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, 1996
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. / X /
The aggregate market value of voting common shares held by nonaffiliates of the
registrant based upon the closing price for registrant's common stock as
reported in The Wall Street Journal as of March 31, 1997 such date was
$48,174,880.
The number of shares of the registrant's common stock issued and outstanding as
of March 31, 1997 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, 1997 are incorporated by reference into
Part III hereof and the exhibits to filings referenced on Pages 40 through 43 of
Part IV hereof are incorporated by reference into Part IV hereof.
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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 makeup air
units. The purchase price for the assets acquired, net of liabilities assumed,
was $1,819,000.
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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. In January
of 1997 the Company pre-paid the contingent purchase price.
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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 February 2, 1996, the Company acquired all of the issued and
outstanding common stock of Omega Flex, Inc. of Exton, Pennsylvania (Omega).
Omega is a manufacturer of flexible metal hose and related hose fabrications.
The purchase price paid for the acquired stock was $9,119,000. Liabilities
assumed were $833,000. The Company has accounted for this acquisition under the
purchase method of accounting. Omega has leased its manufacturing and office
facilities through December 31, 2001, for $182,000 per year which will increase
to $268,146 per year once the 18,000 square foot addition is ready for
occupancy.
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 $5,495,000,
including the assumed liabilities of $1,900,000. The Company has accounted for
this acquisition under the purchase method of accounting. The Company has leased
the Rowe facility in Dallas, including machinery and equipment, on a short term
basis (through April 1997) at a cost of $40,000 per month.
On August 30, 1996, the Company acquired substantially all of the
operating assets of Dahlstrom Industries, Inc. (Dahlstrom) of Schiller Park,
Illinois. Dahlstrom is a leading manufacturer of roll-forming equipment for the
metal fabrication industry. The purchase price paid was $4,288,000 including
assumed liabilities of $2,606,000. The Company has accounted for this
acquisition under the purchase method of accounting.
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, and air conditioning equipment ("HVAC") manufacturing; computer
software development and systems design; and metal products. Each of these
segments is described below. The Company and its subsidiaries together employed
2,411 persons as of December 31, 1996.
HEATING, VENTILATING AND AIR CONDITIONING EQUIPMENT
The Company, through Mestek, Inc. and various of its wholly-owned
subsidiaries, (collectively, the "Reed Division") manufactures and distributes
products in the HVAC industry. These products include residential, commercial
and industrial hydronic heat distribution products, gas-fired heating and
ventilating equipment, louver and damper equipment, commercial and residential
gas and oil-fired boilers, air conditioning units, and related products used in
heating, ventilating and air conditioning systems.
The Reed Division sells finned-tube and baseboard radiation equipment
under the names "Sterling", "Vulcan", "Heatrim", "Petite-7", "Hydrotherm", and
"Suntemp", and other hydronic heat distribution products under the names
"Sterling" and "Beacon-Morris". The division sells gas-fired unit heaters under
the name "Sterling", radiant heating and commercial furnaces under the name "Cox
and gas-fired indoor and outdoor heating and ventilating equipment under the
names "Alton", "Applied Air", "Wing", "Air Fan", and "Temprite". Cooling and air
conditioning equipment is sold under the "Alton",
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"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. A number of these trade names are also registered
trademarks owned by the Company and its subsidiaries. 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 division's products are
manufactured at plants in Westfield, Massachusetts; South Windsor, Connecticut;
Farmville, North Carolina; Dallas, Texas; Orangeville, Ontario; Dundalk,
Maryland; and Wrens, Georgia. The Company closed its Skokie, Illinois and
Ridgeville, Indiana plants in 1996 and consolidated these operations in Dundalk,
Maryland and Farmville, North Carolina, respectively.
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".
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 2254 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. 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, 1996.
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
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Company has competitors with substantially greater manufacturing, sales,
research and financial resources than the Company. Competition in these
industries is based mainly on merchandising capability, service, quality, price
and ability to meet customer specifications. The Reed Division believes that it
has achieved and maintained its position as a substantial competitor in the HVAC
industry largely through the strength of its extensive distribution network, the
breadth of it product line and its ability to meet customer delivery and service
requirements. Most of its competitors offer their products in some but not all
of the industries served by the Reed Division.
The quarterly results of the HVAC segment are affected by the
construction industry's demand for heating equipment, which generally peaks in
the last four months of each year (the "heating season"). Accordingly, sales are
usually higher during the heating season, and such higher levels of sales may in
some years continue into the following calendar year. As a result of these
seasonal factors, the Company's inventories of finished goods reach higher
levels during the heating season and are generally lower during the balance of
the year.
Management does not believe that backlog figures relating to the HVAC
segment are material to an understanding of its business because most equipment
is shipped promptly after the receipt of orders.
The Company owns a number of United States and foreign patents.
Although the Company usually seeks to obtain patents where appropriate, it does
not consider any segment materially dependent upon any single patent or group of
related patents.
The Reed Division has a number of trademarks important to its business,
including those relating to its Sterling, Vulcan, Beacon-Morris, Heatrim, Wing,
Alton, Applied Air, Arrow, Aztec Sensible Cooling, Hydrotherm, Temprite and
Dynaforce product lines.
Expenditures for research and development for the HVAC segment in 1996,
1995, and 1994 were $814,000, $894,000, and $469,000, 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.
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New enhancements to its software products are continually being
developed by MCS. Notable developments in 1996 include the availability of all
MCS products in the Windows NT operating system environment. During 1996, 1995,
and 1994 MCS spent approximately $1,338,000, $1,208,576, and $910,000
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, 1996,
MCS's backlog was $1,838,000.
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.
METAL PRODUCTS (formerly Coil Handling Equipment)
The Company's Coil Handling Equipment Segment, which historically
included only its Cooper- Weymouth, Peterson (CWP) division, added four
additional units in 1996: the assets of Rowe Machinery and Automation Inc.,
(Rowe), a leading manufacturer of press-feeding and cut-to-length equipment,
acquired on February 5, 1996, the assets of Dahlstrom Industries, Inc.,
(Dahlstrom), a leading manufacturer of roll forming equipment, acquired on
August 30, 1996, National Northeast Corporation, (National) an aluminum extruder
and heat sink fabricator acquired on October 30, 1995, and Omega Flex, Inc.
(Omega) an industrial metal hose fabricator, acquired on February 2, 1996. The
Company re-named this segment the Metal Products Segment in 1996 in
consideration of these acquisitions.
The CWP, Rowe and Dahlstrom units manufacture a variety of
metal-forming equipment including coil straighteners, reels, press feeds,
cut-to-length lines, roll-formers, wing benders and related equipment. The
Company believes it has improved its competitive position within this industry
by developing servo- driven feeders with microprocessor controls, affording
diagnostic and operational features, as well as by the strategic acquisitions
made in 1996 which broaden the Company's overall product offerings.
Certain products made by these units are custom designed and
manufactured to meet unique customer needs or specifications 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 unit's standard product
line.
The primary customers for such metal-forming equipment include contract
metal stampers, manufacturers of large and small appliances, commercial and
residential lighting fixtures, automobile accessories, office furniture and
equipment, metal construction and HVAC products.
The businesses of CWP, Rowe and Dahlstrom are highly competitive. CWP
has become a substantial competitor in the manufacture of coil handling
equipment through its abilities to meet customer delivery and service
requirements through its extensive distribution network. The Company expects
that these strengths will be further leveraged by the additions of Rowe and
Dahlstrom.
National extrudes and fabricates high precision aluminum heat sinks
(heat dissipation devices) for use in a wide variety of power control,
communications and related electronic and computer systems applications. Its
products are made through an extrusion process supported by a broad line of
secondary machining capabilities. National's application engineering and
fabrication capabilities have helped it become a substantial competitor in the
heat sink market place.
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Omega manufactures corrugated flexible stainless steel hose for use in
a wide variety of industrial applications. It's products include annular,
helical and braided metal hose and hose fabrications and are sold primarily
through industrial hose distributors. In January of 1997, Omega introduced
Trac-PipeTM, a corrugated stainless steel tubing developed for use in piping gas
appliances. The Company expects that significant synergies will be realized by
distributing Trac-PipeTM through its extensive HVAC distribution network.
The backlog relating to this segment as a whole at December 31, 1996
was $14,364,000.
Expenditures for research and development for this segment, independent
of research and development related to specific customer requests, in 1996,
1995, and 1994 were $204,000, $0, and $68,000, 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 (HVAC segment) of the Company manufactures 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 Reed Division leases manufacturing space from unrelated
parties in Orangeville, Ontario, Canada; as well as warehouse space in
Mississauga, Ontario, Canada.
The metal products segment manufactures products at plants the Company
owns in Clinton, Maine and Schiller Park, Illinois and at leased facilities in
Dallas, Texas, Lawrence, Massachusetts, Winter Haven, Florida and Exton,
Pennsylvania.
During 1996 the Company constructed additions to its Dundalk, Maryland;
Farmville, North Carolina; and Clinton, Maine facilities in anticipation of
product relocations from leased facilities in Skokie, Illinois; Ridgeville,
Indiana; and Dallas, Texas. These transfers are expected to be completed in
1997.
The Company's computer system's segment (MCS) leases office space in
Monroeville, Pennsylvania, which houses its principal offices and computer
facility used in the computer software development and system design business.
MCS owns the computer equipment used in its operations.
The Company's principal executive offices in Westfield, Massachusetts
are leased from an entity owned by an officer and director of the Company. The
Company also owns an office building in Holland, Ohio.
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's Scranton, Pennsylvania manufacturing facility, classified
as Property Held for Sale at December 31, 1995, was sold on January 19, 1996, at
a pre-tax gain of $854,000. The Company's
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Hagerstown, Maryland facility was sold on April 1, 1996 at a pre-tax gain of
$590,000.
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 1996.
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 March 31,1997
was 1,601. The price range of the Company's common stock between January 1, 1997
and March 31,1997 was 16-1/8 to 18-1/8 and the closing price on March 31, 1997
was $16-1/4.
The quarterly price ranges of the Company's common stock during 1996
and 1995 as reported in the consolidated transaction reporting system were as
follows:
PRICE RANGE
1996 1995
---- ----
First Quarter $13-3/4 $12 $ 10-3/8 $ 9-5/8
Second Quarter $14-7/8 $12-1/2 $ 12-7/8 $ 9-3/4
Third Quarter $14-7/8 $14-3/8 $ 14-5/8 $12-1/4
Fourth Quarter $16-1/2 $14-5/8 $ 13-1/4 $10-3/4
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.
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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,
(dollars in thousands except per share data)
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Total assets ............ $170,010 $141,431 $120,430 $126,625 $137,158
Working capital ......... 59,274 41,626 36,628 37,238 58,279
Long-term debt, including
current portion ....... 15,362 3,031 5,548 20,860 32,104
Shareholders' equity .... 103,718 91,046 80,732 73,317 70,552
Common shareholders'
equity, per common
share (1) ........... $ 11.61 $ 10.14 $ 8.93 $ 7.96 $ 7.59
======== ======== ======== ======== ========
SUMMARY OF OPERATIONS - for the year ended December 31, (2) (dollars in
thousands except per share data)
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Total revenues from
continuing operations (3) $299,527 $245,865 $224,018 $231,386 $190,038
Income from continuing
operations ............. 13,329 10,906 9,298 7,583 5,410
Net income ............... 13,329 10,906 9,298 4,265 5,823
Earnings per common share:
Income from continuing
operations ............. $ 1.49 $ 1.21 $ 1.02 $ .82 $ .57
Net income ................ $ 1.49 $ 1.21 $ 1.02 $ .46 $ .62
1) Equity per common share amounts are computed using the common shares and
common stock equivalents outstanding as of December 31, 1996, 1995, 1994,
1993, and 1992.
(2) Includes the results of acquired companies or asset acquisitions from the
date of such acquisition, as follows:
* Dahlstrom Industries, Inc. from August 30, 1996.
* Rowe Machinery and Automation, Inc., from February 5, 1996.
* Omega Flex, Inc., from February 2, 1996.
* National Northeast Corporation and National Southeast 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.
(3) Revenues have been adjusted in 1993 and 1992 to reflect the
reclassification of revenues related to the Company's Environmental
Engineering Segment to Discontinued Operations.
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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RETURN ON AVERAGE NET ASSETS EMPLOYED
1996, 1995, 1994
The Company's Return on Average Net Assets Employed, defined as
operating profits before bonuses, 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 1996, 1995, and 1994 was as follows:
1996 1995 1994
------------ ------------ ------------
Operating Profits (as defined) $ 25,925,000 $ 22,515,000 $ 21,538,000
Average Net Assets Employed (as
defined) ................... $113,594,000 $ 94,956,000 $ 90,691,000
------------ ------------ ------------
Return on Average Net Assets
Employed .................. 22.8% 23.7% 23.8%
============ ============ ============
The 1996 return on Average Net Assets Employed was reduced slightly
from 1995 despite improved performances in the HVAC and Computer Systems
Segments due principally to the costs of certain product development, plant
relocation and other transitional costs incurred in the Company's Metal Products
segment which are described in greater detail below.
ANALYSIS: 1996 VS. 1995
The Company's core HVAC Segment reported comparative results for 1996
and 1995 as follows:
1996 1995
($ 000) 1996 ($ 000) 1995 $Net Change
--------- ------- --------- ------- -----------
Net Sales ...... $ 228,115 100.00% $ 218,456 100.00% +4.42%
Gross Profit ... 62,164 27.25% 60,052 27.49% +3.52%
Operating Income 16,142 7.08% 15,495 7.09% +4.18%
The growth in revenues in this Segment was principally attributable to
the effect of added sales from the acquisition of Heat Exchangers, Inc. on
November 15, 1995. Increases in volume in the Company's historical boiler,
damper and cooling products were largely offset by reduced volumes in certain of
the Company's residential and commercial hydronic products. Gross profit margins
were relatively unchanged in 1996 despite reductions in certain raw material
costs due to the offsetting effect of relocation and other transitional expenses
incurred in relation to the Company's Nesbitt and Koldwave divisions. Operating
income as a percentage of net sales was relatively unchanged from 1995.
The Company's Computer Systems Segment (MCS, Inc.) reported improved
sales, margins and operating profits in 1996 as indicated in the following
table:
11
<PAGE>
1996 1995
($000) 1996 ($000) 1995 $Net Change
------ ---- ------ ---- -----------
Net Sales ...... $16,114 100.00% $15,255 100.00% +5.63%
Gross Profit ... 6,865 42.60% 6,444 42.24% +6.53%
Operating Income 3,063 19.01% 2,749 18.02% +11.42%
MCS's success in 1996 reflects its continuing commitment to product
enhancement and customer support in the Durable Medical Equipment, Home Infusion
Therapy, and Home Health Services marketplaces.
The Company's Coil Handling Equipment Segment, which historically
included only the Cooper- Weymouth, Peterson division, added four additional
units in 1996: the assets of Rowe Machinery and Automation Inc., (Rowe), a
leading manufacturer of press-feeding and cut-to-length equipment, acquired on
February 5, 1996, the assets of Dahlstrom Industries, Inc., (Dahlstrom), a
leading manufacturer of roll forming equipment, acquired on August 30, 1996,
National Northeast, Corporation, (National) an aluminum extruder and heat sink
fabricator acquired on October 30, 1995, and Omega Flex, Inc. (Omega) an
industrial metal hose fabricator, acquired on February 2, 1996. The Company
re-named this segment the Metal Products Segment in 1996 in consideration of
these acquisitions. Comparative results, which were significantly affected by
these acquisitions, were as follows:
1996 1995
($000) 1996 ($000) 1995 $Net Change
------ ---- ------ ---- -----------
Net Sales ...... $55,298 100.00% $12,154 100.00% +454.98%
Gross Profit ... 13,199 23.87% 4,549 37.43% +290.15%
Operating Income 3,687 6.67% 1,926 15.85% +191.43%
The assimilation of the Rowe and Dahlstrom businesses and planning for
the relocation of the Rowe manufacturing operation to Clinton, Maine, home of
Cooper-Weymouth, Peterson, which is expected to be completed in 1997, imposed
significant direct and indirect costs on this segment in 1996 and overshadowed
otherwise excellent results reported by Cooper-Weymouth, Peterson. Significant
synergies are expected to be derived from this relocation in future years. Gross
Profit and Operating Income were also negatively effected by significant new
product development costs undertaken by Omega in anticipation of its January
1997 introduction of Trac-PipeTM, a corrugated stainless steel tubing developed
especially for use in the piping and installation of gas appliances.
As a whole the Company reported comparative results as follows:
1996 1995
($000) 1996 ($000) 1995 $Net Change
------ ---- ------ ---- -----------
Net Sales ...... $299,527 100.00% $245,865 100.00% +21.83%
Gross Profit ... 82,228 27.45% 71,045 28.90% +15.74%
Operating Income 22,892 7.64% 20,170 8.20% +13.49%
Gross Profit and Operating Income percentage margins were slightly
reduced overall principally due to the plant relocation and product development
costs described above.
12
<PAGE>
Sales expense for the Company as a whole, as a percentage of total
revenues, was reduced from 13.08% to 11.85%. (Sales Expense and General and
Administrative Expense for 1995, as reported in the accompanying financial
statements, have been adjusted to reflect certain reclassifications for purposes
of comparability). General and Administrative Expenses, as a percentage of
revenues, increased from 5.23% in 1995 to 5.40% in 1996, principally due to an
increase in the provision for bonuses. Engineering expense, as a percentage of
total revenues, increased slightly from 2.32% to 2.55%. Interest expense
increased substantially reflecting the various acquisitions made in 1996.
Income tax expense for 1996, as a percentage of pretax income, was
relatively unchanged at 39.39%.
The Company's Scranton, Pennsylvania manufacturing facility, classified
as Property Held for Sale at December 31, 1995 was sold on January 19, 1996 at a
gain of $854,000. The Company's Hagerstown, Maryland facility was sold on April
1, 1996 at a gain of $590,000.
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 principally 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.
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 16,
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%
13
<PAGE>
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%
Sales expense for the Company as a whole, as a percentage of total
revenues, was reduced from 13.37% to 13.08%. General and Administrative expenses
as a percentage of total revenues increased from 4.95% in 1994 to 5.29% 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.
14
<PAGE>
ANALYSIS: LIQUIDITY AND CAPITAL STRUCTURE
Working capital increased in 1996 in proportion to the Company's overall
growth, as indicated in the following table (all amounts in thousands):
12/31/96 Net Change 12/31/95 Net Change 12/31/94
$59,274 $17,648 $ 41,626 $4,998 $ 36,628
======= ============ ======== ====== ========
The Company's funded debt to equity ratio (including deferred
compensation and Minority Interest in National Northeast as funded debt)
decreased slightly, from 16.5% at December 31,1995, to 16.2% at December 31,
1996, despite the effect of the Company's 1996 acquisitions of Rowe, Omega and
Dahlstrom due to the offsetting positive effect of income on total equity.
The Company's Net Assets Employed grew from $106,099,000 at December 31,
1995 to $120,647,000 at December 31, 1996, due principally to the effects of the
acquisitions of Rowe, Omega and Dahlstrom, as more fully described in Note 2 to
the Consolidated Financial Statements.
Management regards the Company's current capital structure and banking
relationships as fully adequate to meet foreseeable future needs. The Company
has not paid dividends on its common stock since 1979.
ENVIRONMENTAL DISCLOSURE
The Company is subject to numerous laws and regulations that govern the
discharge and disposal of materials into the environment. The Company is not
aware, at present, of any material administrative or judicial proceedings
against the Company arising under any federal, state or local environmental
protection laws or regulations (Environmental Laws). There are, however, a
number of activities in which the Company is engaged under 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.
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.
15
<PAGE>
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
assignment 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
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.
16
<PAGE>
Item 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, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the years in the three year period ended December 31, 1996. 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.
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, 1996 and 1995, and the consolidated
results of their operations and their consolidated cash flows for each of the
years in the three year period ended December 31, 1996 in conformity with
generally accepted accounting principles.
We have also audited Schedule II of Mestek, Inc. and subsidiaries as of
December 31, 1996 and for each of the years in the three year period ended
December 31, 1996. In our opinion, the schedule presents fairly, in all material
respects, the information required to be set forth therein.
/S/ GRANT THORNTON LLP
GRANT THORNTON LLP
Boston, Massachusetts
March 28, 1997
17
<PAGE>
MESTEK, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31,
1996 1995
-------- --------
(Dollars in thousands)
ASSETS
Current Assets
Cash and Cash Equivalents .......................... $ 11,649 $ 1,405
Accounts Receivable - less allowances of
$1,701 and $1,377 ................................ 49,577 42,911
Unbilled Accounts Receivable ....................... 174 139
Inventories ........................................ 43,265 39,241
Deferred Tax Benefit ............................... 1,823 1,492
Other Current Assets ............................... 2,264 4,381
-------- --------
Total Current Assets ............................... 108,752 89,569
Property and Equipment - net .......................... 31,439 24,968
Equity Investments .................................... 8,778 8,778
Property Held for Sale ................................ -- 2,955
Other Assets and Deferred Charges - net .............. 6,786 8,097
Deferred Tax Benefit .................................. 280 448
Excess of Cost over Net Assets of Acquired Companies... 13,975 6,616
-------- --------
Total Assets ....................................... $170,010 $141,431
======== ========
See Accompanying Notes to Consolidated Financial Statements
18
<PAGE>
MESTEK, INC.
CONSOLIDATED BALANCE SHEETS (continued)
As of December 31,
1996 1995
-------- --------
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current Portion of Long-Term Debt ................... $ 115 $ 2,651
Accounts Payable .................................... 19,559 16,342
Accrued Salaries and Bonuses ........................ 4,886 3,218
Accrued Commissions ................................. 3,404 2,234
Progress Billings in Excess of Cost
and Estimated Earnings ............................. 2,899 2,904
Purchase Price Payable - National Northeast ......... -- 9,960
Customer Deposits ................................... 4,829 --
Other Accrued Liabilities ........................... 13,786 10,634
-------- --------
Total Current Liabilities ............................. 49,478 47,943
Long-Term Debt ........................................ 15,247 380
Deferred Compensation ................................. 18 22
-------- --------
Total Liabilities ..................................... 64,743 48,345
-------- --------
Minority Interest - National Northeast ............... 1,549 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 ................................... 94,794 81,465
Treasury Shares, at cost (680,364 and
634,864 common shares, respectively) ............... ( 6,040) ( 5,449)
Cumulative Translation Adjustment ................... ( 949) ( 883)
-------- --------
Total Shareholders' Equity .......................... 103,718 91,046
-------- --------
Total Liabilities and Shareholders'
Equity ....................................... $170,010 $141,431
======== ========
See Accompanying Notes to Consolidated Financial Statements.
19
<PAGE>
MESTEK, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31,
1996 1995 1994
-------- -------- --------
(Dollars in thousands, Except Earnings Per Common Share)
Net Sales ................................. $283,413 $230,610 $209,557
Net Service Revenues ...................... 16,114 15,255 14,461
-------- -------- --------
Total Revenues............................. 299,527 245,865 224,018
Cost of Goods Sold ........................ 208,050 166,009 149,180
Cost of Service Revenues .................. 9,249 8,811 8,928
-------- -------- --------
Gross Profit .............................. 82,228 71,045 65,910
Selling Expense ........................... 35,492 32,160 29,955
General and Administrative
Expense .............................. 16,202 13,004 11,084
Engineering Expense ....................... 7,642 5,711 5,734
-------- -------- --------
Operating Profit .......................... 22,892 20,170 19,137
Interest Expense .......................... ( 1,377) ( 718) ( 839)
Gain on Sale of Property .................. 1,444 -- --
Other Income (Expense), Net ............... ( 968) ( 1,317) ( 2,250)
-------- -------- --------
Income Before Income Taxes ................ 21,991 18,135 16,048
Income Taxes .............................. 8,662 7,229 6,750
-------- -------- --------
Net Income ................................ $ 13,329 $ 10,906 $ 9,298
======== ======== ========
Earnings per Common Share: ................ $ 1.49 $ 1.21 $ 1.02
======== ======== ========
Weighted Average Shares Outstanding ....... 8,938 9,019 9,137
(In Thousands) ======== ======== ========
See Accompanying Notes to Consolidated Financial Statements.
20
<PAGE>
<TABLE>
MESTEK, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the years ended December 31,
1996, 1995 and 1994
<CAPTION>
$5.00
Cumulative
Convertible Cumulative
Preferred Common Paid In Retained Treasury Translation
(Dollars In Thousands) Stock Stock Capital Earnings Shares Adjustment Total
- ---------------------- --------------- ----------- -------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1993 $ 7,209 $ 387 $ 8,323 $61,261 $ (3,203) $( 660) $ 73,317
Net Income 9,298 9,298
Common Stock Repurchased (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 Repurchase ( 641) ( 641)
Cumulative Translation Adjustment ( 49) ( 49)
------------ ---------- --------- -------- ---------- -------- ---------
Balance - December 31, 1995 $ - $ 479 $15,434 $81,465 $( 5,449) $( 883) $ 91,046
Net Income 13,329 13,329
Common Stock Repurchased ( 591) ( 591)
Cumulative Translation Adjustment ( 66) ( 66)
------------ ---------- ---------- -------- --------- --------- ---------
Balance - December 31, 1996 $ - $ 479 $15,434 $94,794 $(6,040) $( 949) $103,718
============ ========== ========== ========= ========= ======== =========
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
21
<PAGE>
MESTEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
1996 1995 1994
---------- --------- --------
(Dollars in thousands)
Cash Flows from Operating Activities:
Net Income $ 13,329 $ 10,906 $ 9,298
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation and Amortization 5,143 3,940 4,712
Provision for Losses on Accounts
Receivable, net of write offs 324 ( 63) ( 16)
Gain on Sale of Property ( 1,444) - -
Net Change in Minority Interest- ( 491) - -
National Northeast
Changes in assets and liabilities net
of effects of acquisitions and
dispositions:
Accounts Receivable ( 5,047) ( 2,972) 9,353
Unbilled Accounts Receivable ( 35) ( 15) ( 27)
Inventory 1,002 ( 3,176) ( 1,464)
Accounts Payable 1,109 ( 1,823) 3,841
Other Current Liabilities ( 2,212) ( 2,101) ( 2,745)
Progress Billings ( 5) 183 613
Deferred Compensation ( 4) ( 3) ( 7)
Other 4,399 ( 4,248) 797
---------- --------- --------
Net Cash Provided by Operating
Activities 16,068 628 24,355
---------- --------- --------
Cash Flows from Investing Activities:
Capital Expenditures ( 7,213) ( 2,963) ( 5,160)
Disposition of Property & Equipment 4,642 2,727 -
Acquisition of Businesses and Other
Assets Net of Cash Acquired (14,172) (15,595) ( 1,372)
Disposition of Business Segment - 6,000 -
---------- --------- --------
Net Cash Provided by (Used in)
Investing Activities (16,743) ( 9,831) ( 6,532)
---------- --------- --------
Cash Flows from Financing Activities:
Net Borrowings (Repayments) Under
Revolving Credit Agreement ( 1,725) 2,406 ( 5,866)
Principal Payments Under Long
Term Debt Obligations ( 1,699) ( 5,367) ( 9,446)
Proceeds from Issuance of Long
Term Debt 15,000 - -
Purchase Price Payable- - 9,960 -
National Northeast
Redemption of $5.00 Convertible
Preferred Stock - - ( 6)
Repurchase of Common Stock ( 591) ( 641) ( 1,605)
---------- --------- --------
Net Cash Provided by (Used in) 10,985 6,358 (16,923)
Financing Activities ---------- --------- --------
Net Increase (Decrease) in Cash and
Cash Equivalents 10,310 ( 2,845) 900
Translation effect on Cash ( 66) 49 ( 272)
Cash and Cash Equivalents -
Beginning of Year 1,405 4,201 3,573
---------- --------- --------
Cash and Cash Equivalents -
End of Year $ 11,649 $ 1,405 $ 4,201
========== ========= ========
See Accompanying Notes to Consolidated Financial Statements.
22
<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
The Company considers all highly liquid investments with a remaining
maturity of 90 days or less at the time of purchase to be cash equivalents. Cash
equivalents include investments in an institutional money market fund which
invests in U.S.Treasury bills, notes and bonds, and/or repurchase agreements
backed by such obligations.
Inventories
Inventories are valued at the lower of cost or market. Approximately
84% of the cost of inventories is determined 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 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.
23
<PAGE>
Excess of Cost Over Net Assets of Acquired Companies (Goodwill)
The Company amortizes goodwill on the straight line basis over the
estimated period to be benefitted. The acquisitions of assets of Rowe Machinery
and Automation, Inc., and Dahlstrom Industries, Inc., and the acquisition of
stock of Omega Flex, Inc. as more fully described in Note 2, resulted in
goodwill of approximately $7,700,000 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
the underlying acquired businesses is less than the carrying value of the
goodwill. Accumulated amortization of goodwill was $1,172,000 and $887,000 at
December 31, 1996 and 1995, respectively.
Advertising Expense
Advertising costs are charged to operations as incurred, such charges
aggregated $3,193,000, $2,942,000, and $2,655,000 for the years ended December
31, 1996, 1995 and 1994 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 $1,018,000, $894,000, and $537,000, for the
years ended December 31, 1996, 1995 and 1994, respectively.
Software Development Expenses
The Company's MCS, Inc. subsidiary is in the business of application
software and systems development. SFAS 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
$1,338,000, $1,209,000, and $910,000, for the years ended December 31,1996,
1995, and 1994, 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. Common
stock options, as more fully described in Note 15, did not effect the
computation of earning per share.
24
<PAGE>
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
The Company's Scranton, Pennsylvania manufacturing facility, classified
as Property Held for Sale at December 31, 1995, was sold on January 19, 1996, at
a pre-tax gain of $854,000. The Company's Hagerstown, Maryland facility was sold
on April 1, 1996 at a pre-tax gain of $590,000.
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
was 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 adoption of this standard in 1996 did not
materially impact the Company's financial condition or results of operations.
Reclassification
Reclassifications are made periodically to previously issued financial
statements to conform with the current year presentation.
25
<PAGE>
2. BUSINESS ACQUISITIONS
On February 2, 1996, the Company acquired all of the issued and
outstanding common stock of Omega Flex, Inc. of Exton, Pennsylvania (Omega).
Omega is a manufacturer of flexible metal hose and related hose fabrications.
The purchase price paid for the acquired stock was $9,119,000. Liabilities
assumed were $833,000. The Company has accounted for this acquisition under the
purchase method of accounting. Omega has leased its manufacturing and office
facilities through January 31, 2000, for $199,500 per year.
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
$5,495,000, including the assumed liabilities of $1,900,000. The Company has
accounted for this acquisition under the purchase method of accounting. The
Company has leased the Rowe facility in Dallas, including machinery and
equipment, on a short term basis at a cost of $40,000 per month.
On August 30, 1996, the Company acquired substantially all of the
operating assets of Dahlstrom Industries, Inc. (Dahlstrom) of Schiller Park,
Illinois. Dahlstrom is a leading manufacturer of roll-forming equipment for the
metal fabrication industry. The purchase price paid was $4,288,000 including
assumed liabilities of $2,606,000. The Company has accounted for this
acquisition under the purchase method of accounting.
Proforma unaudited results of operations for Omega, Rowe and Dahlstrom
for 1996 and 1995 are not provided herein, they deemed immaterial.
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 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 SHARE $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 $812,000 of 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 acquisitions.
26
<PAGE>
On November 1, 1994, pursuant to a motion approved by the United
States Bankruptcy Court for the District of New Mexico, the Company acquired
substantially all of the inventory, accounts receivable, and fixed tangible and
intangible assets of Aztec Sensible Cooling, Inc. (Aztec) a manufacturer of
evaporative cooling and other custom air handling equipment in Albuquerque, New
Mexico. The purchase price for the assets acquired was $1,372,000.
This acquisition was accounted for as a purchase. Accordingly, the
Company has included the results of this acquired business in its consolidated
statement of operations for the period starting with the acquisition date.
Supplemental proforma information is not deemed meaningful in that the
transaction is not material to the financial statements of the Company taken as
a whole.
3. INVENTORIES
Inventories consisted of the following at December 31:
1996 1995
------------ -------------
Finished Goods $ 11,004,000 $ 9,657,000
Work-in-progress 14,877,000 17,114,000
Raw materials 24,924,000 20,404,000
------------- -------------
50,805,000 47,175,000
Less provision for LIFO
method of valuation 7,540,000 7,934,000
------------ --------------
$ 43,265,000 $ 39,241,000
============ ==============
Progress billings exceeded related contract costs by $2,899,000, and
$2,904,000, at December 31, 1996 and 1995, respectively. As such, these amounts
are reported as a liability in the accompanying consolidated financial
statements.
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31:
Depreciation and
Amortization Est.
1996 1995 Useful Lives
------------- ------------ ----------------
Land $ 1,092,000 $ 777,000
Buildings 13,657,000 11,035,000 19-39 Years
Leasehold Improvements 4,186,000 3,119,000 15-39 Years
Equipment 51,183,000 43,857,000 3-10 Years
------------- -------------
70,118,000 58,788,000
Accumulated Depreciation (38,679,000) (33,820,000)
-------------- -------------
$ 31,439,000 $ 24,968,000
============== ==============
The above amounts include $437,000, and $144,000, at December 31, 1996
and 1995, 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 $5,143,000, $3,864,000, and
$4,669,000, for the years ended December 31, 1996, 1995, and 1994, respectively.
27
<PAGE>
5. EQUITY INVESTMENTS
H. B. Smith Company Incorporated (HBS)
The Company's investment in HBS is carried at a zero balance 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, 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 the Company 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
1996, 1995, and 1994.
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 $1,352,000 and $3,272,000 at December 31, 1996 and 1995,
respectively.
6. LONG TERM DEBT
Long-Term Debt consisted of the following:
Dec. 31, Dec. 31,
1996 1995
----------- ----------
Senior Notes $15,000,000 $ -
Revolving Loan Agreement - 1,725,000
Note Payable Bank - 711,000
Other Bonds and Notes Payable 362,000 595,000
------------ ------------
15,362,000 3,031,000
Less Current Maturities ( 115,000) (2,651,000)
------------ -------------
$15,247,000 $ 380,000
============ =============
Senior Notes - On April 5, 1996, the Company borrowed $15,000,000 from a
commercial insurance company on an unsecured basis, executing a Note Purchase
Agreement and related Senior Notes, (the Notes). The Notes mature March 1, 1998
and bear interest at 5.53%. The Note Purchase Agreement contains a number of
financial covenants which limit the Company's overall debt, its dividends, and
in certain circumstances, its ability to effect acquisitions and/or
divestitures. The Company's management does not believe that these limitations
will materially affect the Company's future operations or strategic plans.
Revolving Loan Agreement - On January 1, 1992, the Company entered into a
Revolving Loan Agreement and Letter of Credit Facility (the Agreement) with a
commercial bank. The Agreement, originally set to expire on January 1, 1993, has
been amended and extended through April 30, 1997. It currently provides $55
million of unsecured revolving credit and $10 million of standby letter of
credit capacity. Borrowings under the Agreement bear interest at a floating rate
based on the bank's prime rate
28
<PAGE>
less 1.00% or, at the discretion of the borrower, LIBOR plus a quoted market
factor or, alternatively, in lieu of the prime based rate, a rate based on the
overnight Federal Funds Rate. Management expects to renew the Agreement on a one
year basis prior to April 30, 1997. 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 $3,233,000, and $3,242,000, at
December 31, 1996 and 1995, respectively.
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, 1996 was $178,000. 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, 1996 are $143,702 and $41,241 respectively, and the
notes mature on May 1, 2001 and March 31, 1997, respectively.
Cash paid for interest was $1,377,000, $718,000, and $839,000, during the
years ended December 31, 1996, 1995, and 1994, respectively.
Maturities of long-term debt in each of the next five years are as
follows:
1997 - $ 115,000
1998 - $ 15,079,000
1999 - $ 85,000
2000 - $ 57,000
2001 - $ 26,000
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 debt and the contractual
values of the outstanding letters of credit approximate their fair values as of
December 31, 1996.
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, 1996, 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 22, 1996, 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, 1996
no shares of the Preferred Stock have been issued.
29
<PAGE>
8. INCOME TAXES
Income before income taxes included foreign earnings (losses) of
($474,000), $217,000 and ($606,000) in 1996, 1995, and 1994, respectively.
Income tax expense (benefit) consisted of the following:
1996 1995 1994
------------ -------------- ----------
Federal Income Tax:
Current $7,259,000 $5,894,000 $5,298,000
Deferred ( 134,000) ( 174,000) ( 89,000)
State Income Tax:
Current 1,551,000 1,543,000 1,534,000
Deferred ( 29,000) ( 46,000) ( 5,000)
Foreign Income Tax:
Current 15,000 12,000 12,000
Deferred - - -
------------- ------------ -----------
Income Taxes $8,662,000 $7,229,000 $6,750,000
============= =========== ============
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 to earnings before income tax, as follows:
1996 1995 1994
------------ ------------ -----------
Computed "expected" income tax $ 7,736,000 $6,347,000 $5,617,000
State income tax, net of
federal tax benefit 989,000 973,000 994,000
Benefit of foreign loss not
allocated to income statement - - 212,000
Foreign tax rate differential ( 14,000) ( 15,000) ( 82,000)
Change in beginning year balance
of the valuation allowance for
deferred tax assets allocated
to income tax expense - ( 76,000) -
Other - net ( 49,000) - 9,000
------------- -------------- -----------
Income Taxes $8,662,000 $7,229,000 $6,750,000
============= ============== ===========
30
<PAGE>
A deferred income tax (expense) benefit results from temporary timing
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, 1996 are as follows:
Change
December 31, (Expense) December 31,
1995 Benefit 1996
------------- ------------- ------------
Deferred Tax Assets:
Warranty Reserve $ 662,000 $ 113,000 $ 775,000
Compensated Absences 721,000 100,000 821,000
Inventory Valuation 350,000 14,000 364,000
Accounts Receivable Valuation 557,000 125,000 682,000
State Tax Operating Loss
Carryforward 192,000 ( 51,000) 141,000
Foreign Tax Operating Loss
Carryforward 629,000 83,000 712,000
Deferred Income on Sale of Assets
to Nonconsolidated Investees 213,000 - 213,000
------------- ------------ -----------
Total Gross Deferred Tax Assets 3,324,000 384,000 3,708,000
Less Valuation Allowance ( 119,000) - ( 119,000)
------------ ------------ -----------
Deferred Tax Assets 3,205,000 384,000 3,589,000
------------ ------------ -----------
Deferred Tax Liabilities:
Prepaid Expenses ( 578,000) - ( 578,000)
Depreciation ( 326,000) (261,000) ( 587,000)
Other ( 361,000) 40,000 ( 321,000)
------------ ------------ -----------
Deferred Tax Liabilities ( 1,265,000) (221,000) (1,486,000)
------------ ------------ -----------
Net Deferred Tax Assets $ 1,940,000 $ 163,000 $2,103,000
=========== ============ ===========
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 year. At December 31, 1996, no
additional 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 carry forwards 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, 1996, the Company has state tax operating loss and
foreign tax operating loss carryforwards of approximately $2,932,000 and
$1,430,000, respectively, which are available to reduce future income taxes
payable, subject to applicable "carryforward" rules and limitations. These
losses expire as follows:
State Foreign
1998 $ 436,000 $ -
2000 - 1,430,000
2007 2,496,000 -
------------ ------------
$2,932,000 $1,430,000
============ ============
Cash paid for income taxes was $7,354,000, $8,222,000 and $ 5,990,000,
for the years ended December 31, 1996, 1995, and 1994 respectively.
31
<PAGE>
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, 1996 including the effect of renewals and amendments executed
subsequent to December 31, 1996 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 $ 576,000
Land and Building - Engineering 07/01/83 15 years 42,000 63,000
Land and Building - South Complex 01/01/94 15 years 256,800 3,081,600
Machinery & Equipment 01/01/93 5 years 41,460 41,460
(Westfield, Farmville and Wrens
Locations)
Machinery Rental
Machinery & Equipment 01/01/93 5 years 223,980 223,980
(Westfield, Farmville, Wrens,
South Windsor and Clinton Locations)
Elizabeth C. Reed Trust
Machinery & Equipment 01/01/93 5 years 14,100 14,100
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 324,000 648,000
MacKeeber
(South Windsor Location) 01/01/97 8 years 324,600 2,596,800
Rent expense for operating leases, including those with related parties,
was $3,454,000, $2,581,000 and $2,433,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
Future minimum lease payments under all noncancelable leases as of December
31, 1996 are as follows:
Operating
Year Ending December 31, Leases
1997 $ 2,427,000
1998 2,144,000
1999 1,794,000
2000 1,195,000
2001 850,000
After 2001 2,770,000
-------------
Total minimum lease payments $11,180,000
=============
32
<PAGE>
10. EMPLOYEE BENEFIT PLANS
The Company maintains a qualified non-contributory profit-sharing plan
covering all eligible employees. Contributions to the plan were $872,000,
$828,000, and $789,000, for the years ended December 31, 1996, 1995, and 1994,
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 $247,000, $252,000, and $176,000, for the years
ended December 31, 1996, 1995, and 1994, 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
$349,000, $243,000, and $212,000 for the years ended December 1996, 1995, and
1994, 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, 1996, 1995, and 1994 was $70,000, $64,000, and $59,000, respectively.
The Company maintains bonus plans for its officers and other key
employees. The plans generally allow for annual bonuses for individual employees
based upon the operating results of related profit centers in excess of a
percentage of the Company's investment in the respective profit centers. The
Company also has employment agreements with certain executive officers.
40% of the Company's employees are covered under collective bargaining
agreements, of which 15% are covered under agreements expected to be renewed in
1997.
11. COMMITMENTS AND CONTINGENCIES
The Company is 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
33
<PAGE>
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.
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,
1996 was $1,204,000.
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 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 operates in the following segments: heating, ventilating and
air conditioning equipment (HVAC); computer software development and system
design (Computer Systems); and the manufacture of metal handling machinery and
metal fabricating, (Metal Products), formerly known as the Coil Handling
Equipment Segment.
The HVAC segment includes the design and manufacture primarily of
residential, commercial and industrial hydronic heat distribution products,
including finned-tube and baseboard radiation equipment, gas-fired heating and
ventilating equipment, air damper equipment and related products used in air
distribution.
The Computer Systems segment includes the development, sale,
installation, and maintenance of business applications software.
The Metal Products Segment includes the design and manufacture of
metal-forming equipment, the extrusion and fabrication of aluminum products, and
the fabrication of flexible metal hose.
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.
34
<PAGE>
The following table presents segment information for the years ended
December 31, 1996, 1995, and 1994. Segment information reflecting the operations
of acquired businesses is shown only for the periods following acquisition.
1996 1995 1994
---------- ---------- ---------
(Dollars in thousands)
Total Revenues
HVAC $ 228,115 $ 218,456 $ 200,445
Computer Systems 16,114 15,255 14,461
Metal Products 55,298 12,154 9,112
---------- ----------- ----------
Total Revenues $ 299,527 $ 245,865 $ 224,018
========== =========== ==========
Operating Profit
HVAC $ 16,142 $ 15,495 $ 15,310
Computer Systems 3,063 2,749 2,244
Metal Products 3,687 1,926 1,583
--------- ----------- -----------
Total Operating Profit $ 22,892 $ 20,170 $ 19,137
========= =========== ===========
Other information regarding the segments for the years 1996, 1995, and 1994
is as follows:
1996
Identifiable assets Capital Depreciation
(at year-end) expenditures * expense
(Dollars in thousands)
HVAC $ 120,020 $ 3,950 $ 3,020
Computer Systems 6,899 204 20
Metal Products 43,091 3,059 1,818
----------- --------- ---------
Total $ 170,010 $ 7,213 $ 4,858
=========== ========= =========
1995
Identifiable assets Capital Depreciation
(at year-end) expenditures * expense
(Dollars in thousands)
HVAC $ 112,259 $ 2,416 $ 3,535
Computer Systems 6,772 25 69
Metal Products 22,400 522 260
------------ ----------- -----------
Total $ 141,431 $ 2,963 $ 3,864
============ =========== ===========
1995 segment data has been reclassified for purposes of comparability.
35
<PAGE>
1994
Identifiable assets Capital Depreciation
(at year-end) expenditures * expense
(Dollars in thousands)
HVAC $ 106,011 $ 4,635 $ 4,516
Engineering 6,000 - -
Computer Systems 4,866 135 62
Metal Products 3,553 390 91
------------- ------------- ----------
Total $ 120,430 $ 5,160 $ 4,669
============= ============= ==========
* Excludes capital assets acquired by acquisition.
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, 1996 and 1995, accounts receivable, net
of allowances, for the HVAC segment totaled $35,862,000 and $38,664,000,
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, 1996 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 1996 and 1995. (Dollars in thousands except per common share
amounts).
1996 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
Total Revenues $66,317 $68,191 $79,067 $85,952
Gross Profit $19,222 $18,678 $21,273 $23,055
Net Income $ 3,142 $ 2,741 $ 3,228 $ 4,218
Per Common Share:
Net Income $ .35 $ .31 $ .36 $ .47
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
36
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14. COMMON STOCK BUYBACK PROGRAM
In 1996 and 1995 the Company continued its program of selective
"open-market" purchases of common shares, originally announced in 1990. 45,500
and 60,440 of such shares were acquired in 1996 and 1995, respectively. All such
shares are accounted for as treasury shares as of December 31, 1996 and 1995,
respectively.
15. STOCK OPTION PLANS
On March 20, 1996 the Company adopted a stock option plan, the Mestek, Inc.
1996 Stock Option Plan, which provides for the granting of incentive and
nonqualified stock options on up to 500,000 shares of stock to certain employees
of the Company and other persons, including directors, for the purchase of the
Company's common stock at fair market value at the date of grant. The Plan was
approved by the Company's shareholders on May 22, 1996. Options granted under
the plan vest over a five-year period and expire at the end of ten years. During
1996, 90,000 options were granted, at an exercise price of $13.75, to four
employees and these options are outstanding at December 31, 1996.
Effective with 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation,
SFAS No. 123. As permitted by the statement, the Company has chosen to continue
to account for stock-based compensation using the intrinsic value method.
Accordingly, no compensation expense has been recognized for its stock-based
compensation plan. Had the fair value method of accounting been applied to the
Company's stock option plan, the impact on operating results would be
insignificant. Accordingly, the Company has omitted certain disclosures relating
to SFAS No. 123.
16. SUBSEQUENT EVENTS
On January 31, 1997, the Company acquired 91% of the issued and outstanding
common stock of Hill Engineering, Inc of Villa Park, Illinois and Danville,
Kentucky (Hill). The purchase price paid for the acquired stock was
approximately $5.1 million. Hill is a leading producer of precision tools and
dies for the gasket manufacturing and roll-forming industries and specialty
equipment.
37
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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, 1997, 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, 1997, 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, 1997, 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, 1997, and, to the extent required, is
incorporated herein by reference.
38
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PART IV
Item 14 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
INDEX
Pages of
this report
Independent Auditors' Reports Page 17
Financial Statements:
(a)(1)Consolidated Balance Sheets as of December 31, 1996
and 1995 Pages 18 and 19
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995, and 1994 Page 20
Consolidated Statements of Shareholders' Equity for
the Years Ended December 31, 1996, 1995, and 1994 Page 21
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995, and 1994 Page 22
Notes to the Consolidated Financial Statements Pages 23 thru 37
(a)(2) Financial Statement Schedules
II. Valuation and Qualifying Accounts Page 40
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 41 through 43
(b) No reports on Form 8-K were filed during the three months ended December
31, 1996.
No annual report to security holders as of December 31, 1996 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 1997. 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.
39
<PAGE>
Schedule II
MESTEK, INC.
Valuation and Qualifying Accounts
Years ended December 31, 1996, 1995 and 1994
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
1996 Allowance
for doubtful
accounts $1,377 $ 740 $ - $ 26 (1) $ (442)(2) $1,701
1995 Allowance
for doubtful
accounts $1,440 $ 867 $ - $ 76 (1) $(1,006)(2) $1,377
1994 Allowance
for doubtful
accounts $1,456 $ 248 $ - $ - $ (264)(2) $1,440
(1) Includes recoveries of amounts previously written-off and allowances for
doubtful accounts of acquired companies.
(2) Bad debts written off.
40
<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., as amended
3.2 By-laws of Mestek, Inc. as amended through April 1, 1993 (D)
10.1 Mestek, Inc. (formerly Reed National Corp.) Deferred Profit
Sharing Plan (A)
10.2 Employment Agreement dated January 1, 1982 between Mestek
and John E. Reed (A)
10.3 Lease dated July 1, 1983 between Sterling Realty Trust (lessor)
and Mestek, Inc. (lessee) (D)
10.4 Lease dated December 17, 1984 between Mestek (lessee) and Sterling
Realty Trust (lessor), as amended on November 1, 1991 (D)
10.5 Lease dated January 1, 1994 between Mestek (lessee) and Sterling
Realty Trust (lessor) (D)
10.6 Amended lease dated as of November 2, 1992 between Mestek
(lessee) and Rudbeek Realty Corp. (lessor) (D)
10.7 Amended and restated lease agreement dated as of January 1, 1997
between Vulcan Radiator Division, Mestek, Inc. (lessee) and
MacKeeber Associates Limited Partnership (lessor)
10.8 Equipment Lease Agreement dated January 1, 1993, between
Mestek (lessee) and Sterling Realty Trust (lessor) (D)
10.9 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. (A)
10.10 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. (A)
10.11 Note Agreement dated as of July 1, 1987 between Mestek,
Inc. and Massachusetts Mutual Life Insurance Company. (B)
41
<PAGE>
10.12 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 (C)
10.13 Acquisition Agreement dated July 29, 1993 for the Purchase
of Stock of Chester Environmental, Inc. between Duquesne
Enterprises, Inc. and Mestek, Inc. (D)
10.14 Variable Interest Rate Cognovit Note dated December 15,
1993 between Mestek, Inc. and The Mary Staebell Trust (D)
10.15 Loan Agreement and Promissory Note between Mestek, Inc.
and ABN Amro Bank, N.V., dated July 9, 1993 (D)
10.16 Loan Agreement and Promissory Note dated June 7, 1993
between The First National Bank of Boston and Mestek, Inc. (D)
10.17 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. (D)
10.18 Closing Agreement dated February 10, 1995 between Shougang
Mechanical Equipment of Pennsylvania, Inc. and West Homestead
Joint Venture Corporation. (E)
10.19 Equipment Lease Agreement dated January 1, 1993 between
Machinery Rental Company (Lessor) and Vulcan Radiator
Corporation (Lessee). (E)
10.20 Equipment Lease Agreement dated January 1, 1993 between Machinery
Rental Company (Lessor) and Mestek, Inc. (Lessee). (E)
10.21 Equipment Lease Agreement dated January 1, 1993 between Elizabeth
C. Reed Trust (Lessor) and Mestek, Inc. (Lessee). (E)
10.22 Asset Purchase Agreement dated September 9, 1994 between Mestek,
Inc. and Aztech International, Ltd., debtor-in-possession; and
Aztec Sensible Cooling, Inc., debtor-in-possession, and the
Amendment thereto dated October 31, 1994. (E)
10.23 Stock Purchase Agreement relating to the acquisition of stock 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. (F)
10.24 Asset Purchase Agreement dated November 15, 1995 by and between
Mestek, Inc. and Heat Exchangers, Inc. and Lease. (G)
10.25 Stock Purchase Agreement dated February 2, 1996 for the purchase
of stock of Omega Flex, Inc. between Mestek, Inc. and Koji Shimada
and Lease. (G)
10.26 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. (H)
42
<PAGE>
10.27 Asset Purchase Agreement dated October 2, 1995 by and between
Mestek, Inc.and Honeywell, Inc. (H)
10.28 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. (H)
10.29 Purchase Contract dated November 15, 1995 for the purchase and
sale of real property in Dunmore, Pennsylvania between
Peritek, Inc. and R.R. Donnelly & Sons Company. (H)
10.30 Amended and Restated Revolving Loan Agreement, Letter of Credit
Facility and Foreign Exchange Facilities between Mestek, Inc.
and Bay Bank, dated September 27, 1996.
10.31 Agreement for The Purchase and Sale of Assets between Formtek, Inc.
(Purchaser)and Dalhstrom Industries, Inc. (Seller) dated
August 8, 1996.
10.32 Stock Purchase Agreement between Formtek, Inc.(Purchaser) and Maurice
Hill Trust dated August 16, 1991, Thomas Nedbal, Donald Hill, Robert
Martinelli, Elmer Utley, and Allen Reczek (Sellers) dated January 30,
1997.
10.33 Letter Agreement between Mestek, Inc. and the Travelers Insurance
Company, dated March 1, 1996, regarding 5.53% Senior Notes due
March 1, 1998.
11.1 Schedule of Computation of Earnings per Common Share.
22.1 Subsidiaries of Mestek, Inc.
(A) Filed as an Exhibit to the Registration Statement 33-7101,
effective July 31, 1986
(B) Filed as an Exhibit to the Current Report on Form 8-K dated
July 2, 1987
(C) Filed as an Exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1987
(D) Filed as an Exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1993
(E) Filed as an Exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1994
(F ) Filed as an Exhibit to the Current Report on Form 8-K dated
November 13, 1995.
(G) Filed as an Exhibit to the Current Report on Form 8-K dated
February 13, 1996.
(H) Filed as an Exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1995.
<PAGE>
MESTEK, INC.
Schedule of Computation of Earnings Per Common Share
Years Ended December 31,
1996 1995 1994
---- ---- ----
Net income $ 13,329 $ 10,906 $ 9,298
Less: dividends on Preferred Stock - - -
--------- -------- -------
Net income for common shareholders $ 13,329 $ 10,906 $9,298
Add back dividends which would not have
been paid if $5.00 Convertible Preferred
Stock had been converted - - -
--------- -------- --------
Net income for earnings per share $ 13,329 $ 10,906 $ 9,298
-------- -------- --------
Weighted average number of common shares
outstanding 8,938 9,019 8,241
Common share equivalents resulting from
conversion of the $5.00 Convertible
Preferred Stock - - 896
-------- -------- -------
Total common shares and common share
equivalents 8,938 9,019 9,137
-------- -------- --------
Earnings per common share $1.49 $1.21 $1.02
======== ======== ========
43
<PAGE>
SUBSIDIARIES OF MESTEK, INC.
Jurisdiction
Corporate Name of Organization
Advanced Thermal Hydronics Delaware
Alapco Holding, Inc. Delaware
Deltex Partners, Inc. Delaware
Formtek, Inc. Delaware
Cooper-Weymouth, Peterson, Inc. Delaware
Hill Engineering, Inc. Illinois
Gentex Partners, Inc. Texas
Mestex, Ltd. Texas
Yorktown Properties, Ltd. Texas
HBS Acquisition Corp. Delaware
Homestead Holding, Inc. Delaware
Lexington Business Trust Massachusetts
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 Corp. Delaware
Westcast, Inc. Massachusetts
44
<PAGE>
Exhibit 10.12
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
David M. Kelly 1996
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
45
<PAGE>
Kevin R. Hoben 1996
Stephen M. Schwaber 1997
Phil K. LaRosa 1997
Robert P. Kandel 1997
Robert F. Neveu 1997
Richard E. Kessler 1997
Timothy P. Scanlan 1997
46
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this report be signed on its
behalf by the undersigned, thereunto duly authorized.
MESTEK, INC.
Date: April 2, 1997 By: /S/ JOHN E. REED
John E. Reed, Chairman of the Board
and Chief Executive Officer
Date: April 2, 1997 By: /S/ STEPHEN M. SHEA
Stephen M. Shea, Senior Vice President
Finance, 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 dates indicated.
Date: April 2, 1997 By: /S/ A. WARNE BOYCE
A. Warne Boyce, Director
Date: April 2, 1997 By: /S/ E. HERBERT BURK
E. Herbert Burk, Director
Date: APRIL 2, 1997 By: /S/ WILLIAM J. COAD
William J. Coad, Director
47
<PAGE>
Date: APRIL 2, 1997 By: /S/ DAVID M. KELLY
David M. Kelly, Director
Date: APRIL 2, 1997 By: /S/ WINSTON R. HINDLE, JR.
Winston R. Hindle, Jr., Director
Date: APRIL 2, 1997 By: /S/ DAVID W. HUNTER
David W. Hunter, Director
Date: APRIL 2, 1997 By: /S/ DAVID R. MACDONALD
David R. Macdonald, Director
Date: APRIL 2, 1997 By: /S/ JOHN E. REED
John E. Reed, Director
Date: APRIL 2, 1997 By: /S/ STEWART B. REED
Stewart B. Reed, Director
48
<PAGE>
RESTATED ARTICLES OF INCORPORATION
(Incorporating Amendments filed with the Secretary of State of the
Commonwealth of Pennsylvania on February 27, 1992 and June 23, 1995.)
1st. The name of the corporation is Mestek, Inc. (the "Corporation").
2nd. The purpose for which the Corporation is incorporated under the
Business Corporation Law of the Commonwealth of Pennsylvania, Act of May 5, 1933
(P.L. 364, No. 106), as amended, is to engage in, and to do, any lawful act
concerning any and all lawful business for which corporations may be
incorporated under said Business Corporation Law.
3rd. The location and post office address of the registered office of the
Corporation in the Commonwealth of Pennsylvania is c/o The Prentice-Hall
Corporation System, Inc., 319 Market Street, Harrisburg, Pennsylvania, 17101.
4th. The term for which the Corporation is to exist is perpetual.
5th. The authorized Capital Stock of the Corporation is 20,000,000 shares
of common stock without par value (the "Common Stock") and 10,000,000 shares of
preferred stock without par value (the "Preferred Stock").
A description of each class of Capital Stock which the Corporation shall
have the authority to issue and a statement of the designations, powers,
preferences, qualifications, limitations, restrictions and special or relative
rights in respect of each class or series of any class are as follows:
I. THE PREFERRED STOCK
The shares of Preferred Stock may be issued from time to time in one or
more series or classes. The Board of Directors of the Corporation is hereby
authorized to fix the designations and powers, preferences and relative,
participating, optional, special or other rights, if any, and
qualifications, limitations or other restrictions thereof, including,
without limitation, dividend rights and preferences over dividends on
Common Stock or any series or classes of Preferred Stock, the dividend rate
(and whether dividends are cumulative), conversion rights, if any, voting
rights, rights and terms of redemption, if any, (including sinking fund
provisions, if any) redemption price and liquidation preferences of any
wholly unissued series or class of Preferred Stock and the number of shares
constituting any such series or class and the designation thereof, or any
of them; and to increase or decrease the number of shares of any series or
class subsequent to the issue of shares of that series or class, but not
below the number of shares of such series or class then outstanding.
II. THE COMMON STOCK
Except for and subject to those rights expressly granted to the holders of
any series or class of the Preferred Stock pursuant to Section I of this
Article 5th and except as may be provided by applicable law, the holders of
Common Stock shall have exclusively all other rights of shareholders.
6th. Section 910 of the Business Corporation Law of the Commonwealth of
Pennsylvania, Act of May 5, 1933 (P.L. 364, No. 106), shall not be applicable to
the Corporation.
7th. The number of directors of the Corporation shall be such number, not
less than three or more than fourteen as shall be provided from time to time in
the by-laws, provided that no amendment to the by-laws decreasing the number of
directors shall have the effect of shortening the term of any incumbent
director.
AMENDED AND RESTATED
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") made as of the 1st day of January, 1997,
by and between MACKEEBER ASSOCIATES LIMITED PARTNERSHIP, a Connecticut limited
partnership, and its successors and assigns ("Landlord"), and MESTEK, INC., a
Pennsylvania corporation, by and through its Vulcan Radiator Division, and its
successors and assigns ("Tenant").
WHEREAS, Landlord and Tenant have previously entered into that certain
Lease Agreement dated January 16, 1984, as amended, with respect to the Premises
(as herein defined); and
WHEREAS, Landlord has constructed additional improvements to the Premises
which shall be occupied and used by Tenant pursuant to this Lease; and
WHEREAS, Landlord and Tenant desire to amend said lease agreement to
account for additional rent to be paid by Tenant for the new improvements, and
other changes to the terms and conditions of said lease agreement;
WITNESSETH
THAT FOR AND IN CONSIDERATION of the mutual covenants and agreements herein
contained, and intending to be legally bound, the parties hereto do hereby
covenant and agree as follows:
1. Lease of Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord that certain parcel of real property located 515 John Fitch
Boulevard, South Windsor, Connecticut, 06074, as more specifically described in
Exhibit A attached to this Lease, and the building thereon, comprising of
162,300 square feet of general manufacturing space, and all structures,
buildings, improvements and fixtures thereon, together with all rights,
privileges, easements, licenses and hereditaments appurtenant thereto (the
"Premises").
2. Term. This Lease shall commence on the date hereof (the "Commencement Date"),
and shall continue until December 31, 2004 (the "Initial Term"), subject to
further extension of such term as may hereafter be otherwise agreed in writing
between Landlord and Tenant. The Initial Term and any extension or renewal
thereof may be referred to as the "Term". Landlord and Tenant agree that this
Lease shall not be recorded.
2.1 Holding Over. If Tenant shall be in possession of the Premises after any
expiration or termination of this Lease, then, the tenancy under this Lease
shall be by sufferance of Landlord terminable at any time. In the event of any
such holdover by Tenant, all other obligations of Tenant under this Lease shall
continue during such holdover period.
3. Rent
3.1 Payment of Rent. Tenant covenants and agrees to pay Landlord at its offices
in Westfield, Massachusetts, or such other address as may be subsequently
directed by Landlord, rent in an amount equal to Three Hundred Twenty Four
Thousand Six Hundred and 00/100 Dollars ($324,600.00) per annum ($2.00/square
foot), payable in advance in equal monthly installments, beginning on the date
hereof and continuing on the first day of each month during the Term (the
"Rent"). The Rent shall be paid without deduction, set-off, discount or
abatement, except as provided in Sections 16 and/or 17 hereof, in the lawful
money of the United States.
3.2 Past Due Rent. If Tenant shall fail to pay any Rent within twenty (20) days
of when the same is due and payable, such unpaid amounts shall bear interest
from the due date thereof to the date of payment at the then current prime rate
of BayBank, or any successor thereto, as established from time to time, plus one
percent (1%), or such lesser rate which is the maximum allowed by law (the
"Default Rate"). It is not the intention of the parties to contract for, pay or
collect any interest in excess of the maximum lawful rate. In the event any sum
is paid by Tenant as interest in an amount which would be in excess of such
lawful rate, then such sum shall be deemed to be a prepayment by Tenant of its
immediately succeeding obligations under this Lease and shall not be deemed to
be interest.
3.3 Net Rent. It is the purpose and intent of Landlord and Tenant that the Rent
be absolutely net to Landlord, so that this Lease shall yield net to Landlord
the Rent as hereinbefore provided, and that all costs, expenses and obligation
of every kind or nature whatsoever, relating to the Premises, which may arise or
become due during the term of this Lease, shall be paid by Tenant and that
Landlord shall be indemnified and saved harmless by Tenant from and against the
same. The Rent may be adjusted annually on the anniversary of this Lease by
thirty (30) days prior written notice from Landlord to Tenant for the purpose of
yielding the Rent absolutely net to Landlord in accordance with this Section
3.3.
4. Insurance. At all times during the term of this Lease, Tenant
shall secure, keep in force and pay for directly, at Tenant's sole
expense, the following insurance:
4.1 Real Property Insurance. Tenant shall, at its sole cost and expense
and at all times during the Term, provide and keep in full force and effect fire
and extended coverage insurance on the Premises with a replacement cost
endorsement (if available) in an amount equal to at least eighty percent (80%)
of the full replacement cost of the improvements on the Premises, including
without limitation all fixtures located on or in the Premises. If the coverage
is available and commercially appropriate, such policy or policies shall insure
against all risks of direct physical loss or damage (except the perils of flood
and/or earthquake) including coverage for any additional costs resulting from
debris removal and reasonable amounts of coverage for the endorsement of any
ordinance or law regulating the reconstruction or replacement of any undamaged
sections of the Premises required to be demolished or removed by reason of the
enforcement of any building, zoning, safely or land use laws as the result of a
covered cause of loss.
4.2 Personal Property Insurance. Tenant shall, at Tenant's sole expense,
obtain and keep in force a policy of fire and extended coverage insurance with
respect to the Premises insuring Tenant against any and all property damage or
casualty loss or other hazards thereto, up to the fair market value of the
personal property of Tenant stored upon the Premises. Tenant is solely
responsible for the security of its personal property upon the Premises and
holds Landlord harmless for any loss thereof.
4.3 Liability Insurance. Tenant shall, obtain and keep in force during the
term of this Lease a policy of commercial public liability insurance with limits
not less than $500,000 per person and $1,000,000 per accident, insuring, Tenant
and, as additional insured, Landlord against any liability arising out of use,
occupancy, or maintenance of the Premises and all areas appurtenant thereto by
Tenant, its agents, employees, contractors, guests and invitees.
4.4 Workers' Compensation. Tenant shall, at Tenant's sole expense, obtain
and keep in force during the term of this Lease a policy of workers'
compensation covering any and all of its employees who may occupy or work upon
the Premises as required by the laws and regulations of the State of
Connecticut.
4.5 Landlord's Approval. Each policy evidencing such insurance shall (a)
name Landlord and any other of its designees as additional insureds (except with
respect to Tenant's own personal property and workers' compensation), (b) shall
contain a provision by which the insured agrees that such policy shall not be
canceled except after thirty (30) days' written notice to Landlord, and (c)
shall provide that coverage shall not be limited or denied by reason of the
provisions in this Lease, including those relating to limitations of liability
and waivers of subrogation and other rights. For all insurance policies procured
by Tenant, a certificate of such insurance shall be provided to Landlord upon
its written request. If Tenant shall fail to perform any of its obligations
under this Article 4, then in addition to any other remedies it may have,
Landlord may, but is not required to, perform the same, and the cost thereof,
together with interest thereon at the Default Rate, shall be deemed additional
rent and shall be payable upon Landlord's demand.
5. Utilities. At all times during the Term of this Lease, Tenant shall pay for
the cost of all utilities, including, but without limitation, water, gas, heat,
light, power, electricity, fuel, sewer charges, supplied to or consumed by
Tenant at the Premises together with any taxes thereon (collectively the
"Utilities"). If Tenant shall fail to perform any of its obligations under this
Article 5, then in addition to any remedies it may have, Landlord may, but is
not required to, perform the same, and the cost thereof, together with interest
thereon at the Default Rate, shall be deemed additional rent and shall be
payable upon Landlord's demand.
6. Taxes. Lessee shall pay the Real Property Taxes (which shall include any tax,
fee, levy, assessment or charge, or any increase therein imposed by reason of
events occurring, improvements being made to the Premises, or changes in
applicable law taking effect, during the term of this Lease) applicable to the
Premises during the term of this Lease. All such payments shall be made at least
10 days prior to the delinquency date of the applicable installment. Tenant
shall promptly furnish Landlord with satisfactory evidence that such taxes have
been paid. Any Real Property Taxes which relate to the fiscal period of the
taxing authority that fall outside of the Term, whether or not such Real
Property Taxes shall be imposed or become payable during the Term, shall be
ratably adjusted as between Landlord and Tenant. Nothing in this Lease shall
require Tenant to pay any franchise, estate, inheritance, succession, capital
levy, or transfer tax of Landlord, or any income tax, excess profits or revenue
tax, or any other tax, assessment, charge or levy upon the Rent.
7. Quiet Possession. Upon Tenant paying all of the obligations hereunder and
performing all of the covenants, conditions, and provisions on Tenant's part to
be observed and performed under this Lease, Tenant shall have quiet possession
of the Premises during the Term, subject to all the conditions, covenants and
provisions of this Lease. The Premises are leased subject to any and all
existing encumbrances, conditions, rights, covenants, easements, restrictions,
rights-of-way, and any matters of record, applicable zoning and building laws,
restrictions on use and such matters as may be disclosed by inspection or
survey.
8. Improvements and Alterations
8.1 Improvements by Tenant. Tenant shall not make any substantial alterations,
renovations or improvements or cause to be installed any fixtures costing in
excess of $10,000 in, on, or to the Premises or any part thereof (including,
without limitation, any structural alterations, or any cutting or drilling into
any part of the Premises or any securing of any fixture, apparatus or equipment
of any kind to any part of the Premises) unless and until Tenant shall have
caused plans and specifications therefor to have been prepared, at Tenant's
expense, by an architect or other duly qualified person and shall have obtained
Landlord's written approval thereof. Tenant shall be responsible for the cost of
any tenant improvements. Upon any expiration or termination of this Lease,
Tenant shall remain responsible for all costs of any tenant improvements and the
completion thereof, as set forth in the plans and specifications therefor and
the portion of the costs of any tenant improvements that are unpaid and
outstanding shall be immediately due and payable by any Tenant. All structures,
buildings, improvements and fixtures constructed or installed in, at or upon the
Premises, and any repairs thereto and substitutions and replacements therefore,
made at the Tenant's cost and expense shall at the expiration of the Term be and
remain the property of Landlord.
8.2 Mechanic's Liens. Tenant shall keep the Premises free from any liens
arising out of any work or service performed or material furnished by or for
Tenant or any person or entity claiming through or under Tenant whether for any
tenant improvements or otherwise. Prior to Tenant's performance of any
construction or other work on or about the Premises, whether for tenant
improvements or otherwise, for which a lien could be filed against the Premises,
Tenant shall take all action which is legally permissible to cause all such
liens which then or at any time in the future may be filed or claimed, to be
finally waived by all contractors, subcontractors, materialmen and all others
performing or to perform any such work. Notwithstanding the foregoing, if any
mechanic's or other lien shall be filed against the Premises, purporting to be
for labor, services or material furnished or to be furnished at the request of
Tenant, then Tenant shall at its expense cause such lien to be discharged of
record by payment, bond or otherwise, within twenty (20) days after the filing
thereof. If Tenant shall fail to cause such lien to be discharged of record
within such twenty (20) day period, Landlord, in addition to any other remedies
it may have, may, but is not required to, cause such lien to be discharged by
payment, bond or otherwise, without investigation as to the validity thereof or
as to any offsets or defenses thereto, and Tenant shall, upon demand, promptly
reimburse Landlord for all amounts paid and costs incurred, including attorneys'
fees, in having such lien discharged of record together with interest at the
Default Rate.
8.3 Contractor's Insurance. Prior to engaging any contractor, Tenant shall
require any contractor performing work on the Premises at Tenant's request or on
Tenant's behalf to carry and maintain such insurance in such amounts of coverage
as Landlord may require from time to time, including contractor's liability
coverage and workers' compensation insurance and to name Landlord as an
additional insured upon the contractor's insurance policy for the terms and
purpose of the work upon the Premises.
9. Use of Premises. Tenant's use and occupancy of the Premises shall be for the
purpose of assembly, manufacture, warehousing, storing and shipping of its
products (the "Products"). Tenant shall not use or permit the Premises to be
used for any other purpose without the prior written consent of Landlord. The
storage of the Products shall be accomplished in a neat and orderly manner
creating proper aisles and not in a manner that will interfere with the
operation of any building systems.
9.1 Prohibited Uses. Tenant shall not do or permit anything to be done in or
about the Premises which will materially obstruct or interfere with the rights
of Landlord or its employees, or to use or allow the Premises to be used for any
improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause,
maintain or permit any nuisance in, on or about the Premises. Tenant shall not
commit or allow to be committed any material waste in or upon the Premises,
reasonable wear and tear excepted. Tenant shall not cause or permit any
hazardous or toxic substance, material or waste including without limitation any
oil, pollutant, contaminant, hazardous waste, asbestos, or other hazardous
substance, as such term or similar terms are now defined, used or understood in
or under any federal, state, local or other governmental statute, rule,
regulation, ordinance or order which relates in any way to the protection of the
environment ("Environmental Laws") to be used, stored, released, dumped or
disposed of upon the Premises in violation of the Environmental Laws.
9.2 Compliance with Law. Tenant shall not use or permit the use of the Premises
in any way in conflict with any law or governmental rule or regulation. Tenant
shall, at Tenant's sole cost, promptly comply in all material respects with all
such laws and governmental rules and regulations and with the requirements of
any board of underwriters or other similar bodies now or hereafter constituted
relating to the condition, use or occupancy of the Premises whether or not
expressly ordered to do so by the applicable governmental authority. The
judgment of any court of competent jurisdiction or the admission of Tenant in
any action against Tenant that Tenant has violated in a material manner any
statute, regulation or rule, whether or not Landlord is a party, shall be
conclusive of the fact as between Landlord and Tenant.
10. Repairs and Maintenance. Tenant shall, at Tenant's own expense and at all
times, keep the Premises neat, clean, and in a sanitary condition, including the
neat and orderly storage of the Products. Except for the structure of the
buildings of which the Premises are a part, including the roof, exterior walls,
foundation, glass, doors, parking lots and driveways, plumbing, electrical,
heating and ventilation systems of such structures, the repairs and maintenance
of which are the responsibility of Landlord, Tenant shall make such repairs as
are necessary to maintain the Premises in as good condition as the Premises now
are, reasonable use and wear excepted. If Tenant refuses or neglects its duties
under this Section 10, then, at the expiration of thirty (30) days' written
demand to Tenant (or without demand in the case of emergency) Landlord may, but
is not required to, make, perform or cause such repairs as it deems necessary
and Tenant agrees to reimburse Landlord promptly upon demand for the cost
thereof, including interest thereon at the Default Rate.
11. Hold Harmless. To the extent permitted by law, and except to the extent of
Landlord's acts or omissions for which Landlord is negligent, Tenant shall
indemnify and hold Landlord harmless from and against any and all claims arising
from, in connection with or related to (a) Tenant's use of the Premises, (b) the
conduct of Tenant's business, (c) any activity, work, or other things, done,
permitted, or suffered by Tenant in or about the Premises, (d) any act or
negligence of Tenant or any officer, agent, affiliate, employee, guest or
invitee of Tenant.
12. Entry by Landlord. At any and all reasonable times during regular business
hours, Landlord reserves and shall have the right to enter the Premises to
inspect the same a reasonable number of times, to submit the Premises to
prospective purchasers or tenants, to repair the Premises and any portion of the
building that Landlord may deem necessary or desirable, without abatement of
rent, and may for that purpose erect scaffolding and other necessary structures
where reasonably required by the character of the work to be performed, using
best efforts to avoid blocking the entrance to the Premises and providing that
the business of Tenant shall not be interfered with unreasonably. Tenant hereby
waives any claim for damages or for any injury or inconvenience to or
interference with Tenant's business, and any loss of occupancy to quiet
enjoyment of the Premises. Landlord shall have the right to enter at any and all
times and to use any and all means which Landlord may deem proper to open any
doors or otherwise obtain access to the Premises in any actual or perceived
emergency, without liability to Tenant, and any entry to the Premises obtained
by Landlord by any of said means or otherwise shall not under any circumstances
be construed or deemed to be a forcible or unlawful entry into or a detainer of
the Premises or an eviction of Tenant from the Premises or any portion thereof.
13. Assignment and Subletting. Tenant shall not either voluntarily or by
operation of law assign, transfer, mortgage, pledge, hypothecate, or encumber
this Lease or any interest therein and shall not sublet the Premises or any part
thereof or any right or privilege appurtenant thereto or allow any person (the
employees, agents, servants, and invitees of Tenant excepted) to occupy or use
the Premises or any portion thereof. Any such assignment or subletting shall be
voidable by Landlord and may constitute a default under the terms of this Lease.
A consent by Landlord to one assignment, subletting, occupation, or use by any
other person shall not be deemed to be consent to any subsequent assignment,
subletting, occupation, or use by another person. A consent by Landlord to any
such assignment, subletting, occupation or use by any other person shall in no
way relieve Tenant of any liability under this Lease. It is understood and
agreed that Landlord may fully assign or encumber Landlord's interest in this
Lease as Landlord. Landlord may assign or encumber the Rent to any person,
partnership, corporation, or bank, and Tenant agrees when notified in writing by
the assignee of such assignment to make the rental payments to assignee under
the terms of said assignment.
14. Tenant's Default. The occurrence of any one or more of the
following events shall constitute an event of default and breach of
this Lease by Tenant:
14.1 Failure to Pay Obligations. Tenant fails to make any payment of the Rent
or any other payment required to be made by Tenant hereunder, as and when due,
where such failure shall continue for a period of five (5) business days after
written notice thereof by Landlord to Tenant.
14.2 Failure to Observe Other Covenants. Tenant fails to observe or perform any
of the covenants, conditions, or provisions of this Lease to be observed or
performed by Tenant, other than described in Section 14.1 herein, where such
failure shall continue for a period of twenty (20) days after written notice
thereof by Landlord to Tenant; provided, however, that if the nature of Tenant's
default is such that more than twenty (20) days are reasonably required for cure
of such condition, then Tenant shall not be deemed to be in default if Tenant
commences such cure within said twenty (20) days and thereafter diligently
prosecutes such cure to completion.
15. Remedies on Default. In the event of any default or breach of this Lease by
Tenant, Landlord may, at any time thereafter with or without notice or demand
and without limiting Landlord in the exercise of a right or remedy which
Landlord may have by reason of such default or breach, exercise any of the
following remedies:
15.1 Termination of Possession. Landlord may terminate immediately Tenant's
right to possession of the Premises by written notice to Tenant or any other
lawful means, terminate this Lease by written notice to Tenant, revoke Tenant's
right to any lease
concessions and recover the value of any such concessions made, re-enter and
take possession of the Premises and Tenant shall immediately surrender
possession of the Premises to Landlord.
15.2 Removal of Personal Property. In the event of a retaking of possession of
the Premises by Landlord, Tenant shall remove all personal property located
thereon and, upon failure to do so upon demand of Landlord, Landlord may remove
and store the same in any place selected by Landlord, including without
limitation a public warehouse, at the expense and risk of Tenant. If Tenant
shall fail to pay the cost of storing any such property after it has been stored
for a period of thirty (30) days of more, Landlord may sell any or all of such
personal property at a public or private sale or auction and shall apply the
proceeds of such sale first to the cost of such sale, secondly to the payment of
the charges for storage, if any, and thirdly to the payment of any other sums of
money which may be due from Tenant to Landlord under the terms of this Lease,
and the balance, if any, to Tenant.
15.3 Other Remedies. In addition to the foregoing, Landlord may pursue any
other remedy now or hereafter available to Landlord under the laws or judicial
decisions of the State of Connecticut. It is understood and agreed that
Landlord's remedies hereunder are cumulative, and the exercise of any right or
remedy shall not constitute a waiver, merger or extinguishment of any other
right or remedy.
16. Damage. In the event the Premises are rendered untenantable in whole or in
part by fire, the elements or other casualty during the term of this Lease,
Tenant shall immediately notify Landlord, specifically stating any repairs
needed to maintain the Tenant's manufacturing operation at the Premises.
Landlord may elect not to restore or rebuild the Premises and shall so notify
Tenant. In such an event, Tenant may, at its option (a) vacate the Premises and
this Lease shall terminate effective thirty (30) days after such notice is
delivered with an abatement of the Rent payable with respect to the time period,
or (b) occupy that portion of the Premises which remains tenable with an
abatement of the Rent in the amount equal to the rent for the untenable portion
of the Premises.
17. Eminent Domain. In the event of any taking or appropriation whatsoever,
Landlord shall be entitled to any and all awards, payments or settlements which
may be given, made or ordered and Tenant shall have no claim against the
condemning authority or Landlord for the value of any unexpired term of this
Lease, and Tenant hereby assigns to Landlord any and all claims to any award,
payments or settlement. Nothing contained herein shall be deemed to give
Landlord any interest in or to require Tenant to assign to Landlord any award
made to Tenant for the taking of personal property or fixtures belonging to
Tenant, for the interruption of or damage to Tenant's business, or for Tenant's
moving expenses.
18. Signs. Tenant may, at Tenant's sole expense, place an external sign on the
Premises, provided such sign has been approved in advance by Landlord, and
provided such sign does not violate any statute or regulation existing during
the term of this Lease. Tenant shall pay the costs of removal of such sign upon
termination of the Lease, and such sign shall remain the property of Tenant. At
any time within 180 days prior to the expiration of the Term, Landlord may place
upon the Premises "for lease", "for sale" or other signs.
19. Subordination. Tenant agrees that this Lease shall be subordinate to any
mortgage or deed of trust that is now or may hereafter be placed upon the
Premises and to any and all advances to be made thereunder, to the interest
thereon, and all renewals, replacements, and extensions thereof; provided, the
lender secured by and named in such mortgage or deed of trust shall agree in
writing to recognize this Lease of Tenant in the event of foreclosure, if Tenant
is not in default. Tenant agrees to take all actions and to execute and deliver
all certificates, instruments, documents and agreements, including, without
limitation, agreements of subordination, waiver and attornment, necessary or
proper to effect the foregoing.
20. Authority of Parties. Each of Tenant and Landlord represents and warrants
that it is a corporation duly organized and in good standing and that the
execution, delivery and performance of this Lease has been duly authorized by
all requisite corporate action. Each individual executing this Lease on behalf
of the corporation that is a party hereto represents and warrants that he or she
is duly authorized to execute, deliver and perform this Lease for, in the name
of and on behalf of the respective party, in accordance with the bylaws of such
corporation, and that this Lease is legally binding upon and enforceable against
such entity in accordance with its terms. Upon request, each of Tenant and
Landlord agrees to provide a Certificate of Officer verifying the authority and
position of each signatory.
21. General Provisions. Landlord and Tenant agree to the following
general provisions:
21.1 Waiver. A waiver by Landlord of any term, covenant, or condition herein
contained shall not be deemed to be a future waiver of such term, covenant, or
condition, nor the waiver of any other term, covenant or condition herein
contained. The subsequent acceptance of any payment hereunder by Landlord shall
not be deemed to be a waiver of any preceding default by Tenant of any term,
covenant, or condition of this Lease.
21.2 Time. Time is of the essence of this Lease and each and
all its provisions in which performance is a factor.
21.3 Headings. The heading and section titles of this Lease are not a part of
this Lease and shall have no effect upon the construction or interpretation of
any part hereof.
21.4 Successors and Assigns. The covenants and conditions herein contained
subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators, and permitted assigns of the parties
hereto.
21.5 Prior Agreements. This Lease contains all of the agreements of the parties
hereto with respect to any matter covered or mentioned in this Lease, and no
prior agreements or understandings pertaining to any such matters shall be
effective or binding upon any party. In case of conflict or ambiguity, the terms
of this Lease shall govern.
21.6 Inability to Perform. This Lease and the obligations of Tenant hereunder
shall not be affected or impaired because Landlord is unable to fulfill any of
Landlord's obligations hereunder or is delayed in doing so, if such inability or
delay is caused by reason of strike, labor troubles, or acts of God so long as
Landlord makes a good faith effort to fulfill its obligations promptly after the
cause of such inability or delay has abated.
21.7 Partial Invalidity. Any provisions of this Lease which shall prove to be
invalid, void, or illegal shall in no way affect, impair, or invalidate any
other provision hereof, and such other provisions shall remain in full force and
effect.
21.8 Cumulative Remedies. No remedy or election of Landlord
hereunder shall be deemed exclusive, but shall whenever possible be
cumulative with all other remedies at law or in equity.
21.9 Governing Law. This Lease shall be governed by and
construed in accordance with the laws of the State of Connecticut.
21.10 Real Estate Commission. No broker is due any finders' or
brokers' commissions with respect to this Lease or the payment of any
rent hereunder.
21.11 Subrogation Waiver. Landlord and Tenant each hereby release the
other and waive all rights of recovery against the other for loss or damage
arising out of the perils described in any policy of insurance in force at the
time of the loss to the extent permissible under such policies.
21.12 Notice. 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 Landlord:
Mackeeber Associates Limited Partnership
260 North Elm Street
Westfield, MA 01085
If to Tenant: Copy to:
Mestek, Inc. Mestek, Inc.
515 John Fitch Blvd. 260 North Elm Street
South Windsor, CT 06074 Westfield, MA 01085
Attention: John W. Kaddaras Attention: Stephen Shea
21.14 Survival. All agreements, covenants, warranties, representations and
indemnification contained herein or made in writing pursuant to the terms of
this Lease by or on behalf of Tenant shall be deemed material and shall survive
the expiration or sooner termination of this Lease.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused their duly authorized
representatives to execute this Lease Agreement as of the date first written
above.
LANDLORD:
MACKEEBER ASSOCIATES LIMITED PARTNERSHIP
By: /s/ John E. Reed
John E. Reed, General Partner
TENANT:
MESTEK, INC., VULCAN RADIATOR DIVISION
By: /s/ John W. Kaddaras
John W. Kaddaras,
Executive Vice President-Vulcan Radiator Division
AMENDED AND RESTATED
REVOLVING LOAN,
LETTER OF CREDIT FACILITY AND
FOREIGN EXCHANGE FACILITIES AGREEMENT
AGREEMENT made as of September 27, 1996 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 an
Amended and Restated Loan Agreement, Letter of Credit Facility and Foreign
Exchange Facilities Revolving Loan Agreement and Letter of Credit Facility
originally dated December 20, 1995.
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 , Letter of Credit Facility and Foreign Exchange
Facilities Agreement, 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 Section 2.18 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;
(c) If an Interest Period is other than the typical LIBOR market
interest period of 7, 14, 21, 30, 60, 90, 180, 270 or 360 days, the
Bank will nonetheless facilitate such Borrower-requested atypical
Interest Period, utilizing reasonable extrapolation methodology to
establish the LIBOR Interest Rate for such Interest Period.
"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 utilizing reasonable
extrapolation methodology, if necessary, depending upon the Interest Period
selected by the Borrower 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, after substitution at Borrower's election, an Overnight Loan) 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) the FX Facility as evidenced by the Back-Up FX Demand Note
described in Section 2.18 below.
"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 Note, the Back-Up L/C Demand Note, the
Backup Foreign Exchange Facility Note 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 or Foreign Exchange Facilities, and (iii) guaranty obligations.
"Overnight Lending Rate" means the rate designated as the Overnight
Federal Funds Rate charged among commercial banks for overnight use of one
million dollars or more and applicable and charged to the Bank as such.
"Overnight Loan" means any Loan when and to the extent that the
interest rate therefor is determined by reference to the Overnight Lending
Rate.
"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 Note" shall have the meaning assigned to such term in
Section 2.4.
"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, 1997, but if the Revolving Line of
Credit Loan is extended or renewed, at the Bank's discretion, the
Termination Date shall be 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,
Fifty-Five Million Dollars ($55,000,000.00) (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 (or Overnight Loans, after
that method of interest calculation has been substituted for the Prime Loan
method) 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
Overnight Loans, after that method of interest calculation has been
substituted for the Prime Loan method) 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 a Prime Loan (or Overnight Loan, after that method of interest
calculation has been substituted for the Prime Loan method) into a LIBOR
Loan and vice versa 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 Overnight Loan, after that method of interest calculation has been
substituted for the Prime Loan method), 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 (or Overnight Loan, after that method of interest calculation has been
substituted for the Prime Loan method) 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 (or
Overnight Loans, after that method of interest calculation has been
substituted for the Prime Loan method), 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 (or Overnight Loans, after that method of interest
calculation has been substituted by Borrower for the Prime Loan method).
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 (or Overnight Loan, after that method of interest calculation has
been substituted by Borrower for the Prime Loan method) 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)(a) For a Prime Loan at a rate equal to the
Prime Rate less one percent (1.00%);
or in the alternative upon Borrower's election prior to the
Termination Date and upon payment of an annual fee of $25,000.00
prorated for the number of days outstanding from the date of
Borrower's election to the Termination Date:
(b) For an Overnight Loan at a rate equal to the Overnight Lending
Rate plus 75 basis points. At the time of such election all
existing Prime Loans shall be converted to Overnight Loans and the
Prime Rate option shall not be available thereafter;
(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.
Any change in the interest rate based on the Overnight Rate resulting
from a change in the Overnight Rate shall be effective as of the opening of
business on the day on which such change in the Overnight Rate becomes
effective.
Interest on each Prime Loan, or Overnight Loan, as the case may be,
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, or Overnight Loan, as the case may be, 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%)(or, after the Overnight Lending Rate method has been
selected by the Borrower, then at a rate equal to the Overnight Lending
Rate plus 275 basis points); 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 (the "Revolving 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 Revolving 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
Revolving 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 Note.
On and after the Termination Date, the unpaid principal amount of the
Revolving 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 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 Note, the Back-Up L/C Demand
Note, the Letter of Credit Facility, the Back-up Foreign Exchange Notes or
the Foreign Exchange Facility shall constitute a default of this Agreement
and any default of this Agreement shall constitute a default of the
Revolving Note, the Back-Up L/C Demand Note, the Letter of Credit Facility,
the Back-up Foreign Exchange Notes and the Foreign Exchange 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 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 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 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 (or
Overnight Loans, after that method of interest calculation has been
substituted by Borrower for the Prime Loan method), upon at least one (1)
Business Day's notice to the Bank, prepay the Revolving 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 periodic installment 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 (or
Overnight Loans, after that method of interest calculation has been
substituted by Borrower for the Prime Loan method) (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 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 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 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 Ten Million Dollars ($10,000,000.00) 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. $2,200,000.00 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 $2,200,000.00 (the "$2,200,000.00 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 "$2,200,000.00 Back-Up Foreign Exchange Facility Note") in the
form attached hereto as Exhibit "D".
3. CONDITIONS PRECEDENT. The obligation of the Bank to make a Revolving Line
of Credit Loan, issue a Letter of Credit or make a Foreign Exchange Facility
Loan 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 Notes 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 or financial
condition of the Borrower.
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 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 which is owned by Borrower 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, the
effect of either of which would have a material adverse effect upon the
Borrower; 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 (or have applications pending) 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 material 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 mutually acceptable to the Bank
and the Borrower, 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.
7.1.9. Liens which the Borrower grants or assumes pursuant to or
by reason of any merger, stock acquisition or asset acquisition
otherwise permitted hereby.
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 to 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
Borrower or such Subsidiary to any Person other than
the Borrower, a Subsidiary or to the management-employees of Borrower
or a 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 other Subsidiaries or the management-employees of a
Subsidiary) or any Indebtedness of any Subsidiary, and will not permit
any Subsidiary to sell, transfer or otherwise dispose of (except to the
Borrower, a Subsidiary or the management-employees of a 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 (i) 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 33 1/3% of the
Consolidated Net Tangible Assets of the Borrower and its Subsidiaries
determined as of the end of the immediately preceding fiscal year and (ii)
the proceeds of such sale, lease or other disposition are not reinvested in
the purchase of assets of comparable value. Sales or other realization on
(i) delinquent receivables and (ii) land held for investment or disposal
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, to any Person other than the
Borrower or a Subsidiary or an Affiliate 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. 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; except
loans to or investments (i) in EAFCO, Inc., (ii) in H.B. Smith Company,
Inc., (iii) in joint ventures to a maximum to $10,000,000.00 in the
aggregate and (iv) as otherwise permitted herein or reasonably approved by
the Bank.
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, guaranties of obligations
of a Subsidiary, 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 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
8.2. 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 1.25 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 $75,000,000.
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 (and, in the case of Insolvency of a
Subsidiary, such Insolvency has a material adverse effect
upon Borrower);
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 reasonable 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 reasonable 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. 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 (with respect to that
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 /s/ Stephen M. Shea
Stephen M. Shea
Its Sr.Vice President - Finance
BayBank, N.A.
By /s/ Dale Janes
Dale Janes
Its Executive Vice President
AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
THIS AGREEMENT is made as of this 8th day of August, 1996, by and between
Dahlstrom Industries, Inc., an Illinois corporation located at 9508 Winona
Avenue, Schiller Park, Illinois 60176 ("Seller"), and Formtek, Inc., a Delaware
corporation with offices located at 260 North Elm Street, Westfield, MA 01085
("Purchaser").
RECITALS
A. Seller is the owner of certain assets including real property, machinery,
equipment, and other tangible personal property, inventory, work-in-process,
rights under agreements, accounts or notes receivable, intellectual property,
permits, goodwill and other books, records, information and materials required
or appropriate for the continued operation of that certain business that
manufactures and sells machinery and equipment for roll forming,
cutting-to-length, and wing forming, Gripall material handling, automated metal
fabricating systems and the repair and service parts related thereof (the
"Dahlstrom Business").
B. Seller desires and intends to sell and transfer the assets and certain
liabilities associated with the Dahlstrom Business of Seller to Purchaser at the
price and on the terms and conditions hereinafter set forth.
C. Purchaser desires and intends to purchase the assets and assume certain
liabilities of Seller associated with the Dahlstrom Business at the price and on
the terms and conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the terms hereof, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Purchase and Sale of Assets
1.1 The Assets. Upon the closing of the transactions contemplated under this
Agreement on August 30, 1996, or such other date as mutually agreed by the
parties (the "Closing Date"), and subject to the terms and conditions contained
in this Agreement, Seller shall sell, transfer, convey, assign and deliver to
Purchaser, and Purchaser shall purchase, acquire and accept from Seller, free
and clear of all liens, encumbrances, restrictions and adverse charges of any
nature whatsoever, except as may be permitted by Section 7.7, all of the assets,
rights, interests, properties and goodwill of every nature whatsoever, tangible
or intangible and wheresoever situated, required or appropriate for the
continued operation of the Dahlstrom Business which is further defined as the
manufacture, application, design, development, engineering, distribution and
sale of various models and types of machinery and equipment for the feeding,
straightening, forming, bending, notching, welding, stacking, and other
activities involved in automated fabricating systems, and the parts and
accessories related thereto set forth by model number in Schedule 1.1 attached
hereto. The assets, rights, interests, properties and goodwill sold,
transferred, conveyed, assigned and delivered by Seller to Purchaser hereunder
(collectively, the "Assets") shall include, but shall not be limited to the
following:
1.1.1 Machinery & Equipment. All of the machinery, equipment, office
equipment, furniture, furnishings, fixtures, jigs, dies, tooling, patterns,
tooling fixtures, trucks, motor vehicles and all other fixed tangible assets of
Seller used in the Dahlstrom Business identified in Schedule 1.1.1 attached
hereto (the "Machinery & 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 items;
1.1.2 Inventory. All saleable, usable, undamaged, non-obsolete and
non-slow-moving inventory of Seller relating to the Dahlstrom Business including
raw materials, work-in-process, and finished goods (the "Inventory") to be
physically counted by the parties on August 30, 1996, (and thereafter as
necessary until the count is completed), listed, valued and attached to this
Agreement thereafter as Schedule 1.1.2;
1.1.3 Material Agreements. Subject to required consents by third
parties, all right, title and interest of Seller in, to and under those certain
executory contracts (including the right to the return of any and all deposits),
contract rights and agreements including sales purchase orders to provide
equipment, repair parts and services to the customers of Seller, sales
representative agreements, leases of personal property, licenses, service and
maintenance agreements, vendor purchase orders, and other agreements related to
the ownership or operation of the Dahlstrom Business expressly identified and
listed by Purchaser and copies of which agreements are attached as exhibits in
Schedule 1.1.3 attached hereto (the "Material Agreements");
1.1.4 Intellectual Property. All patents, patent applications,
trademarks, trademark applications, service marks, tradenames, copyrights and
copyright applications, and licenses with respect to any of the foregoing, 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 (including design choices), 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
of Seller that are used or could be used in the Dahlstrom Business (all of which
are hereinafter collectively referred to as the "Intellectual Property");
1.1.5 Receivables. All cash, accounts or notes
receivable, prepaid expenses and contract rights of Seller as of
the Closing Date, including those identified in Schedule 1.1.5
attached hereto (the "Receivables");
<PAGE>
1.1.6 Real Property. The improved real estate commonly
known as 9508 Winona Avenue, Schiller Park, Illinois and legally
described as set forth in Schedule 1.1.6 attached hereto (the
"Real Property");
1.1.7 Permits. All of Seller's right, title and interest in and to any
and all permits, licenses, authorizations, certifications, consents, orders,
registrations and approvals of any federal, state or local governmental entity
or certifying or regulatory agency or authority required of Seller or otherwise
necessary or advisable for the operation of the Dahlstrom Business as set forth
on Schedule 1.1.7 attached hereto (the "Permits") to the extent the same are
transferable or assignable to Purchaser;
1.1.8 Books and Records. All of Seller's right, title and interest in
or to all books of account, records, files and invoices, including but not
limited to technical and scientific literature, all invoice files kept by serial
number, model or customer and correspondence related thereto, all production
data, testing data, equipment maintenance data, employee files, payroll
information system, accounting records, inventory records, purchasing records,
engineering records, sales and sales promotional data, advertising materials,
customer lists and customer data, cost and pricing information, supplier and
vendor lists, installation and maintenance manuals, business plans, supply
reference catalogs and any other records and data used in connection with the
Dahlstrom Business (whether in computer software, data or any other form) (the
"Books and Records") other than the corporate minute book and records of
shareholder and director action by Seller; and
1.1.9 Goodwill. The goodwill associated with the
Dahlstrom Business (the "Goodwill").
1.2 Conveyance of Assets. The sale, transfer, conveyance, assignment and
delivery of the Assets provided for in this Article 1 shall be made by the
following documentation as appropriate (i) a duly executed bill of sale,
evidencing the warranty provisions of this Agreement, and substantially in the
form of Exhibit 1.2A attached hereto (the "Bill of Sale"), (ii) a duly executed
statutory warranty deed transferring the Real Property substantially in the form
of Exhibit 1.2B attached hereto (the "Deed") and (iii) such other good and
sufficient instruments of conveyance and transfer as shall be reasonably
necessary to vest in Purchaser as of the Closing Date full title to the Assets
being sold, transferred, conveyed, assigned and delivered hereunder.
1.3 Off-Site Assets. All tangible Assets held at any location other than the
facility of Seller are described at the Closing Date will be set forth in
Schedule 1.3 attached to this Agreement at Closing which schedule includes a
description of each of such assets, its type, 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 is attached as an exhibit to
the schedule.
2. Excluded Assets. The assets excluded from this Agreement
(the "Excluded Assets") are set forth in Schedule 2.0 attached
hereto ("Excluded Assets").
3. Purchase Price
3.1 Purchase Price. The purchase price payable to Seller under this
Agreement for the Assets by Purchaser shall be Two Million One Hundred Thousand
and 00/100 Dollars ($2,100,000.00) (the "Purchase Price"), subject to the net
worth adjustment set forth in Section 3.2 of this Agreement.
3.2 Net Worth Adjustment of Purchase Price. The Purchase Price shall be
adjusted dollar-for-dollar for any reduction in, or increase in, the net worth
of Seller between (i) the net worth amount of One Million Six Hundred Sixty-six
Thousand Four Hundred Forty-three and 00/100ths Dollars ($1,666,443.00) (the
"Net Worth Target") and (ii) the net worth of Seller as at the Closing Date as
determined in accordance with the principles set forth hereinafter (the "Net
Worth Determination").
3.2.1 Within 20 days after the Closing Date, or such other time period
as agreed by the parties, Purchaser and Seller shall use their best efforts to
value the physical count of the Inventory to be taken immediately after the
Closing Date. Within thirty (30) days after the Closing Date, Purchaser and
Seller shall work together making such personnel and records available as
necessary to complete a balance sheet for Seller as at the Closing Date and to
finalize the Net Worth Determination in good faith at their earliest convenience
based upon the principles and standards set forth in Section 3.2.2, the
representations and warranties set forth in Sections 7.4, 7.5, 7.12 and 7.15 of
the Agreement and the covenants of Seller set forth in Sections 10.4, 10.5.2,
10.6, 10.10 and 22.8 of this Agreement. The final Net Worth Determination and
the calculation of the adjustments to the Purchase Price, subject to such
offsets by Purchaser against amounts payable by Seller to Purchaser under
Article 16 hereof, if any, shall be set forth in a memorandum of understanding
prepared and executed by the authorized representative of each of the parties
and delivered to the Escrow Agent (as defined below) (the "Memorandum of
Understanding") who then shall make the appropriate disbursements. Any
additional amount due and owing to Seller pursuant to the Net Worth
Determination shall be paid in cash by wire transfer or other immediately
available funds to Seller within ten (10) business days of the execution of the
Memorandum of Understanding.
3.2.2 For purposes of the Net Worth Determination under this Agreement,
the following shall apply:
(A) The actual assets and liabilities of Seller shall be
calculated as at the Closing Date in accordance with generally accepted
accounting principles ("GAAP") consistently applied, except to the extent that
other provisions of this Section 3.2 provide otherwise;
(B) The Real Property, Intellectual Property and Machinery &
Equipment by agreement of the parties shall be valued at One Million Seven
Hundred Twenty-five Thousand Four Hundred Eighty-Two and 00/100ths Dollars
($1,725,482.00);
(C) The Inventory as counted at the Closing Date shall be valued
as set forth in Section 7.15 of this Agreement;
(D) The value of the Receivables shall be valued as
set forth in Section 7.12 of this Agreement; and
(E) The liabilities of Seller shall be those that are expressly
assumed by Purchaser pursuant to Article 5 of this Agreement.
3.3 Payment of Purchase Price. On the Closing Date, Purchaser shall deliver
in cash by wire transfer or other immediately available funds (a) to Seller the
amount of One Million Three Hundred Thousand and 00/100ths Dollars
($1,300,000.00) and (b) to Escrow Agent the amount of Three Hundred Thousand and
00/100ths Dollars ($300,000.00) (the "Short-Term Escrow Amount") and (c) to
Escrow Agent the amount of Five Hundred Thousand and 00/100ths Dollars
($500,000.00) (the "Long-term Escrow Amount").
3.4 Escrow and Disbursement Agreements. The Short-Term Escrow Amount shall
be received, held and disbursed according to the terms and conditions of an
escrow and disbursement agreement substantially in the form of Exhibit 3.4A
attached hereto (the "Short-term Escrow Agreement") among Seller, Purchaser and
Chicago Title Insurance Company (the "Escrow Agent"). The Long-term Escrow
Amount shall be received, held and disbursed according to the terms and
conditions of an escrow and disbursement agreement substantially in the form of
Exhibit 3.4B attached hereto (the "Long-term Escrow Agreement") among Seller,
Purchaser and Escrow Agent.
4. Allocation of Purchase Price. The Purchase Price shall be allocated by the
parties hereto among the Assets as set forth in a memorandum of allocation
delivered on the Closing Date substantially in the form attached hereto as
Exhibit 4.0 (the "Memorandum of Allocation"). Notwithstanding any allocation by
the parties, Purchaser has agreed to purchase and Seller has agreed to sell the
Assets, and the allocation is not intended and shall not be deemed to constitute
an agreement between the parties to transfer less than all of the Assets.
Furthermore, such allocation has been made solely to ascribe fair value to the
Assets and any benefits deriving therefrom shall not inure to any other third
party.
5. Assumption of Liabilities
Upon the Closing Date, Purchaser shall assume or discharge the following
liabilities of Seller:
5.1 Assumed Liabilities. Those trade accounts payables,
customer deposits, that certain secured bank debt and other
obligations of Seller as specifically set forth by Purchaser in
Schedule 5.1 attached hereto as they exist as of the Closing
Date; and
5.2 Assumption of Material Agreements. The obligations and liabilities of
Seller with respect to the assignment to Purchaser of the Material Agreements
described in Section 1.1.3 and listed on Schedule 1.1.3.
<PAGE>
5.3 Limits on Assumption. Except for the assumptions or discharges of
liabilities described in Sections 5.1 and 5.2, Purchaser shall not assume (a)
other 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, including, but not limited to those related to taxes,
employment practices, employee benefits and pensions, implied warranties,
products or professional liability, and environmental, health and safety
obligations all as related to, arising from or in connection with the Dahlstrom
Business for products manufactured and services performed on or before the
Closing Date and (b) those liabilities, obligations and commitments of Seller
that arise after the Closing Date, and the indemnification provisions contained
in Article 16 of this Agreement shall apply to any liability of Seller which is
not assumed by Purchaser and which is asserted or claimed by any person against
Purchaser.
5.4 Assignment of Contracts and Rights. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not constitute an agreement to
assign any particular Material Agreement or any claim, contract, license, lease,
commitment, sales order, purchase order or any claim or right or any benefit
arising thereunder or resulting therefrom if the agreement to assign or attempt
to assign, without the consent of a third party, would constitute a breach
thereof or in any way 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 the Purchaser would not in fact receive all such rights, Purchaser and
Seller will cooperate with each other in any arrangement designed to provide for
Purchaser the benefits of, and to permit Purchaser to assume, insofar as
expressly set forth herein, the stated liabilities under the particular Material
Agreement(s) including 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 or any contract or agreement which shall require the consent or
approval of any third party shall be made subject to such consent or approval
being obtained.
6. Covenant Against Competition
6.1 Covenant Not to Compete. Seller covenants and agrees that neither it nor
its affiliates shall at any time within the three (3) year period immediately
following the Closing Date (a) compete, directly or indirectly, with Purchaser
or (b) have any ownership interest in any firm, corporation, partnership,
proprietorship or other business that engages with third parties in the
activities now engaged in and in the territory served by the Dahlstrom Business,
so long as Purchaser or any affiliate or successor thereof, remains engaged in
the Dahlstrom Business; provided, however, that Seller may own, directly or
indirectly, solely as an investment, securities, or any entity which are
publicly traded if Seller does not, directly or indirectly, own five percent
(5%) or more of any class of securities of any such competitive entity.
6.2 Remedies. Without waiving the Purchaser's rights to monetary damages,
all parties to this Agreement acknowledge that the breach of the obligations
contained in this Article 6 would result in substantial but indeterminable harm
to Purchaser, that the restraints imposed are reasonable, that there is no
adequate remedy at law for a breach of such obligations, and that therefore
injunctive relief, specific performance or other equitable remedies are
appropriate to enforce the obligations undertaken in this Article 6. In the
event that a court finds that the term, territory, or scope of this Article 6 is
too broad to be enforceable, Seller and Purchaser further agree that a
reformation of the terms of this Article 6 is appropriate and should be
undertaken by the court in order to protect the value of the Assets being
conveyed pursuant to this Agreement as a going concern, and to provide for the
enforceability of the obligations contained in this Article 6 to the fullest
extent allowed by law and equity.
7. Representations and Warranties of Seller
Seller represents and warrants to Purchaser as of the Closing Date as
follows:
7.1 Corporate Existence. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois, and
Seller knows of no violation of the requirement for good standing in any other
jurisdiction in which it is required to be qualified to carry on the Dahlstrom
Business. Seller has full corporate power and authority to carry on the
Dahlstrom Business as now being conducted.
7.2 Due Authorization and Enforceability. Seller has full corporate power
and authority to execute and deliver this Agreement and the Bill of Sale, the
Deed, the Short-term Escrow Agreement, the Long-term Escrow Agreement, the
Memorandum of Allocation, the Noncompetition Agreement, and the other documents,
instruments and agreements to which it is a party that are to be delivered upon
the Closing Date (collectively, the "Related Agreements"), and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Related Agreements by Seller and the consummation of the
transactions contemplated hereby and thereby has been duly authorized by all
necessary corporate actions, including votes of the directors of Seller and of
the shareholders of Seller, and no other corporate action or proceeding on the
part of Seller is necessary to authorize the execution and delivery of this
Agreement or the Related Agreements or the consummation by Seller of the
transactions contemplated hereby or thereby. This Agreement and the Related
Agreements have been duly executed and delivered by Seller, and are legal, valid
and binding obligations of Seller enforceable against Seller in accordance with
their terms.
7.3 No Conflicts. Neither the execution and delivery of this Agreement or
the Related Agreements nor the consummation of the transactions contemplated
hereby or thereby will (i) conflict with or violate any provision of the
Articles of Incorporation, Bylaws or other Charter documents of Seller, (ii)
conflict with or violate any law, rule, regulation, ordinance, order, writ,
injunction, judgment or decree applicable to the Dahlstrom Business 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 security interest, lien, charge or
encumbrance 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 Liens permitted
by Section 7.7 of this Agreement 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 Dahlstrom Business.
7.4 Financial Statements. Attached hereto as Schedule 7.4 are the balance
sheets of Seller of the fiscal year ended December 31, 1995, and as of the
interim period ended June 30, 1996, and the related statements of income and
changes in financial position, for the respective fiscal year and interim period
then ended and the Financial Condition Summary dated July 10, 1996 (all of the
foregoing referred to above in this Section 7.4 are herein collectively referred
to as the "Seller Financial Statements"). The Seller Financial Statements fairly
present the assets, liabilities and financial position of Seller as of the
respective dates set forth therein and the results of operations and changes in
financial position of Seller for the respective periods set forth therein; the
Seller Financial Statements have been prepared in each case in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved.
7.5 No Material Changes. Since December 31, 1995, to the date hereof, and at
the Closing Date, (i) there have been no changes in the Assets or the
liabilities (actual or contingent) of Seller or in the nature and prospects of
the Dahlstrom Business or its condition (financial or otherwise) which have in
the aggregate been material and adverse to the Dahlstrom Business, and, (ii)
Seller has operated the Dahlstrom Business in the ordinary course and consistent
with past practice.
7.6 All Necessary Assets. The Assets (including the Machinery & Equipment,
Inventory, Material Agreements, Intellectual Property, Receivables, Real
Property, Permits, Books and Records and Goodwill) being sold, transferred,
conveyed, assigned and delivered by Seller under this Agreement constitute all
of the assets used by Seller in the conduct of the Dahlstrom Business.
7.7 Title to Assets. Seller warrants that Seller has good and marketable
title to the Assets transferred hereunder and, upon consummation of the
transactions contemplated by this Agreement, including execution and delivery of
the Bill of Sale, the Deed or other instruments of transfer, Purchaser will
acquire title to 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 for (i) Liens created by
Purchaser and, (ii) Liens set forth on Schedule 7.7 which Purchaser shall assume
at the Closing Date. At the Closing Date, none of the Assets will be subject to
any commitment or other arrangement for its sale or use by third parties except
under Material Agreements disclosed in Schedule 1.1.3.
7.8 Condition of Assets. The Machinery & Equipment included in the Assets
set forth in Schedule 1.1.1 are in good operating condition and repair, ordinary
wear and tear excepted, and are reasonably satisfactory for the purposes for
which the Assets are being used, and are capable of being used to carry on the
Dahlstrom Business.
7.9 Compliance with Laws. The operation of the Dahlstrom Business and the
use of the Assets comply in all material respects with all applicable laws,
ordinances, rules, decrees, orders and regulations, including federal and state
and local environmental laws and rules and laws related to employment, benefits,
and pensions (collectively the "Laws"), except for such failures to comply which
in the aggregate will not have a material adverse effect on the Assets or
Dahlstrom Business. Seller has obtained all necessary permits, licenses,
certificates, exemptions, orders and approvals and has filed all required
notices with federal, state and local governmental bodies that are required by
applicable law for the use of the Assets and in order to conduct the Dahlstrom
Business as presently conducted, all of which are valid and effective on the
date of this Agreement and will be valid at the Closing Date, and all payments,
fees and costs thereof have been paid in full to the date of this Agreement and
will be paid in full at the Closing Date. Seller has not received notice of any
violations of any Laws or regulations or any covenants or contracts with respect
to the Dahlstrom Business or any of the Assets, and to Seller's knowledge, no
such notice of violations is pending or has been threatened.
7.10 Absence of Litigation. There are no judgments or other judicial or
administrative orders outstanding against Seller, 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, the Assets or any of Seller's
property or rights which, if adversely determined, might materially impair the
right or ability of Seller to carry on the Dahlstrom Business as it is now
conducted or as proposed to be conducted by Purchaser or would materially
adversely affect the financial condition of Seller. A true, correct and complete
list of all suits or proceedings at law, in equity or by or before any
governmental or administrative instrumentality or other agency and other
litigation (whether material or not) pending or threatened against Seller, or
settled within the last five (5) years is attached hereto as Schedule 7.10.
Seller is not in default in any material respect under any applicable statute,
rule, order, certificate or regulation of any governmental authority having
jurisdiction over it. Seller has conducted the Dahlstrom Business in such a
manner so that there have been no breaches of express warranty on the part of
Seller.
7.11 Material Agreements. Schedule 1.1.3 is an accurate and complete list of
all of Seller's Material Agreements of any kind as to which the rights and/or
obligations of which are being assumed or discharged by Purchaser. There are no
other Material Agreements being assumed by Purchaser. Each of the Material
Agreements is valid and effective in accordance with its terms. True and correct
copies of the Material Agreements have been supplied to Purchaser by Seller,
appropriately identified in order that such Material Agreements can be
identified and attached in Schedule 1.1.3. At the Closing Date, all consents to
the assumptions of the obligations of Seller by Purchaser under the Material
Agreements will have been obtained by Seller. All other executory contract
rights or obligations of Seller related to the Dahlstrom Business, not listed on
Schedule 1.1.3 and therefore not being assumed by Purchaser, are listed in
Schedule 7.11. No party to any of the Material Agreements (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
under any of the Material Agreements.
7.12 Receivables. The Receivables being conveyed hereunder and listed in
Schedule 1.1.5, will, at the Closing Date, be owned by Seller, free and clear of
all claims, encumbrances, credits, backcharges, counterclaims, setoffs and
deductions, and are not subject to additional requirements of performance by
Seller, and such Receivables have not been billed or collected for a greater
percentage of the work done or materials supplied than has actually been
performed or supplied by Seller. At the Closing Date Seller and Purchaser shall
establish a reasonable reserve for bad debts against the Receivables for
purposes of the Net Worth Determination. Seller guarantees to Purchaser that the
Receivables shall be collected by Purchaser.
7.13 Intellectual Property. Seller owns or possesses and will have conveyed
to Purchaser at the Closing Date all Intellectual Property used in the Dahlstrom
Business, and the Intellectual Property does 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.
7.14 Related Party Agreements. No affiliate, officer or director of Seller
or any related person has, directly or indirectly, entered into any transaction
with Seller relating to the Dahlstrom Business. For purposes of this Agreement,
the term "related person" shall mean and include any person related to any
affiliate, officer or director of Seller by blood or by marriage, or any
corporation, partnership, proprietorship, trust or other entity in which any
officer or director of Seller (or any spouse, ancestor or descendant of the
same) has more than a five percent (5%) legal or beneficial interest.
7.15 Inventory. The Inventory of Seller included in the Assets (whether raw
materials, purchased components, manufactured parts, work-in-process, finished
goods or other) does not contain any damaged, defective, slow-moving (defined as
more than a two years' supply of items used in new Dahlstrom machine products
and as more than a five years' supply of items sold as repair parts, under
normal conditions of sale) or obsolete items which are not currently usable or
saleable in the ordinary course of the Dahlstrom Business.
(a) Raw materials and purchased components shall be
valued individually at the lower of acquisition costs or market
value in accordance with GAAP consistently applied. Acquisition
costs shall be determined on an item-by-item, FIFO basis. Work-in-process
consisting of manufactured parts, sub-assemblies and equipment in the process of
being assembled and finished goods shall be valued at the sum of the value of
the raw material and purchased components, the direct labor and the factory
burden applicable to said items as further set forth herein: (i) raw materials
and purchased components shall be valued at the lower of acquisition costs or
market value in accordance with GAAP consistently applied, (ii) direct labor
shall be valued at $13.93 per hour of direct labor determined by Seller's labor
collection system, and (iii) factory burden shall be valued at $19.04 per hour
of direct labor adjusted to eliminate any costs inconsistent with GAAP in the
calculation of burden.
(b) The value at which the Inventory is shown on the Seller
Financial Statements has been determined in accordance with the standard
valuation policy of Seller, consistently applied and in accordance with GAAP.
(c) All items of Inventory on hand at the Schiller Park, Illinois
facility of Seller that are included in the physical counts at the Closing Date,
but not yet set forth or reflected in Seller's accounts payable reported in the
Seller Financial Statements, shall be disclosed to Purchaser on Schedule 7.15
attached hereto.
7.16 Taxes. With respect to the Dahlstrom Business and the Assets being
conveyed under this Agreement, Seller has filed all federal, state, county and
local tax returns, including information returns, which it is required by law to
file and has paid all income, payroll, withholding, gross receipts, excise,
business and occupation, sales, use or other taxes, assessments and other
governmental charges due in respect of such returns, except to the extent that
any such taxes are being contested in good faith and as to which adequate
reserves have been set aside and Seller has accrued all taxes not yet due. Since
December 31, 1995, Seller has not incurred any taxes other than taxes incurred
in the ordinary course of business, and all such taxes are fully reserved
against on the books of Seller. Seller is not delinquent in the payment of any
amount of taxes, and there are no Liens for any taxes upon the Assets of Seller,
except Liens for current taxes not yet due that are fully reserved for on the
Seller Financial Statements and will be paid at the Closing Date. 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. All tax returns required to be filed by or on behalf of Seller have
been prepared and filed in accordance with all applicable laws or requirements
and accurately reflect the taxable income (or other measure of tax) of the party
filing the tax returns. All such tax returns, estimates, reports and
declarations are complete and accurate and disclose all taxes required to be
paid for the periods covered thereby. True and complete copies of federal and
state income or franchise tax returns of Seller for the fiscal year ended
December 31, 1995 have been delivered to Purchaser. No audit, action, suit,
investigation, claim, assessment or examination with respect to taxes is now
pending or currently in progress with respect to Seller and, to the best of
Seller's knowledge, there is no basis therefor. Seller has not received from the
Internal Revenue Service or from any other tax authority of any state, foreign,
county, local, or other jurisdiction a notice of underpayment of taxes, a
proposed assessment of taxes, a proposed adjustment to any tax return filed or
other deficiency that has not been paid.
7.17 No Misrepresentation or Material Non-disclosures. Neither this
Agreement nor the Related Agreements, nor any other document, certificate or
statement furnished to Purchaser in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading. There
is no fact known to Seller which materially adversely affects or in the future
may (so far as can now be foreseen) materially adversely affect the Dahlstrom
Business or the Assets which has not been set forth in this Agreement.
7.18 No Defective Products. The products of the Dahlstrom Business
previously manufactured and sold by Seller have, where necessary, been qualified
under and comply in all respects with the specifications and requirements of
applicable rating and compliance agencies and safety standards and contain, to
the best of Seller's knowledge, no defects that will result in damage or injury
to person or property or in epidemic failure of the products.
7.19 Employment Activity. To the best of Seller's knowledge, Seller is in
compliance with all applicable laws respecting employment, employment practices,
employment benefits, non-discrimination in employment and employment practices,
and conditions of employment and payment of wages, and is not engaged in any
unfair labor practice. There is no employment discrimination or unfair labor
practice charge or complaint against Seller pending before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any other
federal, state or local governmental agency arising out of Seller's activities,
and Seller has no knowledge of any facts or information which would give rise
thereto; there is no labor strike or labor disturbance pending or threatened
against Seller nor is any grievance currently being asserted; and Seller has not
experienced a work stoppage or other material labor difficulties.
7.20 Employee Benefit Plans
(a) Set forth in Schedule 7.20(A) is a true and complete list of
each "employee pension benefit plan" (as such term is defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended and the
regulations promulgated thereunder ("ERISA")) maintained by Seller or an ERISA
Affiliate (as defined in Section 7.20(e) below), or with respect to which Seller
or an ERISA Affiliate is or will be required to make any payment, or which
provides or will provide benefits to present or prior employees of Seller or an
ERISA Affiliate due to such employment (the "Pension Plans"). Set forth in
Schedule 7.20(A) is a true and complete list of each "employee welfare benefit
plan" (as such term is defined in Section 3(1) of ERISA) maintained by Seller,
or with respect to which Seller is or will be required to make any payment, or
which provides or will provide benefits to present or prior employees of Seller
due to such employment (the "Welfare Plans") (the Pension Plans and Welfare
Plans together being the "ERISA Benefit Plans"). Neither Seller nor any ERISA
Affiliate (i) maintains or has maintained, or (ii) is or was required to make
any payment with respect to, any "employee pension benefit plan" (as such term
is defined in Section 3(2) of ERISA) ever subject to Section 302 of ERISA. No
ERISA Benefit Plan or prior Pension Plan is or was a "multiemployer plan" (as
such term is defined in Section 3(37) of ERISA).
(b) Other than those plans and programs listed in Schedule 7.20(A),
Schedule 7.20(B) is a true and complete list of each of the following to which
Seller is a party or with respect to which it is or will be required to make any
payments (the "Non-ERISA Commitments"):
(i) each retirement, savings, profit sharing, deferred
compensation, severance, stock ownership, stock purchase, stock option,
performance, bonus, incentive, vacation or holiday pay, hospitalization or other
medical, disability, life or other insurance, or other welfare, benefit or
fringe benefit plan, policy, trust, understanding or arrangement of any kind,
whether written or oral; and
(ii) each employee collective bargaining agreement and each
agreement, understanding or arrangement of any kind, whether written or oral,
with or for the benefit of any present or prior officer, director, employee or
consultant (including, without limitation, each employment, compensation,
deferred compensation, severance or consulting agreement or arrangement and any
agreement or arrangement associated with a change in ownership of Seller).
Seller has delivered to Purchaser correct and complete copies of (i) all written
Non-ERISA Commitments and (ii) all insurance and annuity policies and contracts
and other documents relevant to any Non-ERISA Commitment. Schedule 7.20(B) also
contains a complete and accurate description of all oral Non-ERISA Commitments.
(c) Seller has delivered to Purchaser with respect to each ERISA
Benefit Plan correct and complete copies, where applicable, of (i) all plan
documents and amendments thereto, trust agreements and amendments thereto and
insurance and annuity contracts and policies, (ii) the current summary plan
description, (iii) the Annual Reports (IRS Form 5500 series) and accompanying
schedules, as filed, for the most recently completed three plan years for which
such reports have been filed, (iv) the financial statements for the most
recently completed three plan years for which such statements have been
prepared, (v) the most recent determination letter issued by the Internal
Revenue Service and the application submitted with respect to such letter and
(vi) all correspondence with the Internal Revenue Service, Department of Labor
and Pension Benefit Guaranty Corporation concerning any controversy.
(d) Each Pension Plan which is intended to qualify under Section
401(a) of the Code is so qualified under the Code as amended to the date hereof
and no circumstance exists which might cause such plan to cease being so
qualified. With respect to each ERISA Benefit Plan, (i) there is no pending or,
to the best knowledge of Seller, threatened claim, (ii) all contributions and
premiums due have been made on a timely basis and are deductible by Seller,
(iii) no "prohibited transaction" described in Section 406 of ERISA or Section
4975 of the Code has occurred, and (iv) Seller has no potential liability under
ERISA or the Code. Each of the ERISA Benefit Plans (i) has been administered in
accordance with its terms and (ii) complies in form, and has been administered
in accordance, with the requirements of ERISA and, where applicable, the Code.
No liability has been asserted (whether or not such liability is being
litigated) against Seller or any affiliate of Seller in connection with any
"employee pension benefit plan" (as defined in Section 3(2) of ERISA), including
but not limited to, any withdrawal liability (as described in Section 4201 of
ERISA) with respect to any multiemployer plan (as defined in Section 3(37) of
ERISA). There are no reserves, assets, surplus or prepaid premiums with respect
to any Welfare Plan. Seller and each ERISA Affiliate has complied with the
health care requirements of Part 6 of Title I of ERISA. Seller has no obligation
to provide health or death benefits to its prior employees or any other person
other than while an employee of Seller, except as specifically required by Part
6 of Title I of ERISA. The consummation of the transactions contemplated by this
Agreement will not (i) entitle any individual to severance pay, or (ii)
accelerate the time of payment, vesting or increase the amount of compensation
due to any such individual. Seller has not taken any action or failed to take
any action which will subject Seller or has subjected Seller to liability under
the Worker Adjustment and Retraining Notification Act of 1988.
(e) For purposes of the Agreement, "ERISA Affiliate" means (i) any
corporation which at any time on or before the Closing Date is or was a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as Seller; (ii) any partnership, trade or business (whether
or not incorporated) which at any time on or before the Closing Date is or was
under common control (within meaning of Section 414(c) of the Code) with Seller;
and (iii) any entity which at any time on or before the Closing Date is or was a
member of the same affiliated service group (within the meaning of Section
414(m) of the Code) as either Seller, any corporation described in clause (i) or
any partnership, trade or business described in clause (ii).
7.21 No Indebtedness. Seller does not have any outstanding indebtedness to
any person or entity, except for such indebtedness as is set forth on Schedule
7.21 attached hereto, and except for indebtedness being expressly assumed by
Purchaser under Article 5 of this Agreement, the lenders of any such
indebtedness have consented to the transfer of the Assets to Purchaser hereunder
free and clear of all Liens. For purposes of the Agreement, "Indebtedness" shall
mean all items which in accordance with GAAP would be included in determining
total liabilities secured by any Lien on property owned or acquired, whether or
not such a liability shall have been assumed, liabilities in respect of all
leases, whether capitalized or operating, and guarantees, indemnities,
endorsements (other than for collection in the ordinary course of business) and
other contingent obligations, whether secured or not in respect to the
obligations of other persons or entities.
7.22 Representations Regarding Transfer of Real Property.
(a) There are no persons other than Seller in possession or occupancy
of the Real Property or any part thereof, nor are there any persons who have
possessory rights in respect to the Property or any part thereof.
(b) Seller is not a foreign corporation, foreign partnership, foreign
trust or foreign estate (as those terms are defined in the Internal Revenue Code
and Income Tax Regulations).
(c) There are no claims, causes of action or other litigation or
proceedings by or against Seller pending or, to the best of Seller's knowledge,
threatened in writing to Seller in respect to the ownership or operation of the
Real Property or any part thereof (including disputes with governmental
authorities, utilities, contractors, adjoining land owners) which would
adversely affect the Real Property after the Closing.
(d) To the best of Seller's knowledge, Seller has not received any
notice of any fire, health, safety, building, pollution, environmental, zoning
or other violations of law in respect to the Real Property, which have not been
fully and completely corrected.
(e) To the best of Seller's knowledge, there is no existing, pending,
contemplated, or threatened in writing to Seller, (i) condemnation of any part
of the Real Property, or (ii) widening, change of grade or limitation or use of
streets abutting the Real Property except for anything which is public
information.
(f) There are not any contracts, agreements, leases, licenses, written
or oral, to which Seller is a party or otherwise bound, other than as may be
expressly set forth herein, which Purchaser, upon becoming owner of the Real
Property, will be required to assume or pay or to which Purchaser may, as a
consequence of entering into or closing this Agreement, may become bound except
under Schedule 1.1.3 of this Agreement.
(g) There are no judgments affecting the Real Property that are unpaid
or unsatisfied of record; the Real Property is not in the hands of a receiver;
no application for any such receivership is pending; no petition in bankruptcy
has been filed by or against Seller, and there are no actions, proceedings, or
investigations pending or, to the best of Seller's knowledge, threatened in
writing to Seller against or affecting Seller or the Real Property, and no basis
known to Seller for the same, which, if decided adversely, would affect the
Seller's ability to carry out the transaction contemplated by this Agreement.
(h) Seller has not received written notice of violation of applicable
Environmental Laws (as defined below) with respect to the Real Property from any
governmental agency having authority which have not been cured or remediated in
compliance with applicable Environmental Laws.
(i) Upon repayment of the secured loans made to Seller by American
National Bank, Seller has the right to good and marketable fee simple title to
the Real Property subject to no liens, encumbrances, mortgages, assignments,
pledges, easements, equities, options, claims and rights of others of any nature
whatsoever, except for the following:
(i) Taxes and assessments not due and payable as
at the Closing Date;
(ii) Zoning regulations and building code requirements, ordinances,
and restrictions of record, adopted by the government or municipal authority
having proper jurisdiction thereof, and any amendments thereto, now in force and
effect, which relate to the Real Property; and
(iii) The public utility easements, private and public roads and
highways, and covenants and restrictions of record.
(j) No work has been performed on the Real Property which could give
rise to a mechanics or construction lien which has not been paid.
(k) Seller has no knowledge of either having committed or failed to
commit any acts which would cause a title exception to be noted by a competent
title insurance company and which would render the title of Seller in the Real
Property unmarketable.
(l) Seller has no knowledge of any structural defects in any of the
improvements situated on the Real Property, nor any defects in the plumbing and
electrical systems, or the heating and air conditioning systems which might
reasonably be expected to impair the sales value or the Purchaser's intended use
of the Real Property as an office and manufacturing facility.
<PAGE>
(m) there are no fence disputes, boundary disputes, water disputes or
drainage disputes affecting the Real Property, and the Real Property is not
located in a hazardous flood zone or, to the best of Seller's knowledge, in a
"wetland" or "transition area" as defined in the Environmental Laws.
7.23 Environmental Matters. Seller has all permits, licenses, and other
authorizations which are required as of the date of this Agreement and which
will be required as of the Closing Date for the operation of the Dahlstrom
Business under federal, state, local and foreign laws relating to pollution and
protection of the environment, including, without limitation, the Resource
Conservation and Recovery Act, 42 U.S.C. 6901, et seq., as amended ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601, et seq., as
amended ("CERCLA"), the Clean Air Act, 42 U.S.C. 7401, et seq., as amended
("CAA"), the Clean Water Act, 33 U.S.C. 1251, et seq. ("CWA"), the Toxic
Substance Control Act, 15 U.S.C. 2601, et seq. ("TSCA"), and any other
applicable federal, state or local laws, statutes, ordinances and regulations
relating to the physical or environmental condition of property and 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
regulation, order, decree or judgment issued, entered, promulgated or approved
thereunder (the "Environmental Laws"). With respect to the conduct of its
business, its operations, its properties, and its use of owned and leased
properties, 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 limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws as in effect on the date hereof. There is no pending civil or
criminal litigation, notice of violation or administrative proceeding arising
out of the business or activities of Seller or any affiliates, including without
limitation any pending litigation, notice or proceeding relating in any way to
the Environmental Laws (including notices, demands, letters or claims under
RCRA, CERCLA, CAA, CWA, TSCA and similar foreign, state and local laws). There
is no threatened civil or criminal litigation, notice of violation or
administrative action arising out of the business activities of Seller,
including without limitation, any threatened litigation, notice or proceeding
relating in any way to the Environmental Laws. Seller is not aware 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 the best of Seller's knowledge, no hazardous
substances, pollutants, petroleum oils or fraction, contaminants 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 Schiller Park, Illinois
facility of Seller, or on adjoining properties, by Seller, or, to the best of
Seller's knowledge, any other person.
7.24 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
Seller or the consummation by Seller of the transactions contemplated hereby.
7.25 Insurance. Attached hereto as Schedule 7.25 is a complete and correct
list of all policies of insurance of which Seller is the owner, insured or
beneficiary, or covering the Dahlstrom Business or any of the Assets for any
policy period after January 1, 1993. Such Schedule indicates for each policy the
carrier, policy number or numbers, 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. All premiums under such policies for periods through
the date hereof have been paid and through the Closing Date will be paid. No
notice of cancellation or non-renewal with respect to or disallowance of any
claim under, or increase of the premium for any such insurance policy has been
received by Seller.
7.26 Other Intangibles. The vendor and customer lists of Seller related to
the Dahlstrom Business attached hereto as Schedule 7.26 are true and complete as
of the Closing Date; and the engineering drawings, bills of material,
manufacturing data and other intangibles conveyed to Purchaser as described in
Section 1.1.7 of this Agreement are all of such items used in the Dahlstrom
Business that are in the possession of Seller. 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.
7.27 Warranties. Set forth on Schedule 7.27 attached hereto are the express
warranty terms and disclaimers for all forms of warranties given (or extended
warranties sold) by Seller during the ten-year period prior to the Closing Date
with respect to the Dahlstrom Business for product sold or services related
thereto provided by Seller. Seller, in operating the Dahlstrom Business, has not
sold any parts or equipment or performed any services related thereto which fail
to comply with any express or implied warranties or guarantees of Seller
applicable to such parts or equipment or services related thereto.
8. Representations and Warranties of Purchaser
Purchaser represents and warrants to Seller as of the Closing Date as
follows:
8.1 Corporate Existence. Purchaser is a corporation organized and
existing in good standing under the laws of the State of Delaware. Purchaser
has full power and authority to own its assets and to carry on its business as
and where such business is now conducted.
<PAGE>
8.2 Due Authorization and Enforceability. Purchaser has full 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 of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action and no other
action or proceeding on the part of Purchaser is necessary to authorize the
execution and delivery by Purchaser of this Agreement or Related Agreements to
which it is a party or the consummation by Purchaser of the transactions
contemplated hereby or thereby. This Agreement and the Related Agreements to
which Purchaser is a party have been duly executed and delivered by Purchaser
and this Agreement and the Related Agreements to which Purchaser is a party are
legal, valid and binding obligations of Purchaser, enforceable against Purchaser
in accordance with their terms.
8.3 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, Bylaws or other Charter
documents of Purchaser, (ii) conflict with or violate any law, rule, regulation,
ordinance, order, writ, injunction, judgment or decree 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 or termination or cancellation of, or result in the
creation of any lien, charge or encumbrance on any of their 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 instrument 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) and (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 and the Related Agreements to which
it is a party.
9. Survival of Representations and Warranties. The representations and
warranties made in this Agreement or pursuant hereto shall survive the execution
and delivery of this Agreement and the conclusion and closing of the
transactions contemplated hereby.
10. Covenants
10.1 Retention of Records. Purchaser hereby covenants that for a period of
five (5) years following the Closing Date, Purchaser will retain, at Purchaser's
sole expense, the Books and Records of Seller relating to the operation of the
Dahlstrom Business prior to the Closing Date. During such period, Purchaser will
afford to Seller, its counsel and accountants, during normal business hours,
reasonable access to such books, records and other data, to the extent that such
access may reasonably be required to facilitate the preparation by Seller 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. Following the expiration of such five (5) year period, Purchaser
may dispose of any such books, records and other data; provided, however, that
before disposing of any such materials it will first notify Seller and permit
Seller at its sole expense, to remove such materials.
10.2 Further Actions. Upon the terms and subject to the conditions hereof,
each of the parties hereto agrees to use its best efforts or take or cause to be
taken all action and to do or cause to be done all things necessary, proper and
advisable to consummate the transactions contemplated by this Agreement, the
Related Agreements and other documents necessary to close this transaction, and
shall use its best efforts to obtain all necessary waivers, 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 Liens, assuming Purchaser has satisfied its obligations
pursuant to its assumption of Seller's liabilities as set forth in Article 5 of
this Agreement.
10.3 Press Releases. Purchaser and Seller 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, except as may be required by law or any listing agreement with a
national securities exchange. It is contemplated that the parties will issue
press releases to announce the execution of this Agreement and the expected
Closing. Notwithstanding the foregoing, Seller shall, simultaneously with the
Closing, notify its employees and creditors of the sale of assets contemplated
by this Agreement, specifically noting that Purchaser is not assuming
liabilities beyond those described in this Agreement.
10.4 Receipt of Funds. After the Closing Date, each of Purchaser and Seller
shall segregate any monies or other amounts paid to either of them in respect of
receivables or assets that belong to the other party, and each party shall
promptly pay over and remit to the other party any such monies and amounts
weekly after receipt thereof. Each of Purchaser and Seller shall take all
reasonable actions, including the giving of timely notices to assure that the
covenants set forth in this Section 10.4 are faithfully and timely fulfilled.
10.5 Employees
10.5.1 Potential Employees. Effective as of the Closing Date, Purchaser
or an affiliate of Purchaser may offer employment to any of Seller's personnel
now working full-time at the Schiller Park, Illinois facility of Seller (a
"Potential Employee"). Any Potential Employee who accepts an offer of employment
and who commences employment with Purchaser upon the terms of such offer on or
after the Closing Date is an "Accepting Employee". Seller shall be responsible
and liable for any required notification and payments under the Worker
Adjustment and Retraining Notification Act of 1988.
10.5.2 Benefits. Purchaser will not assume or have any liability,
responsibility or obligation under any of the Pension Plans, Welfare Plans or
Non-ERISA Commitments of Seller. Seller will be responsible and liable for and
discharge at or prior to Closing all obligations to, for or on behalf of all
Potential Employees under any Pension Plans, Welfare Plans and Non-ERISA
Commitments, including, without limitation, if applicable, the cost of accrued
and unpaid wages, unpaid bonuses, stock options, severance pay, accrued personal
days, unpaid holidays, and sick leave, the cost of retirement benefits and
pensions, the cost of payroll taxes, including FICA, Federal Unemployment
Insurance, State Unemployment Insurance and Federal and State withholding, and
the cost of health insurance, dental insurance, disability insurance, life
insurance and the like for events prior to and including the Closing Date.
Seller also will be responsible and liable for the costs of administration and
compliance with the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") for any qualifying event or as required under applicable state law or
similar group health contribution coverage benefits under federal and state law
(collectively such costs and those set forth in the sentence prior hereto shall
be defined as "Separation Benefits").
10.5.3 Eligibility of Accepting Employees. For purposes of eligibility
for employment plans, programs and for vacation during employment with
Purchaser, Purchaser's policies or those of its affiliates as set forth from
time to time hereafter shall be applied in accordance with their terms and
conditions to all Accepting Employees. The service of Accepting Employees with
Seller prior to the Closing Date shall be recognized for purposes of eligibility
for participation in Purchaser's 401(k) plan, vacation accrued in accordance
with and subject to the terms and conditions of Purchaser's or its affiliates'
applicable vacation policies as stated from time to time and other applicable
employment benefits plans and programs.
10.5.4 Claims of Accepting Employees. Seller hereby agrees to indemnify
and hold harmless Purchaser, its agents, officers or directors, employees, and
affiliates against any liabilities, costs or expenses (including reasonable
attorneys' fees) resulting from claims made by any Potential Employees, any
prior employees of Seller and/or any applicants for employment with Seller for
Separation Benefits. Subject to the accuracy of the representations of Seller
contained herein, Purchaser hereby agrees to indemnify Seller, its agents,
officers, directors, employees and subsidiaries against any liabilities, costs
or expenses including reasonable attorney's fees) resulting from claims made by
any Accepting Employees relating to acts and omissions of Purchaser with respect
to the employment of such Accepting Employees by Purchaser after the Closing
Date.
10.6 Discharge of Liabilities. Seller will pay and discharge in due course
after the Closing Date, and hold Purchaser harmless from, all liabilities,
obligations and taxes of Seller relating to and arising from the ownership and
operation of the Assets and the Dahlstrom Business prior to and including the
Closing Date, (whether unrecorded accounts payable, accrued liabilities,
customer deposits or other obligations), that are not expressly assumed by
Purchaser pursuant to the terms of Article 5 of this Agreement, it being
understood that Purchaser is assuming no liabilities or obligations of Seller
other than those expressly set forth in Article 5 of this Agreement. If Seller
fails to pay and discharge any such liabilities and, in the case of bona fide
disputes regarding such liabilities, fails to disclose to Purchaser the
existence of and all facts relating to such bona fide disputes, Purchaser may,
without having any duty, pay or discharge such liabilities of Seller and apply
for reimbursement from the Escrow Agent, offset such amounts paid from any
obligation of Seller to Purchaser or use the indemnification provisions of
Article 16 of this Agreement.
10.7 Products Liability Claims. Seller hereby covenants to defend and
undertake any and all obligations and liabilities under any claims for products
liability, failure to warn, breach of warranty, sales misrepresentation or other
related claims arising from loss and injury to person and/or property occurring
prior to and including the Closing Date due to the alleged acts and omissions of
Seller. Seller will maintain in force policies of insurance in sufficient limits
to meet the above obligation. The Long-term Esrow Amount shall be available to
meet the obligations of Seller hereunder.
10.8 Name Change. Immediately after the Closing Date, Seller shall change
its name sufficiently so as not to use "Dahlstrom" or any variant thereof.
10.9 IRPTA Disclosure Document. Purchaser and Seller acknowledge that the
purpose of the Illinois Responsible Property Transfer Act ("IRPTA") is to ensure
that the parties to the transaction contemplated hereby are made aware of the
existing environmental liabilities associated with the ownership of the
Property, as well as the past use and environmental status of the Property.
Purchaser and Seller hereby waive the thirty (30) day IRPTA Disclosure Document
delivery period and agree that the Disclosure Document required by IRPTA (the
"IRPTA Document") will be prepared by Seller and will be provided to Purchaser
by Seller on or before the Closing Date.
10.10 Real Property Apportionment. The general real estate taxes and
assessments, water and sewer charges, utility bills, prepaid charges, payments
and accrued expenses relating to the Real Property, and any leases, licenses,
occupancy certificates, and any and all other items relating thereto not
specifically mentioned which are customarily apportioned in real estate
transactions of this kind (the "Proratable Items") shall be apportioned as of
the Closing Date. The net amount of any such apportionment shall be added to or
deducted from, as the case may be, the amount due Seller on the Closing Date
with respect to the Real Property. If on the Closing Date, real property taxes
for the then current fiscal period are not known, the apportionment of such real
property taxes shall be made on the basis of 100% of the real property taxes for
the immediately preceding fiscal tax period for which such taxes are known.
Seller and Purchaser hereby agree to adjust the apportionment of such real
property taxes when the actual bills therefor are issued. If the real property
taxes which are to be apportioned shall thereafter be reduced by abatement, the
amount of such abatement, less the reasonable cost of obtaining the same, shall
be apportioned between the parties, provided that neither party shall be
obligated to institute or prosecute proceedings for an abatement.
Notwithstanding anything to the contrary contained herein, Seller and Purchaser
acknowledge that Seller shall be responsible for the Proratable Items relating
to periods on or before the Closing Date regardless of when such Proratable
Items shall become due and payable, and Purchaser shall be responsible for all
such Proratable Items relating to periods after the Closing Date.
10.11 Material Changes in Operations. Seller shall refrain, except as
otherwise allowed in this Agreement or approved in advance by Purchaser, from
(i) making any purchases, sales or transfers of any Assets other than in the
ordinary course of business; (ii) entering into any contracts or commitments
other than in the ordinary course of business; (iii) mortgaging, pledging,
subjecting to lien or otherwise encumbering any Asset; (iv) granting a pay
raise, price increase or decrease or making any change in the compensation or
benefits payable to employees, agents or sales representatives of Seller or
making any bonus payment or arrangement , or (v) violating any federal, state or
local laws with respect to the operation of the Dahlstrom Business or the use of
the Assets. Seller shall use its best efforts to pay all liabilities and taxes
in a timely manner, to preserve the Dahlstrom Business intact, to keep the
services of the present officers and key employees and to preserve the goodwill
of all suppliers, customers, sales representatives and others having material
business relations with Seller. Except with Purchaser's prior written consent,
which will not be unreasonably withheld, Seller shall not allow the coverage of
any of the liability or property insurance of the Dahlstrom Business to be
diminished in any material respect. Seller will exercise all due diligence in
safeguarding and maintaining secure all of the Books and Records of Seller.
Seller shall not on behalf of itself or its shareholders enter into, engage in
or initiate any negotiations or discussions regarding (i) a merger,
consolidation, reorganization, restructuring or similar transaction of or
regarding Seller or (ii) the sale, directly or indirectly, of any of Seller's
capital stock or rights related thereto or the Assets. Seller shall refrain from
declaring, setting aside, paying or making any dividend or other distribution or
payment whether in cash, stock or property with respect to any capital stock of
Seller or other rights in respect of or related thereto.
10.12 Access to Information. Seller shall furnish to Purchaser and its
representatives full access at all reasonable times to the employees, Assets,
agents, affiliates and Books and Records of Seller and shall promptly furnish
all information with respect to the Dahlstrom Business as Purchaser reasonably
requests from time to time.
10.13 Real Property and Asset Matters
10.13.1 Environmental Covenants. Seller agrees to allow Purchaser and
its representatives and agents upon prior notice to conduct a Phase I
Environmental Audit (the "Audit") of all aspects of the operation of the
Dahlstrom Business and the condition of the Real Property, including, without
limitation, historical and present operations, waste disposal practices at the
Real Property, permit status and compliance, prospective viability of continued
operation of the Dahlstrom Business in compliance with the Environmental Laws,
and groundwater, air emission and soil evaluation. Seller will cooperate in all
aspects of the Audit and allow complete access by Purchaser and its
representatives and agents to the Real Property and all information requested.
Seller shall allow Purchaser and its representatives and agents to take such
samples of soil, wastewater effluent, subsurface water, air emissions and solids
as Purchaser deems necessary to complete the Audit. Purchaser agrees to leave
the Real Property in the same condition as prior to the Audit and not to
materially disturb the operations of Seller in the conduct of the Audit.
10.13.2 Maintenance of Real Property. Seller shall maintain the Real
Property in the same manner that Seller has been maintaining the Real Property.
Seller shall use its best efforts to maintain all permits and consents necessary
to the operation of the Dahlstrom Business and to maintain the Real Property. If
the Real Property is in a municipality that has ordinances requiring a
Certificate of Occupancy or other inspection certificate before the Real
Property
<PAGE>
may be used by Purchaser, Seller shall make any and all required repairs and
alterations, at its expense, to maintain or obtain a current certificate by the
Closing Date.
10.13.3 Destruction of Assets. In the event of damage or destruction of
any of the Assets prior to the Closing Date, then, at Purchaser's election, the
damaged or destroyed Assets shall be excluded from this Agreement with a
corresponding reduction in Purchase Price, or Purchaser shall be entitled to
receive the insurance proceeds payable in respect of such Assets in lieu of or
together with such Assets, in which event the Purchase Price shall remain the
same. In the event the Assets are damaged or destroyed by reason of fire or
other casualty to such an extent that the operations of the Dahlstrom Business
are substantially impaired, then Purchaser may, by written notice to Seller,
terminate this Agreement. The Closing may be delayed to determine whether the
Assets have been substantially impaired. Seller shall notify Purchaser
immediately in the event of any damage or destruction to the Assets.
11. Closing
11.1 Closing. The closing of the transaction contemplated by this Agreement
(the "Closing") shall be held on the 30th day of August, 1996 or such other date
as mutually agreed by the parties, at the offices of Barasa & Larkin, 105 West
Madison, 22nd Floor, Chicago, Illinois at 10 a.m., local time, or at such other
time and place as the parties may agree.
11.2 Closing Events. At the Closing upon the Closing Date:
11.2.1 Purchaser, Seller and Escrow Agent shall execute the
Short-term Escrow Agreement and the Long-term Escrow Agreement.
11.2.2 Seller shall execute and deliver to Purchaser the Bill of
Sale and any other documents of transfer regarding personal property.
11.2.3 Seller shall provide to Purchaser any and all required
written consents to Purchaser's assumption of the Material Agreements.
11.2.4 Purchaser shall execute and deliver to Seller the Certificate
of Assumption, in the form attached hereto as Exhibit 11.2.4 for those
liabilities of Seller assumed by Purchaser pursuant to Article 5 of this
Agreement.
11.2.5 Purchaser shall have received a written legal opinion from
counsel to Seller and Seller shall have received a written legal opinion from
counsel to Purchaser substantially in the respective forms attached hereto as
Exhibit 11.2.5.
11.2.6 Purchaser shall have received from Seller a certificate
signed by the Chairman and President of Seller that the representations and
warranties of Seller are true as of the Closing Date, and that all covenants to
be performed by Seller by the Closing Date have been performed.
11.2.7 The parties shall complete and execute the Memorandum of
Allocation.
11.2.8 Seller shall obtain from its secured and judgment creditors
and lenders and deliver to Purchaser such lien releases, terminations and other
documents necessary to assure Purchaser to its satisfaction that the Assets are
being transferred by Seller to Purchaser under this Agreement free and clear of
all liens and encumbrances.
11.2.9 Mr. Harold A. Williamson shall have executed a Limited-Term
Employment Agreement and Messrs. James F. Williamson and Burton Lowther shall
have executed Employment Agreements in form and substance acceptable to
Purchaser.
11.2.10 Seller shall deliver to Purchaser a fully
executed IRPTA Document.
11.2.11 Seller shall deliver to Purchaser a release from the
Illinois Department of Revenue of claims against Seller under Section 902(d) of
the Illinois Income Tax Act and Section 5(j) of the Illinois Retailers
Occupation Tax Act.
11.2.12 Seller shall execute and deliver to Purchaser the Deed and
all other documents, certificates, statements, declarations and affidavits
necessary or generally delivered for the transfer of real estate like the Real
Property, including without limitation, the Title Commitment and Title Policy.
11.2.13 Purchaser shall pay the Purchase Price as set forth in
Section 3.3 of this Agreement.
12. Conditions to Purchaser's Obligation to Complete Closing
The obligation of Purchaser to purchase and pay for the Assets at Closing
shall be subject to the satisfaction, prior to or concurrently with the Closing
Date, of each of the following express conditions precedent, unless waived by
Purchaser:
12.1 Consents and Releases. Seller shall have obtained and delivered to
Purchaser (based upon Purchaser's assumption thereof) any and all required
consents to the assignment of the Material Agreements, the lien and judgment
releases and terminations of security interests described in Section 11.2.8 of
this Agreement so that the Assets may be transferred by Seller to Purchaser free
and clear of all liens and encumbrances, and a release from Hoganson Venture
Group, Inc. regarding its fee.
12.2 Governmental Approvals. Purchaser and Seller shall have obtained all
requisite government approvals, if any, for their participation in the
transactions contemplated under this Agreement.
12.3 Accuracy of Representations. The representations and warranties of
Seller shall be true and correct in all material respects at the Closing Date,
and Seller shall have complied with all covenants set forth in this Agreement.
12.4 Closing Documents Delivered. Seller shall have executed and delivered
the documents, certificates, instruments and agreements and done the acts
required of Seller in connection with the Closing as described in Section 11 of
this Agreement.
12.5 No Prohibition. No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court or competent jurisdiction or governmental
or regulatory authority or instrumentality that prohibits the consummation of
the transactions contemplated hereby.
12.6 Bankruptcy. Seller shall not be the subject of a petition for
reorganization or liquidation under the Federal bankruptcy laws, or under state
insolvency laws, nor shall an assignment for the benefit of creditors or any
similar protective proceeding or act or event of bankruptcy have occurred.
12.7 Real Property Fulfillments. Purchaser shall have received prior to the
Closing Date a title report indicating that, upon the payment of the secured
loans made by American National Bank to Seller, Seller will obtain good and
marketable title to the Real Property and any title defects noted in such title
report shall have been cured in full by Seller. The survey of the Real Property
previously provided by Seller to Purchaser shall have been certified as of the
Closing Date to be accurate by the surveyor. Purchaser is reasonably satisfied
with the results of the Phase I Environmental Audit. No uninsured casualty shall
have occurred with respect to the Real Property. No damage or destruction of the
Assets to the extent that the operation of the Dahlstrom Business has been
substantially impaired shall have occurred.
12.8 Non-Fulfillment Date. In the event that one or more of the foregoing
conditions in this Article 12 is not fulfilled by the date of September 30
,1996, Purchaser may, upon notice to Seller on or prior to Closing, elect either
(i) to waive the condition and proceed to Closing; or (ii) terminate this
Agreement without any further liability on the part of either of the parties
except that the foregoing shall not relieve either of the parties from liability
for damages actually incurred as a result of breach of this Agreement.
13. Conditions to Seller's obligation to Complete the Closing
The obligation of Seller to sell and convey the Assets at the Closing shall
be subject to the satisfaction, prior to or concurrently with the Closing Date,
of each of the following express conditions precedent:
13.1 Government Approvals. Purchaser and Seller have obtained all requisite
government approvals, if any, for their participation in transactions
contemplated under this Agreement.
13.2 Accuracy of Representations. The representations and warranties of
Purchaser shall be true and correct in all material respects at the Closing
Date, and for Purchaser shall have complied with all of its covenants set forth
in this Agreement.
<PAGE>
13.3 Closing Documents Delivered. Purchaser shall have executed and
delivered the documents, certificates, instruments and agreements and done the
acts required of Purchaser in connection with the Closing, as described in
Section 11 of this Agreement.
13.4 No Prohibition. No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order, shall have been enacted, entered,
promulgated or enforced by any court or competent jurisdiction or governmental
or regulatory authority or instrumentality that prohibits the consummation of
the transactions contemplated hereby.
14. [Intentionally left blank.]
15. Amendment and Waiver
15.1 Amendment. This Agreement may be amended only by a writing executed
by the authorized representatives of Purchaser and Seller.
15.2 Waiver. Any party hereto may (a) agree to extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) 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.
16. Indemnification
16.1 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,
as guarantor or principal obligor, howsoever arising), claim, damage and
expense, including, but not limited to, reasonable attorneys' fees and amounts
reasonably expended in settlement of litigation, pending or threatened, arising
out of or relating to: (i) any liabilities or obligations of the Dahlstrom
Business which were expressly assumed by Purchaser under this Agreement; (ii)
any material misrepresentation or material breach of any 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.
16.2 Seller Indemnification. Seller hereby agrees to indemnify and hold
Purchaser harmless from and against any and all loss, liability (whether known
or unknown, actual or contingent, legal or equitable, mature or inchoate,
howsoever arising), damage and expense, including but not limited to reasonable
attorneys' fees and amounts reasonably expended in settlement of litigation,
pending or threatened, arising out of or relating to: (i) any liabilities and
obligations of Seller not expressly assumed by Purchaser under the Agreement;
(ii) any material misrepresentation or material breach of any 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.
16.3 Procedure of Indemnification
16.3.1 Neither Purchaser nor Seller are required to take any action or
make any claim to any third person as a precondition of seeking indemnification
from the other(s) hereunder. The party seeking indemnification (the "Claimant")
shall promptly give notice to the indemnifying party or parties of any matter or
item which forms a basis for indemnification hereunder (a "Claim"). The Claimant
shall afford the indemnifying party or parties, or their authorized
representatives, the opportunity to defend, discharge or compromise such Claim
and examine the 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 and
agents with respect to such Claim. At an 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.
16.3.2 The indemnifying party or parties may, within twenty (20) days
after the Claimant has given notice of the Claim, give notice to the Claimant
that the indemnifying party or parties intend to litigate or otherwise attempt
to resolve the claim identified in the Claimant's notice. Upon such notice from
the indemnifying party or parties to the Claimant: (i) the indemnifying party or
parties, or any of them, shall have the right, at their 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 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 or parties
shall keep the Claimant appraised of all material developments in connection
with any such Claim.
16.3.3. So long as any indemnifying party shall continue determination
that monies are payable by Claimant to a third person, the indemnifying party or
parties will not be obligated to pay to Claimant the monies so claimed.
16.3.4 Notwithstanding the foregoing Section 16.3.3; if as a result of
any Claim, a judgment is entered against Claimant in a court of competent
jurisdiction, or a lien attaches to any property or asset of Claimant, or any
injunction, order or decree is obtained in any court of competent jurisdiction
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 or parties.
16.3.5 All amounts incurred or paid by the Claimant for which it is
entitled to indemnification by the indemnifying party or parties pursuant to the
terms and conditions of this Agreement shall be promptly reimbursed to it by the
indemnifying party or parties if not reimbursed within thirty (30) days of
written request therefor, Claimant shall have the right to offset from any other
amounts it owes or may owe to the indemnifying party or parties. It is
contemplated by the parties to this Agreement that prompt payment by Seller of
the agreed Claims of Purchaser shall be accomplished, insofar as possible, by
application and use of the Short-term Escrow Amount and the Long-term Escrow
Amount. In the event Claimant collects or retains an amount in excess of the
amount of claim or lien, including reasonable costs and expenses including
attorneys' fees, Claimant shall return such funds to the indemnifying party.
Claimant shall cooperate in accordance with its best business judgment, in
attempting to cause third parties who are liable to it or to the indemnifying
party, to cause such third parties to reimburse the indemnifying party for
payment made by it to Claimant; and Claimant shall subrogate the indemnifying
party to Claimant's rights against third parties, with respect to claims paid by
the indemnifying party to Claimant.
16.4 Exclusive Remedy. So long as the indemnifying party is in compliance
with this Article 16, the remedies provided in this Article 16 shall be
exclusive, except for (a) remedies set forth elsewhere in this Agreement (such
as application or use of the Short-term Escrow Amount and Long-term Escrow
Amount), and (b) specific performance or injunctive relief which shall be
available regardless of the provisions of this Article 16 so long as claims for
specific performance or injunctive relief are made within thirty-six (36) months
of the Closing Date.
16.5 Limitation on Indemnities. Notwithstanding anything set forth in this
Agreement, the aggregate total amount of indemnifications required of Seller
under this Article 16 shall not exceed the amount of the Purchase Price. This
limitation on indemnity shall not apply to claims of fraud. The time limitation
set forth in Section 16.4 of this Agreement, shall not apply to claims of fraud
or actions to enforce Article 6, Sections 7.2, 7.7, 7.16, 8.2 and Article 19 of
this Agreement.
16.6 Guarantee of Purchaser Obligations. Mestek, Inc. shall guarantee the
obligations of Purchaser under this Agreement by the execution and delivery of
a guarantee substantially in the form attached hereto as Exhibit 16.6
(the "Mestek Guarantee").
17. 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 Seller:
Dahlstrom Industries, Inc.
c/o Laurence Barasa, Esq.
Barasa & Larkin
105 W. Madison, 22nd Floor
Chicago, Illinois 60602
If to Purchaser:
Formtek, Inc.
260 North Elm Street
Westfield, Massachusetts 01085
Attention: R. Bruce Dewey,
Senior Vice President
or such other address as the person to whom notice is to be given has furnished
in writing to the other parties.
18. Further Assurance -- After Closing
18.1 Assurance of Seller. At any time and from time to time after the
Closing Date, at Purchaser's request and without further consideration, Seller
shall cooperate in good faith and promptly execute and deliver all such further
instruments or documents and perform such other and further acts as Purchaser
may reasonably request is in order to fully conclude the transactions
contemplated hereby.
18.2 Delivery of Notices. After the Closing Date, each party shall promptly
deliver to the other party any notices, correspondence and other documents
relating to the Assets being conveyed hereunder and the Dahlstrom Business,
which are, from time to time, received by that party.
19. Confidentiality
19.1 Proprietary information. Purchaser acknowledges its receipt of
substantial information from Seller concerning the Dahlstrom Business. All such
information is hereinafter called the "Proprietary Information".
19.2 Nondisclosure. Seller acknowledges that it is now in possession of the
same Proprietary Information concerning the Dahlstrom as described above in
Section 19.1. Seller agrees to keep all of the Proprietary Information
confidential after the Closing Date, except such Proprietary Information that
becomes public information without the fault of Seller.
20. Entire Agreement -- Binding Effect. This Agreement (together with the
Exhibits and Schedules hereto, the Related Agreements and the other agreements
executed at the Closing) 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. This Agreement may
not be modified, amended or terminated except in a writing signed by all of the
parties hereto.
21. Assignment. 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 parties hereto. To the extent 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.
22. Miscellaneous
22.1 Expenses. Except as otherwise agreed herein, each party hereto shall
bear its own expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby.
22.2 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 instrument.
22.3 Governing 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.
22.4 No Third Party Rights. This Agreement, the Related Agreements and the
other agreements entered into at the Closing are solely for the benefit of the
parties hereto. No third person shall acquire any rights or claims by reason of
or under this Agreement, the Related Agreements or the other agreements entered
into at the Closing.
22.5 Severability. Should any terms, provision or clause hereof, 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 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.
22.6 Headings. The headings to the sections of this Agreement are inserted
for convenience and reference only and are not intended to define or limit the
substance of any section.
22.7 Singular and Plural. Singular terms in this Agreement may be deemed to
include plural, and plural terms to include the singular.
22.8 Brokerage Fees. Neither Seller nor Purchaser, nor any of their
officers, directors or employees, has incurred any liability for any brokerage
fees, commissions, finders' fees or similar fees or expenses for which either
Seller or Purchaser may be liable, except Seller has engaged Hoganson Venture
Group, Inc. and its principal Kenneth B. Hoganson as its agent and broker and
hereby is liable and undertakes the responsibility for the payment of all fees
and costs thereof, absolving and indemnifying Purchaser of any obligations
therefor or related thereto.
22.9 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal, with the intent that this be a sealed instrument, on the date first above
written.
SELLER: DAHLSTROM INDUSTRIES, INC.
CORPORATE SEAL
ATTEST:
By: /s/ Burton Lowther By:/S/HAROLD A. WILLIAMSON
Harold A. Williamson, Chairman
and Chief Executive Officer
PURCHASER: FORMTEK, INC.
CORPORATE SEAL
ATTEST:
By: /s/ R.B. Dewey By:/S/STEPHEN M. SHEA
Stephen M. Shea, Vice
President-Finance
STOCK PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of this 30th day of January,
1997, by and between Formtek, Inc., a Delaware corporation ("Purchaser"); and
Maurice Hill Trust dated 8/16/91, Thomas Nedbal, Donald Hill, Robert Martinelli,
Elmer Utley and Allen Reczek ("Sellers") who own all of the issued and
outstanding capital stock (the "Stock") of Hill Engineering, Inc., an Illinois
corporation (the "Company"). The Purchaser and Sellers are sometimes
collectively referred to herein as the "Parties", and either one of the Parties
is sometimes referred to as a "Party".
WITNESSETH
WHEREAS, Sellers are the beneficial and record owners of the
Stock as set forth in Schedule 3.3 attached hereto;
WHEREAS, the Company is engaged in the business of designing,
manufacturing, fabricating, assembling, and selling tools, dies and related
machinery and equipment (the "Business");
WHEREAS, the Company retains and owns all such assets, goodwill, properties
and contractual and other rights necessary to conduct the Business (the
"Assets");
WHEREAS, each of Sellers and the Company are domiciled in
the State of Illinois; and
WHEREAS, Purchaser desires to purchase One Hundred Sixty-Two (162) shares
of the Stock (the "Shares") from Sellers as set forth in Schedule 3.3 attached
hereto, and Sellers desire to sell such Shares to Purchaser, upon the terms and
condition specified in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
hereinafter set forth, and of other good and valuable consideration, the Parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
PURCHASE OF THE SHARES
Sellers hereby agree to sell, assign, transfer, and convey to Purchaser at
the Closing (defined below), for the consideration set forth and payable in
accordance with the provisions of Article II of this Agreement, all of Sellers'
rights, title, and interest in and to the Shares, free and clear of all liens,
encumbrances and adverse charges of any nature. At the Closing, Sellers shall
deliver to Purchaser certificates representing the Shares validly endorsed in
blank or accompanied by executed stock powers with respect to such Shares.
ARTICLE II
PURCHASE PRICE
2.1 Consideration. Subject to the terms and conditions set forth herein,
Purchaser hereby agrees to pay to Sellers at the Closing, as consideration for
the purchase of the Shares and for Sellers' covenants contained herein, the
amount of Five Million One Hundred Forty-One Thousand, Seventy and 00/100
Dollars ($5,141,070.00) in cash or other current funds.
2.2 Payment of Purchase Price. On the Closing Date,
Purchaser shall pay the Purchase Price as follows:
(a) the amount of One Hundred Fifty Three Thousand Four
Hundred Fifty and 00/100 Dollars ($153,450.00) to the account of
Hoganson Venture Group, Inc. ("HVG"), Sellers' business valuation
consultant for the transaction;
(b) the amount of Four Thousand One Hundred Fifty and 00/100 Dollars
($4,150.00) to the account of Wolf & Company, LPP ("Wolf"), Sellers' accountant
for the transaction;
(c) the amount of Fifty Thousand and 00/100 Dollars
($50,000.00) to the account of Childress, Eshoo, Williams & Zdeb,
Ltd. ("CEW&Z"), Sellers' attorneys for the transaction;
(d) the amount of Fifteen Thousand Four Hundred and 00/100 Dollars
($15,400.00) to the account of the Company to reimburse it for the payment of
the expenses or liabilities of the Shareholders to be paid at Closing;
(e) the amount of Three Hundred Thousand Dollars ($300,000) to Chicago
Title Insurance Company the "Escrow Agent") pursuant to that certain escrow and
disbursement agreement (the "Escrow Agreement") substantially in the form of
Exhibit 2.2 attached hereto; and
(f) the balance of the Purchase Price to the individual accounts of
each of the Sellers in respect of their individual percentage interest in the
Shares as set forth in Schedule 3.3 attached hereto (the "Ownership
Percentage").
2.3 Transfer of Funds. All amounts of Purchase Price payable under this
Agreement shall be wired according to the instructions provided in writing to
Purchaser by the intended recipient of such funds as assembled into Schedule 2.3
attached hereto.
<PAGE>
ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF SELLERS
All representations and warranties contained herein shall survive the
Closing until such time(s) as stated in Article XVI, and none shall merge into
any Closing document. Sellers represent and warrant the following as of the date
of this Agreement and of the Closing Date (as defined in Article IX below):
3.1 Corporate Organization. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Illinois.
The Company has full corporate power and authority to own, lease and operate its
properties and to carry on and conduct the Business and is in good standing and
is duly qualified to transact business as a foreign corporation in all states in
which the nature of the Business or the Assets require it to be qualified.
3.2 Authority and Non-Contravention. Each of Sellers has the full power,
authority and capacity to enter into, execute, deliver and perform this
Agreement and all Exhibits to which it is a party. The execution, delivery and
performance of this Agreement and such Exhibits, and the consummation of all
transactions contemplated herein and therein, have been duly authorized by all
necessary action of Sellers. This Agreement and such Exhibits, when executed and
delivered by Sellers, shall be valid and binding obligations of Sellers,
enforceable against them in accordance with the terms hereof and thereof,
subject to bankruptcy, insolvency and other similar laws affecting the rights of
creditors generally and except that the remedies of specific performance,
injunction and other forms of mandatory equitable relief may not be available.
Except for approvals of governmental authorities, neither the execution and
delivery of this Agreement nor the execution and delivery of the certificates
and documents set forth as Exhibits hereto 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 the Company, (ii)
conflict with or violate any law, rule, regulation, ordinance, order, writ,
injunction, judgment or decree applicable to Sellers or the Company or the
Business or by which any of their assets are affected, or (iii) conflict with or
result in any breach 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 security interest, lien,
charge or encumbrance on any of Sellers' or 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
Sellers or the Company is a party or by which any of their assets are bound or
affected. Neither Sellers nor the Company are required to submit any notice,
declaration, report or other filing or registration with any governmental or
regulatory authority or instrumentality, and no approvals or non-objections are
required to be obtained or made by Sellers or the Company in connection with the
execution, delivery or performance by Sellers of this Agreement or any Exhibit
or the consummation of the transactions contemplated hereby or thereby.
3.3 Authorized Capitalization. The Company is an Illinois corporation
having authorized capital stock consisting of: 1000 shares of voting common
stock, of which 172 are issued and outstanding and 1000 shares of non-voting
common stock, of which 6 shares are issued and outstanding. Schedule 3.3
attached hereto sets forth all persons or entities owning shares of any class of
the Stock, as well as the amount and nature of the Stock held by each such
person or entity. There are no outstanding options, puts, calls or warrants to
acquire any of the Stock. The Shares constitute 162 out of 178 issued and
outstanding shares of the Stock. All of the Shares are validly issued, fully
paid and nonassessable and are owned of record and beneficially by Sellers in
their individual Ownership Percentage, free and clear of any liens, claims,
options, encumbrances or restrictions of any nature whatsoever. There are no
agreements, arrangements, convertible rights or other rights (vested or
contingent) to acquire any of the Stock, and no such agreements, arrangements,
convertible rights or other rights (vested or contingent) to acquire any of the
Stock will be issued, entered into, or granted prior to the Closing Date without
the prior written approval of the Purchaser. Sellers have the absolute and
indefeasible right, power and capacity to sell, assign and deliver the Shares to
Purchaser, and have good, marketable and indefeasible title to the Shares, free
and clear of all liens, claims, options, encumbrances or restrictions of any
nature whatsoever.
3.4 Operation of the Company's Business. The Company owns and retains all
of the Assets, tangible or intangible, contractual, license and leasehold rights
necessary (i) to operate the Business, and (ii) to utilize the Assets and
contractual, license and leasehold rights in the same manner as they
historically have been used. With the exception of those Assets used in the
Business pursuant to license and leasehold rights in favor of the Company and
disclosed to Purchaser, all of the Assets used in the Business are owned by the
Company, and none are owned by any other party.
3.5 Financial Statements. Attached hereto as Schedule 3.5 is the balance
sheet and the income statement of the Company for the years ended December 31,
1994 and 1995 ("Reviewed Financial") and the interim period ended September 30,
1996, and a balance sheet for the period ended December 31, 1996 ("Unreviewed
Financials"). The Reviewed Financials and Unreviewed Financials shall be
collectively referred to as Financial Statements. The Reviewed Financials are
materially complete and have been prepared from the books and records kept by
the Company and are materially accurate in presenting the properties, assets,
liabilities, financial position and condition of the Company as of their
respective dates. The results of operations set forth in the Reviewed Financials
are materially accurate. The Reviewed Financials to Seller's knowledge have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis. The Unreviewed Financials to Seller's knowledge have been
prepared from the books and records of the Company and reflect the properties,
assets, liabilities, financial position, results of operations, and consolidated
financial condition of the Company and of their respective dates in a manner
consistent with past practices.
3.6 Assets. The Company has good and marketable title to all of the Assets
(except for Third Party Software, for which the Company has valid and
enforceable licenses), and except as set forth in Schedule 3.6 attached hereto,
free and clear of all mortgages, options, leases, covenants, conditions,
agreements, liens, security interests, adverse claims, restrictions, charges,
encumbrances or rights of others. There exists no restriction on the use or
transfer of any of the Assets. The portion of the Assets that are tangible are
in good operating condition and repair, ordinary wear and tear excepted, and are
satisfactory for the purposes for which the Assets are being used in Business.
3.7 Compliance with Laws. The operation of the Business and the use of the
Assets are in material compliance with all applicable laws, ordinances, rules
and regulations, including but not limited to Federal, state, local
environmental, work place safety and employee benefits laws, regulations and
rules (collectively the "Laws"). The Company has all requisite licenses, permits
and certificates from Federal, state and local governmental authorities as may
be necessary to conduct the Business and to own and operate the Assets, and such
permits are valid and in full force and effect and will not be terminated or
adversely affected by the consummation of the transactions contemplated hereby.
Sellers and the Company have not received any notice alleging any violations by
the Company of any Laws, or of investigations or audits of the Company initiated
by governmental, regulatory or administrative agencies, and, to the knowledge of
the Company, no allegations or investigations are pending or have been
threatened.
3.8 Employee Benefit Plans
3.8.1 Except as set forth on Schedule 3.8.1 attached hereto, with
respect to all employees and former employees of the Company, neither the
Company nor any ERISA Affiliate (as defined below) of the Company presently
maintains, contributes to or has any liability under:
(a) any bonus, incentive compensation, profit sharing,
retirement, pension, group insurance, death benefit, group health, medical
expense reimbursement, cafeteria, dependent care, stock option, stock purchase,
stock appreciation rights, savings, deferred compensation, consulting, severance
pay or termination pay, vacation pay, life insurance, welfare or other employee
benefit or fringe benefit plan, program or arrangement;
(b) any plan, program or arrangement which is an "employee
pension benefit plan" as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or an "employee
welfare benefit plan" as such term is defined in Section 3(1) of ERISA.
For purposes of this Agreement, "ERISA Affiliate" shall mean each person (as
defined in Section 3(9) of ERISA) that, together with the Company (or any person
whose liabilities the Company has assumed or is otherwise subject to), currently
or in the past would be treated as a single employer under section 4001(b) of
ERISA or that would be deemed to be a member of the same "controlled group"
within the meaning of section 414(b), (c), (m) and (o) of the Internal Revenue
Code of 1986, as amended (the " Code"). The plans, programs and arrangements set
forth on Schedule 3.8.1 are herein referred to as the "Employee Benefit Plans."
3.8.2 With the exception of health care coverage as described in
Section 3.8.2, with respect to all employees and former employees of the
Company, neither the Company nor any ERISA Affiliate of the Company presently
maintains, contributes to or has any liability under any funded or unfunded
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").
Neither the Company nor any ERISA Affiliate of the Company maintains or
contributes to a trust, organization or association described in any of Sections
501(c)(9), 501(c)(17) or 501(c)(20) of the Code.
3.8.3 Favorable determination letters have been received from the
Internal Revenue Service with respect to each Employee Benefit Plan (except the
Hill Engineering Flexible Benefit Plan effective 1/1/96 for which a
determination is pending and is hereby excluded from the applicable
representations in this Section 3.8.3) which is intended to comply with the
provisions of Section 401(a) of the Code, evidencing compliance with the
relevant provisions of the Tax Equity and Fiscal Responsibility Act of 1982, the
Tax Reform Act of 1984 and the Retirement Equity Act of 1984. Each such Employee
Benefit plan complies in form and in operation with the requirements of the Code
and meets the requirements of a "qualified plan" under Section 401(a) of the
Code. Additionally, amendments have been made to each such Employee Benefit Plan
for the Tax Reform Act of 1986 and subsequent legislation and regulations to the
extent they are required. A proper and timely application for a favorable
determination letter with respect to each such Employee Benefit Plan, as
amended, has been made with the Internal Revenue Service, and no unfavorable
responses have been received with respect to any such application from the
Internal Revenue Service.
3.8.4 With respect to each Employee Benefit Plan which is subject to
Title I of ERISA, neither the Company nor any ERISA Affiliate of the Company has
failed to comply with any of the applicable reporting, disclosure or other
requirements of ERISA and the Internal Revenue Code, and there has been no
"prohibited transaction" as described in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA.
3.8.5 To the best of Seller's knowledge, neither the Company nor any
ERISA Affiliate of the Company, nor any of their respective directors, officers,
employees or any other "fiduciary", as such term is defined in Section 3(21) of
ERISA, has any liability for failure to comply with ERISA or the Internal
Revenue Code for any action or failure to act in connection with the
administration or investment of the Employee Benefit Plans.
3.8.6 With respect to any Employee Benefit Plan which is subject to
Section 412 of the Code or Section 302 of ERISA, if any, there has been no
"accumulated funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Code (whether or not waived). With respect to the Employee
Benefit Plans, all applicable contributions and
<PAGE>
premium payments for all periods ending prior to the Closing Date (including
periods from the first day of the then current plan year to the Closing Date)
have been made, and shall be made prior to the Closing Date in accordance with
past practice and, with respect to each Employee Benefit Plan subject to Title
IV of ERISA, the recommended contribution in the applicable actuarial report.
3.8.7 To the best of Sellers' knowledge, the actuarially determined
present value of all accrued benefits under each Employee Benefit Plan subject
to Title IV of ERISA (computed on a plan termination basis), if any, does not
exceed the fair market value of the assets of each such Employee Benefit Plan.
3.8.8 Neither the Company nor any ERISA Affiliate of the Company
presently 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.
3.8.9 Except as set forth on Schedule 3.8.9 attached hereto:
(a) The Company is not 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 the Company;
(b) The Company does not have outstanding any loan or loans
to any current or former employees of the Company, nor has the Company
guaranteed such loans;
(c) No amount payable to an employee or former employee of
the Company will be an "excess parachute payment" which is non-deductible under
Section 28OG of the Code.
3.8.10 Neither the Company nor any ERISA Affiliate of the Company has
maintained an employee pension benefit plan that has been the subject of a
"reportable event," as that term is defined in Section 4043 of ERISA, as to
which notices would be required to be filed with the Pension Benefit Guaranty
Corporation ("PBGC"), or of any event requiring disclosure under Section 4063(a)
of ERISA. Neither the Company nor any ERISA Affiliate of the Company has
incurred any outstanding liability under Section 4062 of ERISA to the PBGC. All
premiums or other amounts due and payable to the PBGC have been paid. Neither
the Company nor any ERISA Affiliate of the Company has terminated any employee
pension benefit plan subject to Title IV of ERISA, and no proceeding by the PBGC
to terminate any employee pension benefit plan pursuant to Title IV of ERISA has
ever been instituted or (to Sellers' knowledge) threatened, no notice of any
such termination has been received and no condition exists which presents a
material risk of termination of an Employee Benefit Plan.
3.8.11 There is no pending or, to Sellers' knowledge, threatened legal
action, proceeding or investigation against or involving any Employee Benefit
Plan maintained by the Company or any ERISA Affiliate of the Company (other than
routine claims for benefits) and, to the Sellers' knowledge, there is no basis
for or fact which could give rise to any such legal action, proceeding or
investigation. Any bonding required with respect to the Employee Benefit Plans
in accordance with applicable provisions of ERISA has been obtained and is in
full force and effect.
3.8.12 There has been no act or acts which would result in a
disallowance of a deduction or the imposition of a tax pursuant to Section
4980B, or with regard to plan years beginning before December 31, 1988, Section
162(i) of the Code as in effect immediately prior to the enactment of the
Technical and Miscellaneous Revenue Act of 1988, or any regulations promulgated
thereunder, whether final, temporary or proposed. No event has occurred with
respect to which the Company or any ERISA Affiliate of the Company could be
liable for a tax imposed by any of Sections 4972, 4976,4977, 4979, 4980 or 4980B
of the Code, or for a civil penalty under Section 502(c) of ERISA.
3.8.13 With respect to each of the Employee Benefit Plans, Sellers and
the Company have delivered or will deliver within 30 days of closing to
Purchaser true and complete copies of: (i) the plan documents, including any
related trust agreements, insurance contracts or other funding arrangements, or
a written summary of the terms and conditions of the plan if there is no written
plan document; (ii) the most recent determination letter received from the
Internal Revenue Service; (iii) the most recent IRS Form 5500; (iv) the most
recent actuarial valuation; (v) the most recent financial statement; (vi) all
correspondence with the Internal Revenue Service, the Department of Labor and
the Pension Benefit Guaranty Corporation with respect to the past three plan
years other than IRS Form 5500 filings and PBGC premium payments; and (vii) the
most recent summary plan description.
3.9 No Material Change. There has been no material adverse change since
September 30, 1996 in the nature or prospects of the Company and the Business or
its condition (financial or otherwise), or properties, assets, liabilities
(actual or contingent), operations, or the manner of conducting the Business, or
from the condition, position or prospects of the Business as outlined in that
certain The Confidential Corporate Growth Memorandum prepared by Hoganson
Venture Group dated November 16, 1996 (the "Materials") other than changes in
the ordinary course of business which in the aggregate are not material and
adverse. Since September 30, 1996, there has been no event or condition of any
character which, either individually or in the aggregate, might reasonably be
expected to affect in a material adverse manner the business prospects,
operations, properties, assets, liabilities, earnings or financial condition of
the Company, the Business or the Assets. Since September 30, 1996 the Company
has not (i) declared or, directly or indirectly, paid any dividends or made any
other distributions or payments of any kind to its shareholders or partners
other than the agreed exceptions which include the value of the then existing
shareholder loans, the proceeds of the exercise of the stock option of Mr.
Martinelli for five shares, the cash surrender value of the life insurance, the
tax obligations of Sellers for their fourth quarter taxes and the value of the
automobile currently utilized in the Business by Mr. M. Hill, (ii) incurred any
indebtedness for borrowed money, other than in the ordinary course of business,
(iii) created or permitted to be created any liens, encumbrances, or adverse
charges of any nature on any of the Assets of the Company, (other than pursuant
to existing and disclosed liens) (iv) discharged, satisfied or paid, in whole or
in part, or permitted to be discharged, satisfied or paid, in whole or in part,
any obligation or liability (contingent or absolute) relating to the Business or
the properties of the Company, other than in the ordinary course of business, or
(v) waived or permitted to be waived any material right or claim of the Company.
From September 30, 1996 to the date of the Closing inclusive the activities of
the Company were conducted in the ordinary course of business.
3.10 Disposition of Assets. No Asset having a value in excess of $500 has
been disposed of since December 31, 1996.
3.11 Litigation. Other than as set forth on Schedule 3.11 attached hereto,
there are no claims, counterclaims, suits, orders, proceedings, actions, or
investigations pending, or notice of which has been received, or, to the
knowledge of Sellers, threatened against the Company, its assets, the Stock or
the Sellers with respect to the Shares or the Business. Neither Sellers nor the
Company nor any of its subsidiaries, directors, officers, employees or agents is
a plaintiff or defendant in any litigation or proceeding arising out of or
related to the Business other than as set forth in Schedule 3.11.
3.12 Agreements, Leases and Licenses. Schedule 3.12 attached hereto
accurately and completely sets forth all leases, licenses, contracts and other
material agreements to which the Company is a party or otherwise bound including
all amendments or modifications thereto (collectively the "Contracts"). Each of
the Contracts is valid, effective and enforceable in accordance with its terms.
The Company is not in material default under any of the Contracts and, to the
knowledge of Sellers, no other party to any of the Contracts is in default
thereunder. No event has occurred which with the passage of time or the giving
of notice or both would constitute a material default under any of the
Contracts. Each of the Contracts is appropriate in nature and scope to the
Business. Except as set forth on Schedule 3.12, each of the Contracts is valid,
binding and enforceable against the Company and each other party thereto in
accordance with its terms without any defenses, setoffs, counterclaims or
disputes of any nature and is in full force and effect. No purchase commitment
for materials, supplies, component parts or other items of inventory of the
Business to which the Company is a party is in excess of the ordinary, normal,
usual and current requirements of the business or at a price in excess of the
current reasonable market price. No Contract obligates the Company (i) to
provide products or services to third parties which the Company knows or has
reason to believe are at prices which would result in a net loss on the sale or
provision of such products or services, or which are pursuant to terms or
conditions it cannot reasonably expect to satisfy or fulfill in their entirety,
or (ii) to purchase or acquire services, information, products, inventory or
equipment in excess of the normal, ordinary, usual and current requirements of
the Business or at a price in excess of the current reasonable market price. The
Company has not waived any material right under any of the Contracts. The
Company is not a party to, nor are any of the Assets bound by, any agreement
that is materially adverse to the Business. Neither Sellers nor the Company has
received notice that any party to any of the Contracts intends to cancel or
terminate any contract or to exercise or not exercise any option under any
Contract.
3.13 Environmental and Health and Safety Matters
3.13.1 Set forth on Schedule 3.13.1 attached hereto is a true,
accurate and complete list of all real property owned or operated, currently or
previously, by the Company since its incorporation with the dates of ownership
or operation set forth (the "Property"). Those locations currently owned and
operated by the Company (the "Current Property") are noted on Schedule 3.13.1.
3.13.2 Except as set forth in Schedule 3.13.2 attached hereto, the
Company in its ownership and operation, as the case may be, of the Property have
been at all times and are in compliance with the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation, and
Liability Act, the Superfund Amendments and Reauthorization Act, the Federal
Water Control Act, the Occupational Safety and Health Act, and all other
federal, state and local laws, regulations and ordinances, as amended, relating
to pollution, safety, health or protection of the environment, including,
without limitation, those relating to containment, emissions, discharges,
releases or threatened releases of industrial, toxic or hazardous substances,
materials or wastes or other pollutants, contaminates, petroleum products,
asbestos, polychlorinated biphenyls ("PCBs"), or chemicals (collectively,
"Hazardous Substances") into the environment (including without limitation,
ambient air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the manufacturing, processing, distribution, use,
treatment, labeling, storage, disposal, abatement, transport or handling of
Hazardous Substances (the "Environmental Laws").
3.13.3 The Company has obtained and is in full compliance with all
permits, licenses and other consents or authorizations which are required with
respect to the operation of the Business under the Environmental Laws, including
without limitation those that are required to (a) operate or install any
equipment or facilities and (b) generate, manufacture, formulate, store, treat,
handle, transport, discharge, emit or dispose of Hazardous Substances generated
by the Business, a true and complete list of which is included in Schedule
3.13.3.
3.13.4 To the best of Sellers' knowledge, there are polychlorinated
biphenyls (PCBs), Tetrachloroethylene (PCE), Trichlorethylene (TCE), or friable
and unencapsulated asbestos generated, used, treated, stored, maintained,
disposed of, or otherwise located on the Current Property. There are and were no
underground storage tanks whether or not excluded from regulation under
Environmental Laws used, stored, maintained, located on, out of service, closed,
abandoned, decommissioned or otherwise related to the Current Property. The
Company has removed and properly disposed of all used or other obsolete
materials regulated by Environmental Laws, including chemical or other hazardous
substances or wastes, generated by the Business.
3.13.5 Except as set forth in Schedule 3.13.2 of this Agreement, there
has been no "release" as defined in 42 U.S.C. 9601(22) or, to the knowledge of
Sellers, threat of a "release" of any Hazardous Substance on, from, over or
under any of the Property.
3.13.6 Except as set forth in Schedule 3.13.2 of this Agreement,
neither Sellers nor the Company have received notice that any of them have any
potential liability with respect to the contamination, investigation, or cleanup
of any site at which Hazardous Substances have been or have alleged to have been
generated, treated, stored, released, discharged, emitted, transported over or
disposed of, and there are no past or present (or, to the knowledge of Sellers,
future) events, facts, conditions or circumstances which may interfere with or
prevent compliance by the Business in accordance with the Environmental Laws, or
with any order, decree, judgment, injunction, notice or demand issued, entered,
promulgated or approved thereunder, or which may give rise to any common law or
other legal liability, including, without limitation, liability under any of the
Environmental Laws, or otherwise form the basis of any claim, action, demand,
suit, proceeding, hearing, notice of violation, study or investigation, based on
or related to the manufacture, process, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment of any Hazardous Substances by the
Company or a predecessor, as a result of any act or omission of the Company or a
predecessor.
3.13.7 Schedule 3.13.7 contains a true, correct and complete listing
of all Hazardous Substances used by the business of the Company in the conduct
of its operations since January 1, 1980, and the Company has available at its
place of Business a list of the methods used by the Company and any predecessor
(including, but not limited to, a list of past and present disposal or recycling
sites, waste haulers, and manifest numbers) since January 1, 1980 to dispose of
or recycle Hazardous Substances generated by the Company's operations.
3.13.8 To the best of Sellers' knowledge all of the Company's disposal
and recycling practices relating to Hazardous Substances have been accomplished
in accordance with all applicable Environmental Laws.
3.14 Intellectual Property. Schedule 3.14 lists all registered patents,
trademarks, service marks, tradenames and copyrights and all of the applications
thereof, that are owned by the Company and/or which are used in the Business.
The patents, trademarks, servicemarks, tradenames, copyrights, processes of
every kind and description, designs, know- how, formulae, shop rights, trade
secrets, and similar properties, as well as the registrations and applications
therefor, and the renewals thereof, (the "Intellectual Property"), are owned or
lawfully used by the Company. None of the Intellectual Property has been held or
stipulated to be invalid in any litigation or proceeding. The validity of the
Intellectual Property, and of the Company's rights to the Intellectual Property,
has not been questioned in any litigation or proceeding currently pending or
which, to the knowledge of Sellers, has been threatened, and there exists no
basis for a claim against the Company for infringement of any third party's
intellectual property. Neither Sellers nor the Company has received any notice
to the effect that any product it makes or sells, or the distribution or use by
it or another entity of any such product, or any services it performs in the
course of the Business, may infringe any trademark, service mark, tradename,
copyright, patent, trade secret, or similar legally protectable right of
another. All patentable inventions utilized or first reduced to practice in
connection with the Business or pursuant to or in connection with the employment
or engagement by the Company of individuals are the property of the Company. The
Company has not entered into and is not a party to any development, work for
hire, license or other agreement pursuant to which the Company has secured the
right or obligation to use, or granted others the right or obligation to use,
any trademarks, service marks, tradenames, copyrights, patents or knowhow
(except as set forth in Schedule 3.12 attached hereto).
3.15 Related Party Transactions. None of Sellers or any officer or director
of the Company or any affiliate thereof has, directly or indirectly, entered
into any transaction with the Company, except for any arrangements which are
specifically disclosed in the Financial Statements. For purposes of this Section
3.15 only, the term "affiliate" of the Company shall mean and include any
officer or director or shareholder of the Company or any person related to any
officer, director or shareholder of the Company by blood or by marriage, or any
corporation, partnership, proprietorship, trust or other entity in which such
officer or director or shareholder of the Company (or any spouse, ancestor or
descendant of the same) has more than a five percent (5%) legal or beneficial
interest, or any corporation, partnership, proprietorship, trust or other entity
which controls, is controlled by, or is under common control with, the Company.
3.16 Increases in Salaries and Wages. The Company has not, since September
30, 1996, paid any salaries, wages, bonus payments or any other benefits to its
employees at rates exceeding the respective rates paid to such employees which
were in effect thereat except for routine salary increases in the ordinary
course of business or pursuant to any Employee Benefit Plan.
3.17 Taxes. As to any Taxes (as defined in Section 12.1 below) imposed by
the Federal government, or any state government or any subdivision or
municipality thereof, or the government of any other country or political
subdivision thereof, including, without limitation, (i) taxes imposed on or
measured by income, (ii) taxes based on employment (including amounts withheld
from employees' compensation), and (iii) any property, franchise, or sales or
use tax, which, in each case, relates to or could cause a lien or encumbrance
upon any of the Assets, the Stock or the Business, the Company, and as
applicable, the Sellers, have timely, properly and lawfully filed all returns
and elections necessary to be filed and has paid in full the applicable taxes
(including any penalties, assessments and deficiencies in respect of such taxes)
due on such returns; and no claims for any unpaid taxes, interest or penalties
are being asserted by any governmental authority, for any period, against the
Company, the Stock or any Assets of the Company. The Company has not paid and is
not required to pay any income, excise or franchise taxes to any state or states
other than Illinois or Kentucky. The Company, and as applicable, the Sellers
have timely filed and paid all estimated taxes due on or prior to September 30,
1996, if any, and has made accruals on the Financial Statements for all taxes
due with respect to the period ended at the date of the Closing. The Company has
furnished Purchaser with true and complete copies of each of the Federal, state,
local and foreign income and excise tax returns, sales and use and franchise tax
returns, and any amendments thereto, of the Company, as they relate to taxable
periods since December 31, 1994, and the Company has made available to Purchaser
all reports of and communications from Internal Revenue Service agents and the
corresponding agents of other state, local and foreign governmental agencies who
have examined or intend to audit or examine the books and records of the Company
at any time including and since the commencement of the last IRS audit. No audit
or examination of the Company or the Stock by any taxing authority or agency is
now pending or currently in progress, nor has the Company received from any
taxing authority or agency any notice of such an audit or examination. The
Company has paid all deficiencies and altered all practices proposed as a result
of the audits and examinations. No waiver of any statute of limitations has been
given and is in effect in respect to the assessment of any taxes against the
Company. There are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any return of the Company for any period with
respect to any tax. There are no tax sharing agreements or arrangements to which
the Company is now or ever has been a party. There are no deferred taxes payable
by the Company whether set forth on the Financial Statements or otherwise. None
of Sellers is a "foreign person" within the meaning of Section 1445(b)(2) of the
Internal Revenue Code.
3.18 Employee Wages, Salaries and Benefits. The Company has provided
Purchaser with an accurate list of all employees of the Company (whether
full-time, part-time or temporary), and the current rate of compensation for
each such employee (including a separate statement of bonuses and fringe
benefits). There is no liability for unpaid salary or wages, bonuses, vacation
time, or other employee benefits due or accrued, nor liability for withheld or
deducted amounts from employees' earnings, for the period ending on or
immediately prior to the Closing Date, including without limitation commission
payments to agents, representatives or employees except as listed in the
Financial Statements or in Schedule 3.8.1. There are no labor disputes, strikes,
work stoppages or other interruptions in service or performance pending or
threatened, and all relationships between the Company and its employees are
generally stable and satisfactory.
3.19 Insurance. The Company maintains in effect, and has at all times
maintained in effect, product liability insurance, motor vehicle and
comprehensive general liability insurance and workers' compensation insurance
covering the Business and fire and extended coverage insurance with respect to
the Property and the Assets. Schedule 3.19 attached hereto is a complete list of
all of the Company's insurance policies (including the amount of coverage and
exclusions thereunder) in effect at present and as to product liability and
comprehensive general liability, in effect since 1990. All such insurance
policies are owned solely and exclusively by the Company. To the best of
Sellers' knowledge no event has occurred that may enable an insurer to rescind,
revoke or cancel any such policies or to seek any additional or retroactive
premium, charge, fee or penalty.
3.20 Customer and Supplier Relationships: Warranty Claims. The Company has
not received any notice that any customer or supplier of the Company intends to
discontinue or materially alter the prices or terms of, or substantially
diminish, its relationship with the Company. Other than as set forth on Schedule
3.20, since December 31, 1996, there are no outstanding warranty claims against
the Company by any of its customers with respect to products sold or services
rendered by the Company.
3.21 Accounts Receivable and Notes Receivable. Except as set forth in
Schedule 3.21 attached hereto, the accounts receivable and notes receivable of
the Company, represent bona fide claims which the Company has against debtors
for sales, services or funds advanced arising on or before the Closing Date, are
not subject to counterclaims, setoffs or deductions of any kind other than trade
discounts, and are not subject to additional requirements of performance by the
Company. The aggregate amount of customer advance payments (i.e., payments in
excess of actual work performed or materials supplied as of the date of such
payment) received by the Company at or prior to December 31, 1996 with respect
to such accounts receivable are set forth in the Balance Sheet. Such receivables
have been recorded in accordance with the Company's historical revenue
recognition policy and have been collected or are collectable in accordance with
their terms at the full face amount.
3.22 Accounts Payable. The accounts payable of the Company represent bona
fide claims which creditors have against the Company for sales or services, are
not subject to counterclaims, setoffs or deductions by the Company, and are not
subject to additional requirements of performance due to the Company. All of the
accounts payable have been created pursuant to receipt of goods or services
conforming to the terms of purchase orders executed in favor of unrelated third
parties in the ordinary course of business.
3.23 Bonds; Guarantees. There are no bonds, guarantees, notes, sureties,
letters of credit, indebtedness or other similar credit agreements or debt
obligations that exist with respect to the Company, the Business or any of the
Assets except as set forth in Schedule 3.23 attached hereto. The Company is not
in default on the payment of any principal or interest on any indebtedness for
borrowed money, nor is the Company otherwise, to its knowledge, in default under
any indemnity, fidelity or contract bond or letter of credit, note, guarantee or
other credit agreement or debt obligation or instrument.
3.24 Absence of Undisclosed Liabilities. Except as specifically and
explicitly reserved against in the Financial Statements, the Company is not
subject to any material liability or financial obligation (direct or indirect,
absolute, contingent, accrued or otherwise), other than liabilities or financial
obligations arising in the ordinary course of business since September 30, 1996.
The Company is not in default with respect to any term or condition of any
indebtedness or liability (including any current or deferred trade payable).
Sellers know of no facts or circumstances which might reasonably serve as the
basis for any material liabilities or financial obligations with respect to the
Company or the Stock which are not disclosed pursuant to this Agreement. For
purposes of this Section 3.24, any individual liability, or all such liabilities
in the aggregate, are deemed to be material if the individual or aggregate value
is greater than $1,000.
3.25 Inventories. Any and all inventories of the Company reflected in the
Financial Statements, plus any replacements for such items acquired on or before
the Closing Date, and minus any such items sold or leased by the Company in the
ordinary course of business on or before the Closing Date, including the
physical count of the inventory taken December 23, 1996 at the Danville,
Kentucky facility of the Company and December 30, 1996 at the Villa Park,
Illinois facility of the Company (the "Inventories"), are properly valued in
accordance with generally accepted accounting principles consistently maintained
and applied except as set forth in Schedule 3.25 attached hereto, at (i) in the
case of raw material or purchased components the lower of acquisition cost or
market value on an item by item FIFO basis, or (ii) in the case of
work-in-progress and finished goods, the sum of the value of raw material and
purchased components, direct labor and factory burden applicable to such items,
which sum shall be calculated by reference to (a) raw materials and purchased
components valued at the lower of acquisition costs or market costs, (b) direct
labor valued at the Company's labor rates which are based on actual recorded
direct labor minutes multiplied by the average shop-wide, direct labor rate in
effect at December 31, 1996, and (c) standard factory burden expressed and
valued as a percentage of standard direct labor costs, for the respective
products, which percentage shall be those used by the Company as of December 31,
1996, adjusted to eliminate the cost of the (x) wages, fringe costs and expenses
of any engineering activities that are not directly related to application
engineering, (y) the wages, fringe costs and expenses of any sales, marketing
and service activities, and (z) any other costs, including general
administrative costs, inconsistent with generally accepted accounting principles
in the calculation of factory burden. Except for obsolete and slow-moving items
which have been fully written off and except for items sold in the ordinary
course of business, the Inventories consisted of and will, at the Closing Date,
consist of items of a quality and quantity currently usable and saleable in the
ordinary course of business without markdown or discount. With respect to
Inventories in the hands of suppliers for which the Company is committed as of
the date of this Agreement or as of the Closing Date, such inventory is
described in Schedule 3.25 attached hereto and is reasonably expected to be
usable in the ordinary course of business as the Business is presently being
conducted. All items included in the Inventories are the property of the
Company. No items are held by the Company on consignment from others. The
Inventories are free of defects and, to the extent that they consist of finished
or semi-finished goods, also comply with the specifications submitted by the
intended purchasers thereof pursuant to valid and non-cancelable purchase
orders.
3.26 Equipment and Manufacturing. The machinery, equipment, patterns,
tools, dies, jigs, fixtures, vehicles, trucks, furniture and other assets owned,
retained, used or held for use by the Company are complete and adequate for the
purpose of manufacturing the items made by the Company and for the purpose of
providing the services rendered by the Company in connection with the Business.
Schedule 3.26 sets forth all machinery and equipment used to conduct the
Business (the "Equipment"), and the Company's software and computer programs
used in its business, including any software or computer programs not
wholly-owned by the Company ("Third Party Software"). The engineering drawings,
specifications and manufacturing data possessed or owned by the Company are all
of such items that are necessary to manufacture the products presently being
manufactured by the Company and to provide the services rendered by the Company
in connection with the Business.
3.27 Charter Documents. The Company has delivered or made available to
Purchaser certified copies of its Articles or Certificate of Incorporation and
By-laws, each as amended to date, as well as copies of its minute books covering
the period from the date of the Company's incorporation to the date of this
Agreement. Such Articles or Certificate of Incorporation and Bylaws are
complete, correct and current. The minute books of the Company contain a
complete, correct and current record of all meetings and other corporate actions
of the stockholders and Board of Directors of the Company since the
incorporation of the Company.
3.28 Subsidiaries. There are no subsidiaries of the Company.
3.29 "S" Corporation Status. Since January, 1987, the Company has been
qualified as an "S" corporation within the meaning of Section 1361(a)(1) of the
Code (and under any comparable state law) and will be so qualified until the
Closing.
3.30 No Material Misrepresentations or Nondisclosures. Neither this
Agreement nor any Exhibit or Schedule attached hereto nor the Materials (as
defined in Section 3.9 above) contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact not disclosed to
Purchaser by Sellers which adversely affects the Company, the Stock, the
Business or the Assets, or which in the future, as a result of existing material
facts whose impact has not yet been experienced, may (so far as Sellers can now
reasonably foresee) adversely affect the Company, the Stock, the Business or the
Assets.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
All representations and warranties contained herein shall survive the
Closing until such time(s) as stated in Article XVI, and none shall merge into
any Closing documents. Purchaser represents and warrants the following as of the
date of this Agreement and of the Closing Date:
4.1 Corporate Standing. Purchaser is a corporation organized, existing, and
in good standing under the laws of the State of Delaware. Purchaser has full
corporate authority to own, lease and operate its properties and businesses, and
is in good standing and is qualified to transact business as a foreign
corporation in all states in which the nature of its business or the properties
owned by it require it to be qualified.
4.2 Authority and Non-Contravention. Purchaser has the full corporate power
and authority to enter into, execute, deliver and perform this Agreement and all
Exhibits to which it is a party. The execution, delivery and performance of this
Agreement and such Exhibits, and the consummation of all transactions
contemplated herein and therein, have been duly authorized by all necessary
corporate action of Purchaser. This Agreement and such Exhibits, when executed
and delivered by Purchaser, shall be valid and binding obligations of Purchaser,
enforceable against it in accordance with the terms hereof and thereof, subject
to bankruptcy, insolvency and other similar laws affecting the rights of
creditors generally and except that the remedies of specific performance,
injunction and other forms of mandatory equitable relief may not be available.
Except for approvals of governmental authorities neither the execution and
delivery of this Agreement nor the execution and delivery of the certificates
and documents set forth as Exhibits hereto nor the consummation of the
transactions contemplated hereby or thereby will (i) conflict with or violate
any provision of the Articles or Certificate of Incorporation or By-laws of
Purchaser, (ii) conflict with or violate any law, rule, regulation, ordinance,
order, writ, injunction, judgment or decree applicable to Purchaser, or by which
any of Purchaser's 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 security interest, lien,
charge or encumbrance on any of Purchaser's 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
Purchaser is a party or by which any of its assets are bound or affected.
Purchaser is not required to submit any notice, declaration, report or other
filing or registration with any governmental or regulatory authority or
instrumentality and no approvals or non-objections are required to be obtained
or made by Purchaser in connection with the execution, delivery or performance
by Purchaser of this Agreement or the Exhibits or the consummation of the
transactions contemplated hereby or thereby.
4.3 Investment Intent. Purchaser is acquiring the Shares for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof.
4.4 Financing. As of the Closing, Purchaser will have the financial
capacity to perform its obligations under this Agreement.
ARTICLE V
COVENANTS OF THE SELLERS
Between the date of this Agreement and the Closing Date, Sellers shall, and
shall cause the Company to:
5.1 Management of the Company. Operate the Business in a prudent manner
consistent with past practices, and in the usual and ordinary course, and use
its best efforts to preserve the goodwill of suppliers, distributors, sales
representatives, customers, creditors and others having business relationships
with the Company, and shall safeguard and preserve the confidentiality of all
books, records and information relating to the Company in a prudent manner
consistent with past practices.
5.2 Accounting Practices. Refrain from making any change in the
accounting practices or procedures governing the Company and its financial
reporting.
5.3 Stock Restrictions. Refrain from delivering, pledging, encumbering,
selling, or otherwise disposing of any of the Shares, or issuing, redeeming or
repurchasing any shares of the Stock, or granting, issuing, selling, purchasing
or disposing of any option, warrant or right to acquire any shares of the Stock;
and refrain from making, paying, declaring or setting aside any dividend, or
making any distribution on account of any of the Shares. Not enter into, issue,
or grant any agreements, arrangements, warrants, calls, options, convertible
rights, splits, combinations, reclassifications or other rights (vested or
contingent) in respect of or to acquire any of the Stock.
5.4 Reorganization. Refrain from acquiring or agreeing to acquire by merger
or consolidation, purchase of capital stock or assets, or by any other manner,
any business, corporation, partnership or other business unit, division or
organization.
5.5 Maintaining Assets. Except as approved in advance by Purchaser,
maintain the fixed Assets in good condition, repair and working order, normal
wear and tear excepted; and refrain from (a) making or permitting any sales,
transfers or dispositions of any of the Assets (other than Inventory in the
ordinary course of business); (b) entering into any contracts (including
employment agreements), leases, or commitments (including the purchase of
capital assets), or any amendments or modifications to contracts, leases or
commitments existing at the date of this Agreement, involving the Business or
the Assets, other than those in the ordinary course of business, and other than
those that can be terminated without obligation or penalty at the Closing; (c)
taking or permitting any action or entering into or permitting any contract or
agreement prohibited by Section 3.9 of this Agreement; and (d) compromising any
claim of the Business.
5.6 Encumbrance of Assets. Refrain from mortgaging, pledging or subjecting
to any mortgage, pledge, lien, charge or other encumbrance any of the Assets
other than pursuant to existing liens disclosed to Purchaser or in the ordinary
course.
5.7 Compensation. Refrain from making or permitting any increase in the
compensation or benefits payable or to become payable to any of the directors,
officers, employees or agents of the Company, or making any new bonus payment or
arrangement or benefit to or with any of them, or hiring any additional
employees other than in the ordinary course of business.
5.8 Insurance. Have in effect and maintain at all times all insurance now
in force relating to the Company, the Business and the Assets.
5.9 Preserve Organization. Use its best efforts to preserve the business
organization of the Company intact, and to keep available the services of the
present officers and employees of the Company.
5.10 Access to the Records of the Company. Allow Purchaser, its
representatives, attorneys and accountants to continue to have reasonable access
to the records and files, audits, facilities and employees of the Company
relating to the Company, the Business and the Assets, as well as all information
relating to taxes, commitments, contracts, titles and financial condition of, or
otherwise pertaining to, the Company. The Company agrees to cause its
accountants and attorneys to cooperate with Purchaser and its accountants in
making available all financial information concerning the Company as is
requested, and Purchaser and its accountants shall have the right to examine all
working papers pertaining to the financial condition of the Company relating to
the Company, the Business and the Assets, provided that such examinations shall
be designed to cause minimal disruption to the Company, the Business and work
force, and in any event, shall be undertaken with reasonable prior notice and
during normal business hours of the Company.
5.11 Consents and Authorizations. Use its best efforts to obtain all
government authorizations and contractual and leasehold consents and permits
necessary to enable the consummation of all transactions contemplated hereby
without causing the discontinuation or termination of any permits or of any
contractual relationships maintained by the Company.
5.12 Fulfill Closing Conditions. Use its best efforts to take, or to cause
to be taken, all action reasonably necessary or appropriate to cause each of the
conditions set forth in Articles VII and VIII to be fulfilled on or prior to the
Closing Date.
5.13 Taxes. File and pay when due all federal, state, local and foreign
income, franchise and other taxes of the Company, including any taxes on or
arising out of this transaction. Refrain from taking any action to terminate or
revoke its "S" corporation election before the Closing Date.
5.14 Financial Reports. Provide Purchaser with (i) copies of any financial
statements prepared by the Company in the course of its business, to be provided
promptly after they become available; (ii) cumulative and monthly management
reports of the Business (including statements of revenues and expenses), to be
provided within 15 days following the end of each month; and (iii) written
notice immediately upon any significant change in the Business's prospects,
deviations from the ordinary course of business, or any other event that
represents a material adverse change in the prospects of the Business, or the
financial position or operations of the Company.
5.15 Certificate of Incorporation and By-Laws. Refrain from amending the
Articles or Certificate of Incorporation or By-Laws of the Company.
5.16 Damage or Destruction of Assets. Notify Purchaser immediately in the
event of any damage to or destruction of any of the material Assets.
5.17 No Shop. Refrain, and cause the Company's officers, directors,
employees, agents and Affiliates to refrain, from initiating or entering into
any negotiations or soliciting or discussing or encouraging (including by way of
furnishing non-public information) any offer or proposal regarding the sale,
direct or indirect, of any of the Shares; the sale, direct or indirect, of any
of the Assets (other than Inventory in the ordinary course of business); the
issuance of any of the Stock or any options, warrants, or rights to acquire
capital stock of the Company; or any merger, consolidation or similar
transaction involving the Stock or the Shares or any of the Assets; with any
party other than Purchaser or an Affiliate of Purchaser. The Seller shall
promptly notify Purchaser of any such proposal or offer, or any inquiry or
contact with any person with respect thereto, and the terms thereof.
5.18 Confidentiality. Continue, and cause the Company's officers,
directors, employees, agents and Affiliates to continue, to observe, perform,
and comply with that certain confidentiality agreement executed November 5,
1996, by the Company.
5.19 Plans. Refrain from modifying, canceling or establishing any Employee
Benefit Plan.
ARTICLE VI
COVENANTS OF PURCHASER
Between the date of this Agreement and the Closing Date, Purchaser shall:
6.1 Fulfill Closing Conditions. Use its best efforts to take, or cause to
be taken, all action reasonably necessary or appropriate to cause each of the
conditions set forth in Articles VII and VIII to be fulfilled on or prior to the
Closing Date.
6.2 Third Parties and Government Approvals. Use its best efforts to file
and obtain approval of all necessary documentation, and to obtain all necessary
approvals of third parties and of appropriate regulatory authorities, with
respect to the Proposed Transactions.
6.3 Confidentiality. Continue, and cause Purchaser's officers, directors,
employees, agents and Affiliates to continue, to observe, perform, and comply
with that certain confidentiality agreement executed November 8, 1996 by
Purchaser's parent and to which Purchaser became a party January 10, 1997.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING BY PURCHASER
Purchaser shall not be required to proceed on the Closing Date with the
proposed Transactions contemplated by this Agreement unless the following
conditions precedent shall have been fulfilled and satisfied, or shall have been
waived in writing by Purchaser:
7.1 Representations and Warranties. Each of the warranties and
representations of Sellers contained herein shall be true and correct as of the
date of this Agreement, and shall also be true and correct as of the Closing
Date as if then originally made.
7.2 Covenants. Sellers shall have complied with each of the covenants
required of them on or prior to Closing.
7.3 Sellers' and Officers' Certificate. Sellers shall have delivered to
Purchaser a certificate of Sellers, and a certificate of the President and Chief
Financial Officer of the Company, dated the Closing Date, certifying to the best
of the knowledge and belief of such persons and in such detail as Purchaser
reasonably requests to the accuracy of Sellers' representations and warranties
contained herein, and to the fulfillment of Sellers' covenants and to the
conditions precedent to Purchaser's obligations to consummate the transactions
contemplated by this Agreement ("Sellers' and Company Certificate").
7.4 Good Standing. Sellers shall have delivered to Purchaser a
certificate of good standing from the State of Illinois and a certificate of
authorization from the State of Kentucky for the Company.
7.5 Legal Opinion. Sellers shall have delivered to Purchaser a legal
opinion, in substantially the form attached hereto as Exhibit 7.5, from
Childress, Eshoo, Williams & Zdeb, counsel to Sellers ("Sellers' Opinion").
7.6 Governmental Approvals. Sellers, the Company and/or Purchaser, as the
case may be, shall have received all governmental and regulatory consents,
non-objections or permits from all Federal, state, local and foreign
governmental authorities necessary to permit Sellers, Purchaser, and the Company
to consummate the Proposed Transactions, and to enable the Company to conduct
the Business after the Closing Date in all material respects as the Company
conducted such Business on the date of this Agreement.
7.7 Material Adverse Change. There shall have been no material adverse
change (or changes which in the aggregate are materially adverse) since the date
hereof in the financial condition, results of operations, Assets, Business,
prospects or products and services provided by the Company, whether by reason of
change in government regulation or action or otherwise.
7.8 Bankruptcy. Neither the Company nor any of Sellers shall be the subject
of a petition for bankruptcy, reorganization or liquidation under the Federal
bankruptcy laws, or under state or foreign insolvency laws, nor shall an
assignment for the benefit of creditors or any similar protective proceeding or
act or event of bankruptcy have occurred.
7.9 Due Conveyance: Consents. The Shares, at Closing, will be conveyed
and assigned to Purchaser free and clear of all liens, charges, encumbrances and
third party adverse claims, and all necessary consents of other parties to the
contracts, agreements and licenses forming a part of the Business, shall have
been obtained without burdensome limitations or conditions.
7.10 Lawsuits. No action, suit or proceeding shall have been instituted or
threatened before a court, arbitration panel or governmental body with respect
to the Proposed Transactions, and no regulatory enforcement proceeding shall be
pending before any governmental agency or body with respect to the Proposed
Transactions.
7.11 Environmental Audit. The parties acknowledge hereby that an
environmental audit has been performed of the Current Property, the results of
which have been received. The Parties shall
split the cost of this audit.
7.12 Debt. At the Closing Date the Company shall have no debt, other than
trade debt, other accounts payable incurred in the ordinary course of business
and the debt set forth on the balance sheet at December 31, 1996, which forms
part of the Financial Statements.
7.13 Directors. Mr. M. Hill and Mr. Nedbal shall have resigned in writing
from the Board of Directors of the Company effective upon the Closing.
7.14 Non-Fulfillment Date. In the event that one or more of the foregoing
conditions in this Article VII is not fulfilled as of February 21, 1997, (the
"Non-Fulfillment Date"), Purchaser may, upon notice to the Company and on or
prior to the Closing Date, elect either (i) to waive the condition and proceed
to Closing; or (ii) not to consummate the Proposed Transactions and terminate
this Agreement without any further liability on the part of either of the
Parties.
7.15 Employment Agreements. Messrs. Donald Hill, Allen Reczek,
Elmer Utley,and Robert Martinelli shall have executed and delivered employment
agreements on terms and conditions acceptable to Purchaser substantially in the
form of Exhibit 7.15 attached hereto.
7.16 Shareholder Agreement. Purchaser and those Sellers retaining any of the
Stock shall have executed and delivered, effective upon the Closing Date, a
shareholder agreement on terms and conditions acceptable to the Parties
substantially in the form of Exhibit 7.16 attached hereto.
<PAGE>
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING BY THE SELLER
Sellers shall not be required to proceed on the Closing Date with the
transactions contemplated by this Agreement unless the following conditions
precedent shall have been fulfilled and satisfied, or shall have been waived in
writing by Sellers:
8.1 Representations and Warranties. Each of the representations and
warranties of Purchaser contained herein shall be true and correct as of the
date of this Agreement and shall be true and correct as of the Closing Date as
if then originally made.
8.2 Covenants. Purchaser shall have complied with each of the covenants
required of it on or prior to Closing.
8.3 Officers' Certificate. Purchaser shall have delivered to Sellers a
certificate of its President and Chief Financial Officer, dated the Closing
Date, certifying to the best of the knowledge and belief of such officers and in
such detail as Sellers reasonably request to the accuracy of Purchaser's
representations and warranties, and to the fulfillment of Purchaser's covenants
and of the conditions precedent to Sellers' obligations to consummate the
transactions contemplated by this Agreement ("Purchaser's Certificate").
8.4 Good Standing. Purchaser shall have delivered to Sellers a certificate
of good standing from the State of Delaware.
8.5 Legal Opinion. Purchaser shall have delivered to Sellers a legal
opinion, in substantially the form attached hereto as Exhibit 8.5, from
R. Bruce Dewey, general counsel of Purchaser
("Purchaser's Opinion").
8.6 Governmental Approvals. Sellers, Purchaser and/or the Company, as the
case may be, shall have received the any necessary governmental and regulatory
consents, non-objections or permits necessary to permit the Parties to
consummate the Proposed Transactions.
8.7 Bankruptcy. Neither Purchaser nor its parent shall be the subject of a
petition for reorganization or liquidation under the Federal bankruptcy laws, or
under state insolvency laws, nor shall an assignment for the benefit of
creditors or any similar protective proceeding or act or event of bankruptcy
have occurred.
8.8 Lawsuits. No action, suit or proceeding shall have been instituted or
threatened before a court, arbitration panel or governmental body with respect
to the Proposed Transactions, and no regulatory enforcement proceeding shall be
pending before any governmental agency or body with respect to the Proposed
Transactions.
8.9 Corporate Authorizations. There shall have been obtained, by means in
conformity with all applicable provisions of Delaware law, the approval of
Purchaser's Board of Directors to the Proposed Transactions.
8.10 Non-Fulfillment Date. In the event that one or more of the foregoing
conditions in this Article VIII is not fulfilled as of the Non-Fulfillment Date,
Sellers may, upon notice to Purchaser and on or prior to the Closing Date, elect
either (i) to waive the condition and proceed to Closing; or (ii) not to
consummate the Proposed Transactions and terminate this Agreement without any
further liability on the part of either of the Parties, except that the
foregoing shall not relieve either of the Parties from liability for damages
actually incurred as a result of breach of this Agreement.
ARTICLE IX
CLOSING
The actual consummation of the transactions contemplated by this Agreement
(the "Closing") shall take place on January 31, 1997 (the "Closing Date") at the
offices of the Company in Villa Park, Illinois or such other date or at such
other place as shall be otherwise agreed by the Parties hereto.
ARTICLE X
OBLIGATIONS AT THE CLOSING
10.1 Sellers' Obligations. At the Closing, Sellers shall deliver to
Purchaser:
10.1.1 Sellers' and the Company Certificate, or, if any representation
or warranty is untrue or incorrect, specifying the respect in which it is untrue
or incorrect or, if any such covenant is unfulfilled, specifying the respect in
which it is unfulfilled, or, if any such condition is unfulfilled, specifying
the respect in which it is unfulfilled;
10.1.2 Sellers' Opinion;
10.1.3 The certificates representing all of the Shares, together with
appropriate stock powers or forms of transfer in a form satisfactory to
Purchaser and executed by each of respective Sellers assigning such certificates
to Purchaser, free and clear of any liens, claims, options, encumbrances or
restrictions of any nature whatsoever.
<PAGE>
10.2 Purchaser's Obligations. At the Closing Purchaser shall deliver
to Sellers or as instructed by Sellers:
10.2.1 Purchaser's Certificate, or, if any such representation or
warranty is untrue or incorrect, specifying the respect in which it is untrue or
incorrect, or, if any such covenant is unfulfilled, specifying the respect in
which it is unfulfilled, or, if any such condition is unfulfilled, specifying
the respect in which it is unfulfilled;
10.2.2 A copy of resolutions adopted by the Board of Directors of
Purchaser, certified by its Secretary, authorizing or ratifying the execution
and delivery of this Agreement and the performance by Purchaser of its
respective obligations hereunder;
10.2.3 Purchaser's Opinion;
10.2.4 Current funds in the amounts specified in Section 2.2.
ARTICLE XI
FURTHER COVENANTS OF SELLERS AND PURCHASER
Sellers and Purchaser shall, as described below, each perform the indicated
tasks designated to be performed by them:
11.1 Joint Notice. After the Closing, Sellers and Purchaser shall cooperate,
to the extent practicable and reasonable, in giving joint notice of the
consummated transactions to each customer, creditor, distributor, sales
representative and supplier of the Business.
11.2 Further Assurances. Sellers agree that, from time to time and without
further consideration, they will execute and deliver such further documents and
take such other action as Purchaser may require more effectively to transfer to
and vest in Purchaser and put Purchaser in possession of the Shares and all
right and interest in the Shares.
11.3 Contracts. If any of the Contracts require the consent of a third party
in order not to be discontinued or terminated due to the transfer of Shares
consummated hereunder, and such consent cannot be obtained prior to Closing
despite the Parties' best efforts, the Parties shall continue to use their best
efforts to obtain the third party's consent after the Closing Date.
ARTICLE XII
TAX MATTERS
12.1 Certain Definitions. For purposes of this Article XII, "Taxes" means
all federal, foreign, state or local net or gross income, gross receipts, sales,
use, ad valorem, value-added, franchise, withholding, "tollgate", payroll,
employment, excise, property or similar taxes, assessments, duties, fees, levies
or other governmental charges (including, without limitation, any liability for
taxes arising from a consolidated return and imposed by Treasury Regulations
section 1.1502-6) together with any interest thereon, penalties, additions to
tax or additional amounts with respect thereto and any interest in respect of
such penalties, additions or additional amounts, and "Carryforwards" means any
federal or state tax loss carryforwards, investment tax credits, and foreign tax
credits of the Company arising from taxable years or periods prior to the
Closing Date.
12.2 Tax Indemnification
12.2.1 Notwithstanding any other provision of this Agreement, Sellers
hereby agree to indemnify Purchaser against and hold it harmless from (i) all
liability for Taxes of the Company attributable to taxable years or periods
ending on or before the Closing Date and, in the case of taxable years or
periods beginning before and ending after the Closing Date, the portion of such
years or periods ending at the close of business on the Closing Date (the
"Pre-Closing Tax Period"), (ii) all liability whenever incurred for Taxes of
Sellers, and (iii) any liability resulting from a failure of any of Sellers to
fulfill their obligations under this Article XII.
12.2.2 Notwithstanding any other provision of this Agreement, Purchaser
hereby agrees to indemnify Sellers and hold them harmless from (i) any liability
for Taxes of the Company attributable to any taxable periods or portions thereof
commencing after the Pre-Closing Tax Period, and (ii) any liability resulting
from a failure of Purchaser to fulfill its obligations under this Article XII.
12.2.3 In addition to, and not in derogation of, the foregoing, in the
event that the amount of any Carryforward is reduced from the amount set forth
in Section 12.2 for any reason whatsoever, including, without limitation, as a
result of a final determination of taxable income for taxable periods ending on
or before the Closing Date, or as a result of any Adjustment (as defined in
Section 12.10.3), Sellers hereby agree to indemnify Purchaser against and hold
it harmless from any additional liability for Taxes that the Purchaser and/or
the Company incurs as a result of the reduction of the amount of such
Carryforward.
12.3 Closing of Taxable Period. Each of Purchaser and Sellers agree to cause
the Company to file all appropriate Federal, state, local and foreign tax
returns (the "Tax Returns") on the basis that the relevant taxable period ended
as of the close of business on the Closing Date, unless the relevant taxing
authority will not accept a Tax Return filed on that basis.
12.4 Preparation and Filing of Tax Returns by Sellers. Sellers shall prepare
and timely file or shall cause the preparation and timely filing of all
appropriate Tax Returns (including reporting the sale of assets under Section
338(h)(10) as set forth in Section 12.17 below) that include, on a consolidated
or any other basis, the income of the Company for all periods ending on or
before the Closing Date for those jurisdictions which permit or require a short
period tax return ending as of the close of business on the Closing Date.
Purchaser will cooperate with Sellers in making available to them any records
necessary to enable them to comply with this Section 12.4. At the request of
Sellers, Purchaser shall cause the Company to grant a Power of Attorney to such
persons as Sellers may designate to file such Tax Returns in the name of the
Company.
12.5 Preparation and Filing of Tax Returns by the Company. Purchaser and/or
the Company shall prepare and timely file or shall cause the preparation and
timely filings of (i) all Tax Returns with those jurisdictions not allowing a
short period Tax Return ending as of the close of business on the Closing Date
and (ii) all other Tax Returns of any kind with respect to Company that are due
after the Closing Date (other than Tax Returns to be filed by Sellers pursuant
to Section 12.4). Sellers will cooperate with Purchaser and the Company in
making available to Purchaser any records necessary to enable Purchaser and the
Company to comply with this Section 12.5. For all tax periods commencing after
the Closing Date, Purchaser and the Company shall have responsibility for the
preparation and filing of all Tax Returns relating to the assets, operations and
income of the Company.
12.6 Payment of Taxes by Sellers Directly to Taxing Authorities. Except as
provided in Section 12.7, Sellers shall pay or cause to be paid all Taxes due
with respect to Tax Returns which they are required to file pursuant to Section
12.4.
12.7 Payment of Taxes by Sellers to Purchaser. With respect to any
jurisdiction which does not permit or require a short period Tax Return ending
as of the close of business on the Closing Date, Sellers shall compute or cause
to be computed the Tax liability which would be reflected on an Tax Return for
the Company for that jurisdiction for the period through and including the
Closing Date (as if such a short taxable period existed and a return was
permitted or requested in respect thereof), and Sellers shall pay such amount
(less any estimated tax payments paid prior to the Closing Date) to Purchaser or
the Company on or before the due date, including extensions for the payment of
taxes to such jurisdiction with respect to the Tax Return to be filed by
Purchaser and/or Company. In the event that the estimated tax payment paid prior
to the Closing Date exceeds the amount of tax to be paid by the Company on a tax
return required under this Section 12.7, Purchaser shall pay or cause to be paid
such excess to Sellers. Any tax credits and any exemptions, allowances or
deductions that are calculated on an annual basis, such as the deduction for
depreciation, shall be apportioned on a time basis.
12.8 Consolidated and Unitary Tax Returns. Sellers agree to permit Purchaser
to cause the Company to elect, where permitted by law, to carry forward any net
operating loss, net capital loss, charitable contribution or other item arising
after the Closing Date that would, absent such election, be carried back to a
taxable period of the Company ending on or before the Closing Date.
12.9 Cooperation in Preparing and Filing Returns. Sellers and Purchaser
shall, and Sellers and Purchaser shall cause the Company to, cooperate fully
with each other in connection with the preparation and filing of the Tax Returns
or other tax returns, including but not limited to the furnishing or making
available of records, books of account and any other information necessary for
the preparation of any tax returns. Purchaser shall, and Purchaser shall cause
the Company to, provide Sellers with completed Tax Returns or tax return
information packages for the Company including, but not limited to, all
supporting documentation as required in prior years within one hundred twenty
(120) days after the Closing Date, for taxable periods ending on or prior to or
including but not ending on the Closing Date. Sellers shall furnish Purchaser
with completed federal and state Tax Returns or with pro-forma returns for the
Company by the earlier of ninety (90) days after receipt of all information
required for the proper completion of such returns or on or before thirty (30)
days prior to the due date of such returns.
12.10 Intentionally Left Blank.
12.11 Transfer Taxes. Sellers shall be liable for any stock transfer,
conveyance, stamp and other taxes arising from the sale and transfer of the
Shares.
12.12 Negotiation, Settlement or Contest of Tax Disputes. Sellers and their
duly appointed representatives shall have the sole right to supervise or
otherwise coordinate any tax examination process and to negotiate, resolve,
settle or contest any asserted Tax deficiencies or assert and prosecute any
claim for refund of Taxes (a "Tax Claim") for taxable periods ending on or
before the Closing Date. In addition, Sellers shall be entitled to participate
at their expense in the defense of any Tax Claim relating to any year or period
that includes the Closing Date for which Sellers may be required to pay amounts
to Purchaser and/or the Company pursuant to this Article XII, and with the
written consent of Purchaser and/or the Company, and at the Sellers' sole
expense, may assume the entire defense of such Tax Claim. Purchaser shall not,
and shall not allow the Company to, settle any Tax Claim for a year or period
ending on or before the Closing Date or including the Closing Date without the
consent of Sellers (which shall not be unreasonably withheld) if, with respect
to such claim, Sellers would be required to pay amounts to Purchaser and/or the
Company pursuant to this Article XII.
12.13 Cooperation in Connection with Examinations. Purchaser shall, and
shall cause the Company to, give prompt notice to Sellers of the assertion of
any claim, or the commencement of any suit, action, proceeding, investigation or
audit with respect to any Tax Return for any period or portion thereof ending on
or before the Closing Date that includes the operations of the Company,
describing in reasonable detail the facts pertaining thereto and the amount or
an estimate of the amount of the liability arising therefrom. Sellers and
Purchaser shall, and the Purchaser shall cause the Company to, cooperate fully
in any such action by furnishing or making available records, books of account
or other materials or taking such other actions as may be necessary or helpful
for the defense against the assertions of any taxing authority as to any
consolidated, combined or separate Tax Return for such periods.
12.14 Assignment of Tax Refunds. Purchaser shall, and shall cause the
Company to, assign to Sellers all Tax refunds, including interest, relating to
the Company with respect to any taxable year or period ended as of or prior to
the close of business on the Closing Date, and, with respect to any taxable year
or period that includes the Closing Date, the portion of such year or period
ending on and including the Closing Date. Purchaser shall, and shall cause the
Company to, pay over to Sellers promptly upon receipt all such refunds received
directly by any of them.
12.15 Record Retention. Sellers and Purchaser shall retain, and cause the
Company to retain, full and complete records for all tax periods which remain
subject to audit by action of statute or waiver for all periods or portions
thereof through and including the Closing Date. To the extent that such records
are currently maintained in both a hard copy and an electronic media format, the
Parties agree to cause both such types of records that pertain to the income or
operations of the Company prior to the close of business on the Closing Date to
be retained by Company and not to be destroyed without prior written approval of
Sellers or Purchaser, as the case may be. The Parties agree to cause the Company
to enter into such record retention agreements as may be requested by the
Internal Revenue Service with respect to all tax periods ending on or prior to
the Closing Date.
12.16 Termination of Tax Allocation Agreement. Any tax allocation agreement
or arrangement with respect to the Company that may have been entered into by
Sellers or its affiliates on the one hand and the Company on the other hand
shall be terminated as of the Closing Date, and no payments that are owed by or
to the Company pursuant thereto shall be of effect or enforceable, except that
any provision in such tax allocation agreement to provide information regarding
attributes or characteristics of the Company relevant to the determination of
any Taxes to the Company upon departure from the consolidated group of which
Sellers were a member shall be carried out by, and enforceable against, Sellers
or as provided for in such tax allocation agreement.
12.17 Section 338(h)(10) Election
(a) Sellers and Purchaser agree to execute Internal Revenue Service
Form 8023-A and to jointly and timely file an election under Section 338(h)(10)
of the Internal Revenue Code (the "Code"), and any comparable election, under
applicable state or local tax laws that provide for an election comparable to a
Code Section 338(h)(10) election, with respect to the purchase of the Shares.
Sellers and Purchaser shall cooperate fully with each other to take all
necessary and appropriate actions to accomplish the completion and filing of
such election in accordance with the provisions of Treasury Regulations Section
1.338(h)(10)-l and the provision of applicable state or local tax laws and
regulations.
(b) When the joint election is made under Section 338(h)(10) of the
Code with respect to the purchase of the Shares, Purchaser and Sellers agree
that the Purchase Price reflects the fair market value of the assets of the
Company deemed sold pursuant to such election and the Purchase Price shall be
allocated among the assets as set forth in Schedule 12.17 (the "Purchase Price
Allocation"). Purchaser agrees to report or cause the Company to report, and the
Sellers agree to report, the deemed sale of the Company's assets in a manner
consistent with the Purchase Price Allocation issued pursuant to this Section
12.17.
(c) Sellers and Purchaser each acknowledge that each has
independently consulted with its own respective tax advisors concerning the tax
consequences of an election under Section 338(h)(10) of the Code, and neither
Party shall have any recourse against the other with respect to the actual tax
effects thereof under this Agreement.
(d) Sellers and Purchaser agree that the obligations specified in this
Section 12.17 shall be modified as necessary to reflect adjustments to the
Purchase Price, if any, and such adjustments shall be made pursuant to the
provisions of Treasury Regulations section 1.338(b)-3T, as well as other
relevant provisions of Section 338 of the Code and the regulations thereunder.
Moreover, Purchaser shall prepare revisions to Schedule 12.17 hereto to reflect
such adjustments and shall timely forward such revised schedule to Sellers.
Purchaser and Sellers further agree to timely make all filings as may be
required by any or all of them by any relevant taxing jurisdictions to reflect
such adjustments and to file all tax returns in a manner consistent with such
adjustments.
(e) In addition to their obligations under the foregoing subsections,
Sellers and Purchaser shall, and Sellers and Purchaser shall cause the Company
and their Affiliates to, cooperate fully with each other in connection with the
preparation and filing of all Tax Returns relating to the Company, including but
not limited to the furnishing or making available of records, books of account
and any other information necessary for the preparation of such tax returns.
(f) Without limiting the effect of this Section 12.17, if no joint
election is made under Section 338(h)(10) of the Code with respect to the
purchase of the Shares through the acts or omissions of Purchaser, Purchaser
shall be liable for and hereby agrees to indemnify Sellers for any and all
liability for Taxes imposed on Sellers attributable, directly or indirectly, to
any elections made by Purchaser pursuant to Section 338(g) of the Code.
(g) Purchaser shall attach Internal Revenue Service Form 8023-A,
executed by Sellers and Purchaser, to the Company's federal income tax return
for the taxable year which ends on the Closing Date its Federal income tax
return for the taxable year which begins immediately after the Closing Date.
Purchaser shall attach Internal Revenue Service Form 8023-A, executed by Sellers
and Purchaser, to its Federal income tax return for the taxable year which
includes the Closing Date. In the event that a joint election is made under
Section 338(h)(10) of the Code with respect to the purchase of the Shares,
Purchaser and Sellers agree that the Purchase Price reflects the fair market
value of the assets of the Company deemed sold pursuant to such election and the
Purchase Price shall be allocated among the assets as set forth in Schedule
12.17 hereto (the "Purchase Price Allocation"). Buyer also agrees to report or
cause the Company to report, and the Sellers agree to report, the deemed sale of
the Company's assets in a manner consistent with the Purchase Price Allocation
issued pursuant to this Section 12.17.
(h) In the event that any of Sellers fails to take any action required
under this Section 12.17 or breaches any covenant hereof, Sellers shall be
liable for and hereby agree to indemnify Purchaser for any and all liability for
Taxes imposed on Purchaser or the Company attributable, directly or indirectly,
thereto.
12.18 Survival. All rights and obligations provided for in this Article XII
shall remain in force notwithstanding any other provision of this Agreement,
except in the event of termination of this Agreement pursuant to Section 7.14 or
Section 8.10.
12.19 Priority of Article. In the event of a conflict between the provisions
of this Article XII and any other provision of this Agreement, the provisions of
this Article XII shall control.
ARTICLE XIII
COVENANTS AGAINST COMPETITION
In partial consideration of the Purchase Price paid for the Shares by
Purchaser and for other good and sufficient consideration:
13.1 Each of Sellers agrees not to engage, directly or indirectly, as a
proprietor, stockholder, partner, employee, independent contractor or otherwise
in competition with the Business or the business of Purchaser or its Affiliates
during the Noncompetition Period (as hereinafter defined) in any market where
the Company is then conducting the Business; provided, however, this covenant
shall not apply to Messrs. Martinelli, Utley and/or Reczek in the event that
they are terminated by the Company without cause; and in the event Mr. D. Hill
is terminated by the Company without cause, this covenant shall apply only for a
period of one year thereafter.
13.2 Sellers agree not to do any of the following during the Noncompetition
Period in any market where the Company is then conducting the Business: (i)
directly or indirectly solicit or otherwise contact any present or past
customers of the Company, for itself or any other person, firm or corporation,
for the purpose of obtaining business in competition with the Business; (ii)
directly or indirectly solicit, interfere with or endeavor to entice away from
the Company any employees, sales representatives, or distributors; or (iii)
directly or indirectly solicit, interfere with or endeavor to entice away from
the Company any person, firm or corporation dealing or doing business with the
Company. Each of Sellers agrees not to do any of the following at any time after
the Closing Date: (a) directly or indirectly make use of any know-how relating
to the Business's technology or any intellectual property rights of the Company;
or (b) take any actions that in any manner are detrimental to the Company or the
Business. Nothing in this Article XIII shall prohibit Sellers or any of their
Affiliates from ownership of an equity interest not greater than 5% of any class
of securities in a publicly held company engaged in a business in competition
with Purchaser, its Affiliates, or with the Company.
13.3 Except as set forth in Section 13.1 above, for purposes of this
Agreement, the "Noncompetition Period" shall mean the period beginning at
Closing and ending on the second anniversary of the Closing.
13.4 Without waiving the Purchaser's rights to monetary damages, all Parties
to this Agreement acknowledge that the breach of the obligations contained in
this Article would result in substantial but indeterminable harm, that the
restraints imposed are reasonable, that there is no adequate remedy at law for a
breach of such obligations, and therefore, that injunctive relief, specific
performance or other equitable remedies are appropriate to enforce the
obligations undertaken in this Article XIII. In the event that a court finds
that the terms of this covenant not to compete are so broad as to be unlawful
and unenforceable, the Parties further agree that a reformation of the terms of
this Article XIII may be appropriate in order to protect the value of the
Company as a going concern, the value of the Shares being conveyed pursuant to
this Agreement, and the value of the covenant set forth in this Article XIII,
and to provide for the enforceability of the obligations contained in this
Article XIII to the fullest extent permitted by law.
ARTICLE XIV
EXPENSES WITH RESPECT TO TRANSACTION
Except as otherwise set forth in this Agreement, Sellers agree that they
will pay all fees, costs and expenses incurred by them in connection with this
transaction and the closing thereof, including, without limitation, the fees and
expenses of their attorneys, accountants and other persons, and no portion
thereof shall be paid by Purchaser. Purchaser agrees that it will pay all fees,
costs and expenses incurred by it in connection with this transaction and the
closing thereof, including, without limitation, the fees and expenses of its
attorneys, accountants and other persons, and no portion thereof shall be paid
by Sellers. Notwithstanding the foregoing, Sellers and Purchaser shall share
equally any fees of filings required to be made to governmental agencies in
connection with the Proposed Transactions.
ARTICLE XV
BROKERS
Each of the Parties hereby agrees to indemnify and save and hold harmless
the other Party, its shareholders, directors and officers 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 any agreement,
arrangement or understanding alleged to have been made by such party with any
broker or finder in connection with this Agreement or the Proposed Transactions.
<PAGE>
ARTICLE XVI
INDEMNIFICATION
16.1 Mutual Indemnification
16.1.1 Notwithstanding any other provisions of this Agreement, from and
after the Closing, each of Sellers, severally, and the successors and assigns of
any of them, hereby indemnifies Purchaser, its Affiliates, successors and
assigns, and agrees to hold Purchaser, its Affiliates, successors and assigns,
harmless from all Losses (as hereinafter defined) resulting from (i) a breach by
Sellers of any representation, warranty, covenant or agreement under this
Agreement or the Closing documents, subject to the provisions set forth in
Sections 16.1.7 and 16.1.8 of this Agreement or (ii) any liabilities arising at
or prior to the Closing, or any events occurring at or prior to the Closing
giving rise to liability (whether such liabilities or events were known, unknown
or could not be known by Sellers at or prior to the Closing), relating to the
Shares.
16.1.2 From and after the Closing Date, Purchaser, on behalf of its
Affiliates and its successors and assigns, hereby indemnifies Sellers, their
heirs, executors, successors and permitted assigns, and agrees to hold Sellers,
their heirs, executors, successors and permitted assigns, harmless from all
Losses resulting from (i) a breach by Purchaser of any representation, warranty,
covenant or agreement under this Agreement or the Closing documents, or (ii) any
liabilities arising after the Closing Date relating to the Shares.
16.1.3 As used in this Agreement, the term "Indemnifying Party" shall
mean the person or persons against whom a party (the "Indemnified Party") makes
a claim for indemnification hereunder.
16.1.4 The Indemnified Party shall give written notice to the
Indemnifying Party (and so long as the escrow shall exist under the Escrow
Agreement to the Escrow Agent) of any claim or event known to it which does or
may give rise to a claim by the Indemnified Party against the Indemnifying Party
based on this Agreement, stating the nature and basis of said claims or events
and the amounts thereof, to the extent known. Such notice shall be given in
accordance with Article XVII hereof. The giving of such notice shall be a
condition precedent to any liability of the Indemnifying Party hereunder. Such
notice shall be given reasonably promptly, but the fact that the Indemnified
Party failed to give notice with reasonable promptness shall not defeat a claim
made pursuant hereto except to the extent that the Indemnifying Party can
establish that it has been injured by such delay.
16.1.5 In the event of any claim, action, suit or proceeding made or
brought by third parties against the Indemnified Party, the Indemnified Party
shall give written notice as described in Section 16.1.4 above of such claim,
action, suit or proceeding with a copy of the claim, process and all legal
pleadings with respect thereto. After notification, the Indemnifying Party shall
participate in, and jointly with any other Indemnifying Party similarly
notified, assume the defense thereof, with counsel reasonably satisfactory to
such Indemnified Party at the time of such assumption. The Indemnified Party
shall have the right to employ its own counsel and such counsel may participate
in such action, but the fees and expenses of such counsel shall be at the
expense of the Indemnified Party, when and as incurred, unless (1) the
employment of counsel by such Indemnified Party has been authorized by the
Indemnifying Party, or (2) the Indemnifying Party shall not in fact have
employed counsel to assume the defense of such action reasonably satisfactory to
the Indemnified Party at the time of the Indemnifying Party's assumption of the
defense. If clause (2) of the preceding sentence shall be applicable, then
counsel for the Indemnified Party shall have the right to direct the defense of
such claim, action, suit or proceeding on behalf of the Indemnified Party. The
Indemnified Party and the Indemnifying Party, as the case may be, shall be kept
fully informed of such claim, action, suit or proceeding at all stages thereof
whether or not such party is represented by its own counsel.
16.1.6 As used in this Agreement, "Losses" means any and all claims,
demands, costs, losses, damages and liabilities. The term "Losses" includes
reasonable attorneys' fees and costs incurred in the investigation and defense
of a claim, demand, cost, loss or liability, provided however that the term
"Losses" does not include remuneration to the Indemnified Party's employees for
time spent investigating or litigating any claim or demand. With respect to
environmental matters, the term Losses also includes hazardous substances
removal, remedial activity or response action required by any Environmental Law,
required by judicial order or approved settlement or by order of or agreement
with any governmental authority, or requested by or for Sellers, or their
Affiliates.
16.1.7 The representations and warranties of Sellers set forth in
Article III of this Agreement shall survive closing for 14 months from the
Closing Date except Sections 3.1, 3.2 and 3.3 shall survive closing forever, and
Sections 3.5, 3.7, 3.8, 3.11, 3.13, 3.14, 3.17, 3.20, 3.24, 3.29 and 3.30 shall
survive for 36 months from the Closing Date. The covenants of the Sellers set
forth in Article V, VI, VII, VIII and X of this Agreement shall not survive the
Closing. The representations and warranties of the Purchaser set forth in
Sections 4.1 and 4.2 shall survive Closing forever, that set forth in Section
4.3 shall survive for a period of 36 months from the Closing Date and that set
forth in Section 4.4 shall not survive the Closing.
16.1.8 To partially secure the indemnities of Sellers, whose liability
thereof shall be several, and not joint, and in proportion to the percentage of
the shares of Stock each has sold, the Purchaser shall withhold Three Hundred
Thousand Dollars ($300,000) of the Purchase Price as an escrow account to be
held for a maximum period of thirty-six (36) months, and subject to the Escrow
Agreement attached hereto as Exhibit 2.2. No payment for indemnification shall
be made by the Sellers until the first such claim (the "Triggering Claim")
(which when added to the aggregate amount of all prior claims) exceeds the
amount of Twenty-Five Thousand Dollars ($25,000); provided, however, no claims
made prior to the Triggering Claim shall thereby become payable. So long as
sufficient Escrowed Funds remain under the Escrow Agreement, Purchaser shall
seek indemnification thereunder to satisfy its Losses under this Agreement.
16.2 Remedies Cumulative. All rights and remedies existing under this
Agreement are cumulative with, and not exclusive of, (i) each other, and (ii)
any rights or remedies otherwise available.
ARTICLE XVII
NOTICES
17.1 Notice. All notices and other communications required to be given under
the terms of this Agreement or which any of the Parties may desire to give
hereunder shall be in writing and delivered personally or sent by express
delivery, or by facsimile, or by registered or certified mail, with proof of
receipt, postage and expenses prepaid, return receipt requested, addressed as
follows:
(a) As to Purchaser, addressed to:
Formtek, Inc,
260 North Elm Street
Westfield, Massachusetts 01085
Attn.: John E. Reed, President
Fax: (413) 568-7428,
with a copy to:
R. Bruce Dewey, Esq.
Formtek, Inc,
260 North Elm Street
Westfield, Massachusetts 01085
Fax: (413) 568-7428;
or to such other address or addresses and to the attention of such other person
or persons as Purchaser may from time to time designate in writing to Seller;
(b) As to Sellers, addressed as set forth in Exhibit 3.3 attached
hereto, or to such other address or addresses and to the attention of such other
person or persons as each or any of Sellers may from time to time designate in
writing to Purchaser.
17.2 Receipt of Notice. Any notice given in accordance with this Article
XVII shall be deemed to have been given when delivered personally, or when
received if sent via express delivery, facsimile, or registered or certified
mail, return receipt requested.
ARTICLE XVIII
EFFECTIVENESS AND ASSIGNABILITY OF AGREEMENT
This Agreement shall become effective when executed and delivered by
Purchaser and Sellers, and shall be binding in all respects upon the respective
successors and permitted assigns of each of the Parties hereto. No Party hereto
may assign this Agreement in whole or in part without first obtaining the
written consent of the other Party, except that Purchaser may assign its rights
and obligations under this Agreement to one or more Affiliates so long as
Purchaser remains responsible for its performance hereunder.
ARTICLE XIX
ANNOUNCEMENT OF TRANSACTION
Subject to the provisions of Section 11.1, no party hereto shall make a
public announcement of any of the transactions contemplated by this Agreement
without approval of the other Party, unless required by law or by applicable
stock exchange requirements, and in any event such person shall provide notice
accompanied by a copy of all proposed announcements to the other Party. Nothing
in this Agreement shall be construed to inhibit Sellers or Purchaser from
communicating with their employees regarding this Agreement, so long as Sellers
or Purchaser, as the case may be, use their best efforts to make such employees
comply with the confidentiality obligations contained in Section 5.18 of this
Agreement.
ARTICLE XX
COMPLETENESS OF AGREEMENT
This Agreement and the Schedules and Exhibits hereto and Closing documents
represent the entire contract between the Parties with respect to the subject
matter hereof and supersede all offers, proposals, statements, representations
and agreements with respect to the subject matter hereof, including but not
limited to that certain letter of intent dated January 10, 1997. The terms and
conditions of that certain Confidentiality Agreement referenced in Section 5.18
of this Agreement shall not survive the Closing of this Agreement. The Exhibits
and Schedules hereto and the Closing documents are incorporated herein by
reference, and shall be deemed to be included in any reference to this
Agreement. This Agreement may not be amended except by action of each of the
Parties hereto set forth in an instrument in writing signed on behalf of each of
the Parties hereto.
ARTICLE XXI
CAPTIONS
The captions to the Articles and Sections contained in this Agreement are
for reference only, do not form a substantive part of this Agreement and shall
not restrict nor enlarge any substantive provision of this Agreement.
ARTICLE XXII
APPLICABLE LAW
This Agreement, the Schedules and Exhibits, and all other documents given in
connection herewith, shall be construed in accordance with the laws of the State
of Illinois without regard to the principles of conflicts of laws.
ARTICLE XXIII
CHOICE OF FORUM; VENUE; SERVICE OF PROCESS
Any claim, suit, action, or proceeding between Purchaser and any of Sellers
relating to this Agreement; or relating to any document, instrument, or
agreement delivered pursuant hereto, referred to herein, or contemplated hereby;
or in any other manner arising out of or relating to the transactions
contemplated by or referenced in this Agreement, shall be commenced and
maintained exclusively in the United States District Court for the Northern
District of Illinois, or, if that Court lacks jurisdiction over the subject
matter, in a state court of competent subject-matter jurisdiction sitting in
DuPage County, Illinois. Purchaser and each of Sellers hereby submit themselves
unconditionally and irrevocably to the personal jurisdiction of such courts.
Purchaser and Sellers further agree that venue shall be in DuPage County,
Illinois. Purchaser and Sellers irrevocably waive any objection to such personal
jurisdiction or venue including, but not limited to, the objection that any
claim, suit, action, or proceeding brought in DuPage County, has been brought in
an inconvenient forum. Purchaser and Sellers irrevocably agree that process
issuing from such courts may be served on them, either personally or by
certified mail, return receipt requested, at the addresses given in Article XVII
hereof; and Purchaser and Sellers further irrevocably waive any objection to
service of process made in such manner and at such addresses, including without
limitation any objection that service in such manner and at such addresses is
not authorized by the local or procedural laws of Illinois.
ARTICLE XXIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be considered an original but all of which shall constitute but one and
the same Agreement by and among the Parties.
ARTICLE XXV
NO THIRD PARTY BENEFICIARY
This Agreement is intended to inure to the benefit of Purchaser and Sellers
only; and no third party shall have any rights, express or implied, by reason of
this Agreement.
ARTICLE XXVI
UNILATERAL RIGHT TO WAIVE FAILURES OF OTHER PARTIES
26.1 Waiver. Any of the Parties may:
26.1.1 Extend in writing the time for the performance of any of
the obligations herein contained to be performed for the benefit of such party;
26.1.2 Waive in writing any inaccuracies in the representations
and warranties made to it contained in this Agreement or any Exhibit or Schedule
hereto or any certificate or certificates delivered by another party to this
Agreement;
26.1.3 Waive in writing the failure in performance of any of
the conditions herein expressed for its benefit; and
26.1.4 Waive in writing compliance with any of the covenants
herein contained for its benefit.
26.2 Effect of Waiver. No such waiver or extension shall be valid unless in
writing and signed by the party granting the waiver or extension, and no such
waiver or extension shall be construed to excuse or mitigate any subsequent
breach or violation of this Agreement not specifically covered by such waiver.
ARTICLE XXVII
SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement shall
not affect the other provisions hereof, and the Agreement shall be construed in
all respects as if such invalid or unenforceable provisions were omitted.
Furthermore, upon the request of any party hereto, the Parties to this Agreement
shall add, in lieu of such invalid or unenforceable provisions, provisions as
similar in terms to such invalid or unenforceable provisions as may be possible
and legal, valid and enforceable.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as
of the day and year first above written.
Purchaser: FORMTEK, INC.,
a Delaware corporation
By:_/s/ R. BRUCE DEWEY__________
R. Bruce Dewey
Senior Vice President
Sellers:
MAURICE HILL TRUST dated 8/16/91
Maurice Hill, Trustee
ROBERT MARTINELLI
By: /s/ Robert Martinelli
DONALD HILL
By: /s/ Donald Hill
ELMER UTLEY
B: /s/ Elmer Utley
THOMAS NEDBAL
By: /s/ Thomas Nedbal
ALLEN RECZEK
By: /s/ Allen Reczek
Mestek, Inc.
260 North Elm Street
Westfield, Massachusetts 01085
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Re: 5.53% Senior Notes due March 1, 1998
Dated as of March 1, 1996
Ladies and Gentlemen:
Mestek, Inc., a Pennsylvania corporation (the "Company"), agrees with you as
follows:
Section 1. Authorization of Notes;.
The Company will authorize the issue and sale of $15,000,000 aggregate principal
amount of its 5.53% Senior Notes due March 1, 1998 (the "Notes", such term to
include any such notes issued in substitution therefor pursuant to Section 13 of
this Agreement. The Notes shall be substantially in the form set out in Exhibit
1, with such changes therefrom, if any, as may be approved by you and the
Company. Certain capitalized terms used in this Agreement are defined in
Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.
Section 2. Sale and Purchase of Notes;.
Subject to the terms and conditions of this Agreement, the Company will issue
and sell to you and you will purchase from the Company, at the Closing provided
for in Section 3, Notes in the principal amount specified opposite your name in
Schedule A at the purchase price of 100% of the principal amount thereof.
Section 3. Closing;.
The sale and purchase of the Notes to be purchased by you shall occur at the
offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603,
at 11:00 a.m., Chicago time, at a closing (the "Closing") on April 8, 1996 or on
such other Business Day thereafter on or prior to April 15, 1996 as may be
agreed upon by the Company and you. At the Closing the Company will deliver to
you the Notes to be purchased by you in the form of a single Note (or such
greater number of Notes in denominations of at least $100,000 as you may
request) dated the date of the Closing and registered in your name (or in the
name of your nominee), against delivery by you to the Company or its order of
immediately available funds in the amount of the purchase price therefor by wire
transfer of immediately available funds for the account of the Company to
account number 2131067 at BayBank, 1500 Main St., Springfield, MA, ABA number
011001742. If at the Closing the Company shall fail to tender such Notes to you
as provided above in this Section 3, or any of the conditions specified in
Section 4 shall not have been fulfilled to your satisfaction or waived by you,
you shall, at your election, be relieved of all further
<PAGE>
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.
Section 4. Conditions to Closing;.
Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:
Section 4.1. Representations and Warranties;. The
representations and warranties of the Company in this Agreement shall be
correct when made and at the time of the Closing.
Section 4.2. Performance; No Default.'; The Company shall have
performed and complied with all agreements and conditions contained in this
Agreement required to be performed or complied with by it prior to or at the
Closing and after giving effect to the issue and sale of the Notes (and the
application of the proceeds thereof as contemplated by Schedule 5.14) no Default
or Event of Default shall have occurred and be continuing. Neither the Company
nor any Subsidiary shall have entered into any transaction since September 30,
1995 that would have been prohibited by Sections 10.1, 10.3 or 10.4 hereof had
such Sections applied since such date.
Section 4.3. Compliance Certificates;.
(a) Officer's Certificate. The Company shall have delivered to
you an Officer's Certificate, dated the date of the Closing, certifying that
the conditions specified in Sections 4.1, 4.2 and 4.8 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to
you a certificate certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery of
the Notes and the Agreement.
Section 4.4. Opinions of Counsel;. You shall have received opinions in
form and substance satisfactory to you, dated the date of the Closing (a) from
Baker & McKenzie, counsel for the Company, covering the matters set forth in
Exhibit 4.4(a) and covering such other matters incident to the transactions
contemplated hereby as you or your counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinion to you) and (b)
from Chapman and Cutler, your special counsel in connection with such
transactions, substantially in the form set forth in Exhibit 4.4(b) and covering
such other matters incident to such transactions as you may reasonably request.
'Section 4.5. Purchase Permitted By Applicable Law, Etc';. On the date
of the Closing your purchase of Notes shall (a) be permitted by the laws and
regulations of each jurisdiction to which you are subject, without recourse to
provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting
limited investments by insurance companies without restriction as to the
character of the particular investment, (b) not violate any applicable law or
regulation (including, without limitation, Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System) and (c) not subject you to any tax,
penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect on the date hereof. If requested by
you, you shall have received an Officer's Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine whether
such purchase is so permitted.
<PAGE>
Section 4.6. Payment of Special Counsel Fees.; Without limiting the
provisions of Section 15.1, the Company shall have paid on or before the Closing
the fees, charges and disbursements of your special counsel referred to in
Section 4.4 to the extent reflected in a statement of such counsel rendered to
the Company at least one Business Day prior to the Closing.
Section 4.7. Private Placement Number;. A Private Placement Number
issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the
Securities Valuation Office of the National Association of Insurance
Commissioners) shall have been obtained for the Notes.
Section 4.8. Changes in Corporate Structure;. Except as specified in
Schedule 4.8, the Company shall not have changed its jurisdiction of
incorporation or been a party to any merger or consolidation and shall not have
succeeded to all or any substantial part of the liabilities of any other entity,
at any time following the date of the most recent audited financial statements
referred to in Schedule 5.5.
Section 4.9. Proceedings and Documents;. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you and your special counsel
shall have received all such counterpart originals or certified or other copies
of such documents as you or they may reasonably request.
Section 5. Representations and Warranties of the Company;
The Company represents and warrants to you, as of the date of the Closing, that:
'Section 5.1. Organization; Power and Authority';. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement and the Notes
and to perform the provisions hereof and thereof.
Section 5.2. Authorization, etc;. This Agreement and the Notes have
been duly authorized by all necessary corporate action on the part of the
Company, and this Agreement constitutes, and upon execution and delivery thereof
each Note will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 5.3. Disclosure;. The Company, through its agent for the
transactions contemplated hereby, Bank of Boston, has delivered to you the
financial statements listed in Schedule 5.5 relating to the transactions
contemplated hereby. The financial statements listed in Schedule 5.5 fairly
describe, in all material respects, the general nature of the business and
<PAGE>
principal properties of the Company and its Subsidiaries. Except as disclosed in
Schedule 5.3, this Agreement, the documents, certificates or other writings
delivered to you by or on behalf of the Company in connection with the
transactions contemplated hereby and the financial statements listed in Schedule
5.5, taken as a whole, do not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made. Except as
expressly described in Schedule 5.3, or in one of the documents, certificates or
other writings identified therein, or in the financial statements listed in
Schedule 5.5, since December 31, 1995, there has been no change in the financial
condition, operations, business, properties or prospects of the Company or any
Subsidiary except changes that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. There is no fact known
to the Company that could reasonably be expected to have a Material Adverse
Effect that has not been set forth herein or in the other documents,
certificates and other writings delivered to you by or on behalf of the Company
specifically for use in connection with the transactions contemplated hereby.
'Section 5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates';. (a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary, (ii) of
the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's
directors and senior officers.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of capital stock or similar equity
interests of such Subsidiary.
Section 5.5. Financial Statements;. The Company has delivered to
you copies of the financial statements of the Company and its Subsidiaries
listed on Schedule 5.5. All of said financial statements (including in each
case the related schedules and notes) fairly present in all material respects
the consolidated financial position of the Company and its Subsidiaries as of
the
<PAGE>
respective dates specified in such Schedule and the consolidated results of
their operations and cash flows for the respective periods so specified and have
been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments).
Section 5.6. Compliance with Laws, Other Instruments, etc;. The
execution, delivery and performance by the Company of this Agreement and the
Notes will not (i) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of the
Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-laws, or any other
agreement or instrument to which the Company or any Subsidiary is bound or by
which the Company or any Subsidiary or any of their respective properties may be
bound or affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (iii) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary.
Section 5.7. Governmental Authorizations, etc;. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Notes.
'Section 5.8. Litigation; Observance of Agreements, Statutes and
Orders';. (a) Except as disclosed in Schedule 5.8 and 5.18, there are no
actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary or any property of
the Company or any Subsidiary in any court or before any arbitrator of any kind
or before or by any Governmental Authority that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any term
of any agreement or instrument to which it is a party or by which it is bound,
or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.9. Taxes;. The Company and its Subsidiaries have filed all
tax returns that are required to have been filed in any jurisdiction, and have
paid all taxes shown to be due and payable on such returns and all other taxes
and assessments levied upon them or their properties, assets, income or
franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent, except for any taxes and assessments (i)
the amount of which is not individually or in the aggregate Material or (ii) the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP. The Company knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of Federal, state or other taxes for all fiscal periods are adequate.
The Federal income tax liabilities of the
<PAGE>
Company and its Subsidiaries have been determined by the Internal Revenue
Service and paid for all fiscal years up to and including the fiscal year ended
December 31, 1990.
'Section 5.10. Title to Property; Leases';. The Company and its
Subsidiaries have good and sufficient title to their respective properties that
individually or in the aggregate are Material, including all such properties
reflected in the most recent audited balance sheet referred to in Section 5.5 or
purported to have been acquired by the Company or any Subsidiary after said date
(except as sold or otherwise disposed of in the ordinary course of business and
except for the properties reflected in items 3 and 4 of Schedule 5.3), in each
case free and clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.
Section 5.11. Licenses, Permits, etc;. Except as disclosed in
Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others;
(b) to the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise, authorization,
patent, copyright, service mark, trademark, trade name or other right owned by
any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its Subsidiaries
with respect to any patent, copyright, service mark, trademark, trade name or
other right owned or used by the Company or any of its Subsidiaries.
Section 5.12. Compliance with ERISA;. (a) The Company and each ERISA
Affiliate have operated and administered each Plan (other than Multiemployer
Plans) in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not be individually or in the aggregate
Material.
(b) The Company maintains no Plans (other than Multiemployer
Plans).
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material and that remain unpaid.
(d) The expected post-retirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage
<PAGE>
mandated by section 4980B of the Code) of the Company and its Subsidiaries is
not Material.
(e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax could
be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code and for which a
statutory or administrative exception is not available. The representation by
the Company in the first sentence of this Section 5.12(e) is made in reliance
upon and subject to (i) the accuracy of your representation in Section 6.2 as to
the sources of the funds used to pay the purchase price of the Notes to be
purchased by you and (ii) the assumption, made solely for the purpose of making
such representation, that Department of Labor Interpretive Bulletin 75-2 with
respect to prohibited transactions remains valid in the circumstances of the
transactions contemplated herein.
Section 5.13. Private Offering by the Company;. Neither the Company nor
anyone acting on its behalf has offered the Notes or any similar securities for
sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any person other than you and
not more than 4 other Institutional Investors, each of which has been offered
the Notes at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Notes to the registration requirements of Section 5 of
the Securities Act.
'Section 5.14. Use of Proceeds; Margin Regulations';. The Company will
apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No
part of the proceeds from the sale of the Notes hereunder will be used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation G of the Board of Governors of the Federal Reserve System
(12 CFR 207), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 10% of the value of the consolidated assets of the Company
and its Subsidiaries and the Company does not have any present intention that
margin stock will constitute more than 10% of the value of such assets. As used
in this Section, the terms "margin stock" and "purpose of buying or carrying"
shall have the meanings assigned to them in said Regulation G.
'Section 5.15. Existing Indebtedness; Future Liens';. (a) Except as
described therein, Schedule 5.15 sets forth a complete and correct list of all
outstanding Indebtedness of the Company and its Subsidiaries as of December 31,
1995, since which date there has been no Material change in the amounts,
interest rates, sinking funds, installment payments or maturities of the
Indebtedness of the Company or its Subsidiaries. Neither the Company nor any
Subsidiary is in default and no waiver of default is currently in effect, in the
payment of any principal or interest on any Indebtedness of the Company or such
Subsidiary and no event or condition exists with respect to any Indebtedness of
the Company or any Subsidiary that would permit (or that with notice or the
lapse of time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or before its
regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor
any Subsidiary has agreed or consented to cause or permit in the future (upon
the happening of a contingency or
<PAGE>
otherwise) any of its property, whether now owned or hereafter acquired, to be
subject to a Lien not otherwise permitted by Section 10.3.
Section 5.16. Foreign Assets Control Regulations, etc;. Neither the
sale of the Notes by the Company hereunder nor its use of the proceeds thereof
will violate the Trading with the Enemy Act, as amended, or any of the foreign
assets control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto.
Section 5.17. Status under Certain Statutes;. Neither the Company nor
any Subsidiary is subject to regulation under the Investment Company Act of
1940, as amended, the Public Utility Holding Company Act of 1935, as amended,
the Interstate Commerce Act, as amended, or the Federal Power Act, as amended.
Section 5.18. Environmental Matters;. Neither the Company nor any
Subsidiary has knowledge of any claim or has received any notice of any claim,
and no proceeding has been instituted raising any claim against the Company or
any of its Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets, alleging any
damage to the environment or violation of any Environmental Laws, except, in
each case, such as could not reasonably be expected to result in a Material
Adverse Effect.
Except as otherwise disclosed to you in Schedule 5.18:
(a) neither the Company nor any Subsidiary has knowledge of any facts
which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring on or
in any way related to real properties now or formerly owned, leased or operated
by any of them or to other assets or their use, except, in each case, such as
could not reasonably be expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or operated
by any of them and has not disposed of any Hazardous Materials in a manner
contrary to any Environmental Laws in each case in any manner that could
reasonably be expected to result in a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or operated
by the Company or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in a Material Adverse Effect.
Section 6. Representations of the Purchaser;.
Section 6.1. Purchase for Investment;. You represent that (1) you are
purchasing the Notes for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds and
not with a view to the distribution thereof, provided that the disposition of
your or their property shall at all times be within your or their control and
(2) you are an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act. You understand that the Notes
have not been registered under the Securities Act or any state "Blue Sky" laws
and may be resold only if registered pursuant to the provisions of the
Securities Act and any applicable state "Blue Sky" laws, or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to
<PAGE>
register the Notes. Without limiting the foregoing, you agree that you will not
offer to reoffer or resell the Notes purchased by you under this Agreement to
any Person unless, to your knowledge, such Person is not a Competitor.
Section 6.2. Source of Funds;. You represent that at least one of the
following statements is an accurate representation as to each source of funds (a
"Source") to be used by you to pay the purchase price of the Notes to be
purchased by you hereunder:
(a) the Source is an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60
(issued July 12, 1995) and there is no employee benefit plan, treating as a
single plan, all plans maintained by the same employer (or affiliate thereof,
within the meaning of Section V(a)(1) of PTE 95-60) or employee organization,
with respect to which the amount of the general account reserves and liabilities
for all contracts held by or on behalf of such plan, exceed ten percent (10%) of
the total reserves and liabilities of such general account (exclusive of
separate account liabilities) plus surplus, as set forth in the NAIC Annual
Statement filed with your state of domicile; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a
bank collective investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991) and, except as you have disclosed to the Company in writing
pursuant to this paragraph (b), no employee benefit plan or group of plans
maintained by the same employer or employee organization beneficially owns more
than 10% of all assets allocated to such pooled separate account or collective
investment fund; or
(c) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified professional
asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption),
no employee benefit plan's assets that are included in such investment fund,
when combined with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part l(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity of
such QPAM and (ii) the names of all employee benefit plans whose assets are
included in such investment fund have been disclosed to the Company in writing
pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each of
which has been identified to the Company in writing pursuant to this paragraph
(e); or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
If you or any subsequent transferee of the Notes indicates that you or such
transferee are relying on any representation contained in paragraph (b), (c) or
(e) above, the Company shall deliver on
<PAGE>
the date of Closing and on the date of any applicable transfer a certificate,
which shall either state that (i) it is neither a party in interest nor a
"disqualified person" (as defined in Section 4975(e)(2) of the Internal Revenue
Code of 1986, as amended), with respect to any plan identified pursuant to
paragraphs (b) or (e) above, or (ii) with respect to any plan, identified
pursuant to paragraph (c) above, neither it nor any "affiliate" (as defined in
Section V(c) of the QPAM Exemption) has at such time, and during the immediately
preceding one year, exercised the authority to appoint or terminate said QPAM as
manager of any plan identified in writing pursuant to paragraph (c) above or to
negotiate the terms of said QPAM's management agreement on behalf of any such
identified plan. As used in this Section 6.2, the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
Section 7. Information as to Company;.
Section 7.1.Financial and Business Information;. The Company
shall deliver to each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements _ As soon as possible and in any event within
45 days after the end of each quarterly fiscal period in each fiscal year of the
Company (other than the last quarterly fiscal period of each such fiscal year),
duplicate copies of:
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in shareholders' equity
and cash flows of the Company and its Subsidiaries for such quarter and (in the
case of the second and third quarters) for the portion of the fiscal year ending
with such quarter,
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified above of
copies of the Company's Quarterly Report on Form 10-Q prepared in compliance
with the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section 7.1 (a);
(b) Annual Statements _ As soon as possible and in any event within 105
days after the end of each fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied
(A) by an opinion thereon of independent certified public
accountants of recognized
<PAGE>
national standing, which opinion shall state that such financial statements
present fairly, in all material respects, the financial position of the
companies being reported upon and their results of operations and cash flows and
have been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances, and
(B) a certificate of such accountants stating that they have reviewed
this Agreement and stating further whether, in making their audit, they have
become aware of any condition or event that then constitutes a Default or an
Event of Default, and, if they are aware that any such condition or event then
exists, specifying the nature and period of the existence thereof (it being
understood that such accountants shall not be liable, directly or indirectly,
for any failure to obtain knowledge of any Default or Event of Default unless
such accountants should have obtained knowledge thereof in making an audit in
accordance with generally accepted auditing standards or did not make such an
audit),
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with the
Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3
under the Exchange Act) prepared in accordance with the requirements therefor
and filed with the Securities and Exchange Commission, together with the
accountant's certificate described in clause (B) above, shall be deemed to
satisfy the requirements of this Section 7.1(b);
(c) SEC and Other Reports _ promptly upon their becoming available, one
copy of (i) each financial statement, report, notice or proxy statement sent by
the Company or any Subsidiary to public securities holders generally, and (ii)
each regular or periodic report, each registration statement (without exhibits
except as expressly requested by such holder), and each prospectus and all
amendments thereto filed by the Company or any Subsidiary with the Securities
and Exchange Commission and of all press releases and other statements made
available generally by the Company or any Subsidiary to the public concerning
developments that are Material;
(d) Notice of Default or Event of Default _ promptly, and in any event
within five days after a Responsible Officer becoming aware of the existence of
any Default or Event of Default or that any Person has given any notice or taken
any action with respect to a claimed default hereunder or that any Person has
given any notice or taken any action with respect to a claimed default of the
type referred to in Section 11(f), a written notice specifying the nature and
period of existence thereof and what action the Company is taking or proposes to
take with respect thereto;
(e) ERISA Matters _ promptly, and in any event within five days after a
Responsible Officer becoming aware of any of the following, a written notice
setting forth the nature thereof and the action, if any, that the Company or an
ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined in
section 4043(b) of ERISA and the regulations thereunder, for which notice
thereof has not been waived pursuant to such regulations as in effect on the
date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under section 4042
of ERISA for the termination of, or the
<PAGE>
appointment of a trustee to administer, any Plan, or the receipt by the Company
or any ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in the
incurrence of any liability by the Company or any ERISA Affiliate pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, or in the imposition of any Lien on any of
the rights, properties or assets of the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or such penalty or excise tax provisions, if such
liability or Lien, taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material Adverse Effect;
(f) Notices from Governmental Authority _ promptly, and in any event
within 30 days of receipt thereof, copies of any notice to the Company or any
Subsidiary from any Federal or state Governmental Authority relating to any
order, ruling, statute or other law or regulation that could reasonably be
expected to have a Material Adverse Effect; and
(g) Requested Information _ with reasonable promptness, such other data
and information relating to the business, operations, affairs, financial
condition, assets or properties of the Company or any of its Subsidiaries or
relating to the ability of the Company to perform its obligations hereunder and
under the Notes as from time to time may be reasonably requested by any such
holder of Notes.
Section 7.2. Officer's Certificate;. Each set of financial
statements delivered to a holder of Notes pursuant to Section 7.1(a) or
Section 7.1(b) hereof shall be accompanied by a certificate of a Senior
Financial Officer setting forth:
(a) Covenant Compliance _ the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.4 through Section 10.8 hereof,
inclusive, during the quarterly or annual period covered by the statements then
being furnished (including with respect to each such Section, where applicable,
the calculations of the maximum or minimum amount, ratio or percentage, as the
case may be, permissible under the terms of such Sections, and the calculation
of the amount, ratio or percentage then in existence); and
(b) Event of Default _ a statement that such officer has reviewed the
relevant terms hereof and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions of the Company and its
Subsidiaries from the beginning of the quarterly or annual period covered by the
statements then being furnished to the date of the certificate and that such
review shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default or, if any
such condition or event existed or exists (including, without limitation, any
such event or condition resulting from the failure of the Company or any
Subsidiary to comply with any Environmental Law), specifying the nature and
period of existence thereof and what action the Company shall have taken or
proposes to take with respect thereto.
Section 7.3. Inspection;. The Company shall permit the
representatives of each Holder that is an Institutional Investor:
<PAGE>
(a) No Default _ if no Default or Event of Default then exists, at the
expense of such holder and upon reasonable prior notice to the Company, to visit
the principal executive office of the Company, to discuss the affairs, finances
and accounts of the Company and its Subsidiaries with the Company's officers,
and (with the consent of the Company, which consent will not be unreasonably
withheld) its independent public accountants, and (with the consent of the
Company, which consent will not be unreasonably withheld) to visit the other
offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in writing; and
(b) Default _ if a Default or Event of Default then exists, at the
expense of the Company, to visit and inspect any of the offices or properties of
the Company or any Subsidiary, to examine all their respective books of account,
records, reports and other papers, to make copies and extracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
officers and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts of the
Company and its Subsidiaries), all at such times and as often as may be
requested.
Section 8. Prepayment of the Notes;.
Section 8.1. Required Prepayments;. No prepayments shall be
required with respect to the Notes.
Section 8.2. Optional Prepayments with Make-Whole Amount; The Company
may, at its option, upon notice as provided below, prepay at any time all, or
from time to time any part of, the Notes, at 100% of the principal amount so
prepaid, together with interest accrued thereon to the date of such prepayment
plus the Make-Whole Amount determined for the prepayment date with respect to
such principal amount. The Company will give each holder of Notes written notice
of each optional prepayment under this Section 8.2 not less than 30 days and not
more than 60 days prior to the date fixed for such prepayment. Each such notice
shall specify such date, the aggregate principal amount of the Notes to be
prepaid on such date, the principal amount of each Note held by such holder to
be prepaid (determined in accordance with Section 8.3), and the interest to be
paid on the prepayment date with respect to such principal amount being prepaid,
and shall be accompanied by a certificate of a Senior Financial Officer as to
the estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation. Two Business Days prior to such
prepayment, the Company shall deliver to each holder of Notes a certificate of a
Senior Financial Officer specifying the calculation of such Make-Whole Amount as
of the specified prepayment date.
Section 8.3. Allocation of Partial Prepayments;. In the case of each
partial prepayment of the Notes, the principal amount of the Notes to be prepaid
shall be allocated among all of the Notes at the time outstanding in proportion,
as nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore called for prepayment.
'Section 8.4. Maturity; Surrender, Etc';. In the case of each
prepayment of Notes pursuant to this Section 8, the principal amount of each
Note to be prepaid shall mature and become due and payable on the date fixed
for such prepayment, together with interest on such principal amount accrued
to such date and the applicable Make-Whole Amount, if any. From and
<PAGE>
after such date, unless the Company shall fail to pay such principal amount when
so due and payable, together with the interest and Make-Whole Amount, if any, as
aforesaid, interest on such principal amount shall cease to accrue. Any Note
paid or prepaid in full shall be surrendered to the Company and cancelled and
shall not be reissued, and no Note shall be issued in lieu of any prepaid
principal amount of any Note.
Section 8.5. Purchase of Notes;. The Company will not and will not
permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly
or indirectly, any of the outstanding Notes except upon the payment or
prepayment of the Notes in accordance with the terms of this Agreement and the
Notes. The Company will promptly cancel all Notes acquired by it or any
Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to
any provision of this Agreement and no Notes may be issued in substitution or
exchange for any such Notes.
Section 8.6. Make-Whole Amount;. The term "Make-Whole Amount" means,
with respect to any Note, an amount equal to the excess, if any, of the
Discounted Value of the Called Principal of such Note over the amount of such
Called Principal, provided that the Make-Whole Amount may in no event be less
than zero. For the purposes of determining the Make-Whole Amount, the following
terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal of such Note
that is to be prepaid pursuant to Section 8.2 or has become or is declared to be
immediately due and payable pursuant to Section 12.1, as the context requires.
"Discounted Value" means, with respect to the Called Principal of any Note, the
amount obtained by discounting such Called Principal from its scheduled due date
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of any Note,
the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New
York City time) on the second Business Day preceding the Settlement Date with
respect to such Called Principal, on the display designated as "Page 678" on the
Telerate Access Service (or such other display as may replace Page 678 on
Telerate Access Service) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Life of such Called Principal as of such
Settlement Date, or (ii) if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, the Treasury Constant
Maturity Series Yields reported, for the latest day for which such yields have
been so reported as of the second Business Day preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical Release
H.15 (519) (or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the Remaining Life of
such Called Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill quotations to
bond-equivalent yields in accordance with accepted financial practice and (b)
interpolating linearly between (1) the actively traded U.S. Treasury security
with the duration closest to and greater than the Remaining Life and (2) the
actively traded U.S. Treasury security with the duration closest to and less
than the Remaining Life.
<PAGE>
"Remaining Life" means, with respect to any Called Principal, the number of
years (calculated to the nearest one-twelfth year) that will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Called Principal.
"Settlement Date" means, with respect to the Called Principal of any Note, the
date on which such Called Principal is to be prepaid pursuant to Section 8.2 or
has become or is declared to be immediately due and payable pursuant to Section
12.1, as the context requires.
Section 9. Affirmative Covenants;.
So long as any of the Notes are outstanding the Company covenants that:
Section 9.1. Compliance with Law;. The Company will and will cause each
of its Subsidiaries to comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 9.2. Insurance;. The Company will and will cause each of its
Subsidiaries to maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.
Section 9.3. Maintenance of Properties;. The Company will and will
cause each of its Subsidiaries to maintain and keep, or cause to be maintained
and kept, their respective properties in good repair, working order and
condition (other than ordinary wear and tear), so that the business carried on
in connection therewith may be properly conducted at all times, provided that
this Section shall not prevent the Company or any Subsidiary from discontinuing
the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 9.4. Payment of Taxes and Claims;. The Company will and will
cause each of its Subsidiaries to file all tax returns required to be filed in
any jurisdiction and to pay and discharge all taxes shown to be due and payable
on such returns and all other taxes, assessments, governmental charges, or
levies imposed on them or any of their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent and all claims for which sums have become due and
payable that have or might become a Lien on properties or assets of the Company
or any Subsidiary, provided that neither the Company nor any Subsidiary need pay
any such tax or assessment or claims if (i) the amount, applicability or
validity thereof is contested by the Company or such Subsidiary on a timely
basis in good faith and in appropriate proceedings, and the Company or a
Subsidiary has established adequate reserves therefor in accordance with GAAP on
the books of the Company or
<PAGE>
such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
Section 9.5. Corporate Existence, etc;. The Company will at all times
preserve and keep in full force and effect its corporate existence. Subject to
Section 10.2, the Company will at all times preserve and keep in full force and
effect the corporate existence of each of its Subsidiaries (unless merged into
the Company or a Subsidiary) and all rights and franchises of the Company and
its Subsidiaries unless, in the good faith judgment of the Company, the
termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.
Section 9.6. Maintenance of Records;. The Company will keep, and cause
to be kept with respect to the operation and results of each Subsidiary adequate
records and books of account, in which complete entries on a consolidated basis
will be made in accordance with GAAP consistently applied, reflecting all
financial transactions of the Company and any of its Subsidiaries.
Section 9.7. Conduct of Business;. Except as otherwise permitted
herein, continue to engage in the existing lines of business and businesses
ancillary thereto of the same general type as conducted by it on the date of
this Agreement.
Section 9.8. 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 Holders immediately of any
notice of a hazardous discharge or environmental complaint received from any
governmental agency or any other party; notify the Holders 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 Holders to inspect the premises, and to inspect all
books, correspondence, and records pertaining thereto; and at the request of the
Required Holders, and in the event a Default or Event of Default then exists at
the Company's expense, provide a report of a qualified environmental engineer,
satisfactory in scope, form, and content to the Required Holders, and such other
and further assurances reasonably satisfactory to the Required Holders that the
condition has been corrected.
Section 9.9. Place of Business;. Promptly notify the Holders in writing
of any addition to, change in, or discontinuance of, its place of business as
shown in this subsection. The Company has its chief executive office and
principal place of business only at 260 North Elm Street, Westfield,
Massachusetts.
Section 10. Negative Covenants;.
The Company covenants that so long as any of the Notes are outstanding:
Section 10.1. Transactions with Affiliates;. The Company will not and
will not permit any Subsidiary to enter into directly or indirectly any
transaction or Material group of related transactions (including without
limitation the purchase, lease, sale or exchange of properties of any kind or
the rendering of any service) with any Affiliate (other than the Company or
another
<PAGE>
Subsidiary), except in the ordinary course and pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than would
be obtainable in a comparable arm's-length transaction with a Person not an
Affiliate.
Section 10.2. Mergers, Consolidations and Sales of Assets;. (a) The
Company will not, and will not permit any Subsidiary to, consolidate with or be
a party to a merger with any other Person, or sell, lease or otherwise dispose
of all or substantially all of its assets, provided that:
(i) any Subsidiary may merge or consolidate with or into the Company or
any Wholly-Owned Subsidiary so long as in any merger or consolidation involving
the Company, the Company shall be the surviving or continuing corporation;
(ii) the Company may consolidate or merge with or into any other
corporation if (1) the corporation which results from such consolidation or
merger (the "surviving corporation") is organized under the laws of any state of
the United States or the District of Columbia, (2) the due and punctual payment
of the principal of and premium, if any, and interest on all of the Notes,
according to their tenor, and the due and punctual performance and observation
of all of the covenants in the Notes and this Agreement to be performed or
observed by the Company are expressly assumed in writing by the surviving
corporation, and (3) at the time of such consolidation or merger and immediately
after giving effect thereto, no Default or Event of Default would exist; and
(iii) the Company may sell or otherwise dispose of all or substantially
all of its assets to any corporation if (1) the acquiring corporation is a
corporation organized under the laws of any state of the United States or the
District of Columbia, (2) the due and punctual payment of the principal of and
premium, if any, and interest on all the Notes, according to their tenor, and
the due and punctual performance and observance of all of the covenants in the
Notes and in this Agreement to be performed or observed by the Company are
expressly assumed in writing by the acquiring corporation, and (3) at the time
of such sale or disposition and immediately after giving effect thereto, no
Default or Event of Default would exist.
(b) The Company will not, and will not permit any Subsidiary to, sell,
lease, transfer, abandon or otherwise dispose of (any such sale, lease,
transfer, abandonment or other disposition being herein referred to as a
"Transfer") any assets (including stock of any Subsidiary); provided that the
foregoing restrictions do not apply to:
(i) Transfers in the ordinary course of business for fair value
and except as provided in Section 10.2(a); or
(ii) the Transfer of assets of a Subsidiary to the Company or a
Wholly-Owned Subsidiary; or
(iii) the issue of any options or warrants to purchase capital stock of
a Subsidiary or other Securities exchangeable for or convertible into stock of a
Subsidiary to any employee or employees of such Subsidiary pursuant to a stock
option plan; provided that in any case other than in the case of Omega Flex,
Inc. after giving effect to the exercise of any such option, warrant or other
convertible Security, the holders of such options, warrants or other convertible
Securities do not hold in the aggregate more than 5% of the outstanding capital
stock of such Subsidiary,
<PAGE>
provided further that in the case of Omega Flex, Inc., a Pennsylvania
corporation and a Wholly-Owned Subsidiary of the Company, after giving effect to
the exercise of such right, option, warrant, or other convertible Security, such
holders of rights, options, warrants or convertible Securities do not hold in
the aggregate more than 20% of the outstanding capital stock of Omega Flex,
Inc.; or
(iv) the Transfer of either (A) assets of MCS, Inc., a Pennsylvania
corporation and Subsidiary of the Company, or (B) capital stock of MCS, Inc.
held by the Company, in each such case, for cash or other property equivalent to
the fair value of such assets or capital stock to a Person or Persons if
immediately after the consummation of the transaction and after giving effect
thereto, no Default or Event of Default would exist; or
(v) any Transfer of such assets for cash or other property to a
Person or Persons if all of the following conditions are met:
(1) the assets (valued at net book value) do not, together with all
other assets of the Company and its Subsidiaries previously Transferred during
the immediately preceding four fiscal quarter period in reliance upon this
Section 10.2(b), exceed 15% of Consolidated Total Assets, and such assets
(valued at net book value) do not, together with all other assets of the Company
and Subsidiaries previously disposed of during the period from the date of this
Agreement to and including the date of the sale of such assets exceed 25% of
Consolidated Total Assets, in each such case determined as of the end of the
immediately preceding fiscal quarter;
(2) immediately after the consummation of the transaction and
after giving effect thereto, no Default or Event of Default would exist;
provided, however, that for purposes of the foregoing calculation, there shall
not be included any assets (or portions of such assets) to the extent the
proceeds are applied within 12 months of the date of Transfer of such assets to
either (A) the acquisition of fixed assets useful and intended to be used in the
operation of the Company and its Subsidiaries as described in Section 9.7 and
having a fair market value (as determined in good faith by the Board of
Directors of the Company) at least equal to that of the assets so Transferred
and/or (B) the prepayment at any applicable prepayment premium of the Notes. It
is understood and agreed by the Company that any such proceeds paid and applied
to the prepayment of the Notes as hereinabove provided shall be prepaid as and
to the extent provided in Section 8.2.
Section 10.3. Limitation on Liens;. The Company will not, and will not
permit any Subsidiary to, create or incur, or suffer to be incurred or to exist,
any Lien on its or their property or assets, whether now owned or hereafter
acquired, or upon any income or profits therefrom, or transfer any property for
the purpose of subjecting the same to the payment of obligations in priority to
the payment of its or their general creditors, or acquire or agree to acquire,
or permit any Subsidiary to acquire, any property or assets upon conditional
sales agreements or other title retention devices, except:
(a) Liens for property taxes and assessments or governmental charges or
levies and Liens securing claims or demands of mechanics and materialmen,
provided that payment thereof is not at the time required by Section 9.4;
(b) Liens of or resulting from any judgment or award, the time
for the appeal or
<PAGE>
petition for rehearing of which shall not have expired, or in respect of which
the Company or a Subsidiary shall at any time in good faith be prosecuting an
appeal or proceeding for a review and in respect of which a stay of execution
pending such appeal or proceeding for review shall have been secured;
(c) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's compensation,
unemployment insurance and other like laws, warehousemen's and attorneys' liens
and statutory landlords' liens) and Liens to secure the performance of bids,
tenders or trade contracts, or to secure statutory obligations, surety or appeal
bonds or other Liens of like general nature, in any such case incurred in the
ordinary course of business and not in connection with the borrowing of money,
provided in each case, the obligation secured is not overdue or, if overdue, is
being contested in good faith by appropriate actions or proceedings;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other similar
purposes, or zoning or other restrictions as to the use of real properties,
which are necessary for the conduct of the activities of the Company and its
Subsidiaries or which customarily exist on properties of corporations engaged in
similar activities and similarly situated and which do not in any event
materially impair their use in the operation of the business of the Company and
its Subsidiaries;
(e) Liens securing Indebtedness of a Subsidiary to the Company or
to another Wholly-Owned Subsidiary; and
(f) Liens created or incurred after the date of the Closing given to
secure Indebtedness of the Company or any Subsidiary in addition to the Liens
permitted by the preceding clauses (a) through (e) hereof, provided that all
Indebtedness secured by such Liens shall have been incurred within the
limitations provided in Sections 10.4(a).
Section 10.4. Limitations on Indebtedness;. (a) The Company will
not, and will not permit any Subsidiary to, create, issue, assume, guarantee or
otherwise incur or in any manner be or become liable in respect of any
Indebtedness, except:
(i) Indebtedness evidenced by the Notes;
(ii) Indebtedness of the Company and its Subsidiaries outstanding
as of the date of this Agreement and described on Schedule 5.12; and
(iii) additional Indebtedness of the Company or any Subsidiary,
provided that at the time of creation, issuance, assumption, guarantee or
incurrence thereof and after giving effect thereto and to the application of the
proceeds thereof:
(1) no Default or Event of Default would exist; and
(2) in the case of the issuance of any Indebtedness of the Company
secured by Liens permitted by Section 10.3(f) and any Indebtedness of a
Subsidiary, the sum of (A) the aggregate amount of all such Indebtedness of the
Company secured by Liens permitted by Section 10.3(f) plus (B) the aggregate
amount of all Indebtedness of Subsidiaries shall not exceed 15% of Consolidated
Total Assets.
(b) Any Person which becomes a Subsidiary after the date hereof
shall for all purposes
<PAGE>
of this Section 10.4 be deemed to have created, assumed or incurred at the time
it becomes a Subsidiary all Indebtedness of such Person existing immediately
after it becomes a Subsidiary.
Section 10.5. Consolidated Net Worth;. The Company will at all
times keep and maintain Consolidated Net Worth at an amount not less than
$57,000,000.
Section 10.6. Consolidated Interest Expense Coverage Ratio;. The
Company will at all times keep and maintain the ratio of Consolidated EBITDA for
the immediately preceding four fiscal quarter period (treated as a single
accounting period) to Consolidated Interest Expense for such four fiscal quarter
period at not less than 3.0 to 1.0.
Section 10.7. Debt to Net Worth; Leverage Ratio;. The Company at all
times will maintain the ratio of the Company's total Indebtedness and all other
liabilities to its Consolidated Net Worth at or less than 3.00 to 1.00.
Section 10.8. Dividends, Stock Purchases, Restricted Investments;. (a)
The Company will not and the Company will not permit any of its Subsidiaries to,
directly or indirectly, or through any Affiliate, declare or make or incur any
liability to declare or make any Distribution and neither the Company nor any of
its Subsidiaries will declare, make or authorize any Restricted Investment,
unless, immediately after giving effect to the proposed Distribution or
Restricted Investment, the aggregate amount of Distributions declared in the
case of dividends or made in the case of other Distributions plus the aggregate
amount of Restricted Investments then held by the Company and its Subsidiaries
(valued immediately after the making of such Restricted Investment as provided
in the definition thereof) during the period from and after the date of this
Agreement to and including the date of declaration in the case of a dividend,
the date of payment in the case of any other Distribution and the date such
Investment is committed to in the case of a Restricted Investment, would not
exceed the sum of:
(1) $15,000,000; plus
(2) 50% of Consolidated Net Income (or if such Consolidated Net Income
is a deficit figure, then minus 100% of such deficit) for such period determined
on a cumulative basis commencing on December 31, 1995, to and including the date
of such declaration, payment or commitment.
(b) For the purposes of making computations under paragraph (a) of this
Section 10.8, the amount of any Distribution declared, paid or distributed or
Restricted Investment made in property or assets of the Company or a Subsidiary
shall be deemed to be the greater of the book value or fair market value (as
determined in good faith by the Company's Board of Directors) of such property
or assets as of the date of declaration in the case of a dividend, the date of
payment in the case of any other Distribution and the date the Investment is
committed to in the case of any Restricted Investment.
Any corporation which becomes a Subsidiary after the date of this Agreement
shall be deemed to have made, at the time it becomes a Subsidiary, all
Restricted Investments of such corporation existing immediately after it becomes
a Subsidiary.
(c) The Company will not authorize a Distribution on its capital stock
which is not payable within 60 days of authorization.
<PAGE>
(d) The Company will not authorize or make a Distribution on its
capital stock and neither the Company nor any Subsidiary will make any
Restricted Investment if after giving effect to the proposed Distribution or
Restricted Investment a Default or an Event of Default would exist.
Section 11. Events of Default;.
An "Event of Default" shall exist if any of the following conditions or events
shall occur and be continuing:
(a) The Company defaults in the payment of any principal or Make-Whole
Amount, if any, on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b) The Company defaults in the payment of any interest on any
Note for more than five Business Days after the same becomes due and payable; or
(c) Any representation or warranty made or deemed made by the Company
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 this Agreement shall prove to have been incorrect, incomplete, or
misleading in any Material respect on or as of the date made or deemed made;
(d) The Company shall fail, after thirty (30) days of notice thereof,
to perform or observe any term, covenant, or agreement contained herein (other
than failure under (a) or (b) above for which no notice is required);
(e) Dissolution, merger or consolidation of the Company (other
than as permitted in this Agreement);
(f) The Company 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, in excess of $1,000,000, to Persons other than the Holders, 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;
(g) The Company or any of its Subsidiaries shall become Insolvent;
(h) One or more judgments, decrees, or orders for the payment of money
in excess of One Million Dollars ($1,000,000) in the aggregate shall be rendered
against the Company 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;
<PAGE>
(i) 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 Company, or the Company shall deny it has any further liability or
obligation under this Agreement; or
(j) Any of the following events shall occur or exist with respect to
the Company 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 Company to any tax, penalty, or other
liability which in the aggregate may exceed Five Hundred Thousand Dollars
($500,000.00).
Section 12. Remedies on Default, Etc;.
Section 12.1. Acceleration;. (a) If an Event of Default with
respect to the Company described in paragraph (g) of Section 11 has occurred,
all the Notes then outstanding shall automatically become immediately due and
payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 50% in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (i) all accrued and unpaid interest
thereon and (ii) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for), and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
Section 12.2. Other Remedies;. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 12.1, the holder of
any Note at the time outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the
terms hereof or thereof,
<PAGE>
or in aid of the exercise of any power granted hereby or thereby or by law or
otherwise.
Section 12.3. Rescission;. At any time after any Notes have been
declared due and payable pursuant to clause (b) or (c) of Section 12.1, the
holders of not less than 76% in principal amount of the Notes then outstanding,
by written notice to the Company, may rescind and annul any such declaration and
its consequences if (a) the Company has paid all overdue interest on the Notes,
all principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17, and (c)
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section
12.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
Section 12.4. No Waivers or Election of Remedies, Expenses, Etc;. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
'Section 13. Registration; Exchange; Substitution of Notes';.
Section 13.1. Registration of Notes;. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.
Section 13.2. Transfer and Exchange of Notes;. Upon surrender of any
Note at the principal executive office of the Company for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or his attorney duly authorized
in writing and accompanied by the address for notices of each transferee of such
Note or part thereof), the Company shall execute and deliver, at the Company's
expense (except as provided below), one or more new Notes (as requested by the
holder thereof) in exchange therefor, in an aggregate principal amount equal to
the unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be
<PAGE>
substantially in the form of Exhibit 1. Each such new Note shall be dated and
bear interest from the date to which interest shall have been paid on the
surrendered Note or dated the date of the surrendered Note if no interest shall
have been paid thereon. The Company may require payment of a sum sufficient to
cover any stamp tax or governmental charge imposed in respect of any such
transfer of Notes. Notes shall not be transferred in denominations of less than
$500,000, provided that if necessary to enable the registration of transfer by a
holder of its entire holding of Notes, one Note may be in a denomination of less
than $500,000. Any transferee, by its acceptance of a Note registered in its
name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 6.2.
Section 13.3. Replacement of Notes;. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a nominee
for, an original Purchaser or another holder of a Note with a minimum net worth
of at least $5,000,000, such Person's own unsecured agreement of indemnity shall
be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
Section 14. Payments on Notes;.
Section 14.1. Place of Payment;. Subject to Section 14.2, payments of
principal, Make-Whole Amount, if any, and interest becoming due and payable on
the Notes shall be made in Westfield, Massachusetts at the principal office of
the Company in such jurisdiction. The Company may at any time thereafter, by
notice to each holder of a Note, change the place of payment of the Notes so
long as such place of payment shall be either the principal office of the
Company in the United States or a principal office of a bank or trust company in
the United States.
Section 14.2. Home Office Payment;. So long as you or your nominee
shall be the holder of any Note, and notwithstanding anything contained in
Section 14.1 or in such Note to the contrary, the Company will pay all sums
becoming due on such Note for principal, Make-Whole Amount, if any, and interest
by the method and at the address specified for such purpose below your name in
Schedule A, or by such other method or at such other address as you shall have
from time to time specified to the Company in writing for such purpose, without
the presentation or surrender of such Note or the making of any notation
thereon, except that upon written request of the Company made concurrently with
or reasonably promptly after payment or prepayment in full of any Note, you
shall surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 14.1. Prior
to any sale or other disposition of any Note held by you or your nominee you
will, at your election, either endorse
<PAGE>
thereon the amount of principal paid thereon and the last date to which interest
has been paid thereon or surrender such Note to the Company in exchange for a
new Note or Notes pursuant to Section 13.2. The Company will afford the benefits
of this Section 14.2 to any Institutional Investor that is the direct or
indirect transferee of any Note purchased by you under this Agreement and that
has made the same agreement relating to such Note as you have made in this
Section 14.2.
Section 15. Expenses, Etc;.
Section 15.1. Transaction Expenses;. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all costs and expenses
(including reasonable attorneys' fees of a special counsel and, if reasonably
required, local or other counsel) incurred by you or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes (whether or not
such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this Agreement
or the Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save you and each other holder of a Note
harmless from, all claims in respect of any fees, costs or expenses, if any, of
brokers and finders (other than those retained by you).
Section 15.2. Survival;. The obligations of the Company under this
Section 15 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement or the Notes, and the
termination of this Agreement.
'Section 16. Survival of Representations and Warranties; Entire
Agreement';.
All representations and warranties contained herein shall survive the execution
and delivery of this Agreement and the Notes, the purchase or transfer by you of
any Note or portion thereof or interest therein and the payment of any Note, and
may be relied upon by any subsequent holder of a Note, regardless of any
investigation made at any time by or on behalf of you or any other holder of a
Note. All statements contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant to this Agreement shall be deemed
representations and warranties of the Company under this Agreement. Subject to
the preceding sentence, this Agreement and the Notes embody the entire agreement
and understanding between you and the Company and supersede all prior agreements
and understandings relating to the subject matter hereof.
Section 17. Amendment and Waiver;.
Section 17.1. Requirements;. This Agreement and the Notes may be
amended, and the observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any
defined term (as it is used therein), will be effective as to you unless
<PAGE>
consented to by you in writing, and (b) no such amendment or waiver may, without
the written consent of the holder of each Note at the time outstanding affected
thereby, (i) subject to the provisions of Section 12 relating to acceleration or
rescission, change the amount or time of any prepayment or payment of principal
of, or reduce the rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage
of the principal amount of the Notes the holders of which are required to
consent to any such amendment or waiver, or (iii) amend any of Sections 8,
11(a), 11(b), 12, 17 or 20.
Section 17.2. Solicitation of Holders of Notes;.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
Section 17.3. Binding Effect, Etc;. Any amendment or waiver consented
to as provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
Section 17.4. Notes Held by Company, Etc;. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement or the Notes, or
have directed the taking of any action provided herein or in the Notes to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Affiliates shall be deemed not to
be outstanding.
Section 18. Notices;.
All notices and communications provided for hereunder shall be in writing and
sent (a) by
<PAGE>
telecopy if the sender on the same day sends a confirming copy of such notice by
a recognized overnight delivery service (charges prepaid), or (b) by a
recognized overnight delivery service (with charges prepaid). Any such notice
must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other address as you
or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in writing, or
(iii) if to the Company, to the Company at its address set forth at the
beginning hereof to the attention of John E. Reed, Chairman, and R. Bruce Dewey,
General Counsel, or at such other address as the Company shall have specified to
the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
Section 19. Reproduction of Documents;.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
Section 20. Confidential Information;.
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any Person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, trustees, officers, employees, agents,
<PAGE>
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by your Notes), (ii) your
financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this Section 20, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this Section 20), (v) any Person from which you offer to purchase any security
of the Company (if such Person has agreed in writing prior to its receipt of
such Confidential Information to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority having jurisdiction over you,
(vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access to
information about your investment portfolio or (viii) any other Person to which
such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to you, (x) in
response to any subpoena or other legal process, (y) in connection with any
litigation to which you are a party or (z) if an Event of Default has occurred
and is continuing, to the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under your Notes and this Agreement. Each
holder of a Note, by its acceptance of a Note, will be deemed to have agreed to
be bound by and to be entitled to the benefits of this Section 20 as though it
were a party to this Agreement. On reasonable request by the Company in
connection with the delivery to any holder of a Note of information required to
be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.
Section 21. Substitution of Purchaser;.
You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
Section 22. Miscellaneous;.
Section 22.1. Successors and Assigns;. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.
Section 22.2. Payments Due on Non-Business Days;. Anything in this
Agreement or the
<PAGE>
Notes to the contrary notwithstanding, any payment of principal of or Make-Whole
Amount or interest on any Note that is due on a date other than a Business Day
shall be made on the next succeeding Business Day without including the
additional days elapsed in the computation of the interest payable on such next
succeeding Business Day.
Section 22.3. Severability;. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 22.4. Construction;. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
Section 22.5. Counterparts;. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.
Section 22.6. Governing Law;. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the Commonwealth of Massachusetts excluding choice-of-law principles
of the law of such Commonwealth that would require the application of the laws
of a jurisdiction other than such Commonwealth.
* * * * *
If you are in agreement with the foregoing, please sign the form of agreement on
the accompanying counterpart of this Agreement and return it to the Company,
whereupon the foregoing shall become a binding agreement between you and the
Company.
Signature;
Very truly yours,
Mestek, Inc.
By /s/ Stephen M. Shea
Title: Senior Vice President - Finance
By /s/ R. Bruce Dewey
Its Secretary
The foregoing is hereby agreed
to as of the date thereof.
The Travelers Insurance Company
By /S/ JOHN W. PETCHLER
John W. Petchler
Its Second Vice President
<PAGE>
Schedule A (to Note Purchase Agreement)
Information Relating to the Purchaser
Principal Amount of
Notes to Be Purchased
$10,000,000
$ 5,000,000
Name and Address of Purchaser
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Securities Department-Private Placements
Telecopier Number: 860-954-5243
The Chase Manhattan Bank, N.A. (ABA #021000021)
One Chase Manhattan Plaza
New York, New York 10004
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Mestek, Inc., 5.53% Senior Notes due 1998, PPN 590829 A@6, principal, premium
or interest") to:for credit to: The Travelers Insurance Company-
Consolidated Private Placement Account Number 910-2-587434
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed Attention:
Securities Department-Cashier 10PB.
Name of Nominee in which Notes are to be issued: TRAL & Co
Taxpayer I.D. Number: 06-0566090
<PAGE>
Schedule B (to Note Purchase Agreement)
Defined Terms
As used herein, the following terms have the respective meanings set forth below
or set forth in the Section hereof following such term:
"Affiliate" means any Person (1) which directly or indirectly controls, or is
controlled by, or is under common control with the Company 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 Company 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 Company 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.
"Business Day" means (a) for the purposes of Section 8.6 only, any day other
than a Saturday, a Sunday or a day on which commercial banks in New York City
are required or authorized to be closed, and (b) for the purposes of any other
provision of this Agreement, any day other than a Saturday, a Sunday or a day on
which commercial banks in Boston, Massachusetts or Hartford, Connecticut are
required or authorized to be closed.
"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 Company or any Subsidiary is a lessee would be reflected as a
liability on the consolidated balance sheet of the Company and its Subsidiaries.
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time.
"Commonly Controlled Entity" means an entity, whether or not incorporated, which
is under common control with the Company within the meaning of Section 414(b) or
414(c) of the Code.
"Company" means Mestek, Inc., a Pennsylvania corporation.
"Competitor" means the Persons identified on Schedule D hereto.
"Confidential Information" is defined in Section 20.
"Consolidated Current Assets" and "Consolidated Current Liabilities" means such
assets and liabilities of the Company and its Subsidiaries on a consolidated
basis as shall be determined in accordance with GAAP to constitute current
assets and current liabilities respectively.
"Consolidated EBITDA" for any period means the sum of (a) Consolidated Net
Income during such period plus (to the extent deducted in determining
Consolidated Net Income) (b) all provisions for any Federal, state or local
income taxes made by the Company and its Subsidiaries
<PAGE>
during such period, (d) all provisions for depreciation and amortization (other
than amortization of debt discount) made by the Company and its Subsidiaries
during such period, and (e) Consolidated Interest Expense during such period.
"Consolidated Funded Debt" means all Funded Debt of the Company and its
Subsidiaries, determined on a consolidated basis eliminating intercompany items.
"Consolidated Interest Expense" for any period means on a consolidated basis
determined in accordance with GAAP all interest (including the interest
component of Rentals on Capitalized Leases) and all amortization of debt
discount and expense on Indebtedness payable during such period by the Company
and its Subsidiaries (including, without limitation, payment-in-kind, zero
coupon and other like Securities).
"Consolidated Net Income" for any period means the gross revenues of the Company
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 Company or a Subsidiary shall have consolidated or
which shall have merged into or with the Company 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 Company or any Subsidiary has an ownership interest unless such net
earnings have been actually received by the Company 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 Company 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 Company or any Subsidiary; and
(k) any reversal of any contingency reserve, except to the extent
that provision for
<PAGE>
such contingency reserve shall have been made from income arising during such
period.
"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 Company and its Subsidiaries after deducting Minority
Interests to the extent included in the capital stock accounts of the Company,
all as determined on a consolidated basis by the Company and its Subsidiaries.
"Consolidated Total Assets" means as of the date of any determination thereof
the total amount of all assets of the Company and its Subsidiaries as are
properly classified as "assets" in accordance with GAAP, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Total Indebtedness" means all Indebtedness of the Company and its
Subsidiaries, determined on a consolidated basis eliminating intercompany items
in accordance with GAAP.
"Consolidated Working Capital" means the excess of Consolidated Current Assets
over Consolidated Current Liabilities.
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
"Default Rate" means that rate of interest that is 2% per annum above the rate
of interest stated in clause (a) of the first paragraph of the Notes.
"Distribution" in respect of the Company and its Subsidiaries means:
(a) dividends or other distributions on capital stock (including,
without limitation, preferred stock) of a corporation (except dividends or other
distributions payable solely in shares of common stock of such corporation); and
(b) redemption, acquisition or retirement of any shares of its capital
stock or warrants, rights or other options to purchase any shares of its capital
stock (other than in exchange for or out of the net proceeds to the Company from
the concurrent issue or sale of shares of common stock of the Company).
"Environmental Laws" means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not incorporated) that
is treated as a single employer together with the Company under section 414 of
the Code.
"Event of Default" is defined in Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Funded Debt" of any Person means (a) all Indebtedness for borrowed money or
which has been
<PAGE>
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 (b) all Capitalized Rentals;.
"GAAP" means generally accepted accounting principles as in effect from time to
time in the United States of America.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any State or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts jurisdiction over
any properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative
functions of, or pertaining to, any such government.
"Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such Indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of such
Indebtedness or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
Indebtedness or obligation;
(c) to lease properties or to purchase properties or services primarily
for the purpose of assuring the owner of such Indebtedness or obligation of the
ability of any other Person to make payment of the Indebtedness or obligation;
or
(d) otherwise to assure the owner of such Indebtedness or
obligation against loss in respect thereof.
In any computation of the Indebtedness or other liabilities of the obligor under
any Guaranty, the Indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Hazardous Material" means any and all pollutants, toxic or hazardous wastes or
any other substances that might pose a hazard to health or safety, the removal
of which may be required or the generation, manufacture, refining, production,
processing, treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage, or filtration of which is
<PAGE>
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"Holder" means any Person in whose name a Note is registered in the register
maintained by the Company pursuant to Section 13.1.
"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, 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 Company, its Subsidiaries or any other Person shall be
considered to be "Insolvent" when any of the following events shall have
occurred whereby the Company 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.
"Institutional Investor" means (a) any original purchaser of a Note, (b) any
holder of a Note holding more than 10% of the aggregate principal amount of the
Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"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
<PAGE>
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.
"Investments" means all investments, in cash or by delivery of property, made
directly or indirectly in any property or assets or in any Person, whether by
acquisition of shares of capital stock, Indebtedness or other obligations or
Securities or by loan, advance, capital contribution or otherwise; provided that
"Investments" shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business.
"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).
"Long-Term Lease" means any lease of real or personal property (other than a
Capitalized Lease) having an original term, including any period for which the
lease may be renewed or extended at the option of the lessor, of more than three
years.
"Make-Whole Amount" is defined in Section 8.6.
"Material" means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of the Company and its
Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the business,
operations, affairs, financial condition, assets or properties of the Company
and its Subsidiaries taken as a whole, or (b) the ability of the Company to
perform its obligations under this Agreement and the Notes, or (c) the validity
or enforceability of this Agreement or the Notes.
"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 Company 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
<PAGE>
(b) Income taxes and excess profit taxes paid or accrued by the Company
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 Company and its Subsidiaries under all leases
(other than Capitalized Leases) during such period.
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Senior Financial Officer or of
any other officer of the Company whose responsibilities extend to the subject
matter of such certificate.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA or any successor thereto.
"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 Company or a Commonly Controlled Entity is an "employer" as
defined in Section 3(5) of ERISA.
"Preferred Stock" means any class of capital stock of a corporation that is
preferred over any other class of capital stock of such corporation as to the
payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Pro Forma Fixed Charges" means as of the date of any determination thereof the
sum of (a) 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
(b) Interest Charges on all Funded Debt then proposed to be issued for the
twelve full consecutive calendar months after such date of determination, plus
(c) the maximum aggregate Rentals payable during any period of twelve full
consecutive calendar months after such date of determination and prior to March
1, 1998 under all Long-Term Leases under which the Company or a Subsidiary is
then lessee.
"Prohibited Transaction" means any transaction set forth in Section 406 of ERISA
or Section 4975 of the Code.
"property" or "properties" means, unless otherwise specifically limited, real or
personal property of any kind, tangible or intangible, choate or inchoate.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued by
the United States Department of Labor.
"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 Company 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 Company or a Subsidiary (whether or
<PAGE>
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.
"Required Holders" means, at any time, the holders of at least 51% in principal
amount of the Notes at the time outstanding (exclusive of Notes then owned by
the Company or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other officer
of the Company with responsibility for the administration of the relevant
portion of this agreement.
"Restricted Investments" means all Investments, other than:
(a) Investments by the Company and its Subsidiaries in and to
Subsidiaries, including any Investment in a corporation which, after giving
effect to such Investment, will become a Subsidiary;
(b) Investments representing loans or advances in the usual and
ordinary course of business to officers, directors and employees for expenses
(including moving expenses related to a transfer) incidental to carrying on the
business of the Company or any Subsidiary;
(c) Investments in property or assets to be used in the ordinary
course of the business of the Company and its Subsidiaries as described in
Section 9.7 of this Agreement;
(d) Investments representing travel advances in the usual and ordinary
course of business to officers and employees of the Company and its Subsidiaries
incidental to carrying-on the business of the Company or any Subsidiaries;
(e) Investments of the Company existing as of the Closing Date and
described on Schedule C hereto;
(f) receivables arising from the sale of goods and services in the
ordinary course of business of the Company and its Restricted Subsidiaries;
(g) Investments in direct obligations of the United States of America
or any agency or instrumentality of the United States of America, the payment or
guarantee of which constitutes a full faith and credit obligation of the United
States of America, in either case, maturing within twelve months from the date
of acquisition thereof; and
(h) Investments in any money market fund which is classified as a
current asset in accordance with GAAP, the aggregate asset value of which
"marked to market" is at least $100,000,000,000 and which is managed by a fund
manager of recognized national standing, and which invests substantially all of
its assets in obligations described in clause (g) above.
In valuing any Investments for the purpose of applying the limitations set forth
in Section 10.8, Investments shall be taken at the original cost thereof,
without allowance for any subsequent write-offs or appreciation or depreciation
therein, but less any amount repaid or recovered in cash on account of capital
or principal.
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended from time to time.
"Security" shall have the same meaning as in Section 2(1) of the Securities Act
of 1933, as amended.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
"Subsidiary(ies)" means, as to the Company, 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
Company and/or by one or more Subsidiaries.
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred percent
(100%) of all of the equity interests (except directors' qualifying shares) and
voting interests of which are owned by any one or more of the Company and the
Company's other Wholly-Owned Subsidiaries at such time.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000065195
<NAME> MESTEK, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,649
<SECURITIES> 0
<RECEIVABLES> 51,278
<ALLOWANCES> 1,701
<INVENTORY> 43,265
<CURRENT-ASSETS> 108,752
<PP&E> 70,118
<DEPRECIATION> 38,679
<TOTAL-ASSETS> 170,010
<CURRENT-LIABILITIES> 49,478
<BONDS> 0
0
0
<COMMON> 479
<OTHER-SE> 103,718
<TOTAL-LIABILITY-AND-EQUITY> 170,010
<SALES> 283,413
<TOTAL-REVENUES> 299,527
<CGS> 208,050
<TOTAL-COSTS> 217,299
<OTHER-EXPENSES> 968
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,377
<INCOME-PRETAX> 21,991
<INCOME-TAX> 8,662
<INCOME-CONTINUING> 13,329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,329
<EPS-PRIMARY> 1.49
<EPS-DILUTED> 1.49
</TABLE>
