SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
AMENDMENT NUMBER 1
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: September 30, 1997
Commission file number: 1- 448
MESTEK,INC.
Pennsylvania Corporation
I.R.S. Employer Identification No.
25 - 0661650
260 North Elm Street
Westfield, Massachusetts 01085
Telephone: (413) 568-9571
The Registrant 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 has
been subject to such filing requirements for the past 90 days.
The number of shares of Common Stock outstanding as of October 31, 1997 was
8,926,430.
This amendment covers the addition of four exhibits to the previously filed
10-Q.
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PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Statement of Computation of Per Share Earnings...Page 11.
(b) Registrant did not file a Form 8-K during the quarter for which this
report is filed.
(c) EXHIBIT INDEX
Exhibit No.
Description
**************
10.1 Stock Purchase Agreement dated October 27, 1997,
between Formtek, Inc. (Purchaser) and Joseph Julian (Seller).
10.2 Lease Agreement dated January 1, 1997 between
Pacific/Air Balance, Inc. (Lessee) and Production
Realty Corp. (Lessor).
10.3 Amended and Restated Revolving Loans and Foreign Exchange
Facilities Agreement dated July 15, 1997 between Mestek, Inc.
(Borrower) and BankBoston, N.A.(Bank).
10.4 Supplemental Executive Retirement Agreements entered
into between Mestek, Inc. and certain executives of the
Corporation, as set forth in the attached schedule.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MESTEK,INC.
(Registrant)
Date: November 3, 1997
/S/ Stephen M. Shea
Stephen M. Shea
Senior Vice President - Finance
(Chief Financial Officer)
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of this 27th day of October,
1997, by and between Formtek, Inc., a Delaware corporation ("Purchaser"), and
Joseph Julian, an individual residing in the State of Connecticut ("Seller") who
owns all of the issued and outstanding capital stock (the "Stock") of CoilMate,
Inc., a Connecticut corporation (the "Company"). The Purchaser and Seller are
sometimes collectively referred to herein as the "Parties", and either one of
the Parties is sometimes referred to as a "Party".
WITNESSETH
WHEREAS, Seller is the sole beneficial and record owner of the Stock;
WHEREAS, the Company is engaged in the business of designing,
manufacturing, fabricating, assembling, and selling pallet decoilers, traverse
reels, rewind mechanisms straighteners, stock feeders, and the accessories and
options thereto (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"); and
WHEREAS, Purchaser desires to purchase all of the Stock, which consists of
Two Hundred (200) shares of the Stock (the "Shares") from Seller, and Seller
desires to sell the Shares to Purchaser, upon the terms and conditions specified
in this Agreement (the "Transactions").
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
hereinafter set forth, and other good and valuable consideration, the Parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE OF THE SHARES
Seller hereby agrees to sell, assign, transfer, and convey to Purchaser at
the Closing (defined in Article IX below), for the consideration set forth and
payable in accordance with the provisions of Article II of this Agreement, all
of Seller's rights, title, and interest in and to the Shares, free and clear of
all liens, encumbrances and adverse charges of any nature whatsoever. At the
Closing, Seller shall deliver to Purchaser certificates representing the Shares
validly endorsed in blank or accompanied by stock powers executed 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 Seller at the Closing, as consideration for
the purchase of the Shares the amount of Three Million Seventy-Five Thousand and
00/100 Dollars ($3,075,000.00) in cash or other
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current funds payable according to the terms and conditions set forth in Section
2.2 of this Agreement (the "Purchase Price").
2.2 Payment of Purchase Price. On the Closing Date (defined in Article IX
below), Purchaser shall pay the Purchase Price as follows:
(a) the amount of Twenty Thousand and no/100 Dollars ($20,000.00)
shall be deposited with the Escrow Agent in accordance with the terms of the
Escrow Agreement attached hereto as Exhibit 2.2(a) and in accordance with
Section 2.4;
(b) the balance of the Purchase Price to Seller.
The Purchase Price shall be subject to adjustments as set forth in
Paragraph 2.4.
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.
2.4 Adjustments to Purchase Price.
2.4.1 Just prior to the Closing Date the Company shall prepare and
deliver to Purchaser an estimated Balance Sheet and Profit and Loss Statement
(the "Estimated Financial Statements") in accordance with the provisions of this
section as of October 31, 1997 (or such other date chosen by the Parties in the
event that the Closing Date is not November 3, 1997) (the "Balance Sheet Date").
Within thirty (30) days after the Closing Date the Parties shall work together,
making such personnel and records available as necessary, to complete a balance
sheet and income statement for the Company as at the Balance Sheet Date (the
"Closing Financial Statements") and to finalize the net worth determination in
good faith at their earliest convenience based upon the terms and conditions set
forth in this Section 2.4.1, and 2.4.2. The Estimated Financial Statements, the
Closing Financial Statements and the calculation of net worth, shall be set
forth in a memorandum of understanding prepared and executed by the authorized
representative of each of the Parties (the "Memorandum of Understanding")
attached hereto as Schedule 2.4.1. If the determination of net worth reveals
that the net worth of the Company as at the Balance Sheet Date as set forth in
the Closing Financial Statements (in respect and after the distribution of the
Profits of the Company as defined in Section 4.4 through the Balance Sheet Date)
is either (a) greater than, or (b) less than zero (the "Adjustment Amount"),
then the Purchase Price shall be adjusted upward or downward, as the case may
be, dollar-for-dollar by the Adjustment Amount and the increase if any shall be
paid to Seller or the decrease if any shall be paid to Purchaser by the Escrow
Agent within 10 days of the determination of the Adjustment Amount. If the
amount of adjustment exceeds the Escrow Amount the Purchaser or the Seller as
the case may be shall immediately pay any difference to the other party.
2.4.2 For purposes of the preparation of the Estimated Financial
Statements and the Closing Financial Statements and the determination of the net
worth of the Company under this Agreement, the following shall apply:
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(a) Except as otherwise set forth herein, the value
of the assets and liabilities of Seller shall be calculated as of the Balance
Sheet Date in accordance with generally accepted accounting principles ("GAAP"),
consistently applied;
(b) The patents and fixed assets of the Company shall
be valued at their respective net book values; and
(c) The Inventory (as defined in Section 3.25 below)
as counted at or around the Closing Date shall be valued as set forth in Section
3.25 of this Agreement.
2.4.3 Upon adjustment to the Purchase Price as provided herein, the
Parties shall modify, if necessary, Purchase Price Allocation described in
Section 12.17(c) of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
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. Except as set forth on the Schedules hereto, each of which
exceptions or statements shall relate to all relevant representations and
warranties made herein, Seller represents and warrants 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
Connecticut. 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 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. Seller has the full power, authority
and capacity to enter into, execute, deliver and perform this Agreement and all
Exhibits to which he is a party. This Agreement and such Exhibits, when executed
and delivered by Seller, shall be valid and binding obligations of Seller,
enforceable against him 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.
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 Bylaws of the Company, (ii) conflict with or violate any law,
rule, regulation, ordinance, order, writ, injunction, judgment or decree
applicable to Seller or the Company or by which any of the Shares or the Assets
are bound or 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 Seller's Shares or the Assets pursuant to any of the terms, conditions or
provisions of any note,
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bond, mortgage, indenture, permit, license, franchise. lease contract, or other
instrument or obligation to which Seller or the Company is a party or by which
any of the Shares or the Assets are bound or affected that in the aggregate
would have a material adverse affect on the Purchaser. Neither Seller nor the
Company are required to submit any notice. declaration, report or other filing
or registration with any governmental or regulator authority or instrumentality,
and no approvals or non-objections are required to be obtained or made by Seller
or the Company in connection with the execution, delivery or performance by
Seller of this Agreement or any Exhibit or the consummation of the Transactions
contemplated hereby or thereby.
3.3 Authorized Capitalization. The Company is a Connecticut corporation
having authorized capital stock consisting of five thousand (5,000) shares of
voting common stock, of which two hundred (200) are issued and outstanding.
Seller is the sole beneficial owner of all shares of any class of the Stock.
There are no outstanding options, puts, calls or warrants to acquire any of the
Stock. The Shares constitute all of the 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 Seller 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, or granted prior to the Closing Date without the
prior written approval of the Purchaser. Seller has the absolute and
indefeasible right, power and capacity to sell. assign, transfer and deliver the
Shares to Purchaser, and has 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. Except as set forth in Schedule
3.4, the Company has good and marketable title to and owns and retains all of
the Assets. tangible or intangible, contractual, license and leasehold rights
necessary for the Purchaser (i) to operate the Business as the Company operates
it on the date hereof; 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. 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.
3.5 Financial Statements. Attached hereto as Schedule 3.5 are the balance
sheet and the income statement of the Company for the years ended December 31,
1995 and 1996 (the "Compiled Financial Statements") and the interim period ended
June 30, 1997 (the "Interim Financial Statement"). The Compiled Financial
Statements and the Interim Financial Statement shall be collectively referred to
as the Financial Statements. The Compiled Financial Statements are materially
true and complete and have been prepared from the books and records of the
Company and fairly present the properties, assets, liabilities, financial
position, results of operations and condition of the Company as of their
respective dates. The results of operations set forth in the Compiled Financial
Statements are materially accurate. Except as set forth in Schedule 3.5, the
Compiled Financial Statements to Seller's knowledge have been. prepared in
conformity with generally accepted accounting principles applied on a consistent
basis for such
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periods. The Interim Financial Statement to Seller's knowledge has been prepared
from the books and records of the Company and fairly reflects the properties,
assets, liabilities, financial position, results of operations. and condition of
the Company as of its date in a manner consistent with past practice except as
set forth in Schedule 3.5.
3.6 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, fringe benefits
and accrued vacation, sick pay and other perquisites to which they are or may be
entitled). 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, the Closing Financial Statements, or in Schedule 3.8.1 or
Schedule 3.8.9. 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.
3.7 Compliance with Laws. To Seller's knowledge, 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 and local environmental workplace safety, employment 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 to Seller's knowledge will not be terminated or adversely affected by the
consummation of the Transactions contemplated hereby. Seller and to Seller's
knowledge 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 Seller, no allegations or investigations are pending or, to Seller's
knowledge, 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 herein 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 To Seller's knowledge, 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 . To Seller's knowledge, except as set forth on Schedule
3.8.3(i), 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, to Seller's knowledge, except as
set forth on Schedule 3.8.3(i), 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. Except as set forth in Schedule
3.8.3(ii), 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 To Seller's knowledge, except as set forth on Schedule 3.8.4,
with respect to each Employee Benefit Plan which is subject to Title I of ERISA,
the Company and any ERISA Affiliate of the Company is in material compliance
with the applicable reporting, disclosure or other requirements of ERISA and the
Internal Revenue Code, and to Seller's knowledge, 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, except as set forth on
Schedule 3.8.5, 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 the profit sharing plan listed on Schedule
3.8.1, all applicable contributions for all periods ending with the Company's
1996 fiscal year have been made. With respect to the cafeteria plan listed on
Schedule 3.8.1, the company has no contribution obligations.
3.8.7 [Intentionally left blank]
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) Except as shown on the Financial Statements or Closing
Financial Statements or in any Schedules to this Agreement, 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 currently payable to an employee or former
employee of the Company will be an "excess parachute payment" which is
non-deductible under Section 280G of the Code.
3.8.10 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 Seller's 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 Seller's 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 Seller's 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 To Seller's knowledge, 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. To
Seller's knowledge, 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, Seller 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 IRS Form 5500; (iii) the most recent
financial statement, if any; (iv) 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
(v) the most recent summary plan description.
3.9 No Material Change. There has been no material adverse change since
June 30, 1997 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 set forth in the
Financial Statements other than changes in the ordinary course of business which
in the aggregate are not material and adverse. Since June 30. 1997, 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.
3.10 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 Current Property (as defined in Section 3.13.1 below) and the Assets.
Schedule 3.10 attached hereto is a complete list of all of the Company's
insurance policies (including the amount of coverage) in effect at present, and
as to product liability and comprehensive general liability. in effect since the
incorporation of the Company. All such insurance policies are owned solely and
exclusively by the Company. To the best of Seller's 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.
3.11 Litigation. Other than as set forth on Schedule 3.11 attached hereto,
there are no claims, counterclaims, Suits. orders, proceedings, actions, or to
Seller's knowledge investigations pending, or notice of which has been received,
or, to the knowledge of Seller, threatened against the Company, the Assets, the
Stock or the Seller with respect to the Shares or the Business. Neither Seller
nor the Company nor any of its subsidiaries, directors, officers, employees or
agents is a plaintif 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"). To
Seller's knowledge, 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 Seller, no other party to any of the
Contracts is in default thereunder. To Seller's knowledge, 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. Other than the Contracts, there
are no material leases, licenses, contracts or agreements necessary (i) to
operate the Business as it is operated as at the date hereof; or (ii) to utilize
the Assets and contractual, license and leasehold rights in the same manner as
the Company utilizes such assets and contractual, license and leasehold rights
as at the date hereof. No purchase commitment for materials, supplies, component
parts or other items of the 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. The Company has not waived any material right under any of the
Contracts. Neither Seller nor to the Seller's knowledge, 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, leased 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 specifically
noted on Schedule 3.13.1.
3.13.2 Except as set forth in Schedule 3.13.2 attached hereto
including the two environmental reports referred to therein, the Company in its
ownership and operation, as the case may be, of the Property have been at all
times and are in material 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 ("PC Bs"). 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 Except as set forth in Schedule 3.13.2attached hereto including
the two environmental reports referred to therein, the Company has obtained and
is in material 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.
3.13.4 To the best of Seller's knowledge, there are or were no
polychiorinated biphenyls (PCBs), Tetrachioroethylene (PCE), Trichlorethylene
(TCE), or friable and unencapsulated asbestos generated, used, treated. stored,
maintained, disposed of; or otherwise located on the Property during the
Company's ownership or operation. or on the Current Property. Except as set
forth in Schedule 3.13.2 of this Agreement, 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 Property during the Company's
ownership or operation, or the Current Property. The Company has removed and
properly disposed of all used or other obsolete materials regulated by
Environmental Laws, including Hazardous Substances and other wastes generated by
the Business or otherwise on the Current Property.
3.13.5 While the Company has operated its business from the Property,
there has been no "release" as defined in 42 U.S.C.- 9601(22) or, to the
knowledge of Seller, threat of a "release" of any Hazardous Substance on, from,
over or under any of the Property.
3.13.6 Neither Seller nor to Seller's knowledge 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 to Seller's
knowledge there are no past or present 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 July 30, 1992, and the Company has available at its
place of Business a list of the methods used by the Company (including, but not
limited to, a list of past and present disposal or recycling sites, waste
haulers, and manifest numbers and copies of manifests used to transport
Hazardous Substances) since July 30, 1992 to dispose of or recycle Hazardous
Substances generated by the Company's operations.
3.13.8 To the best of Seller's knowledge, all of the Company's
disposal, transportation 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,
pending applications for patents, trademarks, service marks, tradenames and
copyrights 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; (th "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. Except as set forth in
Schedule 3.14, 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 Seller, has been
threatened, and to Seller's knowledge there exists no basis for a claim against
the Company for infringement of any third party's intellectual property rights.
Neither Seller nor the Company has received any notice to the effect that any
product it makes or sells, or the distribution or use by it of any process or
product, or any services it performs in the course of the Business, may infringe
any patent, trademark, service mark, tradename, copyright, trade secret, knowhow
or similar legally protectable right of another. To Seller's knowledge, 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
patents, trademarks, servicemarks, tradenames. copyrights, trade secrets or
knowhow (except as set forth in Schedule 3.14 attached hereto).
3.15 Related Party Transactions. None of Seller 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 [Intentionally Left Blank.]
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 coul cause a lien or encumbrance
upon any of the Assets, the Stock or the Business, except with respect to the
State of California and to Seller's knowledge the Company, and as applicable,
Seller, 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 as shown
on such returns; and except with respect to the State of California and to
Seller's knowledge, 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 to
Seller's knowledge is not required to pay any income, excise or franchise taxes
to any state or states other than Connecticut. The Company, and as applicable,
Seller has timely filed and paid all taxes shown on any returns and estimated
taxes due on or prior to August 31, 1997, if any, and has made accruals on the
Financial Statements or Closing Financial Statements for all taxes due with
respect to the period ended at the Closing Date. 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, payroll and franchise tax
returns, and any amendments thereto, of the Company, as they relate to taxable
periods since December 31, 1994. And to Seller's knowledge, the Company has made
available to Purchaser all material reports of and written 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. To Seller's knowledge, 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. Except with
respect to the State of California and to Seller's knowledge, 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 (except with respect t the State of
California) 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, the Closing Financial Statements or
otherwise. Seller is not a "foreign person" within the meaning of Section
1445(b)(2) of the Internal Revenue Code.
3.18 Accounts Payable. The accounts payable of the Company as set forth in
the Financial Statements represent bona fide claims which creditors have against
the Company for sales or services furnished to the Company 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 of the Company.
3.19 Absence of Undisclosed Liabilities. Except as specifically and
explicitly reserved against in the Financial Statements, the Closing Financial
Statements and the Schedules to this Agreement the Company is not subject to any
material liability or financial obligation (known or unknown, direct or
indirect. absolute, contingent, accrued or otherwise) which are required
pursuant to GAAP to be disclosed on such Financial Statements, or Closing
Financial Statements other than liabilities or financial obligations arising in
the ordinary course of business. Seller knows 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.
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 November 1, 1996, there are no outstanding warranty claims against
the Company by any of its customers or sales representatives 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 as set forth in the Financial Statements. represent bona fide claims
which the Company has against unrelated debtors for sales, services or funds
advanced by the Company arising on or before the Closing Date, to Seller's
knowledge 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 or
deposits (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 are set forth in the Financial
Statements. Such receivables have been recorded in accordance with the Company's
historical revenue recognition policy and have been collected or to Seller<0-
28>s knowledge are collectable in accordance with their terms at the full face
amount.
3.22 Notes. Loans. Bonds. Guarantees. There are no notes, loans, bonds,
guarantees, sureties, letters of credit, indebtedness or other similar credit
agreements or debt obligations of the Company that exist with respect to the
Business or any of the Assets. 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.
3.23 Charter Documents. The Company has delivered or made available to
Purchaser the originals or 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.
3.24 Subsidiaries. There are no subsidiaries of the Company.
3.25 Inventories. Any and all inventories of the Company reflected in the
Financial Statements and Closing Financial Statements, plus any replacements for
such items acquired on or before the Balance Sheet Date, and minus any such
items sold or leased by the Company in the ordinary course of business on or
before the Balance Sheet Date (the "Inventory"), are properly valued in
accordance with this paragraph. The Inventory shall be valued as follows: In the
case of raw material and purchased components - the lower of cost or market
value on an item by item FIFO basis. In the case of work-in-process machines and
finished goods machines: finished goods machines at a cost of goods sold
percentage for each particular model of product as agreed by the Parties based
upon the Company's actual historical margins; and work-in-process machines at a
cost of goods sold percentage for each particular item of inventory as agreed by
the Parties based upon the Company's actual historical margins multiplied by the
percentage of completion of each particular item of Inventory as agreed by the
Parties during the physical count. For the cost of goods sold percentage, the
Parties agree that forty-five (45%) percent of net selling price is
representative of the broad product line. Variations in product mix depending
what work-in-process machines and finished goods machines are on the floor at
the time of the physical count may require individual adjustments by the
Parties. In such an event, the Parties agree t look to the costed price sheets
maintained by the Company. In the case of work-in-process machined and
fabricated parts: material value at the lower of cost or market value and the
labor/burden value at the rate of $25.70 per direct labor hour, such labor hours
per piece to be estimated by the Company and reviewed by Purchaser. Except for
obsolete and slow-moving items of Inventory which have been fully written off in
the Financial Statements and Closing Financial Statements and except for items
sold in the ordinary course of business, the Inventory consisted of and will, at
the Balance Sheet Date, consist of items of a quality and quantity currently
usable and saleable in the ordinary course of business without mark-down or
discount except for demonstration machines, in the hands of the Company or its
sales representatives. With respect to Inventory in the hands of suppliers for
which the Company is committed as of the date of this Agreement or as of the
Balance Sheet Date, such Inventory is described i 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 Inventory
are the property of the Company. No items in the Inventory have been pledged as
collateral or are held by the Company on consignment from others. The items of
Inventory are free of defects and, to the extent that they consist of finished
or work-in-process goods, also comply with the specifications submitted by the
intended purchasers, if any, thereof pursuant to valid purchase orders.
3.26 Machinery and Equipment. Schedule 3.26 sets forth all machinery,
patterns, tools, dies, jigs, fixtures, vehicles, trucks, furniture and equipment
used to conduct the Business (the "Equipment"), and the Company's software and
computer programs used in the conduct of the 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 suc 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 [Intentionally left blank]
3.28 No Material Misrepresentations or Nondisclosures. Neither this
Agreement nor any Exhibit or Schedule attached hereto 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.
3.29 "S" Corporation Status. Since July 22, 1987, the Company has been
qualified as an "S" corporation within the meaning of Section 1361 (a)( 1) of
the Internal Revenue Code (and under any comparable state law) and will be so
qualified until the Closing of the Transactions unless otherwise required by IRS
or comparable state law regulations.
ARTICLE IV h
REPRESENTATIONS AND WARRANTIES OF PURCHASER h
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, validly
existing, and in good standing under the laws of the State of Delaware.
Purchaser has full corporate power and 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 document 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. In addition, upon the
delivery of the Estimated Financial Statements, Purchaser will provide to the
Company as of the Balance Sheet Date sufficient cash to enable the Company to
distribute to Seller a cash bonus equal to the sum of (i) the Company's retained
earnings on its Financial Statements as of December 31, 1996, (ii) the Company's
1997 earned income throug the Balance Sheet Date as set forth on the Estimated
Financial Statements, and (iii) $1,000.00 (collectively, the "Profits of the
Company").
ARTICLE V h
COVENANTS OF SELLER h
Between the date of this Agreement and the Closing Date, Seller 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 statements and
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,
or making, paying, or issuing, granting or entering into 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. The Company may distribute to Seller
prior to the Balance Sheet Date up to one hundred percent (100%) of the earnings
of the Company that are taxable to Seller on account of the Company's status as
a Subchapter "S" corporation through the Balance Sheet Date and consistent with
the Financial Statements and Closing Financial Statements, but in no event shall
such distribution cause the net worth of the Company to be less than Zero and
00/100 Dollars ($0.00) calculated under generally accepted accounting principles
consistently applied.
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 other than in the ordinary course of 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 in the ordinary course.
5.7 Compensation. Except for such distributions to Seller that are
authorized hereunder, 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 attorneys and
accountants in making available all financial information concerning the Company
as is requested, and Purchaser and its attorneys and 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 Approvals. Use its best efforts to file and obtain all
government authorizations and approvals and permits necessary to enable the
consummation of the Transactions without causing the discontinuation or
termination of any permits maintained by the Company. Use its best efforts to
obtain all necessary approvals and consents of third parties to the Contracts to
the consummation of the Transactions.
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 the Transactions. Refrain from taking any action to terminate or
revoke its Subchapter "S" corporation election before the Closing Date.
5.14 Financial Reports. Provide Purchaser with (i) copies of any financial
reports and statements prepared by the Company in the ordinary 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 30 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 Articles or Certificate of Incorporation and By-Laws. Refrain from
amending the Articles or Certificate of Incorporation or By-Laws of the Company
except as may be required to effect the terms and conditions of this Agreement.
5.16 Damage or Destruction of Assets. Notify Purchaser immediately in the
event of any damage to or destruction of any 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. 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 those certain terms of confidentiality set forth in the Letter
of Intent dated September 22, 1997, executed on September 26, 1997, 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 Consents and 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 governmental regulatory authorities, with
respect to the Transactions.
6.3 Confidentiality. Continue, and cause Purchaser's officers, directors,
employees, agents and Affiliates to continue, to observe, perform, and comply
with those certain terms of confidentiality set forth in the Letter of Intent
dated September 22, 1997.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING BY PURCHASER
Purchaser 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 Purchaser:
7.1 Representations and Warranties. Each of the representations and
warranties of Seller 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. Seller shall have complied with each of the covenants
required of him on or prior to Closing.
7.3 Seller's and Officers' Certificate. Seller shall have delivered to
Purchaser a certificate of Seller, 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 Seller's representations and warranties
contained herein, and to the fulfillment of Seller's covenants and the
conditions precedent to Purchaser's obligations to consummate the Transactions
contemplated by this Agreement ("Seller and Company Certificate").
7.4 Good Standing. Seller shall have delivered to Purchaser a certificate
of good standing for the Company from the State of Connecticut.
7.5 Legal Opinion. Seller shall have delivered to Purchaser a legal
opinion, in substantially the form attached hereto as Exhibit 7.5, from counsel
to Seller ("Seller's Opinion").
7.6 Governmental Approvals. Seller, 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 Seller, Purchaser, and the Company
to consummate the 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 Seller 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
transfer of the Shares and the Contracts, 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 Transactions, and no regulatory enforcement proceeding shall be pending
before any governmental agency or body with respect to the Transactions.
7.11 Environmental Audit. The parties acknowledge hereby that a phase one
environmental audit has been performed of the Current Property the results of
which have been received by Purchaser.
7.12 Debt. Except as contemplated by this Agreement, at the Balance Sheet
Date the Company shall have no debt, other than trade accounts, employee and tax
accruals incurred in the ordinary course of business.
7.13 Resignations. All the current directors, officers and plan
administrators of the Company shall have resigned in writing 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 November 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 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 any breach of this Agreement.
7.15 Employment Agreement. Seller and the Company shall have executed and
delivered effective upon the Closing Date, an employment agreement on terms and
conditions acceptable to Purchaser substantially in the form of Exhibit 7.15
attached hereto (the "Employment Agreement").
7.16 Consulting Agreement. Seller and Purchaser shall have executed and
delivered a consulting agreement on terms and conditions acceptable to the
Parties substantially in the form of Exhibit 7.16 attached hereto (the
"Consulting Agreement").
7.17 Lease. Seller and the Company shall have executed and delivered a
lease of the Current Property on terms and conditions acceptable to the Parties
substantially in the form of Exhibit 7.17 attached hereto (the "Lease").
7.18 Sales Representative Agreement. The Company and Stamp One shall have
executed and delivered a Sales Representative Agreement on terms satisfactory to
Purchaser.
7.19 Estimated Financial Statements. Seller shall have delivered to
Purchaser the Estimated Financial Statements in accordance with Section 2.4
hereof.
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING BY THE SELLER
Seller 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 Seller:
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 Seller 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 Seller reasonably requests to the accuracy of Purchaser's
representations and warranties contained here in, and to the fulfillment of
Purchaser's covenants and the conditions precedent to Seller's obligations to
consummate the Transactions contemplated by this Agreement ("Purchaser's
Certificate').
8.4 Good Standing. Purchaser shall have delivered to Seller a certificate
of its good standing from the State of Delaware.
8.5 Legal Opinion. Purchaser shall have delivered to Seller a legal
opinion, in substantially the form attached hereto as Exhibit 8.5, from counsel
to Purchaser. ("Purchaser's Opinion").
8.6 Governmental Approvals. Seller, 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 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
tinder state insolvency laws, nor shall an assignment for the benefit of
creditors or any similar protect i'.~ 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 Transactions, and no regulatory enforcement proceeding shall be pending
before any governmental agency or body with respect to the 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 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,
Seller 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 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 any breach of this Agreement.
8.11 Environmental Report. Seller shall have received a copy of the
Purchaser's environmental report conducted by Purchaser prior to the Closing.
8.12 Employment Agreement. Seller and the Company shall have executed
and delivered effective upon the Closing Date, the Employment Agreement on terms
and conditions acceptable to Seller.
8.13 Consulting Agreement. Seller and the Purchaser shall have
executed and delivered effective upon the Closing Date, the Consulting
Agreement.
8.14 Lease. Seller and the Company shall have executed and delivered
effective upon the Closing Date, the Lease.
8.15 Guaranty of the Employment Agreement, and the Lease by Formtek,
Inc. Seller shall have received from Formtek, Inc. a guaranty of the Company's
obligations under the Employment Agreement in the form that is included on
Exhibit 7.15, and of the Lease, the guaranty of the Lease to be in the form of
Exhibit 8.15 attached hereto.
ARTICLE IX
CLOSING
The actual consummation of the Transactions contemplated by this Agreement
(the 'tClosing") shall take place on November 3, 1997 at 9 a.m. at the offices
of Rogin, Nassau, Caplan, Lassman & Hirtle, LLC, Hartford, Connecticut or such
other date or at such other place as shall be otherwise agreed by the Parties
(the "Closing Date").
ARTICLE X
OBLIGATIONS AT THE CLOSING
10.1 Seller's Obligations. At the Closing, Seller shall deliver to
Purchaser:
10.1.1 The Seller and Company Certificate, or, if any
representation or warranty of Seller is untrue or incorrect, specifying the
respect in which it is untrue or incorrect or, if any such covenant or condition
is unfulfilled, specifying the respect in which it is unfulfilled;
10.1.2 Seller's 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 Seller selling, assigning and
transferring such certificate(s) to Purchaser, free and clear of any liens,
claims, options, encumbrances or restrictions of any nature whatsoever; and
10.2 Purchaser's Obligations. At the Closing Purchaser shall deliver
to Seller:
10.2.1 Purchaser's Certificate, or, if any such representation
or warranty of Purchaser is untrue or incorrect, specifying the respect in which
it is untrue or incorrect, or, if any such covenant or 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 The executed Escrow Agreement ;
10.2.5 [Intentionally left blank].
10.2.6 Current funds payable as Purchase Price in the amounts
and to the entities as set forth and specified in Section 2.2 of this Agreement.
10.3 Joint Obligations. The Parties shall execute the Purchase Price
Allocation substantially in the form of Exhibit 12.17 attached hereto.
ARTICLE XI
FURTHER COVENANTS OF SELLER AND PURCHASER
Seller and Purchaser shall, as described below, each perform the indicated
tasks designated to be performed by them:
11.1 Joint Notice. After the Closing, Seller 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. Seller agrees that, from time to time and without
further consideration, he 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
rights, title and interest therein.
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 commercial efforts, the Parties shall continue
to use their best efforts to obtain the third party's consent after the Closing
Date.
11.4 Profit Sharing and Christmas Bonus. Notwithstanding anything in
the Agreement to the contrary, the Company's normal method of accounting and
generally accepted accounting principles, the Parties agree that (i) on the
Estimated Financial Statements and Closing Financial Statements, the Company
shall accrue an amount equal to ten-twelfths (10/12) of (a) one week's pay for
each current eligible employee (the "Christmas Bonus") and (b) the maximum
amount allowed for the employer's contribution to the Company's profit sharing
plan for 1997 (the "Profit Sharing Contribution"); (ii)after the Closing,
Purchaser shall cause the Company to accrue on the books and records of the
Company an amount equal to two-twelfths (2/12) of (a) the Christmas Bonus and
(b) the Profit Sharing Contribution; and (iii) Purchaser shall cause the Company
to pay the Christmas Bonus and a turkey to each employee before December 25,
1997 and to make the Profit Sharing Contribution in accordance with the
requirements of the Profit Sharing Plan.
ARTICLE XII
TAX MATTERS
12.1 Certain Definitions. For purposes of this Article XII, "Taxes" means
all Federal, state, local or foreign 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 or Subchapter "S" return and imposed by
Treasury Regulations section 1.150 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.
12.2 Tax Indemnification
12.2.1 Notwithstanding any other provision of this Agreement
and except if otherwise reserved for or accrued on the Financial Statements or
Closing Financial Statements, Seller hereby agrees to indemnify Purchaser
against and hold it harmless from (i) all liability for Taxes of the Seller and
the Company attributable to taxable years or periods ending on or before the
Balance Sheet Date and, in the case of taxable years or periods beginning before
and ending after the Balance Sheet Date, the portion of such years or periods
ending at the close of business on the Balance Sheet Date (the "Pre-Closing Tax
Period"), (ii) all liability whenever incurred for Taxes of Seller, and (iii)
any liability resulting from a failure of Seller to fulfill his obligations
under this Article XII.
12.2.2 Notwithstanding any other provision of this Agreement,
Purchaser hereby agrees to indemnify Seller against and hold him 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; (ii) any
liability resulting from a failure of Purchaser to fulfill its obligations under
this Article XII; (iii) any liability for Taxes, on account of, resulting from
or attributable to any elections of Purchaser not consented to by Seller, or
even if made jointly or consented to, if not accepted by the taxing authority or
if revoked or terminated whether by Purchaser or any taxing authority; and (iv)
any liability resulting from a failure of Purchaser to timely pay any taxes of
the Company.
12.3 Closing of Taxable Period. Seller agrees to cause the Company upon
consultation with Purchaser 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 Balance Sheet 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 Seller. Seller 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 Balance Sheet Date for those jurisdictions which permit or require a
short period tax return ending as of th close of business on the Balance Sheet
Date unless another date is otherwise required by the jurisdiction. Purchaser
will cooperate with Seller in making available to him any records necessary to
enable him to comply with this Section 12.4. At the request of Seller, Purchaser
shall cause the Company to grant a Power of Attorney to such persons as Seller
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 Balance Sheet
Date and (ii) all other Tax Returns of any kind with respect to Company that are
due after the Balance Sheet Date (other than Tax Returns to be filed by Seller
pursuant to Section 12.4). Seller 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 Balance Sheet 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 Seller Directly to Taxing Authorities. Except as
provided in Section 12.7, and except if reserved or accrued for in the Financial
Statements or Closing Financial Statements, Seller shall pay or cause to be paid
all Taxes due with respect to Tax Returns which he is required to file pursuant
to Section 12.4.
12.7 Payment of Taxes by Seller to Purchaser. Except as set forth on
Schedule 12.7 attached hereto, 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 Balance Sheet Date, Seller shall compute or cause to be computed the Tax
liability which would be reflected on any Tax Return for the Company for that
jurisdiction for the period through and including the Balance Sheet Date (as if
such a short taxable period existe and a return was permitted or requested in
respect thereof), and Seller shall pay such amount (less any estimated tax
payments paid prior to the Closing Date and/or less any amount reserved for or
accrued in the Financial Statements or Closing Financial Statements) 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 any overpayment from a period
through and including the Balance Sheet Date that is not reflected on the
Financial Statement or Closing Financial Statements is received or credited to a
tax year that includes or is subsequent to Balance Sheet Date, Purchaser shall
promptly pay or cause to be paid such amount to Seller. 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 per diem basis
unless some other method is required b the Company's normal method of accounting
or a taxing jurisdiction.
12.8 [Intentionally left blank].
12.9 Cooperation in Preparing and Filing Returns. Seller and Purchaser
shall, and Seller 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 Seller 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 Balance Sheet Date. Seller 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. Seller shall be liable for any stock transfer,
conveyance, stamp and other taxes arising from the sale, assignment and transfer
of the Shares.
12.12 Negotiation Settlement or Contest of Tax Disputes. Seller and his
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 Balance Sheet Date. In addition, Seller shall be entitled to
participate at his expense in the defense of any Tax Claim relating to any year
or period that includes the Balance Sheet Date for which Seller 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 (which consent shall
not be unreasonably withheld), subject to Section 12.2 hereof; and at Seller's
sole expense, may assume the entire defense of such Tax Claim including the
right to negotiate, resolve, settle or contest the Tax Claim. In this event,
Purchaser an the Company will execute any documents, including a power of
attorney, that may be necessary or required for Seller to assume the defense,
negotiate, resolve, settle or contest the 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 Balance Sheet Date without the consent of Seller (which consent
shall not be unreasonably withheld) if with respect to such claim, Seller 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 Seller 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 Balance Sheet Date that including the operations, income or assets
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
includes copies of all documents. Seller 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, pay over to Seller promptly upon receipt 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 Balance Sheet Date whether
received directly or applied as credits against other tax liabilities but only
if the Tax refunds were not reflected as assets on the Closing Financial
Statements.
12.15 Records Retention. Seller shall retain, and Purchase shall 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 Balance Sheet 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
Balance Sheet Date to be retained by Company and not to be destroyed without
prior written approval of Seller 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 Balance Sheet Date.
12.16 [Intentionally left blank].
12.17 Section 338(h)(10) Election
(a) Seller and Purchaser agree to execute Internal Revenue Service
Form 8023-A and to jointly and timely file an election under Section 338(h)(l0)
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)(l0) election, with respect to the purchase of the Shares.
Seller 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)(l0)-l and the provision of applicable state or local tax laws and
regulations.
(b) When the joint election is made under Section 338(h)(l0)
of the Code with respect to the purchase of the Shares, Purchaser and Seller
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 Exhibit 12.17 (the "Purchase Price
Allocation") delivered by the Parties at Closing as modified if applicable
pursuant to the Memorandum of Understanding. Purchaser agrees to report or cause
the Company to report, and the Seller agrees 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) Seller 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, except that Purchaser hereby agrees to indemnify
Seller against, hold him harmless from and reimburse him for any adverse tax
liability whatsoever and wherever incurred on account of, resulting from or
attributable to the Section 338(h)(10) election required under this Agreement,
including but not limited to, any liability for Taxes on account of, resulting
from or attributable to a change in any allocations of the Purchase Price as set
forth in Exhibit 12.17 whether such change is due to the act of Purchaser or any
taxing authority.
(d) Seller 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 Exhibit 12.17 hereto to reflect
such adjustments and shall timely forward such revised exhibit to Seller.
Purchaser and Seller 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, Seller and Purchaser shall, and Seller 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)(l0) 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 Seller for any and all
liability for Taxes imposed on Seller attributable, directly or indirectly, to
any elections made by Purchaser pursuant to Section 338(g) of the Code.
(g) Seller shall attach Internal Revenue Service Form 8023-A,
executed by Seller and Purchaser, to the Company's Federal income tax return for
the taxable year which ends on the Balance Sheet Date. Purchaser shall attach
Internal Revenue Service Form 8023-A, executed by Seller and Purchaser, to its
Federal income tax return for the taxable year which includes the Closing Date.
(h) In the event that Seller fails to take any action required
under this Section 12.17 or breaches any covenant hereof that causes any
materially adverse tax consequences to the Purchaser or the Company and the
failure to act which causes the tax consequence was not caused by, resulted from
any action of, or attributable solely to the Purchaser or the Company, then
Seller shall be liable for and hereby agree to indemnify Purchaser for any and
all liability for additional 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
until sixty (60) days after the expiration of the applicable statutes of
limitation, 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.
12.20 Covenants of Purchaser. From and after the Closing, Purchaser
shall not, and shall cause the Company not to, take any of the following
actions: (a) change or attempt to change the Company's accounting method or tax
year; (b) change or attempt to change any tax return attributable to periods
prior to and including the Balance Sheet Date; (c) make, change, revoke,
terminate or attempt to make, change and revoke or terminate any election that
would affect any tax period prior to and including the Balance Sheet Date; and
(d) enter into any agreements or waivers or extensions of any statutes of
limitations for any tax period prior to and including the Balance Sheet Date
without the prior consent of the Seller.
ARTICLE XIII
[Intentionally left blank]
ARTICLE XIV
EXPENSES WITH RESPECT TO TRANSACTION
Except as otherwise set forth in this Agreement, Seller agrees that he will
cause the Company to pay or accrue all fees, costs and expenses incurred by him
in connection with the Transactions and the Closing thereof; including, without
limitation, the fees and expenses of his 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
the Transactions 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 Seller. Notwithstanding the foregoing, Seller
and Purchaser shall share equally any fees of filings required to be made to
governmental agencies in connection with the 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 Transactions.
ARTICLE XVI
INDEMNIFICATION
16.1 Mutual Indemnification
16.1.1 Notwithstanding any other provisions of this Agreement,
from and after the Closing, Seller and his heirs, executors, successors,
permitted assigns and personal representatives hereby indemnify 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 a breach by Seller 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. .
16.1.2 From and after the Balance Sheet Date, Purchaser, on
behalf of its Affiliates and its successors and assigns, hereby indemnifies
Seller, his heirs, executors, successors, permitted assigns, and personal
representatives, and agrees to hold Seller, his heirs, executors, successors,
permitted assigns and personal representatives, 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 Balance Sheet Date relating to the transfer of the
Shares and concomitant ownership and control of the Company.
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 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 th 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 o 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, th 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 Seller set forth
in Article III of this Agreement and the covenants of Seller wherever set forth
in this Agreement shall survive Closing for 18 months from the Closing Date
except Sections 3.1, 3.2 and 3.3 shall survive closing forever. The
representations and warranties of the Purchaser set forth in Sections 4.1 and
4.2 and the covenants of Purchaser wherever set forth in this Agreement shall,
unless otherwise provided herein, 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. Any claim for
indemnification must be made within such periods or shall thereafter be barred.
16.1.8 Except for any claim on account of the late filing of
Forms 5500 C/R for the Company's Premium Conversion Plan, no claim for
indemnification against Seller pursuant to this Agreement or otherwise shall be
made unless such claim for indemnification or portion thereof (the "Triggering
Claim"), which when added to the aggregate amount of all prior claims, exceeds
the amount of Seventy-five Thousand Dollars ($75,000.00) and then only for the
amount in excess of $75,000.00. In addition, the indemnification provisions
contained in this Agreement as against Seller shall further be limited in that
except for claims pursuant to Paragraphs 3.1, 3.2, 3.3 and 3.28, the aggregate
of all such claims shall not exceed $500,000.00. If Purchaser's claim for
indemnification exceeds $75,000.00, then Purchaser may withhold the amount of
its claim that is in excess of $75,000.00 from any amount the Company owes
Seller as a bonus under Paragraph 3.2 of the Employment Agreement of even dat
hereof, provided, however, that the amount withheld shall not exceed $300,000.00
and shall be immediately deposited into an escrow account with an independent
escrow agent under the terms of an agreement in the form attached as Exhibit
16.1.8 pending the arbitration of the claim.
16.2 Remedies Cumulative. All rights and remedies existing under this
Agreement are cumulative with, and not exclusive of each other, and any rights
or remedies otherwise available.
ARTICLE XVII e
NOTICES e
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 mall, 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 Seller, addressed to:
Joseph Julian
23 Doe Meadow Court
Southington, CT 06489
with a copy to:
Steven D. Bartelstone, Esq.
Rogin, Nassau, Caplan, Lassman & Hirtle, LLC
CityPlace, 22nd Floor
Hartford, CT 06103
Fax: 860-278-2179
or to such other address or addresses and to the attention of such other person
or persons as Seller 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 e
ARBITRATION e
Any claim, dispute, suit, action, or proceeding between Purchaser and
Seller 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, which cannot be informally
resolved between Purchaser and Seller, other than equitable claims and relief
that shall be governed by Article XXIV and other methods of dispute resolution
specifically referenced in other Sections hereof, shall be referred to
arbitration which shall be conducted at Hartford, Connecticut in accordance with
the Commercial Arbitration Rules of the American Arbitration Association (the
"AAA") then in effect, as modified or supplemented herein, or as the Parties
mutually agree otherwise. Notwithstanding the Commercial Arbitration Rules of
the AAA, the Parties agree (a) that any arbitration shall be presided over by a
panel of three arbitrators, one selected by Purchaser, one selected by Seller,
and the third selected by the two previously-selected arbitrators, and each of
whom shall have been admitted to the practice of law, and be in good standing or
on retirement status, in any of the fifty United States, (b) that the
arbitrators shall base their decision on the facts as presented into evidence
and (c) that the arbitrators shall prepare a written memorandum of decision
setting forth the findings of fact and conclusions of law. The decision of any
two or more arbitrators shall constitute the final award rendered by the
arbitrators, and judgment may be entered upon such decision in accordance with
applicable law in any court of applicable jurisdiction.
ARTICLE XIX
EFFECTIVENESS AND ASSIGNABILITY OF AGREEMENT
This Agreement shall become effective when executed and delivered by
Purchaser and Seller, 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 XX
ANNOUNCEMENT OF TRANSACTION
Subject to the provisions of Section 11.1, no Party shall make a public
announcement 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 Purchaser from communicating with its employees
nor Seller from communicating with th employees of the Company regarding this
Agreement, so long as Seller 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 XXI e
COMPLETENESS OF AGREEMENT e
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 September 22, 1997. The terms and
conditions of confidentiality 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 XXII e
CAPTIONS e
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 XXIII e
APPLICABLE LAW e
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 Connecticut without regard to the principles of conflicts of laws.
ARTICLE XXIV e
CHOICE OF FORUM; VENUE; SERVICE OF PROCESS
Any equitable claim or proceeding between Purchaser and Seller 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 not otherwise governed by Article XVIII, shall be
commenced and maintained exclusively in the United States District Court for the
District of Connecticut, or, if that Court lacks jurisdiction over the subject
matter, in a state court of competent subject-matter jurisdiction sitting in
Hartford County, Connecticut. Purchaser and Seller hereby submit themselves
unconditionally and irrevocably to the personal jurisdiction of such courts.
Purchaser and Seller further agree that venue shall be in Hartford County,
Connecticut. Purchaser and Seller 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 Hartford County, has been
brought in an inconvenient forum. Purchaser and Seller 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 Seller 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 the State of Connecticut.
ARTICLE XXV e
COUNTERPARTS e
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 XXVI e
NO THIRD PARTY BENEFICIARY e
This Agreement is intended to inure to the benefit of Purchaser and Seller
only; and no third party shall have any rights, express or implied, by reason of
this Agreement.
ARTICLE XXVII e
UNILATERAL RIGHT TO WAIVE FAILURES OF OTHER PARTIES
27.1 Waiver. Any of the Parties may:
27.1.1 Extend in writing the time for the performance of any
of the obligations herein contained to be performed for the benefit of such
Party;
27.1.2 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;
27.1.3 Waive in writing the failure in performance of any
of the conditions herein expressed for its benefit; and
27.1.4 Waive in writing compliance with any of the covenants
herein contained for its benefit.
27.2 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 XXVIII
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.
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
Seller:
/S/ JOSEPH JULIAN
JOSEPH JULIAN,
an individual residing in the State of Connecticut
5
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") made as of the 1st day of January, 1997,
by and between PRODUCTION REALTY, INC., a California corporation, and its
successors and assigns ("Landlord"), and PACIFIC/AIR BALANCE, INC., a California
corporation, and its successors and assigns ("Tenant").
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 commonly known as 13516
Desmond Street, Pacoima, California, 91331, and generally described as an
approximately 51,000 square foot parcel of land with a 25,000 square foot
industrial building situated thereon (the "Building"), together with all
improvements thereon (the "Premises").
2. Term. This Lease shall commence on the date hereof (the "Commencement Date"),
and shall continue for twenty-four (24) months (the "Initial Term"), and may be
renewed for one additional lease term, of twenty-four (24) months duration at
the expiration of the Initial Term upon the terms and conditions contained
herein, upon Tenant providing thirty (30) days prior written notice of such
renewal to Landlord; and subject to further extension of such term as may
hereafter be otherwise agreed in writing between Landlord and Tenant. The
Initial Term and any annual renewal thereof may be referred to as the "Term".
Landlord and Tenant agree that this Lease shall not be recorded.
3. Rent
3.1 Payment of Rent. Tenant covenants and agrees to pay Landlord rent in an
amount equal to:
(a) Thirty-Eight Cents ($0.38) per square foot of the Building , in
advance, on or before the first day of each month during the Initial Term;
(b) Forty Cents ($0.40) per square foot of the Building , in advance,
on or before the first day of each month during the renewal of the Initial Term,
if any, of the term of this Lease; and
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 annual rate of
interest of twelve percent (12%) per annum 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.
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
<PAGE>
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 (except the perils of flood) of
direct physical loss or damage 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 comprehensive public liability insurance in
the amount of not less than One Million Dollars ($1,000,000), insuring, Tenant
and, as additional insured, Landlord against any liability arising out of
Tenant's use, occupancy, or maintenance of the Premises and all areas
appurtenant thereto.
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 California.
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 cancelled 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, or changes in applicable law taking effect, during the term of
this Lease, including but not limited to a change in the ownership of the
Premises or in the improvements thereon) 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. Lessee shall promptly
furnish Lessor with satisfactory evidence that such taxes have been paid.
<PAGE>
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.
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. Tenant shall be responsible for and promises
to reimburse Landlord promptly upon demand for any increase in insurance
premiums assessed by Landlord's property and casualty
<PAGE>
insurer due to Tenant's use, misuse or occupancy of the Premises.
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. Landlord shall, at its own cost and expense and at
all times, repair and maintain the exterior walls and foundation of the
Premises. Tenant shall, at Tenant's own cost and expense and at all times, keep
the Premises neat, clean, and in a sanitary condition, including the neat and
orderly storage of the Products, and keep and use the Premises in accordance
with all applicable laws, ordinances, rules, regulations, and requirements of
governmental bodies and authorities. Except as set forth in the first sentence
of this Section 10, 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. If Landlord refuses or neglects its duties to make
repairs to the exterior walls and foundation of the Premises under this Section
10, then, at the expiration of thirty (30) days' written demand to Tenant (or
without demand in the case of emergency), Tenant may, but is not required to,
make, perform or cause such repairs as it deems necessary and Landlord agrees
that Tenant may offset any amounts expended by it in making such repairs against
any amounts due and payable hereunder for the Rent.
11. Hold Harmless. To the extent permitted by law, and except to the extent of
Landlord's acts or omissions for which Landlord is solely 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,
<PAGE>
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 Base
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 12.1 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
<PAGE>
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 California. 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, or (c) Tenant may make such repair to the Premises as is
required and desirable to permit Tenant to use the Premises for the stated
purpose, and Tenant may offset such amount expended by it in making such repairs
against any amounts due hereunder for the Rent.
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 during the term of this Lease, 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
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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 California.
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 Accord and Satisfaction. No payment by Tenant or receipt or
acceptance by Landlord of a lesser amount than the Rent or any other obligations
of Tenant under this Lease including the obligation to pay for any tenant
improvements, herein stipulated, shall be deemed to be other than
<PAGE>
on account of the stipulated amount nor shall Landlord's acceptance of any check
or payment accompanied by and endorsement or statement be deemed to result in an
accord and satisfaction of Landlord's right to recover the balance of such Rent
or pursue any remedy provided in this Lease.
21.12 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.
21.13 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:
Production Realty, Inc.
260 North Elm Street
Westfield, MA 01085
Attention: Stewart B. Reed
If to Tenant:
Pacific/Air Balance, Inc.
260 North Elm Street
Westfield, MA 01085
Attention: Stephen M. 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.
DATED as of the date first set forth above.
LANDLORD:
PRODUCTION REALTY, INC.
By:/S/ STEWART B. REED
Stewart B. Reed
TENANT:
PACIFIC/AIR BALANCE, INC.
By:/S/ RICHARD J. MCKNIGHT
Richard J. McKnight,
Vice President & General Manager
AMENDED AND RESTATED
REVOLVING LOANS AND
FOREIGN EXCHANGE FACILITIES AGREEMENT
AGREEMENT made as of July 15, 1997 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 BankBoston, N.A., a national banking association, having a
principal place of business at 100 Federal Street, Boston, Massachusetts 02110,
successor by merger to BayBank, N.A. (hereinafter referred to as the "Bank")
amends and restates in its entirety an Amended and Restated Loan, Letter of
Credit Facility and Foreign Exchange Facilities Agreement originally dated
September 27, 1996.
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 Loans
and Foreign Exchange Facilities Agreement, as amended,
supplemented, or modified from time to time.
"Base Loan" means any Loan when and to the extent that the
interest rate therefor is determined by reference to the Base Rate.
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"Base Rate" means the greater of (i) that rate of interest
announced from time to time by the Bank at its head office at 100
Federal Street, Boston Massachusetts 02110 as its "Base Rate", and (ii)
the Federal Funds Effective Rate plus one-half percent per annum
(rounded upwards, if needed to the nearest 1/8th of one percent, which
rate is not necessarily the lowest rate charged by the Bank to its
customers.
"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, (i) if the applicable day relates to a Canadian LIBOR Loan,
Canadian LIBOR Interest Period, or notice with respect to a Canadian
LIBOR Loan, a day on which dealings in United States or Canadian Dollar
deposits are also carried on in the London and Toronto, Canada
interbank market and banks are open for business in London and Toronto,
Canada, or (ii) if the applicable day relates to a Eurodollar Loan,
Eurodollar Interest Period, or notice with respect to a Eurodollar
Loan, a day on which dealings in United States Dollar deposits are also
carried on in the interbank Eurodollar market and banks are open for
business.
"Canadian Commitment" shall have the meaning assigned to such
term in Section 2.1 A.
"Canadian LIBOR Interest Rate" means, for each Canadian LIBOR
Loan, the rate per annum (rounded upward, if necessary, to the next
higher 1/100 of 1%) determined by the Bank to be equal to the quotient
of (x) the London Interbank Offered Rate for such Canadian LIBOR Loan
for such Interest Period utilizing reasonable extrapolation
methodology, if necessary, depending upon the Interest Period selected
by the Borrower divided by (y) one minus the Eurocurrency Reserve
Requirement, if any, for such Interest Period.
"Canadian LIBOR Loan" means any Loan when and to the extent
that the interest rate therefor is determined by reference to the
Canadian LIBOR Interest Rate.
"Canadian Loan Facility" means the $5,000,000 (Canadian)
revolving line of credit facility, administered for the Borrower by the
Nassau Branch, denominated in Canadian Dollars.
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"Canadian Revolving Note" shall have the meaning assigned to
such term in Section 2.4.2.
"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
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<PAGE>
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
4
<PAGE>
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.
"Consolidated Tangible 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, and after
deducting 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.
"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, except where followed by the word "Canadian" which
shall mean lawful money of the Dominion of Canada.
5
<PAGE>
"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 Eurodollar
or Canadian LIBOR Loan, for any Eurodollar or Canadian LIBOR 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 Eurodollar or Canadian LIBOR Interest Period, as
the case may be, 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 Eurodollar or Canadian LIBOR
Interest Rate for Eurodollar or Canadian LIBOR Loans, as the case may
be, is to be determined; or (2) any category of extension of credit or
other assets that includes Eurodollar or Canadian LIBOR Loans, it being
understood that as of the date of this Agreement the Eurocurrency
Reserve Requirement percentage is zero (0).
"Eurodollar Interest Rate" means, for each Eurodollar Loan,
for any applicable Eurodollar Interest Period, the quotient of (x) the
rate of interest per annum determined by the Bank to be the prevailing
rate at which deposits in United States Dollars are offered to the Bank
by banks in the interbank Eurodollar market in which it regularly
participates (rounded upward, if necessary, to the next highest 1/100
of 1%)on or about 10:00 a.m. (Boston, Massachusetts time) two Business
Days before the first day of the applicable Eurodollar Interest Period,
in an amount approximately equal to the principal amount of such
Eurodollar Loan for the period of time approximately equal to the
applicable Eurodollar Interest Period, divided by (y) one minus the
Eurocurrency Reserve Requirement, if any, for such Interest Period.
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"Eurodollar Loan" means any Loan when and to the extent that
the interest rate therefor is determined by reference to the Eurodollar
Interest Rate.
"Federal Funds Effective Rate" means, for any day, a
fluctuating interest rate per annum equal to the weighted average of
the rates on overnight Federal funds transactions with members of the
Federal Reserve System, arranged by Federal funds brokers, as published
for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by
the Bank from three Federal funds brokers of recognized standing
selected by the Bank.
"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
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<PAGE>
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
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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
(i) with respect to any Canadian 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 30, 60, 90, 180 or 360 days 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; or
(ii) with respect to any Eurodollar 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 Eurodollar 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
Eurodollar 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
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Eurodollar Interest Rate for such Eurodollar Interest
Period.
"Lending Office" means, with respect to Revolving Loans, the
Bank's office at 1350 Main Street, Springfield, Massachusetts 01103,
and with respect to Canadian LIBOR Loans, the principal office of the
Nassau Branch.
"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.
"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 Eurodollar or Base Rate Revolving Line of
Credit Loan or Loans, a Canadian LIBOR Revolving Line of Credit Loan or
Loans or any outstanding reimbursement obligation under (i) the Letter
of Credit Facility described in Section 2.14 below or (ii) the FX
Facility (as evidenced by the Back-Up Foreign Exchange 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 Canadian LIBOR Loan means the rate of interest per annum
(rounded upward, if necessary, to the next higher 1/100 of 1%) quoted
on the applicable page of the Daily Telerate Financing Reporting
Service as the Canadian LIBOR Rate or Reuter's Canadian LIBOR page (or,
if such reporting services are no longer provided, at the Canadian
LIBOR Rate published in comparable
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financial reporting services) offered for deposits in immediately
available Canadian 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.
"Nassau Branch" means the Bank's affiliate, The First
National Bank of Boston, Nassau Branch, a full service branch of
BankBoston, N.A. located at Charlotte House, Nassau, Bahamas.
"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 Canadian Revolving
Note, the Backup Foreign Exchange Facility Note and any other
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notes executed by the Borrower in favor of the Bank from time to
time.
"Notice of Selection of Interest Period" shall have the
meaning assigned to it in Section 2.2 below.
"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.
"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.
"Principal Office" means the Bank's office at 100 Federal
Street, Boston, Massachusetts 02110.
"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,
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1998 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.
"Restricted Payment(s) shall have the meaning assigned to
such term in Section 7.8
"Revolving Line of Credit Loan(s)", "Revolving Loans" or
"Revolving Credit Loan(s)" shall have the meaning assigned to such
terms in Section 2.1. and shall refer to Loans other than Canadian
LIBOR Loans, issued hereunder pursuant to the Revolving Note or the
Letter of Credit Facility.
"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
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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, 1998, but if the Revolving
Line of Credit or Canadian Revolving Line of Credit 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.
"$3,000,000 FX Facility" shall have the meaning assigned to
that term in Section 2.18.
"$3,000,000 Back-up Foreign Exchange Facility Note shall have
the meaning assigned to that term in Section 2.18.
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" or "Revolving Loans")(including commitments under
the Letter of Credit Facility) 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 Million Dollars ($50,000,000.00) (the
"Commitment"). Each Revolving Line of Credit Loan which is a Eurodollar
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.
Base Loans may be in any amount within the limits of the Commitment and
within such limits, the Borrower may borrow, repay pursuant to Section
2.7, and reborrow under this Section 2.1. On such terms and conditions
as are contained herein, the Loans may be outstanding as either Base
Loans or Eurodollar Loans. Each type of Loan shall be made and
maintained at the Bank's Lending Office for such type of Loan.
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2.1A Canadian Revolving Line of Credit Facility. The Bank
agrees, on the terms and conditions hereinafter set forth and through
its Nassau Branch, to make loans (the "Canadian Revolving Line of
Credit Loans" or "Canadian LIBOR 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, Five Million Dollars ($5,000,000.00)
Canadian (the "Canadian Commitment"). Each Canadian Revolving Line of
Credit Loan which is a Canadian LIBOR Loan and which shall not utilize
the Canadian Commitment in full shall be in an amount not less than
Five Hundred Thousand Dollars ($500,000.00) Canadian or multiples of
One Hundred Thousand Dollars ($100,000.00) Canadian thereabove. Within
the limits of the Canadian Commitment the Borrower may borrow, repay
pursuant to Section 2.7, and reborrow under this Section 2.1A. Each
Canadian LIBOR Loan shall be made and maintained at the Bank's Nassau
Branch.
2.2. Notice and Manner of Borrowing; Conversion and
Renewals.
2.2.1. Revolving Loans. The Borrower may elect from
time to time to initiate a Revolving Loan, to convert all or a
part of a Base Loan into a Eurodollar Loan and vice versa or
to renew all or part of a Revolving 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 Base Loan, or at least two (2)
Business Days before the initiation of, conversion into or
renewal of a Eurodollar Loan, specifying (1) the initial,
renewal or conversion date of the Revolving Loan; (2) the
amount of the Revolving Loan to be provided, converted or
renewed; (3) in the case of conversions, a specification that
the Revolving Loan is to be converted from a Base Loan to a
Eurodollar Loan or vice versa, as the case may be; and (4) in
the case of initiations of, renewals of or a conversion into
Eurodollar Loans, the duration of the Interest Period
applicable thereto; provided that (a) the minimum principal
amount of each Revolving Loan outstanding after an initiation,
a renewal or conversion shall be One Hundred Thousand Dollars
($100,000.00) in the case of Base Loans, and Five Hundred
Thousand Dollars ($500,000.00) or One Hundred Thousand Dollars
($100,000.00) multiples thereabove in the case of Eurodollar
Loans; and (b) Eurodollar Loans can be renewed or converted
only as of the last day of the Interest Period for such
Revolving Loan. In the absence of Borrower specifying the type
of loan,
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advances made pursuant to any cash management arrangement
between the Bank and the Borrower will be made as Base Loans.
2.2.2. Canadian LIBOR Loans. The Borrower may elect
from time to time to initiate a Canadian LIBOR Loan, or to
renew all or part of a Canadian LIBOR Loan by giving the Bank
written, telefax or telegraphic notice (effective upon
receipt) at least two (2) Business Days before the initiation
of or renewal of a Canadian LIBOR Loan, specifying (1) the
initial or renewal date of the Canadian LIBOR Loan; (2) the
amount of the Canadian LIBOR Loan to be provided or renewed;
and (3) in the case of initiations of or renewals of Canadian
LIBOR Loans, the duration of the Interest Period applicable
thereto; provided that (a) the minimum principal amount of
each Canadian LIBOR Loan outstanding after an initiation or a
renewal shall be Five Hundred Thousand Dollars ($500,000.00)
Canadian or One Hundred Thousand Dollars ($100,000.00)
Canadian multiples thereabove for Canadian LIBOR Loans; and
(b) Canadian LIBOR Loans can be renewed only as of the last
day of the Interest Period for such Canadian LIBOR Loan.
Any notice (a "Notice of Selection of Interest Period") given
under this Section 2.2 shall be irrevocable and shall be given not
later than 10:00 a.m. (EST) on the day which is not less than the
number of Business Days specified above for such Notice of Selection of
Interest Period, and specifying (i) the effective date for the
applicable Interest Period and (ii) the duration, subject to the
limitations set forth in this Agreement, of the applicable Interest
Period. If the Borrower shall fail to give the Bank the Notice of
Selection of Interest Period as specified above for the renewal of a
Canadian LIBOR or Eurodollar Loan, as the case may be, prior to the end
of the Interest Period with respect thereto, in the case of a Canadian
LIBOR Loan shall be deemed to be renewed as a 30-day Interest Period
Canadian LIBOR Loan, and, in the case of a renewal or conversion of a
Eurodollar Loan, shall be deemed to automatically convert into a Base
Loan on the last day of the Interest Period for such Loan.
2.3. Interest. The Borrower shall pay interest to the Bank on
the outstanding and unpaid principal amount of the Loans made under
this Agreement at a rate per annum as follows:
(1) For a Base Loan at a rate equal to the Base Rate
less one and three-quarters percent (1.75%);
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(2) For a Eurodollar Loan (applicable only to
Revolving Loans) at a rate equal to the Eurodollar
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 Eurodollar
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
Eurodollar Loan or conversion to a Eurodollar Loan;
and
3) For a Canadian LIBOR Loan (applicable only to
Canadian LIBOR Loans) at a rate equal to the Canadian
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 Canadian 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
Canadian LIBOR Loan or conversion to a Canadian LIBOR
Loan.
Any change in the interest rate based on the Base Rate
resulting from a change in the Base Rate shall be effective as of the
opening of business on the day on which such change in the Base Rate
becomes effective.
Interest on each Base Loan shall be calculated on the basis of
a year of 360 days for the actual number of days elapsed for any
payment period. Interest on each Eurodollar or Canadian LIBOR 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 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 Base Loan, on the first day of each
month, commencing the first such day after such Loan and at
maturity for such Loan, and
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(2) For each Canadian LIBOR or Eurodollar Loan, as
the case may be, on the last day of the applicable 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 Base Loan at a rate equal to the Base
Rate plus one percent (1%); and
(b) For each Canadian LIBOR or Eurodollar Loan, as
the case may be, at a rate equal to the applicable Canadian
LIBOR or Eurodollar Interest rate Loan, as the case may be,
plus three percent (3%) from the time of an Event of Default
until the end of the then current Interest Period therefor,
and thereafter at a rate equal to the Base Rate plus one
percent (1%).
2.4. The Notes.
2.4.1. The Revolving Line of Credit. 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 $50,000,000 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 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 or payment shall not limit or
otherwise affect the obligations of the Borrower under this
Agreement or the Revolving Note.
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On and after the Termination Date, the unpaid
principal amount of the Revolving Note shall be repaid ON
DEMAND.
2.4.2. The Canadian Revolving Line of Credit. All
Canadian 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 $5,000,000 Canadian
Revolving Line of Credit Note (the "Canadian Revolving Note")
of the Borrower in substantially the form of Exhibit B, duly
completed, dated the date of this Agreement, and payable to
the Bank, such Canadian Revolving Note to represent the
obligation of the Borrower to repay the Canadian Revolving
Line of Credit Loans. The Bank is hereby authorized by the
Borrower to endorse on the schedule attached to the Canadian
Revolving Note the amount and type of each Canadian 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 Canadian
Revolving Line of Credit Loans, which endorsement shall, in
the absence of manifest error, be conclusive as to the
outstanding balance of the Canadian Revolving Line of Credit
Loans made by the Bank; provided, however, that the failure to
make such notation with respect to any Canadian 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 Canadian Revolving Note.
On and after the Termination Date, the unpaid
principal amount of the Canadian 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
Canadian Revolving Note, the Foreign Exchange Facility Note 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, the Canadian Revolving Note, the Letter of Credit Facility,
the Back-up Foreign Exchange Note or the Foreign Exchange Facility
shall constitute a default of this Agreement and any default of this
Agreement shall
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constitute a default of the Revolving Note, the Canadian Revolving
Note, the Letter of Credit Facility, the Back-up Foreign Exchange Note
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
or permitted prepayment under this Agreement, under the Revolving Note
or the $3,000,000 Back-up Foreign Exchange Facility Note not later than
11:00 a.m. (Boston time) 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 shall make each payment or permitted prepayment
under this Agreement, under the Canadian Revolving Note not later than
11:00 a.m. (Boston time) on the date when due in lawful money of the
Dominion of Canada to the Bank at its Principal Office or the Nassau
Branch, 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, under the Revolving
Note or under the Canadian 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, under the
Revolving Note or under the Canadian 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 Eurodollar or Canadian 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.
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2.8. Prepayment. The Borrower may, with respect to Base Loans
only, 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. Eurodollar or Canadian
LIBOR Loans may not be prepaid. If for any reason the Bank is obligated
to accept a prepayment of any Eurodollar or Canadian LIBOR Loan on any
day other than the last day of the Interest Period applicable to such
Loan, the Borrower shall pay to the Bank an amount computed pursuant to
the following formula:
L = (R-T) x P x D
360
where:
L = the amount payable to the Bank; R = the applicable
interest rate on such Loan; T = the effective rate per annum
at which any readily
marketable bond or other obligation of the United
States, selected at the Bank's sole discretion,
maturing on or near the last day of the then
applicable Interest Period of such Loan and in
approximately the same amount as such Loan, can be
purchased by the Bank on the day of such payment of
principal;
P = the amount of principal prepaid;
D = the number of days remaining in the applicable
Interest Period for such Loan, as of the date of such
prepayment.
The Borrower shall pay such amount ("L") upon presentation by the Bank
of a statement setting forth in reasonable detail the amount and the
Bank's calculation thereof pursuant hereto, which statement shall be
deemed correct absent manifest error. No amount shall be payable by the
Borrower pursuant to this Section 2.8 if T is equal to or higher than
R.
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
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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 Eurodollar or Canadian LIBOR Loans,
as the case may be, then upon notice to the Borrower by the Bank the
outstanding principal amount of the Eurodollar or Canadian 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 Base
Loan (a) immediately upon demand of the Bank if such change or
compliance with such request, in the judgment of the Bank, requires
immediate repayment; or (b) at the expiration of the last Interest
Period to expire before the effective date of any such change or
request.
2.11. Disaster. Notwithstanding anything to the contrary
herein, if the Bank determines (which determination shall be
conclusive) that:
(1) Quotations of interest rates for the relevant
deposits referred to in the definition of Eurodollar or
Canadian 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 Eurodollar or
Canadian LIBOR Loan as provided in this Agreement; or
(2) The relevant rates of interest referred to in the
definition of Eurodollar or Canadian 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 Eurodollar or Canadian
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 Base Loan in
full, the then outstanding principal amount of each Eurodollar or
Canadian LIBOR Loan together with accrued interest thereon, on the last
day of the then current Interest Period applicable to such Loan.
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<PAGE>
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, the Revolving Note
or the Canadian 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, the Revolving Note or the Canadian 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 Eurodollar or Canadian 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, the
Revolving Note or the Canadian 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 (a) retrospectively or (b) during any
Eurodollar or Canadian 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
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<PAGE>
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 Eurodollar or Canadian 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 Eurodollar or Canadian 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 within the Commitment (the
"Letter of Credit Facility") whereby the Bank will issue up to an
aggregate of Ten Million Dollars ($10,000,000.00) against amounts
available under the Revolving Line of Credit Facility, 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.
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To the extent repayment of such amounts as are reimbursable to
the Bank for such drawings against Letters of Credit is not immediately
made, the amount of such drawings shall be charged as Revolving Line of
Credit Loans. The amount of outstanding commitments under issued
Letters of Credit plus the aggregate amounts drawn under any Letters of
Credit and not reimbursed by the Borrower to the Bank shall reduce
availability under the Revolving Line of Credit Facility.
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.
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(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
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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. $3,000,000.00 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 $3,000,000.00 (the "$3,000,000.00 FX Facility")
or as otherwise may be determined by the Bank from time to time which
line of credit may be used for the 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 or payments from customers 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.
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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 "$3,000,000.00 Back-Up Foreign Exchange
Facility Note") in the form attached hereto as Exhibit "D".
3. CONDITIONS PRECEDENT. The obligation of the Bank to (i) make a
Revolving Line of Credit Loan, (ii) make a Canadian Revolving Line of Credit
Loan,(iii) issue a Letter of Credit or (iv) make a Foreign Exchange Facility
Loan or transaction 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 as of the date of this Agreement and, if requested by the Bank,
as of 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 this
Agreement and, if requested by the Bank, as of the date of the Loan
stating that:
a) The representations and warranties contained
in Section 5 of this Agreement are correct on and as
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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
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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
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<PAGE>
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
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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
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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).
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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
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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
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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;
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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
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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,
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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
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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
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<PAGE>
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 Affiliate, 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
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such other distributions being herein collectively called "Restricted Payments"
and individually, a "Restricted Payment")), 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
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(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;
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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
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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
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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 Tangible Net Worth; Leverage Ratio.
The ratio of the Borrower's total Indebtedness and all other
liabilities to its Consolidated Tangible 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 1.35 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 $75,000,000.00.
8.2.4. Working Capital. At all times Borrower's
Consolidated Current Assets shall exceed its Consolidated
Current Liabilities by $30,000,000.00.
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);
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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
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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 any
outstanding Notes, all interest thereon, and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon such Notes, 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.
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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 1350 Main Street,
Springfield, Massachusetts 01103, Attention: M. Dale Janes, Executive
Vice President, with a copy to BankBoston, N.A. 100 Federal Street,
Boston, Massachusetts 02110, Attention: Senior Lending Officer; 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,
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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.
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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 Senior Vice President - Finance
BankBoston, N.A.
By /S/KATHI L. DONAHUE
Kathi L.Donahue
Its Vice President
51
Exhibit 10.4
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
SCHEDULE OF EXECUTIVES
The Supplemental Executive Retirement Agreement entered into
by certain executives of Mestek, Inc. are identical in all
respects, except for the name of the executive and the date of
execution.
Set forth below is the identity of each executive of Mestek, Inc. who
is a signatory to the Supplemental Executive Retirement Agreement, and the date
upon which the Agreement was executed by the executive.
Year of
Executive Execution
James A. Burk 1997
R. Bruce Dewey 1997
John W. Kaddaras 1997
William S. Rafferty 1997
Stephen M. Shea 1997
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS AGREEMENT, made and entered into as of this day of
, 19__, by and between Mestek, Inc., a Pennsylvania
corporation (the "Company"), and ____________, an individual
residing in the State of _________________ (the "Executive"),
WITNESSETH THAT:
WHEREAS, the Executive is employed by the Company; and
WHEREAS, the Company recognizes the valuable services
heretofore performed and to be performed for it by the Executive;
and
WHEREAS, the Executive wishes to be assured that he will be entitled to
a certain amount of additional compensation upon attaining age 65 and that his
beneficiary will be entitled to a death benefit from and after the Executive's
death; and
WHEREAS, the parties hereto wish to provide the terms and conditions
upon which the Company shall pay such additional compensation to the Executive
or death benefit to his beneficiary after the Executive's death; and
WHEREAS, the parties hereto intend that this Agreement be considered an
unfunded arrangement, maintained primarily to provide deferred compensation
benefits for the Executive, a member of a select group of management or highly
compensated employees of the Company, for purposes of the Employee Retirement
Income Security Act of 1974, as amended;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the parties hereto agree as follows:
1. RETIREMENT BENEFIT
If the Executive continues in employment with the Company
until he attains age 65, the Company shall pay the Executive $2,500
each month, commencing with the month following the month in which the
Executive attains age 65, and payable for
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life. Monthly payments shall be made to the Executive whether or not he
continues in employment with the Company after he attains age 65.
Except as provided in Sections 2(a), 2(b) and 3(a) below, no benefits
shall be payable hereunder to or on behalf of the Executive if he
terminates employment with the Company for any reason before he attains
age 65. Except as provided in Section 3 below, no benefits shall be
payable hereunder to or on behalf of the Executive on or after his
death.
2. TERMINATION OF EMPLOYMENT
(a) In the event the Executive's employment with the Company
is terminated prior to attaining age 65 due to Disability (as such term
is defined below), the Company shall pay the Executive $2,500 each
month, commencing with the month in which the Executive attains age 65,
and payable for life. The monthly benefits described in this Section
2(a) are in addition to, and not in lieu of, any other benefits the
Executive may become entitled to as a result of his Disability
including, but not limited to, Social Security benefits or other
long-term disability benefits provided by the Company. "Disability"
means total, and presumably permanent, incapacity due to physical or
mental illness or accident which either (i) entitles the Executive to
benefits under the Company's long-term disability plan or (ii) entitles
the Executive to disability benefits under the Social Security Act as
in effect on his date of disability.
(b) In the event the Executive's employment with the Company
is terminated prior to attaining age 65 due to Involuntary Termination
without Cause or Termination for Good Reason (as such terms are defined
below), the Company shall pay the Executive $2,500 each month,
commencing with the month following the month in which the Executive
attains age 65, and payable for life. "Involuntary Termination without
Cause" means termination of employment by the Company for a reason
other than (i) the Executive's death, (ii) the Executive's Disability,
or (iii) Cause. "Cause" shall mean any conduct by the Executive
involving dishonesty or moral turpitude or any failure by the Executive
to comply with any material term of any employment, confidentiality or
other similar agreement with the Company to which the Executive is a
party, which
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conduct or failure is materially injurious to the Company,
monetarily or otherwise. "Termination for Good Reason" means
the Executive's voluntary termination of employment
(i) after a "change in control" (as defined in
(iii) below) of the Company because
(A) he has been assigned to a position of
lesser rank or status or to a location other
than Westfield, Massachusetts, without his
consent; or
(B) his annual base salary has been reduced;
or
(C) his benefits have been reduced (unless
such reduction is made uniformly in a plan
of general application to all of the
Company's eligible employees); or
(ii) because of a failure of the Company to comply
with any material provision of this Agreement or any
employment agreement with the Company to which the Executive
is a party which failure has not been cured within ten days
after written notice of such noncompliance has been given by
the Executive to the Company.
(iii) For purposes of this Agreement, a "change in
control" shall mean the purchase or other acquisition by any
person, entity or group of persons, within the meaning of
section 13(d) or 14(d) of the Securities Exchange Act of 1934
("Act"), or any comparable successor provisions, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Act) of 30 percent or more of either the outstanding
shares of common stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote
generally, or the approval by the stockholders of the Company
of a reorganization, merger, or consolidation, in each case,
with respect to which persons who were stockholders of the
Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter,
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own more than 50 percent of the combined voting power entitled
to vote generally in the election of directors of the
reorganized, merged or consolidated Company's then outstanding
securities, or a liquidation or dissolution of the Company or
the sale of all or substantially all of the Company's assets.
(c) Except as provided in Section 3 below, no benefits shall
be payable under this Section 2 to or on behalf of the Executive on or
after his death.
3. DEATH BENEFIT
(a) In the event the Executive dies before attaining age 65
and (i) while employed by the Company or (ii) after becoming eligible
for monthly benefits under Section 2, then the Company shall pay the
Executive's designated beneficiary $1,250 each month. In lieu of the
monthly benefit described in the preceding sentence, if the Executive
has a dependent child on the date of his death and if the Executive's
designated beneficiary includes either his surviving spouse or a
dependent child, then the Company shall pay such designated beneficiary
$2,500 each month until the month in which the youngest dependent child
attains age 22, and, beginning with the month in which the youngest
dependent child attains age 22, the Company shall pay such designated
beneficiary $1,250 each month. If the Executive's designated
beneficiary is entitled to a death benefit under this Section 3(a),
monthly payments shall be made to the designated beneficiary commencing
with the month following the month in which the Executive dies until
the earlier to occur of the date the designated beneficiary has
received 120 monthly payments or the date of the designated
beneficiary's death. Notwithstanding the preceding sentence, if the
Executive's designated beneficiary is entitled to a death benefit under
this Section 3(a) because the Executive dies after becoming eligible
for monthly benefits under Section 2(a), monthly payments shall be made
to the designated beneficiary commencing with the month in which the
Executive dies. In no event shall the designated beneficiary of the
Executive receive more than 120 monthly payments hereunder. For
purposes of this Section 3, "dependent child" means a natural or
adopted child of the Executive who at the time of
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determination has not attained age 22 and who survives the
Executive.
(b) In the event the Executive dies after attaining age 65 and
while receiving monthly payments under Section 1 or Section 2 above,
the Company shall pay his designated beneficiary a single sum amount
equal to the present value of the monthly payments that would have been
paid to the Executive under Section 1 or Section 2 above from and after
the date of his death if he had survived until he reached age 84 and
then died immediately thereafter. For purposes of the preceding
sentence, present value shall be determined using a 5% discount factor.
(c) The Executive's "designated beneficiary" means the
individual or individuals designated by the Executive in a written
instrument filed with the Company to receive any death benefit which
shall be payable under this Section 3. The Executive may change such
designation of beneficiary from time to time by written notice to the
Company.
4. NO TRUST CREATED
Nothing contained in this Agreement, and no action taken
pursuant to its provisions by either party hereto, shall create, nor be
construed to create, a trust of any kind or a fiduciary relationship
between the Company and the Executive, his designated beneficiary, or
any other person.
5. BENEFITS PAYABLE ONLY FROM GENERAL CORPORATE ASSETS:
UNSECURED GENERAL CREDITOR STATUS OF EXECUTIVE
The payments to the Executive, or his designated beneficiary,
hereunder shall be made from assets which shall continue, for all
purposes, to be a part of the general, unrestricted assets of the
Company; no person shall have nor acquire any interest in any such
assets by virtue of the provisions of this Agreement. The Company's
obligation hereunder shall be an unfunded and unsecured promise to pay
money in the future. To the extent that the Executive or his designated
beneficiary acquires a right to receive payments from the Company under
the provisions hereof, such right shall be no greater than the right of
any unsecured general creditor
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of the Company; no such person shall have nor acquire any legal or
equitable right, interest or claim in or to any property or assets of
the Company. The preceding provisions of this Section 5 shall not,
however, prevent the Company from purchasing an annuity contract or
insurance contract to provide any benefits hereunder and from expressly
transferring in writing such annuity contract or insurance contract to
Executive or his designated beneficiary, with his or his designated
beneficiary's consent, whichever is applicable, in exchange for such
person's rights under this Agreement and in full satisfaction thereof.
6. CLAIMS PROCEDURE
(a) If the Executive or his designated beneficiary believes
that such individual is being denied a benefit to which such individual
is entitled under this Agreement (hereinafter referred to as a
"Claimant"), the Claimant may file a written request for such benefit
with the Company, setting forth his claim. The request must be
addressed to the Chairman of the Board of Directors of the Company at
its then principal place of business.
(b) Upon receipt of a claim, the Company shall advise the
Claimant that a reply will be forthcoming within ninety days and shall,
in fact, deliver such reply within such period. The Company may,
however, extend the reply period for an additional ninety days for
reasonable cause. If the claim is denied in whole or in part, the
Company shall adopt a written opinion setting forth:
(i) The specific reason or reasons for such denial;
(ii) The specific reference to pertinent provisions
of the Agreement on which such denial is based;
(iii) A description of any additional material or
information necessary for the Claimant to perfect his claim
and an explanation why such material or such information is
necessary;
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(iv) Appropriate information as to the steps to be
taken if the Claimant wishes to submit the claim for review;
and
(v) The time limits for requesting a review under
Section 6(c) and for review under Section 6(d) hereof.
(c) Within sixty days after the receipt by the Claimant of the
written opinion described above, the Claimant may request in writing
that the Company review its determination. Such request must be
addressed to the Chairman of the Board of Directors of the Company, at
its then principal place of business. The Claimant or his duly
authorized representative may, but need not, review the pertinent
documents and submit issues and comments in writing for consideration
by the Company. If the Claimant does not request a review of the
Company's determination within such sixty day period, he shall be
barred and estopped from challenging the Company's determination.
(d) Within sixty days after the Company's receipt of a request
for review, it will review its determination. After considering all
materials presented by the Claimant, the Company will render a written
opinion setting forth the specific reasons for the decision and
containing specific references to the pertinent provisions of the
Agreement on which the decision is based. If special circumstances
require that the sixty day time period be extended, the Company will so
notify the Claimant and will render the decision as soon as possible,
but no later than one hundred twenty (120) days after receipt of the
request for review.
7. NON-ASSIGNABILITY OF BENEFITS
Neither the Executive, nor his designated beneficiary, nor any
other person shall have any power or right to transfer, assign,
anticipate, hypothecate or otherwise encumber any part or all of the
amounts payable hereunder, which are expressly declared to be
non-assignable and non-transferable. Any such attempted assignment or
transfer shall be void and shall terminate this Agreement; the Company
shall thereupon have no further liability hereunder. No amount payable
hereunder shall, prior to actual payment thereof, be
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subject to seizure by any creditor of the Executive or his designated
beneficiary for the payment of any debt, judgment or other obligation,
by a proceeding at law or in equity, nor be transferable by operation
of law in the event of the bankruptcy, insolvency or death of the
Executive, or his designated beneficiary.
8. AMENDMENT
This Agreement may not be amended, altered or modified, except
by a written instrument signed by the parties hereto or their
respective successors, and may not be otherwise terminated except as
provided herein.
9. BINDING EFFECT
This Agreement shall be binding upon the Company and its
successors and assigns, and the Executive, his successors, heirs,
executors, legal representatives, administrators and beneficiaries.
10. NOTICES
Any notice, required or permitted to be given under the
provisions of this Agreement shall be in writing, and shall be signed
by the party giving or making the same. If such notice is mailed to a
party hereto, it shall be sent by United States certified mail, postage
prepaid, addressed to such party's last known address as shown on the
records of the Company or, in the case of the Company, its then
principal place of business. The date of such mailing shall be deemed
the date of notice.
11. GOVERNING LAW
This Agreement and the rights of the parties hereunder, shall
be governed by and construed in accordance with the laws of the State
of Massachusetts.
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12. WITHHOLDING
The Company may withhold from any payments required to be made
under this Agreement, such amounts which must be withheld pursuant to
applicable federal, state or local tax or similar laws or amounts to
pay the applicable Executive portions of the cost of any retiree health
or life insurance programs for which the Executive or his designated
beneficiary is eligible.
13. FACILITY OF PAYMENT
In the event the Executive or his designated beneficiary is
declared incompetent and a conservator or other person legally charged
with the care of their person or of their estate is appointed, any
benefits under this Agreement to which the Executive or his designated
beneficiary is entitled shall be paid to such conservator or other
person legally charged with the care of their person or their estate.
Except as provided in the preceding sentence, when the Company in its
sole discretion determines that the Executive or his designated
beneficiary is unable to manage his financial affairs, the Company may
make payments under this Agreement to any person for the benefit of the
Executive or his designated beneficiary.
14. INFORMATION
The Executive or his designated beneficiary shall keep the
Company informed of his current address. The Company shall not be
obligated to search for the whereabouts of any person.
15. SEVERABILITY
If, for any reason, any provision of this Agreement is held
invalid, such invalidity shall not affect any other provision of this
Agreement not held so invalid, and each other provision shall to the
full extent consistent with law continue in full force and effect. If
any provision of this Agreement shall be held invalid in part, such
invalidity shall in no way affect the rest of such provision not held
so invalid and the rest of such provision, together with all
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other provisions of this Agreement, shall to the full extent consistent
with law continue in full force and effect.
16. ENTIRETY OF AGREEMENT
This Agreement constitutes the entirety of the agreement
between the Executive and the Company concerning the benefits provided
hereunder.
17. FINAL DECISIONS
The Company, in its sole discretion, shall have full power to
construe, interpret and administer this Agreement and to make each
determination provided for in this Agreement. All determinations made
by the Company shall be conclusive upon the Executive and his
designated beneficiary.
18. NO REDUCTION
This Agreement shall not diminish or reduce any benefits
payable to or on behalf of Executive under the Mestek, Inc.
Retirement Savings Plan. This Agreement and the benefits, if
any, provided hereunder shall be in addition to, and not in
lieu of or in derogation of, benefits provided under the
Mestek, Inc. Retirement Savings Plan.
19. NO GUARANTEE OF EMPLOYMENT
Nothing contained herein shall be construed as a contract of
employment or deemed to give the Executive the right to be retained in
the employ of the Company or to interfere with the rights of the
Company to discharge the Executive at any time, with or without cause.
20. GENDER AND NUMBER
The masculine pronoun wherever used shall include the
feminine. Wherever any words are used herein in the singular, they
shall be construed as though they were also used in the plural in all
cases where they shall so apply.
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21. HEADINGS
The headings of sections of this Agreement are for convenience
of reference only and in case of any conflict the text of this
Agreement, rather than such headings, shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day and year first above written.
MESTEK, INC.
By
Its
ATTEST:
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