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, 1995
MESTEK, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0661650
(State or other jurisdiction of (I.R.S Employer
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:
Name of each exchange
Title of each class on which registered
Common Stock, no par value 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 April 4, 1996, based upon the closing price for registrant's
common stock as reported in The Wall Street Journal as of such date was
$39,730,946.
The number of shares of the registrant's common stock issued and outstanding as
of April 4, 1996 was 8,929,771.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement relating to the annual meeting of shareholders
of the registrant to be held on May 22, 1996 are incorporated by reference into
Part III hereof and the exhibits to filings referenced on Pages 44 thru 47 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.
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.
<PAGE>
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.
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 17 to the
consolidated financial statements. The Company sold its remaining 30% interest
on August 31, 1995, as more fully explained in Note 15 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.
On October 30, 1995, the Company executed an agreement to acquire
approximately eighty-three (83%) of the issued and outstanding voting common
stock of National Northeast Corporation and National Southeast Aluminum
Corporation ("National"). National operates custom aluminum extrusion and
fabrication facilities located in Lawrence, Massachusetts and Winter Haven,
Florida. The transaction was accounted for under the purchase method of
accounting as of October 30, 1995 and, accordingly, the company has included the
results of this acquired business in its consolidated statement of operations
from this date. The Company itself is a user of aluminum extrusions in its HVAC
segment. The consideration for the purchase was $9.96 million in cash and
approximately $3.32 million payable over three years, contingent upon a future
level of earnings. The transaction was completed on January 2, 1996.
<PAGE>
On November 15, 1995, the Company acquired substantially all of the
accounts receivable, inventory, fixed and intangible assets of Heat Exchangers,
Inc., a manufacturer of portable air conditioning equipment in Skokie, Illinois.
The purchase price paid, including the assumption of certain liabilities, was
$6,764,000. The acquisition was accounted for as a purchase and, accordingly,
the Company has included the results of this acquired business in its
consolidated statement of operations since the date of the acquisition.
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 2,255 persons as of December 31, 1995.
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. National, the Company's custom aluminum extruder and
fabricator is included in the Heating, Ventilating, and Air Conditioning segment
also.
The Reed Division sells finned-tube and baseboard radiation equipment
under the names "Sterling", "Vulcan", "Heatrim", "Petite-7", "Hydrotherm", and
"Suntemp", and other hydronic heat distribution products under the names
"Sterling" and "Beacon-Morris". The division sells gas-fired indoor and outdoor
heating and ventilating 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", "Koldwave", "Air Fan", 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, ventilate 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; Ridgeville, Indiana; Skokie, Illinois; and Wrens, Georgia. The Company
consolidated its Northvale, New Jersey and Dundalk, Maryland plants in Dundalk
in 1992.
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", "Pacific Air Balance", "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".
<PAGE>
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 375 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, directly, or 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, 1995.
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 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.
<PAGE>
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, Aztec Sensible Cooling, Hydrotherm, Temprite and
Dynaforce product lines.
Expenditures for research and development for the HVAC segment in 1995,
1994, and 1993 were $894,000, $469,000, and $438,000, 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 1996.
COMPUTER SOFTWARE DEVELOPMENT AND SYSTEM DESIGN
The business of Mestek's wholly-owned subsidiary, MCS, Inc. ("MCS") is
primarily related to business applications software 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.
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 ProfitWorks, 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 1995, 1994, and 1993 MCS spent approximately
$1,208,576, $910,000, and $702,000, 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 business applications software 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, 1995,
MCS's backlog was $2,915,000.
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.
<PAGE>
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,
reels, 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.
The primary customers for such coil handling equipment include contract
metal stampers, 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 1995, 1994, and 1993 were $0, $68,000, and $52,000,
respectively.
SEGMENT INFORMATION
Selected financial information regarding the operations of each of the
above segments is presented in Note 12 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 Skokie, Illinois, as
well as warehouse space in Mississauga, Ontario, Canada. National, the Company's
aluminum extruder and fabricator, operates in leased facilities in Lawrence,
Massachusetts and Winter Haven, Florida.
The Cooper-Weymouth, Peterson Division manufactures coil handling
products at a plant the Company owns in Clinton, Maine.
<PAGE>
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.
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 and the operations of its
Scranton, Pennsylvania facility to Westfield, Massachusetts in 1993. These
properties were sold in July of 1995 and January of 1996, respectively, as
explained more fully in Note 1 to the Consolidated Financial Statements.
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 1995.
<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 4, 1996
was 1,644 The price range of the Company's common stock between January 1, 1996
and April 4, 1996 was $11.75 to $13.63 and the closing price on April 4, 1996
was $13.50.
The quarterly price ranges of the Company's common stock during 1995
and 1994 as reported in the consolidated transaction reporting system were as
follows:
PRICE RANGE
1995 1994
---- ----
First Quarter $ 10-3/8 $ 9-1/2 $ 10-3/8 $ 9-1/2
Second Quarter $ 12-7/8 $ 9-3/4 $ 10 $ 9-1/4
Third Quarter $ 14-5/8 $ 12-1/4 $ 10-1/8 $ 9-1/4
Fourth Quarter $ 13-3/8 $ 10-3/4 $ 10 $ 9-3/8
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.)
SUMMARY OF FINANCIAL POSITION as of December 31,
1995 1994 1993 1992 1991
---------- ---------- -------- --------- ------
Total assets $141,431 $120,430 $126,625 $137,158 $120,865
Working capital 41,626 36,628 37,238 58,279 52,644
Long-term debt, including
current portion 3,031 5,548 20,860 32,104 18,269
Shareholders' equity 91,046 80,732 73,317 70,552 66,397
Common shareholders'
equity, per common
share (1) $10.14 $ 8.93 $ 7.96 $ 7.59 $ 7.05
====== ====== ====== ====== ======
<PAGE>
SUMMARY OF OPERATIONS - for the year ended December 31, (2)
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
Total revenues from
continuing operations (3) $245,865 $224,018 $231,386 $190,038 $173,852
Income from continuing
operations ............. 10,906 9,298 7,583 5,410 8,589
Net income ............... 10,906 9,298 4,265 5,823 8,995
Earnings per common share:
Income from continuing
operations ............. $ 1.21 $ 1.02 $ .82 $ .57 $ .91
Net income ................ $ 1.21 1.02 .46 .62 .95
(1) Equity per common share amounts are computed using the common shares and
common stock equivalents outstanding as of December 31, 1995, 1994, 1993,
1992, and 1991
(2) Includes the results of acquired companies or asset acquisitions from the
date of such acquisition, as follows:
* National Northeast Corporation and National Southeast Aluminum
Corporation from October 30, 1995
* Heat Exchangers, Inc. from November 15, 1995
* Aztec Sensible Cooling, Inc. from November 1, 1994
* Mechanical Specialties, Inc. from August 21, 1992 and Westcast, Inc.
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, and 1991, 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, and sold its remaining 30%
interest on August 31, 1995, as more fully explained in Note 15 to the
Consolidated Financial Statements.
<PAGE>
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RETURN ON AVERAGE NET ASSETS EMPLOYED
1995, 1994, 1993
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 1995, 1994, and 1993 was as follows:
1995 1994 1993
Operating Profits (as defined) $22,515,000 $21,538,000 $15,917,000
Average Net Assets Employed (as
defined) ................... $94,956,000 $90,691,000 $90,267,000
Return on Average Net Assets
Employed .................. 23.7% 23.8% 17.6%
The 1995 return on Average Net Assets Employed was relatively unchanged
from 1994 due principally to weaker performances from certain of the Company's
residential HVAC products and certain of its commercial and industrial damper
products, which offset much improved performances from the Company's industrial
HVAC products divisions.
ANALYSIS: 1995 VS. 1994
The Company's core HVAC Segment reported comparative results for 1995
and 1994 as follows:
1995 1994
($ 000) 1995 ($ 000) 1994 $Net Change
Net Sales ...... $ 218,456 100.00% $ 200,444 100.00% + 8.99%
Gross Profit ... 60,052 27.49% 56,746 28.31% + 5.82%
Operating Income 15,495 7.09% 15,310 7.64% + 1.21%
The growth in revenues was attributable to significantly improved sales
from the Company's Industrial Products divisions in Dallas, Texas, and
Orangeville, Ontario Canada - offset somewhat by reduced sales from the
Company's residential hydronic divisions in Westfield, Massachusetts. Gross
profit margins were slightly reduced in 1995 owing in part to the effect of
reduced hydronic sales, in part to the effect (in early 1995) of material cost
increases, and also to the effect of certain product relocations completed in
1995. Operating income as a percentage of net sales was also slightly reduced
owing to the same effects.
<PAGE>
In addition to the effects on HVAC Net Sales, Gross Profits, and
Operating Income discussed above, the acquisitions of National Northeast
Corporation, as of October 30, 1995, and Heat Exchangers, Inc., on November 15,
1995, as more fully described in Note 2 to the Consolidated Financial
Statements, affected the comparative results for 1995 and 1994 as follows:
Percentage Effect of 1995 Acq. Percentage Change
Change (National Northeast) Net of acquisitions
1995 vs. 1994 (Heat Exchangers, Inc.) 1995 vs 1994
Net Sales + 8.99% + 2.1% + 6.89%
Gross Profit + 5.82% - .86% + 6.68%
Operating Income + 1.21% - 1.53% + 2.74%
The Company's Computer Systems Segment (MCS, Inc.) reported improved
sales, margins and operating profits in 1995 as indicated in the following
table:
1995 1994
($ 000) 1995 ($ 000) 1994 $Net Change
Net Sales ...... $15,255 100.00% $14,461 100.00% + 5.49%
Gross Profit ... 6,444 42.24% 5,583 38.61% + 15.42%
Operating Income 2,749 18.02% 2,244 15.52% + 22.50%
MCS's success in 1995 reflects its ongoing commitment to product
enhancement and customer support in the Durable Medical Equipment, Home Infusion
Therapy, and Home Health Services marketplaces in which it competes.
The Company's Coil Handling Equipment Segment (Cooper-Weymouth,
Peterson) also reported excellent results for 1995, with margins declining only
slightly despite a 33% growth in revenues:
1995 1994
($ 000) 1995 ($ 000) 1994 $Net Change
Net Sales ...... $ 12,154 100.00% $ 9,112 100.00% + 33.38%
Gross Profit ... 4,549 37.43% 3,581 39.30% + 27.03%
Operating Income 1,926 15.85% 1,583 17.37% + 21.67%
These results reflect both the healthy conditions presently affecting
the coil handling equipment marketplace and the success of this segment's
product innovation efforts.
As a whole the Company reported comparative results as follows:
1995 1994
($ 000) 1995 ($ 000) 1994 $Net Change
Net Sales ...... $ 245,865 100.00% $ 224,018 100.00% + 9.75%
Gross Profit ... 71,045 28.90% 65,910 29.42% + 7.79%
Operating Income 20,170 8.20% 19,137 8.54% + 5.40%
<PAGE>
Sales expense for continuing operations of the Company, as a percentage
of total revenues, was reduced from 12.6% to 12.3%. General and Administrative
expenses as a percentage of revenues increased from 5.7% in 1994 to 6.0% in
1995, principally due to an increase in the provision for bad debts. Engineering
expense, as a percentage of total revenues, was reduced from 2.6% to 2.3%.
Interest expense from continuing operations was reduced by $121,000 reflecting
the effect, net of investment and acquisition activities, of the sale of the
Company's remaining interest in Chester Environmental, Inc. in August of 1995
for approximately $6,000,000.
Income tax expense for continuing operations for 1995, as a percentage
of pretax income, was 39.9% as compared with 42.1% for 1994, due to the effect
in 1994 of certain subsidiary losses on state and foreign income tax
obligations, as more fully described in Note 8 to the Consolidated Financial
Statements.
At December 31, 1995, the Company classified an idle manufacturing
facility, in Scranton, Pennsylvania, as a Property Held for Sale. This property
was sold in January of 1996 at which time a gain was realized.
Other Expense decreased substantially in 1995, due to the effect of
reduced carrying costs on idle properties held for sale, and the inclusion in
1995 of a non-recurring $850,000 gain on the sale of the Company's remaining
investment in Mesta Engineering Company.
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.
<PAGE>
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.
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 operationof 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 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 8 to the 1994 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: LIQUIDITY AND CAPITAL STRUCTURE
The Company's working capital increased in 1995 in proportion to the
Company's overall growth, as indicated in the following table (all amounts in
thousands):
12/31/95 Net Change 12/31/94 Net Change 12/31/93
$ 41,626 $4,998 $ 36,628 $( 610) $ 37,238
The Company's funded debt to equity ratio (including deferred
compensation, Minority Interest in National Northeast, and Purchase Price
Payable-National Northeast as funded debt) increased from 6.9% at December
31,1994, to 16.5% at December 31, 1995, reflecting the effect of the Company's
1995 acquisitions (National Northeast Corporation and Heat Exchangers, Inc.)
offset somewhat by the effect of the sale of the Company's remaining investment
in Chester Environmental, Inc. as described above.
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 $2,963,000, and the acquisition of the Cox and
Honeywell assets as more fully described in Note 15 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 Environmental Laws.
Permitting Activities
The Company is engaged in various matters with respect to obtaining,
amending or renewing permits required under 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 received a non-governmental demand that it
comply with its water discharge permit. The Company believes that it is
currently in compliance with the terms of such permit and has invested in
additional discharge system checks and controls to assure continued compliance.
<PAGE>
Potentially Responsible Parties (PRP) Actions
The Company has 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 High Point, North Carolina, the company has been named as a PRP with
regard to the clean-up of groundwater contamination allegedly due to dumping at
a land-fill. The Company's activity at the site represented less than 1% of all
activity at the site. State authorities continue to investigate the extent of
and remediation methods for groundwater contamination at or near the site, and
the Company 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
a site in Southington, Connecticut, as a result of the EPA's preliminary
assignments of derivative responsibility for the presence of hazardous materials
attributable to two other corporations from whom the Company purchased assets
after the hazardous materials had been disposed of at the Southington sites. The
Company is currently participating as part of a joint defense group in
discussions with the EPA for a "de minimis settlement" at the Southington,
Connecticut site. 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.
The Company has recently received notices from Pitt County and the EPA that it
may (along with many others) be a PRP at the Pitt County landfill and a site in
Charlotte, North Carolina. The Company continues to investigate these emerging
matters, but expects that these matters will not be material to the Company's
financial position or results of operations.
Releases of Hazardous Materials
There have been releases of hazardous materials on a few parcels of
property which are presently leased or operated by the Company. All such
releases occurred prior to the occupation of the properties by the Company. All
releases 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. At a site in Massachusetts leased by the Company the lessor has
received notice from a down-stream abutter that activities on the property prior
to the Company's occupation may be the source of groundwater contamination on
the abutter's property. Based upon an investigation by the Lessor, the claim
does not appear to be supportable. 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.
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.
<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 sheets of Mestek,
Inc. and subsidiaries as of December 31, 1995 and 1994, 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, 1995.. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. The consolidated financial statements of Mestek,
Inc. and subsidiaries for the year ended December 31, 1993 were audited by other
auditors whose report dated April 6, 1994 expressed an unqualified opinion on
those statements.
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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Mestek,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the consolidated
results of their operations and their consolidated cash flows for each of the
years in the two year period ended December 31, 1995 in conformity with
generally accepted accounting principles.
We have also audited Schedule II of Mestek, Inc. and subsidiaries as of
December 31, 1995 and for each of the years in the two year period ended
December 31, 1995. In our opinion, the schedule presents fairly, in all material
respects, the information required to be set forth therein.
Boston, Massachusetts
March 29, 1996
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders'
Mestek, Inc.
The Board of Directors
Mestek, Inc.:
We have audited the consolidated statements of income, shareholders'
equity and cash flows for the year ended December 31, 1993 of Mestek, Inc. and
subsidiaries. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows to Mestek, Inc. and subsidiaries for the year ended December 31, 1993 in
conformity with generally accepted accounting principles.
Springfield, Massachusetts
April 6, 1994
<PAGE>
MESTEK, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31,
1995 1994
(Dollars in thousands)
ASSETS
Current Assets
Cash and Cash Equivalents ........................... $ 1,405 $ 4,201
Accounts Receivable - less allowances of
$1,377 and $1,440 ................................. 42,911 35,306
Unbilled Accounts Receivable ........................ 139 124
Inventories ......................................... 39,241 32,102
Deferred Tax Benefit ................................ 1,492 1,088
Other Current Assets ................................ 4,381 3,269
Total Current Assets ................................ 89,569 76,090
Property and Equipment - net ........................... 24,968 18,483
Equity Investments ..................................... 8,778 8,643
Property Held for Sale ................................. 2,955 5,870
Other Assets and Deferred Charges - net ............... 8,545 11,241
Goodwill ............................................... 6,616 103
Total Assets ........................................ $141,431 $120,430
See Accompanying Notes to Consolidated Financial Statements
(Continued)
<PAGE>
MESTEK, INC.
CONSOLIDATED BALANCE SHEETS (continued)
As of December 31,
1995 1994
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current Portion of Long-Term Debt ........... $ 2,651 $ 5,337
Accounts Payable ............................ 16,342 14,117
Accrued Salaries and Bonuses ................ 3,218 3,008
Accrued Commissions ......................... 2,234 1,833
Progress Billings in Excess of Cost
and Estimated Earnings ................... 2,904 2,721
Purchase Price Payable - National Northeast . 9,960 --
Other Accrued Liabilities ................... 10,634 12,446
Total Current Liabilities ................... 47,943 39,462
Long-Term Debt .............................. 380 211
Deferred Compensation ....................... 22 25
Total Liabilities ........................... 48,345 39,698
Minority Interest - National Northeast ..... 2,040 --
Shareholders' Equity:
Common Stock - no par, stated value $0.05 per
share, 9,610,135 shares issued .......... 479 479
Paid in Capital ............................. 15,434 15,434
Retained Earnings ........................... 81,465 70,559
Treasury Shares, at cost (634,864 and
574,424 common shares, respectively) ... ( 5,449) ( 4,808)
Cumulative Translation Adjustment ........... ( 883) ( 932)
Total Shareholders' Equity .................. 91,046 80,732
Total Liabilities and Shareholders'
Equity ............................. $141,431 $120,430
See Accompanying Notes to Consolidated Financial Statements.
(Continued)
<PAGE>
MESTEK, INC
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31,
1995 1994 1993
(Dollars in thousands)
Net Sales ................................... $230,610 $209,557 $219,175
Net Service Revenues ...... ................. 15,255 14,461 12,211
Total Revenues .............................. 245,865 224,018 231,386
Cost of Goods Sold .......................... 166,009 149,180 160,234
Cost of Service Revenues .................... 8,811 8,928 7,798
Gross Profit ................................ 71,045 65,910 63,354
Selling Expense ............................. 30,319 28,282 28,742
General and Administrative
Expense ................................ 14,845 12,757 14,441
Engineering Expense ......................... 5,711 5,734 6,004
Operating Profit ............................ 20,170 19,137 14,167
Interest Expense ............................ ( 718) ( 839) ( 1,361)
Amortization Expense ........................ ( 93) ( 53) ( 55)
Other Income (Expense), Net ................. ( 1,224) ( 2,197) ( 61)
Income From Continuing Operations
Before Income Taxes ................... 18,135 16,048 12,690
Income Taxes ................................ 7,229 6,750 5,107
Income From Continuing
Operations ............................ 10,906 9,298 7,583
Discontinued Operations:
(Loss) From Operations of
Discontinued Segment ........................ -- -- ( 2,323)
Applicable Income Tax Benefit ............... -- -- 793
-- -- ( 1,530)
Loss on Disposal of Discontinued
Segment ................................ -- -- ( 2,425)
Applicable Income Tax Benefit ............... -- -- 637
-- -- ( 1,788)
Net Income .................................. $ 10,906 $ 9,298 $ 4,265
See Accompanying Notes to Consolidated Financial Statements.
(Continued)
<PAGE>
MESTEK, INC.
CONSOLIDATED STATEMENTS OF INCOME (Continued)
For the years ended December 31,
1995 1994 1993
Earnings (loss) per Common Share:
Income From Continuing Operations . $ 1.21 $ 1.02 $ .82
(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)
Net Income ........................ $ 1.21 $ 1.02 $ .46
Weighted Average Shares Outstanding
(in thousands) .................... 9,019 9,137 9,258
See Accompanying Notes to Consolidated Financial Statements.
(Continued)
<PAGE>
<TABLE>
MESTEK, INC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the years ended December 31,
1995, 1994 and 1993
$ 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, 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)
Cumulative Translation Adjustment ......... ( 272) ( 272)
Balance - December 31, 1994 ............... $ -- $ 479 $15,434 $70,559 $(4,808) $(932) $80,732
Net Income ................................ 10,906 10,906
Common Stock Repurchased .................. ( 641) ( 641)
Cumulative Translation Adjustment ......... 49 49
Balance - December 31, 1995 ............... $ -- $ 479 $15,434 $81,465 $(5,449) $(883) $91,046
See Accompanying Notes to Consolidated Financial Statements
(Continued)
</TABLE>
<PAGE>
MESTEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
1995 1994 1993
(Dollars in thousands)
Cash Flows from Operating Activities:
Net Income ........................... $ 10,906 $ 9,298 $ 4,265
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation and Amortization .......... 3,940 4,712 6,205
Provision for Losses on Accounts
Receivable, net of write offs ........ ( 63) ( 16) 462
Changes in assets and liabilities net
of effects of acquisitions and
dispositions:
Accounts Receivable .................... ( 2,972) 9,353 ( 4,765)
Unbilled Accounts Receivable ........... ( 15) ( 27) ( 590)
Inventory .............................. ( 3,176) ( 1,464) 4,416
Accounts Payable ....................... ( 1,823) 3,841 ( 3,492)
Other Current Liabilities .............. ( 2,101) ( 2,745) 6,102
Progress Billings ...................... 183 613 429
Deferred Compensation .................. ( 3) ( 7) ( 63)
Other .................................. ( 4,248) 797 ( 1,616)
Net Cash Provided by Operating
Activities ................................ 628 24,355 11,353
Cash Flows from Investing Activities:
Capital Expenditures ................... ( 2,963) ( 5,160) ( 4,293)
Disposition of Property & Equipment .... 2,727 -- 853
Acquisition of Businesses and Other
Assets Net of Cash Acquired ...... ( 15,595) ( 1,372) ( 7,449)
Disposition of Business Segment ........ 6,000 -- 12,000
Net Cash Provided by (Used in)
Investing Activities .................. ( 9,831) ( 6,532) 1,111
Cash Flows from Financing Activities:
Net Borrowings (Repayments) Under
Revolving Credit Agreement ............ 2,406 ( 5,866) ( 659)
Principal Payments Under Long
Term Debt Obligations ................. ( 5,367) ( 9,446) ( 13,535)
Proceeds from Issuance of Long
Term Debt ............................ -- -- 3,467
Purchase Price Payable - National Northeast 9,960 -- --
Redemption of $5.00 Convertible
Preferred Stock ...................... -- ( 6) --
Repurchase of Common Stock ............. ( 641) ( 1,605) ( 782)
Dividends Paid ......................... -- -- ( 361)
Net Cash Provided by (Used in)
Financing Activities .................. 6,358 (16,923) ( 11,870)
Net Increase (Decrease) in Cash and
Cash Equivalents ...................... ( 2,845) 900 594
Translation effect on Cash ................. 49 ( 272) ( 414)
Cash and Cash Equivalents -
Beginning of Year .......................... 4,201 3,573 3,393
Cash and Cash Equivalents -
End of Year ................................ $ 1,405 $ 4,201 $ 3,573
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 subsidiaries, collectively referred to as the Company. All material
intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Revenue recognition and unbilled receivables
Revenue from product sales is recognized at the time of shipment.
Revenue from the licensing of software applications and software systems
development 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 include 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 are carried at cost. Depreciation and
amortization are computed using the straight-line method and accelerated methods
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>
Goodwill
The Company amortizes Goodwill on the straight line basis over the
estimated period to be benefitted. The acquisition of National Northeast
Corporation and National Southeast Aluminum Corporation ("National"), as more
fully described in Note 2, resulted in goodwill of $4,617,000 which will be
amortized over 25 years. The acquisition of Heat Exchangers, Inc., as more fully
described in Note 2, resulted in goodwill and related intangibles of $2,473,000
which will be amortized over 25 years. The Company continually evaluates the
carrying value of goodwill. Any impairments would be recognized when the
expected future operating cash flows derived from such goodwill is less than
their carrying value.
Advertising Expense
Advertising costs are charged to operations as incurred, such charges
aggregated $2,942,000, $2,426,000, and $2,655,000 for the years ended December
31, 1995, 1994 and 1993 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 $894,000, $537,000, and $490,000, for the years ended
December 31, 1995, 1994 and 1993, 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 $1,208,576, $910,000, and $702,000, 1995,
1994, and 1993, 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.
<PAGE>
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.
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. Net
foreign currency transactions are reported in the results of operations in U.S.
dollars at average exchange rates. Adjustments resulting from balance sheet
translations are excluded from the determination of income and are accumulated
in a separate component of shareholders' equity.
Income Taxes
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. 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.
Property Held for Sale
Property Held for Sale includes a manufacturing facility in Scranton,
Pennsylvania which was sold at a gain in January of 1996.
The Company's Northvale, New Jersey facility, reflected in Property
Held for Sale at December 31, 1994, was sold on July 5, 1995 for $2,450,000 in
notes payable secured by the property, personal and corporate guarantees, and
other security. A loss of $400,000 was reported in connection with this
transaction in 1995.
New Accounting Standard
In March, 1995 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of", which
will be effective for the Company's fiscal year ending December 31, 1996. This
statement requires the Company to review long-lived assets for impairment
whenever events or changes in circumstances, indicate that the carrying amount
of an asset may not be recoverable. The Company intends to adopt this statement
prospectively. The impact of this standard is not expected to have a material
impact on the Company's financial condition or results of operations.
<PAGE>
Reclassification
Reclassifications are made periodically to previously issued financial
statements to conform with the current year presentation.
2. BUSINESS ACQUISITIONS
On October 30, 1995, the Company executed an agreement to acquire
approximately eight-three (83%) of the issued and outstanding voting common
stock of National Northeast Corporation and National Southeast Aluminum
Corporation ("National"). National operates custom aluminum extrusion and
fabrication facilities located in Lawrence, Massachusetts and Winter Haven,
Florida. The transaction was accounted for under the purchase method of
accounting as of October 30, 1995 and, accordingly, the Company has included the
results of this acquired business in its consolidated statement of operations
from this date. The Company itself is a user of aluminum extrusions in its HVAC
segment. The consideration for the purchase was $9.96 million in cash and
approximately $3.32 million payable over three years, contingent upon a future
level of earnings. The transaction was completed on January 2, 1996.
Proforma unaudited results of operations for 1994 and 1995, reflecting
a hypothetical acquisition date of January 1, 1994 are as follows:
1995 1994
Total Revenues $267,234 $242,197
Net Income 11,652 9,657
Earnings per shar $ 1.30 $ 1.06
============ ===========
On November 15, 1995, the Company acquired substantially all of the
accounts receivable, inventory, fixed and intangible assets of Heat Exchangers,
Inc., a manufacturer of portable air conditioning equipment in Skokie, Illinois.
The purchase price paid, including the assumption of certain liabilities, was
$6,764,000. The acquisition was accounted for as a purchase and, accordingly,
the Company has included the results of this acquired business in its
consolidated statement of operations since the date of the acquisition. On a
proforma basis this acquisition would not have had a material effect on the
Company's consolidated results of operations for either of the two years in the
period ended December 31, 1995.
3. INVENTORIES
Inventories consisted of the following at December 31:
1995 1994
------------- -----------
Raw materials $ 20,404,000 $ 17,524,000
Work-in-progress 17,114,000 13,441,000
Finished goods 9,657,000 8,241,000
----------- -----------
47,175,000 39,206,000
Less provision for LIFO
method of valuation 7,934,000 7,104,000
----------- -----------
$ 39,241,000 $ 32,102,000
=========== ===========
Progress billings exceeded related contract costs by $2,904,000, and
$2,721,000, at December 31, 1995 and 1994, 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:
1995 1994
------------- -----------
Land $ 777,000 $ 750,000
Buildings 11,035,000 10,662,000
Leasehold Improvements 3,119,000 2,873,000
Equipment 43,857,000 34,442,000
------------- ------------
58,788,000 48,727,000
Accumulated Depreciation (33,820 000) (30,244,000)
------------ ------------
$ 24,968,000 $ 18,483,000
============ ============
The above amounts include $144,000, and $1,370,000, at December 31, 1995
and 1994, 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.
Depreciation and amortization expense was $3,864,000, $4,669,000, and
$6,205,000, for the years ended December 31, 1995, 1994, and 1993 respectively.
5. EQUITY INVESTMENTS
H. B. Smith Company Incorporated (HBS)
The Company's investment in HBS is zero reflecting the Company's equity
in HBS' cumulative losses. The Company has no obligation to fund future HBS
operating losses.
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 1995, 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 was $3,272,000 and $1,474,000 at December 31, 1995 and 1994,
respectively.
<PAGE>
Note 6 - Long-Term Debt
Long-Term Debt consisted of the following:
Dec. 31, Dec. 31,
1995 1994
------------ -----------
Senior Notes $ - $ 1,000,000
Revolving Loan Agreement 1,725,000 -
Note Payable Bank 711,000 -
Notes Payable American Standard, Inc. - 1,903,000
Notes Payable Eafco, Inc. - 2,400,000
Other Bonds and Notes Payable 595,000 245,000
------------ ----------
3,031,000 5,548,000
Less Current Maturities (2,651,000) (5,337,000)
----------- -----------
$ 380,000 $ 211,000
============ ===========
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, which had been extended through June 30, 1995,
was recently extended through April 30, 1996. Under the terms of this most
recent extension, it provides $48 million of unsecured revolving credit and
standby letter of credit capacity. Borrowings under the Agreement bear interest
at a floating rate based upon the bank's prime rate less 1.00%, or LIBOR plus a
quoted market factor, at the discretion of the borrower, and may be used for
working capital or acquisition purposes, or to retire previously incurred debt.
It is management's intention, upon expiration of the Revolving Loan Agreement on
April 30, 1996 to extend or otherwise negotiate a similar financing agreement
for future capital needs. The Revolving Loan Agreement contains financial
covenants which require that the Company maintain certain current ratios,
working capital amounts, capital bases and leverage ratios. This agreement also
contains 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.
Commitment fees on letters of credit are 3/4% annually. Outstanding
letters of credit, principally related to the Company's insurance programs,
aggregated $3,242,000 and $3,827,000, at December 31, 1995 and 1994,
respectively.
Note Payable Bank - The Company's subsidiary, National Northeast Corporation had
in effect at December 31, 1995 a revolving credit agreement with a commercial
bank. The outstanding balance of $711,000 was paid off in January of 1996
through advances under the Company's Revolving Loan Agreement.
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 final installment on the notes of
$1,903,000 was paid on January 1, 1995.
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, 1995 was $212,000. The
Company's National Northeast subsidiary is obligated under two non-interest
bearing subordinated Notes Payable on which interest was imputed at 8%. The
notes are secured by certain pieces of equipment. The outstanding balances under
the notes at December 31, 1995 are $185,000 and $198,000, respectively, and the
notes mature on May 1, 2001 and March 31, 1997, respectively.
<PAGE>
Cash paid for interest was $718,000, $839,000, and $1,535,000, during the
years ended December 31, 1995, 1994, and 1993, respectively.
Maturities of long-term debt in each of the next five years are as
follows:
1996 - $ 2,651,000
1997 - $ 116,000
1998 - $ 80,000
1999 - $ 85,000
2000 - $ 62,000
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, 1995.
7. 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, 1995, John E.
Reed, Chairman, President and CEO of the Company and Stewart B. Reed, a Director
of the Company and son of John E. Reed, together beneficially own a majority of
the outstanding shares of the Company's common stock.
By a vote of its shareholders at its annual meeting of shareholders on
May 24, 1995, the Company amended its Articles of Incorporation to authorize
10,000,000 shares of a new class (or classes) of preferred stock (the Preferred
Stock) and to eliminate both its $5.00 convertible, non-cumulative, non-voting,
$100 par, preferred stock (the Convertible Preferred) and its $6.00, $100 par,
redeemable preferred stock (the Redeemable Preferred) . As of December 31, 1995
no shares of the Preferred Stock have been issued.
Prior to May 25, 1995 the Company had 250,000 shares of authorized $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.
8. INCOME TAXES
Income before income taxes included foreign earnings (losses) of $217,000,
($606,000), and ($449,000) in 1995, 1994, and 1993, respectively. Income tax
expense (benefit) from continuing operations consisted of the following:
<PAGE>
1995 1994 1993
-------------- ------------- -----------
Federal income tax:
Current $ 5,894,000 $ 5,298,000 $ 4,052,000
Deferred ( 174,000) ( 89,000) ( 249,000)
State income tax:
Current 1,543,000 1,534,000 1,306,000
Deferred ( 46,000) ( 5,000) ( 36,000)
Foreign income tax:
Current 12,000 12,000 -
Deferred - - 34,000
------------ ------------- ------------
Income taxes from
Continuing Operations $ 7,229,000 $ 6,750,000 $ 5,107,000
=========== =========== ===========
Total income tax expense from 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:
1995 1994 1993
----------- ----------- ----------
Computed "expected" income tax $ 6,347,000 $ 5,617,000 $ 4,314,000
State income tax, net of
federal tax benefit 973,000 994,000 838,000
Benefit of foreign loss not
allocated to income statement - 212,000 -
Foreign tax rate differential ( 15,000) ( 82,000) ( 152,000)
Change in beginning year balance
of the valuation allowance for
deferred tax assets allocated
to income tax expense ( 76,000) - 195,000
Other - net - 9,000 ( 88,000)
-------------- ------------ -----------
Income Taxes $ 7,229,000 $ 6,750,000 $ 5,107,000
=========== =========== ===========
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, 1995 are as follows:
<PAGE>
Change
December 31, (Expense) December 31,
1994 Benefit 1995
----------- --------- -----------
Deferred Tax Assets:
Warranty Reserve .................. $ 630,000 $ 32,000 $ 662,000
Compensated Absences .............. 522,000 199,000 721,000
Inventory Valuation ............... 283,000 67,000 350,000
Accounts Receivable Valuation ..... 622,000 ( 65,000) 557,000
Capital Loss Carryforward ......... 323,000 (323,000) --
State Tax Operating Loss
Carryforward ................... 100,000 92,000 192,000
Foreign Tax Operating Loss
Carryforward ................... 704,000 ( 75,000) 629,000
Deferred Income on Sale of Assets
to Nonconsolidated Investees .. 213,000 -- 213,000
----------- -------- ---------
Total Gross Deferred Tax Assets ... 3,397,000 ( 73,000) 3,324,000
Less Valuation Allowance .......... ( 195,000) 76,000 ( 119,000)
---------- --------- -------
Deferred Tax Assets ........ 3,202,000 3,000 3,205,000
---------- --------- -------
Deferred Tax Liabilities:
Prepaid Expenses .................. ( 653,000) 75,000 ( 578,000)
Depreciation ...................... ( 443,000) 117,000 ( 326,000)
Other ............................. ( 386,000) 25,000 ( 361,000)
---------- --------- ---------
Net Deferred Tax Liabilities (1,482,000) 217,000 (1,265,000)
---------- --------- ---------
Net Deferred Tax Assets .... $ 1,720,000 $ 220,000 $ 1,940,000
========== ========= =========
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. This valuation
allowance was adjusted downward to $119,000 on December 31, 1995 because the
foreign operations resulted in earnings for the current year. It is management's
belief that this trend will continue. At December 31, 1995, no valuation
allowance has been established relative to the remaining foreign tax operating
loss carryforward or state tax operating 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, 1995, the Company has state tax operating loss and
foreign tax operating loss carryforwards of approximately $3,553,000 and
$1,259,000, respectively, which are available to reduce future income taxes
payable, subject to applicable "carryforward" rules and limitations. The
significant increase in state tax operating loss carryforwards resulted
primarily from a change in Pennsylvania law permitting loss carryforwards which
were not previously allowed. These losses expire as follows:
State Foreign
2000 $1,600,000 $ -
2007 1,953,000 1,259,000
----------- -----------
$3,553,000 $1,259,000
========== ==========
<PAGE>
Cash paid for income taxes was $8,222,000, $5,990,000 and $1,889,000, for
the years ended December 31, 1995, 1994, and 1993 respectively.
9. 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, 1995 are as follows:
Date Basic Minimum
of Annual Future
Lease Term Rental Rentals
Sterling Realty Trust
Land and building - Main 12/17/84 15 years $ 192,000 $ 768,000
Land and building - Engineering 07/01/83 15 years 42,000 105,000
Land and building - South Complex 01/01/94 15 years 256,800 3,338,400
Machinery & Equipment 01/01/93 5 years 41,460 82,920
(Westfield, Farmville and Wrens
Locations)
Machinery Rental
Machinery & Equipment 01/01/93 5 years 223,980 447,960
(Westfield, Farmville, Wrens,
South Windsor and Clinton Locations)
Elizabeth C. Reed Trust
Machinery & Equipment 01/01/93 5 years 14,100 28,200
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 324,000 972,000
MacKeeber
(South Windsor Location) 07/01/90 14.5 years 616,041 5,852,424
Rent expense for operating leases, including those with related parties,
was $2,581,000, $2,433,000, and $4,699,000, for the years ended December 31,
1995, 1994 and 1993, respectively.
<PAGE>
Future minimum lease payments under all noncancelable leases as of December
31, 1995 are as follows:
Operating
Year Ending December 31, Leases
1996 $ 3,170,000
1997 2,482,000
1998 2,120,000
1999 1,775,000
2000 1,271,000
-------------
After 2000 4,795,000
-------------
Total minimum lease payments $15,613,000
10. EMPLOYEE BENEFIT PLANS
The Company maintains a qualified non-contributory profit-sharing plan
covering all eligible employees. Contributions to the plan were $828,000,
$789,000, and $755,000, for the years ended December 31, 1995, 1994, and 1993,
respectively. Contributions to the Plan are defined as 3.0% of gross wages up to
the current Old Age, Survivors, and Disability, (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:
The Company maintains a Retirement Savings Plan qualified under Internal
Revenue Code Section 401(k) for 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 $252,000, $176,000 and $178,000, for the years
ended December 31, 1995, 1994, and 1993, respectively.
The Company maintains a separate qualified 401(k) Plan for 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 $0.25 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
$243,000, $212,000, and $197,000 for the years ended December 1995, 1994, and
1993, respectively.
One of the Company's subsidiaries maintains a qualified defined
contribution target benefit pension plan which covers substantially all of it's
employees. 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, 1995, 1994, and 1993 was $64,000, $59,000, and $48,000, respectively.
<PAGE>
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.
40% of the Company's employees are covered under collective bargaining
agreements, of which 15% are covered under agreements expected to be renewed in
1996.
11. 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 $147,000, $93,000, and $378,000, for the years
ended December 31, 1995, 1994, and 1993, 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,
1995 was $1,348,000.
The Company is subject to numerous laws and regulations that govern the
discharge and disposal of materials into the environment. Liabilities for
environmental remediation and/or restoration are recorded when it is probable
that obligations have been incurred and the amounts can be reasonably estimated.
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
Environmental Laws. The Company is engaged in various matters with respect to
obtaining, amending or renewing permits required under Environmental Laws to
operate each of its manufacturing facilities. 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, in the judgement of management, would have a material adverse
impact on the financial condition or results of operations of the Company. There
have been releases of hazardous materials on a few parcels of property which are
presently owned, leased or operated by the Company. 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.
12. 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.
<PAGE>
The Computer Systems segment includes the development, sale,
installation, and maintenance of business applications software.
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, 1995, 1994, and 1993. 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.
Also, Operating Profit has been adjusted in 1993 to give effect to the
reclassification of corporate overhead originally charged to the Engineering
segment in accordance with APB 30.
1995 1994 1993
-------------- -------------- --------
(Dollars in thousands)
Total Revenues
HVAC $ 218,456 $ 200,445 $ 213,106
Computer Systems 15,255 14,461 12,211
Coil Handling Equipment 12,154 9,112 6,069
--------- --------- ---------
Total Revenues $ 245,865 $ 224,018 $ 231,386
========= ========= =========
Operating Profit
HVAC 15,495 15,310 12,335
Computer Systems 2,749 2,244 1,374
Coil Handling Equipment 1,926 1,583 458
---------- --------- ----------
Total Operating Profit $ 20,170 $ 19,137 $ 14,167
========== ========= =========
Other information regarding the segments for the years 1995, 1994, and 1993 is
as follows:
1995
Identifiable assets Capital Depreciation
(at year-end) expenditures * expense
(Dollars in thousands)
HVAC $ 128,093 $ 2,416 $ 3,604
Computer Systems 6,772 25 69
Coil Handling Equipment 6,476 522 191
---------- -------- ---------
Total $ 141,341 $ 2,963 $ 3,864
========== ======== =========
*Excludes capital assets acquired by acquisition
<PAGE>
1994
Identifiable assets Capital Depreciation
(at year-end) expenditure 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 assets Capital Depreciation
(at year-end) 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
=========== ============ ===========
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, 1995 and 1994, accounts receivable, net
of allowances, for the HVAC segment totaled $38,664,000 and $30,837,000,
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, 1995 are adequate to absorb any such
losses.
13. SELECTED QUARTERLY INFORMATION (UNAUDITED)
The table below sets forth selected quarterly information for each full quarter
of 1995 and 1994. (Dollars in thousands except per common share amounts).
1995 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
Total Revenues $ 53,759 $ 52,479 $ 64,686 $ 74,941
Gross Profit $ 15,535 $ 15,475 $ 18,956 $ 21,079
Net Income $ 2,675 $ 1,904 $ 2,963 $ 3,364
Per Common Share:
Net Income $ .30 $ .21 $ .33 $ .37
<PAGE>
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
14. COMMON STOCK BUYBACK PROGRAM
In 1995 and 1994 the Company continued its program of selective "open-market"
purchases of common shares, originally announced in 1990. 60,440 and 169,200 of
such shares were acquired in 1995 and 1994, respectively. All such shares are
accounted for as treasury shares as of December 31, 1995 and 1994, respectively.
15. OTHER TRANSACTIONS
Mesta
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 reported a gain on the
transaction in 1995 of approximately $850,000.
Chester
On August 31, 1995, the Company, completed the disposition of 30% of the
outstanding common stock of Chester Environmental, Inc. ("Chester"), a
Pennsylvania corporation headquartered in Pittsburgh, Pennsylvania. Chester is
engaged in environmental engineering and consulting. Prior to August 1993,
Chester was a wholly owned subsidiary of the Company. The Company sold 70% of
Chester's common stock to Duquesne Enterprises, Inc. ("Duquesne") in 1993, and
this redemption in 1995 of the remaining 30% of Chester's common stock by
Chester, liquidated the Company's interest in Chester.
Under the terms of the redemption, the Company received $6,000,000 from Chester,
and simultaneously, settled in full certain indemnities and guarantees of
Chester accounts receivable undertaken in 1993. The Company fully reserved for
these obligations at the time of the 1993 transaction. A nominal loss was
reported in 1995 as a result of these transactions.
This disposition completes the Company's exit from its environmental services
segment. The Company's three remaining business segments are: Heating,
Ventilating, and Air Conditioning (HVAC); Computer Systems; and Coil Handling
Equipment.
Cox
On July 12, 1995, the Company purchased certain operating assets of Cox
Manufacturing Co., Inc. of Ridgeville, Indiana for approximately $500,000 in a
bulk sales transaction. The Company leased a portion of the former Cox facility
to manufacture the radiant heating and furnace product line obtained in the
transaction.
<PAGE>
Honeywell
On October 2, 1995, the Company purchased certain manufacturing assets and
inventory from Honeywell Corp. (Honeywell) of Minneapolis, Minnesota for
approximately $500,000. The Company expects to manufacture a line of dampers for
Honeywell.
Note 16. Subsequent Events
On February 5, 1996, the Company acquired certain assets of the press feeding
and cut-to-length line businesses of Rowe Machinery and Automation Inc. of
Dallas, Texas ("Rowe"). Rowe is a leading manufacturer of press feeding and
cut-to-length line equipment serving the appliance, office furniture,
automotive, and many other markets. The purchase price paid was approximately $5
million, including the assumption of certain liabilities. Mestek will lease the
Rowe facility in Dallas including all machinery and equipment through the end of
1996 at a cost of $40,000 per month.
On February 2, 1996, the Company acquired all of the issued and outstanding
common stock of Omega Flex, Inc. of Exton Pennsylvania. Omega Flex is a
manufacturer of flexible metal hose and related hose fabrications. The purchase
price paid for the acquired stock was approximately $9 million. Omega Flex has
leased its manufacturing and office facility through January 31, 2000, for
$199,500 per year.
Note 17. Discontinued Operations (1993)
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 enabled the Company, at
its option, to sell its remaining 30% interest for a minimum of $6,000,000. The
Company 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) in 1993 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 1993 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 accounted for its remaining investment in Chester under the
cost method of accounting, since the Company did not have the ability to exert
significant influence over the operations or financial policies of Chester. The
"put" rights received by the Company also allowed 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 in 1993. Also, under the terms of the
Agreement of Sale, Duquesne received a "call" right which enabled it to
purchase, at its option, the Company's remaining interest for $12,000,000.
Interest expense was allocated to the Loss from Discontinued Operations for 1993
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 for the year 1993 were 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
for 1993 (through August 17, 1993).
<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 22, 1996, 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
22, 1996, 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 22, 1996, 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 22, 1996, 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
Independent Auditors' Reports
Financial Statements:
(a)(1) Consolidated Balance Sheets as of December 31, 1995
and 1994
Consolidated Statements of Income for the Years Ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Shareholders' Equity for
the Years Ended December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1995, 1994, and 1993
Notes to the Consolidated Financial Statements
(a)(2) Financial Statement Schedules
II. Valuation and Qualifying Accounts
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 44 thru 47
(b) One report on Form 8-K was filed during the three months ended December
31, 1995.
No annual report to security holders as of December 31, 1995 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 1996. 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>
Schedule II
MESTEK, INC.
Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
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
1995 Allowance
for doubtful
accounts $1,440 $ 867 $ - $ 76 $(1,006)(2) $1,377
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
(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 parenthetical 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 (H)
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
and John E. Reed (B)
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 (G)
Partnership (lessor)
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 (H)
Mechanical Equipment of Pennsylvania, Inc. and West Homestead
Joint Venture Corporation.
10.24 Equipment Lease Agreement dated January 1, 1993 between (H)
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). (H)
10.26 Equipment Lease Agreement dated January 1, 1993 between Elizabeth
C. Reed Trust (Lessor) and Mestek, Inc. (Lessee). (H)
10.27 Asset Purchase Agreement dated September 9, 1994 between Mestek, (H)
Inc. and Aztech International, Ltd., debtor-in-possession; and
Aztec Sensible Cooling, Inc., debtor-in-possession, and the
Amendment thereto dated October 31, 1994.
10.29 Stock Purchase Agreement relating to the acquisition of stock (I)
of National Northeast Corporation dated October 30, 1995 by
and between Mestek, Inc. as Buyer and David Weener,
Wayne Frerichs, Mark McCrill, and Jon Morrison as Sellers; Stock
Purchase Agreement dated October 30, 1995 relating to the
acquisition of stock of National Southeast Aluminum Corporation
by and between Mestek, Inc. as Buyer and David Weener,
Wayne Frerichs, Mark McCrill, and Jon Morrison as Sellers.
10.30 Amended and Restated Revolving Loan Agreement, Letter of Credit
Facility and Foreign Exchange Facilities dated December 20, 1995.
10.31 Asset Purchase Agreement dated November 15, 1995 by and between
Mestek, Inc. and Heat Exchangers, Inc. and Lease.
10.32 Stock Purchase Agreement dated February 2, 1996 for the purchase
of stock of Omega Flex, Inc. between Mestek, Inc. and
Koji Shimada and Lease. (J)
10.33 Agreement for the Purchase and Sale of Assets dated January 12, 1996
by and between Mestex, Ltd., Rowe Machinery & Automation, Inc.,
and Met-Coil Systems Corporation, and the Amendment thereto
dated February 5, 1996 and Lease. (J)
10.34 Agreement of Sale dated July 5, 1995 between The Hydrotherm
Corporation and SET Realty, L.L.C. for the purchase and sale of real
property in Northvale, New Jersey.
11.1 Schedule of Computation of Earnings per Common Share
<PAGE>
22.1 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
(H) Filed as an Exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1994
(I) Filed as an Exhibit to the Current Report on Form 8-K dated
November 13, 1995.
(J) Filed as an Exhibit to the Current Report on Form 8-K dated
February 13, 1996.
<PAGE>
Exhibit 11.1
MESTEK, INC.
Schedule of Computation of Earnings Per Common Share
Years Ended December 31,
1995 1994 1993
---- ---- ----
Net income $ 10,906 $ 9,298 $ 4,265
Less: dividends on Preferred Stock - - 361
---------- ----------- ---------
Net income for common shareholders $ 10,906 $ 9,298 $ 3,904
Add back dividends which would not have
been paid if $5.00 Convertible Preferred
Stock had been converted - - 361
---------- ----------- --------
Net income for earnings per share $ 10,906 $ 9,298 $ 4,265
-------- ------- -------
Weighted average number of common shares
outstanding 9,019 8,241 7,395
Common share equivalents resulting from
conversion of the $5.00 Convertible
Preferred Stock - 896 1,863
-------- --------- ---------
Total common shares and common share
equivalents 9,019 9,137 9,258
-------- -------- ---------
Earnings per common share $1.21 $1.02 $ .46
===== ===== =====
<PAGE>
Exhibit 22.1
SUBSIDIARIES OF MESTEK, INC.
Jurisdiction
Corporate Name of Incorporation
Alapco Holding, Inc. Delaware
Deltex Partners, Inc. Delaware
Gentex Partners, Inc. Texas
HBS Acquisition Corporation Delaware
Homestead Holding, Inc. Delaware
MCS, Inc. Pennsylvania
Mestek Canada, Inc. Ontario
Mestek Foreign Sales Corporation U.S. Virgin Islands
National Northeast Corporation Delaware
Omega Flex, Inc. Pennsylvania
Pacific/Air Balance, Inc. California
TEK Capital Corporation Delaware
The Hydrotherm Corporation Delaware
Westcast, Inc. Massachusetts
<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
identical 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 and/or Officer Year of Execution
A. Warne Boyce 1987
E. Herbert Burk 1987
William J. 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
Robert K. McCauley 1995
Richard J. McKnight 1987
Walter J. Markowski 1990
John F. Melesko, Jr. 1987
Jack E. Nelson 1996
William S. Rafferty 1990
Stephen M. Shea 1987
Charles J. Weymouth 1995
<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 to be signed on its
behalf by the undersigned, thereunto duly authorized.
MESTEK, INC.
Date: April 11, 1996 By: /S/ John E. Reed
----------------------------------------------------------------------
John E. Reed, Chairman of the
Board and Chief Executive Officer
Date: April 11, 1996 By: /S/ Stephen M. Shea
-------------------------------------------------------
Stephen M. Shea, Vice President
Finance and Chief Financial
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dated indicated.
Date: April 11, 1996 By: /S/ A. Warne Boyce
-------------------------------------------------------
A. Warne Boyce, Director
Date: April 11, 1996 By: /S/ E. Herbert Burk
----------------------------------------------------------------------
E. Herbert Burk, Director
Date: April 11, 1996 By: /S/ William J. Coad
--------------------------------------------------------
William J. Coad, Director
<PAGE>
Date: April 11, 1996 By: /S/ Peter Glynn-Jones
----------------------------------------------------------
Peter Glynn-Jones, Director
Date: April 11, 1996 By: /S/ Winston R. Hindle, Jr.
--------------------------------------------------------------
Winston R. Hindle, Jr.
Date: April 11, 1996 By: /S/ David W. Hunter, Director
------------------------------------------------------------------
David W. Hunter, Director
Date: April 11, 1996 By:/S/ David R. Macdonald, Director
--------------------------------------------------------------------
David R. Macdonald, Director
Date: April 11, 1996 By: /S/ John E. Reed, Director
--------------------------------------------------------------
John E. Reed, Director
Date: April 11, 1996 By: /S/ Stewart B. Reed, Director
-----------------------------------------------------------------
Stewart B. Reed, Director
AMENDED AND RESTATED
REVOLVING LOAN AGREEMENT,
LETTER OF CREDIT FACILITY AND
FOREIGN EXCHANGE FACILITIES
AGREEMENT made as of December , 1995 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, N.A., a national banking association, having a
principal place of business at 175 Federal Street, Boston, Massachusetts 02110
(hereinafter referred to as the "Bank") amends and restates in its entirety a
Revolving Loan Agreement and Letter of Credit Facility originally 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.
"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.
"Commitment" shall have the meaning set forth in
Section 2.1 below.
"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 capital 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;
(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.
"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 (1) 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.
"Foreign Exchange Facility" or "FX Facility" means the facility or
facilities described in Sections 2.18 and 2.19 below.
"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 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.
"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 no more than twelve months thereafter 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 (i) the Letter of
Credit Facility as evidenced by the Back-Up L/C Demand Note or otherwise or
(ii) either FX Facilities as evidenced by the Back-Up FX Demand Notes
described in Sections 2.18 and 2.19 respectively.
"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 Reuter's
LIBOR page (or, if such reporting services are no longer 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, the Foreign Exchange Facility Notes and any other notes executed by
the Borrower in favor of the Bank from time to time.
"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) 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, and (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 175
Federal Street, Boston, 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.
"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, 1996, except with respect to the
$1,000,000 FX Facility for which the Termination Date shall be April 30,
1997, 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, Forty
Million Dollars ($40,000,000.00) (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.
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 (1) 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 one percent (1.00%);
(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.
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.
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),
shall constitute a default in the Revolving Line of Credit Note, the
Back-Up L/C Demand Note, the Foreign Exchange Facility Notes and any other
obligations of the Borrower to the Bank whether evidenced by notes or
otherwise or (ii) 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.
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 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
($8,000,000.00) of letters of credit (a "Letter of Credit") for the
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 a 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 Letters 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:
(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;
(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.
2.18. $1,200,000.00 Foreign Exchange Line. In addition to the
Revolving Line of Credit and the Letter of Credit Facility established
hereby, the Bank hereby establishes a line of credit in Borrower's favor in
the amount of $1,200,000.00 (the "$1,200,000.00 FX Facility") or as
otherwise may be determined by the Bank from time to time which line of
credit may be used for the purchases of such foreign currencies as may be
hereafter agreed to by the Bank pursuant to contracts or other agreements
to purchase such currency from the Bank (as principal or agent) (the
"Foreign Exchange Contracts") with settlement dates up to the Termination
Date; it being understood, however, that the Foreign Exchange Line is
intended for contracts necessary for payments to suppliers rather than for
speculative purposes. In the event that the Bank is required to advance
funds on account of its obligation (as Borrower's principal or agent) to
purchase foreign currency, the Bank may charge Borrower's account therefor
and such charges shall be deemed to be advances made under the Revolving
Line of Credit. 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 a single, master back-up
demand note (the "$1,200,000.00 Back-Up Foreign Exchange Facility Note") in
the form attached hereto as Exhibit "D".
2.19. $1,000,000.00 Foreign Exchange Line. In addition to the
Revolving Line of Credit, Letter of Credit Facility and the $1,200,000 FX
Facility established hereby, the Bank hereby establishes a line of credit
in Borrower's favor in the amount of $1,000,000.00 (the $1,000,000.00 FX
Facility") or as otherwise may be determined by the Bank from time to time
which line of credit may be used for the purchase of such foreign
currencies as may be hereafter agreed to by the Bank pursuant to contracts
or other agreements to purchase such currency from the Bank (as principal
or agent) (the "Foreign Exchange Contracts") with settlement dates until
April 30, 1997; it being understood, however, that the Foreign Exchange
Line is intended for contracts necessary for payments to suppliers rather
than for speculative purposes. In the event that the Bank is required to
advance funds on account of its obligation (as Borrower's principal or
agent) to purchase foreign currency, the Bank may charge Borrower's account
therefor and such charges shall be deemed to be advances made under the
Revolving Line of Credit. 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 a single, master
back-up demand note (the "$1,000,000.00 Back-Up Foreign Exchange Facility
Note") in the form attached hereto as Exhibit "E". 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 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 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 other
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
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 such that Borrower has any
outstanding withdrawal liability; 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 outstanding
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 that would have
a material adverse effect on Borrower.
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, 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 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
remain 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, 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.
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:
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 due, 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 effect 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 on a
consolidated basis is in full compliance with the covenants set
forth in Section 8.2 below.
(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 for or convertible into stock) of
such Subsidiary to any Person other than the Borrower or a
wholly-owned Subsidiary, except for the purpose of qualifying
directors, or except in satisfaction of the validly pre-existing
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 every 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 best interest of the
Borrower;
(3) such stock and Indebtedness is sold, transferred or otherwise
disposed of 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 Borrower and its Subsidiaries
determined as of the end of the immediately 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.
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 giving
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 Loans or Investments. Except as permitted
herein make any loans to or investments in any 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 against 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.
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. 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 (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
(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 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;
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.
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 or 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 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.
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 or 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, answerback received, respectively,
addressed as aforesaid.
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
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
Its
BayBank, N.A.
By
Its Executive Vice President
<PAGE>
EXHIBIT "A"
Revolving Line of Credit Note
<PAGE>
EXHIBIT "B"
Back-Up Demand Note
Letter of Credit
<PAGE>
EXHIBIT "C"
List of Subsidiaries
Jurisdiction
Corporate Name of Incorporation
Alapco Holding, Inc. Delaware
HBS Acquisition Corporation Delaware
The Hydrotherm Corporation Delaware
Hydrotherm Canada Corporation Ontario
MCS, Inc. Pennsylvania
Pacific/Air Balance, Inc. California
Peritek, Inc. Delaware
TEK Capital Corporation Delaware
960236 Ontario Ltd., Temprite Industries Ontario
Westcast, Inc. Massachusetts
West Homestead Joint Venture Corporation Pennsylvania
<PAGE>
EXHIBIT "D"
Back-Up Demand Note
Foreign Exchange Facility in the amount of $1,200,000
<PAGE>
EXHIBIT "E"
Back-Up Demand Note
Foreign Exchange Facility in the amount of $1,000,000
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") made this 5th day of November,
1995, by and between Heat Exchangers, Inc., an Illinois corporation with offices
located at 8100 Monticello, Skokie, Illinois 60076 ("Seller"), and Mestek, Inc.,
a Pennsylvania corporation with offices located at 260 North Elm Street,
Westfield, Massachusetts 01085 ("Purchaser").
RECITALS
A. Seller is the owner of certain assets including machinery, equipment,
furniture, fixtures and other tangible personal property, inventory,
work-in-process, rights under agreements, intellectual property, permits,
goodwill and other books, records, information and materials used in the
operation of the business conducted by Seller at its Skokie, Illinois facility
(the "Koldwave Business").
B. Seller desires and intends to sell to Purchaser substantially all of the
assets and rights related to the production of those certain air conditioning
products sold under the Koldwave name (the "Koldwave Products") at the price and
on the terms and conditions hereinafter set forth.
C. Purchaser desires and intends to purchase from Seller substantially all of
the assets and rights of Seller related to the Koldwave Products and to assume
ceriain liabilities and obligations of Seller at the price and on the terms and
conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Purchase and Sale of Assets
1.1 The Assets Pertainin~ to the Koidwave Business. Except as
otherwise provided in Section 2, as of the date of execution of this Agreement
and the documents and instruments contemplated herein (the "Closing Date"), and
subject to the terms and conditions contained in this Agreement, Seller shall
sell, transfer, conve~y, assign and deliver to Purchaser, and Purchaser shall
purchase, acquire and accept from Seller, all of the assets, rights, interests,
properties and goodwill of every nature whatsoever, tangible or intangible and
wheresoever situated, owned by Seller and required or appropriate for use in the
Koldwave Business (collectively, the "Assets"), which is further defined as the
manufacture, application, design, development, engineering, distribution and
sale of those certain Koldwave Products described and identified on Schedule 1.1
(Koldwave Products) attached hereto. The Assets shall include, without limiting
the foregoing, the following, but shall exclude the Excluded Assets (as defined
below):
1.1.1 Machinery and Equipment. All of the machinery, equipment, office
equipment, furrniture, furnishings, fixtures, tooling, jigs, dies, patterns,
tooling fixtures, manufacturing supplies, material handling equipment, trucks,
laboratory and testing equipment, samples and displays, and other fixed tangible
personal property owned by Seller, other than those identified as Excluded
Assets including, but not limited to, those
<PAGE>
identified and set forth on Schedule 1.1.1 (Machinery and Equipment) attached
hereto (the "Machinery and Equipment") together with any rights of Seller to all
warranties, if any, and to the extent assignable, received from the
manufacturers and sellers of such tangible assets, all as related to the
manufacture of the Koldwave Products;
1.1.2 Inventory. All inventory owned by Seller, including raw
materials, work- in-process and finished goods, and including consignment
inventories, if any, held at vendor or customer sites, and service and warranty
spare parts, all used to produce the Koldwave Products (the "Inventory");
1.1.3 Agreements. All right, title and interest of Seller in, to
and under:
(a) material contracts (including the right to the return of any and
all deposits), representation agreements, distribution agreements, leases of
personal property, licenses, service agreements, maintenance agreements, and
other agreements related to the ordinary course of the Koldwave Business
identified and set forth by Purchaser on Schedule 1.1.3A (Certain Material
Agreements) attached hereto (the "Certain Material Agreements");
(b) the backlog of contracts and certain proposed contracts, for the
sale of the Koldwave products to customers, (the "Sales Orders") and the open
purchase orders for component parts and raw materials intended to be used in the
manufacture of the Koldwave Products (the "Purchase Orders"), all as identified
as of 8:00 a.m. (Chicago time), October 30, 1995, and set forth by Purchaser on
Schedule 1.1.3B (Sales Orders & Purchase Orders) attached hereton and any Sales
Orders & Purchase Orders arising after 8:00 a.m. (Chicago time) on October 30,
1995; and
(c) the lease agreements more particularly described on Schedule
1.1.3C (Real Property Leases) attached hereto.
1.1.4 Intellectual Property. All patents, patent applications,
trademarks (including the trademark "Koldwave"), service marks, trade names,
copyrights and copyright applications owned by Seller and rights of Seller on
any licenses with respect to any of the foregoing used in the Koldwave Business
identified and set forth on Schedule 1.1.4 (Registered Rights) attached hereto
(the "Registered Rights") and all of Seller's right, title and interest in and
to all inventions, inventor's notes, discoveries, trade secrets, ideas,
proprietary processes and formulae, whether patentable or not, improvements,
engineering drawings, computer-assisted design and manufacturing data, bills of
material, designs and specifications, computer software and laboratory
certifications, proprietary and trade rights and data, ideas and know-how,
whether patentable or not, and all shop rights, manufacturing data, licenses,
and other intellectual property and all correspondence related thereto that are
used as of the Closing Date in the Koldwave Business or in the manufacture and
sale of the Koldwave Products (all of which, including the Registered Rights,
are hereinafter collectively referred to as the "Intellectual Property");
1.1.5 Receivables. All of Seller's right, title and interest in and to
all accounts or notes receivable, prepaid expenses, contract rights, security
deposits, funds, reserves and other rights to payment arising from the operation
of the Koldwve Business as of the Closing, including, but not limited to, those
identified in Schedule 1.1.5 (Receivables) attached hereto (the "Receivables");
<PAGE>
1.1.6 Permits. All of Seller's right, title and interest in and to the
permits, licenses, authorizations, test data, certifications, consents, orders,
registrations and approvals of any federal, state or local governmental entity
or regulatory or certif~ing agency or authority issued to Seller and relating to
the Koidwave Business as set forth on Schedule 1.1.6 (Permits) attached hereto
(the "Permits"), to the extent the same are transferable or assignable to
Purchaser;
1.1.7 Books and Records. Except as described in Section 2, all of
Seller's right, title and interest in and to all books of account, records and
files, including, but not limited to, technical and scientific literature,
production data, testing data, equipment maintenance data, employee files,
payroll information system, accounting records, inventory records, purchasing
records, supplier and vendor lists, sales and marketing records, promotional
literature, engineering records, installation and maintenance manuals, business
plans, supply reference catalogs and any other records and data relating to the
Koldwave Business (whether in computer software, data, written, printed or any
other form) (the "Books and Records"); and
1.1.8. Goodwill. The goodwill associated with the Koldwave Business.
1.2 Conveyance of Assets. Upon the Closing Date, the sale, transfer,
conveyance, assignment and delivery of all of the Assets provided for inthis
Section 1, shall be made by (i) a duly executed bill of sale and assignment
substantially in the form of Exhibit A (Form of Bill of Sale) and (ii) such
other good and sufficient instruments of cnveyance and transfer as shall be
reasonably necessary to sell, transfer, convey, assign and deliver the Assets to
Purhcaser as of the Closing Date.
2. Excluded Assets. Notwithstanding any provision of Section 1.1, the assets of
Sesller that are identified on Schedule 2.0 (Excluded Assets) attached hereto
(the "Excluded Assets") shall not be included in the Assets transferred to
Purchaser hereby and none of the representations or warranties of Seller
contained herein shall apply to, or are being made by Seller with respect to,
the Excluded Assets.
3. Purchase Price.
3.1 Calculation of Purchase Price. The purchase price of the Assets
shall be (i) the amount of FOUR MILLION NINE HUNDRED TWENTY TWO THOUSAND TWO
HUNDRED THIRTY THREE DOLLARS ($4, 922,233.00) plus (ii) the Contingent
Obligation (as defined below) and the performance of the contractual obligations
of Purchaser as defined and set forth in Articles 4 and 9 hereof (the "Purchase
Price"), all as adjusted pursuant to the terms and conditions of Section 3.2
below.
3.2 Adjustment of Purchase Price. The parties hereto acknowledge that the
Purchase Price reflects adjustments made as a result of the agreement of the
parties hereto relating to any existing or potential disputes (i) between Seller
and Carleton-Stuart, Inc. ("Carleton-Stuart"), including but not limited to
disputes involving, related to or arising out of any warranty claims on Aire
King units purchased, received, distributed, sold or held by or produced for
Carleton-Stuart or any receivables due Seller from Carleton-Stuart (the
"Potential Carleton-Stuart Dispute") and (ii) between Seller and Kapiolani
Community College, Oahu Plumbing & Sheet Metal Ltd., Allied Construction, Inc.,
the State of Hawaii, Admor Distributors Corp. and Pacific Design Engineers
relating to DAGS Job No.12-31-4934, including any potential costs and
liabilities attributable to the performance under such job and any claims or
assessments for any lost profits, liquidated damages, fees or penalties assessed
in connection with such job (the "Potential KCC Dispute"). In addition, the
parties acknowledge that the amount of the Purchase Price payable by Purchaser
reflects a downward adjustment,
<PAGE>
dollar-for-dollar, by the amount of the liabilities set forth in Schedule 5.1.2
(Assumed Liabilities) of this Agreement, which are being assumed by Purchaser as
of the Closing.
3.3 Pavment of Purchase Price at Closing Date. On the. Closing Date,
the Purchase Price shall be paid to Seller by Purchaser delivering to Seller the
amount of FOUR MILLION NINE HUNDRED TWENTY TWO THOUSAND TWO HUNDRED THIRTY THREE
DOLLARS ($4,922,233.00) in payment of the Purchase Price set forth in Section
3.1 after adjustment pursuant to Section 3.2, in cash or other immediately
available flinds (the "Initial Payment").
3.4 Contingent Obligation. As additional consideration for the Assets
and as a portion of the Purchase Price, Purchaser shall pay to Seller a
cornmission amount equal to ten percent (10%) of the annual net sales,
calculated in accordance with the terms and definitions set forth on Exhibit B
(Definition of Net Sales) attached hereto, of the Koldwave Products that are in
excess of Nine Million and 00/100 Dollars ($9,000,000.00) per year for each of
the five one-year periods ending respectively December 31, 1995, December 31,
1996, December 31, 1997, December 31, 1998, and December 31, 1999, subject to
the further terms and conditions as follows (the "Contingent Obligation"):
3.4.1 The amount of the Contingent Obligation for the year
ending December 31, 1995, will be the greater of the amount computed pursuant to
the above paragraph or Fifty Thousand and 00/100 Dollars ($50,000.00);
3.4.2 The products to which the Contingent Obligation will
apply shall be all (i) existing Koldwave Products, (ii) new or modified Koldwave
Products, (iii) products derived from Koldwave Products introduced by Purchaser
in the future under the Koldwave brandname, (iv) Koldwave Products sold under
another brandname of Purchaser or under any private label, and (v) existing
products of Purchaser sold under the Koldwave brandname (collectively, the
"Applicable Products");
3.4.3 If any Koidwave product line currently produced by
Seller is discontinued, sold or otherwise disposed of after the Closing Date,
the Nine Million Dollar ($9,000,000.00) annual net sales threshold will be
reduced by the total net sales of such discontinued or disposed product line in
the 12-month period ending September 30, 1995; provided, however, that no such
reduction to the annual net sales threshold shall be made if any or all of the
mini-split line is discontinued, sold or otherwise disposed of and the annual
net sales threshold shall be reduced by $200,000 if the KPC 6000 line is
discontinued, sold or otherwise disposed of;
3.4.4 During the contingent period, Pruchaser will provide
periodic statements, on a quarterly basis delivered no later than 45 days
afterthe end of each calendar quarter for the first three calendar quarters and
no later than 60 days after the end of each calendar year, of the net sales of
the Applicable Products, which information for the first 12-month period shall
be dreived from the books and records maintained bu Purchaser and Seller and for
the second, third, foruth and fifith aplicable 12 month periods shall be derived
from Purchaser's audited or interim, as the case may be, financial statements,
in each cse broken doewn by product line nad providing a detailed breakdown of
wach of the components described on Exhibit B (Definintion of Net Sales); and at
Seller's option, Seller or its representatives will be given full access to
Purhcaser's record produced or kept in connection with the manufacutre,
marketing or sale ofhte Koldwave Products;
<PAGE>
3.4.5 The Contingent Obligation shall be paid within 60 days
of the end of each applicable calendar period and shall not be subject to
set-off or deduction of any kind;
3.4.6 Purchaser shall not consummate or enter into any
agreement requiring Purchaser to consummate any proposed sale, transfer or
assigument by Purchaser to a third party of a portion or all of the Koldwave
Business (which term is deemed for purposes of this Section 3.4.6 to include any
business of Purchaser engaged in the production of any of the Applicable
Products) (a "Proposed Sale") without the prior written consent of Seller to the
arrangements made in connection with the Proposed Sale for the satisfaction of
the Contingent Obligation with respect to that portion of the annual net sales
of the Koldwave Business represented by the portion of the Koldwave Business to
be sold in the Proposed Sale. Purchaser will provide Seller with 30 days'
advance written notice of any Proposed Sale and shall include in such notice a
reasonably detailed description of the Proposed Transaction. Upon receipt by
Seller of such notice, Seller shall notify Purchaser within 20 days as to
whether Seller consents to the arrangements referenced above, which consent
shall not be unreasonably withheld; and
3.4.7 If, at any time prior to receipt of the Contingent
Obligation payable for the year ending December 31, 1999, Seller adopts a plan
of complete or partial liquidation and in connection therewith makes a
liquidating distribution to its shareholders of its right to receive the
Contingent Obligation, Seller shall appoint a representative to act as agent and
nominee to receive the Contingent Obligation on behalf of all of such
shareholders and shall notify Purchaser in writing of the name and address of
such representative. Upon receipt of such notice, Purchaser shall thereafter
make all payments of the Contingent Obligation directly to such representative
at the address specified in such notice or at such other address or by such
other means as the representative may designate from time to time in writing.
Any payment of the Contingent Obligation made, or any notice given, by Purchaser
to such representative shall be deemed to be payment or notice, as the case may
be, to all of the shareholders of Seller.
3.5 Allocation of Purchase Price. The Purchase Price (including, for purposes of
this Section 3.5, any other consideration paid to Seller and including the
liabilities assumed by Purchaser pursuant to Article 5 hereof) shall be
allocated among the Assets in accordance with the Memorandum of Allocation (the
"Memorandum of Allocation") attached hereto as Exhibit C (Memorandum of
Allocation). The Memorandum of Allocation shall be a reasonable allocation of
the consideration paid by Purchaser using the residual method of allocation in
accordance with Section 1060 of the Code and the regulations thereunder.
Purchaser and Seller shall each file Internal Revenue Service Form 8594, and all
federal, state, local and foreign tax returns, for the taxable year that
includes the Closing Date in accordance with the Memorandum of Allocation.
Purchaser and Seller shall provide the other promptly with any other information
required to complete Form 8594. Such allocations have been made solely to
ascribe fair value to the Assets for tax purposes and any benefits deriving
therefrom shall not inure to any third party.
4. Lease of Skokie Facility. At the Closing Date, Purchaser shall lease Seller's
manufacturing facility located at 8100 North Monticello Avenue, Skokie, Illinois
(the "Skokie Facility") pursuant to the terms and conditions of a lease between
Seller and Purchaser (the "Skokie Lease") in substantially the form attached
hereto as Exhibit E (Form of Lease).
5. Assumption of Liabilities
5.1 Assumed Liabilities. Upon the Closing Date, pursuant to the execution
and delivery of such
<PAGE>
assignment and assumption agreements as necessary and proper, Purchaser shall
assume and thereafter pay, perform and discharge the following liabilities of
Seller (collectively, the "Assumed Liabilities"):
5.1.1 Assumption of Contracts and Permits. The obligations
and liabilities of Seller with respect to the terms and conditions of the
agreements and contracts assigned and transferred to Purchaser pursuant hereto,
including, without limitation, (i) the Certain Material Agreements listed on
Schedule 1.1 .3A (Certain Material Agreements), including the Assignment and
Assumption of Lease relating to the lease of the warehouse facilities located at
8141-49 North Lawndale Avenue, Skokie, Illinois (the "Lease Assignment"), (ii)
the Sales Orders and Purchase Orders listed on Schedule 1.1 .3B (Sales Orders &
Purchase Orders) and any other Sales Order and Purchase Order arising after 8:00
a.m. (Chicago time) on October 30, 1995 and (iii) the Permits listed on Schedule
1.1.6 (Permits), in each such case, that are assigned to Purchaser hereunder or
with respect to which Seller provides the benefits thereof to Purchaser;
5.1.2 Expressly Assumed Liabilities. Those liabilities of
Seller set forth on Schedule 5.1.2
(Assumed Liabilities) attached hereto;
5.1.3 Historical Warranty Obligations. Subject to any
obligations of Seller arising pursuant to Section 10.5 hereof, the repair and
warranty obligations of Seller for Koidwave Products;
5.1.4 Certain Employee Matters. All obligations or
liabilities arising from or relating to
the obligations and liabilities assumed or otherwise accepted by Purchaser
pursuant to Section 9.2 hereof;
5.1.5 Potential Carleton-Stuart and KCC Disputes.
All obligationsandliabilities arising
from or relating to the operation of the Koldwave Business or the ownership or
operation of the Assets after
8:00 a.m. (Chicago time) on October 30, 1995;
5.1.6 Ordinarv Course Liabilities. All obligations or
liabilities of Seller arising out of or
relating to the operation of the Koidwave Business or the ownership or operation
of the Assets after 8:00 a.m.
(Chicago time) on October 30, 1995.
5.2 Other Liabilities. Purchaser shall discharge the liabilities
of Seller required to be assumed or
disch&ged by Purchaser pursuant to or under Sections 4 and 9.2 hereof.
5.3 Limits on Assumption. Except for the assumptions and discharges of
liabilities, obligations and debts of Seller described in Sections 5.1 and 5.2,
Purchaser shall not assume or discharge and is not assuming or discharging any
liabilities, obligations and commitments of Seller, whether fixed or contingent,
legal or equitable, mature or inchoate, written or oral, express or implied,
known or unknown, whether arising prior to or after the Closing Date. Seller
shall discharge any other liabilities pursuant to Section 10.1 hereof. Seller
acknowledges that Seller shall retain and discharge any liability (including any
withdrawal liability) and obligation of Seller arising at or prior to the
Closing out of or relating to the Multiemployer Plan described on Schedule
6.12A.
5.4 Assignment of Contracts and Rights. Notwithstanding anything in
this Agreement to the contrary, this Agreement shall not constitute an agreement
to assign or assume the agreements and contracts referenced in Section 1.1.3
hereof, including the Certain Material Agreements, Sales Orders or Purchase
Orders, or any claim, agreement, contract, license, lease, commitment or any
claim or right or any benefit
<PAGE>
arising thereunder or resulting therefrom or any of the Permits if the agreement
to assign or attempt to assign, without the consent of a third party, would
constitute a material breach thereof or in any way materially adversely affect
the rights of Purchaser or Seller thereunder. Until such consent is obtained, or
if an attempted assignment thereof would be ineffective or would affect the
rights of Seller thereunder so that Purchaser would not in fact receive all such
rights, Purchaser and Seller will cooperate with each other in any reasonable
arrangement designed to and, with respect to the assignment of the matters
referenced in the correspondence from Tecumseh Products Company to Seller dated
November 2, 1995 and Seller's correspondence to Tecumseh Products Company dated
November 9, 1995, Purchaser and Seller shall use their best efforts to provide
for Purchaser the benefits of, and to permit Purchaser to assume, insofar as
expressly set forth herein, stated liabilities under the agreements and
contracts referenced in Section 1.1.3 hereof, including the Certain Material
Agreements, Sales Orders or Purchase Orders, or any of the Permits, including
(where applicable) enforcement at the request and expense and for the benefit of
Purchaser of any and all rights of Seller against a third party thereto arising
out of the breach or cancellation thereof by such third party or otherwise. Any
transfer or assignment to Purchaser by Seller of any property or property
rights, any contract or agreement or any of the Permits which shall require the
consent or approval of any third party shall be made subject to such consent or
approval being obtained.
6. Representations and Warranties of Seller
Seller represents and warrants to Purchaser as of and including the
Closing Date as follows:
6.1 Corporate Existence. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois,
and Seller has flill power to own or lease its assets and properties and to
carry on the Koldwave Business as and where such business is now being
conducted.
6.2 Due Authorization and Enforceability. Seller has full power and
authority to execute and deliver this Agreement and the Bill of Sale, and the
other documents, instruments and agreements to be delivered on the Closing Date
(the Bill of Sale, Skokie Lease, Lease Assignment, the Assumption Agreement (as
defined below), any other documents evidencing the assignment and assumption of
liabilities and such other documents, instruments and agreements which shall be
executed by the applicable parties pursuant to this Agreement are collectively
referred to in this Agreement as the "Related Agreements"), and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Related Agreements to which Seller is a party by Seller
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate actions of Seller and no other
corporate action or proceeding on the part of Seller is necessary to authorize
the execution and delivery by Seller of this Agreement or such Related
Agreements, or the consummation by Seller of the transactions contemplated
hereby or thereby. This Agreement has been duly executed and delivered by
Seller, and this Agreement and the Related Agreements to which Seller is a party
(when executed and delivered at the Closing Date) are or will be legal, valid
and binding obligations of Seller, enforceable against Seller in accordance with
their terms.
6.3 No Conflicts. Except as set forth on Schedule 6.3 (Conflicts)
attached hereto, neither the execution and delivery of this Agreement or the
Related Agreements, nor the consummation of the transactions contemplated hereby
or thereby, nor the performance and compliance with the terms, conditions and
provisions of this Agreement or the Related Agreements will (i) conflict with or
violate any provision of the Articles of Incorporation or Bylaws of Seller, (ii)
conflict with or violate any law, rule, regulation,
<PAGE>
ordinance, order, writ, injunction, judgment or decree applicable to Seller or
by which any of the Assets are bound or affected, or (iii) conflict with or
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination or cancellation of, or accelerate the performance required
by or maturity of, or result in the creation of any Lien (as described below) on
any of the Assets pursuant to any of the terms, conditions or provisions of, any
note, bond, mortgage, indenture, permit, license, franchise, lease, contract or
other instrument or obligation to which Seller is a party or by which any of the
Assets are bound or affected; except those permitted by Section 6.7 below, and
in the case of (ii) or (iii) above, for such conflicts, violations, breaches,
defaults, terminations, cancellations and accelerations which in the aggregate
will not have a material adverse effect on the ability of Seller to consummate
the transactions contemplated by this Agreement or the operation of the Koldwave
Business.
6.4 Compliance with Laws. The operation of the Koldwave Business and
the use of the Assets by Seller comply in all respects with all applicable laws,
ordinances, rules, decrees, orders and regulations, including federal and state
environmental laws and regulations, except for such failures to comply which in
the aggregate will not have a material adverse effect on the Koidwave Business
and the Assets. Seller has obtained all necessary permits, licenses,
certificates, exemptions, orders and approvals from and has filed all required
and due notices with federal, state and local governmental bodies that are
required by applicable law for the use of the Assets and in order to operate the
Koidwave Business, as presently operated, except to the extent that failure to
so obtain would not have a material adverse effect on the Koldwave Business as
previously conducted by Seller, all of which are valid and effective on the
Closing Date and, to the extent permitted by the terms thereof, will be assigned
and transferred to Purchaser in accordance with this Agreement (and, to the
extent not assignable or transferable, to Seller's knowledge no condition exists
with respect to the Koldwave Business that would materially impair the ability
of Purchaser to obtain such permit, license, certificate, exemption, order or
approval> and all due and payable payments, fees and costs thereof have been
paid in full to the Closing Date. Seller has not received notice of any
violations of any laws or regulations, or, except for such that would not have a
material adverse effect on the Koldwave Business, any contracts with respect to
the operation of the Koldwave Business or any of the Assets.
6.5 Financial Statements. Seller has delivered to Purchaser copies of the
audited consolidated financial statements of Seller as of and for the years
ended September 30, 1993 and September 30, 1994 and copies of unaudited
consolidated financial statements for the eleven-month period from October ~,
1994 to August 31, 1995 (the "August Financial Statements") (all of which, with
any footnotes thereto, are collectively referred to herein as the "Financial
Statements"). Except as otherwise indicated therein, the Financial Statements
have been prepared on a consistent basis throughout the indicated periods
(except for footnote disclosures and year-end adjustments) and fairly and
accurately present the fmancial condition and results of operations of Seller as
of the dates and for the relevant periods indicated (subject to year-end
adjustments in the case of the August Financial Statements). To Seller's
knowledge, Seller has no debts, obligations or material liabilities, absolute,
fixed, contingent or otherwise, of any nature whatsoever, whether due or to
become due, except as (i) disclosed on the balance sheet as of August 31, 1995
or (ii) have arisen in the ordinary course of the Koldwave Business.
6.6 All Necessary Assets. Except Tor the real property to be leased to
Purchaser pursuant to the Skokie Lease and except for such assets as are not
material to any product line or the Koldwave Business, the Assets and the
Excluded Assets constitute all of the assets used in the Koldwave Business by
Seller and no asset which is reasonably necessary to the operation of the
Koldwave Business as presendy conducted is
<PAGE>
owned by any affiliate of Seller, as the term "affiliate" is defmed in Rule 144
adopted under the Securities Act of 1933.
6.7 Title to Assets. Seller has good and marketable title to the
tangible assets included in the Assets transferred hereunder and, upon
consummation of the transactions contemplated by this Agreement, including
execution and delivery of the Bill of Sale or other documents of transfer as
required, Purchaser will acquire title to the tangible assets included in the
Assets, free and clear of all mortgages, pledges, liens, security interests,
assignments, conditional sales agreements, encumbrances, claims or charges of
any kind ("Liens"), except (i) as disclosed on Schedule 6.7 (Liens) attached
hereto and (ii) for Liens created by Purchaser. Seller's title is sufficient to
permit the use of the Assets as currently used by Seller in the Koldwave
Business. As of the Closing Date, none of the Assets is or, as a result of
actions taken prior to the Closing (as defined below), will be, subject to any
commitment or other arrangement for its sale or use by third parties except
Linder the agreements and contracts assigned and transferred to Purchaser
pursuant to Section 1.1.3 hereof, including the Certain Material Agreements
disclosed on Schedule 1.1 .3A (Certain Material Agreements).
6.8 Condition of Machinery and Equipment. Except as set forth on
Schedule 6.8 (Condition of Machinery & Equipment) attached hereto, the Machinery
and Equipment as set forth on Schedule 1.1.1 (Machinery & Equipment) is in good
operating condition and repair, ordinary wear and tear excepted, and is
reasonably satisfactory for the purpose for which such assets are being used.
6.9 Condition of Inventorv. The parties hereto acknowledge and agree that the
Inventory listed on Schedule 6.9 (Inventory) represents the Inventory acquired
by Purchaser hereunder.
6.10 No Changes. Except as disclosed and set forth on Schedule 6.10
(Changes), since Augssst 31, 1995, Seller has conducted its business only in the
ordinary course in conformity with past practice. Without limiting the
generality of the foregoing, except as disclosed on Schedule 6.10 (Changes),
since August 31, 1995, there has not been:
(a) any adverse change in the aggregate financial condition,
assets, liabilities, net worth or business of Seller except changes in the
ordinary course of business, and changes which, individually or in the
aggregate, have not been materially adverse to the Assets or the Koldwave
Business;
(b) any damage, destruction, loss or claim, whether or
not covered by insance, materially
adversely affecting the Assets;
(c) any material Lien imposed on any of the Assets other
than Liens to be discharged at
or prior to the Closing;
(d) any strike, organized walkout, or material labor
dispute at the Skokie Facility or, to
Seller's knowledge, threat thereof;
(e) except for the $157,624.75 bonus payments made to
employees on November 15, 1995, which amount has been deducted from the Purchase
Price pald to Seller, any increase in the salaries or other compensation payable
or to become payable to, or any advance or loan to, any officer, employee or
consultant of Seller or any increase in or any addition to other benefits
(including without limitation any
<PAGE>
bonus, profit sharing, pension or other plan) to which any of its officers,
employees or consultants may be entitled, or any payments to any pension,
retirement, profit sharing, bonus or similar or other plan, except (i) payments
in the ordinary course of business and consistent with past practice, (ii)
payments made in connection with the transactions contemplated by this Agreement
or expenses incurred in connection therewith, and (iii) any other payment of any
kind to (or on behalf of) any such officer, employee or consultant of base
compensation and reimbursement for business expenses in the ordinary course of
business and consistent with past practice;
(f) any cancellation or waiver of any right material to the
operation of the Koidwave Business or any cancellation or waiver of any debts or
claims of substantial value owed to Seller, relating to the Koidwave Business
and included in the Assets or the Assumed Liabilities;
(g) any sale, transfer or other disposition of any Assets
with a value of more than
$25,000, except sales of Inventory in the ordinary course of business;
(h) any change in Seller's relationship with, or any loss of
any representative, distributor or customer of Seller in the prior twelve-month
period which has had, or is reasonably expected to have, a material adverse
effect on Seller or the Koldwave Business;
(i) any write-off as uncollectible of any Receivables of
Seller of more than $10,000 in the aggregate, or any change in the method of
payment or the timing of payment of Receivables having an aggregate face amount
of more than $10,000;
(j) any creation, occurrence, assumption or guaranty by
Seller of any obligations or liabilities (whether absolute, accrued, contingent
or otherwise) and whether due or to become due, except in the ordinary course of
business, assumed by Purchaser hereunder;
(k) any sale, transfer or lease of any Assets (whether real,
personal or mixed, tangible or intangible) to, or entering into of any
agreement, arrangement or transaction with respect thereto with, any affiliate
(as defmed above);
(l) any new material contract or agreement related to the
operation of the Koldwave Business of Seller other than those entered into in
the ordinary course of business;
(m) any disposition of or failure to keep in effect any
rights in, to or for the use of any of the Intellectual Property or any
unprotected disclosure to any person other than an employee of Seller, or other
disposal of any Irtellectual Property;
(n) any variance in the levels of Inventory which
materially differs from the levels
customarily maintained; or
(o) any delay of payment of any account payable or other
liability assumed by Purchaser hereunder beyond the later of its due date or the
date when such liability would have been paid in the ordinary course of business
consistent with past practice.
<PAGE>
In addition, since 8:00 am. October 30, 1995, Seller has not
made any payments on any bank debt or other long-term indebtedness that is not
assumed by Purchaser hereunder, other than the $3,437.50 mortgage payment made
on November 1, 1995, which amount has been deducted from the Purchase Price paid
to Seller.
6.11 No Defective Products. Except as set forth on Schedule 6.11 (Defective
Products) attached hereto, to Seller's knowledge, the Koidwave Products
previously manufactured and sold by Seller have, where necessary by law,
regulation, practice or policy, been qualified under and comply in all material
respects with the specifications and requirements of applicable rating and
compliance agencies and safety standards (including those relating to labels,
rating plates, cautions and warnings), are merchantable and fit for the purpose
intended, and are not defective in design, manufacture or operation; provided,
however, that the parties acknowledge that no third party testing authority
exists with respect to certain of Seller's products and, accordingly, aspects of
certain ratings have been approximated by Seller.
6.12 Emplovee Benefit Plans.
(a) With respect to all employees and former employees of
Seller, neither Seller nor any of its subsidiaries or affiliates (as such term
is defined in Sections 414(b), (c), (m) and (o) of ERISA) presently malntains,
contributes to or has any liability under any flinded or tinflinded medical,
health or life insurance plan or. arrangement for present or future retirees or
present or future terminated employees except as required by the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") or other
applicable laws.
(b) Except as set forth on Schedule 6. 12A (Multiemployer
Plans), neither Seller nor any of its subsidiaries or affiliates (as such term
is defined in Sections 414(b), (c), (m) and (o) of ERISA) presendy maintains,
contributes to or has any liability (including current or potential withdrawal
liability) with respect to any 'multiemployer plan" as such term is defined in
Section 3(37) of ERISA that is subject to Subtitle E of Title IV of ERISA.
(c) Neither Seller nor any of its subsidiaries or affiliates
(as such term is defined in Sections 414(b), (c), (m) and (o) of ERISA) is a
party to any employment agreement, whether written or oral, or agreement with
change in control or similar provisions, or collective bargaining agreement or
contract with any labor union relating to any employees or former employees of
Seller except as set forth in Schedule 6.12B (Certain Labor Agreements) hereof.
(d) There has been no act or acts which would result in a
disallowance of a deduction or the imposition of a tax to Seller pursuant to
Section 4980B, or with regard to plan years beginning before December 31, 1988,
Section 162(i) of the Internal Revenue Code as in effect immediately prior to
the enactrnent of the Technical and Miscellaneous Revenue Act of 1988, or any
regulations promulgated thereunder, whether final, temporary or proposed.
6.13 Employment Activity. Seller is in compliance with all applicable
laws respecting employment and employment practices, employment discrimination,
terms and conditions of employment and wages and is not engaged in any unfalr
labor practice, except where failure to comply would not have a material adverse
effect on the Koldwave Business. To Seller's knowledge, there is no unlawful
labor practice charge or complaint against Seller pending before the National
Labor Relations Board or any other governmental agency
<PAGE>
arising out of Seller's activities; to Seller's knowledge, there is no labor
strike or labor disrurbance pending or threatened against Seller nor is any
grievance currently being asserted thereat; and, during the three years, Seller
has not experienced a work stoppage or other material labor difficulties thereat
except as set forth on Schedule 6.13 (Employment Activity) attached hereto.
6.14 Off-Site Assets. All tangible Assets held at any location other
than the Skokie Facility or the facilities located at 8141-49 North Lawndale
Avenue, Skokie, Illinois are described on Schedule 6.14 (Off- Site Assets),
which schedule includes a description of each of such assets, its type (whether
finished goods or in-process inventory, machinery and equipment or whatever),
the name and address of the vendor or customer holding such assets and, if such
asset is held pursuant to an agreement, a copy or description of such agreement
will be attached to the schedule.
6.15 Skokie Facility Agreements. Any service contracts to which
Seller is a party now applicable to or affecting the Skokie Facility are set
forth on Schedule 1.1 .3A (Certain Material Agreements).
6.16 Absence of Litigation. Except as set forth on Schedule 6.16
(Litigation) attached hereto, there are no judgments or other judicial or
administrative orders outstanding against Seller or affecting the Assets, nor is
there any action, suit or proceeding at law or in equity or by or before any
governmental or administrative instrumentality or other agency now pending or,
to the knowledge of Seller, threatened against or affecting Seller or any of the
Assets which, if adversely determined, would materially impair the right or
ability of Seller to carry on the Koldwave Business as it is now conducted.
6.17 Agreements. Schedule 6.17 (Executory Contracts) attached hereto
is an accurate and complete list of all of Seller's written, material executory
contracts of any kind that are not terminable in less than or upon 30-day
notice. Schedule 1.1 .3A (Certain Material Agreements) and Schedule 6.17
(Executory Contracts) together list each agreement, other than the Skokie Lease,
material to the operation of the Koldwave Business. Except as set forth on
Schedule l.l.3A (Certain Material Agreements), each of the Certain Material
Agreements is valid and effective in accordance with its terms. Except as set
forth on Schedule 6.17 (Executory Contracts), to Seller's knowledge, no partyto
any of the contracts listed thereon (including Seller) is in material default
thereunder and no event has occurred which with the passage of time or the
giving of notice or both would constitute a material default thereunder. True
and correct copies of the Certain Material Agreements have been supplied or made
available to Purchaser by Seller, appropriately identified in order that such
Certain Material Agreements can be identified on Schedule 1.1 .3A (Certain
Material Agreements). An "executory contract" is herein defined as a contract or
agreement as to which not all of the obligations of Seller have been performed.
6.18 Trademarks, Patents, Licenses. Set forth on Schedule 1.1.4
(Registered Rights) are those filed or registered items of Intellectual
Property, including all patents, patent applications, trademarks, service marks,
trade names, licenses, copyrights and copyright applications, currently used in
the operation of the Koldwave Business, none of which has been held or
stipulated to be invalid in any litigation which has been concluded and the
validity of none of which has been questioned in any litigation currently
pending or which to the best knowledge of Seller, has been threatened. Seller
owns or possesses and will have conveyed to Purchaser at the Closing Date all
Intellectual Property used in the Koldwave Business, except for such
Intellectual Property that is not material to the Koldwave Business as currently
conducted. Such rights do not, to the best knowledge of Seller, infringe any
patent or other rights owned by others, nor has Seller received any notice of
conflict thereof with the asserted rights of others.
<PAGE>
6.19 Related Partv Transactions. Except for any arrangements reflected on the
Financial Statements or described on Schedule 6.19 (Related Party Transactions)
and except for the Skokie Lease, there are no arrangements, obligations or
agreements affecting the Assets, Assumed Liabilities or the Koldwave Business
between Seller and any director or stockholder or any affiliate thereof as such
term is defined in Rule 144 under the Securities Act of 1933.
6.20 Taxes. Seller has filed (or will have filed, if due after the
date hereof and by the Closing Date) all federal, state, foreign, county, local
and other tax and information returns (including Forms 1099 and any Schedules),
reports and declarations which it is required by law to file on or prior to the
Closing Date (taking into account any applicable extension of time for filing)
(the "Tax Returns") and has paid all income or franchise, payroll, withholding,
gross receipts, capital stock, ad valorem, personal property, real estate,
excise, occupation, sales, use, mercantile, business and occupation or other
taxes, assessments and other governmental charges due in respect of such Tax
Returns (including any interest and penalties related thereto) (collectively the
"Taxes"), except to the extent that any such Taxes are being contested in good
falth and as to which adequate reserves have been set aside. The accrual for
Taxes in the Financial Statements are adequate to cover all liabilities for
Taxes of Seller for all periods ending on or before August 31, 1995. Since
August 31, 1995, Seller has not incurred any Taxes other than Taxes incurred in
the ordinary course of business. There are no Liens for any Taxes upon the
Assets, except Liens for current Taxes not yet due. All Taxes that Seller was or
is required by law to withhold or collect, have been and are being withheld or
collected by it and have been or are being held by it for such payment. Except
as disclosed on Schedule 6.20 (Taxes), no audit, action, suit, investigation,
clalm, assessment or examination with respect to Taxes is now pending or
currently in progress with respect to Seller. Except as disclosed on Schedule
6.20 (Taxes), Seller has not waived any restrictions on assessment or collection
of Taxes or executed a waiver or consented to the extension of any statute of
limitations for federal income or other Tax liability that remalns outstanding.
Seller is not a "foreign person" within the meaning of the Code and the
regulations promulgated thereunder.
6.21 Environmental Matters. To Seller's knowledge, Seller has all
permits, licenses, and other authorizations which are required as of the date
hereof and the Closing Date for the operation of the Koldwave Business under
federal, state and local laws relating to pollution and protection of the
environment, including, without limitation, the Resource Conservation and
Recovery Act of 1976 ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Clean Air Act, the Clean
Water Act, the Toxic Substances Control Act and all other laws relating to the
maintenance, record-keeping and disposition of any underground tanks and
relating to emissions, discharges, releases or threatened releases, of
pollutants, contaminants, petroleum oils, chemicals or industrial, hazardous or
toxic materials or waste into the environment (including, without limitation,
ambient water, surface water, groundwater, land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, petroleum
oils, chemicals or industrial, hazardous toxic materials or waste or any
applicable regulation, law, rule or ordinance issued, entered, promulgated or
approved thereunder (the "Environmental Laws"). To Seller's knowledge, with
respect to the Koldwave Business, Seller is in compliance in all material
respects with all terms and conditions of the required permits, licenses and
authorizations necessary under the Environmental Laws, and is also in compliance
in all material respects with all other applicable limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws as in effect on the date hereof.
To Seller's knowledge, there is no pending civil or criminal litigation, notice
of violation or administrative proceeding arising out of the business or
activities of Seller and/or its shareholders or affiliates, including without
limitation any pending litigation, notice or proceeding relating in any way to
the Environmental Laws
<PAGE>
(including notices, demands, letters or claims under RCRA, CERCLA and similar
foreign, state and local laws). To Seller's knowledge, there is no threatened
civil or criminal litigation, notice of violation or administrative action
arising out of the Koldwave Business, including without limitation, any
threatened litigation, notice or proceeding relating in any way to the
Environmental Laws. Except as disclosed on Schedule 6.21 (Environmental
Matters), Seller does not have knowledge of any past or present events,
conditions, circumstances, practices, incidents or actions which may give rise
to any legal liability, or otherwise form the basis of any claim, action, suit,
proceeding, hearing or investigation against or involving Seller arising out of
any violation or alleged violation of the Environmental Laws or any
circumstances which could reasonably be expected to interfere with or prevent
continued compliance with the Environmental Laws in effect on the date hereof or
the Closing Date. To Seller's knowledge, no hazardous substances, pollutants,
petroleum oils, contaninants or hazardous waste including, but not limited to,
asbestos, "PCB's" and urea formaldehyde are contained in or have been, from any
source whatsoever, generated, released, spilled, stored or deposited over,
beneath or on the Skokie facility, or on adjoining properties, by Seller, or, to
the best of Seller's knowledge, by any other person, except oniy such substances
as have been fully disclosed to Purchaser on Schedule 6.21 (Environmental
Matters) attached hereto.
6.22 Approvals and Consents. Except as set forth on Schedule 6.22 (Approvals &
Consents), no consent, authorization or approval of, or waiver or exemption by,
or filing with any other person or entity is required in connection with the
execution, delivery or performance of this Agreement by Seller or the
consummation by Seller of the transactions contemplated hereby except such as
will be terminable at will or upon 31 or less days advance notice.
6.23 Insurance. Attached hereto as Schedule 6.23 (Insurance) is a
complete and correct list of all policies of insurance of which Seller is the
owner, insured or beneficiary, covering any of the Assets for any policy period
after September 30, 1994. Such Schedule indicates for each policy the carrier,
names of all insured parties thereunder (including the named insured and
additional insured parties, if any), risks insured, the amounts of coverage,
deductibles and retentions, if any, and any pending claims thereunder. Except as
set forth on Schedule 6.23 (Insurance), all premiums under such policies for
periods through the date hereof have been paid.
No notice of cancellation or non-renewal with respect to or disallowance of any
claim under any such insurance policy has been received by Seller.
6.24 Receivables. Except as set forth on Schedule 6.24 (Certain Receivables),
the Receivables being conveyed to Purchaser by Seller hereunder all as set forth
on Schedule 1.1.5 (Receivables) are owned by Seller free and clear of all claims
or encumbrances and are not subject to counter-claims, set-offs, deductions or
additional requirements of performance by Seller. Such Receivables represent
bona fide claims which Seller has against debtors for sales or other charges
arising prior to 8:00 a.m. (Chicago time) on October 30, 1995. The Receivables
have not been billed and collected for a greater percentage of the total billing
than the percentage of the total materials and labor which have actually been
completed by Seller under purchase orders and contracts (i.e., Seller has not
billed and collected a greater percentage of the total contract price than the
percentage of completion achieved by Seller of the total work to be performed
and materials to be manufactured and procured under such purchase orders and
contracts).
6.25 Other Intangibles. The engineering drawings, bills of
material, manufacturing data, software
and data collection services and other intangibles conveyed to Purchaser as
described in Section 1.1.4 are all
<PAGE>
of such items currently used in the Koldwave Business that are in the possession
of Seller.
6.26 Warranties. Set forth on Schedule 6.26 (Warranties) are the
express warranty terms and disclaimers for all forms of warranties given (or
extended warranties sold) by Seller during the one-year period prior to the date
of this Agreement with respect to Koldwave Products sold or services related
thereto performed by Seller. Warranty terms and disclaimers given (or extended
warranties sold) by Seller during the four-year period immediately preceding
such one-year period are substantially similar in substance to the warranty
terms and disclaimers set forth on Schedule 6.26 (Warranties). To the best of
Seller's knowledge, except as set forth on Schedule 6.26 (Warranties), Seller
has not sold any Koldwave Products or performed any services related thereto
which fail to comply with any express or implied warranties or guarantees of
Seller applicable to. such Koldwave Products or services related thereto, as set
forth on the Schedule 6.26 (Warranties) and as required by applicable federal
and state statutes and regulations.
6.27 Customers and Suppliers. Set forth on Schedule 6.27 (Customers &
Suppliers) attached hereto is (i) a list of the names and addresses of the ten
largest customers and the ten largest suppliers (measured by dollar volume of
purchases or sales) of the Koldwave Business during the year ended September 30,
1994, and for the year ended September 30, 1995, and (ii) copies of Seller's
standard forms of purchase order for inventory and other supplies and sales
contracts for Koldwave Products. Except as set forth on Schedule 6.27 (Customers
& Suppliers), there exists no actual or, to the knowledge of Seller, threatened
termination, cancellation or material limitation of, or material modification
in, the business relationship of Seller with any customer or supplier listed on
Schedule 6.27 (Customers & Suppliers).
7. Representations and Warranties of Purchaser.
Purchaser represents and warrants to Seller as of the Closing Date as
follows:
7.1 Cornorate Existence. Purchaser is a corporation organized,
validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania. Purchaser has full
power and authority to own
its assets and properties and to carry on its business as and where such
business is now being conducted.
7.2 Due Authorization and Enforceability. Purchaser has full corporate
power and authority to execute and deliver this Agreement and the Related
Agreements to which it is a party, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Related Agreements to which it is a party by Purchaser, and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action of Purchaser and no other corporate
action or proceeding on the part of Purchaser is necessary to authorize the
execution and delivery by Purchaser of this Agreement or the Related Agreements
or the consummation by Purchaser of the transactions contemplated hereby or
thereby. This Agreement has been duly executed and delivered by Purchaser, and
this Agreement and the Related Agreements to which it is a party, when executed
and delivered at the Closing Date, are or will be legal, valid and binding
obligations of Purchaser, enforceable against Purchaser in accordance with their
terms.
7.3 No Conflicts. Neither the execution and delivery of this Agreement
or the Related Agreements to which Purchaser is a party, nor the consummation of
the transactions contemplated hereby or thereby, will (i) conflict with or
violate any provision of the Articles of Incorporation or Bylaws of Purchaser,
(ii) conflict with or violate any law, rule, regulation, ordinance, order, writ,
injunction, judgment or decree
<PAGE>
applicable to Purchaser or by which any of its properties or assets are bound or
affected or (iii) conflict with or result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination or cancellation of,
or result in the creation of any Lien on any of its assets or properties
pursuant to any of the terms, conditions, or provisions of, any note, bond,
mortgage, indenture, permit, license, franchise agreement, lease, contract or
other rnntrument or obligation to which Purchaser is a party or by which any of
Purchaser's properties or assets are bound or affected; except, in the case of
(ii) or (iii) above, for such conflicts, violations, breaches, defaults,
terminations, cancellations and accelerations which in the aggregate will not
have a material adverse effect on the ability of Purchaser to consummate the
transactions contemplated by this Agreement or the Related Agreements.
7.4 Approvals and Consents. No consent, authorization or approval of'
or waiver or exemption by, or filing with any other person or entity is required
in connection with the execution, delivery or performance of this Agreement by
Purchaser or the consummation by Purchaser of the transactions contemplated
hereby.
8. Survival of Representations and Warranties. The representations and
warranties made in this Agreement or pursuant hereto by Seller and Purchaser
shall, for a period of twenty (20) months from the Closing Date, survive the
execution and delivery of this Agreement and the Related Agreements and the
consummation and closing of the transactions contemplated hereby and none shall
merge into any closing document.
9. Covenants of Purchaser
9.1 Retention of Records. Purchaser hereby covenants that following the
Closing Date, Purchaser will retain, at Purchaser's sole expense, all material
Books and Records of Seller relating to the operation of the Koldwave Business
prior to the Closing Date. Purchaser will afford to Seller, its counsel and
accountants, during normal business hours, reasonable access to such Books and
Records of Seller to the extent that such access may reasonably be required to
facilitate the preparation by Seller or any of its stockholders or affiliates of
such tax returns as they may be required to file with respect to Seller and the
investigation, litigation and final disposition of any claims which may be made
against Seller or any of its stockholders or affiliates or with respect to which
indemnification is sought against Seller or any of its stockholders or
affiliates. Purchaser will give written notice to Seller prior to disposing,
destroying or moving to a different facility any of the Books and Records and
will provide Seller with a reasonable period of time, but not less than 30 days,
in which to remove such Books and Records (if Purchaser proposes to dispose of
or destroy such Books and Records) or to make copies thereof. Any relocated
Books and Records shall remain subject to this Section 9.1. For purposes of this
Section 9.1, the term "material Books and Records" includes, without limitation,
all Books and Records required to facilitate the preparation of the tax returns
of Sellers or any of its stockho1ders or affiliates and all Books and Records
set forth on Schedule 9.7 (Financial Information) attached hereto.
9.2 Employees.
9.2.1 Potential Emplovees. Effective as of the Closing Date,
Purchaser or an agent or affiliate of Purchaser shall offer to all
non-bargaining unit personnel now working at the Skokie Facility, the names and
employment status of each of which are set forth on Schedule 9.2.1 (Potential
Employees) attached hereto (collectively, the "Potential Employees"), either (i)
employment
<PAGE>
at such Potential Employee's salary and benefit level as of the date of the
Closing Date (any Potential Employee who accepts any such offer of employment
and who commences employment upon the terms of such offer at the Closing Date
shall be a "Transferred Employee") or (ii) a temporary term of employment
pursuant to a written employment agreement to be entered into between Purchaser
and any employee to whom such temporary employment is offered (any Potential
Employee who executes any such written employment agreement shall be a
"Temporary Employee").
9.2.2 Costs of Separation. Purchaser shall be responsible for
and assumes (i) with respect to each Transferred Employee and each Temporary
Employee, the cost of the severance and separation benefits required under
Seller's severance policy, a copy of which is included in Schedule 9.2.2
(Severance Terms), (ii) except to the extent expressly limited in Schedule 9.2.2
(Severance Terms) by specific reference to this Section 9.2.2, any and all
payments due or obligations (x) arising under or as a result of the termination
resulting from the transaction contemplated hereby or (y) following the Closing
of any employee of Seller, including the severance and termination payments to
be made to certain employees of Seller as referenced
in such Schedule 9.2.2 (Severance Terms), and (iii) any duties,
obligations or payments under the WARN Act or similar acts.
9.2.3 Union Issues. For those employees of Seller currently in
the bargaining unit under contract with Local 743 of the Warehouse, Mail Order,
Office, Technical and Professional Employees Union, affiliated with the
International Brotherhood of Teamsters at the Skokie Facility (the "Union"),
Seller and Purchaser will advise the Union of the transaction under this
Agreement and Purchaser's acquisition of the Assets promptly after the Closing
Date. Upon the Closing Date, Purchaser will, and Purchaser has advised the Union
that Purchaser will, (i) recognize the Union as the sole bargaining agent for
the bargaining unit employees, (ii) offer employment to all bargaining unit
employees then employed by Seller, and (iii) implement and abide by the terms of
the Labor Contract and Working Agreement dated April 9, 1993 (the "Union
Contract") during the term of such Union Contract, so long as the Union
continues to conduct good faith bargaining and negotiations and otherwise acts
in good faith to secure a new and acceptable contract or extension to Purchaser.
Purchaser agrees to indemnify and save and hold harmless Seller, its
shareholders, directors, officers, affiliates and agents from and against any
and all claims, losses, damages, costs or expenses of any kind or character,
including attorneys' fees, arising out of or resulting from Purchaser's failure
to comply with any of the provisions of this Section 9.2.3 or any of Seller's
obligations or liabilities arising out of or related to the Union Contract after
the Closing.
9.2.4 Notice of Termination. For so long as Purchaser
operates out of the Skokie Facility, Purchaser will provide to each Transferred
Employee and to each Union employee at least six (6) months advance notice of
any termination of Purchaser's operations at the Skokie Facility or of any
termination or salary or wage reduction affecting such Transferred Employee,
unless such termination or salary or wage reduction is "for cause" with respect
to such Transferred Employee. The term "for cause" is deemed for purposes of
this Section 9.2.4 to include, but is not limited to, participation by such
Transferred Employee in a major organized work stoppage or slowdown or material
sabotage of the assets of the Koldwave Business.
9.3 Discharge of Liabilities. Purchaser will pay and discharge in due
course after the Closing, and hold Seller harmless from, all liabilities and
obligations related to and arising from the Assumed Liabilities and all
liabilities and obligations relating to and arising from the ownership and
operation of the Assets and the Koldwave Business after the Closing.
<PAGE>
9.4 Collection of Excluded Assets. Purchaser shall remit to Seller any
monies and receivables paid to Purchaser in respect of any Excluded Assets
within five (5) business days after receipt thereof. Purchaser shall take all
reasonable actions, including the giving of timely notices as reasonably
requested by the other party, to assure that the covenants set forth in this
Section 9.4 are faithfully and timely fulfilled.
9.5 Continued Benefits. Purchaser shall allow, at Purchaser's sole
expense and for so long as it operates the Koldwave Business at the Skokie
Facility, David Sniader, Laura Sniader, Barb Sniader North, Steve North and
Dustianne North to participate in, and shall continue to include such
individuals in, the health, dental and life insurance plans currently maintained
by Seller or in a reasonably equivalent successor plan purchased or maintained
by Purchaser at reasonably comparable costs and, upon the termination of such
benefits, Purchaser shall make available COBRA benefits to each such individual.
9.6 Non-Competition and/or Services Agreements. Purchaser shall make an
aggregate payment of One Million Dollars ($1,000,000.00) to the shareholders of
Seller pursuant to the terms of non-competition and/or services agreements
substantially in the forms attached as Exhibit F (Forms of
Non-Competition/Services Agreements), in consideration for the shareholders of
Seller agreeing therein not to compete with the Koldwave Business for the
periods and to the extent provided therein and to provide such services, if any,
as required thereby.
9.7 Financial and Tax Work Purchaser shall provide to Seller the
financial statements and tax return and payroll information identified on
Schedule 9.7 (Financial Information) attached hereto on the dates specified on
such Schedule. Purchaser agrees, at Purchaser's sole expense, to offer to engage
Peter Garvey for a period beginning immediately following the Closing and
continuing for at least six (6) weeks thereafter and with salary and benefits
substantially identical to Mr. Garvey's salary and benefits immediately prior to
the Closing and to make Mr. Garvey available to Seller to assist in the
preparation of any tax returns, financial statements or other documentation of
Seller, its stockholders or affiliates. In the event Mr. Garvey does not accept
such engagement offer or terminates such engagement prior to the conclusion of
the preparation of such documentation, Purchaser shall, at Purchaser's sole
expense, make available personnel to assist Seller in a manner substantially
equivalent to the assistance to have been provided by Mr. Garvey. Purchaser
acknowledges that the timely delivery of the information on Schedule 9.7
(Financial Information) is vital to Seller and agrees to use all reasonable
efforts to make such information available to Seller on a timely basis. If
Purchaser falls, as a result of action or inaction of Purchaser or its agents or
employees, to provide such information within ten (10) business days of the date
specified on Schedule 9.7 (Financial Information), Purchaser agrees to pay a
liquidated damages amount of $100 per day for day's delay.
10. Covenants of Seller
10.1 Discharge of Liabilities. Seller will pay and discharge in due
course after the Closing, and hold Purchaser harmless from, all liabilities and
obligations of Seller relating to and arising from the ownership and operation
of the Assets and the Koldwave Business prior to the Closing which are not
assumed by Purchaser as set forth in Section 5 hereof.
10.2 Collection of Receivables. For period of at least twelve (12)
months after the Closing Date, Seller shall remit to Purchaser any monies and
receivables paid to Seller in respect of the Inventory, the Receivables or other
Assets purchased by Purchaser hereunder within five (5) business days after
receipt
<PAGE>
thereof. Seller shall take all reasonable actions, including the giving of
timely notices as reasonably requested by Purchaser to assure that the covenants
set forth in this Section 10.2 are faithfully and timely fulfilled.
10.3 Taxes.
10.3.1 Seller shall be liable for and shall pay all Taxes (whether assessed or
unassessed) applicable to its business, including the Koidwave Business and the
Assets, in each case attributable to taxable periods (or portions thereof)
ending on or prior to the Closing Date other than any liabilities for Taxes set
forth in Schedule 5.1.2 (Assumed Liabilities) and assumed by Purchaser pursuant
to Section 5.2. Purchaser shall be liable for and shall pay all Taxes (whether
assessed or unassessed) applicable to the Koidwave Business or the Assets that
are attributable to taxable periods (or portions thereof) beginning after the
Closing Date. For purposes of this Section 10.3, any taxable period beginning
before and ending after the Closing Date shall be treated as two partial
periods, one ending on the Closing Date and the other beginning after the
Closing Date, except that Taxes (such as property Taxes) imposed on a periodic
basis shall be allocated on a daily basis.
10.3.2 Notwithstanding Section 10.3.1, any sales Tax, use
Tax, property transfer or gains Tax, documentary stamp Tax or similar Tax
attributable to the sale or transfer of the Koidwave Business or the Assets
shall be paid by Purchaser. Purchaser and Seller will timely sign and deliver
such certificates or forms as may be necessary or appropriate to establish an
exemption from (or otherwise reduce), or make a report with respect to, such
Taxes.
10.3.3 Seller or Purchaser, as the case may be, shall provide
reimbursement for any Tax paid by one party all or a portion of which is the
responsibility of the other party in accordance with the terms of this Section
10.3. Within a reasonable time prior to the payment of any said Tax, the parry
paying such Tax shall give notice to the other party of the Tax payable and the
portion which is the liability of each party, although failure to do so will not
relieve the other party from its liability hereunder.
10.3.4 Notwithstanding anything to the contrary in this
Agreement, the obligations of the parties set forth in this Section 10.3 shall
be unconditional and absolute and shall remain in effect without limitation as
to time.
10.4 Bulk Sale. Seller hereby agrees to indemnify and save and hold
harmless Purchaser, its shareholders, directors, officers, affiliates and agents
from and against any and all claims, losses, damages, costs or expenses of any
kind or character, including attorneys' fees, other than those expressly assumed
by Purchaser, arising out of or resulting from failure to comply with the
"Uniform Commercial Code - Bulk Transfers" of the State of Illinois or of such
other state, provinces or governmental unit as to which such act or equivalent
act applies or may apply to the transactions contemplated by this Agreement.
10.5 Certain Warrantv Service. For the twelve (12) month period from
the Closing Date through November 15, 1996, if the aggregate direct,
out-of-pocket costs attributable to or arising out of warranty claims actually
paid by Purchaser during such twelve (12) month period (not including warranty
costs paid by Seller prior to the Closing or warranty costs paid or incurred by
Purchaser in connection with the Potential Carleton-Stuart Dispute) for Koldwave
Products sold prior to the Closing exceed $200,000, then Seller shall reimburse
Purchaser for fifty percent (50%) of such direct, out-of-pocket costs to the
extent in excess of such $200,000 amount; provided, however, that Seller shall
not be required to reimburse Purchaser for any such direct, out-of-pocket costs
unless and until Seller's portion of such direct, out-of~pocket costs
attributable to
<PAGE>
costs paid by Purchaser together with any Liabilities (as defined below) for
which Purchaser is entitled to indemnification pursuant to Article 14 hereof
exceeds, in the aggregate, $75,000, and then only to the extent in excess of
$75,000. Any amounts paid hereunder shall be included in and subject to the
maximum aggregate amounts to be paid pursuant to Section 14.4. Any amounts owed
by Seller as reimbursement as aforesaid shall be itemized and submitted to
Seller within sixty (60) days after the end of such twelve (12) month period,
and Seller shall promptly reimburse Purchaser upon its receipt of such claims.
Purchaser shall flirnish Seller with such documents and other records as Seller
shall reasonably request in order to confirm any claim by Purchaser for
reimbursement pursuant to this section. In addition, within sixty (60) days
after the end of each calendar quarter included in such twelve (12) month
period, Purchaser shall provide Seller with a reasonably detailed report of any
warranty costs incurred or paid by Purchaser during such period relating to
Koldwave Products sold prior to the Closing.
10.6 Strategic Assistance in Potential KCC Dispute. During the twelve
month period immediately following the Closing, Seller shall, to the extent
reasonably requested by Purchaser and at Purchaser's sole expense, cooperate
with Purchaser with respect to any required resolutions or settlements by
Purchaser of the Potential KCC Dispute. Provided Purchaser is in compliance with
its obligations hereunder, Seller agrees not to communicate with any
unaffiliated third parties (other than Seller's shareholders, agents,
consultants and advisors) with respect to the Potential KCC Dispute except as
otherwise required by law.
11. Closing
11.1 Closing Date. The closing of the transaction contemplated by this Agreement
relating to the Koidwave Business (the "Closing19) shall be held on November 15,
1995, at the offices of Jones, Day, Reavis & Pogue, Chicago, Illinois at 10:00
a.m., local time, or at such other time and place as the parties may agree.
11.2 Closing Events. At the Closing, the parties shall do the
following with respect to the
Koidwave Business:
11.2.1 Seller shall execute and deliver to Purchaser the Bill
of Sale, substantially in the form attached hereto as Exhibit A (Form of Bill of
Sale).
11.2.2 There shall be executed and delivered to Purchaser
appropriate certificates of title or other documents of transfer or ti~e, duly
executed and, to the extent necessary, notarized, for any asset conveyed
hereunder as to which a title certificate other than the Bill of Sale is
appropriate.
11.2.3 Seller shall provide to Purchaser the consents set
forth on Schedule 11.2.3 (Consents) attached hereto.
11.2.4 Purchaser shall execute and deliver to Seller an
Assumption Agreement (the "Assumption Agreement"), substantially in the form
attached hereto as Exhibit F (Form of Assumption Agreement), and all documents
necessary for the assumption of the liabilities assumed by Purchaser pursuant to
Section 5.
11.2.5 Purchaser shall execute and deliver to Seller the Skokie Lease
substantially in the form of Exhibit D (Form of Lease).
<PAGE>
11.2.6 Purchaser and the shareholders of Seller shall execute
and deliver their respective non-competition and/or services agreements in
substantially the forms attached hereto as Exhibit F (Forms of
Non-Competition/Services Agreements).
11.2.7 Purchaser and Seller shall execute and deliver the
Assignment of Lease in form and substance satisfactory to the parties hereto.
11.2.8 Purchaser shall have received a written legal opinion
from counsel to Seller substantially in the form attached hereto as Exhibit G
(Form of Opinion of Counsel to Seller).
11.2.9 Seller shall have received a written legal opinion
from counsel to Purchaser substantially in the form attached as Exhibit H (Form
of Opinion of Counsel to Purchaser).
11.2.10 Seller shall have received from the Secretary of
Purchaser and Purchaser shall have received from the Secretary of Seller a
certificate setting forth, as to such party, the corporate resolutions
authorizing and approving the execution, delivery and performance of the
Agreement and the other documents to be executed by that party in connection
herewith, and a Good Standing Certificate, dated a date not more than five (5)
business days prior to the Closing Date, from the applicable Secretary of State
of such party's state of incorporation.
11.2.11 All other documents, certificates, instruments and
agreements necessary and proper to consummating the transactions contemplated
under this Agreement shall be executed and delivered by the parties as
appropriate.
11.2.12 Purchaser shall deliver the Initial Payment to Seller.
12. Further Actions. Upon the terms and subject to the conditions hereof, each
of the parties hereto agrees to act in good falth and to use its best efforts to
take or cause to be taken all actions and to do or cause to be done all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement, the Related Agreements and the other documents necessary to
close this transaction, and shall use its best efforts to obtain all necessary
walvers, consents and approvals and to effect all necessary registrations and
filings. In addition, Seller covenants and agrees that it will take all actions
and execute and deliver all documents, instruments and agreements necessary to
assist Purchaser in the removal of all filings and recordings of Liens
terminated by Seller or otherwise. At any time and from time to time after the
Closing Date, at the other party's reasonable request and without further
consideration, the parties shall cooperate in good faith and prompty execute and
deliver all such further instruments or documents and perform such other and
further acts as the other party may reasonably request in order to fully
conclude the transactions contemplated by this Agreement.
13. Amendment and Waiver
13.1 Amendment. This Agreement may be amended only by a writing
executed by the
authorized representatives of Purchaser and Seller.
13.2 Waiver. Any party hereto may (i) agree to extend the time for
the performance of any
of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the
<PAGE>
representations and warranties contained herein or in any document delivered
pursuant hereto or (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of the party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by the authorized representative of such party.
14. Indemnification.
14.1 Purchaser Indemnification. Purchaser hereby agrees to indemnify
and hold Seller harmless, from and against any and all loss, liability (whether
known or unknown, actual or contingent, legal or equitable, mature or inchoate,
however arising), claim, damage and expense (collectively, "Liabilities"),
including, but not limited to, reasonable attorneys' fees and amounts reasonable
expended in settlement of litigation, pending or threatened, after the date
hereof, incurred after the Closing Date and arising out of or relating to: (i)
any liabilities and obligations of Seller which were expressly assumed by
Purchaser under Article 5 of this Agreement (including bot not limited to the
Potential Carleton-Stuart Dispute and the Potential KCC Dispute); (ii) any
material misrepresentations or material breaches of Purchaser's representations
and warranties set forth in this Agreement; or (iii) any material breach of any
of Purchaser's covenants or obligations under this Agreement.
14.2 Seller Indemnification. Seller hereby agrees to indemnify and hold
harmless Purchaser from and against any and all Liabilities, including but not
limited to, reasonable attorneys' fees and amounts reasonable expended in
settlement of litigation, pending or threatened, incurred after the Closing Date
and arising out of or relating to: (i) any liabilities and obligations of Seller
not expressly assumed by Purchaser under this Agreement; (ii) any material
misrepresentations or material breaches of Seller's representations and
warranties set forth in this Agreement; or (iii) any material breach of any of
Seller's covenants or obligations under this Agreement.
14.3 Procedure of Indemnification.
14.3.1 Neither Purchaser nor Seller is required to take any
action or make any claim to any third person as a precondition of seeking
indemnification from the other hereunder. The party seeking indemnification (the
"Claimant") shall promptly give notice to the indemnifying party in sufficient
detail of any matter or item which forms a basis for the indemnification under
this Agreement (a "Claim"). The Claimant shall afford the indemnifying party, or
its authorized representatives, the opportunity to defend, discharge or
compromise such Claim and examine the
<PAGE>
books and records of the Claimant insofar as they relate to such Claim and to
copy or make extracts therefrom, and will (at the expense of the indemnifying
party) provide full cooperation of itself and its employees with respect to such
Claim; provided, however, that with respect to any Claim by Seller in connection
with the Potential KCC Dispute, Purchaser shall, at Seller's request and at
Purchaser's sole expense, defend, discharge or compromise such Claim and/or
cooperate with Seller's legal counsel in connection therewith. At any
indemnifying party's request and expense, the Claimant will assign any claims or
rights which the Claimant may have against any third party in an action against
the third parties, and, at the indemnifying party's expense, the Claimant will
cooperate fully with the indemnifying party in pursuing any such claim or right.
14.3.2 The indemnifying party may, within twenty (20) days
after the Claimant has given notice of a Claim, give notice to the Claimant that
the indemnifying party intends to litigate or otherwise attempt to resolve the
Claim identified in the Claimant's notice. Upon such notice from the
indemnifying party to the Claimant: (i) the indemnifying patty shall have the
right, at its sole cost and expense and without liability, cost or expense to
Claimant, to prosecute any such proceeding, defend any such Claim or otherwise
attempt to resolve the Claim (including, but not limited to, settling such claim
by paying, without liability of the Claimant, all amounts in settlement); and
(ii) Claimant shall have the right to participate at its expense in the defense
of any such Claim. The indemnifying party shall keep the Claimant appraised of
all material developments in connection with any such Claim.
14.3.3 So long as any mdemnifying party shall continue to
handle a Claim or proceeding in good faith, or until a final determination that
monies are payable by Claimant to a third person, the indemnifying party shall
not be obligated to pay to Claimant the monies so claimed.
14.3.4 Notwithstanding the foregoing Section 14.3.3, if as a
result of any Claim, a judginent is entered against Claimant in a court of
competent jurisdiction, or a lien attaches to any property or asset of Claimant
which materially and adversely affects or threatens to materially affect the
assets, property, business or operations of Claimant, Claimant will be entitled
to discharge, compromise or settle such Claim in good faith without the consent
of the indemnifying party.
14.3.5 All amounts paid by the Claimant for which it is
entitled to indemnification by the indemnifying party pursuant to the terms and
conditions of this Agreement shall be promptly reimbursed to it by the
indemnifying party after written request therefore, which request shall specify
in reasonable detail the amounts paid by the Claimant. In the event Claimant
collects or retains an amount in excess of the amount of any Claim, Claimant
shall promptly return such fluids to the indemnifying party. Claimant shall use
reasonable efforts to cooperate in attempting to cause third parties who are
liable to it or to the indemnifying patty to reimburse the indemnifying party
for payment made by it to Claimant; and Claimant shall grant to the indemnifying
party any transferable subrogation rights that Claimant may have against third
parties with respect to claims paid by the indemnifying party to Claimant.
14.4 DeMinimis and Maximum Amounts. Seller shall not be required to
indemnify and hold harmless Purchaser from any Liailities unless and until the
amount of such Liabilities incurred by Purchaser and for which Purchaser
provides prompt written notice to Seller (which notice shall
<PAGE>
state the amount incurred by Purchaser that Purchaser is deeming a Liability
hereunder) exceeds, in the aggregate, $75,000, and Seller shall only be
obligated to indemnify Purchaser with respect to the amount of such Liabilities
that exceeds such $75,000 and then only to the extent provided in the
immediately following sentence. The maximum amount of indemnification which may
be required of Seller hereunder (including for this purpose the amount of
Seller's obligation to reimburse for certain warranty claims pursuant to Section
10.5) shall be lirnited to (i) an aggregate maximum of $400,000 with respect to
Claims notice of which shall have been given to Seller on or before September
15, 1996 and (ii) an aggregate maximum of $100,000, less indemnification amounts
previously paid in excess of $300,000, with respect to Claims notice of which
shall have been given Seller on or before July 15, 1997. Seller shall have no
indemnification obligation under this article in excess of the above-mentioned
maximum amounts and, in any event, shall have no such obligation as to any Claim
notice of which is not given prior to July 15, 1997.
14.5 Exclusive Remedy. So long as the indemnifying party is in
compliance with this Section 14, the remedies provided in this Section 14 shall
be exclusive, except for specific performance or injunctive relief, which shall
be available regardless of the provisions of this Section 14.
14.6 Asset Retention. Seller (or a liquidating trust organized by
Seller in the event Seller is liquidated and dissolved prior to July 15, 1997)
shall retain cash or liquid investments having a maturity date of no more than
one-hundred twenty (120) days (i) during the period from the Closing Date
through September 15, 1996, equal or greater in value to $400,000 less the
aggregate of any indemnification amounts paid to Purchaser and (ii) during the
period from September 15, 1996 through July 15, 1997, equal or greater in value
to $100,000 less the aggregate of any indemnification amounts paid to Purchaser
in excess of $300,000 during such first period and less the aggregate of any
indemnification amounts paid to Purchaser during such second period.
15. Press Releases and Notices
15.1 Press Releases. Purchaser and SeUer will consult with each other
before issuing any press release or otherwise making any public statements with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such press release or make any such public statement prior to such
consultation and opportunity to comment except as required by law or the rules
of a national securities exchange; provided, however, that no public filing that
may be required by law or any listing agreement with a national securities
exchange will be made until the other party has been offered a reasonable
opportunity to review and comment thereon.
15.2 Post-Execution Notices. Any notices or other communications
required or permitted hereunder or otherwise in connection herewith shall be in
writing and shall be deemed to have been duly given when delivered in person or
transmitted by facsimile transmission or on receipt after dispatch by express,
registered or certified mail, postage prepaid, addressed as follows:
If to Purchaser:
Mestek, Inc.
Mestek, Inc.
260 North Elm Street
Westfield, Massachusetts 01085
<PAGE>
Facsimile: (413) 568-7428
Attention: John E. Reed, President
cc: R. Bruce Dewey, Esquire
Senior Vice President
and General Counsel
If to Seller:
Barb Sniader North
6146 Kentland Avenue
Woodland Hills, California 91367
Facsimile: (818) 347-5099
cc: Timothy J. Melton, Esquire
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, Illinois 60601-1692
Facsimile: (312) 782-8585
or such other address as the party to whom notice is to be given has furnished
in writing to the other party.
16. Delivery of Notices. After the Closing Date, Seller shall prompfly deliver
to Purchaser any notices, correspondence and other documents relating to the
Assets being conveyed hereunder or the Koidwave Business which are, from time to
time, received by Seller.
17. Entire Ageement - Binding Effect
This Agreement (together with the Exhibits and Schedules hereto, and
the other agreements, including the Related Agreements, executed pursuant
hereto) sets forth the entire integrated understanding and agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements whether written or verbal, except as expressly provided to the
contrary herein.
18. Assigment
No party to this Agreement shall have the right to assign any of its rights and
obligations hereunder without the prior written consent of the other party
hereto; provided, however, that all rights of Seller hereunder may be assigned
by Seller to its successors in interest by way of liquidation and that Seller
and any such successors in interest shall have the right to assign and transfer
(i) Seller's rights to the Contingent Obligation and any amounts due thereunder
to any one or more of Seller's shareholders and (ii) the Skokie Lease in
accordance with the terms thereof. To the extent that such assignment is
permitted in the foregoing sentence or that such consent is given, this
Agreement and all provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, but
no assignment of this Agreement or any provision hereof by either party shall
discharge that party from its obligations hereunder.
19. Miscellaneous
19.1 Expenses. Except as otherwise agreed herein, each party hereto
shall bear its own expenses
<PAGE>
incurred in connection with the preparation and closing of this Agreement and
the consumation of the transactions contemplated by this Agreement.
19.2 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original instrument, but
all such counterparts together shall constitute one and the same i'i5rument.
19.3 Govening Law. This Agreement is being made in and shall be
governed by and construed and enforced in accordance with the laws of the State
of Illinois and the United States of America, except for the conflicts laws of
those jurisdictions.
19.4 No Third Party Rights. This Agreement and the Related Agreements
are solely for the benefit of the parties hereto and Seller's shareholders as of
the Closing Date, and no other person shall acquire any rights or clalms by
reason of or under this Agreement or the Related Agreements.
19.5 Severability. Should any term, provision or clause of this
Agreement, the Related Agreements or of any other agreement or document which is
required by this Agreement, be held to be invalid, such invalidity shall not
affect or render invalid any other terms, provisions or clauses hereof or
thereof the consideration or mutuality of which can be given effect without such
invalid provision, and all of which shall remain in full force and effect. If
any provision of this Agreement is so broad as to be unenforceable, such
provision shall be interpreted to be only so broad as is enforceable under
applicable law.
19.6 Headings. The headings to the sections of this Agreement are
inserted for convenience and
reference only and are not intended to defme or limit the substance of any
section.
19.8 No Brokerage Fees. Neither Seller nor Purchaser, nor any of their officers,
directors or employees, has incurred any liability for any brokerage fees,
commissions, fmders' fees or sintilar fees or expenses for which either Seller
or Purchaser may be liable except the fees of The Randolph Group, which are the
sole responsibility of Seller and shall be satisfied and discharged by Seller.
19.9 Exhibits and Schedules. The exhibits and schedules referenced in this
Agreement and attached hereto shall be deemed to be a part of this Agreement and
are incorporated herein by this reference. Information set forth on any
particular schedule hereto shall be deemed incorporated by reference, where
applicable, in each other schedule hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
HEAT EXCHANGERS, INC.
BY:
Emile Garneau, President
MESTEK, INC.
<PAGE>
By:
Stephen M. Shea,
Senior Vice President-Finance
AGREEMENT
THIS AGREEMENT is made and entered into as of the 5th day of July, 1995
by and between The HydroTherm Corporation, a Delaware corporation (formerly
known as Reed Financial, Inc.) having an office at 260 North Elm Street,
Westfield, Massachusetts 01085 ("Seller"), and SET Realty, L.L.C., a New Jersey
limited liability company having an office c/o Quantum Conveyor Systems, Inc.,
P.O. Box 343, 373 Margaret King Avenue, Ringwood, New Jersey 07456,
("Purchaser").
RECITALS
A. Seller represents that it is the owner of the entire fee of certain
real estate (the "Land") in Northvale, New Jersey, commonly known as 119
Rockland Avenue, Northvale, New Jersey, Block 1007 Lot 1 and legally described
on Exhibit "A" attached hereto, and made a part hereof, together with all
rights, hereditaments and appurtenances in any manner belonging or appertaining
thereto, including all buildings, structures, improvements and fixtures located
thereon, any additions thereto and replacements thereof (all of which buildings,
structures, improvements and fixtures are collectively referred to as the
"Improvements"), including, but not limited to, all of the foundations and
footings therefor; all plants; appliances; furnaces; boilers; machinery;
engines; motors; compressors; elevators; fittings; pipings; heating;
ventilation; air conditioning equipment; fire and burglar alarms; movable
partitions; wall mounted desks; existing lighting and electrical systems,
conduits, fixtures and replacement parts; trash compactor; kitchen equipment and
appliances, sprinkler systems (including but not limited to fire sprinkler
systems); telephone switchboard, wiring, conduits, switches and instruments;
venetian blinds in office; existing safety equipment (including but not limited
to fire suppression and fire extinguisher, etc.); 3-Jib cranes and support
structures; hot and cold water distribution; sanitary and plumbing facilities,
fixtures and systems; articles of personal property; connections; conduits;
ducts; partitions and apparatus of every kind and description now or hereafter
affixed or attached to the Improvements; also including all easements, licenses
and privileges, if any, belonging to or inuring to the benefit of the Land
and/or the Seller, and all minerals, plants, trees, shrubs and landscaping (all
of which Land and Improvements are hereinafter collectively referred to as the
"Real Estate" or the "Premises"),
B. Purchaser is desirous of acquiring by purchase and
Seller is desirous of selling, assigning and conveying to Purchaser, subject to
those certain encumbrances identified on Exhibit "B" hereto and made a part
hereof (hereinafter referred to as the "Permitted Encumbrances", all of Sellers
right, title and interest in and to the Real Estate and any and all rights,
powers, privileges, leases (collectively the "Leases"), contracts, agreements
and other instruments (collectively the "Contracts") relative to or connected
with the Real Estate, described in Exhibits "C" or "O" annexed hereto and made a
part hereof, or permitted hereunder.
PROVISIONS
NOW, THEREFORE, in consideration of the foregoing
<PAGE>
Recitals, which are incorporated herein by this reference, and in consideration
of the payment by the Purchaser of the purchase price Purchaser hereby agrees to
purchase from Seller and Seller hereby agrees to sell, assign and convey to
Purchaser all right, title and interest in and to the Real Estate, together with
such rights, powers, privileges, relative thereto or connected therewith
including the Contracts and Leases, all the personal property owned by Seller
incidental to the operation or maintenance of the Premises, and all of Seller's
right, title and interest in and to all intangible property now or hereafter
owned or held by Seller in connection with its ownership of the Premises,
subject only to the Permitted Encumbrances, in accordance with all of the terms,
provisions and conditions hereafter contained.
1. PURCHASE PRICE AND MANNER OF PAYMENT.
(a) The purchase price ("Purchase Price") to be paid in respect to the Real
Estate, together with all rights, powers, privileges, Contracts and Leases
relative thereto or connected therewith, shall be $2,450,000 Dollars, payable by
Purchaser as follows:
(i) $50,000 (the "Down Payment") on the date of execution of this
Agreement by delivery of a letter of credit (the "Down Payment Letter of
Credit") in the form annexed hereto as Exhibit "l(a)(i)", from a reputable bank,
thrift or savings institution, naming the Seller as beneficiary, to be held in
escrow pursuant to the provisions of Section 2 hereof by the Escrowee (as
defined below);
(ii) $2,450,000 Dollars at Closing (as said term is hereinafter
defined) by delivery of two notes (the "Notes"), each in the form attached
hereto as Exhibits l(a)(ii), in the amounts of $2,000,000 and $450,000,
respectively. Seller shall return the Down Payment Letter of Credit upon
delivery of the notes.
2. ESCROW.
(i) The Down Payment Letter of Credit and any other
sums paid on account of the Purchase Price prior to the Closing shall be held by
and delivered to Smith Stratton, Wise, Heher & Brennan as counsel to the Seller
("Escrowee"). The Escrowee shall hold the Down Payment Letter of Credit until
the Closing or sooner termination of this Agreement and shall deliver the Letter
of Credit in accordance with the terms of this Agreement.
(ii) The parties acknowledge that Escrowee is acting solely as a
stakeholder at their request and for their convenience, that Escrowee shall not
be deemed to be the agent of either of the parties, and that Escrowee shall not
be liable to either of the parties for any act or omission on its part unless
taken or suffered in bad faith and in willful disregard of this contract or
involving gross negligence. Seller and Purchaser shall jointly and severally
indemnify and hold Escrowee harmless from and against all costs, claims and
expenses, including reasonable attorneys fees, incurred in connection with the
performance of Escrowees duties hereunder, except with respect to actions or
omissions taken or suffered by Escrowee in bad faith and in willful disregard of
this contract or involving gross negligence on the part of Escrowee.
(iii) Escrowee agrees not to deliver or release the Down Payment
Letter of Credit or the
<PAGE>
Collateral Letter of Credit (see Paragraph 3(b)(v)) out of escrow except in
accordance with the terms of this Agreement.
(iv) If the transactions contemplated herein are not consummated or if
title to the property is not delivered to Purchaser solely as a result of
Seller's wilful default, or if this Agreement is terminated by its terms as
otherwise provided herein, Purchaser shall be entitled to the return of the Down
Payment Letter of Credit. Seller shall be entitled to the Down Payment Letter of
Credit only in the event of a default by Purchaser to acquire title to the
Premises hereunder, provided that Seller is ready, willing and able to
consummate the transactions contemplated by this Agreement in accordance with
the provisions hereof but only after the expiration of are reasonable notice and
cure period. Nothwithstanding the foregoing, if, at any time, for any reason,
either party makes a written demand upon Escrowee for delivery to it of the Down
Payment Letter of Credit, Escrowee shall give prompt written notice (the
"Release Notice") to the other party of such demand. If Escrowee does not
receive a written objection from the other party to the proposed payment within
ten (10) business days after the date Escrowee gives the Release Notice,
Escrowee is hereby authorized to deliver the Down Payment Letter of Credit to
the party demanding release. If Escrowee timely receives a written objection
within such ten (10) day period, or if, for any other reason, Escrowee in good
faith shall elect not to deliver the Down Payment Letter of Credit to the party
making demand, Escrowee shall continue to hold the Down Payment Letter of Credit
until otherwise directed by a joint written instruction form the parties to this
Agreement or a final non-appealable judgment of a court of competent
jurisdiction. However, Escrowee shall have the right at any time after receipt
of a demand for release of the Down Payment Letter of Credit, to deposit the
Down Payment Letter of Credit with the clerk of the United States District
Court, District of New Jersey or the Clerk, New Jersey Superior Court. Escrowee
shall give written notice of such deposit to Seller and to Purchaser. Upon such
deposit Escrowee shall be relieved and discharged of all further obligations and
responsibilities hereunder, Escrowee shall also be entitled, at its sole
discretion and election, to commence an action or proceeding, including but not
limited to any action in interpleader, to obtain a determination by a court
relating to a matter affecting release of a Down Payment Letter of Credit. The
cost of any such action or proceeding shall be the responsibility of the party
against whose interest the dispute is finally determined.
3. CLOSING REQUIREMENTS.
(a) Seller hereby covenants and agrees to deliver to Purchaser,
on or before the Closing Date, all documents necessary or appropriate to the
consummation of the transactions contemplated by and provided for in this
Agreement, all duly executed, including, but not limited to, the following:
(i) a bargain and sale deed with a covenant against grantor's
acts in form and substance satisfactory to Purchaser's title insurance company,
conveying to Purchaser, or its nominee, good and marketable, fee simple title
and all right, title and interest in and to the Real Estate, subject only to the
Permitted Encumbrances and any mortgage lien granted by the Purchaser to the
Seller hereunder;
(ii) return Buyer's Down Payment Letter of Credit;
(iii) an affidavit of title in form reasonably acceptable
to Buyer's title insurance
company, executed by the president or a vice president and the secretary or an
assistant of the
<PAGE>
Seller;
(iv) the originals, or certified copies, of the Leases and
Contracts together with a duly executed assignment thereof as well as an
assignment of the security deposits held pursuant thereto, The Assignment shall
include an indemnity from Seller and recourse by Purchaser against Seller with
respect to any claims arising under the Leases or Contracts prior to the Closing
Date which are asserted against Purchaser after the Closing Date, and for
recourse by Seller against Purchaser with respect to any claims arising under
the Leases and Contracts arising after the Closing Date which are asserted
against Seller after the Closing Date.
(v) No personal property is to be conveyed; (vi) Expense statements with
respect to the Premises far the period commencing January 1, 1994 through and
inclusive of the Closing Date prepared by the Seller and certified by an officer
of the Seller as true, complete and accurate.
(vii) A certificate duly acknowledged by Seller that the
representations and warranties set forth in section 11 of this Agreement are
true and correct on and as of the Closing.
(viii) All permits, certificates and licenses which relate to the
Real Estate or Premises in Seller's possession or under Seller's control.
(ix) One (1) complete CAD set of the "as built" plans and
specifications for the Premises has previously been delivered to Purchaser,
which receipt is acknowledged.
(x) One (1) true and complete copy of Seller's certificate of
incorporation and by-laws, each as amended to the date of closing certified by
the Seller's officers and a Good Standing Certificate from the Secretary of
State of Delaware with respect to the Certificate of Incorporation and each
amendment and by an officer of Seller with respect to the By-laws.
(xi) The resolutions of the board of directors of the Seller approving
the sale of the Premises and all instruments to be executed and delivered
before, after or during the closing, certified by the secretary that such
resolutions are true, correct and complete and have not been rescinded or
modified.
(xii) An assignment of all warranties and guarantees (including,
without limitation, HVAC, pest control, and roof bonds) received from
contractors for the roof, systems, Improvement, equipment and materials,
additions, fixtures, etc.,installed in or at the premises. To the extent that
such assignment cannot be made without the consent of a Third party, then Seller
shall obtain such consents.
(xiii) Either: (a) a certification that Seller is not a non-resident
alien ( foreign corporation, partnership, trust or estate as defined in the
Internal Revenue Code of 1986, as amended ("IRC") and Treasury Regulation
("T.R.") promulgated thereunder) in accordance with T.R. 1.1445; or (b) provide
from the cash proceeds of the sale, or otherwise, sufficient cash to the
Purchaser to permit the Purchaser to withhold tax in accordance with IRC 1445;
or (c) otherwise copy with IRC section 1445. The Seller shall also provide such
information as may be required by Purchaser to enable Purchaser to cause
Treasury Forms 8288 and 8288A to be filed in accordance with IRC section 1445,
and any amendments or modifications thereof.
(xiv) There is no condemnation award for the taking of any portion
of the Premises; a
substitution of Purchaser for Seller in any tax certiari proceeding;
(xv) Purchaser has previously been given the keys and alarm codes
for the Premises; (xvi) An opinion of counsel to the Seller in the form
of Exhibit 3(a)(xvi); and
(xvii) Such other documents as counsel for both parties may
reasonably deem necessary
<PAGE>
in order to consummate the sale of the Real Estate by Seller.
(b) Purchaser hereby covenants and agrees to execute and/or deliver
to Seller (or its designated agent or representative) on the Closing Date:
(i) A note drawn by Purchaser to the order of Seller in the amount
of Two Million Dollars (the "52,000,000 Note") in the form of Exhibit l(a)(ii);
(ii) A note drawn by Matthew Mulhern to the order of Purchaser and
negotiated, and assigned endorsed to Seller in the amount of $450,000 (the
"$450,000 Note") in the form of Exhibit l(a) (ii) ;
(iii) A mortgage made by Purchaser in favor of Seller in the form
of Exhibit 3(b)(iii) to secure the $2,000,000 Note and the $450,000 Note (the
"Mortgage");
(iv) (a) Evidence of the irrevocable transfer of marketable
securities with a value ~on the date of Closing of at least $500,000 into a
brokerage account in the name of Seller at First United Securities Corp. Inc.
(the "Account". The Account shall be the exclusive property of Seller, which
shall be entitled to the ownership and control of the securities therein. Seller
agrees not to sell or otherwise dispose of any securities in the Account, except
in the event of a Default as hereinafter defined, unless Seller reasonably
believes, upon notice from Buyer or otherwise, that one or more of such
securities is declining in value to such a degree as to warrant such action.
Seller, however, shall have no obligation to sell or dispose of any security. In
the event of an event of default under this Agreement, the $2,000,000 Note, the
$450,000 Note, the Mortgage, the Quantum Guaranty and the Mulhern Guaranty (as
each of those terms is defined herein, and collectively, the "Financing
Documents"), or any of them, Seller may sell the securities held in the Account,
up to a maximum amount of $450,000 and collect the proceeds of such sale for the
Seller's own benefit and Purchaser shall have no right to any of such proceeds.
Upon the delivery to Seller of the Collateral Letter of Credit (as defined
hereinafter), Seller shall promptly transfer all of the securities held in the
Account to the Purchaser, and any and all of Seller's rights in and to such
securities shall thereupon cease and terminate.
The securities, securities entitlement and other assets (collectively the
"Collateral") pledged under this Paragraph (a) shall be held in the Account. The
Account shall be established with First United Securities Corporation of Garden
City, New York in the name of THE HYDROTHERM CORPORATION AS SECURED PARTY UNDER
AGREEMENT DATED AS OF JULY 5, 1995. The Collateral held in the Account
(including but not limited to the items initially deposited as collateral and
any additional collateral, substitutions and earnings from time to time) shall
be released concurrently with the delivery to the Seller of, or to the issuer of
the Collateral Letter of Credit (as defined hereafter), in order to obtain such
letter of credit in favor of the Seller, In addition, upon payment of the
$2,000,000 Note and the $450,000 Note, the Collateral shall be released to
Matthew T. Mulhern (the "Pledgor"). Pledgor may substitute securities,
securities entitlement and other assets for any item of Collateral with the
prior written consent of the Seller. Seller agrees not to unreasonably withhold,
delay or condition such consent.
If the aggregate market value of the Collateral in the Account falls below
$500,000, then, upon notice to the Purchaser and the Pledgor, Purchaser shall
cause additional securities, securities entitlement and assets to be transferred
into the Account as additional Collateral, The
<PAGE>
quality of the additional Collateral shall be at least equal to that of the
original Collateral and shall be reasonably acceptable to the Seller. Seller
agrees not to unreasonably withhold, delay or condition such approval. If,
Purchaser fails within a reasonable period to provide additional Collateral
which is sufficient to bring the aggregate value of the securities, securities
entitlement and assets in the Account to at least $500,000, and if the aggregate
value in the Account falls below $475,000, then, Seller may sell all or any
portion of the Collateral at market after first giving telefaxed notice of its
intent to make such sale to the Purchaser. If any of the Collateral is sold, the
proceeds shall be held in the Account as additional collateral and invested as
the parties may determine. It shall be released as otherwise provided herein.
(b) A letter of credit in The amount of $450,000 (in the form of
Exhibit 3(b)(iv)) issued by the same or another financial institution meeting
the requirements of Section 2 hereof. Such letter of credit (the "Collateral
Letter of Credit") shall be delivered to Seller and held until released. The
Collateral Letter of Credit shall be for a term of at least one year and shall
contain terms which provide for its automatic renewal thereafter. It shall be
presented by Seller to the issuing institution for payment only upon an Event of
Default as defined in the Financing Documents. Purchaser may substitute cash or
other suitable equivalent collateral for the Collateral Letter of Credit upon
ten (10) days' prior notice to Seller). For substitute collateral other than
cash, Seller shall have the right to approve the form and amount of any such
substitute collateral. Seller agrees not to unreasonably withhold, delay or
condition such approval. Seller's failure to object within such ten (10) day
period shall constitute approval.
(v) An opinion of Counsel to Purchaser relating to the
enforceability of the $450,000 Note, the $2,000,000 Note, the Mortgage, the
Quantum Guaranty and the Mulhern Guaranty in the form set forth in Exhibit 3(b)
(v).
(vi) A guaranty of the obligations of Purchaser under the
$2,000,000 Note and the $450,000 Note in favor of Seller from Quantum Conveyor
Systems Inc. (the "Quantum Guaranty") in the form of Exhibit 3(b)(vi).
(vii) Such other documents as counsel for both parties hereto may
reasonably deem necessary in order to consummate the purchase of the Real Estate
by Purchaser.
Seller and Purchaser shall jointly deliver to Purchaser's title company
at Closing, duly executed real estate transfer declarations and statements.
(viii) A guaranty of the obligation of Purchaser under the
$2,000,000 Note in favor of Seller from Matthew Mulhern (the "Mulhern Guaranty")
in the form of Exhibit 3(b)(viii).
(ix) One (1) true and complete copy of Purchaser's certificate of
formation and operating agreement, each as amended to the date of closing,
certified by the Purchaser's manager and a Good Standing Certificate from the
Secretary of State of New Jersey with respect to the certificate of formation.
4. ASSIGNMENT AND ASSUMPTION OF OBLIGATIONS. As of the Closing Date, Seller
shall assign, transfer and set over to Purchaser all of its rights, authority,
powers, duties and obligations under the Leases and the Contracts, and Purchaser
shall accept, assume and agree to be bound by all of the covenants, agreements,
promises, terms, conditions and provisions contained in the Leases and the
Contracts to be observed, kept, performed or complied with by Purchaser from and
after the Closing Date. Seller covenants and agrees to indemnify and hold
Purchaser harmless from any claim, demand, cause or causes of action which may
be asserted
<PAGE>
against Purchaser arising from any breach, violation or failure to perform any
provisions of the Leases or the Contracts on the part of the owner, on or before
the Closing Date. Purchaser covenants and agrees to indemnify and hold Seller
harmless from any claim, demand, cause or causes of action which may be asserted
against Seller arising from any breach, violation or failure to perform any
provisions of the Leases or Contracts, on the part of the owner, after the
Closing Date. On the Closing Date, Seller shall deliver to Purchaser all
documents, correspondence, lease files and related records pertaining to the
Leases and the Contracts.
5. APPORTIONMENTS AND/OR ADJUSTMENTS AT CLOSING.
The items listed in this Paragraph shall be apportioned between Seller and
Purchaser. All apportionments shall be made as of 11:59 P.M. of the day
preceding the Closing Date except those items not capable of determination on
the Closing Date or which are expressly provided to be determined on a
subsequent date shall be apportioned after the Closing Date as though computed
as of 11:59 P.M. of the day preceding the Closing Date.
(a) Water and sewer charges accrued and payable by Seller based
upon the last bill therefor. With respect to any adjustment relating to water
and sewer charges, if it is practicable for Seller to obtain a reading of the
meter or other measuring device of the utility consumption, as of the Closing
Date, Seller shall do so, and in such case shall pay directly to the utility
company the amount determined to be due instead of adjusting same with
Purchaser;
(b) Prepaid charges, payments and accrued expenses with respect to
Contracts and Leases;
(c) Real estate taxes (including any rental occupancy tax) , and
assessments against the premises (collectively the "impositions") which have
been paid or are payable for the tax periods or other applicable periods in
which the closing Date occurs. seller shall not withdraw or compromise any
pending tax reduction proceeding affecting the promises without the purchaser's
consent, which consent purchaser agrees not to unreasonably withhold or delay.
Seller agrees that subsequent to the closing Date purchaser shall have the
exclusive right to pursue, compromise or withdraw any pending tax reduction
proceeding. If, after the closing Date, any such proceeding shall result in any
reduction of taxes applicable to the tax year in which the closing hereunder
occurs, the amount of tax saving or refund for such tax year, less the legal
fees and disbursements payable in connection with such proceedings and less any
suns payable to tenants, shall thereafter be apportioned between seller and
purchaser as of the closing Date. purchaser acknowledges and understands that
Seller shall receive a- tax refund check from the Borough of Northvale for
overpayment of real estate taxes by seller which taxes wore assessed on the
premises the years 1992, 1993 and 1994;
(d) licenses, occupancy certificates and permits to the extent
transferable, inspection fees and vault taxes, if any;
(e) any and all other items, not specifically mentioned in (a) through
(d) above, which are customarily apportioned in real estate transactions of this
kind.
6. POSSESSION. Vacant and broom clean possession of the Real Estate, has been
delivered to Purchaser as of the date of the Occupancy Agreement (as defined
hereinafter).
7. CONDUCT OF BUSINESS PRIOR TO CLOSING. (a) Subject to the provisions of the
<PAGE>
Occupancy Agreement, (as defined hereinafter) Seller and Purchaser agree that,
prior to the Closing Date, Seller, or its agent, at its sole cost and expense,
shall continue to maintain, repair, manage, make replacements to and operate the
Premises in the current, usual and customary manner. The Premises shall be
delivered at Closing in the condition required pursuant to this Agreement.
(b) Except for agreements, contracts or other instruments that do
not contain a term of more than thirty (30) days in duration, or may be canceled
upon thirty (30) days notice without premium, fee, charge, recalculation of rate
or penalty, and in either event, do not entail a cost in excess of Two Hundred
($200) Dollars per month, Seller shall submit to Purchaser, for approval, any
agreement, contract or other instrument relating to the Real Estate which is to
be entered into by Seller at any time after the execution of this Agreement.
Seller shall not execute any such agreement, contract or instrument until it is
first approved in writing by Purchaser, which approval may not be unreasonably
withheld or delayed. Seller shall not modify, extend, renew, cancel, or
surrender any Contracts without Purchasers consent in writing in each instance.
(c) If Purchaser approves any such agreement, contract or other
instrument in writing for execution by Seller, an executed counterpart of such
item shall be delivered by Seller to the Purchaser on the Closing Date.
(d) Seller shall not unreasonably undertake or omit to undertake
any other act which adds or would be deemed to add a new restriction or has or
would have an adverse effect on the Premises or the operations.
(e) The Seller will not, hereafter and prior to the Closing, (i)
lease or rent or grant any license or permission to use any space in or at the
Premises, or a portion thereof, which is now or may hereafter become vacant,
(ii) cancel, modify or amend any present Lease without, in either case
obtaining, the prior written consent of Purchaser.
8. TITLE INSURANCE.
8.1 Seller shall supply a complete abstract of title to the Premises
and a copy of the title insurance policy issued to Seller within twenty (20)
days from the date of this Agreement. Purchaser shall, on or before the
scheduled Closing Date, obtain a written commitment (the "Title Commitment") for
owners title insurance on the Standard ALTA Owners Title Policy Form (10172) The
Purchaser's obligations pursuant to this Agreement shall be conditioned upon the
Title Commitment showing that the fee simple title is merchantable in Seller,
free and clear of all mortgages, liens, ground leases, restrictions, covenants
and other encumbrances except the Permitted Encumbrances. The Title Commitment
and policy shall be issued by First American Title Insurance Company through an
abstract company selected by Purchaser. The Purchaser's obligations pursuant to
this Agreement shall be further conditioned upon the issuance of a title policy
or binder at the Closing, which shall insure that the Purchaser is vested with
good, marketable, fee simple title to the Premises, subject only to the
Permitted Encumbrances and the mortgage lien granted by the Purchaser to the
Seller. If the Premises are subject to any lien or charge in a fixed or
ascertainable amount including, without limitation intended, any mortgages or
deeds of trust, mechanic's liens or judgments, Seller shall satisfy and pay the
same at or prior to Closing. If Seller wishes to obtain mortgage title
insurance, it shall bear the cost thereof.
9. TITLE DEFECTS
<PAGE>
9.1 If the Title Commitment to be obtained by Purchaser discloses any
exceptions to title other than the Permitted Encumbrances, Seller shall have
sixty (60) calendar days from the date of delivery thereof to Seller to clear
such exceptions of record and to have such exceptions removed as exceptions from
the Title Commitment. If Seller fails to have such exception or exceptions
removed from title and from the Title Commitment within said sixty (60) calendar
day period, the Purchaser may than terminate this Agreement or may elect, upon
notice to Seller, to accept title as it then is with or without an abatement of
the Purchase Price. Seller agrees to cooperate with Purchaser, at Seller's
expense, in the execution of any documents reasonably necessary far the removal
of any and all such exceptions on or prior to the Closing Date (and post Closing
if Purchaser elects to take title with or without an abatement). The obligations
of Seller under this Paragraph "9" shall survive the Closing. If, under such
circumstances, Purchaser does not so elect to accept title as it then is, this
Agreement shall become null and void, without further action of the parties; the
Down Payment Letter of Credit shall be returned to Purchaser; and Seller shall
have no further liability to Purchaser.
10. DOCUMENTARY FEES. ETC. The parties shall divide equally the payment of the
amount of any transfer tax imposed on the transfer of title pursuant hereto and
the recording of the deed.
11. REPRESENTATIONS AND WARRANTIES.
(a) To induce Purchaser to enter into this Agreement, Seller represents
and warrants to Purchaser the truth, as of the date hereof and as of the Closing
Date, of each of the following:
(i) Seller holds and owns the entire fee simple title to the Real
Estate free and clear of all liens and encumbrances other than the Permitted
Encumbrances;
(ii) Seller has furnished Purchaser with true and correct copies of all
Leases, Contracts and warranties with respect to the Real Estate, together with
any and all written modifications, amendments or supplements thereto;
(iii) The Premises are, to the knowledge of Seller, zoned so as to
permit light manufacturing and assembly; and to the knowledge of Seller the
Premises are free from any restrictions which restrict or prevent such uses of
the Premises;
(iv) Seller has not received any actual notice from any
governmental authority or any insurance carrier of zoning, electrical, building,
fire, environmental or health code violations or changes in ratings or rates,
or~other violations, in respect to the Real Estate that will not have been
corrected on or before the Closing Date and Seller has no reason to believe that
any such authority or insurance carrier contemplates issuing same or that any
violation exists;
(v) Upon the execution and delivery of this Agreement by Seller, this
Agreement will be legally binding upon Seller in accordance with all of its
terms and conditions, without any qualification whatsoever which is not
expressly provided for herein;
(vi) Except as set forth in Paragraph 20 hereinafter, no leasing or
brokerage commission in connection with the Real Estate is or will became due
and owing to any party;
(vii) seller has not voluntarily committed any act or suffered or
permitted the occurrence of any transaction, event or action which prohibits or
in any way impedes or hinders the complete performance by Seller of all of the
duties and obligations required of it by, under or pursuant to this Agreement in
accordance with all of its terms and conditions;
<PAGE>
(viii) Seller has not received written notice of outstanding
requirements by any insurance company which has issued a policy with respect to
the Premises, requiring any repairs or work to be done an the Premises;
(ix) seller has duly filed all federal and New Jersey income, excise
and other tax returns and reports required to filed up to the date hereof with
respect to Seller's ownership of the Premises and will continue to file all such
returns and reports through the Closing Date. Seller has paid or provided for
payment of such taxes and will continue to do so through the Closing Date;
(x) There is no litigation or proceeding pending or threatened against
or relating to any part of the Premises, to the knowledge of Seller. No Lis
Pendens or similar notice have been filed against the Premises, to the knowledge
of Seller. Seller agrees to indemnify and hold Purchaser harmless from any
liability arising out of, or in connection with, any action or proceeding
affecting the Real Estate, during the period in which it was owned by Seller.
(xi) There is access for ingress and egress to and from the
Premises to the public roads, streets and highways. best knowledge and belief of
Seller, there are no facts or conditions which will result in the termination of
the present access from the Premises to any utility services or to existing
highways and roads;
(xii) A railroad siding abuts the Premises;
(xiii) Seller has in all material respects performed all obligations
required to be performed by it to date and is not in default in any material
respect under any Contracts, Leases, Warranties or other document affecting the
Premises to which it is a party or by which it is bound. All work to be
performed and payments to be made pursuant to the terms of the Permitted
Encumbrances, the Leases, Contracts and Warranties, shall be completely
performed and paid for prior to the Closing Date;
(xiv) Seller has not, and between the date hereof and the Closing, will
not, with respect to the Premises (i) except as provided in this Agreement,
incur any obligations under contracts, leases, agreements and documents not
referred to or permitted in this Agreement; (ii) mortgage, pledge or subject to
lien or encumbrance any of its assets, tangible or intangible (except possible
liens for current state and local property taxes not in default); (iii) waive
any rights affecting the premises; (v) incur any obligations or liabilities or
enter into any transactions other than those in the ordinary course of business
that affect the Premises, or those set forth in the Contracts and Leases; or
(xv) There are no pending or, to seller's knowledge after due inquiry,
threatened condemnation or similar proceedings affecting the premises or any
portion thereof, or pending public improvements in, about or outside the
premises which will in any manner affect access to or the full right of
engagement of the premises; nor has seller any knowledge of any legal action of
any kind or character whatsoever affecting the Premises which will in any manner
affect purchaser upon or after the consummation hereof, nor has seller knowledge
that any such action is presently contemplated or under consideration;
(xvi) [Intentionally omitted.]
(xvii) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated will not conflict with any
applicable law, ordinance, regulation, statute, rule, restriction or any
judgment, order or decree of any court having jurisdiction over the seller or
the Premises;
(xviii) The purchase of the premises by purchaser is "AS IS" and
except as expressly set
<PAGE>
forth in subsection (xix) , neither Seller nor any agent, representative or
employee of seller has or is. now making any representations or warranties of
any kind whatsoever related to the physical or mechanical condition of the
premises. purchaser shall conduct its own inspections and "due diligence" with
respect to all physical, legal and other aspects of the premises.
(xix) To seller's actual knowledge, there are no latent structural
defects in any of the buildings and improvements erected on or serving the
Premises and there is no material deferred maintenance or extraordinary repairs
required in connection with the premises.
(xx) Except as noted in this Agreement or otherwise disclosed to
Purchaser in writing:
(1) The Leases and Contracts are the result of bona fide arms' length
negotiations between the parties thereto;
(2) There are no agreements of any nature with any person or entity,
tenant, whether oral or written, affecting the Premises other than the Leases
and Contracts heretofore delivered by Seller to purchaser or those that are
cancelable and which shall be canceled prior to Closing, and
(3) To the best of Seller's knowledge there are no uncured or
threatened breaches or defaults under any of the Leases, Contracts or Warranties
nor are there any impending bankruptcy or insolvency proceedings against any
former tenant, occupant or contracting party and there are no claims, offsets or
defenses which any farmer tenant, occupant or contracting party under any of the
Leases, Contracts or Warranties may have against the Seller or the Premises.
(4) To the best of Seller's knowledge there are no circumstances which,
with the passage of time or the giving of notice or both, would constitute an
event of default under the terms of any Lease or Contract;
(5) To the best of Seller's knowledge the Leases and Contracts are in
good standing and no material breach thereof exists on the part of the tenants
or the landlord, all rental payments thereunder are current;
(xxi) The Premises are noted and designated as a discrete and separate
Block, Lot and Section for real estate taxation purposes by the governmental
authorities having jurisdiction. The present real estate taxes imposed on the
Premises are $2,700,000 pursuant to a Stipulation of Settlement dated December
8, 1994 in a Tax Court Proceeding (Docket Numbers 002331-93, 005553-93, and
004924-994) (Exhibit Il(a)(xxii) which is in full force and effect. This
representation shall survive Closing for two years. No portion of the Premises
is, or to Seller's knowledge, as of the Closing, will be affected by any Special
assessments, whether or not a lien thereon and there are no assessments for
improvements or otherwise, including-without limitation, those for construction
of sewer, water, gas and electric lines and mains, streets, roads, sidewalks and
curbs, and to the best of Seller's knowledge, none have been proposed. To
Seller's knowledge, there is no proceeding pending for increase of the assessed
valuation of any portion of the premises. Seller hereby authorizes its counsel,
Robert J. Regan, to disclose fully all of the facts, materials and circumstances
relating to such Tax Court Proceeding;
(xxii) [Intentionally omitted.]
(xxiii) Each party executing and delivering this
Agreement and all documents to be
executed and delivered in regard to the consummation of the transactions
contemplated hereby on behalf of Seller has due and proper authority to execute
and deliver same. Seller has the full right, power and authority to sell and
convey the Premises, improvements, personal property,
<PAGE>
Leases and Contracts to Purchaser as provided herein and to carry out its
obligations hereunder; (xxiv) To Seller's knowledge, Seller or its
predecessor has received all certificates of
occupancy, licenses, permits, authorizations and approvals required by all
governmental authorities having jurisdiction over the Premises and its prior use
by Seller. Seller makes no representation regarding the current status of any
certificates of occupancy, licenses, permits, authorizations and approvals. A
copy of the Certificate of Occupancy originally obtained by Seller's predecessor
is annexed as Exhibit "11(a) (xxiv) ";
(xxv) To the Seller's knowledge, the Premises are not located in a
flood plain or flood hazard area as delineated by the federal government.
(xxvi) Seller agrees to immediately notify Purchaser, in writing, of
any event or condition of which Seller has knowledge and which occurs prior to
Closing hereunder, which causes a material change in the facts relating tor or
the truth of any of the above representations.
(xxvii) [Intentionally omitted.]
(xxviii) Except for the Permitted Encumbrances, the Leases,
and the Contracts subject to which the Purchaser has agreed to accept title to
the Premises, there are no instruments or agreements which in any way encumber
or affect the Premises and Seller has not done or failed to do anything, as a
result of which the Premises or any part thereof has been or will be encumbered
or title thereto has been or will be affected in any way;
(xxix) Seller represents that it never leased the Premise to anyone;
(xxx) [Intentionally omitted.] (xxxi) There is now and shall be on the
Closing Date, fully paid and enforceable fire,
liability and other forms of insurance described in Exhibit "'l(a) (xxxi)"
annexed hereto and made a part hereof to the extent the same are assignable;
provided, however, that nothing contained herein shall be construed to impose
upon the Purchaser, an obligation to accept an assignment of such insurance, or
to pay any premium or other fee for cancellation thereof;
(xxxii) In addition to the agreement of Seller set forth in Paragraph
3(a)(vii) hereof Seller shall deliver to Purchaser, at Seller's cost and
expense, at or within three (3) days before the Closing Date, expense statements
prepared by Seller's management agent covering the period from the date hereof
to and inclusive of the Closing Date, which statements will truly accurately and
completely set forth all of Seller's expenses and capital expenditures, if any,
during such period with respect to the Real Estate;
(xxxiii) No person, firm or entity has or shall have as of the
Closing Date, any rights in or right to acquire any fee or leasehold or other
interest, or the right to access, ingress or egress through, or mineral surface,
soil or other rights in the Premises or any part thereof, other than as
described herein~or permitted hereunder;
(xxxiv) Seller has no employees engaged or hired exclusively with
respect to the Premises, except a caretaker who shall be dismissed by the Seller
as of the Closing, and Purchaser shall not be required to accept title to the
Premises subject to any employment agreements; and
(xxxv) Seller represents that there is no existing mortgage on the
Premises; (xxxvi) (a) To Seller's actual knowledge, there are no
pending or threatened or
contemplated claims for personal injury, property damage or damage to natural
resources or environmental quality made, asserted or prosecuted by or on behalf
of any third party (whether based on negligent acts or omissions, statutory
liability, strict liability, without fault or otherwise), including, without
limitation, any governmental entity, employee, former employee,
<PAGE>
member of the public or their respective legal representatives, heirs,
beneficiaries and estates, relating to or arising out of the release, use or
storage of any hazardous substance or the violation of any environmental law
with respect to the Real Property (the "Environmental Claims"). As used herein,
"Environmental Law" shall mean any and all federal, state or local laws,
statutes, codes, ordinances, rules, regulations, permits, consents ,approvals,
licenses, orders, writs, decrees, injunctions or other authorizations,
restrictions , or requirements relating to any hazardous or toxic substance,
material or waste which is regulated by the State of New Jersey or the United
States government, including, without limitation, any substance or waste that is
(1) defined as "Hazardous Substance" pursuant to Section 311 of the Water
Pollution Control Act, (v) defined as a "Hazardous Waste" pursuant to Section
1004 of the Federal Resource Conservation of Recovery Act ("RCRA"), (vi) defined
as a "Hazardous Substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), or (vii)
defined as a "Regulated Substance" pursuant to sub-chapter ix, Solid Waste
Disposal Act (the "Hazardous Substances"), or to omissions, discharges, releases
or threatened releases of pollutants, contaminants or hazardous or toxic
materials or wastes into ambient air, surface water, ground water, publicly
owned treatments works, septic systems or land, or otherwise relating to the
pollution or protection of health or the environment, including but not limited
to, CERCLA, RCRA, ISRA, the New Jersey Underground Storage of Hazardous
Substances Act, the New Jersey Water Pollution Control Act, the New Jersey Air
Pollution Control Act, the Hazardous Materials Transportation Act, The Clean Air
Act, the Toxic Substance Control Act, the Safe Drinking Water Act, the Emergency
and Community Right-to-Know Act, each as amended, and the counterparts of such
statutes as enacted by state and local governments with jurisdiction over the
Real Property and any and all rules and regulations adopted and publications
promulgated pursuant to any and all of the aforementioned laws applicable to the
Real Property (the "Environmental Laws").
(b) To Seller's actual knowledge with regard to the Real
Property, Seller is in compliance with all Environmental Laws and Seller has not
engaged in any act or conduct that will give rise to any cost or expense of any
nature whatsoever required to be undertaken pursuant to any Environmental Law to
contain, remove, remedy, respond to, clean up or abate any release of Hazardous
Substances to surface water, ground water, land surface or subsurface strata, on
the Real Property arising from Seller's activities on the Real Property,
including, but not limited to, the manufacture, generation, labeling,
distribution, introduction into commerce or on-site or off-site use, treatment,
handling, storage, disposal or transportation of any Hazardous Substance by
Seller (the "Environmental Clean-up Liabilities") or Environmental Claims. To
the best of Seller's knowledge, no Hazardous Substances are accumulated or
stored on the Real Property.
(c) To the best of Seller's knowledge, no material containing more than
one percent (1%) by weight of asbestos or any material containing
polychlorinated biphenyls is present in or on the Real Property.
(d) To the best of Seller's knowledge, no underground storage tanks are
present, either in use or out of service, on the Real Property.
(e) To the best of Seller's knowledge, no solid wastes have been
disposed of on the Real Property.
(f) Exhibit 11(a) (xxxvi) identifies, to the best of Seller's
knowledge, all environmental investigations, audits, assessments of the Real
Property and operations conducted thereon by environmental engineers or
consultants, all documents known to the Seller setting forth results
<PAGE>
of any analysis including, but not limited to, analysis-of water, soil, air or
asbestos samples, inspection reports of the Real Property by any environmental
agency and any documents or communications from any environmental agency
concerning any notice under the environmental laws (the "Environmental
Documents"). Seller shall within two weeks of the date hereof deliver to
Purchaser, complete and correct copies of all Environmental Documents and any
summons, citation, directive, order, claim, litigation, investigation,
proceeding, judgment, letter or other written communication actually received by
or known to Seller from the New Jersey Department of Environmental Protection
("NJDEP"), the United States Environmental Protection Agency ("EPA") or other
federal, state or local agency or authority concerning any act or omissions
which resulted, is resulting or which may result in any releasing, spilling,
leaking, pumping, pouring, omitting, emptying, discharging, ejection, escaping,
leaching, disposing or dumping Hazardous Substances onto lands or into waters in
violation of the environmental laws (a "Release") or any other violation of any
environmental law ( collectively a "Notice"). Seller shall promptly furnish to
Purchaser, true, accurate and complete copies of any Environmental Documents or
Notices related to the Real Property which become known to the Seller after the
date hereof and prior to the closing. Seller shall notify Purchaser in advance
of all meetings scheduled prior to the closing between the Seller and any
environmental agency regarding the Real Property.
(g) In connection with any transfer, termination or closure of
operations on the Real Property by the Seller or any tenant or person or entity
in occupancy or possession after July 31, 1991, the provisions of ISRA (formerly
known as ECRA) and the regulations promulgated thereunder have resulted in the
receipt of a "negative declaration" as such term is defined in ISRA which have
been previously provided to Purchaser. The affidavits, information and other
submissions and supplements made to the NJDEP in connection therewith were true,
complete and correct and did not fail to disclose or state any fact which would
have made such filings incomplete or inaccurate.
(h) Seller currently holds a "letter of non-applicability" as such term
is defined in ISRA which has been previously provided to Purchaser. The standard
industrial classification ("SIC") number(s) which most closely describe(s) the
operations of Seller (and any person in occupancy or possession of the Premises
after July 31, 1991) conducted upon the Real Property prior to the closure of
operations were 3433 and 3585, as defined by the most recent edition Standard
Industrial Classification Manual published by the Federal Executive Office of
the President, Office of Management and Budget. If prior to closing, the Real
Property becomes subject to the provisions of ISRA or a Release of Hazardous
Substances occurs, or Hazardous Substances are found to exist upon the Real
Property, Seller shall expeditiously comply fully with ISRA at no cast or
expense to Purchaser, unless such release or act resulting in the Real Property
being subject to the provisions of ISRA is caused in whole or in part by
Purchaser or its agents, representatives or invitees.
(i) To the best of Seller's knowledge, Seller has obtained all
environmental permits which are required with respect to the Real Property and
Seller has delivered copies of such environmental permits to Purchaser.
(b) Purchaser hereby represents and warrants to Seller that:
(i) Purchaser is a limited liability company, duly organized, validly
existing and in good
<PAGE>
standing under the laws of the State of New Jersey and has all requisite power
and authority to execute this Agreement and to consummate the transactions
contemplated hereby; and
(ii) This Agreement, and all certificates, documents and instrument
incident to the closing of the transaction contemplated herein, have been duly
authorized, executed and delivered by Purchaser and constitute the valid and
legally binding obligation of Purchaser, enforceable against Purchaser in
accordance with the terms contained therein.
(iii) The execution and delivery of this Agreement by Purchaser does
not, and the consummation of the transactions contemplated hereby will not,
violate any provision of Purchaser's Certificate of Formation or Operating
Agreement or other governing documents, or any provision of any law, rule,
regulation, mortgage, lien, lease, agreement, instrument, order, arbitration
award, judgment or decree to which Purchaser or any of its members or managers
is a party or by which Purchaser or any of its members or managers are bound.
12. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS.
(a) The Seller shall deliver the following items to purchaser
prior to the closing Date:
(i) originals or certified copies of the Leases, contracts and
warranties (including any amendments and modifications thereto).
(ii) An opinion of seller's counsel as provided in Exhibit 3(a) (xvi).
(b) purchaser shall have until thirty (30) days after the date of
this Agreement, to
cause an engineering and an environmental inspection of the premises to be
performed at its own cost and expense. If any such inspector's report discloses
conditions which are not satisfactory to purchaser, purchaser shall have the
right to terminate this Agreement by written notice thereof given to Seller on
or before the forty-fifth (45th) day after the date of this Agreement. Purchaser
may waive the benefits of this paragraph at closing.
(c) Purchaser shall have until thirty (30) days after the date of this
Agreement to examine all expense and capital records relating to the operation
of the premises in the possession or control of seller. seller shall make the
books and records available to purchaser's authorized representatives at the
offices of seller at the address on the first page of this Agreement or at such
other address convenient to both parties hereto during normal business hours,
and purchaser's authorized representatives shall be permitted to make such
abstracts or copies of the records as they may deem advisable. purchaser may
waive the benefits of this paragraph at closing.
(d) purchaser shall have received, at least two (2) days prior to the
scheduled Closing Date, drafts of each of the closing documents described in
Paragraph 3(a). The failure to provide these documents shall not be a breach of
this Agreement.
13. TERMINATION. If the Seller is in material breach of or in default
under any of the provisions of this Agreement, Purchaser may elect either to (i)
terminate this Agreement; or (ii) pursue a claim against Seller for specific
performance as a result of such breach or default, and if same is denied by a
Court of competent jurisdiction, then recover such money damages as are awarded
it by a court of competent jurisdiction; or (iii), proceed with the completion
of the transactions contemplated by and provided for herein, thereby waiving
such breach or such default. If this Agreement is terminated for any reason
other than Purchaser's default, Purchaser shall recover the Down Payment Letter
of Credit. If, however, termination of this Agreement is
<PAGE>
caused by Purchaser's default, then, upon notice to Purchaser, as liquidated
damages and as its sole remedy hereunder, Seller shall receive and draw down the
Down Payment Letter of Credit.
14. OCCUPANCY AND OCCUPANCY GUARANTY AGREEMENT. Seller and Purchaser
have executed the Occupancy Agreement (the "Occupancy Agreement") to Purchaser
concurrently attached hereto as Exhibit 116". This Agreement incorporates by
reference all the
terms therein as if set forth herein with particularity.
15. MUTUAL INDEMNIFICATIONS
15.1 Each party hereby indemnifies and agrees to defend and hold the
other and its successors and assigns harmless from and against any and all
claims, expenses, costs, damages, losses and liabilities (including reasonable
attorneys' fees and disbursements, appeal bonds, etc.) which may at any time be
asserted against or suffered by the other, whether before or after the Closing,
as a result of, on account of, or arising from (a) any breach or falseness of
any representation or warranty or the breach of any covenants or agreements made
herein or in any instrument or exhibit delivered pursuant to this Agreement
through the survival period stated for such representation, warranty, covenant,
or agreement, and/or (b) any contractual obligation, or restriction (other than
restrictions expressly approved by Purchaser) created, arising or accruing prior
to the Closing, regardless of when asserted and relating to the Premises or its
operations, including without limitation, accounts payable, any and all
liabilities for Federal or State income taxes, or any liability relating to
employee compensation which shall not have been assumed by Purchaser in this
Agreement.
15.2 If any action or suit is instituted against one party hereto by
reason of, or in connection with, any claim against or liability of the other
party dealing with matters indemnified against by such other party hereto, then,
and in such event, the party, upon being duly served with process, shall give
notice to the other party of the institution of such action, and in any such
action, such other party shall have the obligation to defend the same at its own
expense and pay any judgment entered therein, but the indemnified. party shall
have the right, at its option, to participate in any such action or suit with
counsel of its own selection at its own expense. Should liability in any such
action be decreed that of the indemnified party, then such party shall reimburse
the other party the reasonable costs of defense, including reasonable attorneys'
fees and disbursement, appeal bonds, etc.
16. RISK OF LOSS.
repairing any such damage, as hereinabove provided for, the time for Closing
hereunder shall be extended for such reasonable period of time as the Seller
shall require in order to repair such damage, not to exceed one hundred and
twenty (120) days. If the repair and restoration is not completed within said
one hundred and twenty (120) day period, Purchaser may, at its option to be
exercised at any time within thirty (30) days after the expiration of said one
hundred and twenty (120) day period, cancel this Agreement, except that in the
event that Seller is then actively attempting to repair such damage, then it
shall have an additional thirty (30) days within which to complete its work.
<PAGE>
(d) Notwithstanding the foregoing, if the cost of repair or restoration
of the damage shall exceed $150,000, Purchaser may at its option, to be
exercised at any time after receipt of notice of the casualty, cancel this
Agreement.
(e) If Purchaser or Seller cancels this Agreement in any of the
foregoing events, the Down Payment Letter of Credit and any sums paid on account
of the Purchase Price shall immediately be returned to Purchaser, and thereupon
neither party shall have any further right or obligation hereunder. Further, the
insurance proceeds payable with respect to a loss to the Real Estate or
Improvements owned by Seller shall be paid to Seller (net of proceeds
attributable to injury or loss to Purchaser's business or property).
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the representations,
covenants, warranties and indemnification obligations of both Seller and
Purchaser set forth in this Agreement above shall survive the Closing and shall
not be deemed merged into the Deed or otherwise released at the Closing.
18. CLOSING DATE. The sale and purchase of the Real
Estate contemplated herein shall be consummated on July 5, 1995 at the offices
of Purchaser's lender or its attorneys. Purchaser shall have the right to extend
the date of Closing from such date by twenty-five (25) days upon five (5) day's
prior written notice to Seller. (The actual date upon which the sale and
purchase of Real Estate contemplated herein is required to be consummated is
known as the "Closing or "Closing Date.") In the event Seller is unable to
transfer title in the Premises to Purchaser on or before August 31, 1995, then
and in such event Purchaser shall have the exclusive right to terminate this
Agreement (whereupon this Agreement shall be deemed null and void and of no
further force or effect) and Purchaser shall (i) be entitled to a return of the
Down Payment Letter of Credit and any other deposits made by Purchaser on
account of the Purchase Price under this Agreement; and (ii) reimbursement for
the net cost of title examination, the cost of a new survey or survey update and
the actual cost of all Phase I or Phase II environmental surveys.
19. NOTICES. Any notice in respect to this Agreement or to any transaction or
other matter
arising in connection herewith shall be in writing and be served upon the party
to which it is
directed at the following addresses:
If directed to Seller, to:
The HydroTherm Corporation
260 North Elm Street
Westfield, MA 01085
Attention: Mr. R. Bruce Dewey, Sr. Vice President
With a Copy to:
Christopher S. Tarr, Esq.
<PAGE>
Smith, Stratton, Wise, Heher & Brennan
600 College Road East
Princeton, NJ 08540
If directed to Purchaser, to:
Mulhern Enterprises, Inc.
c/O Quantum Conveyor Systems, Inc.
P.O. Box 343 373 Margaret King Avenue
Ringwood, NJ 07456
Attention: Matthew Mulhern, President
With a Copy to:
S. Reid Kahn, Esq.
Kane Kessler P.C.
1350 Avenue of the Americas
26th Floor
New York, New York 10019
Any notice shall be served personally or be sent by Registered or Certified
mail, return receipt requested or by a nationally recognized overnight delivery
service which requires a receipt upon delivery. If sent by Certified or
Registered Mail, return receipt requested, a notice shall be deemed to have been
given on the date of receipt or as of the third day following its deposit,
properly addressed with postage fully prepaid, with the U.S. Postal Service,
whichever is earlier. Notice by overnight delivery service shall be deemed given
when received. The address at which notice is to be given to either party may be
changed by giving notice to the other party as provided above. Any notice
hereunder may be given by counsel.
20. BROKERS' FEES. Seller and Purchaser each represent and warrant to the other
that neither has dealt with any broker in connection with the transactions
contemplated by or provided for in this Agreement except that Purchaser dealt
with Andouer Realty of New Jersey, Inc., and seller dealt with Charles Klatskin
company. Seller shall pay such brokerage commissions through Charles Klatskin
company pursuant to separate agreement. No lien shall exist with respect to such
payment. Other than as provided above, each of the parties agrees to indemnify,
defend and hold the other harmless from and against any and all claims of any
brokers or real estate sales persons or others claiming a fee, commission or
expense reimbursement resulting from any dealings or negotiations relating to
the Real Estate.
21. MISCELLANEOUS.
(a) Waivers of any term or condition of this Agreement must be in
writing signed by the party against whom such waiver is sought to be enforced.
No waiver of any breach hereunder shall be deemed a waiver of any other or
subsequent breach.
(b) This Agreement cannot be altered, amended, changed, waived,
terminated or
<PAGE>
modified in any respect or particular unless the same shall be in writing and
signed by or on behalf of the party against whom the same is sought to be
enforced.
(c) On the closing Date and from time to time within six (6) months
thereafter, seller agrees to execute and deliver or cause the execution and
delivery to purchase of such assignments, deeds, agreements, consents,
instruments, documents and further assurances as may be reasonably necessary in
order to effect or confirm any of the provisions of this Agreement or the
transactions intended to be accomplished in connection herewith or to carry out
the intent and purposes hereof.
(d) If any litigation is commenced or any claim is litigated by either
the purchaser or seller against the other party, the prevailing party shall be
entitled to recover its reasonable attorneys' fees, costs, and disbursements,
including those incurred in connection with any appeals, regardless of whether a
judgment is entered.
(e) This Agreement and the Exhibits contain the entire understanding
between Purchaser and Seller with respect to the transactions contemplated
herein and any and all prior or contemporaneous negotiations, agreements or
understandings, whether oral, written, express or implied are superseded hereby
and merged herein.
(f) The caption headings in this Agreement are for convenience only and
are not intended to be a part of this Agreement and shall not be construed to
modify, explain or alter any of the terms, covenants or conditions herein
contained.
(g) This Agreement shall be interpreted and governed by the laws of
State of New Jersey applicable to agreements executed and to be fully performed
in such State.
IN WITNESS WHEREOF, the parties hereto have executed, delivered and
entered into this Agreement as of the date first above written.
WITNESS: SELLER:
The HydroTherm Corporation
By:
Timothy P. Scanlan
WITNESS: PURCHASER:
SET Realty L.L.C.
By:
Matthew Mulhearn
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<PERIOD-END> DEC-31-1995
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