 519,000
Benefit of foreign loss not
allocated to income statement 212,000 - -
Foreign tax rate differential ( 82,000) ( 152,000) ( 88,000)
Reduction in prior year over
accrual - - ( 478,000)
Change in beginning year balance
of the valuation allowance for
deferred tax assets allocated
to income tax expense - 195,000 -
Other - net 9,000 ( 88,000) 18,000
----------- ----------- ------------
Income Taxes $ 6,750,000 $ 5,107,000 $ 2,743,000
=========== =========== ===========
A deferred income tax (expense) benefit results from temporary
differences in the recognition of income and expense for income tax and
financial reporting purposes. The components of and changes in the net deferred
tax assets (liability) which give rise to this deferred income tax (expense)
benefit for the year ended December 31, 1994 are as follows:
Change
December 31, (Expense) December 31,
1993 Benefit 1994
---- ------- ----
Deferred Tax Assets:
Warranty Reserve $ 367,000 $ 263,000 $ 630,000
Deferred Compensation 13,000 ( 13,000) -0-
Compensated Absences 418,000 104,000 522,000
Inventory Valuation 281,000 2,000 283,000
Accounts Receivable Valuation 572,000 50,000 622,000
Self-Insurance 140,000 ( 140,000) -0-
Capital Loss Carryforward 494,000 ( 171,000) 323,000
State Tax Operating Loss
Carryforward 155,000 ( 55,000) 100,000
Foreign Tax Operating
Carryforward 480,000 224,000 704,000
Deferred Income on Sale of Assets
to Nonconsolidated Investees 213,000 -0- 213,000
----------- ----------- -----------
Total Gross Deferred Tax Assets 3,133,000 264,000 3,397,000
Less Valuation Allowance ( 195,000) -0- ( 195,000)
Net Deferred Tax Assets 2,938,000 264,000 3,202,000
----------- ----------- -----------
Deferred Tax Liabilities:
Prepaid Expenses ( 449,000) ( 204,000) ( 653,000)
Depreciation ( 588,000) 145,000 ( 443,000)
Other ( 87,000) ( 299,000) ( 386,000)
----------- ----------- -----------
Net Deferred Tax Liabilities (1,124,000) ( 358,000) (1,482,000)
----------- ----------- -----------
Total Deferred Tax Asset $ 1,814,000 $( 94,000) $ 1,720,000
=========== =========== ===========
<PAGE>
A valuation allowance of $195,000 was established at December 31, 1993.
This allowance reflects uncertainties as to the realization of a portion of the
foreign tax operating loss carryforward identified above. At December 31, 1994,
no valuation allowance has been established relative to the remaining foreign
tax operating loss carryforward, state tax operating loss carryforward, or
capital loss carryforward. It is management's belief that it is more likely than
not that these carryforwards will be utilized prior to their expiration. The
Company has available to it a number of tax planning opportunities which support
this conclusion.
At December 31, 1994, the Company has state tax operating loss, foreign
tax operating loss and capital loss carryforwards of approximately $2,115,000,
$1,409,000, and $797,000, respectively, which are available to reduce future
income taxes payable, subject to applicable "carryforward" rules and
limitations. These losses begin expiring approximately as follows:
State Foreign Capital
1997 $ 470,000 $ - $ 797,000
2007 1,645,000 1,409,000 -
---------- ---------- ----------
$2,115,000 $1,409,000 $ 797,000
========== ========== ==========
Cash paid for income taxes during 1994, 1993, and 1992, amounted to
$5,990,000, $1,889,000, and $4,026,000, respectively.
10. LEASES
The Company leases various manufacturing facilities and equipment from
companies owned by certain officers and directors of the Company, either
directly or indirectly, through affiliates. The leases generally provide that
the Company will bear the cost of property taxes and insurance.
Details of the principal operating leases with related parties as of
December 31, 1994 are as follows:
Basic
Date Annual Minimum
of Rental Future
Lease Term for 1994 Rentals
----- ---- -------- -------
Sterling Realty Trust
Land and Building - Main 12/17/84 15 years $ 192,000 $ 960,000
Land and Building - Engineering 07/01/83 15 years 42,000 147,000
Land and Building - South Complex 01/01/94 15 years 256,800 3,595,200
Machinery & Equipment 01/01/93 15 years 41,460 124,380
(Westfield, Farmville and Wrens
Locations)
<PAGE>
Machinery Rental
Machinery & Equipment 01/01/93 5 years 223,980 671,940
(Westfield, Farmville, Wrens,
South Windsor and Clinton Locations)
Elizabeth C. Reed Trust
Machinery & Equipment 01/01/93 5 years 14,100 42,300
Production Realty
Land and Building N/A monthly 26,400 2,200
Machinery & Equipment N/A monthly 41,400 3,450
Rudbeek Realty Corp.
(Farmville Location) 11/02/92 6 years 324,000 1,296,000
MacKeeber
(South Windsor Location) 07/01/90 14.5 years 554,100 6,468,465
Rent expense for operating leases, including those with related parties,
was $2,433,000, (reduced due to the effect of Discontinued Operations),
$4,699,000, and $5,250,000, for the years ended December 31, 1994, , 1993 and
1992, respectively.
Future minimum lease payments under all noncancelable leases as of December
31, 1994 are as follows:
Operating
Year Ending December 31, Leases
1995 $ 2,140,000
1996 2,093,000
1997 2,060,000
1998 1,738,000
1999 1,429,000
After 1999 5,875,000
-----------
Total minimum lease payments $15,335,000
11. EMPLOYEE BENEFIT PLANS
The Company maintains a non-contributory profit-sharing plan covering all
eligible employees. Contributions to the plan were $789,000, $755,000, and
$685,000, for the years ended December 31, 1994, 1993, and 1992, respectively.
Assets of the plan were $8,286,000, $8,449,000, and $7,271,000, at December 31,
1994, 1993, and 1992, respectively. Contributions to the Plan are defined as
3.0% of gross wages up to the current Old Age, Survivors, and Disability,
<PAGE>
(OASDI), limit and 6.0% of the excess over the Old Age, Survivors, and
Disability, (OASDI), limit, subject to the maximum allowed under the Employee
Retirement Income Security Act, (ERISA). The plan's vesting terms are 20%
vesting after 3 years of service, 40% after 4 years, 60% after 5 years, 80%
after 6 years, and 100% vesting after 7 years.
In addition to the profit-sharing plan, the Company also offers the
following defined contribution benefit plans:
A Retirement Savings Plan is offered to employees covered under regional
collective bargaining agreements. Service eligibility requirements differ by
division and collective bargaining agreement. Participants may elect to have up
to 15% of their compensation withheld, up to the maximum allowed by the Internal
Revenue Code. Participants may also elect to make nondeductible voluntary
contributions up to an additional 10% of their gross earnings each year within
the legal limits. The Company contributes differing amounts depending upon the
division's collective bargaining agreement. Contributions are funded on a
current basis. Contributions to the Plan were $176,000, $178,000 and $131,000,
for the years ended December 31, 1994, 1993, and 1992, respectively.
A 401(K) Plan is offered to salaried employees not covered by a
collective bargaining agreement, who chose to participate, and who have at least
one year of 1,000 hours or more of service at the time of participation.
Participants may elect to have up to 15% of their compensation withheld, up to
the maximum allowed by the Internal Revenue Code. Participants may also elect to
make nondeductible voluntary contributions up to an additional 10% of their
gross earnings each year within the legal limits. The Company contributes $.025
of each $1.00 deferred by participants and deposited to the Plan not to exceed
1.50% of an employee's compensation. The Company does not match any amounts for
withholdings from participants in excess of 6.00% of their compensation or for
any nondeductible voluntary contributions. Contributions are funded on a current
basis. Contributions to the Plan were $212,000, $197,000, and $170,000 for the
years ended December 1994, 1993, and 1992, respectively.
One of the Company's subsidiaries maintains a defined contribution target
benefit pension plan which covers substantially all of it's employees. The
Internal Revenue Service has issued a favorable determination letter for this
plan. Pension costs are accrued annually based on contributions earned by
participants under plan provisions as determined by an independent actuary. The
total expense related to this pension plan for the twelve months ended December
31, 1994, 1993, and 1992 was $59,000, $48,000, and $51,000, respectively.
The Company maintains bonus plans for its officers and other key
employees. The plans generally allow for annual bonuses for individual employees
based upon the operating results of related profit centers in excess of a
percentage of the Company's investment in the respective profit centers. The
Company also has employment agreements with certain executive officers.
<PAGE>
12. COMMITMENTS AND CONTINGENCIES
Mestek and its subsidiaries are subject to several legal actions and
proceedings in which various monetary claims are asserted. Management, after
consultation with its corporate counsel and outside counsel, does not anticipate
that any ultimate liability arising out of all such litigation and proceedings
will have a material adverse effect on the financial condition of the Company.
David R. Macdonald, a member of the Company's Board of Directors, is a
partner in the law firm of Baker & McKenzie. Management from time to time
retains Baker & McKenzie to perform legal services for the Company. Amounts paid
for such services aggregated $93,000, $378,000, and $659,000, for the years
ended December 31, 1994, 1993, and 1992, respectively.
The Company is obligated as guarantor with respect to the debt of MacKeeber
Associates Limited Partnership, a Connecticut Limited Partnership, under an
Industrial Development Bond issued in 1984 by the Connecticut Development
Authority. The balance outstanding under the bond as of December 31, 1994 was
$1,498,000.
13. SEGMENT INFORMATION
The Company has historically operated in the following segments: heating,
ventilating and air conditioning equipment ("HVAC"); environmental engineering
and consulting services ("Engineering"); computer software development and
system design ("Computer Systems"); and the manufacture of coil handling
equipment ("Coil Handling Equipment").
The HVAC segment includes the design and manufacture primarily of
residential, commercial and industrial hydronic heat distribution products,
including finned-tube and baseboard radiation equipment, gas-fired heating and
ventilating equipment, air damper equipment and related products used in air
distribution.
The Computer Systems segment includes computer processing services, sale
and installation of computer systems including software development and design.
The Coil Handling Equipment segment includes the design and manufacture
of coil stock handling devices such as coil straighteners, feeders and other
shaping equipment.
Intersegment sales are not significant. Operating income is defined as
net sales directly related to a segment's operations, less operating expenses.
Identifiable assets by segments are those assets used in the operations of that
segment. The Company has not identified any of its assets as corporate assets.
The following table presents segment information for the years ended
December 31, 1994, 1993, and 1992. Segment information reflecting the operations
of acquired businesses is shown only for the periods following acquisition.
Segment information for the Engineering segment is excluded from this table due
to the disposition of this segment in 1993, as more fully explained in Note 7.
<PAGE>
Also, Operating Profit has been adjusted in 1993 and 1992 to give effect
to the reclassification of corporate overhead originally charged to the
Engineering segment in accordance with APB 30.
1994 1993 1992
---- ---- ----
(Dollars in thousands)
Total Revenues
HVAC $ 200,445 $ 213,106 $ 172,903
Computer Systems 14,461 12,211 10,834
Coil Handling Equipment 9,112 6,069 6,301
--------- --------- ---------
Total Revenues $ 224,018 $ 231,386 $ 190,038
========= ========= =========
Operating Profit
HVAC 15,310 12,335 8,259
Computer Systems 2,244 1,374 1,448
Coil Handling Equipment 1,583 458 591
--------- --------- ---------
Total Operating Profit $ 19,137 $ 14,167 $ 10,298
========= ========= =========
Other information regarding the segments for the years 1994, 1993, and 1992
is as follows:
1994
Identifiable Capital Depreciation
assets expenditures expense
(Dollars in thousands)
HVAC $ 106,011 $ 4,635 $ 4,516
Engineering 6,000 0 0
Computer Systems 4,866 135 62
Coil Handling Equipment 3,553 390 91
--------- --------- ---------
Total $ 120,430 $ 5,160 $ 4,669
========= ========= =========
1993
Identifiable Capital Depreciation
assets expenditures expense
(Dollars in thousands)
HVAC $ 112,963 $ 3,590 $ 4,284
Engineering 6,000 622 1,749
Computer Systems 3,947 39 55
Coil Handling Equipment 3,715 42 65
----------- ------------ -----------
Total $ 126,625 $ 4,293 $ 6,153
=========== ============ ===========
<PAGE>
1992
Identifiable Capital Depreciation
assets expenditures expense
(Dollars in thousands)
HVAC $ 102,233 $ 3,535 $ 4,089
Engineering 27,065 207 2,507
Computer Systems 4,444 69 58
Coil Handling Equipment 3,416 22 71
---------- ---------- -----------
Total $ 137,158 $ 3,833 $ 6,725
========== ========== ===========
The Company sells its HVAC products primarily to contractors, installers,
and end users in the construction industry, wholesale distributors, and original
equipment manufacturers. At December 31, 1994 and 1993, accounts receivable, net
of allowances, for the HVAC segment totaled $30,837,000, and $40,900,000,
respectively. These receivables are generally of high quality, and the Company's
history is that losses from bad debts are not excessive. Management believes
that established reserves at December 31, 1994 are adequate to absorb any such
losses.
14. SELECTED QUARTERLY INFORMATION (UNAUDITED)
The table below sets forth selected quarterly information for each full
quarter of 1994 and 1993. (Dollars in thousands except per common share
amounts).
1994 1st 2nd 3rd 4th
- ----
Quarter Quarter Quarter Quarter
Total Revenues $50,043 $46,155 $64,738 $63,082
Gross Profit $14,391 $13,420 $18,267 $19,832
Net Income $ 1,722 $ 1,595 $ 2,829 $ 3,152
Per Common Share:
Net Income $ .19 $ .17 $ .31 $ .35
1st 2nd 3rd 4th
1993 Quarter Quarter Quarter Quarter
- ---- ------- ------- ------- -------
Total Revenues $49,925 (1) $47,980 (1) $62,851 $70,630
Gross Profit $13,742 (1) $12,905 (1) $16,865 $19,842
Net Income $ 1,039 $ 1,110 $ 391 $ 1,725
Per Common Share
Net Income $ .11 $ .12 $ .04 $ .19
<PAGE>
(1) Total Revenues and Gross Profit for the first and second quarters of 1993
have been restated to reflect the reclassification of operating results of the
Company's Engineering segment to (Loss) From Operations of Discontinued Segment,
as more fully explained in the Note 7 to the Consolidated Financial Statements.
15. COMMON STOCK BUYBACK PROGRAM
In 1994 and 1993 the Company continued its program of selective
"open-market" purchases of common shares, originally announced in 1990. 169,200
and 85,773 of such shares were acquired in 1994 and 1993, respectively. In
addition, in 1993 5,054 shares were acquired by the Company under a common stock
buy back program for holders of fewer than 100 shares. All such shares are
accounted for as treasury shares at December 31, 1994 and 1993, respectively.
16. OTHER TRANSACTIONS
On March 3, 1995, the Company, through its Delaware-based subsidiary, West
Homestead Joint Venture Corporation, concluded the sale of its remaining 30%
partnership interest in Mesta International (formerly Mesta Engineering Company)
to Shougang Mechanical Equipment Co. of Pennsylvania, Inc., a U.S. subsidiary of
a Chinese industrial company, for $850,000 in cash and the assumption of all
liabilities of Mesta International. The Company will report a gain on the
transaction in 1995 of approximately $850,000.
<PAGE>
PART III
With respect to items 10 through 13, the company will file with the
Securities and Exchange Commission, within 120 days of the close of its fiscal
year, a definitive proxy statement pursuant to Regulation 14-A.
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors of the Company will be set forth in the
Company's proxy statement relating to the annual meeting of shareholders to be
held May 24, 1995, and to the extent required, is incorporated herein by
reference. Information regarding executive officers of the Company is forth
under the caption "Executive Officers".
Item 11 - EXECUTIVE COMPENSATION
Information regarding executive compensation will be set forth in the
Company's proxy statement relating to the annual meeting of shareholders to be
held May 24, 1995, and, to the extent required, is incorporated herein by
reference.
The report of the Compensation Committee of the Board of Directors of the
Company shall not be deemed incorporated by reference by any general statement
incorporating by reference the proxy statement into any filing under the
Securities Exchange Act of 1934, and shall not otherwise be deemed filed under
such Act.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
Information regarding security ownership of certain beneficial owners and
management will be set forth in the Company's proxy statement relating to the
annual meeting of shareholders to be held May 24, 1995, and, to the extent
required, is incorporated herein by reference.
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions will
be set forth in the Company's proxy statement relating to the annual meeting of
shareholders to be held May 24, 1995, and, to the extent required, is
incorporated herein by reference.
<PAGE>
PART IV
Item 14 - EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
INDEX
Pages of
this report
Independent Auditors' Report Pages 20 - 21
Financial Statements:
(a)(1) Consolidated Balance Sheets as of December 31, 1994
and 1993 Pages 22 - 23
Consolidated Statements of Income for the Years Ended
December 31, 1994, 1993, and 1992 Pages 24 - 25
Consolidated Statements of Shareholders' Equity for
the Years Ended December 31, 1994, 1993, and 1992 Page 26
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1994, 1993, and 1992 Page 27
Notes to the Consolidated Financial Statements Pages 28 - 44
(a)(2) Financial Statement Schedules
II. Valuation and Qualifying Accounts Page 48 All other financial statement
schedules required by Item 14(a)(2) have been omitted because they are
inapplicable or because the required information has been included in the
consolidated financial statements or notes thereto.
(a)(3) Exhibits
The Exhibit Index is set forth on Pages 49 thru 51
(b) No reports were filed on Form 8-K during the three months ended December
31, 1994.
No annual report to security holders as of December 31, 1994 had been
sent to security holders and no proxy statement, form of proxy or other
proxy soliciting material has been sent by the registrant to more than ten
of the registrant's security holders with respect to any annual or other
meeting of security holders held or to be held in 1995. Such annual report
to security holders, proxy statement or form of proxy will be furnished to
security holders subsequent to the filing of this Annual Report on Form
10-K.
<PAGE>
MESTEK, INC.
Valuation and Qualifying Accounts
Years ended December 31, 1994, 1993 and 1992
Charged Charged
Bal. at to cost to other Bal.
at Beg. and Accts. Other Deduct. at end
Year Description of Year expense (Desc.) (Desc.) (Desc.) of Year
---- ----------- ------- ------- ------- ------- ------- -------
1994 Allowance
for doubtful
accounts $1,456 $ 248 $ - $ - $ 264(2) $1,440
1993 Allowance
for doubtful
accounts $1,455 $1,071 $ - $( 350)(1) $ 720(2) $1,456
1992 Allowance
for doubtful
accounts $ 923 $ 788 $ - $ 1,043 (3) $ 1,299(2) $1,455
(1) Includes recoveries of amounts previously written-off and eliminated
reserve due to sale of Chester.
(2) Bad debts written off.
(3) Includes recoveries of amounts previously written-off and allowances for
doubtful accounts of acquired companies.
<PAGE>
EXHIBIT INDEX
Those Documents Followed By A Paranthetical Notation Are Incorporated
Herein By Reference To Previous Filings With The Securities And Exchange
Commission As Set Forth Below.
Exhibit No.
Description
****************
3.1 Restated Articles of Incorporation of Mestek, Inc. (A)
3.2 By-laws of Mestek, Inc. as amended through April 1, 1993 (G)
9.1 Agreement dated April 13, 1976 between John E. Reed and
Stewart B. Reed (B)
10.1 Amended and Restated Revolving Loan Agreement and Letter
of Credit facility between Mestek,Inc. and BayBank dated
April 30, 1994
10.2 Mestek, Inc.(formerly Reed National Corp.) Deferred Profit
Sharing Plan (B)
10.3 Employment Agreement dated January 1, 1982 between Mestek
and Stewart B. Reed (B)
10.4 Employment Agreement dated January 1, 1982 between Mestek (B)
and John E. Reed
10.5 Lease dated July 1, 1983 between Sterling Realty Trust(lessor)
and Mestek Inc. (lessee) (G)
10.6 Lease dated December 17, 1984 between Mestek (lessee) and Sterling
Realty Trust(lessor), as amended on November 1, 1991 (G)
10.7 Lease dated January 1, 1994 between Mestek (lessee) and Sterling
Realty Trust(lessor) (G)
10.8 Amended lease dated as of November 2, 1992 between Mestek
(lessee)and Rudbeek Realty Corp. (lessor) (G)
10.9 Amended lease dated as of July 1, 1990 between Vulcan Radiator
Corporation (lessee) and MacKeeber Associates Limited Partnership
(lessor) (G)
10.10 Equipment Lease Agreement dated January 1, 1993, between
Mestek (lessee) and Sterling Realty Trust (lessor) (G)
<PAGE>
10.11 Loan Agreement dated as of December 1, 1984 among
Reed National Corp., Rudbeek Realty Corp. and The Pitt
County Industrial Facilities and Pollution Control
Financing Authority and the Promissory Notes thereunder,
two Guaranty Agreements dated as of December 1, 1984
between Reed National Corp., NCNB National Bank of
North Carolina, and Rudbeek Realty Corp. (B)
10.12 Loan Agreement dated as of May 1, 1984 among the
Connecticut Development Authority (the "CDA"), MacKeeber
Limited Partnership, Vulcan Radiator Corporation and the
Promissory Notes thereunder; Guaranty of Vulcan Radiator
Corporation and Reed National Corp. to the Connecticut
Bank and Trust Company, N.A. (B)
10.13 Note Agreement dated as of July 1, 1987 between Mestek,
Inc. and Massachusetts Mutual Life Insurance Company. (C)
10.14 Indemnification Agreements entered into between Mestek,
Inc. and its Directors and Officers and the Directors
of its wholly-owned subsidiaries incorporated by
reference as provided herein, except as set forth in the
attached schedule (F)
10.15 Acquisition Agreement dated July 29, 1993 for the Purchase
of Stock of Chester Environmental, Inc. between Duquesne
Enterprises Inc. and Mestek, Inc. (G)
10.16 Amended Asset Purchase Agreement dated March 26, 1992
between Mestek, Inc. and Mechanical Specialties, Inc. (D)
10.17 Agreement for the Purchase and Sale of Assets dated
December 22, 1992 between Peritek, Inc. and American
Standard Inc.; and Agreement for Purchase and Sale of
Assets between Wabco Standard Trane Inc., and Mestek,
Inc., dated December 22, 1992 (E)
10.18 Subscription and Stock Purchase Agreement dated October
1, 1992 between Mestek, Inc. and Eafco, Inc. (G)
10.19 Variable Interest Rate Cognovit Note dated December 15,
1993 between Mestek, Inc. and The Mary Staebell Trust (G)
10.20 Loan Agreement and Promissory Note between Mestek, Inc.
and ABN Amro Bank, N.V., dated July 9, 1993 (G)
10.21 Loan Agreement and Promissory Note dated June 7, 1993
between The First National Bank of Boston and Mestek, Inc. (G)
<PAGE>
10.22 Mortgage Note dated February 1, 1986 between Arrow United
Industries, Inc. and Chemical Bank; said Note assumed by
Mestek, Inc.in the purchase of certain assets of Arrow United
Industries Inc. (G)
10.23 Closing Agreement dated February 10, 1995 between Shougang
Mechanical Equipment of Pennsylvania, Inc. and West Homestead
Joint Venture Corporation.
10.24 Equipment Lease Agreement dated January 1, 1993 between
Machinery Rental Company (Lessor) and Vulcan Radiator
Corporation (Lessee).
10.25 Equipment Lease Agreement dated January 1, 1993 between Machinery
Rental Company (Lessor) and Mestek, Inc. (Lessee).
10.26 Equipment Lease Agreement dated January 1, 1993 between Elizabeth
C. Reed Trust (Lessor) and Mestek, Inc. (Lessee).
10.27 Asset Purchase Agreement dated September 9, 1994 between Mestek,
Inc. and Aztech International, Ltd., debtor-in-possession; and
Aztec Sensible Cooling, Inc., debtor-in-possession, and the
Amendment thereto dated October 31, 1994.
11.1 Schedule of Computation of Earnings per Common Share
21.1 Subsidiaries of Mestek, Inc.
(A) Filed as an Exhibit to the Annual Report on Form 10-Q for the
quarter ended September 30, 1986
(B) Filed as an Exhibit to the Registration Statement 33-7101,
effective July 31, 1986
(C) Filed as an Exhibit to the Current Report on Form 8-K dated
July 2, 1987
(D) Filed as an Exhibit to the Current Report on Form 8-K dated
August 13, 1982
(E) Filed as an Exhibit to the Current Report on Form 8-K dated
December 15, 1992
(F) Filed as an Exhibit to the Annual Report on Form 10-K for the year
ended December 31, 1987
(G) Filed as an Exhibit to the Annual Report on Form 10-K for the year
ended December 31, 1993
<PAGE>
Exhibit 11.1
MESTEK, INC.
Schedule of Computation of Earnings Per Common Share
Years Ended December 31,
1994 1993 1992
---- ---- ----
Net income $ 9,298 $ 4,265 $ 5,823
Less: dividends on Preferred Stock - 361 366
Net income foe common shareholders $ 9,298 $ 3,904 $ 6,189
Add back dividends which would not have
been paid if $5.00 Convertible Preferred
Stock had been converted - 361 366
Net income for earnings per share $ 9,298 $ 4,265 $ 5,823
Weighted average number of common shares
outstanding 8,241 7,395 7,531
Common share equivalents resulting from
conversion of the $5.00 Convertible
Preferred Stock 896 1,863 1,874
Total common shares and common share
equivalents 9,137 9,258 9,405
Earnings per common share $1.02 $ .46 $ .62
<PAGE>
Exhibit 22.1
SUBSIDIARIES OF MESTEK, INC.
Jurisdiction
Corporation Name of Incorporation
Alapco Holding Delaware
HBS Acquisition Corporation Delaware
The Hydrotherm Corporation Delaware
MCS, Inc Pennsylvania
Mestek Canada, Inc. Ontario
Pacific/Air Balance, Inc. California
Peritek, Inc. Delaware
TEK Capital Corporation Delaware
Westcast, Inc. Massachusetts
West Homestead Joint Venture Corporation Delaware
Mestek Foreign Sales Corporation U.S. Virgin Islands
<PAGE>
Exhibit 10.14
SCHEDULE OF DIRECTORS/OFFICERS
Indemnification Agreements
The Indemnification Agreement entered into by the Directors and/or Officers of
Mestek, Inc. and certain Directors of Mestek's wholly-owned subsidiaries are
indentical in all respects, except for the name of the indemnified director or
officer and the date of execution.
Set forth below is the identity of each director and officer of Mestek, Inc. and
the date upon which the above Indemnification Agreement was executed by the
Director or Officer.
Director Year of Execution
A. Warne Boyce 1987
E. Herbet Burk 1987
William Coad 1987
David R. Macdonald 1987
Peter Glynn-Jones 1993
Winston R. Hindle, Jr. 1995
David W. Hunter 1987
John E. Reed 1987
Stewart B. Reed 1987
James A. Burk 1987
R. Bruce Dewey 1990
Robert G. Dewey 1988
Nicholas Kakavis 1987
Richard J. McKnight 1987
Walter J. Markowski 1990
John F. Melesko, Jr. 1987
William S. Rafferty 1990
Stephen M. Shea 1987
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has caused this report be signed on its behalf by
the undersigned, thereunto duly authorized.
MESTEK, INC.
Date: April 11, 1995 By: John E. Reed
John E. Reed, Chairman
of the Board and Chief
Executive Officer
Date: April 12, 1995 By: Stephen M. Shea
Stephen M. Shea, Senior
Vice President - Finance,
Chief Financial Officer
Pursuant to therequirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: April 10, 1995 By: A. Warne Boyce
A. Warne Boyce, Director
Date: April 10, 1995 By: E. Herbert Burk
E. Herbert Burk, Director
Date: April 7, 1995 By: William J. Coad
William J. Coad, Director
<PAGE>
Date: April 11, 1995 By: Peter Glynn-Jones
Peter Glynn-Jones, Director
Date: April 11, 1995 By: Winston R. Hindle, Jr.
Winston R.Hindle, Jr.,
Director
Date: April 7, 1995 By: David W. Hunter
David W. Hunter, Director
Date: April 13, 1995 By: David R. Macdonald
David R. Macdonald, Director
Date: April 12, 1995 By: John E. Reed
John E. Reed, Director
Date: April 7, 1995 By: Stewart B. Reed
Stewart B. Reed, Director
AMENDED AND RESTATED
REVOLVING LOAN AGREEMENT
AND LETTER OF CREDIT FACILITY
AGREEMENT made as of April 30, 1994 by and between Mestek, Inc., a
Pennsylvania corporation having a principal place of business at 260 North Elm
Street, Westfield, Massachusetts 01085 (hereinafter referred to as the
"Borrower"), and BayBank, a Massachusetts chartered bank having a principal
place of business at 7 New England Executive Park, Burlington, Massachusetts
01803 (hereinafter referred to as the "Bank") amends and restates in its
entirety a Revolving Loan Agreement and Letter of Credit Facility dated December
31, 1991 as previously amended and restated.
In consideration of the mutual covenants herein contained, it is agreed
as follows:
1. DEFINITIONS AND ACCOUNTING TERMS.
1.1. Defined Terms. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
"Affiliate" means any Person (1) which directly or indirectly
controls, or is controlled by, or is under common control with the
Borrower or a Subsidiary; (2) which directly or indirectly beneficially
owns or holds five percent (5%) or more of any class of voting stock of
the Borrower or any Subsidiary; or (3) five percent (5%) or more of the
voting stock of which is directly or indirectly beneficially owned or
held by the Borrower or a Subsidiary. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise.
"Agreement" means this Amended and Restated Revolving Loan
Agreement and Letter of Credit Facility, as amended, supplemented, or
modified from time to time.
"Back-Up L/C Demand Note" shall have the -meaning assigned to such
term in Section 2.14.
"Business Day" means any day other than a Saturday, Sunday, or
other day on which commercial banks in Massachusetts are authorized or
required to close under the laws of The Commonwealth of Massachusetts
and, if the applicable day relates to a LIBOR Loan, LIBOR Interest
Period, or notice with respect to a LIBOR Loan, a day on which dealings
in Dollar deposits are also carried on in the London interbank market
and banks are open for business in London.
<PAGE>
"Capitalization" means, as of the date of any determination
thereof, the sum of (i) Consolidated Funded Debt and (ii) consolidated
Net Worth.
"Capital Lease" or "Capitalized Lease" means any lease the
obligation for rentals with respect to which have been or should be
capitalized on the balance sheet of the lessee in accordance with GAAP.
"Capitalized Rentals" means, as of the date of any determination,
the amount at which the aggregate Rentals due and to become due under
all Capitalized Leases of which the Borrower or any Subsidiary is a
lessee would be reflected as a liability on the consolidated balance
sheet of the borrower and its Subsidiaries.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time and the regulations and published interpretations thereof.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 414(b) or 414(c) of the Code.
"Consolidated Current Assets" and "Consolidated Current
Liabilities" means such assets and liabilities of the Borrower and its
Subsidiaries on a consolidated basis as shall be determined in
accordance with GAAP to constitute current assets and current
liabilities respectively.
"Consolidated Net Income" for any period means the gross revenues
of the Borrower and its Subsidiaries for such period less all expenses
and other proper charges (including taxes on income), determined on a
consolidated basis in accordance with GAAP consistently applied and
after eliminating earnings or losses attributable to outstanding
Minority Interests, but excluding in any event:
(a) any gains or losses on the sale or other
disposition of investments or fixed-or ca-ital assets, and any
taxes on such excluded gains and any tax deductions or credits on
account of such excluded losses;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Subsidiary
accrued prior to the date it became a Subsidiary;
(d) net earnings and losses of any corporation
(other than a Subsidiary), substantially all the assets of which
have been acquired in any manner, realized by such other
corporation prior to the date of such acquisition;
(e) net earnings and losses of any corporation
(other than a Subsidiary) with which the Borrower or a Subsidiary
shall have consolidated or which shall have merged into or with
the Borrower or a Subsidiary prior to the date of such
consolidation or merger;
<PAGE>
(f) net earnings of any business entity (other than
a Subsidiary) in which the Borrower or any Subsidiary has an
ownership interest unless such net earnings have been actually
received by the Borrower or the Subsidiary in the form of cash
distributions;
(g) any portion of the net earnings of any
Subsidiary which for any reason is unavailable for payment of
dividends to the Borrower or any other Subsidiary;
(h) earnings resulting from any reappraisal,
revaluation or write-up of assets;
(i) any deferred or other credit representing any
excess of the equity in any Subsidiary at the date of acquisition
thereof over the amount invested in such Subsidiary;
(j) any gain arising from the acquisition of any
Securities of the Borrower or any Subsidiary; and
(k) any reversal of any contingency reserve, except
to the extent that provision for such contingency reserve shall
have been made from income arising during such period.
"Consolidated Net Tangible Assets" means, as of the date of any
determination thereof, the total amount of all assets of the Borrower
and its Subsidiaries (less depreciation, depletion and other properly
deductible valuation reserves) after deducting (i) all items which in
accordance with GAAP would be included on the liability side of a
consolidated balance sheet, except capital stock (less treasury stock),
surplus and retained earnings, deferred taxes and funded debt, and (ii)
goodwill, patents, tradenames, trademarks, copyrights, franchises,
experimental expense, organization expense, unamortized debt discount
and expense, deferred assets other than prepaid insurance and prepaid
taxes, the excess of cost of shares acquired over book value of the
related assets and such other assets as are properly classified as
"intangible assets" in accordance with GAAP.
"Consolidated Net Worth" means, as of the date of any
determination thereof, the aggregate amount of the capital stock (less
treasury stock), surplus and retained earnings of the Borrower and its
Subsidiaries after deducting Minority Interests to the extent included
in the capital stock accounts of the Borrower, all as determined on a
consolidated basis by the Borrower and its Subsidiaries.
"Current Debt" of any person means all Indebtedness for money
borrowed other than Funded Debt.
"Default" means any of the events specified in section 9, whether
or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
<PAGE>
"Dollars" and the sign "$" mean lawful money of the United States
of America.
"ERISA" means the Employment Retirement, Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereof.
"Event of Default" means any of the events specified in section 9,
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Eurocurrency Reserve Requirement" means, for any LIBOR Loan for
any Interest Period therefor, the daily average of the stated maximum
rate (expressed as a decimal) at which reserves (including any
marginal, supplemental, or emergency reserves), if any, are required to
be maintained during such interest Period under Regulation D by the
Bank against "Eurocurrency Liabilities" (as such term is used in
Regulation D) but without benefit or credit of proration, exemptions,
or offsets that might otherwise be available to the Bank from time to
time under Regulation D. Without limiting the effect of the foregoing,
the Eurocurrency Reserve Requirement shall reflect any other reserves
required to be maintained by the Bank against: (l) any category of
liabilities that includes deposits by reference to which the LIBOR
Interest Rate for LIBOR Loans is to be determined; or (2) any category
of extension of credit or other assets that includes LIBOR Loans.
"Funded Debt" of any Person means (i) all Indebtedness for
borrowed money or which has been incurred in connection with the
acquisition of assets in each case having a final maturity of one or
more than one year from the date of origin thereof (or which is
renewable or extendable at the option of the obligor for a period or
periods of more than one year from the date of origin), excluding all
payments in respect thereof that are required to be made within one
year from the date of any determination of Funded Debt, whether or not
included in Consolidated Current Liabilities; and (ii) all capitalized
Rentals. "Consolidated" when used as a prefix to any Funded Debt shall
mean the aggregate amount of such Funded Debt of the Borrower and its
Subsidiaries on a consolidated basis eliminating intercompany items.
"GAAP" means generally accepted accounting principles consistently
applied, in accordance with financial reporting standards from time to
time in effect among nationally recognized certified public accounting
firms in the United States, including the statements and
interpretations of the United States Financial Accounting Standards
Board and any successor entity.
"Indebtedness" of any Person means and includes all obligations of
such Person which in accordance with GAAP shall be classified on a
balance sheet of such Person as liabilities of such Person, and in any
event shall include all (i) obligations of such Person for borrowed
money or which has been incurred in connection with the acquisition of
property or assets, (ii) obligations secured by any lien or other
charge upon property or assets owned by such Person, even though such
Person has not assumed or become liable for the payment of such
obligations, (iii) obligations created or arising under any conditional
sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and
remedies of the seller, lender, or lessor under such agreement in the
<PAGE>
event of default are limited to repossession or sale of property, (iv)
all guaranties of payment or performance of any obligations of others
for borrowed money, or accrued as liabilities in accordance with GAAP,
or as shown on Borrower's financial statements, and (v) Capitalized
Rentals under any Capitalized Lease. For purpose of computing the
"Indebtedness" of any Person there shall be excluded any particular
Indebtedness to the extent that, upon or prior to the maturity thereof,
there shall have been deposited with the proper depository in trust the
necessary funds (or evidences of such Indebtedness, if permitted by the
instrument creating such Indebtedness) for the payment, redemption or
satisfaction of such Indebtedness; and thereafter such funds and
evidences of Indebtedness so deposited shall not be included in any
computation of the assets of such Person.
"Insolvent" The Borrower, its Subsidiaries or any other person
shall be considered to be "Insolvent" when any of the following events
shall have occurred whereby the Borrower or any of its Subsidiaries (a)
shall generally not pay, or shall be unable to pay, or shall admit in
writing its inability to pay its debts as such debts become due; or (b)
shall make an assignment for the benefit of creditors, or petition or
apply to any tribunal for the appointment of a custodian, receiver, or
trustee for it or a substantial part of its assets; or (c) shall
commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or liquidation law or
statute of any jurisdiction, whether now or hereafter in effect; or (d)
shall have had any such petition or application filed or any such
proceeding commenced against it in which an order for relief is entered
or an adjudication or appointment is made, and which remains
undismissed for a period of ninety (90) days or more; or (e) shall take
any corporate action indicating its consent to, approval of, or
acquiescence in any such petition, application, proceeding, or order
for relief or the appointment of a custodian, receiver, or trustee for
all or any substantial part of its properties; or (f) shall suffer any
such custodianship, receivership, or trusteeship to continue
undischarged for a period of ninety (90) days or more.
"Interest Charges" for any period means all interest (including
the imputed interest factor in respect of Capitalized Leases) and all
amortization of debt discount and expense on any particular
Indebtedness for which such calculations are being made. Computations
of interest Charges on a proforma basis for Indebtedness having a
variable interest rate shall be calculated at the rate in effect on the
day of any determination.
<PAGE>
"Interest Period" means with respect to any LIBOR Loan, the period
commencing on the Business Day such loan is made and ending, as the
Borrower may select, pursuant to Section 2.2, on the corresponding day
which is one month, two months, three months, four months, five months
or six months thereafter, except that each such Interest Period that
commences on the last Business Day of a calendar month (or on any day
for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month; provided that all of the
foregoing provisions relating to Interest Periods are subject to the
following:
(a) No Interest Period may extend beyond the
Termination Date without prior approval by the Bank;
(b) If an Interest Period would end on a day that
is not a Business Day, such Interest Period shall be extended to
the next Business Day unless such Business Day would fall in the
next calendar month, in which event such Interest Period shall end
on the immediately preceding Business Day.
"Lending Office" means the Bank's office at 1500 Main Street,
Springfield, Massachusetts 01115.
"Letter of Credit" means any documentary, standby or other type of
Letter of Credit issued by the Bank for the account of the Borrower or
any Subsidiary as provided in Section 2.14 below.
"Letter of Credit Facility" means the credit accommodation
facility for the issuance of Letters of Credit being made available to
the Borrower or any of its Subsidiaries pursuant to Section 2.14 below.
"LIBOR Interest Rate" means, for each LIBOR Loan, the rate per
annum (rounded upward, if necessary, to the nearest 1/16 of 1%)
determined by the Bank to be equal to the quotient of (1) the London
Interbank Offered Rate for such LIBOR Loan for such Interest Period
divided by (2) one minus the Eurocurrency Reserve Requirement, if any,
for such Interest Period.
"LIBOR Loan" means any Loan when and to the extent that the
interest rate therefor is determined by reference to the LIBOR Interest
Rate.
"Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), or preference, priority, or other security
agreement or preferential arrangement, charge, or encumbrance of any
kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing
lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any
of the foregoing).
"Loan" means a LIBOR or Prime Rate Revolving Line of Credit Loan
or Loans or any outstanding reimbursement obligation under the Letter
of Credit Facility as evidenced by the Back-Up L/C Demand Note or
otherwise.
"Loan Documents" means this Agreement, the Notes, and other
documents related to the transactions discussed in this Agreement.
"London Interbank Offered Rate" applicable to any Interest Period
for a LIBOR Loan means the rate of interest per annum (rounded upward,
if necessary, to the nearest 1/16 of 1%) quoted on the applicable page
of the Daily Telerate Financing Reporting Service as the LIBOR Rate or
Reuters LIBOR page (or, if such reporting services are no longer
<PAGE>
provided, at the LIBOR Rate published in comparable financial reporting
services) offered for deposits in immediately available United States
Dollars for a period of time comparable to the specified Interest
Period, at 11:00 a.m. (London time) on the Business Day which is two
Business Days preceding the first Business Day of the requested LIBOR
Loan for such Interest Period.
"Minority Interests" means any shares of stock of any class of a
Subsidiary (other than directors' qualifying shares as required by law)
that are not owned by the Borrower and or one or more of its
Subsidiaries. Minority Interests shall be valued by valuing Minority
Interests constituting preferred stock at the voluntary or involuntary
value of such preferred stock, whichever is greater, and by valuing
Minority Interests constituting common stock at the book value of
capital and surplus applicable thereto adjusted, if necessary, to
reflect any changes from the book value of such common stock required
by the foregoing method of valuing minority interests in preferred
stock.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3)
of ERISA.
"Net Income Available for Fixed Charges" means, as of the date of
any determination thereof, the sum of the following for the twelve (12)
full consecutive calendar months immediately preceding such date of
determination:
(a) Consolidated Net Income for such period; PLUS
(b) Income taxes and excess profit taxes paid or
accrued by the Borrower and its Subsidiaries on account of such
Consolidated Net Income during such periods; PLUS
(c) The sum of (i) Interest Charges in respect of
Consolidated Funded Debt during said period (whether or not paid
or payable but only to the extent deducted in computing
consolidated Net Income for such period) and (ii) the aggregate
rentals paid by the Borrower and its subsidiaries under all leases
(other than Capitalized Leases) during such period.
"Notes" mean the Revolving Line of Credit Note, the Back-Up L/C
Demand Note, and any other notes executed by the Borrower in favor of
the Bank from time to time.
"Note Agreement" means the Note Agreement dated as of July 1, 1987
between the Borrower and Massachusetts Mutual Life Insurance Company.
"Obligation" and "Obligations, means any and all liabilities and
obligations of the Borrower or any of its Subsidiaries to the Bank of
every kind and description, direct or indirect, absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter
arising, regardless of how they arise or by what agreement or
instrument they may be evidenced or whether evidenced by any agreement
or instrument, and includes (i) obligations to perform acts and refrain
from taking action as well as obligations to pay money, (ii)
<PAGE>
reimbursement obligations of the Borrower or any of its Subsidiaries
pursuant to any documentation executed in conjunction with or related
to the issuance by the Bank of any Letters of Credit, or (iii) guaranty
obligations.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, or other entity of whatever nature.
"Plan" means any pension plan which is covered by Title IV of
ERISA and in respect of which the Borrower or a commonly Controlled
Entity is an "employer" as defined in Section 3(5) of ERISA.
"Prime Loan" means any Loan when and to the extent that the
interest rate therefor is determined by reference to the Prime Rate.
"Prime Rate" means that rate announced from time to time by the
Bank as its Prime Rate, which rate-is not necessarily the lowest rate
charged by the Bank to its customers.
"Principal Office", means the Bank's office at 7 New England
Executive Park, Burlington, Massachusetts.
"Pro Forma Fixed Charges" shall mean as of the date of any
determination thereof the sum of (i) Interest Charges in respect of
Consolidated Funded Debt (other than Funded Debt then proposed to be
retired) for the twelve full consecutive calendar months period
immediately preceding such date of determination, plus (ii) Interest
Charges on all Funded Debt then proposed to be issued for the twelve
full consecutive calendar months after such date of determination, plus
(iii) the maximum aggregate Rentals payable during any period of twelve
full consecutive calendar months after such date of determination and
prior to July 15, 1997 under all long-term Leases under which the
Borrower or a Subsidiary is then lessee.
"Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as amended or supplemented from time to time.
"Rentals" means and includes all fixed rents (including as such
all payments which the lessee is obligated to make to the lessor on
termination of the lease or surrender the property) payable by the
Borrower or a Subsidiary, as lessee or sublessee under lease of real or
personal property, but shall be exclusive of any amounts required to be
paid by the Borrower or a Subsidiary (whether or not designated as
rents or additional rents) on account of maintenance, repairs,
insurance, taxes and similar charges. Fixed rents under any so-called
"percentage lease" shall be computed solely on the basis of the minimum
rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues.
<PAGE>
"Reportable Event" means any of the events set forth in Section
4043 of ERISA.
"Revolving Line of Credit Loan(s)" or "Revolving Credit Loan(s)"
shall have the meaning assigned to such terms in Section 2.1.
"Revolving Line of Credit Note" shall have the meaning assigned to
such term in Section 2.1.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Subsidiary(ies)" means, as to the Borrower, a corporation of
which more than 80% (by number of votes) of shares of stock having
ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
the Borrower and/or by one or more Subsidiaries.
"Termination Date" means April 30, 1995, but if the Revolving Line
of Credit Loan is extended or renewed, at the Bank's discretion, the
Termination Date shall that date set forth by the Bank as of the
extension or renewal as the new Termination Date, or as otherwise
determined by the Bank.
1.2. "Accounting Terms". All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent
with those applied in the preparation of the financial statements
referred to in Section 5.3, and all financial data submitted pursuant
to this Agreement shall be prepared in accordance with such principles.
2. AMOUNT AND TERMS OF LOAN.
2.1. Revolving Line of Credit. The Bank agrees, on the terms and
conditions hereinafter set forth, to make loans (the "Revolving Line of
Credit Loans") to the Borrower from time to time during the period from
the date of this Agreement up to but not including the Termination Date
in an aggregate principal amount not to exceed outstanding, at any
time, Thirty Million Dollars ($30,000,000.00) (the "Commitment"). Each
Revolving Line of Credit Loan which is a LIBOR Loan and which shall not
utilize the Commitment in full shall be in an amount not less than Five
Hundred Thousand Dollars ($500,000.00) or multiples of one Hundred
Thousand Dollars ($100,000.00) thereabove. Prime Loans may be in any
amount within the limits of the Commitment and within such limits, the
Borrower may borrow, repay pursuant to Section 2.7, and reborrow under
this Section 2.1. On such terms and conditions as are contained herein,
the Loans may be outstanding as either Prime Loans or LIBOR Loans. Each
type of Loan shall be made and maintained at the Bank's Lending Office
for such type of Loan.
<PAGE>
2.2. Notice and Manner of Borrowing; Conversion and Renewals. The
Borrower may elect from time to time to initiate a Loan, to convert all
or a part of one type of Loan into another type of Loan or to renew all
or part of a Loan by giving the Bank written, telefax or telegraphic
notice (effective upon receipt) at least-one Business Day before the
initiation of or conversion into a Prime Loan, or at least two (2)
Business Days before the initiation of, conversion into or renewal of a
LIBOR Loan, specifying (1) the initial, renewal or conversion date of
the Loan; (2) the amount of the Loan to be provided, converted or
renewed; (3) in the case of conversions, a specification that the Loan
is to be converted from a Prime Loan to a LIBOR Loan or vice versa, as
the case may be; and (4) in the case of initiations of, renewals of or
a conversion into LIBOR Loans, the duration of the Interest Period
applicable thereto; provided that (a) the minimum principal amount of
each Loan outstanding after an initiation, a renewal or conversion
shall be One Hundred Thousand Dollars ($100,000.00) in the case of
Prime Loans, and Five Hundred Thousand Dollars ($500,000.00) or One
Hundred Thousand Dollars ($100,000.00) multiples thereabove in the case
of LIBOR Loans; and (b) LIBOR Loans can be renewed or converted only as
of the last day of the Interest Period for such Loan. In the absence of
Borrower specifying the type of loan, advances made pursuant to any
cash management arrangement between the Bank and the Borrower will be
made as Prime Loans.
All notices given under this Section 2.2 shall be irrevocable and
shall be given not later than 11:00 a.m(EST) on the day which is not
less than the number of Business Days specified above for such notice.
If the Borrower shall fail to give the Bank the notice as specified
above for the renewal or conversion of a LIBOR Loan prior to the end of
the Interest Period with respect thereto, such LIBOR Loan shall
automatically be converted into a Prime Loan on the last day of the
Interest Period for such Loan.
2.3. Interest. The Borrower shall pay interest to the Bank on the
outstanding and unpaid principal amount of the Revolving Line of Credit
Loans made under this Agreement at a rate per annum as follows:
(1)For a Prime Loan at a rate equal to the Prime Rate less
three quarters of one percent (.75%);
(2) For a LIBOR Loan at a rate equal to the LIBOR
Interest Rate plus an amount expressed in terms of "basis
points" or whole or fractional percentage points quoted by
an authorized representative of the Bank, based upon the
interest Period selected by the Borrower, the amount of
the requested LIBOR Loan, the market conditions and the
date of the request, and confirmed in writing to Borrower
on the Business Day following Borrower's request for a
LIBOR Loan or conversion to a LIBOR Loan.
Any change in the interest rate based on the Prime Rate resulting
from a change in the Prime Rate shall be effective as of the opening of
business on the day on which such change in the Prime Rate becomes
effective.
<PAGE>
Interest on each Prime Loan shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed for any payment
period. Interest on each LIBOR Loan shall be calculated on the basis of
a year of 360 days for the actual number of days elapsed for the
Interest Period.
Interest on the Loans shall be paid in immediately available funds
at the Principal office or the Lending office for the account of the
applicable Lending office as follows:
(1) For each Prime Loan, on the first day of each month,
commencing the first such day after such Loan and at maturity for
such Loan, and
(2) For each LIBOR Loan, on the last day of the
Interest Period with respect thereto and, in the case of an
Interest Period greater than one month, at one month intervals
after the first day of such Interest Period.
Any principal amount not paid when due (at maturity, by
acceleration or otherwise) shall bear interest thereafter until paid in
full, payable on demand, at a rate per annum equal to:
(a) For each Prime Loan at a rate equal to the
Prime Rate plus one percent (1%); and
(b) For each LIBOR Loan at a rate equal to the
LIBOR Interest rate plus three percent (3%) from the time of
default in payment of principal until the end of the then current
Interest Period therefor, and thereafter at a rate equal to the
Prime Rate plus one percent (1%).
2.4. The Revolving Line of Credit Note. All Revolving Line of
Credit Loans made by the Bank under this Agreement shall be evidenced
by, and repaid with interest in accordance with, a single promissory
Revolving Line of Credit Note of the Borrower in substantially the form
of Exhibit A, duly completed, dated the date of this Agreement, and
payable to the Bank, such Note to represent the obligation of the
Borrower to repay the Revolving Line of Credit Loans. The Bank is
hereby authorized by the Borrower to endorse on the schedule attached
to the Note the amount and type of each Revolving Line of Credit Loan
and each renewal, conversion, and payment of principal amount received
by the Bank for the account of the applicable Lending Office on account
of the Revolving Line of Credit Loans, which endorsement shall, in the
absence of manifest error, be conclusive as to the outstanding balance
of the Revolving Line of Credit Loans made by the Bank; provided,
however, that the failure to make such notation with respect to any
Revolving Line of Credit Loan or renewal, conversion, or payment shall
not limit or otherwise affect the obligations of the Borrower under
this Agreement or the Revolving Line of Credit Note.
On and after the Termination Date, the unpaid principal amount of
the Revolving Line of Credit Note shall be repaid ON DEMAND.
<PAGE>
2.5. Cross Default. A material default in any of the terms and
conditions of (i) any other obligation of the Borrower to the Bank
(including, without limitation, any guaranty obligations or any
reimbursement obligations arising out of the Letter of credit
Facility), (ii) the obligations of the Borrower to Massachusetts Mutual
Life Insurance Company (or any successor, assignee or transferee
thereof) pursuant to the Note Agreement as the same may be amended,
modified or substituted, shall constitute a default in the Revolving
Line of Credit Note, the Back-Up L/C Demand Note and any other
obligations of the Borrower to the Bank whether evidenced by notes or
otherwise or (iii) the obligations of the Borrower under any
Indebtedness to any other institutional lender shall constitute a
default hereunder. A default in any of the terms and conditions of the
Revolving Line of Credit Note, the Back-Up L/C Demand Note or the
Letter of Credit Facility shall constitute a default of this Agreement
and any default of this Agreement shall constitute a default of the
Revolving Line of credit Note, the Back-Up L/C Demand Note and the
Letter of Credit Facility.
2.6. Use of Proceeds. The proceeds of the Loans hereunder shall be
used by the Borrower (i) to refinance or retire previously incurred
debt, and (ii) for working capital and acquisition purposes. The
Borrower will not, directly or indirectly, use any part of such
proceeds for the purpose of purchasing or carrying any margin stock
within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or to extend credit to any Person for the
purpose of purchasing or carrying any such margin stock, or for any
purpose which violates, or is inconsistent with, Regulation X of such
Board of Governors.
2.7. Method of Payment. The Borrower shall make each payment under
this Agreement and under the Revolving Line of Credit Note not later
than 1:00 p.m. (EST) on the date when due in lawful money of the United
States to the Bank at its Principal office or Lending office for the
account of the applicable Lending office in immediately available
funds. The Borrower hereby authorizes the Bank, if and to the extent
payment is not made when due under this Agreement or under the
Revolving Line of Credit Note, to charge from time to time against any
account of the Borrower with the Bank any amount so due. Whenever any
payment to be made under this Agreement or under the Revolving Line of
Credit Note shall be stated to be due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the
computation of the payment of interest except, in the case of a LIBOR
Loan, if the result of such extension would be to extend such payment
into another calendar month, such payment shall be made on the
immediately preceding Business Day.
2.8. Prepayment. The Borrower may, with respect to Prime Loans
only, upon at least one (1) Business Day's notice to the Bank, prepay
the Revolving Line of Credit Note in whole or in part with accrued
interest to the date of such prepayment on the amount prepaid. LIBOR
Loans may not be prepaid.
2.9. Late Payment. Any payment on the Loans received more than
fifteen (15) days after its due date shall be subject to an additional
charge of five percent (5.00%) of the amount due.
<PAGE>
2.10. Illegality. Notwithstanding any other provision in this
Agreement, if the Bank determines that any applicable law, rule, or
regulation, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority, central bank,
or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank (or its Lending Office) with any
request or directive (whether or not having the force of law) of any
such authority, central bank, or comparable agency shall make it
unlawful or impossible for the Bank (or its Lending office) to (1)
maintain this credit facility, then upon notice to the Borrower by the
Bank this credit facility shall terminate; or (2) maintain or fund
LIBOR Loans, then upon notice to the Borrower by the Bank the
outstanding principal amount of the LIBOR Loans, together with interest
accrued thereon, and any other amounts payable to the Bank under this
Agreement shall be repaid or converted to a Prime Loan (a) immediately
upon demand of the Bank if such change or compliance with such request,
in the judgment of the Bank, requires immediate repayment; or (b) at
the expiration of the last Interest Period to expire before the
effective date of any such change or request.
2.11. Disaster. Notwithstanding anything to the contrary herein,
if the Bank determines (which determination shall be conclusive) that:
(1) Quotations of interest rates for the relevant
deposits referred to in the definition of LIBOR Interest Rate are
not being provided in the relevant amounts or for the relative
maturities for purposes of determining the rate of interest on a
LIBOR Loan as provided in this Agreement; or
(2) The relevant rates of interest referred to in
the definition of LIBOR Interest Rate, upon the basis of which the
rate of interest for any such type of loan is to be determined do
not accurately cover the cost to the Bank of making or maintaining
such type of Loans;
then the Bank shall forthwith give notice thereof to the Borrower,
whereupon (a) the obligation of the Bank to make LIBOR Loans shall be
suspended until the Bank notifies the Borrower that the circumstances
giving rise to such suspension no longer exist; and (b) the Borrower
shall repay in full, or convert to a Prime Loan in full, the then
outstanding principal amount of each LIBOR Loan together with accrued
interest thereon, on the last day of the then current Interest Period
applicable to such Loan.
2.12. Additional Costs; Regulatory Changes; Capital Adequacy. The
Borrower shall pay to the Bank from time to time such amounts as the
Bank may reasonably determine to be necessary to compensate the Bank
for any costs incurred by the Bank which the Bank determines are
attributable to its making or maintaining any Loans hereunder or its
obligation to make any such Loans hereunder, or any reduction in any
amount receivable by the Bank under this Agreement or the Revolving
Line of Credit Note in respect of any such Loans or such obligation
(such increases in costs and reductions in amounts receivable being
herein called "Additional Costs"), resulting from any change after the
date of this Agreement in U.S. federal, state, municipal, or foreign
laws or regulations (including Regulation D), or the adoption or making
<PAGE>
after such date of any interpretations, directives, or requirements
applying to a class of banks including the Bank of or under any U.S.
federal, state, municipal, or any foreign laws or regulations (whether
or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration
thereof ("Regulatory Change"); which (1) changes the basis of taxation
of any amounts payable to the Bank under this Agreement or the
Revolving Line of Credit Note in respect of any of such Loans (other
than taxes imposed on the overall net income of the Bank or of its
Lending Office for any of such Loans by the jurisdiction where the
Principal office or such Lending office is located); or (2) imposes or
modifies any reserve, special deposit, compulsory loan, or similar
requirements relating to any extensions of credit or other assets of,
or any deposits with or other liabilities of, the Bank (including any
of such Loans or any deposits referred to in the definition of LIBOR
Interest Rate); or (3) requires an increase in the amount of capital
required or expected to be maintained by the Bank or any entity
controlling the Bank, or (4) imposes any other condition affecting this
Agreement or the Revolving Line of Credit Note (or any of such
extensions of credit or liabilities). The Bank will notify the Borrower
of any event occurring after the date of this Agreement which will
entitle the Bank to compensation pursuant to this Section 2.12 as
promptly as practicable after it obtains knowledge thereof and
determines to request such compensation. The provisions of this Section
2.12 however shall not be applied retrospectively or during any LIBOR
Interest Period in effect when a Regulatory Change resulting in
Additional costs occurs.
Determinations by the Bank for purposes of this Section 2.12 of
the effect of any Regulatory Change on its costs of making or
maintaining Loans after the date of notification of such Regulatory
Change by the Bank to the Borrower or on amounts receivable by it in
respect of Loans, and of the additional amounts required to compensate
the Bank in respect of any Additional Costs, shall be conclusive,
provided that such determinations are made on a reasonable basis.
2.13. Funding Loss Indemnification. The Borrower shall pay to
the Bank, upon the request of the Bank, such amount or amounts as shall
be sufficient (in the reasonable opinion of the Bank) to compensate it
for any loss, cost, or expense incurred as a result of:
(1) Any payment of a LIBOR Loan on a date other than the
last day of the Interest Period for such Loan including,
but not limited to, acceleration of the Loans by the Bank
pursuant to Section 9; or
(2) Any failure by the Borrower to borrow or convert, as the
case may be, a LIBOR Loan on the date for borrowing or
conversion, as the case may be, specified in the relevant
notice provision under Sections 2.2.
2.14. Letter of Credit Facility. So long as no Default hereunder
has occurred, the Bank shall make available to the Borrower and its
Subsidiaries a credit facility (the "Letter of Credit Facility")
whereby the Bank will issue up to an aggregate of Eight Million Dollars
($8,000,0000.00) of letters of credit (a "Letter of Credit") for the
<PAGE>
Borrower's or one of its Subsidiaries' account with an expiration date
on any specific Letter of Credit no later than the Termination Date,
unless the Bank chooses to issue a Letter of Credit to expire after the
Termination Date. The individual Letters of Credit shall be issued in
accordance with the Bank's customary practices at the time of issuance,
utilizing documentation prevailing at such times and, if drawn upon,
amounts paid thereon will be repaid upon demand by the Borrower (and,
if applicable, its Subsidiary for whose account the Letter of Credit
was issued) in full reimbursement to the Bank of all such amounts drawn
upon under any or all Letters of Credit, pursuant hereto, or to such
additional reimbursement obligations as may be contained in any
documentation executed by the Borrower in conjunction with the issuance
of such Letter(s) of Credit.
To the extent repayment of such amounts as are reimbursable to the
Bank for such drawings against Letters of Credit is not immediately
made, and to the extent there is availability sufficient under the
Commitment, the amount of such drawings shall be charged as Revolving
Line of Credit Loans. To the extent there is insufficient availability
under the Commitment, the reimbursement obligations resulting from such
drawings shall be evidenced by and subject to the terms of s single,
master back-up demand note (the "Back-Up L/C Demand Note") in the form
attached hereto as Exhibit "B".
This Letter of Credit Facility will be made available to those
Subsidiaries of Borrower listed in the attached Exhibit "C" as well as
to Borrower and Borrower's reimbursement obligations described herein
shall apply regardless of whether Borrower or one of its Subsidiaries
is the account party of a particular Letter of Credit.
2.15. Letter of Credit Fees. Whenever a Letter of Credit is
issued, extended or renewed for the Borrower's (or one of its
Subsidiaries') account, a per annum fee of three quarters of one
percent (.75%) of the face amount of the Letter of Credit shall be
charged (the "Letter of Credit Fee") together with an issuance,
extension or renewal fee of Two Hundred Dollars ($200.00) covering
document preparation costs. An amendment fee of Forty Dollars ($40.00)
per amendment and a drawing fee equal to the greater of (i) one eighth
of one percent (.125%) of the amount drawn or (ii) Seventy Five Dollars
($75.00), payable if a draw occurs, constitute additional fees
associated with the Letter of Credit. If a Letter of Credit is returned
to the Bank prior to twelve (12) months from its date of issue, the
Bank will refund to the Borrower the pro rata portion of the Letter of
Credit Fee for that period of time during which the Letter of Credit is
no longer in effect.
2.16. Uniform Customs and Practice. The Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber
of Commerce Publication No. 500, and any subsequent revisions thereof
approved by a Congress of the International Chamber of Commerce and
adhered to by the Bank (the "Uniform Customs and Practice"), shall be
binding on the Borrower and the Bank except to the extent otherwise
provided herein, in any Letter of Credit or in any other credit
document. Anything in the Uniform Customs and Practice to the contrary
notwithstanding:
<PAGE>
(a) Neither the Borrower nor any beneficiary of any
Letter of Credit shall be deemed an agent of the Bank.
(b) With respect to each Letter of Credit, neither
the Bank nor its correspondents shall be responsible for or
shall have any duty to ascertain:
(i) the genuineness of any signature;
(ii) the validity, form, sufficiency,
accuracy, genuineness or legal effect of any
endorsements;
(iii) delay in giving, or failure to give,
notice of arrival, notice of refusal of documents or
of discrepancies in respect of which the Bank refuses
the documents or any other notice, demand or protest;
(iv) the performance by any beneficiary
under any Letter of Credit of such beneficiary's
obligations to the Borrower;
(v) inaccuracy in any notice received by
the Bank;
(vi) the validity, form, sufficiency,
accuracy, genuineness or legal effect of any
instrument, draft, certificate or other document
required by such Letter of Credit to be presented
before payment of a draft, or the office held by or
the authority of any Person signing any of same; or
(vii) failure of any instrument to bear any
reference or adequate reference to such Letter of
Credit, or failure of any Person to note the amount
of any instrument on the reverse of such Letter of
Credit or to surrender such Letter of Credit or to
forward documents in the manner required by such
Letter of Credit;
<PAGE>
(c) the occurrence of any of the events referred to
in the Uniform Customs and Practice or in the preceding
clauses of this Section 2.16 shall not affect or prevent the
vesting of any of the Bank's rights or powers hereunder or the
Borrower's obligation to make reimbursement of amounts paid
under any Letter of Credit or any draft accepted thereunder.
(d) The Borrower will promptly examine (i) each
Letter of Credit (and any amendments thereof) sent to it by
the Bank and (ii) all instruments and documents delivered to
it from time to time by the Bank. The Borrower will notify the
Bank of any claim of noncompliance by notice actually received
within three Business Days after receipt of any of the
foregoing documents, the Borrower being conclusively deemed to
have waived any such claims against the Bank and its
correspondents unless such notice is given. The Bank shall
have no obligation or responsibility to send any such Letter
of Credit or any such instrument or document to the Borrower.
(e) In the event of any conflict between the
provisions of this Agreement and the Uniform Customs and
Practice, the provisions of this Agreement shall govern.
2.17. Subrogation. Upon any payment by the Bank under any
Letter of Credit and until the reimbursement of the Bank by the
Borrower (and appropriate Subsidiary) with respect to such payment, the
Bank shall be entitled to be subrogated to, and to acquire and retain,
the rights which the Person to whom such payment is made may have
against the Borrower, all for the benefit of the Bank. The Borrower
will use all commercially reasonable efforts to take such action as the
Bank may reasonably request, including requiring the beneficiary of any
Letter of Credit to execute such documents as the Bank may reasonably
request, to assure and confirm to the Bank such subrogation and such
rights, including the rights, if any, of the beneficiary to whom such
payment is made in accounts receivable,-,inventory and other properties
and assets of any obligor.
3. CONDITIONS PRECEDENT. The obligation of the Bank to make a Revolving
Line of Credit Loan or issue a Letter of Credit shall be subject to the
condition precedent that the Bank shall have received on or before the day of
such transaction each of the following, in form and substance satisfactory to
the Bank and its counsel:
3.1.Execution of Notes. The Notes duly executed by the Borrower.
3.2.Evidence of Borrower's Authority and Incumbency of
Representatives. Certified (as of the date of this Agreement) copies of
all corporate action taken by the Borrower, including resolutions of
its Board of Directors, authorizing the execution, delivery, and
performance of the Loan Documents to which it is a party and each other
document to be delivered pursuant to this Agreement together with a
<PAGE>
certificate (dated as of the date of this Agreement) of the Clerk or
Secretary of the Borrower certifying the names and true signatures of
the officers of the Borrower authorized to sign the Loan Documents to
which it is a party and the other documents to be delivered by the
Borrower under this Agreement.
3.3.Opinion. A favorable opinion of counsel for the Borrower,
dated the date of the Loan, in such form as is acceptable to the Bank
and as to such other matters as the Bank may reasonable request.
3.4.Officer's Certificate, etc. The following statements shall be
true and the Bank shall have received a certificate signed by a duly
authorized officer of the Borrower dated the date of the Loan stating
that:
(a) The representations and warranties contained in
Section 5 of this Agreement are correct on and as of the date of
the Loan as though made on and as of such date; and
(b) No Default or Event of Default has occurred and
is continuing, or would result from the making of the Loan.
3.5. Other Related Documents. The Bank shall have received such
other approvals, opinions, certificates or documents as the Bank may
reasonably request.
4. PROMISE TO PAY. Borrower promises to pay:
4.1.Obligations. All Obligations of the Borrower to the Bank,
including, but not limited to, the Obligations evidenced by the Notes
of even date with interest at the rate set forth or in the manner
determined in accordance with this Agreement and the Notes.
4.2.Taxes. Any and all taxes, charges and expenses of every kind
or description which are the binding and legal obligations of the
Borrower, paid or incurred by the Bank (after notice to the Borrower)
with respect to the loans or financial accommodations made or the
collection or realization upon the same, together with interest thereon
at the highest rate specified in Section 2.3 above.
5. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. To induce the Bank
to enter into this Agreement, the Borrower represents and warrants as
follows:
5.1.Corporate Existence; Authority; Standing. The Borrower is a
corporation duly organized, validly existing and in good standing under
the laws of The commonwealth of Pennsylvania. Borrower has full
corporate power to own its properties and conduct its business as now
conducted, and to enter into and perform this Agreement. Borrower is in
good standing in each jurisdiction in which the failure to qualify
would have a material, adverse effect upon its financial condition,
business or properties. The execution and delivery of this Agreement,
the Note and all related documents has been duly authorized and
evidence valid and binding obligations of the Borrower.
5.2.Legally Enforceable Agreement. This Agreement is, and each of
<PAGE>
the other Loan Documents when delivered under this Agreement will be,
legal, valid, and binding obligations of the Borrower in accordance
with their respective terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, insolvency, and other similar
laws affecting creditors' rights generally.
5.3.Financial Statements. The balance sheet of the Borrower and
any of its Subsidiaries and the related statements of income and
retained earnings and cash flow of the Borrower and any of its
Subsidiaries for the fiscal year then ended, and the accompanying
footnotes, together with any interim financial statements of the
Borrower and any of its Subsidiaries, copies of which have been
furnished to the Bank, are complete and correct and fairly present the
financial condition of the Borrower and any of its Subsidiaries as at
such dates and the results of the operations of the Borrower and any of
its Subsidiaries for the periods covered by such statements, all in
accordance with GAAP consistently applied (subject to year-end
adjustments in the case of the interim financial statements), and there
has been no material adverse change in the condition (financial or
otherwise), business, or operations of the Borrower or any Subsidiary
since the presentation to the Bank of the most recently dated financial
statements, nor are there any liabilities of the Borrower or any
Subsidiary, fixed or contingent, which are material but are not
reflected in such financial statements or in the notes thereto, other
than liabilities arising in the ordinary course of business. No
information, exhibit or report furnished by the Borrower to the Bank in
connection with the negotiation of this Agreement contained any
material misstatement of fact or omitted to state a material fact or
any fact necessary to make the statement contained therein not
materially misleading.
5.4.Labor Disputes and Acts of God. Neither the business nor the
properties of the Borrower or any Subsidiary are affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy, or
other casualty (whether or not covered by insurance), materially and
adversely affecting such business or properties or the operation of the
Borrower or such subsidiary.
5.5.Other Agreements. Neither the Borrower nor any Subsidiary is a
party to any indenture, loan or credit agreement, or to any lease or
o:,her agreement or instrument, or subject to any charter or corporate
restriction which could have a material adverse effect on the business,
properties, assets, operations, or conditions, financial or otherwise,
of the Borrower or any Subsidiary, or the ability of the Borrower to
carry out its obligations under the Loan Documents to which it is a
party. Neither the Borrower nor any Subsidiary is in default in any
material respect in the performance, observance, or fulfillment of any
of the obligations, covenants, or conditions contained in any agreement
or instrument material to its business to which it is a party.
5.6.Litigation. There is no pending or threatened action or
proceeding against or affecting the Borrower or any of its Subsidiaries
before any court, governmental agency, or arbitrator, which may, in any
one case or in the aggregate, materially adversely affect the financial
<PAGE>
condition, operations, properties, or business of the Borrower or any
Subsidiary or the ability of the Borrower to perform its obligations
under the Loan Documents to which it is a party.
5.7.No Defaults. The Borrower and each of its Subsidiaries have
satisfied all judgments, and neither the Borrower nor any Subsidiary is
in default with-respect to any judgment, writ, injunction, decree, rule
or regulation of any court, arbitrator, or Federal, state, municipal,
or other governmental authority, commission, board, bureau, agency, or
instrumentality, domestic or foreign.
5.8. Subsidiaries. Set forth in Exhibit 'C' is a complete and
accurate list of the Subsidiaries of the Borrower, showing the
jurisdiction of incorporation of each. All of the outstanding capital
stock of any Subsidiary has been validly issued, is fully paid and
nonassessable, and is owned by the Borrower free and clear of all Liens.
5.9.ERISA. The Borrower and each of its Subsidiaries are to the
best of its knowledge in compliance in all material respects with all
applicable provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect to
any Plan; no notice of intent to terminate a Plan has been filed, nor
has any Plan been terminated; no circumstances exist which constitute
grounds entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted
any such proceedings; neither the Borrower nor any Commonly Controlled
Entity has completely or partially withdrawn from a Multiemployer Plan;
the Borrower and each Commonly controlled Entity have met their minimum
funding requirements under ERISA with respect to all of their Plans and
the present value of all vested benefits under each Plan does not
exceed the fair market value of all Plan assets allocable to such
benefits, as determined on the most recent valuation date of the Plan
and in accordance with the provisions of ERISA; and neither the
Borrower nor any Commonly Controlled Entity has incurred any liability
to the PBGC under ERISA.
5.10. Operation of Business. The Borrower and each of its
Subsidiaries possess all licenses, permits, franchises, patents,
copyrights, trademarks, and trade names, or rights thereto, to conduct
their respective businesses substantially as now conducted and as
presently proposed to be conducted, and the Borrower and any of its
Subsidiaries are not in violation of any valid rights of others with
respect to any of the foregoing.
5.11. Taxes. The Borrower and each of its Subsidiaries have filed
all tax returns (Federal, state, and local) required to be filed and
have paid all taxes, assessments, and governmental charges and levies
thereon to be due, including interest and penalties unless such taxes
are being contested in good faith by appropriate action with adequate
reserves established on Borrower's financial statements.
5.12. Debt. Set forth in the financial statements referred to in
this Agreement, to the extent required by GAAP, is a complete and
correct list of all credit agreements, indentures, purchase agreements,
<PAGE>
guaranties, Capital Leases, and other investments, agreements, and
arrangements presently in effect providing for or relating to
extensions of credit (including agreements and arrangements for the
issuance of letters of credit or for acceptance financing) in respect
of which the Borrower or any Subsidiary is in any manner directly or
contingently obligated; and the maximum principal or face amounts of
the credit in question, which are outstanding and which can be
outstanding, are correctly stated, and all Liens of any nature given or
agreed to be given as security therefor are correctly described or
indicated in such financial statements.
5.13. Environment. To the best of Borrower's knowledge, the
Borrower and each of its Subsidiaries have duly complied with, and
their businesses, operations, assets, equipment, property, leaseholds,
or other facilities are in compliance with, the provisions of all
Federal, state, and local environmental, health, and safety laws, codes
and ordinances, and all rules and regulations promulgated thereunder.
The Borrower and any Subsidiary have been issued and will maintain all
required Federal, state, and local permits, licenses, certificates, and
approvals relating to (1) air emissions; (2) discharges to surface
water or groundwater; (3) noise emissions; (4) solid or liquid waste
disposal; (5) the use, generation, storage, transportation, or disposal
of toxic or hazardous substances or wastes (intended hereby and
hereafter to include any and all such materials listed in any Federal,
state, or local law, code or ordinance, and all rules and regulations
promulgated thereunder as hazardous or potentially hazardous); or (6)
Other environmental, health, or safety matters. Neither the Borrower
nor any Subsidiary has received notice of, nor knows of, or suspects,
facts which might constitute any violations of any Federal, state, or
local environmental, health, or safety laws, codes or ordinances, and
any rules or regulations promulgated thereunder with respect to its
businesses, operations, assets, equipment, property, leaseholds, or
other facilities. Except in accordance with a valid governmental
permit, license, certificate, or approval, there has been no emission,
spill, release, or discharge into or upon (1) the air; (2) soils, or
any improvements located thereon; (3) surface water or groundwater; or
(4) the sewer, septic system or waste treatment, storage or disposal
system servicing the premises, of any toxic or hazardous substances or
wastes at or from the premises; and accordingly the premises of the
Borrower and any of its Subsidiaries are free of all such toxic or
hazardous substances or wastes. There has been no complaint, order,
directive, claim, citation, or notice by any governmental authority or
any person or entity with respect to (1) air emissions; (2) spills
releases, or discharges to soils or improvements located thereon,
surface water, groundwater or the sewer, septic system or waste
treatment, storage or disposal systems servicing the premises; (3)
noise emissions; (4) solid or liquid waste disposal; (5) the use,
generation, storage, transportation, or disposal of toxic or hazardous
substances or waste; or (6) other environmental, health, or safety
matters affecting the Borrower or its business, operations, assets,
equipment, property, leaseholds, or other facilities. Neither the
Borrower nor any of its Subsidiaries have any indebtedness, obligation,
or liability, absolute or contingent, matured or not matured, with
respect to the storage, treatment, cleanup, or disposal of any solid
wastes, hazardous wastes, or other toxic or hazardous substances
(including without limitation any such indebtedness, obligation, or
<PAGE>
liability with respect to any current regulation, law, or statute
regarding such storage, treatment, cleanup, or disposal).
6. AFFIRMATIVE COVENANTS. So long as any Loan shall re-main unpaid
or any credit accommodation or commitment remains in effect hereunder,
the Borrower will:
6.1.Maintenance of Existence. Except as otherwise permitted
herein, preserve and maintain, and cause each Subsidiary to preserve
and maintain, its corporate existence and good standing in the
jurisdiction of its incorporation, and qualify and remain qualified,
and cause any Subsidiary to qualify and remain qualified, as a foreign
corporation in each jurisdiction in which such qualification is
required.
6.2.Maintenance of Records. Keep, and cause each Subsidiary to
keep, adequate records and books of account, in which complete entries
will be made in accordance with GAAP consistently applied, reflecting
all financial transactions of the Borrower and any of its Subsidiaries.
6.3.Maintenance of Properties. Maintain, preserve and keep, and
will cause each Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business
(whether owned in fee or a leasehold interest) in good repair and
working order and from time to time will make all necessary repairs,
replacements, renewals and additions so that at all times the
efficiency thereof shall be maintained.
6.4.Conduct of Business. Except as otherwise permitted herein,
continue, and cause each Subsidiary to continue, to engage in an
efficient and economical manner in a business of the same general type
as conducted by it on the date of this Agreement.
6.5.Maintenance of Insurance. Maintain and will cause each
Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers in such forms and amounts and against such risks as
are customary for corporations of established reputation engaged in the
same or a similar business and owning and operating similar properties.
6.6.Compliance With Laws. Promptly pay and discharge and will
cause each Subsidiary promptly to pay and discharge, all lawful taxes,
assessments and governmental charges or levies imposed upon the
Borrower or such Subsidiary, respectively, or upon or in respect of all
or any part of the property or business of the Borrower or such
Subsidiary, all trade accounts payable in accordance with usual and
customary business terms, and all claims for work, labor or materials,
which if unpaid might become a lien or charge upon any property of the
Borrower or such Subsidiary; provided the Borrower or such Subsidiary
shall not be required to pay any such tax, assessment, charge, levy,
<PAGE>
account payable or claim if (i) the validity, applicability or amount
thereof is being contested in good faith by appropriate actions or
proceedings which will prevent the forfeiture or sale of any property
of the Borrower or such Subsidiary or any material interference with
the use thereof by the Borrower or such Subsidiary, and (ii) the
Borrower or such Subsidiary shall set aside on its books, reserves
deemed by it to be adequate with respect thereto. The Borrower will
promptly comply and will cause each Subsidiary to comply with all laws,
ordinances or governmental rules and regulations to which it is
subject, including without limitation, the occupational Safety and
Heath Act of 1970, ERISA, the Americans with Disabilities Act and all
laws, ordinances, governmental rules and regulations relating to
environmental protection in all applicable jurisdictions, the violation
of which would materially and adversely affect the properties,
business, prospects, profits or condition of the Borrower and its
Subsidiaries or would result in any lien or charge upon any property of
the Borrower or any Subsidiary.
6.7.Right of Inspection. At any reasonable time and from time to
time, permit the Bank or any agent or representative thereof to examine
and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Borrower and any subsidiary, and
to discuss the affairs, finances, and accounts of the Borrower and any
Subsidiary with any of their respective officers and directors and the
Borrower's independent accountants.
6.8.Environment. Be and remain, and cause each Subsidiary to be
and remain, in compliance with the provisions of all federal, state,
and local environmental, health, and safety laws, codes and ordinances,
and all rules and regulations issued thereunder; notify the Bank
immediately of any notice of a hazardous discharge or environmental
complaint received from any governmental agency or any other party;
notify the Bank immediately of any hazardous discharge from or
affecting its premises; immediately contain and remove the same, in
compliance with all applicable laws; promptly pay any fine or penalty
assessed in connection therewith, except such assessments as are being
contested in good faith, against which adequate reserves have been
established; permit the Bank to inspect the premises, to conduct tests
thereon, and to inspect all books, correspondence, and records
pertaining thereto; and at the Bank's request, and at the Borrower's
expense, provide a report of a qualified environmental engineer,
satisfactory in scope, form, and content to the Bank, and such other
and further assurances reasonably satisfactory to the Bank that the
condition has been corrected.
6.9.Place of Business. Promptly notify the Bank in writing of any
addition to, change in, or discontinuance of its place of business as
shown in this subsection. The Borrower has its chief executive office
and principal place of business only at 260 North Elm Street,
Westfield, Massachusetts.
6.10. Principal Depositary. conduct its principal banking business
with the Bank, including maintaining the Bank as its principal
depository for its funds, including deposits for payroll taxes and
income taxes, savings, certificates of deposit, general demand deposit
account, and such other accounts as may be permitted.
<PAGE>
7. NEGATIVE COVENANTS. So long as any Loan shall remain unpaid or
any credit accommodation or commitment remains in effect hereunder,
neither the Borrower nor any Subsidiary will:
7.1.Liens. Create, incur, assume, or suffer to exist, or permit
any Subsidiary to create, incur, assume, or suffer to exist, any Lien
upon or with respect to any of its properties, now owned or hereafter
acquired, except:
7.1.1. Liens in favor of the Bank;
7.1.2. Liens for taxes or assessments or other
government charges or levies if not yet due and payable or, if due
and payable, if they are being contested in good faith by
appropriate proceedings and for which appropriate reserves are
maintained;
7.1.3. Liens imposed by law, such as mechanics',
materialmen's, landlords', warehousemen's, and carriers' Liens,
and other similar Liens, securing obligations incurred in the
ordinary course of business which are not past due for more than
fifteen (15) days or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have
been established;
7.1.4. Liens under workers' compensation,
unemployment insurance, Social Security, or similar legislation;
7.1.5. Liens, deposits, or pledges to secure the
performance of bids, tenders, contracts (other than contracts for
the payment of money), leases (permitted under the terms of this
Agreement), public or statutory obligations, surety, stay, appeal,
indemnity, performance or other similar bonds, or other similar
obligations arising in the ordinary course of business;
7.1.6. Judgment and other similar Liens arising
in connection with court proceedings, provided the execution or
other enforcement of such Liens is effectively stayed and the
claims secured thereby are being actively contested in good faith
and by appropriate proceedings;
7.1.7. Easements, rights-of-way, restrictions,
and other similar encumbrances which, in the aggregate, do not
materially interfere with the occupation, use, and enjoyment by
the Borrower or any Subsidiary of the property or assets
encumbered thereby in the normal course of its business or
materially impair the value of the property subject thereto; and
7.1.8. Liens securing obligations of a Subsidiary
to the Borrower or another Subsidiary.
7.2. Indebtedness. Create, incur, assume, or suffer to exist, or permit
any Subsidiary to create, incur, assume, or suffer to exist, any
Indebtedness, except:
<PAGE>
7.2.1. Indebtedness of the Borrower under this
Agreement or the Note;
7.2.2. Indebtedness of up to Forty Million
Dollars ($40,000,000) excluding current liabilities except for the
current portion of long-term debt, and other than Indebtedness to
the Bank;
7.2.3. Indebtedness of the Borrower subordinated
on terms satisfactory to the Bank to the Borrower's obligations
under this Agreement and the Note; and
7.2.4. Accounts payable to trade creditors for
goods or services which are not aged more than one hundred and
twenty (120) days from the billing date and current operating
liabilities (other than for borrowed money) which are not more
than sixty (60) days past plus, in each case incurred in the
ordinary course of business, as presently conducted, and paid
within the specified time, unless contested in good faith and by
appropriate proceedings.
7.2.5. Indebtedness which Borrower assumes or
which is otherwise includable as a liability on its financial
statements pursuant or by reason of any merger, stock acquisition
or asset acquisition otherwise permitted hereby.
7.3. Mergers, etc.
(a)(i) consolidate with or be a party to a merger
with any other corporation, or (ii) sell, lease or otherwise dispose of
all or any substantial part of the assets of the Borrower and its
Subsidiaries, provided, however that:
(1) any subsidiary may merge or consolidate with or
into the Borrower or any wholly-owned Subsidiary so long as in
any merger or consolidation involving the Borrower, the
Borrower shall be the surviving or continuing corporation;
(2) the Borrower may consolidate or merge with
any other corporation if (i) the Borrower shall be the
surviving or continuing corporation, (ii) at the time of such
consolidation or merger and after giving affect thereto no
Default or Event of Default shall have occurred and be
continuing, and (iii) after giving effect to such
consolidation or merger the Borrower would be permitted to
incur at least $1.00 of additional Funded Debt under the
provisions of Section 5.8(a)(3) of the Note agreement; and
(3) any Subsidiary may sell, lease or otherwise
dispose of all or any substantial part of its assets to the
Borrower or any wholly-owned Subsidiary.
(b) permit any Subsidiary to issue or sell any shares of
stock of any class (including as 'stock" for the purpose of this
Section 7.3 any warrants, rights or options to purchase or otherwise
acquire stock or other securities exchangeable to or convertible into
stock) of such Subsidiary to any Person other than the Borrower or a
<PAGE>
wholly-owned Subsidiary, except for the purpose of qualifying
directors, or except in satisfaction of the validly preexisting
preemptive rights of minority shareholders in connection with the
simultaneous issuance of stock to the Borrower and/or a Subsidiary
whereby the Borrower and/or such Subsidiary maintain their
proportionate interest in such subsidiary.
(c) sell, transfer or otherwise dispose of any shares of
stock in any Subsidiary (except to qualifying directors) or any
Indebtedness of any Subsidiary, and will not permit any Subsidiary to
sell, transfer or otherwise dispose of (except to the Borrower or a
wholly-owned Subsidiary) any shares of stock or any Indebtedness of any
other Subsidiary, without the consent of the Bank, which will not be
unreasonably withheld or delayed unless:
(1) simultaneously with such sale, transfer,
or disposition, all shares of stock and all Indebtedness
of such subsidiary at the time owned by the Borrower and
by any other Subsidiary shall be sold, transferred or
disposed of as an entirety;
(2) the Board of Directors of the Borrower shall have
determined, as evidenced by a resolution thereof, that the
retention of such stock and indebtedness is no longer in
the beat interest of the Borrower;
(3) such stock and indebtedness is sold, transferred
or otherwise disposed to a Person, for a cash
consideration and on terms reasonably deemed by the Board
of Directors to be adequate and satisfactory;
(4) the subsidiary being disposed of shall not have
any continuing investment in the Borrower or any other
Subsidiary not being simultaneously disposed of; and
(5) such sale or other disposition does not involve
a substantial part (as hereinafter defined) of the
assets of the Borrower and its Subsidiaries.
As used in this Section 7.3 a sale, lease or other
disposition of assets shall be deemed to be a "substantial part" of the
assets of the Borrower and its Subsidiaries only if the book value of
such assets when added to the book value of all other assets sold,
leased or otherwise disposed of by the Borrower and its subsidiaries
(other than in the ordinary course of business) during the same fiscal
year, exceeds 20% of the Consolidated Net Tangible Assets of the its
subsidiaries determined as of the and of Borrower and sales or other
the immediate preceding fiscal year. Sales or other realization on (i)
delinquent receivables and (ii) land held for investment purposes as of
the date of this Agreement shall not be included in any computation of
sales or other dispositions hereunder.
<PAGE>
7.4.Leases.
(a) become obligated, as lessee, under any long-term Lease
unless at the time of entering into any such long-term Lease and
after gibing effect thereto, the average of the Net Income
Available for Fixed Charges for any two of the three immediately
preceding fiscal years shall have been at least 250% of the
average of the Pro Forma Fixed Charges for such two fiscal years
and Net Income Available for Fixed Charges for such two fiscal
years and Net Income Available for Fixed Charges for the
immediately preceding fiscal year shall have been at least 250% of
Pro Forma Fixed Charges for such fiscal year.
(b) enter into any arrangement whereby the Borrower
or any Subsidiary shall sell or transfer any property owned by the
Borrower or any Subsidiary to any Person other than the Borrower
or a Subsidiary and thereupon the Borrower or Subsidiary shall
lease or intend to lease, as lessee, the same or substantially the
same property.
7.5 No Loan or Investments. Except as permitted herein make any
loan to or investments in any in individual or entity, other than in
normal course of business without the prior approval of the Bank, which
will not be unreasonably withheld.
7.6.Guaranties, Etc. Assume, guaranty, endorse, or otherwise be or
become directly or contingently responsible or liable, or permit any
Subsidiary to assume, guaranty, endorse, or otherwise be or become
directly or contingently responsible or liable (including, but not
limited to, an agreement to purchase any obligation, stock, assets,
goods, or services, or to supply or advance any funds, assets, goods,
or services of any person, or an agreement to maintain or cause such
Person to maintain a minimum working capital or net worth, or otherwise
to assure the creditors of any such Person again loss) for obligations
of any Person, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business, or guaranties for the benefit of the Bank.
7.7. Transactions With Affiliates. Enter into any
transaction, including, without limitation, the purchase, sale, or
exchange of property or the rendering of any service, with any
Affiliate, or permit any Subsidiary to enter into any transaction,
including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Affiliate,
except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Borrower
or such Subsidiary than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate.
<PAGE>
7.8. Dividends.
(a) declare or pay any dividends, either in cash
or property, on any shares of its capital stock of any class
(except dividends or other distributions payable solely in
shares of capital stock of the Borrower); or
(b) directly or indirectly, or through any
Subsidiary, purchase, redeem or retire any shares of its
capital stock of any class or any warrants, rights or options
to purchase or acquire any shares of its capital stock (other
than in exchange for or out of the net proceeds to the
Borrower from the substantially concurrent issue or sale of
other shares of capital stock of the Borrower or warrants,
rights or options to purchase or acquire any shares of its
capital stock); or
(c) make any other payment or distribution,
either directly or indirectly or through any Subsidiary, in
respect of its capital stock;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options, and all
such other distributions being herein collectively called "Restricted
Payments"), if after giving effect thereto the aggregate amount of
Restricted Payments made during the period from and after December 31,
1990 to and including the date of the making of the Restricted Payment
in question, would exceed 50% of Consolidated Net Income for such
period, computed on a cumulative basis for said entire period (or if
such Consolidated Net Income is a deficit figure, then minus 100% of
such deficit).
(d) declare any dividend which constitutes a
Restricted Payment payable more than sixty (60) days
after the date of declaration thereof.
For the purposes of this Section 7.8 the amount of any Restricted
Payment declared, paid or distributed in property of the Borrower shall
be deemed to be the greater of the book value or fair market value (as
determined in good faith by the Board of Directors of the Borrower) of
such property at the time of the making of the Restricted Payment in
question.
8. FINANCIAL COVENANTS. The following financial covenants may, at the
Bank's discretion, be altered, amended, or revised, prior to the
Termination Date, to reflect or address changes in Borrower's
Capitalization and capital structure, including its Funded Debt, or changes
in the terms of the Note Agreement with Massachusetts Mutual Life Insurance
Company. So long as any Loan shall remain unpaid or any credit
accommodation or commitment remains in effect hereunder:
8.1.Reporting Requirements. The Borrower and any of its
Subsidiaries will furnish to the Bank:
8.1.1. Quarterly Statements. As soon as available and in any
event within 45 days after the end of each quarterly fiscal period
<PAGE>
(except the last) of each fiscal year, duplicate copies of:
(1) consolidated and consolidating balance
sheets of the Borrower and its Subsidiaries as of the
close of such quarter setting forth in comparative form
the amount for the corresponding period of the preceding
fiscal year,
(2) consolidated and consolidating statements of
income and retained earnings of the Borrower and its
Subsidiaries for such quarterly period, setting forth in
comparative form the amount for the corresponding period
of the preceding fiscal year, and
in each case setting forth in comparative
form the consolidated figures for the preceding fiscal
year, all in reasonable detail and accompanied by an
opinion thereon of a firm of independent public
accountants of recognized national standing selected by
the Borrower to the effect that the consolidated financial
statements have been prepared in accordance with GAAP
consistently applied (except for changes in application in
which such accountants concur) and present fairly the
financial condition of the Borrower and its subsidiaries
and that the examination of such accountants in connection
with such financial statements has been made in accordance
with generally accepted auditing standards and
accordingly, includes such tests of the accounting records
and such other auditing procedures as were considered
necessary in the circumstances; and
(3) consolidated and consolidating statements of
cash flow of the Borrower and its Subsidiaries of the
portion of the fiscal year ending with such quarter,
setting forth in comparative form the amount for the
corresponding period of the preceding fiscal year,
all in reasonable detail and certified as complete and correct, by an
authorized financial officer of the Borrower.
8.1.2. Annual Statements. As soon as available
and in any event within 105 days after the close of each fiscal
year of the Borrower, duplicate copies of:
(1) consolidated balance sheets of the
Borrower and its Subsidiaries as of the close of such
fiscal year, and
(2) consolidated statements of income and
retained earnings and cash flow of the Borrower and its
Subsidiaries for such fiscal year,
in each case setting forth in comparative form the
consolidated figures for the preceding fiscal year, all in
reasonable detail and accompanied by an opinion thereon of a firm
of independent public accountants of recognized national standing
selected by the Borrower to the effect that the consolidated
financial statements have been prepared in accordance with GAAP
<PAGE>
consistently applied (except for changes in application in which
such accountants concur) and present fairly the financial
condition of the Borrower and its subsidiaries and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted
auditing standards and accordingly, includes such tests of the
accounting records and such other auditing procedures as were
considered necessary in the circumstances; and
(3) a consolidating statement of the Borrower and
its Subsidiaries prepared by the Borrower in support of
the consolidated statements referred to in clauses (1) and
(2) above.
The financial statements delivered pursuant to paragraphs (a)
and (b) above shall set forth the amounts charged in each of the
periods involved for depreciation, interest expense and Rentals
payable under long-term Leases;
8.1.3. Audit Reports. Promptly upon receipt thereof,
one copy of each interim or special audit made by independent
accountants of the books of the Borrower or any subsidiary;
8.1.4. SEC and Other Reports. Promptly upon their
becoming available, one copy of each financial statement, report,
notice or proxy statement sent by the Borrower to stockholders
generally and of each regular or periodic report, and any
registration statement or prospectus filed by the Borrower or any
Subsidiary with any securities exchange or the Securities and
Exchange commission or any successor agency, and copies of any
orders in any proceedings to which the Borrower or any of its
Subsidiaries is a party, issued by any governmental agency,
Federal or state, having jurisdiction over the Borrower or any of
its Subsidiaries;
8.1.5. Requested Information. with reasonable
promptness, such other data and information as the Bank may
reasonably request;
8.1.6. Officers' Certificates. Within the periods
provided in Sections 8.1.1 and 8.1.2 above, a certificate of an
authorized financial officer of the Borrower stating that he has
reviewed the provisions of this Agreement and setting forth: (i)
the information and computations (in sufficient detail) required
in order to establish whether the Borrower was in compliance with
the requirements of Section 8.2.1 through 8.2.4, inclusive, at the
end of the period covered by the financial statements then being
furnished and (ii) whether there existed as of the date of such
financial statements and whether, to the best of his knowledge,
there exists on the date of the certificate or existed at any time
during the period covered by such financial statements any Default
or Event of Default and, if any such condition or event exists on
the date of the certificate, specifying the nature and period of
existence thereof and the action the Borrower is taking and
proposes to take with respect thereto;
<PAGE>
8.1.7. Accountant's Certificates. Within the
period provided in Sections 8.1.2 above, a certificate of the
accountants who render an opinion with respect to such financial
statements, stating that they have reviewed this Agreement and
stating further, whether in making their audit, such accountants
have become aware of any Default or Event of Default under any of
the terms or provisions of this Agreement insofar as any such
terms or provisions pertain to or involve accounting matters or
determinations, and if any such condition or event then exists,
specifying the nature and period of existence thereof;
8.1.8. Notice of litigation. Promptly after the
commencement thereof, notice of all actions, suits, and
proceedings before any court or governmental department,
commission, board, bureau, agency, or instrumentality, domestic or
foreign, affecting the Borrower or any Subsidiary, which, if
determined adversely to the Borrower or such Subsidiary, could
have a material adverse effect on the financial condition,
properties, or operations of the Borrower or such Subsidiary;
8.1.9. Notice of Defaults and Events of Default.
As soon as possible and in any event within five (5) days after
the occurrence of each Default or Event of Default, a written
notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the
Borrower with respect thereto;
8.1.10. ERISA Reports. As soon as possible, and
in any event within thirty (30) days after the Borrower knows or
has reason to know that any circumstances exist that constitute
grounds entitling the PBGC to institute proceedings to terminate a
Plan subject to ERISA with respect to the Borrower or any Commonly
Controlled Entity, and promptly but in any event within two (2)
Business Days of receipt by the Borrower or any Commonly
Controlled Entity of notice that the PBGC intends to terminate a
Plan or appoint a trustee to administer the same, and promptly but
in any event within five (5) Business Days of the Receipt of
notice concerning the imposition of withdrawal liability (in
excess of $10,000.00 with respect to the Borrower or any Commonly
Controlled Entity, the Borrower will deliver to the Bank a
certificate of the chief financial officer of the Borrower setting
forth all relevant details and the action which the Borrower
proposes to take with respect thereto;
8.1.11. Reports to other creditors. Promptly
after the furnishing thereof, copies of any statement or report
furnished to any other party pursuant to the terms of any
indenture, loan, credit, or similar agreement and not otherwise
required to be furnished to the Bank pursuant to any other clause
of this Section; and
8.1.12. Proxy statements, etc. Promptly after
the sending or filing thereof, copies of all proxy statements,
financial statements, and reports which the Borrower or any
Subsidiary sends to its stockholders.
<PAGE>
8.2.Financial Covenants. For purposes of the following
financial covenants the Borrower and its Subsidiaries shall be treated
on a consolidated basis, and all ratios, except as otherwise specified,
will be tested on a quarterly basis:
8.2.1. Debt to Net Worth; Leverage Ratio. The
ratio of the Borrower's total Indebtedness and all other
liabilities to its tangible Consolidated Net Worth shall be
maintained at or less than 3.00 to 1.00:
8.2.2. Current Ratio. The ratio of combined
tangible Consolidated Current Assets of the Borrower to the
combined Current Liabilities of the Borrower shall at all times
be not less than 1.40 to 1.00.
8.2.3. Minimum Consolidated Net Worth. At all
times the Borrower will maintain consolidated Net Worth at an
amount not less than $60,000,000.00.
8.2.4. Working Capital. At all times Borrower's
Consolidated Current Assets shall exceed its Consolidated Current
Liabilities by $25,000,000.00.
9. EVENTS OF DEFAULT. If any of the following events shall occur:
9.1.The Borrower shall fail to pay the principal of, or interest
on, the Notes or any other payment obligations of Borrower to the Bank,
or any amount of a commitment or other fee, as and when due and
payable;
9.2. Any representation or warranty made or deemed made by the
Borrower in this Agreement or which is contained in any certificate,
document, opinion, or financial or other statement furnished at any
time under or in connection with any Loan Document shall prove to have
been incorrect, incomplete, or misleading in any material respect on or
as of the date made or deemed made;
9.3.The Borrower shall fail, after thirty (30) days of notice
thereof, to perform or observe any term, covenant, or agreement
contained herein (other than failure under Section 9.1 or 9.2 above for
which no notice is required);
9.4. Dissolution, merger or consolidation of the Borrower
(other than as permitted in this Agreement);
9.5.The Borrower or any of its Subsidiaries shall, after the
expiration of any applicable notice-Dr grace periods, (a) fail to pay
any Indebtedness for borrowed money to Persons other than the Bank, or
any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise), or
(b) fail to perform or observe any term, covenant, or condition on its
part to be performed or observed under any agreement or instrument
relating to any such Indebtedness, when required to be performed or
observed, if the effect of such failure to perform or observe is to
accelerate, or to permit the acceleration of after the giving of notice
<PAGE>
or passage of time, or both, the maturity of such Indebtedness, whether
or not such failure to perform or observe shall be waived by the holder
of such Indebtedness; or any such Indebtedness shall be declared to be
due and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof;
9.6.The Borrower or any of its Subsidiaries shall become
Insolvent;
9.7.One or more judgments, decrees, or orders for the payment
of money in excess of One Hundred Thousand Dollars ($100,000.00) in the
aggregate shall be rendered against the Borrower or any of its
Subsidiaries, and such judgments, decrees, or orders shall continue
unsatisfied and in effect for a period of ninety (90) consecutive days
without being vacated, discharged, satisfied, or stayed or bonded
pending appeal;
9.8.This Agreement shall at any time after its execution and
delivery and for any reason cease to be in full force and effect or
shall be declared null and void, or the validity or enforceability
thereof shall be contested by the Borrower, or the Borrower shall deny
it has any further liability or obligation under this Agreement;
9.9.Any of the following events shall occur or exist with
respect to the Borrower and any Commonly Controlled Entity under ERISA:
any Reportable Event shall occur; complete or partial withdrawal from
any multiemployer Plan shall take place; any Prohibited Transaction
shall occur; a notice of intent to terminate a Plan shall be filed, or
a Plan shall be terminated; or circumstances shall exist which
constitute grounds entitling the PBGC to institute proceedings to
terminate a Plan, or the PBGC shall institute such proceedings; and in
each case above, such event or condition, together with all other
events or conditions, if any, could subject the Borrower to any tax,
penalty, or other liability which in the aggregate may exceed One
Hundred Thousand Dollars ($100,000.00);
then, and in any such event, the Bank may, notwithstanding any time or
credit allowed by any instrument evidencing a liability, without notice or
demand (i) refuse to make any additional advances or Loans, and/or (ii)
declare the outstanding Note, all interest thereon, and all other amounts
payable under this Agreement to be forthwith due and payable, whereupon the
Note, all such interest, and all such amounts shall become and be forthwith
due and payable. Upon the occurrence and during the continuance of any
Event of Default, the Bank is hereby authorized at any time and from time
to time, without notice, to exercise any or all of its rights and remedies
provided in this Agreement or otherwise permitted by law, including all
rights of set-off.
<PAGE>
10. DEPOSITS. Any and all deposits or other sums at any time credited by or
due from the Bank to Borrower, and any securities or other property of
Borrower being held by the Bank or on account of Borrower, may at all times
be held and treated as collateral for any and all obligations of the
Borrower to the Bank, whether direct or indirect, absolute or contingent,
due or to) become due, now existing or hereafter arising. The Bank may
apply or set-off such deposits or other sums against any obligations at any
time, whether or not said obligations or other security held by the Bank is
considered by the Bank to be adequate. The Bank, on or after an Event of
Default, may sell any such securities or other property held as collateral
for the repayment or performance of such obligations in a commercially
reasonable manner.
11. WAIVERS. The Borrower waives demand, notice, protest, notice of
acceptance of this Agreement, notice of loans made, credit extended, or any
action taken in reliance hereon, and all other demands and notice of any
description. With respect to liabilities, the Borrower assents to any
extension or postponement of the time of payment or any other indulgence to
the addition or release of any party or person primarily or secondarily
liable, to the acceptance of partial payments thereon and the settlement
thereof, all in such manner and at such time ox- times as the Bank may deem
advisable. No delay or omission on the part of the Bank in exercising any
right shall operate as a waiver of such right or any other right. A waiver
on any one occasion shall not be construed as a bar to or waiver of any
right on any future occasion. All rights and remedies of the Bank, whether
evidenced hereby or by any other instrument or papers, shall be cumulative
and may be exercised singularly or concurrently.
12. MISCELLANEOUS
12.1. Amendments, Etc. No amendment, modification, termination, or
waiver of any provision of any Loan Document to which the Borrower is a
party, nor consent to any departure by the Borrower from any Loan Document
to which it is a party, shall in any event be effective unless the same
shall be in writing and signed by the Bank, and then such waiver or consent
shall be effective only in the specific instance and for the specific
purpose for which given.
12.2. Notices, Etc. All notices and other communications provided
for under this Agreement and under the other Loan Documents to which the
Borrower is a party shall be in writing (including telegraphic, telex, and
facsimile transmissions) and mailed or transmitted or delivered, if to the
Borrower, at its address at 260 North Elm Street, Westfield, Massachusetts
01085, Attention: John E. Reed, Chairman, and if to the Bank, at its
address at 1500 Main Street, Springfield, Massachusetts 01115, Attention:
M. Dale Janes, Executive Vice President; or, as to each party, at such
other address as shall be designated by such party in a written notice to
the other party complying as to delivery with the terms of this Section.
Except as is otherwise provided in this Agreement, all such notices and
communications shall be effective when deposited in the mails or delivered
to the telegraph company, or sent, answer back received, respectively,
addressed as aforesaid.
<PAGE>
12.3. Survival. All representations, warranties, covenants, and
agreements contained herein shall survive the execution and delivery of
this Agreement, the Note and any other agreements or documents required
for this transaction.
12.4. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower may not assign or transfer
any of its rights under any Loan Document to which the Borrower is a party
without the prior written consent of the Bank.
12.5. Costs, Expenses, and Taxes. The Borrower agrees to pay on
demand all costs and expenses, incurred by the Bank in connection with the
preparation, execution, delivery, filing, and administration of the Loan
Documents, and of any amendment, modification, or supplement to the Loan
Documents, including, without limitation, the fees and out-of-pocket
expenses of counsel for the Bank incurred in connection with advising the
Bank as to its rights and responsibilities hereunder. The Borrower also
agrees to pay all such costs and expenses, including court costs, incurred
in connection with enforcement of the Loan Documents, or any amendment,
modification, or supplement thereto, whether by negotiation, legal
proceedings, or otherwise. In addition, the Borrower shall pay any and all
stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing, and recording of any of
the Loan Documents and the other documents to be delivered under any such
Loan Documents, and agree to hold the Bank harmless from and against any
and all liabilities with respect to or resulting from any delay in paying
or omission to pay such taxes and fees. This provision shall survive
termination of this Agreement.
12.6. Integration. Except as provided in Section 12.12, this
Agreement and the Loan Documents contain the entire agreement between the
parties relating to the subject matter hereof and supersede all oral
statements and prior writings with respect thereto.
12.7. Indemnity. The Borrower hereby agrees to defend, indemnify,
and hold the Bank harmless from and against any and all claims, damages,
judgments, penalties, costs, and expenses (including attorney fees and
court costs now or thereafter arising from the aforesaid enforcement of
this clause) arising directly or indirectly from the activities of the
Borrower and any of its Subsidiaries, its predecessors in interest, or
third parties with whom it has a contractual relationship, or arising
directly or indirectly from the violation of any environmental protection,
health, or safety law, whether such claims are asserted by any governmental
agency or any other person. This indemnity shall survive termination of
this Agreement.
12.8. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of The Commonwealth
of Massachusetts.
12.9. Severability of Provision. Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
<PAGE>
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in
any other jurisdiction.
12.10. Captions, Counterparts and Modifications. The captions of
this Agreement are for convenience only and shall not affect the
construction hereof. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but may not be
terminated or modified orally.
12.11. Jury Trial Waiver. THE BANK AND THE BORROWER HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN
CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED
TO THIS AGREEMENT OR THE LOAN DOCUMENTS. NO OFFICER OF THE BANK HAS
AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
to this Agreement the day and year first above written.
In the presence of:
Mestek, Inc.
______________________________ By /s/ John E. Reed
Its President
BayBank
______________________________ By /s/ M. Dale Janes
Its Executive Vice President
CLOSING AGREEMENT
THIS CLOSING AGREEMENT (the "Agreement") dated and effective as of the 10th day
of February, 1995, by and between Shougang Mechanical Equipment of Pennsylvania,
Inc., a corporation organized and existing under the laws of the Commonwealth of
Pennsylvania ("SMEC") and West Homestead Joint venture Corporation, a
corporation organized and existing under the laws of the State of Delaware
("WHJV") , either or both of which may be referred to as the Party or Parties.
WHEREAS, SMEC and WHJV have entered into a certain Purchase Agreement dated
August 17, 1988 (the "Purchase Agreement"), for the sale of WHJV's interest in
Mesta International (f/k/a Mesta Engineering Company), a partnership organized
and existing under the laws of the Commonwealth of Pennsylvania ("MEC") to SMEC;
and
WHEREAS, WHJV has commenced an arbitration to enforce the terms of the
Purchase Agreement; and
WHEREAS, WHJV and SMEC desire to settle the matters of the arbitration and to
close the purchase and sale of WHJV's remaining thirty percent (30%) partnership
interest in MEC (the "Partnership Interest") to SMEC pursuant to the exercise on
September 16, 1992, of WHJV's option under Section 6 of the Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, the sufficiency of which is hereby acknowledged, SMEC and WHJV,
intending to be legally bound, agree that:
1. The closing of the purchase and sale of the Partnership Interest under this
Agreement will take place on February __, 1995, at 11:00 A.M. local time (the
'Closing Date') at the offices of SMEC at Seven Parkway Center, Pittsburgh,
Pennsylvania or at such other time, date or place as the Parties shall mutually
agree.
2. SMEC shall execute and deliver to WHJV at the closing of the transfer of
the Partnership Interest:
a) an Instrument of Assumption of Liabilities and Indemnity
substantially in the form of Exhibit A attached hereto;
b) a Certificate of Incumbency and signature specimen signed by the
President of SMEC and certified by the Secretary of SMEC.
c) Settlement Agreement and Mutual Release substantially in the form
of Exhibit B attached hereto.
<PAGE>
d) the Promissory Note of WHJV payable in favor of SMEC in the
principal amount of $47,502.46 marked canceled.
3. WHJV shall execute and deliver to SMEC at the closing of the transfer
of the Partnership Interest:
a) an Assignment and Bill of Sale substantially in the form of
Exhibit C attached hereto;
b) a Quit Claim of Intellectual Property substantially in the form of
Exhibit D attached hereto;
c) Notification to MEC of the sale of WHJV's Partnership Interest in
accordance with Internal Revenue Code Section 605OK(c); and
d) a Certificate of Incumbency and signature specimen signed by the
officers of WHJV and certified by the Secretary of WHJV; and
e) Settlement Agreement and Mutual Release.
f) the Promissory Note dated September 15, 1988 of SMEC in the
principal amount of $300,000 marked canceled together with all
necessary UCC-3 termination statements.
g) letter terminating that certain Guarantee Agreement dated August
17, 1988.
4. In consideration of the transfer of the Partnership Interest, SMEC shall
pay to WHJV Eight Hundred Fifty Thousand Dollars ($850,000) in cash or other
immediately available funds at the Closing.
5. In further consideration of the transfer of the Partnership Interest,
the obligation of SMEC to pay WHJV the sum of $300,000.00 together with accrued
and unpaid interest thereon (at a per diem rate of $57.51) shall be canceled and
shall be deemed to be satisfied and fully paid for all purposes; and the
obligation of WHJV to pay SMEC the sum of $47,502.46 (US) together with accrued
and unpaid interest thereon (at a per them rate of $7.80) shall be canceled and
shall be deemed to be satisfied and fully paid for all purposes. 6 . The
obligations of WHJV hereunder shall be subject to the condition that, Shoudu
Iron and Steel Co. (also known as Shougang Corporation), an entity organized and
existing under the laws of the People Republic of China ("Shoudu") and the sole
shareholder of SMEC unconditionally and irrevocably guarantee the payments and
performance of SMEC under this Agreement and the Instrument of Assumption of
Liabilities and Indemnity by the execution and delivery by Shoudu of a guaranty
in favor of WHJV.
<PAGE>
7. SMEC and WHJV shall at any time, and from time to time, on or after the
closing of the purchase and sale of the Partnership Interest, upon written
request and without further consideration, take or cause to be taken such
actions, and execute and deliver such documents, conveyances or assurances that
SMEC or WHJV may reasonably require for completing the transaction contemplated
hereunder, including but not limited to the preparation of tax returns for MEC
and the incorporation of MEC.
8. The Agreement and obligations of the Parties contained in this Agreement
shall survive the closing hereof and shall be legally biding and enforceable
upon the Party or Parties to be charged in accordance with the terms of any
provisions stated herein, and execution of this Agreement shall in no way act or
operate to terminate or invalidate the future obligations or performance
thereof.
9. In the event of a breach by either Party hereunder of their respective
obligations under this Agreement or under Section 6 of the Purchase Agreement or
under the other closing documents described herein, the non-breaching Party may
resort to any and all remedies it may now or hereafter possess, at law or in
equity, to enforce the rights under the closing documents described herein or
under this Agreement or the Purchase Agreement, which remedies shall be
cumulative and exercisable at the discretion of the non-breaching Party. The
breaching Party shall pay all costs and expenses, including reasonable
attorneys' fees, incurred by non-breaching party in the exercise of its remedies
hereunder, under the Purchase Agreement or under the other closing documents
described herein.
10. In connection with any dispute under this Agreement or in the closing
documents described herein, WHJV and SMEC hereby irrevocably consent to the
jurisdiction of the United States District Court for the District of Columbia or
if such court rules that it lacks jurisdiction then to the Superior Court for
the District of Columbia or if both such courts rule that they lack jurisdiction
then the parties consent to the jurisdiction of the United States District Court
for the Western District of Pennsylvania, and waive personal service of any and
all process upon it and consent that all such services of process be made by
certified or registered mail directed to WHJV and/or SMEC at the addresses
provided for in Section 11 of this Agreement and service so made shall be deemed
to be completed upon actual receipt thereof. Each of WHJV and SMEC waives any
objection to jurisdiction and venue of any action instituted against it as
provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue.
11. All notices, and other communications given or made pursuant to this
Agreement shall be in writing and shall be deemed to have been duly given or
made (i) the second day after mailing, if sent by registered or certified mail,
return receipt requested, (ii) upon delivery, if sent by hand delivery, (iii)
when received, if sent by prepaid overnight carrier, with a record or receipt,
or (iv) the first day after dispatch, if sent by cable, telegram, facsimile or
telecopy (with a copy simultaneously sent by registered or certified mail,
return receipt requested), to the parties at the following addresses:
<PAGE>
If to WHJV, to:
West Homestead Joint Venture Corporation
260 North Elm Street
Westfield, MA 10185
Attention: R. Bruce Dewey
With a copy to:
Baker & McKenzie
815 Connecticut Avenue, N.W.
Washington, D.C. 20006
Attention: John W. Polk
If to SMEC, to:
Shougang Mechanical Equipment of
Pennsylvania, Inc.
Seven Parkway Center
Pittsburgh, PA 15220
Attention: President
With a copy to:
Kirkpatrick & Lockhart
1500 Oliver Building
Pittsburgh, PA 15222
Attention: W. Henry Snyder
Any party hereto may change the address to which notice to it, or copies
thereof, shall be addressed, by giving notice thereof to the other parties
hereto in conformity with the foregoing.
12. WHJV and SMEC shall each bear their own costs and expenses (including,
without limitation, legal fees) incurred by them or their respective affiliates
in connection with the arbitration, the preparation, negotiation, execution,
delivery and performance of the Closing Agreement and the related closing
documents and the consummation of the transactions contemplated hereby and
thereby.
13. This Agreement shall in all respects be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
its conflict of law doctrines.
<PAGE>
IN WITNESS WHEREOF the Parties have set their hand and seal.
CORPORATE SEAL SHOUGANG MECHANICAL EQUIPMENT OF
PENNSYLVANIA INC.
BY: /s/ Wang Zhiduo
ATTEST: Acting President
CORPORATE SEAL WEST HOMESTEAD JOINT VENTURE CORPORATION
BY: /s/ John E. Reed
ATTEST: President
<PAGE>
EQUIPMENT LEASE AGREEMENT
THIS EQUIPMENT LEASE AGREEMENT, is effective January 1, 1993 and is
between Machinery Rental Company, a sole proprietorship wholly owned by John E.
Reed of Westfield, Massachusetts (the Lessor), and Vulcan Radiator Corp., a
Connecticut corporation with its principal place of business in Westfield,
Massachusetts (the Lessee).
First: Description of Leased Property - The Lessor does
hereby lease and let to the Lessee one U. S. Amada Turret Punch
Press Model PEGA Serioal AH 440031 with Program Verification System and Tooling.
Second: Lease Term - The lease term for said equipment shall be for a
period of five years beginning January 1, 1993 and ending on December 31, 1997.
Third: Fixed Rent Payment - The Lessee agrees that it will pay the
Lessor fixed rent for said equipment in the amount of $2,000.00 per month
payable on or before the first day of each month.
Fourth: Taxes - The Lessor agrees to pay any and all taxes, assessments
and other governmental charges of whatsoever kind or character and by whomever
payable on or relating to the said equipment leased hereunder.
Fifth: Maintenance and Servicing - The Lessee agrees to pay all costs,
expenses, fees and charges incurred in connection with the use and operation of
the equipment during the lease term thereof, including, but not limited to,
repairs, maintenance, storage and servicing.
Sixth: Insurance - The Lessee agrees that it will at all
times during the term of this Lease, and at its own cost and
<PAGE>
expense, keep the equipment insured at not less than the full insurable value
thereof against loss by fire, windstorm and explosion and with extended coverage
and against such other risks as are customarily insured against by companies
owning property of a similar character and engaged in a business similar to that
engaged in by the Lessee, and will maintain public liability and property damage
insurance with respect to the equipment with limits acceptable to Lessor.
Seventh: Indemnity - The Lessee does hereby assume liability for, and
does hereby agree to indemnify, protect, save and keep harmless the Lessor, its
agents and servants and any assigns of the Lessor from and against, any and all
losses, damages, injuries, claims, demands and all expenses, legal or otherwise
(including court costs and attorneys' fees), of whatsoever kind and nature
arising on account of the use (including by reason of the use for incorporation
of any invention in equipment or infringements of patents), condition
(including, without limitation, latent and other defects, and whether or not
discoverable by the Lessor) or operation of the equipment, and by whomsoever
used or operated, during the continuance of this Lease. The Lessee shall not,
however, be required to pay or discharge any claim or demand referred to in this
Paragraph so long as the validity or the amount thereof shall be contested in
good faith and by appropriate legal proceedings in any reasonable manner which
will not result in the forfeiture or sale of the equipment. The indemnities and
assumptions of liability in this Paragraph contained shall continue in full
force and effect notwithstanding the termination of this Lease, whether
<PAGE>
by expiration of time, by operation of law or otherwise. The Lessor shall give
the Lessee prompt notice of any claim or liability hereby indemnified against,
and the Lessee shall be entitled to control the defense thereof.
Eighth: Loss or Destruction of Equipment - In the event any units of
equipment are lost, destroyed or irreparably damaged, the Lessee shall have the
option to terminate this Lease in respect of such units on the following terms
and conditions:
The Lessee shall give the Lessor written notice of the exercise of the
option designating the equipment in respect of which the Lease is being
terminated and the date on which such termination will be effective.
Ninth: Use of the Equipment - The Lessee agrees that the equipment will
be used solely in the conduct of the business of the Lessee and/or its
subsidiaries and affiliated companies and will at all times be and remain in the
possession and control of the Lessee at any of its places of business. The
Lessee warrants that the equipment will at all times be used and operated under
and in compliance with the laws of the jurisdiction in which such unit may be
operated, and in compliance with all lawful acts, rules, regulations and orders
of any commissions, boards or other legislative, executive or judicial bodies or
officers having power to regulate or supervise the use of such property;
provided, however, that the Lessee may in good faith contest in any reasonable
manner the application of any such rule, regulation or order to the extent that
such contest does not result in the forfeiture or sale of any of the equipment.
The Lessee agrees that, without the prior written consent of the Lessor (which
<PAGE>
consent shall not be unreasonably withheld), the Lessee will not assign,
transfer, or sublease its rights under this Lease, or permit its rights or
interest hereunder to be subject to any lien, charge or encumbrance. No
assignment or sublease shall relieve the Lessee of any of its obligations,
liabilities or duties hereunder. The Lessee further agrees that it will keep
each unit of equipment free and clear of any and all liens, charges and
encumbrances which may be levied against or imposed upon such unit as a result
of the failure of the Lessee for any reason to perform or observe any of the
covenants and agreements required to be performed or observed by the Lessee
hereunder and, without limiting the foregoing, the Lessee covenants and agrees
that it will keep the equipment free and clear of any liens, rights of
distraint, charges, encumbrances or claims of the owner or owners of any
interest in the real estate of which such equipment is installed, and purchaser
of, or present or future creditor obtaining a lien on such real estate, and will
upon the request of the Lessor, obtain and deliver concurrently with delivery of
any unit of equipment a waiver of any of the foregoing as to the equipment in
recordable form satisfactory to the Lessor.
Tenth: Ownership - Lessee acknowledges and agrees that it has not, and
by the execution hereof it does not and will not have or obtain any title to the
equipment subject to this Lease, nor any property right or interest, legal or
equitable, therein, except solely as Lessee hereunder and subject to all the
terms hereof.
It is expressly understood that all of the equipment shall be and
remain personal property notwithstanding the manner in which the equipment may
be attached or affixed to realty, and that upon
<PAGE>
termination of the lease term Lessee shall have the duty and Lessor shall have
the right to remove the equipment from the premises whereon the same is located
whether or not affixed or attached to the realty or any building at the sole
cost and expense of Lessee. The Lessor shall not be liable for any damage caused
to the realty or any building by the removal of the equipment.
Eleventh: Defaults - In the event that: (a) Lessee shall
default in the payment of any installment of fixed rent, and such
default shall continue for a period of 10 days; or
(b) Lessee shall default in the observance or performance of any other
covenant required to be observed or performed by the Lessee hereunder and such
default shall continue for more than 30 days after notice thereof to the Lessee
by the Lessor; or
(c) The Lessee becomes insolvent or bankrupt or admits in writing its
inability to pay its debts as they may mature, or makes an assignment for the
benefit of creditors or applies for or consents to the appointment of a trustee
or receiver for the Lessee or for the major part of its property, or the Lessee
shall make any voluntary assignment or transfer of the Lessee's interest as
Lessee hereunder in a manner or to a person not permitted by the terms hereof;
or
(d) A trustee or receiver is appointed for the Lessee, or for
the major part of its property, and such appointment is not
discharged within 30 days after such appointment; or
(e) Bankruptcy, reorganization, arrangements, insolvency or liquidation
proceedings, or other proceedings for relief under any bankruptcy law or similar
law for the relief of debtors, are instituted by or against the Lessee, and if
instituted against the
<PAGE>
Lessee are allowed against the Lessee or are consented to or are not dismissed
within 60 days after such institution; then in any such case (herein sometimes
called "events of default") the Lessor at its option may:
(i) Proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by the Lessee of the applicable covenants and
terms of the Lease or to recover damages for the breach thereof; or
(ii) By notice in writing to the Lessee, terminate this Lease and/or
the Lessee's rights of possession hereunder as to all or any part of the
equipment leased hereunder whereupon all right, title and interest of the Lessee
to or in the use of such equipment shall terminate and the Lessor may directly
or by its agent, enter upon the premises of the Lessee or other premises where
the equipment may be located and take possession thereof (any damages occasioned
by such taking of possession being hereby expressly waived by the Lessee). In
the event of any such termination (aa) the Lessor shall be entitled to retain
all rents and additional sums paid by the Lessee hereunder in respect of all
equipment theretofore paid or received by the Lessor, including any such then in
its possession which, had this Lease not been declared in default, would
otherwise be payable to the Lessee hereunder, (bb) the Lessor may recover from
the Lessee all rents and additional sums accrued and unpaid under any of the
terms hereof as of the date of termination and (cc) the Lessor may recover from
the Lessee as liquidated damages, but not as penalty, an aggregate sum, which at
the time of such termination, represents the excess, if any, of the then present
value of the aggregate rents which would have accrued
<PAGE>
for the balance of the term of this Lease over the then present value of the
aggregate fair rental value of the equipment for the balance of the term. In
addition to the foregoing the Lessor shall be entitled to recover from the
Lessee any and all damages which the Lessor shall sustain by reason of the
occurrence of any such Event of Default, together with a reasonable sum for
attorneys' fees and such expenses as shall be expended or incurred in the
seizure, rental or sale of the equipment or in the enforcement of any right or
privilege hereunder or in any consultation or action in connection therewith.
The remedies herein provided in favor of the Lessor in the event of
default as hereinabove set forth shall not be deemed to be exclusive, but shall
be cumulative and shall be in addition to all other remedies in its favor
existing at law, in equity or in bankruptcy.
Twelfth: Miscellaneous - (a) No delay or omission to exercise any
right, power or remedy accruing to Lessor upon any breach or default by Lessee
under this Lease shall impair any such right, power or remedy of Lessor, nor
shall any such delay or omission be construed as a waiver of any breach or
default, or of any similar breach or default thereafter occurring; nor shall any
waiver of a single breach or default be deemed a waiver of any subsequent breach
or default. All waivers under this Lease must be in writing. All remedies either
under this Lease or by law afforded to Lessor shall be cumulative and not
alternative. Any provision of this Lease prohibited by law shall be ineffective
to the extent of such provision without invalidating the remaining provisions
thereof.
<PAGE>
(b) Lessee acknowledges and agrees (i) that the equipment is of a size,
design, capacity and manufacture selected by the Lessee (ii) that Lessee is
satisfied that the same is suitable for its purposes, (iii) that Lessor is not a
manufacturer thereof nor a dealer in property of such kind, and (iv) that Lessor
has not made and does not hereby make, any representation of warranty or
covenant with respect to the merchantability, condition, quality, durability or
suitability of the equipment in any respect or in connection with or for the
purposes and uses of Lessee, or any other representation or warranty or covenant
of any kind or character, express or implied, with respect thereto.
(c) The Lessor shall have the right to inspect the equipment at any
reasonable time or times during the continuance of this Lease and for its
purpose to enter upon any building or place where the equipment is located. The
Lessee shall furnish to the Lessor such information and data as the Lessor may
from time to time reasonably request as to location and the existence and status
of any claims for damages (whether against the equipment or against the Lessor
or the Lessee) arising out of the use, operation or condition of the equipment,
and such other data pertinent to the equipment and the condition, use and
operation thereof as the Lessor may from time to time reasonably request.
Without limiting the foregoing the Lessee agrees that, without any such request,
it will furnish the Lessor with prompt written notice of any material damage,
loss, theft or destruction, partial or complete, of any of the equipment.
<PAGE>
(d) This Lease shall be binding upon and shall inure to the benefit of
the Lessor and the Lessee and their respective successors and assigns.
(e) This Lease and all of the rights and obligations hereunder,
including matters of construction, validity and performance shall be governed by
the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this
instrument to be executed as of the 31st day of December, 1992.
In presence of: MACHINERY RENTAL COMPANY
__________________ By: ______________JOHN E. REED
JOHN E. REED
__________________ VULCAN RADIATOR CORP.
By: ____________Stephen M. Shea
Stephen M. Shea
Vice President
<PAGE>
SCHEDULE A
Type of Equipment Location
90 Ton Johnson Press Westfield
Fin dropping machines Westfield
Cincinnati Press Brake Farmville
Federal 250 Ton Brake Farmville
Niagra Shear Wrens
S-2 Rouselle Press Farmville
Verson B76 Brake Wrens
6B-60 Rouselle Press Wrens
Heim Press Brake Wrens
#10 Rouselle Press Wrens
<PAGE>
EQUIPMENT LEASE AGREEMENT
THIS EQUIPMENT LEASE AGREEMENT, is effective January 1, 1993 and is
between Machinery Rental Company, a sole proprietorship wholly owned by John E.
Reed of Westfield, Massachusetts (the Lessor), and Mestek, Inc., a Pennsylvania
corporation with its principal place of business in Westfield, Massachusetts
(the Lessee).
First: Description of Leased Property - The Lessor does hereby lease
and let to the Lessee the personal property listed on Schedule A, attached
hereto and made a part hereof.
Second: Lease Term - The lease term for said equipment shall be for a
period of five years beginning January 1, 1993 and ending on December 31, 1997.
Third: Fixed Rent Payment - The Lessee agrees that it will pay the
Lessor fixed rent for said equipment in the amount of $2,000.00 per month
payable on or before the first day of each month.
Fourth: Taxes - The Lessor agrees to pay any and all taxes, assessments
and other governmental charges of whatsoever kind or character and by whomever
payable on or relating to the said equipment leased hereunder.
Fifth: Maintenance and Servicing - The Lessee agrees to pay all costs,
expenses, fees and charges incurred in connection with the use and operation of
the equipment during the lease term thereof, including, but not limited to,
repairs, maintenance, storage and servicing.
Sixth: Insurance - The Lessee agrees that it will at all
times during the term of this Lease, and at its own cost and
<PAGE>
expense, keep the equipment insured at not less than the full insurable value
thereof against loss by fire, windstorm and explosion and with extended coverage
and against such other risks as are customarily insured against by companies
owning property of a similar character and engaged in a business similar to that
engaged in by the Lessee, and will maintain public liability and property damage
insurance with respect to the equipment with limits acceptable to Lessor.
Seventh: Indemnity - The Lessee does hereby assume liability for, and
does hereby agree to indemnify, protect, save and keep harmless the Lessor, its
agents and servants and any assigns of the Lessor from and against, any and all
losses, damages, injuries, claims, demands and all expenses, legal or otherwise
(including court costs and attorneys' fees), of whatsoever kind and nature
arising on account of the use (including by reason of the use for incorporation
of any invention in equipment or infringements of patents), condition
(including, without limitation, latent and other defects, and whether or not
discoverable by the Lessor) or operation of the equipment, and by whomsoever
used or operated, during the continuance of this Lease. The Lessee shall not,
however, be required to pay or discharge any claim or demand referred to in this
Paragraph so long as the validity or the amount thereof shall be contested in
good faith and by appropriate legal proceedings in any reasonable manner which
will not result in the forfeiture or sale of the equipment. The indemnities and
assumptions of liability in this Paragraph contained shall continue in full
force and effect notwithstanding the termination of this Lease, whether by
expiration of time, by operation of law or
<PAGE>
otherwise. The Lessor shall give the Lessee prompt notice of any claim or
liability hereby indemnified against, and the Lessee shall be entitled to
control the defense thereof.
Eighth: Loss or Destruction of Equipment - In the event any units of
equipment are lost, destroyed or irreparably damaged, the Lessee shall have the
option to terminate this Lease in respect of such units on the following terms
and conditions:
The Lessee shall give the Lessor written notice of the exercise of the
option designating the equipment in respect of which the Lease is being
terminated and the date on which such termination will be effective.
Ninth: Use of the Equipment - The Lessee agrees that the equipment will
be used solely in the conduct of the business of the Lessee and/or its
subsidiaries and affiliated companies and will at all times be and remain in the
possession and control of the Lessee at any of its places of business. The
Lessee warrants that the equipment will at all times be used and operated under
and in compliance with the laws of the jurisdiction in which such unit may be
operated, and in compliance with all lawful acts, rules, regulations and orders
of any commissions, boards or other legislative, executive or judicial bodies or
officers having power to regulate or supervise the use of such property;
provided, however, that the Lessee may in good faith contest in any reasonable
manner the application of any such rule, regulation or order to the extent that
such contest does not result in the forfeiture or sale of any of the equipment.
The Lessee agrees that, without the prior written consent of the Lessor (which
consent shall not be unreasonably withheld), the Lessee will not
<PAGE>
assign, transfer, or sublease its rights under this Lease, or permit its rights
or interest hereunder to be subject to any lien, charge or encumbrance. No
assignment or sublease shall relieve the Lessee of any of its obligations,
liabilities or duties hereunder. The Lessee further agrees that it will keep
each unit of equipment free and clear of any and all liens, charges and
encumbrances which may be levied against or imposed upon such unit as a result
of the failure of the Lessee for any reason to perform or observe any of the
covenants and agreements required to be performed or observed by the Lessee
hereunder and, without limiting the foregoing, the Lessee covenants and agrees
that it will keep the equipment free and clear of any liens, rights of
distraint, charges, encumbrances or claims of the owner or owners of any
interest in the real estate of which such equipment is installed, and purchaser
of, or present or future creditor obtaining a lien on such real estate, and will
upon the request of the Lessor, obtain and deliver concurrently with delivery of
any unit of equipment a waiver of any of the foregoing as to the equipment in
recordable form satisfactory to the Lessor.
Tenth: Ownership - Lessee acknowledges and agrees that it has not, and
by the execution hereof it does not and will not have or obtain any title to the
equipment subject to this Lease, nor any property right or interest, legal or
equitable, therein, except solely as Lessee hereunder and subject to all the
terms hereof.
It is expressly understood that all of the equipment shall be and
remain personal property notwithstanding the manner in which the equipment may
be attached or affixed to realty, and that upon termination of the lease term
Lessee shall have the duty and Lessor
<PAGE>
shall have the right to remove the equipment from the premises whereon the same
is located whether or not affixed or attached to the realty or any building at
the sole cost and expense of Lessee. The Lessor shall not be liable for any
damage caused to the realty or any building by the removal of the equipment.
Eleventh: Defaults - In the event that: (a) Lessee shall
default in the payment of any installment of fixed rent, and such
default shall continue for a period of 10 days; or
(b) Lessee shall default in the observance or performance of any other
covenant required to be observed or performed by the Lessee hereunder and such
default shall continue for more than 30 days after notice thereof to the Lessee
by the Lessor; or
(c) The Lessee becomes insolvent or bankrupt or admits in writing its
inability to pay its debts as they may mature, or makes an assignment for the
benefit of creditors or applies for or consents to the appointment of a trustee
or receiver for the Lessee or for the major part of its property, or the Lessee
shall make any voluntary assignment or transfer of the Lessee's interest as
Lessee hereunder in a manner or to a person not permitted by the terms hereof;
or
(d) A trustee or receiver is appointed for the Lessee, or for
the major part of its property, and such appointment is not
discharged within 30 days after such appointment; or
(e) Bankruptcy, reorganization, arrangements, insolvency or liquidation
proceedings, or other proceedings for relief under any bankruptcy law or similar
law for the relief of debtors, are instituted by or against the Lessee, and if
instituted against the Lessee are allowed against the Lessee or are consented to
or are
<PAGE>
not dismissed within 60 days after such institution; then in any such case
(herein sometimes called "events of default") the Lessor at its option may:
(i) Proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by the Lessee of the applicable covenants and
terms of the Lease or to recover damages for the breach thereof; or
(ii) By notice in writing to the Lessee, terminate this Lease and/or
the Lessee's rights of possession hereunder as to all or any part of the
equipment leased hereunder whereupon all right, title and interest of the Lessee
to or in the use of such equipment shall terminate and the Lessor may directly
or by its agent, enter upon the premises of the Lessee or other premises where
the equipment may be located and take possession thereof (any damages occasioned
by such taking of possession being hereby expressly waived by the Lessee). In
the event of any such termination (aa) the Lessor shall be entitled to retain
all rents and additional sums paid by the Lessee hereunder in respect of all
equipment theretofore paid or received by the Lessor, including any such then in
its possession which, had this Lease not been declared in default, would
otherwise be payable to the Lessee hereunder, (bb) the Lessor may recover from
the Lessee all rents and additional sums accrued and unpaid under any of the
terms hereof as of the date of termination and (cc) the Lessor may recover from
the Lessee as liquidated damages, but not as penalty, an aggregate sum, which at
the time of such termination, represents the excess, if any, of the then present
value of the aggregate rents which would have accrued for the balance of the
term of this Lease over the then present
<PAGE>
value of the aggregate fair rental value of the equipment for the balance of the
term. In addition to the foregoing the Lessor shall be entitled to recover from
the Lessee any and all damages which the Lessor shall sustain by reason of the
occurrence of any such Event of Default, together with a reasonable sum for
attorneys' fees and such expenses as shall be expended or incurred in the
seizure, rental or sale of the equipment or in the enforcement of any right or
privilege hereunder or in any consultation or action in connection therewith.
The remedies herein provided in favor of the Lessor in the event of
default as hereinabove set forth shall not be deemed to be exclusive, but shall
be cumulative and shall be in addition to all other remedies in its favor
existing at law, in equity or in bankruptcy.
Twelfth: Miscellaneous - (a) No delay or omission to exercise any
right, power or remedy accruing to Lessor upon any breach or default by Lessee
under this Lease shall impair any such right, power or remedy of Lessor, nor
shall any such delay or omission be construed as a waiver of any breach or
default, or of any similar breach or default thereafter occurring; nor shall any
waiver of a single breach or default be deemed a waiver of any subsequent breach
or default. All waivers under this Lease must be in writing. All remedies either
under this Lease or by law afforded to Lessor shall be cumulative and not
alternative. Any provision of this Lease prohibited by law shall be ineffective
to the extent of such provision without invalidating the remaining provisions
thereof.
<PAGE>
(b) Lessee acknowledges and agrees (i) that the equipment is of a size,
design, capacity and manufacture selected by the Lessee (ii) that Lessee is
satisfied that the same is suitable for its purposes, (iii) that Lessor is not a
manufacturer thereof nor a dealer in property of such kind, and (iv) that Lessor
has not made and does not hereby make, any representation of warranty or
covenant with respect to the merchantability, condition, quality, durability or
suitability of the equipment in any respect or in connection with or for the
purposes and uses of Lessee, or any other representation or warranty or covenant
of any kind or character, express or implied, with respect thereto.
(c) The Lessor shall have the right to inspect the equipment at any
reasonable time or times during the continuance of this Lease and for its
purpose to enter upon any building or place where the equipment is located. The
Lessee shall furnish to the Lessor such information and data as the Lessor may
from time to time reasonably request as to location and the existence and status
of any claims for damages (whether against the equipment or against the Lessor
or the Lessee) arising out of the use, operation or condition of the equipment,
and such other data pertinent to the equipment and the condition, use and
operation thereof as the Lessor may from time to time reasonably request.
Without limiting the foregoing the Lessee agrees that, without any such request,
it will furnish the Lessor with prompt written notice of any material damage,
loss, theft or destruction, partial or complete, of any of the equipment.
<PAGE>
(d) This Lease shall be binding upon and shall inure to the benefit of
the Lessor and the Lessee and their respective successors and assigns.
(e) This Lease and all of the rights and obligations hereunder,
including matters of construction, validity and performance shall be governed by
the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this
instrument to be executed as of the 31st day of December, 1992.
In presence of: MACHINERY RENTAL COMPANY
_________ By: _____________JOHN E. REED
JOHN E. REED
_________ MESTEK, INC.
By: ______Stephen M. Shea ____
Stephen M. Shea, Vice President
<PAGE>
January 1, 1993
EQUIPMENT LEASE AGREEMENT
MACHINERY RENTAL COMPANY/MESTEK, INC.
Mitsubishi Vertical Machining Center Clinton
Yoder Rolling Mill Line - complete with tooling
for Suntemp product - backplate Farmville
Dies, Fixtures for making Suntemp brackets and
accessories Farmville
Wales Strippit NC Punch Press Farmville
Houidaille Strippit Tape Machine Farmville
P40 Yoder Roll Former Farmville
M2 Yoder Roll Former Farmville
#400 D & K Press Farmville
Alphil Spot Welder Farmville
Painting Equipment Westfield
MFR Roll Former Westfield
Maple Wood Roll Former Westfield
V & O Press Westfield
Kent Grinder Westfield
Niagara Power Shear, Model 714B Wrens
Mercury Power Press Brake, Model 6510 Wrens
Rousselle Power Press, Model SS 30-100 Wrens
Heim Press Brake Wrens
<PAGE>
EQUIPMENT LEASE AGREEMENT
THIS EQUIPMENT LEASE AGREEMENT, is effective January 1, 1993 and is
between Elizabeth C. Reed Trust, John E. Reed, Trustee, of Westfield,
Massachusetts (the Lessor), and Mestek, Inc., a Pennsylvania corporation with
its principal place of business in Westfield, Massachusetts (the Lessee).
First: Description of Leased Property - The Lessor does hereby lease
and let to the Lessee the personal property listed on Schedule A, attached
hereto and made a part hereof.
Second: Lease Term - The lease term for said equipment shall be for a
period of five years beginning January 1, 1993 and ending on December 31, 1997.
Third: Fixed Rent Payment - The Lessee agrees that it will pay the
Lessor fixed rent for said equipment in the amount of $2,000.00 per month
payable on or before the first day of each month.
Fourth: Taxes - The Lessor agrees to pay any and all taxes, assessments
and other governmental charges of whatsoever kind or character and by whomever
payable on or relating to the said equipment leased hereunder.
Fifth: Maintenance and Servicing - The Lessee agrees to pay all costs,
expenses, fees and charges incurred in connection with the use and operation of
the equipment during the lease term thereof, including, but not limited to,
repairs, maintenance, storage and servicing.
Sixth: Insurance - The Lessee agrees that it will at all
times during the term of this Lease, and at its own cost and
expense, keep the equipment insured at not less than the full
<PAGE>
insurable value thereof against loss by fire, windstorm and explosion and with
extended coverage and against such other risks as are customarily insured
against by companies owning property of a similar character and engaged in a
business similar to that engaged in by the Lessee, and will maintain public
liability and property damage insurance with respect to the equipment with
limits acceptable to Lessor.
Seventh: Indemnity - The Lessee does hereby assume liability for, and
does hereby agree to indemnify, protect, save and keep harmless the Lessor, its
agents and servants and any assigns of the Lessor from and against, any and all
losses, damages, injuries, claims, demands and all expenses, legal or otherwise
(including court costs and attorneys' fees), of whatsoever kind and nature
arising on account of the use (including by reason of the use for incorporation
of any invention in equipment or infringements of patents), condition
(including, without limitation, latent and other defects, and whether or not
discoverable by the Lessor) or operation of the equipment, and by whomsoever
used or operated, during the continuance of this Lease. The Lessee shall not,
however, be required to pay or discharge any claim or demand referred to in this
Paragraph so long as the validity or the amount thereof shall be contested in
good faith and by appropriate legal proceedings in any reasonable manner which
will not result in the forfeiture or sale of the equipment. The indemnities and
assumptions of liability in this Paragraph contained shall continue in full
force and effect notwithstanding the termination of this Lease, whether by
expiration of time, by operation of law or otherwise. The Lessor shall give the
Lessee prompt notice of any
<PAGE>
claim or liability hereby indemnified against, and the Lessee shall be entitled
to control the defense thereof.
Eighth: Loss or Destruction of Equipment - In the event any units of
equipment are lost, destroyed or irreparably damaged, the Lessee shall have the
option to terminate this Lease in respect of such units on the following terms
and conditions:
The Lessee shall give the Lessor written notice of the exercise of the
option designating the equipment in respect of which the Lease is being
terminated and the date on which such termination will be effective.
Ninth: Use of the Equipment - The Lessee agrees that the equipment will
be used solely in the conduct of the business of the Lessee and/or its
subsidiaries and affiliated companies and will at all times be and remain in the
possession and control of the Lessee at any of its places of business. The
Lessee warrants that the equipment will at all times be used and operated under
and in compliance with the laws of the jurisdiction in which such unit may be
operated, and in compliance with all lawful acts, rules, regulations and orders
of any commissions, boards or other legislative, executive or judicial bodies or
officers having power to regulate or supervise the use of such property;
provided, however, that the Lessee may in good faith contest in any reasonable
manner the application of any such rule, regulation or order to the extent that
such contest does not result in the forfeiture or sale of any of the equipment.
The Lessee agrees that, without the prior written consent of the Lessor (which
consent shall not be unreasonably withheld), the Lessee will not assign,
transfer, or sublease its rights under this Lease, or
<PAGE>
permit its rights or interest hereunder to be subject to any lien, charge or
encumbrance. No assignment or sublease shall relieve the Lessee of any of its
obligations, liabilities or duties hereunder. The Lessee further agrees that it
will keep each unit of equipment free and clear of any and all liens, charges
and encumbrances which may be levied against or imposed upon such unit as a
result of the failure of the Lessee for any reason to perform or observe any of
the covenants and agreements required to be performed or observed by the Lessee
hereunder and, without limiting the foregoing, the Lessee covenants and agrees
that it will keep the equipment free and clear of any liens, rights of
distraint, charges, encumbrances or claims of the owner or owners of any
interest in the real estate of which such equipment is installed, and purchaser
of, or present or future creditor obtaining a lien on such real estate, and will
upon the request of the Lessor, obtain and deliver concurrently with delivery of
any unit of equipment a waiver of any of the foregoing as to the equipment in
recordable form satisfactory to the Lessor.
Tenth: Ownership - Lessee acknowledges and agrees that it has not, and
by the execution hereof it does not and will not have or obtain any title to the
equipment subject to this Lease, nor any property right or interest, legal or
equitable, therein, except solely as Lessee hereunder and subject to all the
terms hereof.
It is expressly understood that all of the equipment shall be and
remain personal property notwithstanding the manner in which the equipment may
be attached or affixed to realty, and that upon termination of the lease term
Lessee shall have the duty and Lessor shall have the right to remove the
equipment from the premises
<PAGE>
whereon the same is located whether or not affixed or attached to the realty or
any building at the sole cost and expense of Lessee. The Lessor shall not be
liable for any damage caused to the realty or any building by the removal of the
equipment.
Eleventh: Defaults - In the event that: (a) Lessee shall
default in the payment of any installment of fixed rent, and such
default shall continue for a period of 10 days; or
(b) Lessee shall default in the observance or performance of any other
covenant required to be observed or performed by the Lessee hereunder and such
default shall continue for more than 30 days after notice thereof to the Lessee
by the Lessor; or
(c) The Lessee becomes insolvent or bankrupt or admits in writing its
inability to pay its debts as they may mature, or makes an assignment for the
benefit of creditors or applies for or consents to the appointment of a trustee
or receiver for the Lessee or for the major part of its property, or the Lessee
shall make any voluntary assignment or transfer of the Lessee's interest as
Lessee hereunder in a manner or to a person not permitted by the terms hereof;
or
(d) A trustee or receiver is appointed for the Lessee, or for
the major part of its property, and such appointment is not
discharged within 30 days after such appointment; or
(e) Bankruptcy, reorganization, arrangements, insolvency or liquidation
proceedings, or other proceedings for relief under any bankruptcy law or similar
law for the relief of debtors, are instituted by or against the Lessee, and if
instituted against the Lessee are allowed against the Lessee or are consented to
or are not dismissed within 60 days after such institution; then in any
<PAGE>
such case (herein sometimes called "events of default") the Lessor at its option
may:
(i) Proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by the Lessee of the applicable covenants and
terms of the Lease or to recover damages for the breach thereof; or
(ii) By notice in writing to the Lessee, terminate this Lease and/or
the Lessee's rights of possession hereunder as to all or any part of the
equipment leased hereunder whereupon all right, title and interest of the Lessee
to or in the use of such equipment shall terminate and the Lessor may directly
or by its agent, enter upon the premises of the Lessee or other premises where
the equipment may be located and take possession thereof (any damages occasioned
by such taking of possession being hereby expressly waived by the Lessee). In
the event of any such termination (aa) the Lessor shall be entitled to retain
all rents and additional sums paid by the Lessee hereunder in respect of all
equipment theretofore paid or received by the Lessor, including any such then in
its possession which, had this Lease not been declared in default, would
otherwise be payable to the Lessee hereunder, (bb) the Lessor may recover from
the Lessee all rents and additional sums accrued and unpaid under any of the
terms hereof as of the date of termination and (cc) the Lessor may recover from
the Lessee as liquidated damages, but not as penalty, an aggregate sum, which at
the time of such termination, represents the excess, if any, of the then present
value of the aggregate rents which would have accrued for the balance of the
term of this Lease over the then present value of the aggregate fair rental
value of the equipment for the
<PAGE>
balance of the term. In addition to the foregoing the Lessor shall be entitled
to recover from the Lessee any and all damages which the Lessor shall sustain by
reason of the occurrence of any such Event of Default, together with a
reasonable sum for attorneys' fees and such expenses as shall be expended or
incurred in the seizure, rental or sale of the equipment or in the enforcement
of any right or privilege hereunder or in any consultation or action in
connection therewith.
The remedies herein provided in favor of the Lessor in the event of
default as hereinabove set forth shall not be deemed to be exclusive, but shall
be cumulative and shall be in addition to all other remedies in its favor
existing at law, in equity or in bankruptcy.
Twelfth: Miscellaneous - (a) No delay or omission to exercise any
right, power or remedy accruing to Lessor upon any breach or default by Lessee
under this Lease shall impair any such right, power or remedy of Lessor, nor
shall any such delay or omission be construed as a waiver of any breach or
default, or of any similar breach or default thereafter occurring; nor shall any
waiver of a single breach or default be deemed a waiver of any subsequent breach
or default. All waivers under this Lease must be in writing. All remedies either
under this Lease or by law afforded to Lessor shall be cumulative and not
alternative. Any provision of this Lease prohibited by law shall be ineffective
to the extent of such provision without invalidating the remaining provisions
thereof.
(b) Lessee acknowledges and agrees (i) that the equipment is
of a size, design, capacity and manufacture selected by the Lessee
<PAGE>
(ii) that Lessee is satisfied that the same is suitable for its purposes, (iii)
that Lessor is not a manufacturer thereof nor a dealer in property of such kind,
and (iv) that Lessor has not made and does not hereby make, any representation
of warranty or covenant with respect to the merchantability, condition, quality,
durability or suitability of the equipment in any respect or in connection with
or for the purposes and uses of Lessee, or any other representation or warranty
or covenant of any kind or character, express or implied, with respect thereto.
(c) The Lessor shall have the right to inspect the equipment at any
reasonable time or times during the continuance of this Lease and for its
purpose to enter upon any building or place where the equipment is located. The
Lessee shall furnish to the Lessor such information and data as the Lessor may
from time to time reasonably request as to location and the existence and status
of any claims for damages (whether against the equipment or against the Lessor
or the Lessee) arising out of the use, operation or condition of the equipment,
and such other data pertinent to the equipment and the condition, use and
operation thereof as the Lessor may from time to time reasonably request.
Without limiting the foregoing the Lessee agrees that, without any such request,
it will furnish the Lessor with prompt written notice of any material damage,
loss, theft or destruction, partial or complete, of any of the equipment.
(d) This Lease shall be binding upon and shall inure to the benefit of
the Lessor and the Lessee and their respective successors and assigns.
<PAGE>
(e) This Lease and all of the rights and obligations hereunder,
including matters of construction, validity and performance shall be governed by
the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this
instrument to be executed as of the 31st day of December, 1992.
In presence of: ELIZABETH C. REED TRUST
__________________ By: ______________John E. Reed
John E. Reed,
Trustee
__________________ MESTEK, INC.
By: __________Stephen M. Shea
Stephen M. Shea,
Vice President
<PAGE>
January 1, 1993
EQUIPMENT LEASE AGREEMENT
Elizabeth C. Reed Trust/Mestek, Inc.
SCHEDULE A
1 #25 A-25 Havir Automatic Press Westfield
1 L & J Punch Press #150 Westfield
1 Rockford OBI Punch Press Model 4-S Farmville
37 Ton, Serial # 6375
1 Rockford Punch Press 100 Ton Farmville
1 Ten Foot, 10 gauge, Wysong & Miles Power Wrens
Shear
1 Banner Special Multi-Gun Spot Welder Wrens
1 Ten Foot Mercury Brake Model 6510, Serial Wrens
# 4874-176
1 Rouselle Model 6F OBI Press, Serial #FFSA- Wrens
8850
1 40 Ton Rouselle Presses Wrens
1 100 Ton Rouselle Press Wrens
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, made as of this day of September, 1994,
between Mestek, Inc., a Pennsylvania corporation having its principal
place of business at 260 North Elm Street, Westfield, Massachusetts
("Buyer") and Aztech International, Ltd., debtor-in- possession, a
Colorado corporation ("AIL") and Aztec Sensible Cooling, Inc.,
debtor-in-possession, a Colorado corporation ("ASC"), each having its
principal place of business at 2417 Aztec Road N.E., Albuquerque, New
Mexico (collectively hereinafter AIL and ASC are referred to as
"Seller").
W I T N E S S E T H:
WHEREAS, ASC is engaged in the manufacture and distribution of
air handling and evaporative cooling parts and equipment; and
WHEREAS, Seller has encountered certain financial difficulties
and as a result has filed a Chapter 11 bankruptcy proceeding (the
"Bankruptcy Proceeding") in the United States Bankruptcy Court for the
District of New Mexico ("Bankruptcy Court") on June 16, 1994 which
proceeding was consolidated as one proceeding under the caption of
"Aztech International, Ltd., and Aztec Sensible Cooling, Inc.
consolidated under Case No. 11-94-11625RA" on August 5, 1994; and
WHEREAS, ASC now wishes to sell substantially all of its
assets to Buyer and AIL now wishes to sell certain of its assets to
Buyer, subject to Bankruptcy Court approval and certain other
conditions contained herein, and Buyer wishes to purchase same, in
accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, intending to be legally bound, the parties
hereto agree as follows:
1. Sale of Assets.
(a) AsseSeller agrees to sell and Buyer agrees to
purchase at a closing described hereinafter (the "Closing")the assets
of Seller set forth as follows, which are substantially all of the
assets, rights, interests and properties required or appropriate for
the operation of the business of ASC including, without limitation:
(i) all right, title and interest of Seller in and
to those certain material agreements, leases and contract rights of
Seller including the right to all pre-payments thereof and therefor
made or received by Seller all as the set forth on Schedule A attached
hereto (the "Material Agreements");
(ii) all useable pre-petition inventory and
supplies of ASC including raw material, work-in-process and
finished goods that is not damaged, slow-moving or obsolete (the
<PAGE>
"Pre-petition Inventory") which Pre-petition Inventory shall be counted
as soon as practicable after the filing of the Order (as defined in
Section 1(d) below) of the Bankruptcy Court and immediately prior to
the Closing and each item of which and the quantities thereof shall be
set forth, valued at cost and adjusted to the date of Closing by Seller
and Buyer on Schedule B which shall be attached hereto at Closing;
(iii) all useable post-petition inventory and
supplies of ASC including raw material, work-in-process and finished
goods that is not damaged, slow-moving or obsolete (the "Post-petition
Inventory") which Post-petition Inventory shall be counted as soon as
practicable after the filing of the Order of the Bankruptcy Court and
immediately prior to the Closing and each item of which and the
quantities thereof shall be set forth and valued at cost and adjusted
to the date of Closing by Seller and Buyer on Schedule C which shall be
attached hereto at Closing;
(iv) all post-petition accounts receivable of ASC
(the "Accounts Receivable") which Accounts Receivable shall be set
forth by Seller and Buyer on Schedule D immediately prior to Closing
which Schedule D shall be attached hereto at Closing;
(v) all machinery, equipment, tools, tooling, jigs,
dies and tooling fixtures and all other fixed tangible assets of Seller
set forth on Schedule E attached hereto (the "Machinery and
Equipment");
(vi) all office equipment, furniture, furnishings
and fixtures of Seller set forth on Schedule F attached hereto (the
"Office Furniture");
(vii) all patents, trademarks, service marks,
copyrights, and applications therefor and all other intellectual
property of Seller set forth on Schedule G attached hereto (the
"Intellectual Property");
(viii) all right, title and interest of Seller in
the goodwill of ASC (the "Goodwill"); and
(ix) all other assets (other than Excluded Assets
listed in Section 1(b) below) relating to the business carried on by
ASC, including, without limitation, engineering drawings, designs,
bills of material, correspondence, customer lists, credit, sales and
other records, business and accounting books and records (but not
corporate minutes and organizational records), computer printouts,
software programs, vendor lists, price sheets and catalogs, sales and
other literature, plates, supplies, trade names, labels, and other
trade rights, all inventions, discoveries, manufacturing data,
improvements, processes, formulae (secret or otherwise), proprietary
rights and data, trade secrets, ideas, know-how, whether patentable or
not, all shop rights and licenses,
<PAGE>
all permits, licenses, exemptions and certifications, all warranty
rights and all claims against third parties, as well as any other asset
(other than the Excluded Assets) of ASC (the "Other Assets").
All of the foregoing, including the Material Agreements, the Pre-
petition Inventory, the Post-petition Inventory, the Accounts
Receivable, the Machinery and Equipment, the Office Furniture, the
Intellectual Property, the Goodwill and the Other Assets shall be
referred to hereinafter as the "Assets").
(b) Excluded Assets. For the purposes of this
Agreement, the term "Excluded Assets" shall mean the following:
(i) all cash of Seller;
all Federal income tax refunds of Seller, if
any;
(iii) all right, title and interest of Seller in its
Employee Benefit Plans, and in any employee and collective bargaining
agreements, the right, title, interest, liabilities and obligations of
which shall, notwithstanding anything to the contrary in this Agreement
or in those plans and agreements or elsewhere, be retained by Seller
and not transferred to or assumed by Buyer. (For purposes of this
Agreement, "Employee Benefit Plans" is defined to include (A) any
bonus, incentive compensation, profit sharing, retirement, pension,
group insurance, death benefit, medical expense reimbursement,
dependent care, stock option, stock purchase, stock appreciation
rights, savings, deferred compensation, consulting, severance pay or
termination pay, vacation pay, welfare or other employee benefit or
fringe benefit plan, program or arrangement; and (B) any plan, program
or arrangement which is an "employee pension benefit plan" as such term
is defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or an "employee welfare benefit
plan" as such term is defined in Section 3(1) of ERISA);
(iv) all right, title and interest of Seller in those
contracts and agreements not assumed in writing by Buyer pursuant to
the Certificate of Assumption Agreement (as defined in Section 1(c)(ii)
below), the right, title, interest, liabilities and obligations of
which unassumed contracts shall, notwithstanding anything to the
contrary in this Agreement or in those contracts or elsewhere, be
retained by Seller and not transferred to or assumed by Buyer;
(v) all right, title and interest of Seller in
all litigation, claims and proceedings brought against the Seller,
Seller's businesses and the Assets, including but not limited to, all
charges or complaints brought before federal, state, or local
administrative agencies, the right, title, interest, liabilities and
obligations of which shall, notwithstanding anything to the
<PAGE>
contrary in this Agreement or elsewhere, remain with Seller and not
be transferred to or assumed by Buyer;
(vi) all right, title and interest of AIL in those
assets not set forth in a Schedule attached hereto, including the real
property at 2417 Aztec Road, Albuquerque, New Mexico, and the capital
stock of ASC and any rights derivative thereof; and
(vii) all right, title and interest in all
obligations of Seller for claims of Seller's customers under warranties
(except as otherwise set forth herein), for claims of third parties for
back charges, liquidated damages or consequential or special damages
related to products or services supplied by Seller, and for claims by
third parties under theories of products liability related to products
designed, manufactured, sold or distributed by Seller.
(c) FormThe sale, transfer, conveyance
and delivery of the Assets at Closing shall be made by:
(i) a duly executed warranty bill of sale satisfactory in
form and content to Buyer which shall be executed by Seller and
attached hereto at Closing as Exhibit 1 (the "Bill of Sale");
(ii) a duly executed assignment and assumption of
contracts in form and content satisfactory to Buyer and Seller by which
the Material Agreements and any other obligations of Seller to be
assumed by Buyer which shall be executed by Seller and Buyer and
attached hereto at Closing as Exhibit 2 (the "Certificate of Assumption
Agreement"); and
such other good and sufficient instruments of conveyance and
transfer as shall be reasonably necessary to vest in Buyer as of the
date of Closing full title to the Assets.
(d) Contingent on Approval of Bankruptcy Court. The
purchase and sale of the Assets under this Agreement shall be
contingent upon the approval and issuance of an order of the Bankruptcy
Court (the "Order") issued in connection with a Section 363(b) motion
(the "Motion") under Chapter 11 of the Bankruptcy Reform Act of 1978,
as amended (the "Bankruptcy Code").
(e) Free and Clear of Liens. The purchase of the
Assets by Buyer shall be free and clear of all liens (including tax
liens), mortgages, encumbrances, security interests, claims,
counterclaims and adverse charges of any nature whatsoever, and the
Order of the Bankruptcy Court shall so state.
2. Liabilities. Buyer shall assume the following
obligations of Seller: (a) express warranty obligations of ASC for
products manufactured, shipped and sold by ASC during the post-
petition period in respect of which an Account Receivable set forth
<PAGE>
on Schedule D hereto has been created and is being conveyed to Buyer
hereunder; and (b) the outstanding obligations of Seller at the date of
Closing, according to the terms of its written policies, to the
employees of Seller hired by Buyer for accrued vacation and sick leave
an accurate and complete list of which shall be delivered to Buyer at
Closing and attached to the Certificate of Assumption. Other than the
liabilities and obligations of Seller set forth in the Material
Agreements and in this Section 2, Buyer shall not assume any of the
liabilities, obligations or commitments of Seller, whether fixed or
contingent, legal or equitable, mature or inchoate, written or oral,
known or unknown, including, but not limited to, pending or threatened
litigation, warranty (express or implied), products liability,
environmental, employment, employee benefit plans or the like, tax
obligations or any other obligations, liabilities or commitments of
Seller whatsoever.
3. Purchase Price. The amount of the purchase price to be
paid by Buyer for the Assets at Closing (the "Purchase Price")
shall be the sum of the following:
(a) an amount equal to the aggregate funds prepaid by
Seller under purchase orders for production materials delivered to
vendors by ASC which are included as Material Agreements in Schedule A
of this Agreement; and
(b) an amount equal to the lesser of (i) the total
extended cost of the Pre-petition Inventory set forth at Closing on
Schedule B of this Agreement adjusted for receipts and shipments to the
date of the Closing or (ii) the total value of the pre-petition
inventory of ASC according to its accounting books adjusted for
receipts and shipments to the date of Closing less the amount of
$31,500.00; and
(c) an amount equal to of the total extended cost of
the Post-petition Inventory set forth at Closing on Schedule C of this
Agreement adjusted for receipts and shipments to the date of Closing as
required in that certain Stipulated Order Authorizing Increase in
Post-Petition Borrowing of the Bankruptcy Court filed August 24, 1994
(the "Extended Financing Order"); and
(d) an amount equal to the face invoice value of the
Accounts Receivable set forth in Schedule D of this Agreement less two
and one-half percent (2.5%) thereof as a reserve for bad debts and
warranty expense; and
(e) the amount of Two Hundred Forty Thousand and
00/100ths Dollars ($240,000.00) for the Machinery and Equipment, Office
Furniture, Intellectual Property, Goodwill and Other Assets as set
forth in the various Schedules of this Agreement, half of which amount
shall be deemed to be applicable to "goodwill" for purposes of
determining "additional interest" under that certain
<PAGE>
Loan and Security Agreement by and between Seller and Alapco Holding,
Inc., the wholly-owned subsidiary of Buyer ("Alapco"), as required in
that certain Order Approving Loan and Security Agreement Regarding
Post-Petition Financing, Granting Liens and Super-Priority Status (the
"Financing Order") of the Bankruptcy Court filed July 7, 1994.
4. Payment of Purchase Price. The Purchase Price to be paid
to the estate of Seller by Buyer upon the Closing of the sale of
the Assets pursuant to the Order of the Bankruptcy Court approving
the Motion, shall be paid or credited as follows:
(a) Buyer's forgiveness and cancellation of all of
the aggregate face amount of outstanding indebtedness plus accrued
interest and expenses owed by Seller to Alapco pursuant to the
Financing Order and Extended Financing Order of the Bankruptcy Court
approving post-petition financing of Seller, which amount shall be
deemed to be bid-in and applied at Closing against the Purchase Price
and which shall be deemed paid by (i) the return at Closing by Alapco
of all promissory notes executed by Seller in connection with the
post-petition financing of Seller marked "Paid in Full" and (ii) the
delivery at Closing by Alapco of a loan account statement marked final
and setting forth a zero-balance; and
(b) Buyer's forgiveness and cancellation of all of
the aggregate outstanding amount of indebtedness plus accrued interest
and expenses owed by Seller to Buyer by reason of (i) the amount of the
obligations of Seller to K.B.B. Investments Ltd. assigned to Buyer
pursuant to that certain Order Approving Substitution of Collateral of
the Bankruptcy Court filed August 5, 1994, which amount shall be deemed
to be bid-in and applied at Closing against the Purchase Price and
which shall be deemed paid by the delivery by Buyer to Seller at
Closing of a duly executed satisfaction of mortgage suitable for
recording, (ii) the amount of all post-petition accounts payable of
Seller for goods and services supplied to Seller by Buyer or its
affiliates pursuant to purchase orders of Seller or other written
agreements, which amount shall be deemed to be bid-in and applied at
Closing against the Purchase Price and which shall be deemed paid by
the delivery by Buyer to Seller at Closing of invoices or statements
showing such amount to be paid in full and (iii) the amount of any
obligations of Seller to Buyer pursuant to breaches of the
representations and warranties of Seller as described in Section 6 of
this Agreement;
(c) the aggregate actual amount of any obligations of
Seller assumed, paid or otherwise fulfilled on behalf of Seller by
Buyer or its affiliates pursuant to written guaranties or agreements
other than this Agreement whereby Buyer or its affiliates are required
to fulfill specific obligations of Seller to third parties, which
amount shall be deemed to be bid-in and applied at Closing against the
Purchase Price;
<PAGE>
(d) the aggregate actual amount paid by Buyer to
remove any prior liens of individual assets being sold to Buyer by
Seller hereunder as to which purchase money security interests exist;
and
(e) the balance of the Purchase Price in cash or other
immediately available funds.
5. Memorandum of Allocation. Buyer and Seller shall execute
and attach hereto as Exhibit 3 at Closing a memorandum of allocation
(the "Memorandum of Allocation"), satisfactory in form and content to
both Buyer and Seller, allocating the Purchase Price among Assets. Such
allocation shall be binding upon the parties hereto for the filing of
all federal income tax forms and elections notwithstanding anything set
forth elsewhere in this Agreement. Such allocation is made by the
parties solely for the purpose of setting forth the fair value of the
Assets and shall not inure to the benefit of any third party.
6. Representations and Warranties. Seller shall make certain
representations and warranties to Buyer regarding Seller's business and
the Assets as of the date of this Agreement and as of the date of the
Closing by means of a certificate of representations and warranties
signed by the President of Seller (the "Certificate of Representations
and Warranties"), in form and content satisfactory to Buyer which
Certificate shall be attached hereto at Closing as Exhibit 4. All
representations and warranties contained in such Certificate shall not
survive the Closing. Nevertheless, Buyer may prior to the Closing set
off against the Purchase Price any losses resulting from any breach of
Seller's representations and warranties against any amounts due from
the Buyer to the Seller under this Agreement. In addition to the
representations and warranties of Seller set forth in the Certificate,
Seller represents and warrants that it has (i) good, valid and
marketable title to the Assets, and (ii) all power and authority to
execute and deliver this Agreement and the documents, certificates and
instruments required at Closing (the "Related Documents"), all of which
shall be enforceable in accordance with their terms and these
representations and warranties of Seller set forth in this sentence
shall survive the Closing. Buyer represents and warrants that it has
all power and authority to execute and deliver this Agreement and the
Related Documents, all of which shall be enforceable in accordance with
their terms and this representation and warranty of Buyer shall survive
the Closing.
7. Closing. The Closing of the purchase and sale of Assets
under this Agreement shall take place at the offices of Behles &
Associates, 309 Gold S.W., Albuquerque, New Mexico, within thirty (30)
days following the date upon which all conditions to Closing described
in Sections 10 and 11 of this Agreement have occurred or have been
waived in writing by the party that would receive the
<PAGE>
benefit of such condition. The time of Closing shall be deemed to be of
the essence unless waived by mutual written agreement of the parties.
8. Bankruptcy Court Approval. The rights and obligations of
Buyer and Seller under this Agreement are subject to and conditioned
upon obtaining a final and unappealable Order pursuant to the Motion
from the Bankruptcy Court, in a form reasonably satisfactory to Buyer,
(i) approving the terms and conditions of this Agreement and the
consummation of the transactions contemplated hereby, (ii) ruling that
the Assets shall be sold, assigned, transferred and conveyed to Buyer
under this Agreement and the Related Documents, free and clear of all
liens, security interests, mortgages, claims, counterclaims,
encumbrances and adverse charges of any nature whatsoever, including
but not limited to all liabilities and obligations of Seller for which
Buyer is not liable under Section 2 of this Agreement, and, (3)
approving the Motion under Section 363(b) Chapter 11 of the Bankruptcy
Code. If such Order has not been issued by the Bankruptcy Court by
November 1, 1994, Buyer's obligations under this Agreement shall
terminate without further liability to Seller.
9. Seller's Undertakings. Subject to any limitations upon
Seller imposed by the Bankruptcy Court or the bankruptcy
proceedings, Seller shall, through the date of Closing:
(a) use its best efforts to institute promptly and
diligently, upon consultation with Buyer, all things on its part to be
performed necessary to satisfy the requirements and conditions to
Closing of this Agreement, including, without limitation, all
conditions contained in Section 10 of this Agreement;
(b) Cooperate with Buyer to enable Buyer to
understand ASC's business, to employ those of Seller's employees who
may be offered employment by Buyer, to have an orderly transition of
the Assets being purchased under this Agreement, and to have a
satisfactory transition of the Material Agreements;
(c) Secure, protect and maintain undamaged and in
good working order the Pre-petition Inventory, Post-petition Inventory,
Machinery and Equipment, Office Furniture and other tangible assets of
Seller in a diligent manner (excepting only inventory sold in the
ordinary course so to create Accounts Receivable);
(d) Dispose of any hazardous substance, material or
waste stored or generated upon the premises of Buyer prior to Closing
in compliance with all applicable federal, state and local laws,
ordinances, regulations and rules for the regulation of the
environment;
(e)Insofar as Bankruptcy Court approved post-petition
financing allows, operate the business of ASC in the usual and
<PAGE>
ordinary course consistent with past practice, maintain and service its
existing customer base and pending customer orders, and preserve the
goodwill of suppliers, customers and others having business
relationships Seller;
(f) Operate the Assets and the Seller's business so
as to comply in all material respects with all applicable laws,
ordinances, rules and regulations, including, but not limited to, all
federal, state and local environmental and employee benefit laws and
rules;
(g) Refrain from entering into any contract or
agreement with any Affiliate (as defined below) of Seller, and from
making any change in the accounting practices or procedures governing
the Seller's business;
(h) Except as approved by Buyer, refrain from (i)
making any sales, transfers or dispositions of any of the Assets (other
than the Excluded Assets and inventory in the ordinary course of
business so to create Accounts Receivable); (ii) entering into any
material contracts, leases, or commitments, or any amendments or
modifications to the Material Agreements other than (1) as first
approved in writing by a representative of Buyer; or (2) which can be
terminated at the Closing;
(i) Refrain from making, without the prior approval
of Buyer, any change in the compensation or benefits payable or to
become payable to any of the employees or agents of the Seller's
business, or making any new bonus payment or arrangement or benefit to
or with any of them;
(j) Have in effect and maintain at all times all
insurance now in force relating to the Seller's business or the
Assets;
(k) Use its best efforts to preserve the business
organization of Seller and the independent sales representative
distribution system intact, and to keep available the services of the
present officers and employees of the Seller's business;
(l) Allow Buyer, its representatives, attorneys and
accountants to continue to have reasonable access to the records and
files, audits, properties and operations of Seller relating to ASC's
business and the Assets as well as all information relating to the
taxes, commitments, contracts, title and financial condition of, or
otherwise pertaining to, ASC's business. From the date hereof, Seller
agrees to cause its accountants to cooperate with Buyer and its
accountants in making available all financial information concerning
the Seller's business as is requested by Buyer, and Buyer and its
accountants shall have the right to examine all working papers
pertaining to examinations of Seller relating to the Seller's business
and the Assets, provided that
<PAGE>
such examinations shall be designed to cause minimal disruption to
Seller, its business and its work force, and in any event, shall be
undertaken with reasonable prior notice and during normal hours of
Seller;
(m) As allowed by the Bankruptcy Court, pay all
federal, state and local income, franchise, payroll, sales, business
and organization, excise, real estate and other taxes of Seller,
including any taxes on or arising out of this transaction;
(n) Accept responsibility and liability for all group
health plan continuation coverage under the Consolidated Omnibus Budget
Reconciliation Act, as amended ("COBRA") and any state COBRA-type
statutes for active employees, former employees and other qualified
beneficiaries;
(o) Provide Buyer with cumulative and monthly
management reports, schedules, forecasts and financial statements of
the Seller's business (including statements of revenues and expenses)
for each month until the date of Closing, and said financial statements
to be provided within thirty (30) days following the end of each month;
and Seller shall provide Buyer promptly with financial statements
prepared in the ordinary course and all reports and documents prepared
for and filed with the Bankruptcy Court or the Unites States Trustee's
Office;
(p) Use its best efforts to obtain all creditor
stipulations, authorizations and consents necessary to consummate the
sale of Assets on the terms contained in this Agreement and the Motion;
(q) Use its best efforts to file all necessary
documentation, and to obtain all necessary approvals of appropriate
regulatory authorities, including but not limited to, the approval of
the Bankruptcy Court to consummate the sale of Assets on the terms
contained in this Agreement;
(r) Except as otherwise required by the Bankruptcy
Code, refrain and cause its officers, directors, Affiliates and agents
to refrain from entering into, or initiating or soliciting any
negotiations or soliciting or discussing any offer or proposal
regarding (1) the sale, directly or indirectly, of any of the capital
stock of a corporation directly or indirectly owning Assets, or (2) a
material portion of the Assets, or (3) any merger, consolidation or
similar transaction involving the Assets or a material portion thereof;
(s) Refrain from making any promises, pledges,
guarantees, or obligations or otherwise act on behalf or in the
name of Buyer; and
<PAGE>
(t) The term "Affiliate" of Seller shall mean and
include any company or other entity controlling, controlled by or under
common control with Seller, and any officer or director of Seller or of
such company, or any spouse, ancestor or descendant of any officer or
director of Seller or such company, or any company in which Seller or
such company or any officer or director of Seller or of such company
(or any spouse, ancestor or descendant of the same) has more than a
five percent (5%) legal or beneficial interest.
10. Conditions Precedent to Buyer's Obligation. The
obligation of Buyer to purchase the Assets hereunder is subject to
the following conditions:
(a) All of Seller's representations and warranties
contained in the Certificate of Representation and Warranties described
in Section 6 of this Agreement shall be true and correct at the
Closing, and all of Seller's undertakings, covenants and agreements
contained herein shall have been performed by the Closing;
(b) Seller and Buyer shall have obtained a final and
unappealable order from the Bankruptcy Court approving the transactions
contemplated in this Agreement and Seller's counsel shall have
delivered a letter in form and content acceptable to Buyer so stating,
which letter shall be attached hereto at Closing as Exhibit 5;
(c) Seller shall have obtained all other government
or third party approvals or consents required of it or reasonably
necessary on its part to the consummation of the transactions
contemplated by this Agreement;
(d) Seller shall have continued to operate its
business in good faith and in the ordinary course consistent with past
practice from the date of this Agreement until Closing;
(e) Buyer shall have entered into a rental
arrangement effective upon the date of Closing and terminable upon
February 15, 1995, or upon thirty (30) days' notice any time after
November 30, 1994, for the improved property located at 2417 Aztec
Road, N.E., Albuquerque, New Mexico 87107 where Seller currently
conducts its business, satisfactory in form and content to Buyer which
lease shall be attached hereto at Closing as Exhibit 6;
(f) Seller shall have delivered to Buyer certificates
executed by Sellers' respective presidents and secretaries certifying
that the Seller's covenants and the conditions precedent to the Buyer's
obligations to consummate the purchase contemplated by this Agreement
have been fulfilled and all corporate action necessary to close the
transactions contemplated in this Agreement, including duly authorized
shareholder votes, has been duly taken.
<PAGE>
(g) All material consents of other parties to the
assignment of the Material Agreements to Buyer shall have been obtained
without increase in cost to the Buyer;
(i) There shall have been no material adverse change
(or changes which in the aggregate are materially adverse to the Assets
or the business of ASC) since the date of this Agreement in the
financial position, results of operations, properties, business,
business prospects or services provided by the Seller's business, taken
as a whole, whether by reason of change in government regulation or
action or otherwise;
(j) No action, suit or proceeding shall have been
instituted or threatened before a court, arbitration panel or
governmental body with respect to the transactions contemplated by this
Agreement, and no regulatory enforcement proceeding shall be pending
before any governmental agency or body with respect to the transactions
contemplated by this Agreement; and
(k) In the event that one or more of the foregoing
conditions in this Section 10 is not fulfilled by the close of business
Eastern Standard time on November 15, 1994, the Buyer may, upon notice
to Seller on or prior to the date of Closing, elect not to consummate
the transactions contemplated in this Agreement without further
liability to Seller.
11. Conditions Precedent to Seller's Obligations. The
obligation of Seller to sell the Assets hereunder is subject to the
following conditions precedent:
(a) Seller and Buyer shall have obtained a final and
unappealable order from the Bankruptcy Court, approving the
transactions contemplated in the Agreement;
(b) Buyer shall have obtained all other government or
third party approvals or consents required of it or reasonably
necessary on its part to the consummation of the transactions
contemplated by this Agreement; and
(c) Buyer shall have delivered to Seller a
certificate executed by Buyer's president and secretary certifying that
the Buyer's covenants and the conditions precedent to the Seller's
obligations to consummate the purchase contemplated by this Agreement
have been fulfilled.
12. Cooperation. The parties shall take all steps necessary
and appropriate, and shall execute all such additional documents as
may be reasonable necessary to carry out the intent and purpose of
this Agreement and to vest in Buyer full title to the Assets being
purchased by it.
<PAGE>
13. Risk of Loss. Risk of loss of the Assets to be purchased
by Buyer under this Agreement will not pass from Seller to Buyer
prior to Closing.
14. Notice. All notices to be given by the parties hereunder
shall be in writing and deemed sufficient if sent by courier,
telecopy or certified mail, postage prepaid as follows:
(a) If to Buyer:
Mestek, Inc.
260 North Elm Street
Westfield, Massachusetts 01085
Attention: Stewart B. Reed
with a copy to:
R. Bruce Dewey, Esq.
Mestek, Inc.
260 North Elm Street
Westfield, Massachusetts 01085
(b) If to Seller:
Aztech International, Ltd.
2417 Aztec Road N.E.
Albuquerque, New Mexico 87107
Attention: Bennett King
with a copy to:
Daniel J. Behles, Esq.
Behles & Associates
309 Gold S.W.
Albuquerque, New Mexico 87103
15. Amendment. This Agreement may not be amended, modified
or terminated orally, and no amendment, modification or termination
nor any claimed waiver of any of the provisions hereof shall be
valid or binding unless the same be evidenced in writing.
16. Assignment. Neither party hereto shall have the right to
assign and/or transfer any of the benefits or obligations set forth in
this Agreement, in whole or in part, to any individual, partnership,
corporation or other entity without the prior written consent of the
other party; provided, however, Buyer shall have the right to assign
its rights and benefits hereunder to any corporation which it controls,
provided that, notwithstanding any
<PAGE>
such assignment, Buyer shall remain liable for the payment of the
Purchase Price hereunder.
17. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, their successors and
permitted assigns. No third party shall have or obtain any rights,
express or implied, by reason of this Agreement.
18. Entire Agreement. This Agreement and the Related Documents
are intended as the final complete expression of the agreement of the
parties hereto, and parol or extrinsic evidence is inadmissible to
explain, vary or contradict the express terms of this Agreement and the
Related Documents. The Exhibits and Schedules to this Agreement, the
Related Documents and any other documents executed and delivered
pursuant to Closing are incorporated herein by reference, and shall be
deemed to be included in any reference to this Agreement.
19. Governing Law. This Agreement shall be governed,
construed and enforced according to the laws of the State of New
Mexico.
20. Counterparts. This Agreement may be executed in
counterparts and when each party shall have executed a counterpart,
this Agreement shall be deemed to be binding on both parties.
21. Unilateral Waiver.
(a) Either of the parties may:
(i) Extend in writing, for a period of up to
thirty (30) days the time for the performance of any of the obligations
of the other party;
(ii) Waive in writing any inaccuracies in the
representations and warranties made to it contained in this Agreement
or any Exhibit or Schedule hereto or any certificates delivered by the
other party to this Agreement;
(iii) Waive in writing the failure in performance of
any of the conditions herein expressed for its benefit; and
(iv) Waive in writing compliance with any of
the covenants herein contained by the other party.
(b) No such waiver or extension shall be valid unless
in writing and signed by the party granting the waiver or extension,
and no such waiver or extension shall be construed to excuse or
<PAGE>
mitigate any subsequent breach or violation of this Agreement not
specifically covered by such waiver.
IN WITNESS WHEREOF, the parties have executed this Agreement
the day and year first above written.
Seller:
AZTEC SENSIBLE COOLING, INC.
Attest: By: Bennett King
Bennett King, President
AZTECH INTERNATIONAL , LTD.
Attest: By: Bennett King
Bennett King, President
Buyer:
MESTEK, INC.
Attest: By: John E. Reed
John E. Reed, President
<PAGE>
AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT to that certain Asset Purchase Agreement
(the "Agreement") dated as of the 8th day of September, 1994, by
and between Aztech International, Ltd. and Aztec Sensible Cooling,
Inc. (as the "Seller") and Mestek, Inc. (as the "Buyer") is made
this ___ day of October, 1994.
1. Amendment of Section 1(b)(i). Section 1(b)(i) of the
Agreement shall be deleted in its entirety and the following shall
be placed in lieu thereof:
"(i) all right, title and interest of Seller in pre-petition
accounts receivable and the proceeds thereof, including those cash
proceeds contained in the debtor-in-possession account;".
2. Amendment of Article 3. Article 3 of the Agreement shall be
deleted in its entirety and the following shall be placed in lieu
thereof:
"3. Purchase Price and Payment. The amount of the purchase
price to be paid by Buyer for the Assets at Closing (the "Purchase
Price") shall be the sum of Sections (a), (b) and (c) that follow, to
be paid as set forth in Section (d) and adjusted, if necessary, as
required in Article 4.
(a) The amount of One Hundred Sixty Thousand and
00/100ths Dollars ($160,000.00) for the Pre-Petition Inventory.
(b) The amount of Two Hundred Forty Thousand and
00/100ths Dollars ($240,000.00) for the Machinery and Equipment, Office
Furniture, Intellectual Property, Goodwill and Other Assets as set
forth in the various Schedules of this Agreement, half of which amount
shall be deemed to be applicable to "goodwill" for purposes of
determining "additional interest" under that certain Loan and Security
Agreement by and between Seller and Alapco Holding, Inc., the
wholly-owned subsidiary of Buyer ("Alapco"), as required in that
certain Order Approving Loan and Security Agreement Regarding
Post-Petition Financing, Granting Liens and Super-Priority Status (the
"Financing Order") of the Bankruptcy Court filed July 7, 1994.
(c) An amount equal to the fair value of all Post-
petition Inventory (including prepaid amounts), all Post-Petition
<PAGE>
Accounts Receivable and all cash contained in debtor-in-possession
operating cash accounts of Debtor.
(d) Subject to the adjustments required by Article 4
of this Agreement, if any, the Purchase Price to be paid to the estate
of Seller by Buyer upon the Closing of the sale of the Assets pursuant
to the Order of the Bankruptcy Court approving the Motion, shall be
paid or credited as follows:
(i) the $160,000 portion of the Purchase Price
related to the assets described in Section (a) of this Article 3 shall
be paid in cash or other immediately available funds;
(ii) the $240,000 portion of the Purchase Price
related to the assets described in Section (b) of this Article 3 shall
be paid by (A) Buyer's forgiveness and cancellation of all of the
aggregate outstanding amount of indebtedness plus accrued interest
through September 13, 1994, owed by Seller to Buyer by reason of the
amount of the obligations of Seller to K.B.B. Investments Ltd. assigned
to Buyer pursuant to that certain Order Approving Substitution of
Collateral of the Bankruptcy Court filed August 5, 1994 (in the amount
of $179,506.25), which amount shall be deemed to be bid-in and applied
at Closing against the Purchase Price and which shall be deemed paid by
(A) the delivery by Buyer to Seller at Closing of a duly executed
satisfaction of mortgage suitable for recording, and (B) the payment of
the balance in cash or other immediately available funds; and
(iii) the portion of the Purchase Price related to
the assets described in Section (c) of this Article 3 shall be paid by
Buyer's forgiveness and cancellation of the aggregate face amount of
outstanding indebtedness plus accrued interest and expenses owed by
Seller to Alapco pursuant to the Financing Order and Extended Financing
Order of the Bankruptcy Court approving post-petition financing of
Seller (the "Alapco Loan"), which amount shall be deemed to be bid-in
and applied at Closing against the Purchase Price and which shall be
deemed paid by (A) the return at Closing by Alapco of all promissory
notes executed by Seller in connection with the post-petition financing
of Seller marked "Paid in Full" and (B) the delivery at Closing by
Alapco of a loan account statement marked final and setting forth a
zero- balance. Seller and Buyer agree that interest accrued on the
Alapco Loan from October 1, 1994, to Closing shall also be bid in
against the portion of the Purchase Price related to the assets
described in Section (c) of this Article 3 and shall not otherwise be
paid by or charged to Seller."
3. Amendment of Article 4. Article 4 of the Agreement shall be
deleted in its entirety and the following shall be placed in lieu
thereof:
<PAGE>
"4. Adjustments to Purchase Price. The Purchase Price
payable at Closing shall be adjusted downward dollar for dollar by
the following:
(a) the aggregate amount of all post-petition
accounts payable of Seller and any other obligations of Seller assumed,
paid or otherwise fulfilled on behalf of Seller by Buyer or its
affiliates at or before Closing (other than those liabilities of Seller
assumed by Buyer under Article 2 of this Agreement, including, without
limitation, the accounts payable of Seller referred to in Article
2(c));
(b) the aggregate amount paid by Buyer at or before
Closing to remove any prior liens of individual assets being sold to
Buyer by Seller hereunder as to which purchase money security interests
exist;
(c) the amount of any obligations of Seller to Buyer
pursuant to breaches of the representations and warranties of
Seller as described in Section 6 of this Agreement; and
(d) the amount of any cash contained in debtor-in-
possession operating cash accounts of Debtor that is retained by
the estate of Debtor."
4. Amendment of Article 2. The first sentence of Article 2 of
the Agreement shall be amended by adding at the end thereof the
following:
"(c) the outstanding accounts payable of Aztec Sensible
Cooling, Inc. at Closing that exceed the amount of Ten Thousand
Dollars ($10,000)."
5. Amendment of Article 10. Article 10 of the Agreement shall
be amended by adding a new section (l) which shall read as
follows:
"(l) Buyer and Seller shall have entered into an
administrative agreement effective upon the date of Closing and
terminable upon February 15, 1995, whereby Buyer shall engage Seller to
manage medical and insurance programs on behalf of Buyer for a monthly
fee of $1,500.00, which agreement satisfactory in form and content to
Buyer shall be attached hereto at Closing as Exhibit 7.".
6. No Further Changes. Except as amended by this Amendment, the
terms and conditions of the Agreement shall remain the same and in
full force and effect, subject to the approval of the Bankruptcy
Court.
<PAGE>
7. Capitalized Terms. Except as otherwise set forth in this
Amendment, all capitalized terms in this Amendment shall be as
defined in the Agreement.
Executed as of the day and year first set forth above.
SELLER:
AZTECH INTERNATIONAL, LTD.
By:_Bennett King
Bennett King, President
AZTEC SENSIBLE COOLING, INC.
By:_Bennett King
Bennett King, President
BUYER:
MESTEK, INC.
By:_John E. Reed
John E. Reed, President
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 4,201
<SECURITIES> 0
<RECEIVABLES> 36,870
<ALLOWANCES> 1,440
<INVENTORY> 32,102
<CURRENT-ASSETS> 3,269
<PP&E> 48,727
<DEPRECIATION> 30,244
<TOTAL-ASSETS> 120,430
<CURRENT-LIABILITIES> 39,462
<BONDS> 0
<COMMON> 479
0
0
<OTHER-SE> 80,253
<TOTAL-LIABILITY-AND-EQUITY> 120,430
<SALES> 209,557
<TOTAL-REVENUES> 224,018
<CGS> 149,180
<TOTAL-COSTS> 158,108
<OTHER-EXPENSES> 2,250
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 839
<INCOME-PRETAX> 16,048
<INCOME-TAX> 6,750
<INCOME-CONTINUING> 9,298
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,298
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
</TABLE>
