UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 25, 1995
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MORGAN PRODUCTS LTD.
(Exact name of registrant as specified in its charter)
Delaware 06-1095650
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
Commission File Number 1-9843
469 McLaws Circle, Williamsburg, Virginia 23185
(Address of principal executive offices) (Zip Code)
(757) 564-1700
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 25, 1997, pursuant to an Asset Purchase Agreement (the
"Purchase Agreement") dated as of July 15, 1997, by and among Morgan Products
Ltd. (the "Company"), Wahlfeld Manufacturing Company ("Wahlfeld") and Ted
Wahlfeld and John Wahlfeld, the Company acquired substantially all of the assets
of Wahlfeld. Wahlfeld used the purchased assets in its business as a distributor
of windows, doors, and other millwork products to residential builders and other
customers. The Company intends to continue using the purchased assets for such
purposes.
The purchased assets generally include (i) substantially all of the
machinery and equipment used by Wahlfeld, and (ii) substantially all of the
inventories and receivables of Wahlfeld.
Under the terms of the Purchase Agreement, the purchase price was
approximately $4.6 million, representing the book value of the Purchased Assets
(as defined in the Purchase Agreement) at July 16, 1997. The purchase price was
based upon the assumption that the book value of the Purchased Assets on July
18, 1997 would equal the book value of the Purchased Assets on July 16, 1997.
The purchase price will be adjusted upward or downward to the extent the book
value of the Purchased Assets on July 16, 1997 differs from the book value of
the Purchased Assets on July 18, 1997. Such determination is expected to be made
within 60 days of the closing date, as provided in the Purchase Agreement. The
purchase was entirely in cash, which the Company financed with borrowings under
the Company's new acquisition term loan line of credit. The credit agreement
that the Company maintains with Fleet Capital Corporation was amended effective
July 25, 1997. The amendment (i) increased the Company's maximum revolving
credit facility by $10 million to $75 million, (ii) added to the credit facility
a credit line to finance the Company's acquisitions consisting of a term loan
line of a maximum of $10 million and a revolving line of credit of a maximum of
$5 million, and (iii) altered several financial covenants under the credit
facility, which alterations are generally favorable to the Company. The credit
agreement, as amended, is effective through July 14, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) and (b) Financial Statements of Business Acquired and Pro Forma
Financial Information
It is impracticable at this time to file any financial statements and
pro forma financial information required to be filed pursuant to Item 7 of Form
8-K. Such financial statements and pro forma financial information that may be
required will be filed as soon as practicable, but not later than 60 days
from the date hereof.
(c) Exhibits
1. Asset Purchase Agreement dated as of July 15, 1997 by and among
Morgan Products Ltd., Wahlfeld Manufacturing Company and Ted Wahlfeld and John
Wahlfeld, as amended on July 18, 1997 and July 25, 1997.
2. Tenth Amendment to Loan and Security Agreement dated as of July 25,
1997 by and among Morgan Products Ltd., the lenders named therein and Fleet
Capital Corporation, successor in interest to Barclays Business Credit, Inc., as
agent for the lenders.
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SIGNATURES
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 hereunto duly authorized.
MORGAN PRODUCTS LTD.
By: /s/ Mitchell J. Lahr
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Mitchell J. Lahr
Vice President and Chief Financial
Officer
DATE: August 8, 1997
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of this 15 day of July, 1997, by and among MORGAN PRODUCTS LTD.,
a Delaware corporation (the "Buyer"), WAHLFELD MANUFACTURING COMPANY, an
Illinois corporation (the "Seller"), and TED WAHLFELD and JOHN WAHLFELD,
shareholders of the Seller (the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Buyer desires to purchase from the Seller certain
of the assets and properties of the Seller relating to its business and
operations (the "Business"), subject to certain exceptions as hereinafter
specified, and to assume certain liabilities of the Seller, all upon the terms
and conditions hereinafter set forth;
WHEREAS, the Seller is willing to sell, transfer, convey, assign
and deliver the same to the Buyer upon the terms and conditions hereinafter set
forth; and
WHEREAS, the Shareholders desire that the foregoing be effected.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual representations, warranties, covenants and agreements hereinafter set
forth, the parties hereto agree as follows:
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ARTICLE 1
PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF LIABILITIES
1.1 Agreement of Purchase and Sale. On the terms and subject to
the conditions of this Agreement and in reliance upon the representations and
warranties contained herein, at the Closing (as defined herein), the Seller
shall sell, transfer, convey, assign and deliver (or cause to be sold,
transferred, conveyed, assigned and delivered) to the Buyer, and the Buyer shall
purchase and accept delivery of, all of the Seller's right, title and interest
in and to the assets of the Seller described on Schedule 1.1(a) hereto (said
assets constituting the "Purchased Assets"). The Purchased Assets will be sold
free and clear of all mortgages, deeds of trust, liens, pledges, charges,
security interests, contractual restrictions, claims or encumbrances of any kind
or character (collectively, "Encumbrances").
1.2 Assumed Liabilities. On the terms and subject to the
conditions of this Agreement and in reliance upon the representations and
warranties contained herein, at the Closing the Buyer shall assume and undertake
to perform the liabilities and obligations of the Seller specifically described
on Schedule 1.2 hereto (such liabilities and obligations being hereinafter
referred to as the "Assumed Liabilities"). Other than the Assumed Liabilities,
the Buyer shall not assume or be responsible for, and the Seller shall retain
and remain responsible for, any
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and all obligations and liabilities of the Seller of any nature whatsoever,
whether past, current or future, whether accrued, contingent, known or unknown.
1.3 Purchase Price; Allocation.
(a) Purchase Price. At the Closing, in addition
to the assumption by the Buyer of the Assumed Liabilities, as full consideration
to be paid by the Buyer for the Purchased Assets, the Buyer shall pay to the
Seller the aggregate purchase price, as the same may be adjusted pursuant to
Section 1.4 hereof (the "Purchase Price"), of (i) the value of the Inventory (as
defined below), as such Inventory is shown on the Pre-Closing Inventory Schedule
(as defined below), plus (ii) the value of the Accounts Receivable (as defined
below), as such Accounts Receivable are shown on the Pre-Closing AR Schedule (as
defined below), plus (iii) the amount of Nine Hundred Seventy-five Thousand
Dollars ($975,000), less (iv) the amount of Twenty Thousand Dollars ($20,000),
less (v) the amount of Ninety Thousand Five Hundred Seventy-six and 40/100
Dollars ($90,576.40). Three Hundred Thousand Dollars ($300,000) of the Purchase
Price (the "Escrow Amount") shall be paid into escrow pursuant to the terms of
the Escrow Agreement (the "Escrow Agreement") substantially in the form of
Exhibit 1.3 attached hereto, and the balance of the Purchase Price shall be
payable to the Seller by wire transfer to an account of the Seller which shall
be designated by the Seller in writing at least one (1)
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full Business Day (as defined below) prior to the Closing Date (as defined
below).
(b) Definitions. For purposes of this Agreement, the
following definitions shall apply:
(i) "Inventory" shall have the meaning assigned to such term on
Schedule 1.3(b)(i). The value of the Inventory of the Seller for
purposes of determining the Purchase Price shall be calculated as set
forth on Schedule 1.3(b)(i).
(ii) "Pre-Closing Inventory Schedule" shall mean a schedule of
Inventory of the Seller as of two (2) Business days prior to the
Closing Date. The Pre-Closing Inventory Schedule shall set forth the
same types and classes of information regarding Inventory of the Seller
as are set forth on the schedule of Inventory of the Seller as of July
9, 1997, which is attached hereto as Schedule 1.3(b)(ii) (the "Sample
Inventory Schedule"), and shall otherwise be prepared in a manner that
is consistent with the preparation of the Sample Inventory Schedule.
(iii) "Accounts Receivable" shall have the meaning assigned to
such term on Schedule 1.3(b)(ii). The value of the Accounts Receivable
of the Seller for purposes of determining the Purchase Price shall be
calculated as set forth on Schedule 1.3(b)(iii).
(iv) "Pre-Closing AR Schedule" shall mean a schedule of
Accounts Receivable of the Seller as of two (2) Business
Days prior to the Closing Date. The Pre-Closing AR Schedule
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shall set forth the same type and classes of information regarding
Accounts Receivable of the Seller as are set forth on the Schedule of
Accounts Receivable of the Seller as of July 9, 1997, which is attached
hereto as Schedule 1.3(b)(iv) (the "Sample AR Schedule") and shall
otherwise be prepared in a manner that is consistent with the
preparation of the Sample AR Schedule.
(c) Allocation. Schedule 1.3(c) hereto sets forth the allocation
of the Purchase Price and the Assumed Liabilities among the Purchased Assets, as
mutually agreed between the Seller and the Buyer.
1.4 Adjustment of Purchase Price. The Purchase Price shall
be subject to adjustment after the Closing as specified in this
Section 1.4:
(a) Closing Date Schedules. As promptly as practicable, but in
any event within sixty (60) calendar days following the Closing Date, the Buyer
and the Seller shall prepare, jointly and in cooperation with the accountants
for each of the Seller and the Buyer, a schedule of Accounts Receivable of the
Seller as of the Closing Date (the "Closing AR Schedule") and a schedule of
Inventory of the Seller as of the Closing Date (the "Closing Inventory
Schedule," and together with the Closing AR Schedule, the "Closing Date
Schedules"). The parties shall conduct a physical inventory as of the Closing
Date for purposes of preparing the Closing Inventory Schedule. The Closing
Inventory Schedule shall set forth a list of Inventory of the
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Seller as of the Closing Date, shall set forth the same type and classes of
information regarding the Inventory of the Seller as are set forth on the Sample
Inventory Schedule, and shall otherwise be prepared in a manner that is
consistent with the preparation of the Sample Inventory Schedule. The Closing AR
Schedule shall set forth a list of Accounts Receivable of the Seller as of the
Closing Date, shall set forth the same type and classes of information regarding
the Accounts Receivable of the Seller as are set forth on the Sample AR
Schedule, and shall otherwise be prepared in a manner that is consistent with
the preparation of the Sample AR Schedule.
(b) Cooperation. During the preparation of the Closing Date
Schedules by the parties and the period of any dispute with respect thereto,
each of the Seller and the Buyer shall provide to the other party reasonable
access to the persons engaged in preparing such schedules, as well as the
relevant books and records of such party (including any electronic data) and
allow such other party to make copies of such books and records solely for the
purposes set forth herein, and shall otherwise reasonably cooperate with the
other party in connection with the preparation of, and disputes with respect to,
the Closing Date Schedules.
(c) Disputes. In the event that, by the expiration of sixty (60)
days after the Closing Date, the parties have not resolved all disputes with
respect to the Closing Date Schedules and shall not have agreed in writing that
such Closing Date
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Schedules have become final, conclusive and binding on all of the parties
hereto, either party may, at any time after such sixty (60) day period and
before such exceptions are resolved, by written notice to the other party,
submit all such exceptions which remain unresolved at the time of such notice to
binding arbitration in Chicago, Illinois, before a panel of three arbitrators
(the "Panel"), in accordance with the rules of the American Arbitration
Association. All of the arbitrators on the Panel must be independent certified
public accountants engaged in auditing and have had personal responsibility for
audits of corporations engaged in businesses similar to the businesses of the
Seller and the Buyer. Of the three arbitrators, one shall be selected by the
Seller, one shall be selected by the Buyer and the third, who shall act as
Chairman of the Panel, shall be selected by the other two arbitrators. The costs
in connection with such arbitration shall be borne and paid by the parties in
reverse proportion to the manner in which amounts under dispute in such
arbitration were awarded to the parties (i.e., if a party is awarded ninety
percent (90%) of the amount in dispute, such party shall bear ten percent (10%)
of the costs and the other party will bear ninety percent (90%) of the costs).
The parties shall instruct the Panel to issue its determination regarding the
dispute and the Closing Date Schedules within thirty (30) days of its engagement
or, otherwise, as soon as practicable. The determination by the Panel shall be
conclusive and binding on all the parties hereto.
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(d) Purchase Price Adjustment. (i) The Purchase
Price shall be adjusted downward as follows:
(A) by an amount, if any, by which the value
of the Inventory of the Seller, as shown on the Closing
Inventory Schedule, is less than the value of the Inventory of
the Seller, as shown on the Pre-Closing Inventory Schedule;
(B) by an amount, if any, by which the value
of the Seller's Accounts Receivable, as shown on the Closing AR
Schedule, is less than the value of the Accounts Receivable of
the Seller, as shown on the Pre-Closing AR Schedule; and
(C) by an amount, if any, by which the value
of the Accounts Receivable of the Seller, as shown on the
Closing AR Schedule, exceeds the aggregate total of such
Accounts Receivable of the Seller as of the Closing Date that
have actually been collected as of a date one hundred eighty
(180) days after the Closing Date.
(ii) The Purchase Price shall be adjusted upwards
as follows:
(A) by an amount, if any, by which the value
of the Inventory of the Seller, as shown on the Closing
Inventory Schedule, exceeds the value of the Inventory of the
Seller, as shown on the Pre-Closing Inventory Schedule;
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(B) by an amount, if any, by which the value
of the Seller's Accounts Receivable, as shown on the Closing AR
Schedule, exceeds the value of the Accounts Receivable of the
Seller, as shown on the Pre-Closing AR Schedule; and
(C) by an amount, if any, by which the value
of the Accounts Receivable of the Seller, as shown on the
Closing AR Schedule, is less than the aggregate total of such
Accounts Receivable of the Seller as of the Closing Date that
have actually been collected as of a date one hundred eighty
(180) days after the Closing Date.
(e) Payments. Any downward adjustments to the
Purchase Price pursuant to Section 1.4(d)(i)(A) and (B) above, shall be paid by
the Seller to the Buyer within three (3) Business Days of the Closing Date
Schedules being deemed final. Any downward adjustments to the Purchase Price
pursuant to Section 1.4(d)(i)(C) above may be paid by the Seller to the Buyer by
releasing all or a portion of the Escrow Amount to the Buyer and, in the event
that the Escrow Amount that is not at such time subject to any Buyer Demand (as
defined in the Escrow Agreement) is not sufficient to cover the amount of any
such adjustment, the Seller shall, within three (3) Business Days after a date
one hundred eighty (180) days following the Closing Date, pay to Buyer the
balance of such adjustment in cash as provided below. Any upward adjustments to
the Purchase Price pursuant to Sections
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1.4(d)(ii)(A) and (B) as set forth above, shall be paid by the Buyer to the
Seller within three (3) Business Days of the Closing Date Schedules being deemed
final. Any upward adjustment to the Purchase Price pursuant to Section
1.4(d)(ii)(C) above shall be paid by the Buyer to the Seller within three (3)
Business Days after a date one hundred eighty (180) days following the Closing
Date. All such payments from one party to the other as set forth above shall be
made by wire transfer in immediately available funds to an account designated by
the receiving party.
(f) Business Day. For purposes of this Agreement the term
"Business Day" shall mean any day other than a Saturday, a Sunday or a day on
which banks are authorized or required to be closed in the either of the States
of Virginia or Illinois.
1.5 Instruments of Conveyance and Transfer; Further
Assurances; Access.
(a) Instruments of Conveyance and Transfer. At the
Closing, the Seller shall deliver to the Buyer a Bill of Sale and
Assignment, substantially in the form of Exhibit 1.5 hereto (the
"Bill of Sale"), and such other endorsements, certificates of
title, assignments and other good and sufficient instruments of
conveyance and transfer, as shall be necessary to vest in the
Buyer good, valid, marketable and insurable title to the
Purchased Assets in accordance herewith. Simultaneously
therewith, the Seller shall take all steps as may be required to
transfer to the Buyer actual possession and exclusive operating
control of the Purchased Assets.
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(b) Further Assurances. The Seller further agrees that, from and
after the Closing, it will execute and deliver to the Buyer such additional
instruments and documents and take such further action as the Buyer may
reasonably require in order to more fully vest, record and/or perfect the
Buyer's title to, or interest in, the Purchased Assets.
ARTICLE 2
CLOSING
The sale and purchase of the Purchased Assets contemplated
hereby shall take place at a closing (the "Closing") at the offices of
Westervelt, Johnson, Nicoll & Keller, First Financial Plaza, 411 Hamilton
Boulevard, Peoria, Illinois 61602, at 10:00 a.m. local time on July 18, 1997,
unless another date or place is agreed to in writing by the Seller and the
Buyer. The date on which the Closing occurs shall be referred to herein as the
"Closing Date".
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as
follows:
3.1 Organization; Good Standing; Qualifications. The
Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Illinois. The
Seller is qualified as a foreign corporation and in good standing
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in the jurisdictions listed on Schedule 3.1 annexed hereto, which jurisdictions
are the only jurisdictions where the nature of the Seller's business and the
Purchased Assets require such qualification.
3.2 Authority; Consents; Enforceability.
(a) Authority. The Seller has full corporate
power and authority to carry on its business as now conducted, to execute and
deliver this Agreement and the other agreements, documents and instruments
contemplated hereby, to consummate the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. The execution
and delivery by the Seller of this Agreement and the other agreements, documents
and instruments contemplated hereby, the consummation by the Seller of the
transactions contemplated hereby and thereby and the performance by the Seller
of its obligations hereunder and thereunder have been duly and validly
authorized by all necessary corporate action, including, without limitation, all
necessary shareholder action. The execution and delivery by the Seller of this
Agreement and the other agreements, documents and instruments contemplated
hereby, the consummation of the transactions contemplated hereby and thereby and
the performance by the Seller of its obligations hereunder and thereunder do not
and will not, except as set forth on Schedule 3.2(a) hereto, (i) conflict with
or violate any of the provisions of the certificate of incorporation or by-laws,
each as amended, of the Seller, (ii) violate any law, ordinance, rule or
regulation or
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any judgment, order, writ, injunction or decree or similar command of any court,
administrative or governmental agency or other body applicable to the Seller,
the Purchased Assets or the Assumed Liabilities, (iii) violate or conflict with
the terms of, or result in the acceleration of, any indebtedness or obligation
of the Seller under, or violate or conflict with or result in a breach of, or
constitute a default under, any material instrument, agreement or indenture or
any mortgage, deed of trust or similar contract to which the Seller is a party
or by which the Seller or any of the Purchased Assets or Assumed Liabilities are
bound or affected, or (iv) result in the creation or imposition of any
Encumbrance upon any of the Purchased Assets.
(b) Consents. Except as set forth on Schedule
3.2(b) hereto, no consent, authorization or approval of, or notice to, or filing
or registration with, any governmental body or authority, or any other third
party, is required in connection with the execution and delivery by the Seller
of this Agreement and the other agreements, documents and instruments to be
executed and delivered in connection herewith, the consummation of the
transactions contemplated hereby and thereby and the performance by the Seller
of its obligations hereunder or thereunder. All consents, authorizations,
approvals, notices, filings and registrations set forth on Schedule 3.2(b) have
been, or as of the Closing will have been, duly obtained, effected, given or
made and will be, as of the Closing, in full force and
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effect. Originals or certified copies thereof will have been
delivered to the Buyer prior to the Closing.
(c) Enforceability. This Agreement constitutes,
and all instruments of conveyance and other agreements, documents and
instruments to be executed and delivered by the Seller in connection herewith
shall, when so executed and delivered, constitute, the legal, valid and binding
obligations of the Seller, enforceable against the Seller in accordance with
their respective terms, except to the extent that enforceability may be limited
by bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors' rights generally.
3.3 Capitalization. Except as set forth on Schedule 3.3 hereto,
all issued and outstanding shares of capital stock of the Seller are held of
record and beneficially by the Shareholders in the amounts set forth opposite
their names on Schedule 3.3 hereto, free and clear of any Encumbrances. The
Seller has no outstanding subscriptions, options, warrants, calls, contracts,
commitments, convertible securities or other instruments, agreements or
arrangements of any character or nature whatsoever under which the Seller is or
may be obligated to issue any shares of its capital stock.
3.4 Financial Statements. The Seller has delivered
to the Buyer prior to the date hereof:
(i) The audited balance sheets for the
Seller as of December 31, 1996, 1995 and 1994, and the related audited
statements of income, stockholders' equity
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and changes in cash flow of the Seller for the fiscal years then ended
(including the notes thereto and any other information included
therein), accompanied, in each case, by the opinion of Clifton
Gunderson L.L.C., the Seller's independent certified public accountants
(collectively, the "Annual Financial Statements"); and
(ii) The unaudited balance sheet of the
Seller as of May 31, 1997 and the related unaudited statements of
income, stockholders' equity and changes in cash flow for the five (5)
month period then ended (collectively, the "Interim Financial
Statements"), as certified by the Seller's President (the Annual
Financial Statements and the Interim Financial Statements are
hereinafter collectively referred to as the "Financial Statements").
(b) The Financial Statements (i) are in
accordance with the books and records of the Seller, (ii) are true, correct and
complete, (iii) fully and fairly present the financial condition and results of
the operations of the Seller as of and for the periods indicated, and (iv) have
been prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), except as set forth on Schedule 3.4 hereto.
(c) The Seller has also delivered to the Buyer
prior to the date hereof the Sample Inventory Schedule and the
Sample AR Schedule (collectively, the "Sample Schedules"). The
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Sample Schedules (i) are in accordance with the books and records of the Seller,
(ii) are true, correct and complete, and (iii) have been prepared in accordance
with GAAP and otherwise in accordance with the methodology set forth on
Schedules 1.3(b)(i) and 1.3(b)(iii), respectively.
3.5 Absence of Certain Changes. Since December 31, 1996, the
Seller has operated the Business in the ordinary course and, except as set forth
on Schedule 3.5 hereto, there has not been incurred, nor has there occurred:
(a) Any damage, destruction or loss (whether or
not covered by insurance) adversely affecting the Purchased
Assets or the Business;
(b) Any sale, transfer, pledge or other
disposition of any assets of the Seller (except sales of inventory in the
ordinary course of business) having an aggregate book value of $5,000 or more;
(c) Any termination, amendment, cancellation or
waiver of any Material Contract (as defined in Section 3.6 hereof) or any
termination, amendment, cancellation or waiver of any rights or claims of the
Seller under any Material Contract (except in each case in the ordinary course
of business and consistent with past practices);
(d) Any change in the accounting methods,
procedures or practices followed by the Seller or any change in
depreciation or amortization policies or rates theretofore
adopted by the Seller;
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(e) Any obligation, liability or indebtedness
(whether absolute, accrued, contingent or otherwise and whether due or to become
due) incurred by the Seller to any person or entity other than in the ordinary
course of business and consistent with past practices;
(f) Any material change in policies, operations
or practices with respect to business operations followed by the Seller,
including, without limitation, with respect to selling methods, returns,
discounts or other terms of sale, or with respect to the policies, operations or
practices of the Seller concerning the sales representatives of the Seller;
(g) Any strikes, work stoppages or other labor
disputes involving the employees of the Seller;
(h) Any write-down or write-up of the value of
any Inventory or equipment of the Seller;
(i) Any forward purchase or sales contracts or
commitments;
(j) Any material increase in Inventory levels in
excess of historical levels for comparable periods;
(k) Any sales contracts or commitments which
will be in excess of the capacity of the Seller as of the date of the Closing;
(l) Any purchase contracts or commitments in
excess of the requirements of the Seller in the ordinary course
or at prices higher than current market prices;
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(m) Any account receivable owing to the Seller
that (i) has been written off as uncollectible, in whole or in part, (ii) has
had asserted against it any claim, refusal or right of setoff, or (iii) the
account or note debtor has refused to, or threatened not to, pay for any reason,
or such account or note debtor has become insolvent or bankrupt; or
(n) Any other change in the condition (financial
or otherwise), business operations, assets, earnings, business or prospects of
the Seller which, in the judgment of the Seller, has, or could reasonably be
expected to have, a material adverse effect on the Purchased Assets or the
business or operations of the Seller.
3.6 Material Contracts.
(a) List of Material Contracts. Set forth on
Schedule 3.6(a) hereto is a list of all of the following contracts, agreements,
documents, instruments, understandings or arrangements, written or oral,
relating to the Purchased Assets or the Assumed Liabilities (collectively, the
"Material Contracts"):
(i) purchase or sales orders and
commitments and other contracts for the sale of goods or
services;
(ii) purchase orders, commitments or
contracts outstanding or in effect as of the date hereof in
any instance for the purchase of Inventory in the ordinary
course of business;
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(iii) contracts and agreements relating to
the leasing (as lessor or lessee) or to the conditional purchase or
sale by the Seller of any property, real, personal or mixed, indicating
whether operating lease or capital lease;
(iv) contracts, commitments and
arrangements with any governmental body, agency or
authority;
(v) indentures, mortgages, deeds of trust,
promissory notes, loan agreements, capital leases, security agreements
or other agreements or commitments for the borrowing of money, or the
deferred purchase price of assets, or which otherwise evidence
indebtedness of the Seller or which create an Encumbrance on any of the
Purchased Assets;
(vi) agreements which restrict the Seller
from doing business with any other person or entity in any
geographic area or from producing or selling any product;
(vii) employment, severance or consulting
agreements or arrangements with sales representatives of Seller and
collective bargaining agreements and other related agreements with any
employees of Seller;
(viii) distributor, dealer, sales,
advertising, agency, manufacturer's representative,
franchise or similar agreements or any other contract
relating to the payment of a commission;
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(ix) any agreement, arrangement, commitment
or understanding for the sale of any of the Purchased
Assets, outside the ordinary course of business; and
(x) any other agreement, understanding or
arrangement, written or oral, which, in the judgment of the Seller and
the Shareholders, is material to the Business or the Purchased Assets
and not otherwise described in this Section 3.6.
True copies of all written Material Contracts and
written summaries of all oral Material Contracts described or required to be
described on Schedule 3.6(a) have been furnished to the Buyer.
(b) Performance, Defaults, Enforceability. The
Seller has in all material respects performed all of its obligations required to
be performed by it to the date hereof, and is not in default or alleged to be in
default in any material respect, under any Material Contract, and there exists
no event, condition or occurrence which, after notice or lapse of time or both,
would constitute such a default. To the knowledge of the Seller, no other party
to any Material Contract is in default in any respect of any of its obligations
thereunder. Each of the Material Contracts is valid and in full force and effect
and enforceable against the parties thereto in accordance with their respective
terms, and, except as set forth on Schedule 3.6(b) hereto, the transfer and
assignment to the Buyer of the Material Contracts that are included in the
Purchased Assets, will not
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(i) require the consent of any party thereto or (ii) constitute an event
permitting termination thereof.
3.7 Title to Purchased Assets and Related Matters. The Seller
has good, marketable and insurable title to all of the Purchased Assets, free
and clear of all Encumbrances, except those described on Schedule 3.7 and liens
for taxes not yet due and payable. Except as set forth on Schedule 3.7, the
Purchased Assets are in the exclusive possession and control of the Seller and
no person or entity other than the Seller is entitled to possession of any
portion of the Purchased Assets; and (iii) do not include any contracts for
future services, prepaid items or deferred charges the full value or benefit of
which will not be usable by or transferable to the Buyer, or any goodwill,
organizational expense or other similar intangible asset.
3.8 Real Property Used by the Business. Schedule 3.8 hereto
contains a complete list and description of all real property owned, leased or
used by Seller in conducting the Business (herein collectively the "Premises").
True, correct and complete copies of all leases of all Premises that are leased
have been delivered to the Buyer.
3.9 Machinery, Equipment, Etc.
(a) Owned Equipment. Schedule 3.9(a) sets forth
a list of all material machinery, equipment, motor vehicles, furniture and
fixtures owned by the Seller and included in the Purchased Assets (collectively,
the "Owned Equipment").
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(b) Leased Equipment. Schedule 3.9(b) contains a
list of all leases or other agreements, indicating, in each case, whether
written or oral and whether operating or capital, under which the Seller is
lessee of or holds or operates any items of machinery, equipment, motor
vehicles, furniture and fixtures or other property owned by any third party
(collectively the "Leased Equipment").
(c) Maintenance of Equipment. The Owned
Equipment and the Leased Equipment is in good operating condition, maintenance
and repair in accordance with industry standards taking into account the age
thereof.
3.10 Inventories of the Seller. Except as set forth on Schedule
3.10, all Inventories of the Seller included in the Purchased Assets consist of
items of a quality and quantity usable and salable in the normal course of
business, are generally sufficient to do business in the ordinary course, and
the levels of Inventories are consistent with the levels maintained by the
Seller in the ordinary course consistent with past practices. The values at
which such Inventories are carried in the Financial Statements are based on the
LIFO method and are stated in accordance with GAAP at the lower of historic cost
or market.
3.11 Accounts Receivable of the Seller. The Seller has
delivered to the Buyer the Sample AR Schedule, which schedule
sets forth a true and correct aged list of all unpaid Accounts
Receivable of the Seller as of June 23, 1997. At the Closing,
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the Seller shall deliver to the Buyer the Pre-Closing AR Schedule, which
schedule shall set forth a true and correct aged list of all unpaid Accounts
Receivable of the Seller as of two (2) Business Day prior to the Closing Date.
All Accounts Receivable of the Seller included in the Purchased Assets will
constitute legal, valid, binding and enforceable claims with respect to which
the rendition of services or the sale of goods has been completed in bona fide
transactions in the ordinary course of business, are collectible at the
aggregate recorded amounts thereof (subject to any reserve, which reserve shall
be reasonable, in the ordinary course, and consistent with past practices) and
are not subject to any known offsets or counterclaims. Notwithstanding anything
in this Section 3.11 to the contrary, to the extent that the Seller shall have
made any payments to the Buyer pursuant to Section 1.4(d)(i)(C), there shall be
no breach of this Section 3.11 by the Seller with respect to the collectibility
of any Accounts Receivable of the Seller.
3.12 Approvals, Permits and Authorizations. Set forth on
Schedule 3.12 hereto is a list of all governmental licenses, permits,
certificates of inspection, other authorizations, filings and registrations
which are necessary for the Seller to own the Purchased Assets and to operate
the Business as presently conducted (collectively, the "Authorizations").
3.13 Compliance with Laws. The Seller has conducted
its operations and business in compliance in all material
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respects with, and all of the Purchased Assets comply in all material respects
with, (i) all applicable laws, rules and regulations (including, without
limitation, any laws, rules and regulations relating to anticompetitive
practices, contracts, discrimination, employment, health, safety, zoning, and
the environment and (ii) all applicable orders, rules, writs, judgments,
injunctions, decrees and ordinances. The Seller has not received any
notification of any asserted present or past failure by it to comply with such
laws, rules or regulations, or such orders, rules, writs, judgments,
injunctions, decrees or ordinances. Set forth on Schedule 3.13 are all orders,
writs, judgments, injunctions, decrees and other awards of any court or any
governmental instrumentality applicable to the Purchased Assets or the Business.
3.14 Taxes.
(a) All federal, state and local tax returns and
reports required as of the date hereof to be filed by the Seller for taxable
periods ending prior to the date hereof have been duly and timely filed by the
Seller with the appropriate governmental agencies, and all such returns and
reports are true, correct and complete.
(b) All federal, state and local income, profits,
franchise, sales, use, occupation, property, excise, payroll, withholding,
employment, estimated and other taxes of any nature, including interest,
penalties and other additions to such taxes ("Taxes"), payable by, or due from,
the Seller for all periods
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prior to the date hereof have been fully paid or adequately reserved for by the
Seller or, with respect to Taxes required to be accrued, the Seller has properly
accrued or will properly accrue such Taxes in the ordinary course of business
consistent with past practice of the Seller.
3.15 Litigation. Except as set forth on Schedule 3.15, there are
no actions, suits, claims, investigations or legal or administrative or
arbitration proceedings pending, or to the Seller's knowledge, threatened or
probable of assertion, against the Seller with respect to the Purchased Assets,
the Assumed Liabilities or the Business. The Seller knows of no basis for the
institution of any such suit or proceeding. The Seller is not now under any
judgment, order, writ, injunction, decree, award or other similar command of any
court, administrative agency or other governmental authority applicable to the
business of the Seller or any of the Purchased Assets or Assumed Liabilities.
3.16 Broker's and Finder's Fees. Except as set forth on Schedule
3.16 attached hereto, the Seller has not incurred any liability to any broker,
finder or agent or any other person or entity for any fees or commissions with
respect to the transactions contemplated by this Agreement, and the Seller
hereby agrees to assume all liability to any such broker, finder or agent or any
other person or entity claiming any such fee or commission.
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3.17 Compensation. Schedule 3.17 hereto contains a list as of a
date no more than ten (10) days prior to the date hereof of all employees
(including sales representatives) and consultants of the Seller, together with
each such employee's title, the amount of total compensation paid to each such
person for the twelve month period ended December 31, 1996 and the current
aggregate base salary or hourly rate (including any bonus or commission) for
each such person.
3.18 Certain Liabilities. Schedule 3.18 hereto sets forth a list
of all bank or lending institution indebtedness of the Seller as of the close of
business on the day preceding the date hereof (other than accounts payable)
including, without limitation, money borrowed, the deferred purchase price of
assets, letters of credit and capitalized leases, indicating, in each case, the
name or names of the lender, the date of maturity and the unpaid principal
amount of such indebtedness as of such date.
3.19 Business Generally. The Seller is not aware of the
existence of any conditions, including, without limitation, any actual or
potential competitive factors in the markets in which the Seller participates,
which have not been disclosed to the Buyer and which could reasonably be
expected to have a material adverse effect on the Buyer's opportunity for
on-going relationships with the Seller's current customers, other than general
business and economic conditions affecting the industry and markets in which the
Seller participates.
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3.20 Suppliers and Customers. The Seller is not required to
provide bonding or any other security arrangements in connection with any
transactions with any of its respective customers or suppliers. Schedule 3.20
contains a true and complete list of all customers of the Business and all
suppliers to the Seller. The list of customers is accompanied by a true, correct
and complete description of the payment terms, including, without limitation,
the agreement between Seller and each such customer regarding rebates,
discounts, allowances, co-op claims and other similar items, currently
applicable to transactions between Seller and each such customer, as well as the
purchase history for each such customer for the year ended December 31, 1996 and
the 1997 year to date, by product as well as dollar volume. The list of
suppliers is accompanied by a true, correct and complete schedule of the
purchase history of the Seller with respect to each such supplier for the year
ended December 31, 1996 and the 1997 year to date, by product as well as dollar
volume. To the knowledge of the Seller, no such supplier or customer intends or
has threatened, or reasonably could be expected, to terminate or modify any of
their respective relationships with the Seller as a result of the transactions
contemplated hereby or otherwise.
3.21 Environmental Matters.
(a) Except to the extent that any such non-
compliance does not, and is not likely to, result in the creation
of any Encumbrance upon any of the Purchased Assets or have a
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material adverse effect on any of the Assumed Liabilities, the Seller is in
compliance with all federal, state and local laws, regulations, rules and
ordinances relating to pollution or protection of the environment, and all
provisions contained in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
under such laws, regulations, rules and ordinances (all of the foregoing being,
collectively, the "Environmental Laws").
(b) Except to the extent that the entering into
of any such agreement does not, and is not likely to, result in the creation of
any Encumbrance upon any of the Purchased Assets or have a material adverse
effect on any of the Assumed Liabilities, the Seller has not entered into any
agreement that may require it to pay to, reimburse, guarantee, pledge, defend,
indemnify or hold harmless any person for or against any Environmental
Liabilities and Costs. For purposes of this Agreement, "Environmental
Liabilities and Costs" means all liabilities, obligations, responsibilities,
obligations to conduct cleanup, losses, damages, deficiencies, punitive damages,
consequential damages, treble damages, costs and expenses (including, without
limitation, all reasonable fees, disbursements and expenses of counsel, expert
and consulting fees and costs of investigations and feasibility studies and
responding to government requests for information or documents), fines,
penalties, restitution and monetary sanctions, interest, direct or indirect,
known or unknown, absolute or contingent,
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past, present or future, resulting from any claim or demand, by any person or
entity, whether based in contract, tort, implied or express warranty, strict
liability, joint and several liability, criminal or civil statute, including any
Environmental Law, or arising from environmental, health or safety conditions,
or the release or threatened release of Hazardous Substances into the
environment, as a result of past or present ownership, leasing or operation of
any properties owned, leased or operated by the Seller.
3.22 Warranties; Return Policy; No Rebates or Allowances. (a)
Set forth on Schedule 3.22(a) hereto are descriptions or copies of the forms of
all express warranties and disclaimers of warranty made by the Seller (separate
and distinct from any applicable manufacturers' or suppliers' warranties or
disclaimers of warranties) during the past five (5) years to customers or users
of the products or services of the Seller. There have been no breach of warranty
or breach of representation claims against the Seller during the past five (5)
years which have resulted in any material cost, expenditure or exposure to the
Seller.
(b) Set forth on Schedule 3.22(b) is a true and
complete copy or description of the Seller's policy concerning goods returned by
customers. Such return policy is applicable to each and every customer of
Seller, except as set forth on Schedule 3.22(b), which lists any customers as to
whom the
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general return policy does not apply, as well as the return policy that is
applicable to such customers.
(c) The Seller does not, and has not for the past
five (5) years, sponsored or offered to its customers participation in any
programs whereby the customer was, is or will be of the Closing Date eligible to
be paid or receive the benefit of any rebates or allowances in connection with
purchases of products from Seller.
3.23 Interest in Competitors and Related Entities. Except as set
forth on Schedule 3.23 hereto, no Shareholder and no affiliate of any
Shareholder (i) has any direct or indirect interest in any person or entity
engaged or involved in any business which is competitive with the Business, (ii)
has any direct or indirect interest in any person or entity which is a lessor of
assets or properties to, material supplier of, or provider of services to, the
Seller, or (iii) has a beneficial interest in any contract or agreement to which
the Seller is a party; provided, however, the foregoing representation and
warranty shall not apply to any person or entity, or any interest or agreement
with any person or entity, which is a publicly held corporation in which the
Shareholders individually and collectively own less than three percent (3%) of
the issued and outstanding voting stock.
3.24 Patents; Trademarks; Trade Names; Copyrights;
Licenses, Etc. Except as set forth on Schedule 3.24 hereto,
there are no patents, trademarks, trade names, service marks,
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service names or copyrights, and there are no applications therefor or licenses
thereof, inventions, trade secrets, computer software, logos, slogans,
proprietary processes and formulae and all other proprietary information,
know-how and intellectual property rights, whether patentable or unpatentable,
that are owned or leased by the Seller or used in the conduct of the Business
that are material to the Business. There is no existing claim, or, to the
knowledge of the Seller, any basis for any claim, against the Seller that any of
its operations, activities or products infringe the patents, trademarks, trade
names, copyrights or other property rights of others or that the Seller is
wrongfully or otherwise using the property rights of others.
3.25 Misstatements and Omissions. No representation or warranty
made by the Seller in this Agreement, and no statement contained in any
certificate or Schedule furnished or to be furnished by the Seller or any of the
Shareholders pursuant hereto, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make such representation or warranty or such statement not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller
as follows:
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4.1 Organization and Good Standing. The Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
4.2 Authority; Consents; Enforceability.
(a) Authority. The Buyer has full corporate
power and authority to execute and deliver the Agreement and the other
agreements and documents and instruments contemplated hereby, to consummate the
transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. The execution and delivery by the Buyer of this
Agreement and the other agreements, documents and instruments contemplated
hereby, the consummation by the Buyer of the transactions contemplated hereby
and thereby and the performance by the Buyer of its obligations hereunder and
thereunder have been duly and validly authorized by all necessary corporate
action on the part of the Buyer. The execution and delivery by the Buyer of this
Agreement and the other agreements, documents and instruments contemplated
hereby, the consummation by the Buyer of the transactions contemplated hereby
and thereby and the performance by the Buyer of its obligations hereunder and
thereunder will not (i) conflict with or violate any of the provisions of the
Certificate of Incorporation or By-laws of the Buyer, (ii) violate any law,
ordinance, rule or regulation or any judgment, order, writ, injunction or decree
or similar command of any court administrative or governmental agency or other
body applicable to the Buyer or any of its assets, or (iii) violate or conflict
with
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the terms of, or result in the acceleration of, any indebtedness or obligation
of the Buyer under, or violate or conflict with or result in a breach by the
Buyer of, or constitute a default under, any material instrument, agreement or
indenture or any mortgage, deed of trust or similar contract to which the Buyer
is a party or by which the Buyer or any of its assets may be otherwise bound or
affected.
(b) Consents. Except as set forth on Schedule
4.2(b) hereto, no consent, authorization or approval of, or notice to, or filing
or registration with, any governmental body or authority, or any other third
party, is required in connection with the execution and delivery by the Buyer of
this Agreement and the other agreements, documents and instruments to be
executed and delivered in connection herewith, the consummation by the Buyer of
the transactions contemplated hereby and thereby and the performance by the
Buyer of its obligations hereunder and thereunder.
(c) Enforceability. This Agreement constitutes,
and all other agreements, documents and instruments to be executed and delivered
by the Buyer in connection herewith shall, when so executed and delivered,
constitute, the legal, valid and binding obligations of the Buyer, enforceable
against the Buyer in accordance with their respective terms, except to the
extent that enforceability may be limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally.
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4.3 Broker's and Finder's Fees. The Buyer has not incurred any
liability to any broker, finder or agent or any other person or entity for any
fees or commissions with respect to the transactions contemplated by this
Agreement, and the Buyer hereby agrees to assume all liability to any such
broker, finder or agent or any other person or entity claiming any such fee or
commission.
4.4 Litigation. There are no actions, suits, claims,
investigations or legal or administrative or arbitration proceedings pending or,
to the Buyer's knowledge, threatened or probable of assertion, against the Buyer
before any court, governmental or administrative agency or other body relating
to this Agreement and/or the transactions contemplated hereby. The Buyer is not
now under any judgment, order, writ, injunction, decree or other similar command
of any court, administrative agency or other governmental agency which relate to
this Agreement and/or the transactions contemplated hereby.
4.5 Misstatements or Omissions. No representation or warranty
made by the Buyer in this Agreement, and no statement contained in any
certificate or Schedule furnished or to be furnished by the Buyer to the Seller
and/or the Shareholders pursuant hereto, contains or will contain an untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make such representation or warranty or such statement not
misleading.
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ARTICLE 5
PRE-CLOSING COVENANTS
OF THE SELLER
The Seller hereby covenants and agrees that from and after the
date hereof until the Closing:
5.1 Provide Access to Information. Subject to prior compliance
with any applicable laws regarding employee notification, the Seller shall
afford to the Buyer, its attorneys, accountants, and such other representatives
of the Buyer as the Buyer shall designate to the Seller in writing, free and
full access at all reasonable times, and upon reasonable prior notice, to the
Purchased Assets and the properties, books and records of the Seller, and to
interview personnel, suppliers and customers of the Seller, in order that the
Buyer may have full opportunity to make such investigation as it shall
reasonably desire of the Purchased Assets (including, without limitation, any
appraisals or inspections thereof), Assumed Liabilities and the businesses and
operations of the Seller. In addition, the Seller shall provide to the Buyer and
its representatives such additional financial and operating data and other
information in respect of the Purchased Assets, Assumed Liabilities and the
business and properties of the Seller as the Buyer shall from time to time
reasonably request.
5.2 Operation of Business of the Seller. The Seller
shall maintain its corporate existence in good standing,
operate its business substantially as presently operated and
only in the ordinary course and consistent with past operations,
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use its best efforts to preserve intact its present business organizations and
employees and its relationships with persons having business dealings with them,
comply in all respects with all applicable laws, rules and regulations, maintain
its insurance coverages, not take any action, or omit to take any action, that
would result or be likely to result in the creation of any Encumbrance on the
Purchased Assets, maintain the property, plant and equipment included in the
Purchased Assets in good operating condition in accordance with industry
standards taking into account the age thereof, and (h) not, without the prior
written consent of the Buyer, issue any purchase commitment for Inventory, which
purchase commitment will or is likely to be an Assumed Liability of the Buyer.
5.3 Books of Account. The Seller shall maintain its
books and records of account in the usual, regular and ordinary
manner.
5.4 Issuance of Securities. The Seller shall not (a) issue any
debt or equity security or any options or warrants, (b) enter into any
subscriptions, agreements, plans or other commitments pursuant to which the
Seller is or may become obligated to issue any shares of its capital stock or
any securities convertible into shares of its capital stock, (c) otherwise
change or modify its capital structure, (d) engage in any reorganization or
similar transaction, or (e) agree to take any of the foregoing actions.
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5.5 Other Changes. The Seller shall not take, cause,
agree to take or cause, or permit to occur any of the actions or
events set forth in Section 3.5 of this Agreement.
5.6 Additional Information. The Seller shall furnish to the
Buyer such additional information with respect to any matters or events arising
or discovered subsequent to the date hereof which, if existing or known on the
date hereof, would have rendered any representation or warranty made by the
Seller or any information contained in any Schedule hereto or in other
information supplied in connection herewith then inaccurate or incomplete. The
receipt of such additional information by the Buyer shall not operate as a
waiver by the Buyer of the obligation of the Seller to satisfy the conditions to
Closing set forth in Section 7.1 hereof; provided, however, if such information
shall be furnished to the Buyer in a writing which shall also specifically refer
to one or more representations and warranties of the Seller contained herein
which in the absence of such information is inaccurate or incomplete, then if
the Buyer waives the condition to Closing set forth in said Section 7.1 hereof
and elects to close the transactions contemplated hereunder, the furnishing of
such additional information shall be deemed to have amended as of the Closing
any such representation and warranty so specifically referred to by the Seller.
5.7 Publicity. Except as may be required by law or
the applicable rules or regulations of any securities exchange,
the Seller shall not make any press release or other public
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announcement relating to this Agreement or the transactions contemplated hereby,
without the prior written approval of the Buyer.
5.8 Other Negotiations. Neither the Seller nor any of the
Shareholders shall pursue, initiate, encourage or engage in any negotiations or
discussions with, or provide any information to, any other person or entity
(other than the Buyer and its representatives and affiliates) regarding the sale
of the assets or capital stock of the Seller or any merger or consolidation or
similar transaction involving the Seller.
5.9 Closing Conditions. The Seller shall use all reasonable best
efforts to satisfy promptly the conditions to Closing set forth in Article 7
hereof required herein to be satisfied by the Seller and any other covenants or
agreements of the Seller to be satisfied prior to the Closing.
5.10 Transition Agreement. In the event that Buyer determines
that it would be useful for Buyer to have use of any or all of the Premises
during a transition period following the Closing, the Seller agrees to make such
Premises available to Buyer for such use, substantially pursuant to the terms
and conditions of the Transition Agreement attached hereto as Exhibit 5.10,
which shall provide, among other things, for a month-to-month lease by Buyer of
the applicable Premises and the payment by Buyer of a rental rate that is
commercially reasonable in the marketplace surrounding such Premises.
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ARTICLE 6
PRE-CLOSING COVENANTS OF THE BUYER
The Buyer hereby covenants and agrees that, from and after the
date hereof until the Closing:
6.1 Publicity. Except as may be required by law or as necessary
in connection with the transactions contemplated hereby, the Buyer shall not
make any press release or other public announcement relating to this Agreement
or the transactions contemplated hereby, without the prior written approval of
the Seller.
6.2 Closing Conditions. The Buyer shall use all
reasonable best efforts to satisfy promptly the conditions to
Closing set forth in Article 8 hereof required herein to be
satisfied by the Buyer.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
BUYER The obligations of the Buyer under this Agreement at the
Closing and the consummation by the Buyer of the transactions contemplated
hereby are subject to the satisfaction or fulfillment by the Seller, prior to or
at the Closing, of each of the following conditions, unless waived by the Buyer:
7.1 Representations and Warranties. The
representations and warranties made by the Seller in this
Agreement shall be true and correct in all material respects at
and as of the date of this Agreement and at and as of the date of
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the Closing as though such representations and warranties were
made at and as of such times.
7.2 Performance of Obligations of the Seller.
The Seller shall have performed and complied with all its covenants, agreements,
obligations and restrictions pursuant to this Agreement required to be performed
or complied with prior to or at the Closing.
7.3 Closing Certificate. The Seller shall have
delivered a certificate, signed by the Seller's President and
dated the date of the Closing, certifying to the satisfaction of
the conditions set forth in Sections 7.1 and 7.2 hereof.
7.4 Supporting Documents. The Buyer shall have
received the following:
(a) A copy of the Certificate of Incorporation of
the Seller, and all amendments thereto, certified as of a recent
date by the Secretary of State of the State of Illinois;
(b) One or more certificates of the Secretary of
State of the State of Illinois dated as of a recent date as to the due
incorporation and good standing of the Seller, and stating that the Seller owes
no franchise taxes in such state;
(c) One or more certificates of officials from
the jurisdictions listed on Schedule 3.1 hereto as to the good
standing of the Seller in such jurisdictions;
(d) A certificate of the Secretary or an
Assistant Secretary of the Seller dated the date of the Closing and certifying
(i) that attached thereto is a true, complete and
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correct copy of the By-laws of the Seller as in effect on the date of such
certification, (ii) that the Certificate of Incorporation of the Seller has not
been amended since the date of the last amendment referred to in the certificate
delivered pursuant to Subsection (a) above, (iii) that attached thereto are
true, complete and correct copies of the resolutions duly adopted by the Board
of Directors and the shareholders of the Seller approving the transactions
contemplated hereby and authorizing the execution, delivery and performance by
the Seller of this Agreement and the sale and transfer of the Purchased Assets
as in effect on the date of such certification, and (iv) as to the incumbency
and signatures of those officers of the Seller executing any instrument or other
document delivered in connection with such transactions;
(e) Uniform Commercial Code Search Reports on
Form UCC-11 with respect to the Seller from the states and local jurisdictions
where the principal places of business of the Seller and the Purchased Assets
are located and evidence, satisfactory to Buyer, that any and all Encumbrances
on the Purchased Assets reflected on such Search Reports have been released on
or prior to the Closing;
(f) Such reasonable additional supporting
documents and other information as the Buyer or its counsel may
reasonably request; and
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(g) An opinion of Westervelt, Johnson, Nicoll &
Keller, counsel to the Seller, dated the date of the Closing, in the form of
Exhibit 7.4 annexed hereto.
7.5 Bill of Sale, Etc. The Buyer shall have received a duly
executed Bill of Sale and all necessary deeds, assignments, documents and
instruments to effect the transfers, conveyances and assignments to the Buyer
referred to in Article 1 hereof, free and clear of all Encumbrances, and the
Seller shall have taken such action as shall be necessary to put the Buyer in
actual possession and exclusive control of each of the Purchased Assets.
7.6 Books and Records. The Buyer shall have received
all books and records of, or pertaining to, the Purchased Assets
and the Assumed Liabilities.
7.7 Consents. The Buyer shall have received duly executed copies
of all consents, authorizations, approvals, notices, registrations and filings
referred to in Schedules 3.2(b) and 3.6(b) hereof, and the consents of of
Andersen Corporation, the Buyer's lenders, and the Buyer's Board of Directors
with respect to the transactions contemplated hereby and the provision to Buyer
by such lenders of the necessary financing to consummate the transactions
contemplated hereby.
7.8 No Litigation. No action, suit or other
proceeding shall be pending or threatened before any court,
tribunal or governmental authority seeking or threatening to
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restrain or prohibit the consummation of the transactions contemplated by this
Agreement, or seeking to obtain damages in respect thereof, or involving a claim
that consummation thereof would result in a violation of any law, rule, decree
or regulation of any governmental authority having appropriate jurisdiction and
no order, decree or ruling of any governmental authority or court shall have
been entered challenging the legality, validity or propriety of, or otherwise
relating to, this Agreement or the transactions contemplated hereby or
prohibiting, restraining or otherwise preventing the consummation of the
transactions contemplated hereby.
7.9 Material Adverse Change. There shall have been no material
adverse change or development in the business, prospects, properties, earnings,
results of operations or financial condition of the Business or any of the
Purchased Assets or Assumed Liabilities.
7.10 Approval of Legal Matters. The form of all instruments,
certificates and documents to be executed and delivered by the Seller to the
Buyer pursuant to this Agreement and all legal matters in respect of the
transactions as herein contemplated shall be reasonably satisfactory to the
Buyer and its counsel, none of whose approval shall be unreasonably withheld or
delayed.
7.11 Bulk Sales Requirements. The Seller shall comply
with all requirements of applicable bulk sales laws in respect of
the transactions contemplated hereby, or, in the alternative,
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shall indemnify the Buyer in respect of any and all damages incurred by Buyer in
connection with non-compliance with such laws.
7.12 Satisfactory Investigation. The Buyer, its accountants,
attorneys and other representatives shall have been given a full opportunity to
conduct a due diligence review of the Seller's assets, liabilities, books and
records and to interview the Seller's management personnel, key customers and
suppliers (including suppliers of personnel) and the Buyer shall have been
satisfied in all respects with the results of such investigation.
7.13 Non-Competition Agreements. The Seller and each
of the Shareholders shall each have executed and delivered to the
Buyer the Non-Competition Agreement substantially in the form of
Exhibit 7.13 attached hereto.
7.14 Escrow Agreement. The Seller and the escrow agent
shall have executed and delivered to the Buyer the Escrow
Agreement.
7.15 Discharge of Obligations. The Seller shall have paid off
any balances owing (i) pursuant to all capital leases related to any machinery
or equipment that is part of the Purchased Assets, (ii) to Andersen Corporation,
and (iii) to Marine Midland Bank, and, in all cases, Buyer shall have received
evidence thereof that is reasonably satisfactory to Buyer.
7.16 Preparation for Inventory Count. The Seller and
the Buyer shall be prepared, in the opinion of Buyer, to conduct
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a physical count of the Inventory of the Business for purposes of
preparing the Closing Inventory Schedule.
7.17 Software License Consents. The Seller shall have obtained
the consent of the licensor under the Seller's agreement to license the Woodware
Software or, in the alternative, Seller shall have agreed to indemnify and hold
Buyer harmless from all Buyer's Damages (as defined herein) related to Buyer's
use of such software during the period of time the Buyer occupies the Premises
(as defined in the Transition Agreement).
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE SELLER
The obligations of the Seller under this Agreement at the
Closing and the consummation by the Seller of the transactions contemplated
hereby are subject to the satisfaction or fulfillment by the Buyer, prior to or
at the Closing, of each of the following conditions, unless waived by the
Seller:
8.1 Representations and Warranties. The representations and
warranties made by the Buyer in this Agreement shall be true and correct in all
material respects at and as of the date of this Agreement and at and as of the
date of the Closing as though such representations and warranties were made at
and as of such times.
8.2 Performance of Obligations of the Buyer. The
Buyer shall have performed and complied with all its covenants,
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agreements, obligations and restrictions pursuant to this Agreement required to
be performed or complied with prior to or at the Closing.
8.3 Closing Certificate. The Buyer shall have
delivered a certificate, signed by the Buyer's President and
dated the date of the Closing, certifying to the satisfaction of
the conditions set forth in Sections 8.1 and 8.2 hereto.
8.4 Payment of Purchase Price. The Buyer shall have
tendered to the Seller payment of the cash portion of the
Purchase Price and delivered to the escrow agent the Escrow
Amount pursuant to Section 1.3(a) hereof.
8.5 Supporting Documents. The Seller shall have
received the following:
(a) A copy of the Certificate of Incorporation of
the Buyer, and all amendments thereto, certified as of a recent
date by the Secretary of State of the State of Delaware;
(b) A certificate of the Secretary of State of
the State of Delaware dated as of a recent date as to the due
incorporation and good standing of the Buyer;
(c) A certificate of the Secretary or an
Assistant Secretary of the Buyer dated the date of the Closing, and certifying
(i) that attached thereto is a true, complete and correct copy of the By-laws of
the Buyer as in effect on the date of such certification, (ii) that the
Certificate of Incorporation of the Buyer has not been amended since the date of
the last amendment referred to in the certificate delivered pursuant to
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Subsection (a) above, (iii) that attached thereto are true, complete and correct
copies of the resolutions duly adopted by the Board of Directors of the Buyer
approving the transactions contemplated hereby and authorizing the execution,
delivery and performance by the Buyer of this Agreement as in effect on the date
of such certification, and (iv) as to the incumbency and signatures of certain
officers of the Buyer executing any instrument or other document delivered in
connection with such transactions;
(d) Copies of all authorizations, consents,
approvals, notices, filings and registrations referred to in Section 4.2(b)
hereof, including, without limitation, the consent of Andersen Corporation to
the transactions contemplated hereby; and
(e) An opinion of Winthrop, Stimson, Putnam &
Roberts, counsel to the Buyer, dated the date of the Closing, in the form of
Exhibit 8.5 annexed hereto.
8.6 Approval of Legal Matters. The form of all certificates,
instruments and documents to be executed and/or delivered by the Buyer to the
Seller pursuant to this Agreement and all legal matters in respect of the
transactions as herein contemplated shall be reasonably satisfactory to the
Seller and its counsel, none of whose approval shall be unreasonably withheld or
delayed.
8.7 No Litigation. No action, suit or other
proceeding shall be pending or threatened before any court,
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tribunal or governmental authority seeking or threatening to restrain or
prohibit the consummation of the transactions contemplated by this Agreement, or
seeking to obtain damages in respect thereof, or involving a claim that
consummation thereof would result in the violation of any law, rule, decree or
regulation of any governmental authority having appropriate jurisdiction, and no
order, decree or ruling of any governmental authority or court shall have been
entered challenging the legality, validity or propriety of, or otherwise
relating to, this Agreement or the transactions contemplated hereby or
prohibiting, restraining or otherwise preventing the consummation of the
transactions contemplated hereby.
8.8 Preparation for Inventory Count. The Seller and
the Buyer shall be prepared, in the opinion of the Seller, to
conduct a physical count of the Inventory of the Business for
purposes of preparing the Closing Inventory Schedule.
ARTICLE 9
TRANSFER TAXES; PRORATION OF CHARGES; POST-CLOSING COVENANTS
9.1 Certain Taxes and Fees. All sales, transfer,
documentary, stamp, recording and other similar taxes and/or fees which may be
due or payable in connection with the sale of the Purchased Assets or the
assumption of the Assumed Liabilities pursuant hereto shall be borne by the
Seller.
9.2 Proration of Certain Charges. Schedule 9.2
attached hereto sets forth a list of any taxes, charges and
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payments imposed on or with respect to the Purchased Assets ("Charges") that
shall be prorated on a per diem basis and apportioned between the Seller and the
Buyer as of the date of the Closing. The Seller shall be liable for that portion
of the Charges relating to, or arising in respect of, periods on or prior to the
date of the Closing and the Buyer shall be liable for that portion of the
Charges relating to, or arising in respect of, any period after the date of the
Closing.
9.3 Certain Costs. If the total aggregate amount paid by Buyer
during the one (1) year period following the Closing for co-op claims and
returns that relate to products sold, services provided or costs incurred for
periods prior to the Closing (collectively, "Costs") exceeds Twenty Thousand
Five Hundred Dollars $20,500, the Seller shall pay to the Buyer the amount of
such excess Costs promptly upon receipt of notification from Seller of the
amounts that are due. If the aggregate amount of Costs is less than Nineteen
Thousand Five Hundred ($19,500), the Buyer shall pay to Seller the difference
between the actual amount and Nineteen Thousand Five Hundred Dollars ($19,500)
promptly after the end of such one (1) year period.
9.4 Collection of Account Receivable. Buyer will, at
its own cost and expense, use its reasonable best efforts to
collect from the customers, as and when same become due, the
Account Receivable. Buyer will appoint one qualified individual,
reasonably acceptable to Seller, to perform the bookkeeping for
and collection of the Accounts Receivable. Buyer will send
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billing statements for the Accounts Receivable no less than once per month. All
payments received by Buyer from a customer owing on the Accounts Receivable will
be allocated as requested by such customer. The Buyer shall promptly notify the
Seller of any Accounts Receivable that Buyer determines in its opinion have
become uncollectible and the parties hereby agree to work together and
cooperate, in good faith, to collect any such Accounts Receivable in full. No
later than the fifteenth (15th) day following the end of the preceding month
Buyer will prepare and provide Seller with an open aging report with respect to
the Accounts Receivable. Buyer will keep separate and accurate records at a
location no farther away from the Seller's Peoria location than Chicago of the
Accounts Receivable and all payments received by Buyer on the Accounts
Receivable. Seller's accountants shall be permitted upon reasonable prior
written notice and at reasonable times to inspect, audit, check and make
abstracts and photocopies from Buyer's books, accounts, orders, records, or
other papers, computer programs or correspondence relating to the Accounts
Receivable and Buyer will make available its books, records and files to
Seller's accountants at reasonable times for such purposes. Buyer will not
discount, credit, compromise, discharge or settle for less than full payment any
of the Accounts Receivable without the prior written approval of Seller, which
approval shall not be unreasonably withheld. Any Accounts Receivable that have
not been paid as of a date one hundred eighty (180) days after the Closing Date
will
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be immediately reassigned to Seller and Buyer will deliver all documents, books,
records and correspondence pertaining thereto to Seller.
9.5 Use of Supplies. The Buyer may, after the Closing and up to
the earlier of the date on which the Buyer vacates the Premises (as defined in
the Transition Agreement) or until Buyer replaces such Supplies (as defined
below), use the Seller's remaining inventory of packaging materials, literature,
forms, brochures and similar materials ("Supplies") that contain the name
"Wahlfeld"; provided, that, such Supplies shall be used solely in connection
with the operation of the Business. The Buyer shall destroy any remaining
supplies after Buyer has ceased to use such Supplies hereunder.
9.6 Insurance. The Seller agrees and covenants that it shall,
for a period of seven (7) years following the Closing, keep in place product
liability insurance that will cover product liability claims for which Seller
has indemnified Buyer hereunder, in amounts sufficient and customary with
respect to the Business of the Seller.
9.7 Access to Books and Records. Following the Closing, the
Buyer shall cooperate with and provide reasonable access to the Seller, at
reasonable times and upon reasonable prior written notice, to the relevant books
and records of the Business in the possession of the Buyer (including any
electronic data) and allow the Seller to make copies of such books and records
and otherwise reasonably cooperate with the Seller for
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the purpose of allowing Seller to close its books and records and prepare its
tax returns and for similar purposes.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
10.1 Survival of Representations and Warranties. All
statements contained in any schedule or certificate delivered
hereunder or in connection herewith by or on behalf of any of the
parties pursuant to this Agreement shall be deemed
representations and warranties by the respective parties
hereunder unless otherwise expressly provided herein. The
representations and warranties of the Seller and the Buyer
contained in this Agreement, including those contained in any
Schedule or certificate delivered hereunder or in connection
herewith, shall survive the Closing for a period of seven (7)
years with the exception of the representations and warranties
contained in Section 3.7 which shall survive the Closing
indefinitely, and Section 3.14 which shall survive the Closing
until the expiration of the applicable tax statutes of limitation
plus a period of sixty (60) days. As to each representation and
warranty of the parties hereto, the date to which such
representation and warranty shall survive is hereinafter referred
to as the "Survival Date."
10.2 Agreement to Indemnify by the Seller. Subject to
the terms and conditions of Sections 10.4 and 10.5 hereof, the
Seller hereby agrees to indemnify and save the Buyer, its
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affiliates, and their respective shareholders, officers, directors, employees,
successors and assigns (each, a "Buyer Indemnitee") harmless from and against,
for and in respect of, any and all demands, judgments, injuries, penalties,
damages, losses, obligations, liabilities, claims, actions or causes of action,
encumbrances, costs and expenses (including, without limitation, reasonable
attorneys' fees and expert witness fees) suffered, sustained, incurred or
required to be paid by any Buyer Indemnitee (collectively, "Buyer's Damages")
arising out of or based upon or in connection with or as a result of:
(a) the untruth, inaccuracy or breach of any
representation and warranty of the Seller contained in or made pursuant to this
Agreement, including in any Schedule or certificate delivered hereunder or in
connection herewith;
(b) the breach or nonfulfillment of any covenant
or agreement of the Seller contained in this Agreement or in any
other agreement document or instrument delivered hereunder or
pursuant hereto;
(c) the assertion against the Buyer or the
Purchased Assets of any liability or obligation of the Seller (whether absolute,
accrued, contingent or otherwise and whether a contractual, tort or any other
type of liability, obligation or claim) not expressly assumed by the Buyer
pursuant to this Agreement;
(d) the ownership and operation of the Purchased
Assets by the Seller prior to the Closing;
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(e) the funding, operation, administration,
amendment or termination of, or withdrawal or partial withdrawal from, any
employee benefit plan established, maintained or contributed to by Seller or any
affiliate thereof, whether arising out of or relating to any event or state of
fact occurring or existing before, on or after the Closing Date, and including,
without limitation, any failure by Seller or any affiliate thereof to comply
with continuation coverage requirements contained in Section 4980B(f) of the
Internal Revenue Code of 1986, as amended, and any claims made for compensation
and/or benefits pursuant to any employee benefit plan or program or any employee
agreement with respect to severance, salary continuation, the continuation of
medical or other welfare benefits or similar post-employment benefits, whether
arising out of or relating to any event or state of facts occurring or existing
before, on or after the Closing Date; and
(f) any product liability claim or product
warranty claim related to any product or service sold or provided by Seller on
or prior to the Closing Date. With respect to the Seller's obligation to pay
Buyer's Damages pursuant to Section 10.2 of this Agreement, the Buyer shall be
entitled (but shall not be obligated) to make a claim for Buyer's Damages
against the Escrow Amount.
10.3 Agreement to Indemnify by the Buyer. Subject to
the terms and conditions of Sections 10.4 and 10.5 hereof, the
Buyer hereby agrees to indemnify and save the Seller and the
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Shareholders (each, a "Seller Indemnitee") harmless from and against, for and in
respect of, any and all demands, judgments, injuries, penalties, damages,
losses, obligations, liabilities, claims, actions or causes of action,
encumbrances, costs and expenses (including, without limitation, reasonable
attorneys' fees and expert witness fees) suffered, sustained, incurred or
required to be paid by any Seller Indemnitee arising out of or based upon or in
connection with or as a result of:
(a) the untruth, inaccuracy or breach of any
representation and warranty of the Buyer contained in or made pursuant to this
Agreement, including in any Schedule or certificate delivered hereunder or in
connection herewith;
(b) the breach or nonfulfillment of any covenant
or agreement of the Buyer contained in this Agreement or in any
other agreement, document or instrument delivered hereunder or
pursuant hereto; and
(c) the assertion against the Seller of any
liability or obligation included in the Assumed Liabilities.
10.4 Claims for Indemnification. No claim for indemnification
with respect to a breach of a representation and warranty shall be made under
this Agreement after the applicable Survival Date unless prior to such Survival
Date the Buyer Indemnitee or the Seller Indemnitee, as the case may be, shall
have given the Seller or the Buyer, as the case may be, written notice of such
claim for indemnification based upon actual loss sustained, or potential loss
anticipated, as a result of the
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existence of any claim, demand, suit or cause of action against such Buyer
Indemnitee or Seller Indemnitee, as the case may be.
10.5 Procedures Regarding Third Party Claims. The
procedures to be followed by the Buyer and the Seller with
respect to indemnification hereunder regarding claims by third
persons shall be as follows:
(a) Promptly after receipt by any Buyer
Indemnitee or Seller Indemnitee, as the case may be, of notice of the
commencement of any action or proceeding (including, without limitation, any
notice relating to a tax audit) or the assertion of any claim by a third person,
which the person receiving such notice has reason to believe may result in a
claim by it for indemnity pursuant to this Agreement, such person (the
"Indemnified Party") shall give notice of such action, proceeding or claim to
the party against whom indemnification pursuant hereto is sought (the
"Indemnifying Party"), setting forth in reasonable detail the nature of such
action or claim, including copies of any written correspondence from such third
person to such Indemnified Party.
(b) The Indemnifying Party shall be entitled, at
its own expense, to participate in the defense of such action, proceeding or
claim, and, if (i) the action, proceeding or claim involved seeks (and continues
to seek) solely monetary damages, (ii) the Indemnifying Party confirms, in
writing, its obligation hereunder to indemnify and hold harmless the Indemnified
Party with respect to such damages in their entirety pursuant to
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Sections 10.2 or 10.3 hereof, as the case may be, and (iii) the Indemnifying
Party shall have made provision which, in the reasonable judgment of the
Indemnified Party, is adequate to satisfy any adverse judgment as a result of
its indemnification obligation with respect to such action, proceeding or claim,
then the Indemnifying Party shall be entitled to assume and control such defense
with counsel chosen by the Indemnifying Party and approved by the Indemnified
Party, which approval shall not be unreasonably withheld or delayed. The
Indemnified Party shall be entitled to participate therein after such
assumption, the costs of such participation following such assumption to be at
its own expense. Upon assuming such defense, the Indemnifying Party shall have
full rights to enter into any monetary compromise or settlement which is
dispositive of the matters involved; provided, that such settlement is paid in
full by the Indemnifying Party and will not have any direct or indirect
continuing material adverse effect upon the Indemnified Party.
(c) With respect to any action, proceeding or
claim as to which (i) the Indemnifying Party does not have the right to assume
the defense or (ii) the Indemnifying Party shall not have exercised its right to
assume the defense, the Indemnified Party shall assume and control the defense
of and contest such action, proceeding or claim with counsel chosen by it and
approved by the Indemnifying Party, which approval shall not be unreasonably
withheld. The Indemnifying Party shall be entitled to participate in the defense
of such action, the cost
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of such participation to be at its own expense. The Indemnifying Party shall be
obligated to pay the reasonable attorneys' fees and expenses of the Indemnified
Party to the extent that such fees and expenses relate to claims as to which
indemnification is due under Sections 10.2 or 10.3 hereof, as the case may be.
The Indemnified Party shall have full rights to dispose of such action and enter
into any monetary compromise or settlement; provided, however, in the event that
the Indemnified Party shall settle or compromise any claims involved in the
action insofar as they relate to, or arise out of, the same facts as gave rise
to any claim for which indemnification is due under Sections 10.2 or 10.3
hereof, as the case may be, it shall act reasonably and in good faith in doing
so.
(d) Both the Indemnifying Party and the
Indemnified Party shall cooperate fully with one another in connection with the
defense, compromise or settlement of any such claim, proceeding or action,
including, without limitation, by making available to the other all pertinent
information and witnesses within its control.
ARTICLE 11
TERMINATION
This Agreement may be terminated prior to the Closing (a) at any
time by the written mutual consent of the Buyer and the Seller, (b) by the
Buyer, if the conditions set forth in Article 7 hereof shall not have been met
by the close of business
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on July 31, 1997, or (c) by the Seller if the conditions set forth in Article 8
hereof shall not have been met by the close of business on July 31, 1997. In the
event that this Agreement is terminated as aforesaid, this Agreement shall be of
no further force or effect and no party shall have any liability to any other
party hereto; provided, however, that the termination of this Agreement will not
relieve either party of any liability for breach of any agreement hereunder
occurring prior to such termination and, provided, further, that,
notwithstanding such termination, the provisions of Sections 5.7., 6.1 and 13.1
hereto shall survive any termination of this Agreement.
ARTICLE 12
GUARANTY OF SHAREHOLDERS
12.1 Guaranty. The Shareholders, jointly and severally, hereby
guarantee the due and punctual payment, observance and performance by the Seller
of each and every obligation and liability of the Seller under this Agreement
and all other agreements, documents and instruments to be executed and delivered
by the Seller pursuant to, or in connection with, this Agreement (collectively,
the "Other Agreements"), including, without limitation, the Seller's obligation
to indemnify and save the Buyer Indemnitee harmless, in accordance with the
provisions of Article 10 of this Agreement; provided, that, the Shareholders'
liability to pay money pursuant to this Article 12 shall be limited to a total
aggregate payment by each Shareholder
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severally of an amount equal to Seven Hundred Fifty Thousand Dollars ($750,000).
All of the foregoing liabilities and obligations of the Seller under this
Agreement and the Other Agreements, together with any and all reasonable fees,
costs and expenses (including, without limitation, attorneys' fees) which may be
paid or incurred by the Buyer in enforcing or collecting liabilities and
obligations of the Shareholders under this Guaranty, are hereinafter called,
collectively, the "Guaranteed Obligations" and, individually, a "Guaranteed
Obligation."
12.2 Notice to the Shareholders. The Shareholders hereby agree
that if any Guaranteed Obligation is not paid, observed or performed, as the
case may be, when and as due, the Buyer may notify the Shareholders of such
non-performance, whereupon the Shareholders shall cause the Seller to promptly
pay, observe or perform or the Shareholders, jointly and severally, will
promptly pay, observe or perform, as the case may be, such Guaranteed
Obligation.
12.3 Absoluteness of Guaranty. The obligations of the
Shareholders under this Guaranty shall be absolute and unconditional, present
and continuing, irrespective of any bankruptcy proceeding involving the Seller
or any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of or termination of the existence of the Seller, or any circumstance
which might constitute a legal or equitable discharge of a guarantor.
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12.4 Guaranty Not Affected. Each of the Shareholders
hereby consents and agrees that, at any time and from time to
time:
(a) the time, manner, place and/or terms and
conditions of payment, observance or performance of all or any of the Guaranteed
Obligations may be extended, amended, modified or changed pursuant to agreement
between the Buyer and the Seller;
(b) any action may be taken under or in respect
of this Agreement or any of the Other Agreements, and the
exercise of any remedy, power or privilege thereunder may be
waived, omitted or not enforced;
(c) the time for performance of or compliance
with any term, obligation, covenant or agreement on the part of the Seller to be
performed or observed by the Seller under this Agreement or any of the Other
Agreements may be extended, or such performance or compliance waived, or failure
in or departure from such performance or compliance consented to; and
(d) this Agreement and/or any of the Other
Agreements may be amended or modified in any respect by the parties thereto, all
in such manner and upon such terms as the parties thereto may deem proper, and
without notice to or further assent from the Shareholders, and all without
affecting this Guaranty or the obligations of the Shareholders hereunder, which
shall continue in full force and effect until all of the Guaranteed Obligations
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and all obligations of the Shareholders hereunder shall have been fully paid,
observed and performed.
12.5 Waiver. Each of the Shareholders hereby waives notice of
acceptance of this Guaranty, presentment, demand, protest, or (except as set
forth in Section 12.2 hereof) any notice of any kind whatsoever, with respect to
any or all of the Guaranteed Obligations, and promptness in making any claim or
demand hereunder; and no act or omission of any kind shall in any way affect or
impair this Guaranty. Each of the Shareholders, except as set forth in Section
12.2 hereof, also waives any requirement, and any right to require, that any
right or power be exercised or any action be taken against the Seller or any
other person or entity or any assets for any of the Guaranteed Obligations.
12.6 No Subrogation. Notwithstanding any payment, observance or
performance made by the Shareholders pursuant to this Article 12, the
Shareholders hereby irrevocably waive any and all rights of subrogation to all
of the Buyer's rights against the Seller and any and all rights of
reimbursement, assignment, indemnification or implied contract or any similar
rights against the Seller or against any endorser or other guarantor of all or
any part of any obligations of the Seller to the Buyer with respect to any
liabilities of the Shareholders under this Article 12. If, notwithstanding the
foregoing, any amount shall be paid to the Shareholders on account of any
subrogation rights at any time when all of the obligations of the
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Seller to the Buyer shall not have been paid in full, such amount shall be held
by the Shareholders in trust for the Buyer, segregated from other funds of the
Shareholders, and shall, forthwith upon receipt by the Shareholders, be turned
over to the Buyer in the exact form received by the Shareholders (duly endorsed
by the Shareholders to the Buyer, if required), to be applied against the
obligations of the Seller to the Buyer, whether matured or unmatured, in such
order as the Buyer may determine.
12.7 Reinstatement. This Guaranty shall continue to be effective
or be reinstated, as the case may be, if at any time payment, observance or
performance, or any part thereof, of any of the Guaranteed Obligations is
rescinded or must otherwise be restored or returned by the Buyer upon the
insolvency, bankruptcy or reorganization of the Seller, all as though such
payment, observance or performance had not been made.
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 Confidentiality.
Notwithstanding anything herein to the contrary,
each party shall hold in strict confidence documents and information concerning
the other, the other's affiliates and their respective businesses and properties
(including that of the Seller) and the transactions contemplated hereby, except
that either party may disclose such documents and information to (i)
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any governmental authority reviewing the transactions contemplated hereby or as
required in either party's judgment pursuant to federal or state laws; or (ii)
such persons as are required to have such information in either party's good
faith judgment in order to assist either party in consummating the transactions
contemplated hereby, and except that upon consummation of the transactions
contemplated by this Agreement, the Buyer may disclose such documents and
information to such persons as it may desire in order to carry on the business
heretofore conducted by the Seller.
13.2 Remedies. Each of the parties to this Agreement is entitled
to all remedies in the event of breach provided at law or in equity,
specifically including, but not limited to, specific performance.
13.3 Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be given in writing and shall
be delivered personally or sent by telecopier or by a nationally recognized
overnight courier, postage prepaid, and shall be deemed to have been duly given
when so delivered personally or sent by telecopier, with receipt confirmed, or
one (1) Business Day after the date of deposit with such nationally recognized
overnight courier. All such notices, claims, certificates, requests, demands and
other communications shall be addressed to the respective parties at the
addresses set forth below or to such other address as the person to whom notice
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is to be given may have furnished to the others in writing in
accordance herewith.
If to the Buyer, to:
Morgan Products Ltd.
469 McLaws Circle
Williamsburg, Virginia 23185
Telecopier No.: (757) 564-1714
Attention: Larry Robinette
with a copy to:
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
Post Office Box 6760
Stamford, Connecticut 06904-6760
Telecopier No.: (203) 965-8226
Attention: Frode Jensen, III, Esq.
If to the Seller, to:
Wahlfeld Manufacturing Company
c/o Morris Anderson and Associates Ltd.
111 East Touhy Avenue, No. 286
Des Plaines, Illinois 60018
Telecopier No.: (847) 768-4401
Attention: Daniel S. Morris
in either case, with a copy to:
Westervelt, Johnson, Nicoll & Keller
400 First Financial Plaza
Peoria, Illinois 61602
Telecopier No.: (309) 671-3588
Attention: Kevin Schneider, Esq.
The Buyer, the Seller or the Shareholders may change the address
or telecopier number to which such communications are to be directed by giving
written notice to the others in the manner provided in this Agreement.
-65-
<PAGE>
13.4 Parties in Interest; No Third-Party Beneficiaries.
(a) Subject to Section 13.6 hereof, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the respective successors and assigns of the parties hereto.
(b) Nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon or give to any
employee of the Seller or the Buyer, or any other person, firm, corporation or
legal entity, other than the parties hereto and their successors and permitted
assigns, any rights, remedies or other benefits under or by reason of this
Agreement.
13.5 Assignability. This Agreement shall not be assignable by
any party hereto without the prior written consent of the other parties,
provided that Buyer may assign its rights under the Agreement to any affiliate
of Buyer presently existing or hereafter formed and to any person or entity that
shall acquire all or substantially all of the assets of the Buyer; provided,
however, that no such assignment by the Buyer shall release it from its
obligations hereunder without the consent of the Seller and the Shareholders.
13.6 Entire Agreement; Amendment. This Agreement and
the other writings referred to herein or delivered pursuant
hereto contain the entire understanding of the parties hereto
with respect to its subject matter. There are no
representations, promises, warranties, covenants or undertakings
other than as expressly set forth herein or therein. This
-66-
<PAGE>
Agreement supersedes all prior agreements and understandings between the parties
hereto with respect to its subject matter. This Agreement may be amended or
modified only by a written instrument duly executed by the parties hereto, and
any condition to a party's obligations hereunder may only be waived in writing
by such party.
13.7 Headings. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
13.8 Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, and all such counterparts together shall constitute but one
agreement.
13.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois, without giving
effect to its principles of conflicts of law. THE PARTIES HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE BOTH PARTIES INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO OR
CONNECTED WITH THIS AGREEMENT.
13.10 Knowledge. Whenever any representation or warranty of the
Seller contained herein or in any other document executed and delivered in
connection herewith is based upon the knowledge of the Seller, such knowledge
shall be deemed to include the knowledge, if any, of any of the Shareholders.
-67-
<PAGE>
13.11 Waivers. Any party to this Agreement may, by written
notice to the other parties hereto, waive any provision of this Agreement from
which such party is entitled to receive a benefit. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach of such provision or any other
provision of this Agreement.
13.12 Severability. In the event that any provision, or
part thereof, of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions, or parts thereof, shall not in any way be affected or
impaired thereby.
13.13 Expenses. Except as otherwise set forth herein, each party
shall be responsible for its own legal fees and other costs and expenses
incurred in connection with this Agreement and the negotiation and consummation
of the transactions contemplated hereby.
-68-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed all as of the day, month and year first above
written.
MORGAN PRODUCTS LTD.
By____________________________________
Name: David A. Braun
Title: Vice President and
President of Morgan Distribution
WAHLFELD MANUFACTURING COMPANY
By____________________________________
Name: Ted Wahlfeld
Title: President
-----------------------------------
Ted Wahlfeld
-----------------------------------
John Wahlfeld
-69-
<PAGE>
List of Schedules
Schedule 1.1(a) - Purchased Assets
Schedule 1.2 - Assumed Liabilities
Schedule 1.3(b)(i) - Calculation of Value of Inventory
Schedule 1.3(b)(ii) - Sample Inventory Schedule
Schedule 1.3(b)(iii) - Calculation of Value of Accounts
Receivable
Schedule 1.3(b)(iv) - Sample AR Schedule
Schedule 1.3(c) - Allocation of Purchase Price
Schedule 3.1 - Jurisdictions of Foreign
Qualification of Seller
Schedule 3.2(a) - Required Authorizations to
Agreement
Schedule 3.2(b) - Required Consents to Agreement
Schedule 3.3 - Capitalization
Schedule 3.4 - Financial Statements of the Seller
Schedule 3.5 - Certain Changes
Schedule 3.6(a) - Material Contracts
Schedule 3.6(b) - Required Consents for Sale of
Purchased Assets and Transfer of
Assumed Liabilities
Schedule 3.7 - Encumbrances
Schedule 3.8 - Premises
Schedule 3.9(a) - Owned Equipment
Schedule 3.9(b) - Leased Equipment
Schedule 3.10 - Inventory
Schedule 3.12 - Approvals, Permits and
Authorizations
Schedule 3.13 - Compliance with Laws
<PAGE>
Schedule 3.15 - Litigation
Schedule 3.16 - Broker's and Finder's Fees
Schedule 3.17 - Compensation
Schedule 3.18 - Certain Liabilities
Schedule 3.20 - Suppliers and Customers
Schedule 3.22(a) - Warranties
Schedule 3.22(b) - Return Policy
Schedule 3.23 - Interests in Competitors
Schedule 3.24 - Patents; Trademarks; Trade Names;
Copyrights; Licenses, Etc.
Schedule 4.2(b) - Buyer Consents
Schedule 9.2 - Proration of Certain Charges
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<PAGE>
Schedule 1.1(a)
Purchased Assets
The Purchased Assets shall include the following:
(a) all fixed assets owned or leased pursuant to
capital leases by Wahlfeld, including, without limitation, machinery, equipment
(both mobile and non-mobile), computers, computer programs, databases and
related manuals and other materials necessary for the development, use,
installation, maintenance and modification of such computer programs and
databases, tapes, tools, furniture, furnishings, automobiles, trucks, vehicles,
tools, dies, molds, supplies and parts and other tangible personal property, but
excluding all facilities and all real estate fixtures;
(b) all Accounts Receivable of the Seller;
(c) all Inventory of the Seller;
(d) all of the rights of the Seller under all
contracts, arrangements, commitments, sales orders, purchase orders, invoices,
license and technology agreements with customers and Inventory suppliers of
Seller, including any of the Seller's right to receive goods and services
pursuant to such contracts and to assert claims and take other rightful actions
in respect of breaches, defaults and other violations of such contracts and
otherwise;
(e) all rights of Seller under any and all
operating leases of Seller, which Buyer shall designate to Seller at least one
(1) week prior to Closing (the "Designated Operating Leases"), which shall, as
of the Closing, be appended to this Schedule 1.1(a) and acknowledged by the
signature of a duly-authorized representative of each party;
(f) any and all trade names and service marks set
forth on Schedule 3.24, except for such trade names and service marks that
contain the name "Wahlfeld" and any existing or pending registrations or
applications in connection with the foregoing; and
(g) all goodwill of Seller; and
(h) any and all rights of Seller pursuant to the
agreement between the Seller and Terrace Springs Limited Partnership by Landmark
Illinois L.L.C., the agreement regarding Seller's Bidmaster software and the
agreement regarding the Seller's Woodware software (collectively, the "Assumed
Contracts").
<PAGE>
Notwithstanding anything to the contrary contained in this
Schedule or the Agreement, the following items shall not be Purchased Assets:
1. The automobiles of the Seller used by Ted Wahlfeld
and John Wahlfeld; and
2. Personal effects of the Shareholders located at
the facilities.
-4-
<PAGE>
Schedule 1.2
Assumed Liabilities
The Buyer shall assume the following liabilities of the Seller
to the extent (and only to the extent) such liabilities arise out of the
operation of the Business in the ordinary course:
(a) all liabilities under all purchase
commitments for Inventory issued in the ordinary course of business, and
containing pricing, terms and conditions that are ordinary and customary based
on the Seller's normal past practices, which purchase commitments are open and
which Inventory related to such purchase commitments has not been delivered to
and received by the Seller as of the Closing Date;
(b) all liabilities under all sales commitments
accepted by Seller in the ordinary course of business and containing pricing,
terms and conditions that are ordinary and customary based on Seller's past
practices, which sales commitments are open as of the Closing Date;
(c) all liabilities under the Designated
Operating Leases and the Assumed Contracts;
(d) all liabilities for fulfilling obligations to
customers and/or suppliers regarding discounts, co-op claims and returns for
sales of products by Seller to customers of Seller on or prior to the Closing
Date; provided that such liabilities assumed by Buyer shall not exceed Twenty
Thousand Five Hundred Dollars ($20,500) in the aggregate.
<PAGE>
List of Exhibits
Exhibit 1.3 - Escrow Agreement
Exhibit 1.5 - Bill of Sale and Assignment
Exhibit 5.10 - Form of Transition Agreement
Exhibit 7.4 - Opinion of Seller's Counsel
Exhibit 7.14 - Non-Competition Agreement
Exhibit 8.5 - Opinion of Buyer's Counsel
<PAGE>
ASSET PURCHASE AGREEMENT
by and among
MORGAN PRODUCTS LTD.,
WAHLFELD MANUFACTURING COMPANY
and
TED WAHLFELD and JOHN WAHLFELD
Dated as of July 15, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1PURCHASE AND SALE OF ASSETS; ASSUMPTION OF
LIABILITIES......................................................... 2
1.1 Agreement of Purchase and Sale......................... 2
1.2 Assumed Liabilities.................................... 2
1.3 Purchase Price; Allocation............................. 3
1.4 Adjustment of Purchase Price........................... 5
1.5 Instruments of Conveyance and Transfer; Further
Assurances; Access.....................................10
ARTICLE 2CLOSING.............................................................11
ARTICLE 3REPRESENTATIONS AND WARRANTIES OF THE SELLER........................11
3.1 Organization; Good Standing; Qualifications............11
3.2 Authority; Consents; Enforceability....................12
3.3 Capitalization.........................................14
3.4 Financial Statements...................................14
3.5 Absence of Certain Changes.............................15
3.6 Material Contracts.....................................18
3.7 Title to Purchased Assets and Related Matters..........20
3.8 Real Property Used by the Business.....................21
3.9 Machinery, Equipment, Etc..............................21
3.10 Inventories of the Seller..............................21
3.11 Accounts Receivable of the Seller......................22
3.12 Approvals, Permits and Authorizations..................23
3.13 Compliance with Laws...................................23
3.14 Taxes..................................................24
3.15 Litigation.............................................24
3.16 Broker's and Finder's Fees.............................25
3.17 Compensation...........................................25
3.18 Certain Liabilities....................................25
3.19 Business Generally.....................................26
3.20 Suppliers and Customers................................26
3.21 Environmental Matters..................................27
3.22 Warranties; Return Policy; No Rebates or Allowances....28
3.23 Interest in Competitors and Related Entities...........29
3.24 Patents; Trademarks; Trade Names; Copyrights;
Licenses, Etc..........................................30
3.25 Misstatements and Omissions............................30
ARTICLE 4REPRESENTATIONS AND WARRANTIES OF THE BUYER.........................31
4.1 Organization and Good Standing.........................31
4.2 Authority; Consents; Enforceability....................31
4.3 Broker's and Finder's Fees.............................33
4.4 Litigation.............................................33
ARTICLE 5PRE-CLOSING COF THE SELLER..........................................34
5.1 Provide Access to Information..........................34
5.2 Operation of Business of the Seller....................34
5.3 Books of Account.......................................35
<PAGE>
5.4 Issuance of Securities..................................35
5.5 Other Changes...........................................36
5.6 Additional Information..................................36
5.7 Publicity...............................................36
5.8 Other Negotiations......................................37
5.9 Closing Conditions......................................37
5.10 Transition Agreement....................................37
ARTICLE 6PRE-CLOSING COVENANTS OF THE BUYER...................................38
6.1 Publicity...............................................38
6.2 Closing Conditions......................................38
ARTICLE 7CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER.....................38
7.1 Representations and Warranties..........................38
7.2 Performance of Obligations of the Seller................39
7.3 Closing Certificate.....................................39
7.4 Supporting Documents....................................39
7.5 Bill of Sale, Etc.......................................41
7.6 Books and Records.......................................41
7.7 Consents................................................41
7.8 No Litigation...........................................41
7.9 No Material Adverse Change..............................42
7.10 Approval of Legal Matters...............................42
7.11 Bulk Sales Requirements.................................42
7.12 Satisfactory Investigation..............................42
7.13 Non-Competition Agreements..............................43
7.14 Escrow Agreement........................................43
7.15 Discharge of Obligations................................43
7.16 Preparation for Inventory Count.........................43
7.17 Software License Consents...............................43
ARTICLE 8CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER....................44
8.1 Representations and Warranties..........................44
8.2 Performance of Obligations of the Buyer.................44
8.3 Closing Certificate.....................................44
8.4 Payment of Purchase Price...............................45
8.5 Supporting Documents....................................45
8.6 Approval of Legal Matters...............................46
8.7 No Litigation...........................................46
8.8 Preparation for Inventory Count.........................47
ARTICLE 9TRANSFER TAXES; PRORATION OF CHARGES; POST-CLOSING
COVENANTS............................................................47
9.1 Certain Taxes and Fees..................................47
9.2 Proration of Certain Charges............................47
9.3 Certain Costs...........................................48
9.4 Collection of Account Receivable........................48
9.5 Use of Supplies.........................................49
9.6 Insurance...............................................50
9.7 Access to Books and Records.............................50
ARTICLE 1SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION......................................................50
10.1 Survival of Representations and Warranties..............50
<PAGE>
10.2 Agreement to Indemnify by the Seller...................51
10.3 Agreement to Indemnify by the Buyer....................53
10.4 Claims for Indemnification.............................54
10.5 Procedures Regarding Third Party Claims................54
ARTICLE 1TERMINATION.........................................................57
ARTICLE 1GUARANTY OF SHAREHOLDERS............................................57
12.1 Guaranty...............................................57
12.2 Notice to the Shareholders.............................58
12.3 Absoluteness of Guaranty...............................59
12.4 Guaranty Not Affected..................................59
12.5 Waiver.................................................60
12.6 No Subrogation.........................................60
12.7 Reinstatement..........................................61
ARTICLE 1MISCELLANEOUS PROVISIONS............................................62
13.1 Confidentiality........................................62
13.2 Remedies...............................................62
13.3 Notices................................................62
13.4 Parties in Interest; No Third-Party Beneficiaries......64
13.5 Assignability..........................................64
13.6 Entire Agreement; Amendment............................64
13.7 Headings...............................................65
13.8 Counterparts...........................................65
13.9 Governing Law..........................................65
13.10 Knowledge..............................................65
13.12 Severability...........................................66
13.13 Expenses...............................................66
<PAGE>
MORGAN PRODUCTS LTD.
469 McLaws Circle
Williamsburg, Virginia 23185
July 18, 1997
Wahlfeld Manufacturing Company
c/o Morris Anderson and Associates Ltd.
111 East Touhy Avenue, No. 286
Des Plaines, Illinois 60018
Attention: Daniel S. Morris
Re: Amendment to Asset Purchase Agreement
Gentlemen:
Reference is made to that certain Asset Purchase Agreement
(the "Agreement") dated as of July 15, 1997 by and among Morgan Products Ltd.,
Wahlfeld Manufacturing Company and Ted Wahlfeld and John Wahlfeld. Capitalized
terms used but not defined herein shall have the meanings assigned to such terms
in the Agreement. This letter agreement sets forth our understanding with
respect to certain amendments to the Agreement.
The parties hereby agree as follows:
1. The Closing under the Agreement shall be scheduled
to take place on Friday, July 25, 1997.
2. The physical counting of inventory to be conducted by the
parties and referred to in Section 1.4(a) of the Agreement shall be
conducted beginning on July 19, 1997 and shall be completed as soon as
possible thereafter.
3. The Pre-Closing Inventory Schedule and the Pre-Closing AR
Schedule shall be schedules of Inventory and Accounts Receivable,
respectively, of the Seller as of July 16, 1997 and as of July 18,
1997, respectively. The Closing Inventory Schedule and the Closing AR
Schedule shall be prepared by the parties in the manner set forth in
Section 1.4 of the Agreement, but shall be prepared by the parties as
of July 18, 1997.
4. At the Closing, the Buyer and the Seller shall
execute and deliver to one another the Transition Agreement,
substantially in the form attached to the Agreement as
#90071466.2
<PAGE>
Exhibit 5.10. Also at the Closing, the Buyer shall pay to the Seller an
amount equal to the amount that the Buyer would have paid to the Seller
or otherwise under the Transition Agreement for the period from July
18, 1997 through the Closing Date (including, without limitation,
payments for the services of the Employees, the Occupancy Fee, the
License Fee and any other charges to be paid by the Buyer and set forth
in Section 3 of the Transition Agreement) had the Transition Agreement
been executed and delivered by the parties and become effective as of
July 18, 1997.
5. At the Closing, the Buyer shall pay to the Seller an amount
equal to $10,000 to cover in full any and all incremental interest,
late charges, penalties or other similar expenses or fees ("Incremental
Fees") related to financial obligations of Seller, which Incremental
Fees were incurred by Seller during the period July 18, 1997 through
the Closing Date and would not have been incurred by the Seller had the
Seller been able to satisfy all such obligations in full as of July 18,
1997.
6. At the Closing, the Buyer will (a) pay to the Seller any
and all costs and expenses of the Business ("Expenses") actually
incurred and paid by Seller in the ordinary course, consistent with
past practice (except as otherwise previously approved by the Buyer in
writing), during the period July 18, 1997 through the Closing Date, and
(b) assume as an Assumed Liability any and all accounts payable of
Seller, under which Seller became obligated during the period July 18,
1997 through the Closing Date and which were incurred by the Seller in
the ordinary course, consistent with past practice (except as otherwise
previously approved by the Buyer in writing), during the period July
18, 1997 through the Closing Date; provided, that, no Expense or
account payable of Seller shall be reimbursed or assumed by Buyer
hereunder if such Expense or account payable is covered under and paid
for or assumed by Buyer pursuant to Paragraph 4 or Paragraph 5 above or
otherwise.
7. At the Closing, the Seller will (a) pay to the Buyer an
amount equal to any and all payments that have been received by the
Seller during the period July 18, 1997 through the Closing Date and
that relate to any of the Accounts Receivable listed on the Pre-Closing
AR Schedule, and (b) will assign, transfer, convey and deliver to
Seller any assets of Seller related to the Expenses paid and accounts
payable assumed by Buyer pursuant to Paragraph 6 above.
8. Any and all Charges that are to be prorated as of the
Closing Date pursuant to Section 9.2 of the Agreement shall be
pro-rated as of July 18, 1997.
#90071466.2
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<PAGE>
9. Any reference to the Closing Date contained in Section 1.2
shall be deemed to be a reference to July 18, 1997.
This letter amends the Agreement only to the extent provided
herein and does not amend, modify or change any other provision of the
Agreement. From and after the date hereof any reference to the Agreement shall
be deemed to be a reference to the Agreement as amended hereby.
Please indicate your agreement with the foregoing by executing
below in the spaces provided.
Very truly yours,
MORGAN PRODUCTS LTD.
By:_________________________
Name:
Title:
Accepted and agreed:
WAHLFELD MANUFACTURING COMPANY
By:_________________________
Name:
Title:
- ----------------------------
Ted Wahlfeld
- ----------------------------
John Wahlfled
#90071466.2
-3-
<PAGE>
<PAGE>
MORGAN PRODUCTS LTD.
469 McLaws Circle
Williamsburg, Virginia 23185
July 25, 1997
Wahlfeld Manufacturing Company
c/o Morris Anderson and Associates Ltd.
111 East Touhy Avenue, No. 286
Des Plaines, Illinois 60018
Attention: Daniel S. Morris
Re: Amendment No. 2 to Asset Purchase
Agreement
Gentlemen:
Reference is made to that certain Asset Purchase Agreement
(the "Agreement") dated as of July 15, 1997 by and among Morgan Products Ltd.,
Wahlfeld Manufacturing Company and Ted Wahlfeld and John Wahlfeld, as amended on
July 19, 1997. Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Agreement. This letter agreement sets
forth our understanding with respect to certain amendments to the Agreement.
The parties hereby agree as follows:
1. With the exception of the reference to July 18,1997
contained in the first sentence of Paragraph 3 of the amendment to the
Agreement dated July 19, 1997 (the "Amendment"), any reference to the
date July 18, 1997 contained in the Amendment shall be deemed to be a
reference to 11:59 p.m. on July 18, 1997, and any reference in the
Agreement to the Closing Date shall be deemed to be a reference to
11:59 p.m. on the Closing Date.
2. The word "discounts" contained in clause (d) on
Schedule 1.2 of the Agreement shall be deleted.
3. The Designated Operating Leases shall be deemed to be all
operating leases of the Seller set forth on Schedule 3.6(a) to the
Agreement.
4. Pursuant to Section 7.11 of the Agreement ,the
Seller hereby affirms its obligation to indemnify Buyer in
respect of any and all damages incurred by Buyer in
<PAGE>
connection with non-compliance by Seller with all requirements of
applicable bulk sales laws in respect of the transactions contemplated
by the Agreement.
5. With respect to any Inventory of the Seller sold to the
Buyer pursuant to the Agreement that is Inventory manufactured by or
purchased from Pease Industries or Inventory that is specifically
manufactured for use in connection with Pease products (such as sills,
frame materials and lites), the Buyer and Seller shall cooperate and
work together and use their commercially reasonable best efforts to
accomplish the sale of all such Inventory during the ninety day period
immediately following the Closing Date (the "Measurement Period"),
including without limitation, communicating with Pease Industries and
customers of the Business, as required or deemed necessary. The parties
shall mutually determine, no later than the end of the Measurement
Period, the amount of such Inventory which has been sold by the Seller
during the Measurement Period and the amount of such Inventory that
remains unsold. If the total cost of such Inventory (as set forth on
the final Closing Inventory Schedule) exceeds the total amount of
proceeds received by the Seller on sales of such Inventory (less a
reasonable and mutually agreed amount for shipping and delivery costs
of Seller in connection with such sales) during such period, then the
Seller shall promptly pay to the Buyer one-half of such excess amount.
The Buyer and the Seller shall consider and mutually agree, at the time
such total amount of proceeds is determined pursuant to the immediately
preceding sentence, whether to extend the Measurement Period for an
additional thirty days.
6. Sections 1(c) and (d) of the valuation of the Inventory
section of Schedule 1.3(b)(i) of the Agreement shall be deleted their
entirety and replaced with the following:
(c) All remaining Andersen merchandise and all
non-Andersen merchandise that is not included in the
applicable current supplier's catalog or is over an
eighteen (18) month ordinary course of business
operating supply and all damaged/scratched
merchandise will be valued at twenty percent (20%) of
book value; provided, that, in no event shall such
value exceed Fifty Thousand Six Hundred Dollars
($50,600).
This letter shall amend the Agreement only to the extent
provided herein and shall not amend, modify or change any other provision of the
Agreement. Any and all references to the Agreement after the date hereof shall
be deemed to be references to the Agreement as amended hereby.
-2-
<PAGE>
Please indicate your agreement with the foregoing by executing
below in the spaces provided.
Very truly yours,
MORGAN PRODUCTS LTD.
By:_________________________
Name:
Title:
Accepted and agreed:
WAHLFELD MANUFACTURING COMPANY
By:_________________________
Name:
Title:
- ----------------------------
Ted Wahlfeld
- ----------------------------
John Wahlfled
#90071689.1
-3-
<PAGE>
<PAGE>
07/24/97
TENTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THE TENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Tenth Amendment")
is made as of the 25th day of July, 1997 by and among Morgan Products Ltd., a
Delaware corporation having its chief executive office at 469 McLaws Circle,
Williamsburg, Virginia 23185 ("Borrower"), the lenders who are or who may from
time to time become signatories hereto ("Lenders") and Fleet Capital
Corporation, a Connecticut corporation having an office at 20800 Swenson Drive,
Waukesha, Wisconsin 53186 ("FCC") which is the successor-in-interest to Barclays
Business Credit, Inc., as agent for the Lenders ("FCC," in such capacity being
"Agent").
W I T N E S S E T H:
WHEREAS, FCC, as Agent and Lender, and Borrower entered into a certain
Loan and Security Agreement dated as of July 14, 1994 as amended by (i) a
certain First Amendment to Loan and Security Agreement ("First Amendment") dated
as of September 30, 1994 by and among Agent, Borrower and the lender signatories
thereto, (ii) a certain Second Amendment to Loan and Security Agreement ("Second
Amendment") dated as of October 20, 1994 by and among Agent, Borrower and the
lender signatories thereto, (iii) a certain First (sic) Amendment to Loan and
Security Agreement dated as of March 29, 1995 by and among Agent, Borrower and
the lender signatories thereto, (iv) a certain Fourth Amendment to Loan and
Security Agreement dated as of October 30, 1995 by and among Agent, Borrower and
the lender signatories thereto, (v) a certain Fifth Amendment to Loan and
Security Agreement dated as of June 30, 1996 by and among Agent, Borrower and
the lender signatories thereto, (vi) a certain Sixth Amendment to Loan and
Security Agreement dated as of August 30, 1996 by and among Agent, Borrower and
the Lender signatories thereto, (vii) a certain Seventh Amendment to Loan and
Security Agreement dated as of October 22, 1996 by and among Agent, Borrower and
the Lender signatories thereto, (viii) a certain Eighth Amendment to Loan and
Security Agreement dated as of March 13, 1997 by and among Agent, Borrower and
the Lender signatories thereto and (ix) a certain Ninth Amendment to Loan and
Security Agreement dated as of May 15, 1997 by and among Agent, Borrower and the
Lender signatories thereto. Said Loan and Security Agreement, as amended from
time to time, is hereinafter referred to as the "Loan Agreement"; and
WHEREAS, Borrower, Lenders and Agent desire to amend and modify certain
provisions of the Loan Agreement.
NOW THEREFORE, in consideration of the premises, the mutual covenants
and agreements herein contained, and any extension of credit heretofore, now or
hereafter made by Lenders and Agent to Borrower, the parties hereto hereby agree
as follows:
<PAGE>
1. Definitions. Except as otherwise specifically provided
for herein, all capitalized terms used herein without definition
shall have the meanings given to them in the Loan Agreement.
2. Amended Definitions and Deleted Definitions. (a) The definitions of
"Borrowing Base", "Commitment Termination Date", "Interest Coverage Ratio",
"LIBOR Option," "LIBOR Rate," "LIBOR Request", "LIBOR Revolver Added Rate",
"LIBOR Revolving Credit Portion", "Loans", "Maximum Revolving Credit Loan",
"Mortgages" "Prime Revolver Added Rate", "Prime Revolving Credit Portion",
"Statutory Reserves" and "Tax" contained in Section 1.1 of the Loan Agreement
are hereby deleted and the following are inserted in their stead:
"1.1 Defined Terms. When used herein, the following terms shall have
the following meanings (terms defined in the singular to have the same meaning
when used in the plural and vice versa):
* * *
"Borrowing Base - as at any date of determination
thereof, an amount equal to the lesser of:
(a) the Maximum Revolving Credit Loan; and
(b) an amount equal to:
(i) eighty-five percent (85%) or such lesser
percentage as Agent in its reasonable discretion deems
appropriate, of the net amount of Eligible Accounts
outstanding at such date:
PLUS
(ii) the lesser of (A) Forty Million Dollars
($40,000,000) and (B) sixty percent (60%) or such lesser
percentage as Agent in its reasonable discretion deems
appropriate of the value of Eligible Inventory at such date
consisting of raw materials and finished goods, calculated on
the basis of the lower of cost or market, as determined by
Agent, in its reasonable discretion, on a first-in, first-out
("FIFO") basis;
MINUS (subtract from the lesser of clauses
(a) and (b) above)
(c) an amount equal to the sum of (A) the face amount of all
LC Guaranties and Letters of Credit issued by Agent or Bank and
outstanding at such date, plus (B) any amounts which Agent and/or
Lenders may then be obligated to pay for the account of Borrower under
this Agreement.
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For purposes hereof, the net amount of Eligible Accounts at
any time shall be the face amount of such Eligible Accounts less any
and all returns, rebates, discounts (which, if granted outside the
ordinary course of business as in effect on the Closing Date, may, at
Agent's option, be calculated on shortest terms), credits, allowances
or excise taxes of any nature at any time issued, owing, claimed by
Account Debtors, granted, outstanding or payable in connection with
such Accounts at such time, all as determined by Agent in the
reasonable exercise of its discretion.
* * *
Commitment Termination Date - the earliest of (i) July 14,
2000, (ii) the date of termination of the commitment to make further
Revolving Credit Loans pursuant to Section 3.3 or 3.4 hereof, and (iii)
the date of termination of the commitment to make further Revolving
Credit Loans pursuant to Section 11.2 hereof.
* * *
Interest Coverage Ratio - with respect to any fiscal period,
the ratio of Borrower's (a) net income before interest, income tax
expense, depreciation expense, amortization expense, any gain or loss
(in excess of $40,000 within the immediately previous twelve month
period) from the sale of assets outside the ordinary course of business
and any charge or expense to net income (in an amount not to exceed
$5,500,000 in total for fiscal year 1996 and the partial fiscal year
ended July 5, 1997) in respect to the restructuring of Borrower for or
taken within such period to (b) Borrower's interest expense for such
period.
* * *
LIBOR Added Rate - Two and one quarter percent (21/4%).
LIBOR Option - the option granted pursuant to Section 3.1(B)
to have the interest on all or any portion of the principal amounts on
the Revolving Credit Loan or the Acquisition Term Loans based on a
LIBOR Rate.
* * *
LIBOR Rate - with respect to any LIBOR Portion for the related
LIBOR Period, an interest rate per annum (rounded upwards, if
necessary, to the next higher 1/8 of 1%) equal to the product of (a)
the Base LIBOR Rate (as hereinafter defined) and (b) Statutory
Reserves. For purposes of this
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<PAGE>
definition, the term "Base LIBOR Rate" shall mean the rate (rounded to
the nearest 1/8 of 1% or, if there is no nearest 1/8 of 1%, the next
higher 1/8 of 1%) at which deposits of U.S. dollars approximately equal
in principal amount to the LIBOR Portion specified in the applicable
LIBOR Request are offered to Bank by prime banks, in the London
interbank foreign currency deposits market at approximately 11:00 a.m.,
London time, two (2) Business Days prior to the commencement of such
LIBOR Period, for delivery on the first day of such LIBOR Period. Each
determination of Agent of any LIBOR Rate shall in the absence of
manifest error, be conclusive, and at Borrower's request, Agent shall
demonstrate the basis for such determination.
LIBOR Request - a notice in writing (or by telephonic
communication confirmed by telex, telecopy or other facsimile
transmission on the same day as the telephone request) from Borrower to
Agent requesting that interest on the Revolving Credit Loan or
Acquisition Term Loans be based on the LIBOR Rate, specifying: (i) the
first day of the LIBOR Period, (ii) the length of the LIBOR Period
consistent with the definition of that term, and (iii) a dollar amount
of the LIBOR Portion consistent with the definition of such terms.
LIBOR Portion - that portion of the Revolving Credit Loan
and/or Acquisition Term Loans specified in a LIBOR Request (including
any Revolving Credit Loan or Acquisition Term Loan which is being
borrowed by Borrower concurrently with such LIBOR Request) which is not
less than $2,500,000 and an integral multiple of $100,000, which does
not exceed the outstanding balance of Revolving Credit Loans and
Acquisition Term Loans (including any Revolving Credit Loan or
Acquisition Term Loan, as applicable, which is being borrowed by
Borrower concurrently with such LIBOR Request) not already subject to a
LIBOR Option and, which, as of the date of the LIBOR Request specifying
such LIBOR Portion, has met the conditions for basing interest on the
LIBOR Rate in Section 3.1(B) hereof and the LIBOR Period of which was
commenced and not terminated. Each LIBOR Portion shall be allocated
among Lenders in accordance with their respective Revolving Credit
Percentage and/or Acquisition Term Loan Percentage, as applicable.
* * *
Loans - all loans and advances of any kind made by any Lender
pursuant to the Agreement.
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* * *
Maximum Revolving Credit Loan - Seventy Five Million Dollars
($75,000,000); provided, however, that on at least thirty (30) days
prior written notice to Agent and Lenders, Borrower may increase the
Maximum Revolving Credit Loan to an amount not to exceed Eighty Million
Dollars ($80,000,000) if (x) any such increase is made for the purpose
of funding the purchase price of a Permitted Acquisition and (y) after
giving effect to any such increase, there are no existing and
continuing Defaults or Events of Default; and provided, further,
however, that on at least thirty (30) days' prior written notice to
Agent, Borrower may reduce the amount of Maximum Revolving Credit Loan
by an amount not less than One Million Dollars ($1,000,000) and an
integral multiple of One Hundred Thousand Dollars ($100,000). Once the
amount of the Maximum Revolving Credit Loan has been reduced by
Borrower, it shall not be thereafter increased.
.
* * *
Mortgages - the mortgages or deeds of trust to be executed by
Borrower on or about the Closing Date (in respect to the real Property
specified in clauses (i) and (ii) below) or the Tenth Amendment
Effective Date (in respect to the real Property specified in clause
(iii) below) in favor of Agent, for its benefit and the ratable benefit
of Lenders by which Borrower shall grant and convey to Agent, for its
benefit and the ratable benefit of Lenders, as security for the
Obligations, a Lien upon the real Property of Borrower located in (i)
Springfield, Oregon, (ii) Lexington, North Carolina and (iii) Oshkosh,
Wisconsin. Agent and Lenders acknowledge that Borrower has prior to the
Tenth Amendment Effective Date sold the real Property located in (i)
Springfield, Oregon and (ii) Lexington, North Carolina.
* * *
Prime Added Rate - one-half of one percent (1/2%).
Prime Portion - that portion of the Revolving Credit Loan
and/or Acquisition Term Loans not subject to a LIBOR Option.
* * *
Statutory Reserves - a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is
the number one minus the aggregate of the maximum reserve percentages
(including, without limitation, any marginal, special, emergency or
supplemental
5
<PAGE>
reserves), expressed as a decimal, established by the Board and any
other banking authority to which Bank or any Lender is subject for
Eurocurrency Liabilities (as defined in Regulation D of the Board or
any successor thereto). Such reserve percentages shall include, without
limitation, those imposed under such Regulation D. LIBOR Portions shall
be deemed to constitute Eurocurrency Liabilities and as such shall be
deemed to be subject to such reserve requirements without benefit of or
credit for proration, exceptions or offsets which may be available from
time to time to Bank or any Lender under such Regulation D. Statutory
Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
* * *
Tax - in relation to any LIBOR Portion and the applicable
LIBOR Rate, any tax, levy, impost, duty, deduction, withholding or
charges of whatever nature required by any Legal Requirement (i) to be
paid by any Lender and/or (ii) to be withheld or deducted from any
payment otherwise required hereby to be made by Borrower to any Lender;
provided, that the term "Tax" shall not include any taxes imposed upon
the net income of any Lender."
(b) The definitions of "Interest Rate Coverage Ratio" and "Inventory
Percentage" are hereby deleted from the Loan Agreement.
3. Additional Definitions. The following are inserted
into Section 1.1 of the Loan Agreement:
"1.1 Defined Terms. When used herein, the following terms
shall have the following meanings (terms defined in the singular
to have the same meaning when used in the plural and vice versa).
Acquisition Conditions - the items (i) through (x) contained
in the definition of Permitted Acquisitions.
Acquisition Term Loan Commitment - as defined in Section 2.6
of this Agreement.
Acquisition Term Loan(s) - as defined in Section 2.6 of this
Agreement.
Acquisition Term Note(s) - as defined in Section 2.6 of this
Agreement.
Acquisition Term Loan Percentage - as defined in Section 2.6
of this Agreement.
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<PAGE>
* * *
B of A - Bank of America National Trust and Savings
Association, successor by merger to Bank of America Illinois. All
references, to "BAI" or "Bank of America Illinois" in the Agreement and
the other Loan Documents shall be deemed to be references to B of A or
Bank of America National Trust and Savings Association as applicable.
* * *
Fixed Charge Coverage Ratio - with respect to any fiscal
period, the ratio of Borrower's (a) net income plus (i) depreciation
and amortization expense, minus (ii) Capital Expenditures (other than
the principal portion of payments with respect to Capitalized Lease
Obligations) made within such period to (b) the sum of (i) the
principal portion of payments made within such period with respect to
Capitalized Lease Obligations, plus (ii) the total amount of Retirement
Income Plan payments made within such period plus (iii) the aggregate
amount of all principal installments scheduled to be made within such
period in respect to outstanding Acquisition Term Loans.
Permitted Acquisition(s) - means any acquisition(s) by
Borrower of assets or all of the outstanding capital stock of a Person,
which in either case, constitutes a business unit and which acquisition
is closed prior to the Commitment Termination Date so long as each of
the following conditions precedent (collectively, the "Acquisition
Conditions") have been fulfilled to the satisfaction of Agent:
(i) no Default or Event of Default shall have
occurred and be continuing at the time of such
acquisition or would occur as a result thereof;
(ii) the business unit being acquired (the "Target")
is primarily located in the United States of America and is in
the same line of business as Borrower's Morgan Distribution
Division;
(iii) the aggregate purchase price for the
Target does not exceed Seven Million Five Hundred
Dollars ($7,500,000) ;
(iv) average Excess Revolving Credit Loan
Availability for the thirty days prior to the consummation of
the proposed acquisition and Excess Revolving Credit Loan
Availability immediately after giving effect to the proposed
acquisition equals or exceeds Eight Million Dollars
($8,000,000);
7
<PAGE>
(v) Borrower and Target shall have executed such
amendments to the Loan Agreement, assumption agreements,
security agreements, guarantees, financing statements,
promissory notes or other loan documentation as reasonably
requested by Agent to, inter alia, make the Target a guarantor
of the Obligations or co-borrower under the Loan Agreement, as
determined by Agent in its sole discretion, and to grant to
Agent for its benefit and the ratable benefit of Lenders a
first, perfected security interest in substantially all of the
assets of the Target;
(vi) Agent shall have received projections of
Borrower's and the Target's pro forma financial projections,
in form and substance reasonably acceptable to Agent, which
projections shall demonstrate to Agent's satisfaction that,
upon the consummation of the proposed acquisition, Borrower
and the Target on a consolidated basis will remain in
compliance with the provisions of Section 9.3 of the Loan
Agreement;
(vii) Agent shall have received a certified copy of
resolutions of the Board of Directors (or the Executive
Committee of the Board of Directors, if so empowered) of
Borrower and the Board of Directors (or comparable governing
body) of Target approving the acquisition of the Target;
(viii) Agent or any Lender, if, in its sole
discretion has elected to do so or has requested Agent to do
so, shall have completed an audit of the Target's working
capital assets (inventory and accounts receivable) to be
included in the Borrowing Base and the results of such audit
shall have been satisfactory to Agent;
(ix) Borrower's Interest Coverage Ratio (computed
without adding back to net income any restructuring charge or
reserve) for the twelve month period most recently ended prior
to the closing date for the proposed acquisition shall be 2.0
to 1 or greater. Borrower, Lenders and Agent agree that the
Acquisition Condition contained in this clause (ix) may only
be waived with the consent of all Lenders; and
(x) Agent shall have received a certificate, in form,
scope and substance acceptable to the Agent and in such detail
as Agent shall have required, of the chief financial officer
of the Borrower demonstrating or confirming, as the case may
be, satisfaction of each of the conditions precedent listed in
clauses (i)
8
<PAGE>
through (ix) above (such certificate being required to be
delivered to Agent at least fifteen (15) Business Days' prior
to the date of any such acquisition) and Agent shall not have,
within ten (10) Business Days following such delivery,
objected to the designation of such acquisition as a
"Permitted Acquisition" or questioned any calculation or
assertion contained in such certificate, in any case, in
writing."
* * *
Tenth Amendment Effective Date - the date on which
all of the conditions precedent listed in Section 14 of the
Tenth Amendment have been satisfied or waived.
* * *
Wahlfeld Acquisition Documents - that certain Asset
Purchase Agreement by and among Morgan Products Ltd., Wahlfeld
Manufacturing Company and Ted Wahlfeld and John Wahlfeld and
dated July 15, 1997, all exhibits and schedules thereto, all
amendments and modifications thereto and all other documents,
instruments and agreements executed in connection therewith
and the transactions contemplated thereby. Borrower represents
and warrants to Agent and Lenders that true and correct copies
of all Wahlfeld Acquisition Documents existing as of the Tenth
Amendment Effective Date have been delivered by Borrower to
Agent.
4. Acquisition Term Loan and Acquisition Term Loan
Commitments. The following is inserted into the Loan Agreement
as Section 2.6:
"2.6 Acquisition Term Loan; Acquisition Term Loan Commitment. (A)
During the period between the Tenth Amendment Effective Date and the Commitment
Termination Date, each Lender agrees, for so long as no Default or Event of
Default exists, to make acquisition term loans ("Acquisition Term Loan(s)") to
Borrower to finance Permitted Acquisitions. The aggregate amount of the
Acquisition Term Loans to be made by each Lender (such Lender's "Acquisition
Term Loan Commitment"), pursuant to the terms hereof, shall be the amount set
below such Lender's name on the signature pages hereof. The aggregate principal
amount of the Acquisition Term Loan Commitments is Ten Million Dollars
($10,000,000). The percentage equal to the quotient of (x) each Lender's
Acquisition Term Loan Commitment, divided by (y) the aggregate of all
Acquisition Term Loan Commitments, is that Lender's "Acquisition Term Loan
Percentage." Subject to all of the terms and conditions of this Agreement,
including, without limitation, satisfaction of each of the Acquisition
Conditions in respect to the applicable potential acquisition, each Lender
9
<PAGE>
agrees, for so long as no Default or Event of Default exists, to make
Acquisition Term Loans to Borrower from time to time, as requested by Borrower
in accordance with the terms of Section 3.1 hereof, up to a maximum principal
amount at any time outstanding equal to the product of (A) Ten Million Dollars
($10,000,000), multiplied by (B) such Lender's Acquisition Term Loan Percentage.
No portion of any Acquisition Term Loan may be reborrowed following repayment or
prepayment thereof. The foregoing notwithstanding, Lenders shall not be required
to make any Acquisition Term Loans, unless, inter alia, all Acquisition
Conditions in respect to the applicable acquisition have been satisfied.
(B) Each Acquisition Term Loan shall be in an amount equal to One
Million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand
Dollars ($100,000) in excess thereof and shall be made on the date specified in
the written notice or telephonic notice (confirmed in writing) for such
Acquisition Term Loan, as described in Section 2.6(D) hereof. All such
Acquisition Term Loans shall be secured by the Collateral. The principal amount
of any Acquisition Term Loan shall be amortized on the basis of sixty (60)
monthly payments, commencing the first day of the calendar month after the
calendar month in which the Acquisition Term Loan is made (September 1, 1997 in
respect to the initial Acquisition Term Loan); provided that the entire
principal balance of all Acquisition Term Loans shall be due on the Commitment
Termination Date. The amount of such scheduled monthly payments shall be 1.167%
of the initial principal amount of such Acquisition Term Loan for the first
thirty-six monthly payments, 2.417% of the principal amount of such Acquisition
Term Loan for the next twenty-three (23) monthly payments, and the remaining
outstanding principal balance of such Acquisition Term Loan for the sixtieth
(60th) monthly payment. Each Acquisition Term Loan shall be evidenced by
promissory notes to be executed and delivered by Borrower to Lenders on or prior
to the date of such Acquisition Term Loan, the form of which is attached hereto
and made a part hereof as Exhibit A-1 (the "Acquisition Term Note(s)"), shall
bear interest as specified in Section 3.1 and shall be repayable in accordance
with the terms hereof and of the Acquisition Term Notes.
(C) Except as otherwise provided in Section 2.6(D), each Acquisition
Term Loan shall be made on notice, given not later than 11:00 a.m. (Milwaukee
time) on the Business Day of the Acquisition Term Loan, by Borrower to Agent,
which shall give to each Lender prompt written notice thereof by telecopier,
telex or cable. Each such notice (a "Notice of Acquisition Term Loan") shall be
in writing or by telephone to Agent at (414) 798-4800, confirmed immediately in
writing, specifying therein the requested date and amount of such Acquisition
Term Loan. Each Lender shall, not later than 2:00 p.m. (Milwaukee time) on each
requested date, wire to a bank designated by Agent the amount of
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<PAGE>
that Lender's Acquisition Term Loan Percentage of the requested Acquisition Term
Loan. Agent shall, before 2:30 P.M. (Milwaukee time) on the date of the proposed
Acquisition Term Loan, subject to the provisions hereof, wire to a bank
designated by Borrower and reasonably acceptable to Agent, the amount of such
Acquisition Term Loan to the extent received from the Lenders. The failure of
any Lender to make the Acquisition Term Loan to be made by it shall not relieve
any other Lender of its obligation hereunder to make its Acquisition Term Loan.
Neither Agent nor any other Lender shall be responsible for the failure of any
other Lender to make the Acquisition Term Loan to be made by such other Lender.
The foregoing notwithstanding, unless otherwise notified by any Lender, Agent,
in its sole discretion, may, from its own funds, make a Acquisition Term Loan on
behalf of any Lender hereto. In such event, the Lender on behalf of whom Agent
made the Acquisition Term Loan shall reimburse Agent for the amount of
Acquisition Term Loan so made on its behalf, on a weekly (or more frequent basis
as determined by Agent, in its sole discretion) basis and the entire amount of
interest attributable to such Acquisition Term Loan for the period from the date
on which said Acquisition Term Loan was made by Agent on such Lender's behalf
until Agent is reimbursed by such Lender, shall be paid to Agent. The foregoing
notwithstanding, Lenders shall not be required to make any Acquisition Term
Loans, unless, inter alia, all Acquisition Conditions in respect to the
applicable acquisition have been satisfied.
If at any time one or more Lenders refuse or fail to make a requested
Revolving Credit Loan or Acquisition Term Loan when all conditions to a
Revolving Credit Loan or Acquisition Term Loan have been satisfied or waived,
then Agent may, at its option, but shall have no obligation whatsoever to,
purchase all, but not less than all, of the Revolving Credit Notes and
Acquisition Term Notes held by the Lender(s) who so fail or refuse, and to
assume such Lender's commitments to make future Revolving Credit Loan or
Acquisition Term Loans and each such Lender shall be obligated to sell and
transfer such Revolving Credit Notes and Acquisition Term Notes to Agent for a
price in cash equal to the principal balance outstanding plus all accrued but
unpaid interest thereon plus all accrued fees due any such Lender under the
terms hereof, and the foregoing provisions of this Section will be applicable to
Agent with respect to the Revolving Credit Notes or Acquisition Term Notes so
purchased by it. Any such purchase, however, shall not relieve any such Lender
from any breach of contract claims available to Agent and/or Borrower against
such Lender as a result of its failure to make any such Revolving Credit Loan or
Acquisition Term Loan.
(D) The first such Acquisition Term Loan shall, subject to all of the
terms and conditions contained herein, be made on the Tenth Amendment Effective
Date to fund, in part, the purchase price payable in connection with the
transactions contemplated by
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<PAGE>
the Wahlfeld Acquisition Documents. Agent and Lenders agree to
waive compliance with the Acquisition Conditions in respect to
the acquisition contemplated by the Wahlfeld Acquisition
Documents and hereby consent to such acquisition.
5. Interest Rates and Unused Line Fee. Sections 3.1 (A),
(B) and (D) of the Loan Agreement are hereby deleted and the
following are inserted in their stead:
"3.1. Interest, Fees and Charges.
(A) Interest. (i) Interest shall accrue on the Prime Portion
outstanding at the end of each day (computed on the basis of a calendar year of
360 days) at a fluctuating rate per annum equal to the sum of Prime Added Rate
plus the Base Rate. After the date hereof, the foregoing rate of interest shall
be increased or decreased, as the case may be, by an amount equal to any
increase or decrease in the Base Rate, with such adjustments to be effective as
of the opening of business on the day that any such change in the Base Rate
becomes effective. The Base Rate in effect on the date hereof shall be the Base
Rate effective on the opening of business on the date hereof, but if this
Agreement is executed on a day that is not a Business Day, the Base Rate in
effect on the date hereof shall be the Base Rate effective as of the opening of
business on the last Business Day immediately preceding the date hereof.
(ii) Interest shall accrue on each LIBOR Portion
outstanding at the end of each day (computed on the basis of a calendar year of
360 days) at rates equal to the sum of the LIBOR Rate applicable to each such
LIBOR Portion plus the LIBOR Added Rate.
(B) LIBOR Option.
(i) Conditions for Basing Interest on the LIBOR
Rate. Upon the condition that:
(a) Agent shall have received a LIBOR
Request from Borrower at least three (3) Business Days prior
to the first day of the LIBOR Period requested;
(b) There shall have occurred no change
in applicable law which would make it unlawful for Lenders
to obtain deposits of U.S. dollars in the London
interbank foreign currency deposits market;
(c) As of the date of the LIBOR Request and
the first day of the LIBOR Period, there shall exist no
Default or Event of Default which has not been waived by
Required Lenders;
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<PAGE>
(d) Agent shall not have determined in good
faith that Lenders are unable to determine the LIBOR Rate in
respect of the requested LIBOR Period or that Lenders are
unable to obtain deposits of U.S. dollars in the London
interbank foreign currency deposits market in the applicable
amounts and for the requested LIBOR Period; and
(e) As of the first date of the LIBOR
Period, there are no more than six outstanding LIBOR
Portions including the LIBOR Portion in question;
then interest on the LIBOR Portion requested during the LIBOR Period requested
will be based on the applicable LIBOR Rate. Agent shall give each Lender prompt
written notice by telecopier, telex or cable of any LIBOR Request made by
Borrower in accordance with the terms hereof.
(ii) Indemnification for Funding and Other Losses.
Each LIBOR Request shall be irrevocable and binding on Borrower. Borrower shall
indemnify Agent and Lenders as a result of any failure on the part of Borrower
to fulfill, on or before the date specified in any LIBOR Request, the applicable
conditions set forth in this Agreement or as a result of the prepayment of the
applicable LIBOR Portion prior to the last day of the applicable LIBOR Period,
including, without limitation, any loss (including loss of anticipated profits)
or expense incurred by reason of the liquidation or redeployment of deposits or
other funds acquired by Agent or Lenders to fund or maintain the requested LIBOR
Portion, when, as a result of such failure on the part of Borrower or prepayment
by Borrower, interest on such LIBOR Portion is not based on the applicable LIBOR
Rate for the requested LIBOR Period.
(iii) Change in Applicable Laws, Regulations,
etc. If any Legal Requirement shall make it unlawful for any Lender to fund
through the purchase of U.S. dollar deposits any LIBOR Portion, or otherwise to
give effect to its obligations as contemplated under this Section 3.1(B), or
shall impose on any Lender any costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Lender which includes deposits by reference to which the LIBOR Rate is
determined as provided herein or a category of extensions of credit or other
assets of such Lender which includes any LIBOR Portion, or shall impose on any
Lender any restrictions on the amount of such a category of liabilities or
assets which such Lender may hold, (i) Agent may by notice thereof to Borrower
terminate the LIBOR Option, with respect to the Revolving Credit Loans or
Acquisition Term Loans made or to be made by such Lender (ii) any LIBOR Portion
of such Lender's Revolving Credit Loans or Acquisition Term Loans subject
thereto shall immediately bear interest thereafter at the rate provided
13
<PAGE>
for in Section 3.1(A) payable on the dates provided for in Sections 3.5(B)(1),
and 3.5(B)(2). Borrower shall indemnify Agent and Lenders against any loss,
penalty or expense incurred by Lenders by reason of the liquidation or
redeployment of deposits or other funds acquired by Lender to fund or maintain
such LIBOR Portion. If conditions subsequently change so that the foregoing
conditions no longer exist, such Lender shall promptly notify Borrower and Agent
and upon receipt of such notice the LIBOR Option shall be reinstated.
(iv) Taxes. It is the understanding of Borrower
and Agent and Lenders that Lenders shall receive payments of amounts of
principal of and interest on the Revolving Credit Notes and the Acquisition Term
Notes, with respect to the LIBOR Portions from time to time subject to a LIBOR
Option free and clear of, and without deduction for, any Taxes. If (i) any
Lender shall be subject to any such Tax in respect of any such LIBOR Portion or
any part thereof or, (ii) Borrower shall be required to withhold or deduct any
such Tax from any such amount, the LIBOR Rate applicable to such LIBOR Portion
shall be adjusted by Agent on behalf of any such Lender to reflect all
additional costs incurred by such Lender in connection with the payments by any
such Lender or the withholding by Borrower of such Tax and Borrower shall
provide Agent and such Lender with a statement detailing the amount of any such
Tax actually paid by Borrower. Determination by Agent of the amount of such
costs shall, in the absence of manifest error, be conclusive, and at Borrower's
request, Agent shall demonstrate the basis of such determination. If after any
such adjustment, any part of any Tax paid by any such Lender is subsequently
recovered by any such Lender, such Lender shall reimburse Borrower to the extent
of the amount so recovered. A certificate of an officer of such Lender setting
forth the amount of such recovery and the basis therefor shall, in the absence
of manifest error, be conclusive.
* * *
(D) Unused Line Fee. Borrower shall pay to Agent for the ratable
benefit of Lenders an unused line fee equal to the sum of (x) one-half of one
percent (1/2%) per annum of the average monthly amount by which Eighty Million
Dollars ($80,000,000) less any amount by which Borrower has reduced the Maximum
Revolving Credit Loan in accordance with the terms hereof exceeds the sum of the
outstanding principal balance of the Revolving Credit Loans plus the aggregate
amount of all outstanding Letters of Credit and LC Guaranties plus (y) one-half
of one percent (1/2%) per annum of the average monthly amount by which Ten
Million Dollars ($10,000,000) exceeds the amount of undrawn Acquisition Term
Loan Commitments. The unused line fee shall be payable monthly in arrears on the
first day of each calendar month hereafter. Such unused line fee shall be
computed on the basis of a 360 day calendar year."
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6. Term of Agreement. Section 3.3 of the Loan Agreement
is hereby deleted and the following is inserted in its stead:
"3.3. Term of Agreement. Subject to Lenders' right to cease making
Loans to Borrower at any time upon or after the occurrence and during the
continuance of any Default or Event of Default and subject to Borrower's right
to terminate this Agreement pursuant to Section 3.4, this Agreement shall be in
effect for a period through and including July 14, 2000 (the "Term")."
7. Section 3.5 of the Loan Agreement is hereby deleted and
the following is inserted in its stead:
"3.5. Payments. Except where evidenced by notes or other instruments
issued or made by Borrower to Lenders specifically containing payment provisions
which are in conflict with this Section 3.5 (in which event the conflicting
provisions of said notes or other instruments shall govern and control), that
portion of the Obligations consisting of:
(A) Principal, payable on account of Revolving Credit Loans
made by Lenders to Borrower pursuant to Section 2.1 of this Agreement, shall be
payable by Borrower to Agent, on behalf of Lenders, immediately upon the
earliest of (i) the receipt by Agent or any Lenders or Borrower of any proceeds
of any of the Collateral consisting of Accounts or Inventory, to the extent of
said proceeds, which proceeds shall be deposited in the Dominion Account and
distributed as set forth in Section 3.6 and other provisions of this Agreement,
(ii) the occurrence of an Event of Default in consequence of which Required
Lenders elect to accelerate the maturity and payment of the Obligations, and
(iii) termination of this Agreement pursuant to Section 3.4 hereof; provided,
however, that if the principal balance of Revolving Credit Loans outstanding at
any time shall exceed the Borrowing Base at such time, Borrower shall, on
demand, repay the Revolving Credit Loans in an amount sufficient to reduce the
aggregate unpaid principal amount of such Revolving Credit Loans by an amount
equal to such excess. Principal payable on account of the Acquisition Term Loans
shall be payable by Borrower to Agent, for the ratable benefit of Lenders in
accordance with the terms and conditions of the Acquisition Term Notes, as
applicable and the provisions of this Agreement;
(B) Interest accrued on the Prime Portion and the LIBOR
Portion shall be due on the earliest of (i) the first day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in the consequence
of which Required Lenders elect to accelerate the maturity and payment of the
Obligations or (iii) termination of this Agreement pursuant to Section 3.4
hereof; provided, however, the Borrower hereby
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irrevocably authorizes Lenders, in Agent's sole discretion, to advance to
Borrower and to charge to Borrower's Loan Account hereunder as a Revolving
Credit Loan, a sum sufficient each month to pay all interest accrued on the
Prime Portion and on the LIBOR Portion during the immediately preceding month.
(C) Costs, fees and expenses payable pursuant to this
Agreement shall be payable by Borrower, on demand, to Agent or to any other
Person designated by Agent in writing; and
(D) The balance of the Obligations requiring the payment of
money, if any, shall be payable by Borrower to Lenders and/or Agent as and when
provided in this Agreement, the Other Agreements or the Security Documents, or
if no such specific payment provision is so provided, then on demand."
8. Mandatory Prepayments. The following is inserted into
the Loan Agreement as Section 3.9:
"3.9 Proceeds of Sale, Loss, Destruction or Condemnation of Collateral.
Except as provided in Section 7.4 hereof, if Borrower sells any of the Equipment
or real Property, or if any of the Collateral is lost or destroyed or taken by
condemnation, Borrower shall pay to Agent for the ratable benefit of Lenders,
unless otherwise agreed by Required Lenders, as and when received by Borrower
and as a mandatory prepayment of (x) the Acquisition Term Loans or (y) if the
Acquisition Term Loans are paid in full, the outstanding Revolving Credit Loan a
sum equal to the proceeds (including insurance payments) net of any reasonable
costs of sale or disposition and provisions for any income tax expense incurred
as a result of such sale or disposition received by Borrower from such sale,
loss, destruction or condemnation. Any such prepayments shall be applied ratably
among Lenders to principal installments due under the Acquisition Term Notes, as
applicable, in inverse order of maturity. Such prepayments shall be governed by
the provisions of Section 7.4. The foregoing notwithstanding, if the insurance
or condemnation cash proceeds from any such loss or condemnation of Collateral
are Two Hundred Fifty Thousand Dollars ($250,000) or less and if there is no
existing and continuing Event of Default, Agent shall apply such proceeds to
outstanding Revolving Credit Loans and, absent any subsequent Event of Default,
shall make additional Revolving Credit Loans in the amount of such insurance or
condemnation proceeds to Borrower in order to permit Borrower to replace or
repair such lost, damaged, destroyed or condemned Equipment, Property or other
Collateral."
9. Collateral. Section 4.1 of the Loan Agreement is
hereby deleted and the following is inserted in its stead:
"4.1. Security Interest in Collateral. To secure the
prompt payment and performance to Agent and Lenders of the
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Obligations, Borrower hereby grants to Agent, for its benefit and the ratable
benefit of Lenders, a continuing security interest in and Lien upon the
following Property of Borrower, whether now owned or existing or hereafter
created, acquired or arising and wheresoever located:
(A) Accounts;
(B) Inventory;
(C) Equipment;
(D) General Intangibles;
(E) All monies and other Property of any kind, now or at any
time or times hereafter, in the possession or under the control of Agent or any
Lender or a bailee of Agent or any Lender;
(F) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (A), (B), (C), (D) and (E) above,
including, without limitation, proceeds of and unearned premiums with respect to
insurance policies insuring any of the Collateral;
(G) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (A), (B), (C), (D), (E)
or (F) above.
Notwithstanding the foregoing, Collateral shall not include (1) any
licenses or permits the encumbrance of which would violate any law, statute or
regulation or (2) any contract rights (including, without limitation, any
contracts or leases), the encumbrance of which would violate the terms of the
agreements establishing such rights; provided that Borrower shall use reasonable
good faith efforts to obtain any necessary consent to enable any such contract
right to be included within the Collateral.
10. Dispositions of Equipment. The following is inserted
into the Loan Agreement as Section 7.4:
"7.4 Dispositions of Equipment. Borrower will not sell, lease or
otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Agent; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Borrower's Equipment made after July 24,
1997 which, in the aggregate in respect to all such dispositions made after July
24, 1997 by Borrower during any consecutive twelve-month period, has a fair
market value or book value,
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whichever is less, of Two Hundred Fifty Thousand Dollars ($250,000) or less,
provided that all proceeds thereof are remitted to Agent for application to the
Loans pursuant to Section 3.9 or are expended pursuant to clause (ii) of this
sentence, (iii) replacements of Equipment that is substantially worn, damaged,
redundant, replaceable with better Equipment or obsolete with Equipment of like
kind, function and value provided that the replacement Equipment shall be
acquired prior to or concurrently or within 90 days of the disposition of the
worn, damaged, redundant, replaceable with better Equipment, or obsolete
Equipment, the replacement Equipment shall be free and clear of Liens other than
Permitted Liens that are not Purchase Money Liens (except to the extent that the
replaced equipment was subject to a Purchase Money Lien), and Borrower shall
have given Agent at least 5 days prior written notice of such disposition; or
(iii) dispositions of Borrower's Equipment made prior to July 25, 1997.
11. Negative Covenants. Section 9.2 (A) and 9.2(L) of the
Loan Agreement are hereby deleted and the following are inserted
in their stead:
"9.2(A) Mergers; Consolidations; Acquisitions. Merge or consolidate, or
permit any Subsidiary of Borrower to merge or consolidate, with any Person; nor
acquire, nor permit any of its Subsidiaries to acquire, all or any substantially
all of the Properties of any Person, except in respect to (i) a consolidation or
merger involving only Borrower and one or more wholly-owned Subsidiaries or
involving only two or more wholly-owned Subsidiaries of Borrower and (ii) a
Permitted Acquisition."
* * *
(L) Capital Expenditures. Make Capital Expenditures which, in the
aggregate, as to Borrower and its Subsidiaries, exceed, (i) during any fiscal
year of Borrower (other than fiscal year 1997) Five Million Dollars ($5,000,000)
or (ii) during fiscal year 1997 of Borrower Six Million Dollars ($6,000,000)
(exclusive of the purchase price payable pursuant to the Wahlfeld Acquisition
Documents)."
* * *
12. Financial Covenants. Section 9.3 of the Loan Agreement
is hereby deleted and the following is inserted in its stead:
"9.3. Specific Financial Covenants. During the Term of
this Agreement, and thereafter for so long as there are any
Obligations to Agent or any Lender, Borrower covenants that,
unless otherwise consented to by Required Lenders in writing, it
shall:
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(A) Minimum Net Worth. Maintain at the end of each fiscal quarter
within the term hereof a Tangible Net Worth of not less than the amount shown
below for the fiscal quarter corresponding thereto:
Fiscal Quarter Ending Amount
March 31, 1997 $43,500,000
June 30, 1997 $44,100,000
September 30, 1997 $44,100,000
December 31, 1997 and the last day
of each fiscal quarter thereafter $44,500,000
(B) Total Liabilities to Tangible Net Worth Ratio. Have at the end of
each month within the Term hereof, a ratio of Indebtedness (computed in
accordance with GAAP) to Tangible Net Worth equal to or less than the ratio set
forth opposite such month in the following schedule:
Month Ending Ratio
January 31, 1997 and February 28, 19971.80 to 1
March 31, 1997, April 30, 1997 and May
31, 1997 1.97 to 1
June 30, 1997, July 31, 1997 and August
31, 1997 2.10 to 1
September 30, 1997, October 31, 1997
and November 30, 1997 2.00 to 1
December 31, 1997 and the last day
of each month thereafter 1.75 to 1
(C) Interest Coverage Ratio. Have at the end of each fiscal quarter of
Borrower within the Term hereof, commencing with the fiscal quarter ending March
31, 1997, an Interest Coverage Ratio for the twelve consecutive months then
ended equal to or greater than the Interest Coverage Ratio set forth opposite
the last day of each such fiscal quarter in the following schedule:
Fiscal Quarter Ending Interest Coverage Ratio
March 31, 1997 2.75 to 1
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June 30, 1997 1.50 to 1
September 30, 1997 1.50 to 1
December 31, 1997 1.75 to 1
March 31, 1998 1.75 to 1
June 30, 1998 2.00 to 1
September 30, 1998 2.25 to 1
December 31, 1998 2.25 to 1
March 31, 1999 2.50 to 1
June 30, 1999 2.50 to 1
September 30, 1999 and the last day
of each fiscal quarter thereafter 2.75 to 1
(D) Fixed Charge Coverage Ratio. Have the end of each fiscal quarter of
Borrower within the Term hereof, commencing with the fiscal quarter ending
December 31, 1997, a Fixed Charge Coverage Ratio for the twelve consecutive
months then ended equal to or greater than the ratio set forth opposite the last
day of each such fiscal quarter in the following schedule:
Fiscal Quarter Ending Fixed Charge Coverage Ratio
December 31, 1997 .50 to 1
March 31, 1998 1.00 to 1
June 30, 1998 1.25 to 1
September 30, 1998 1.25 to 1
December 31, 1998 and the last day
of each fiscal quarter thereafter 1.50 to 1
13. Intentionally Omitted.
14. Conditions Precedent. This Tenth Amendment shall
become effective upon the satisfaction of the following
conditions precedent:
14.1 Agent shall have received each of the following
documents, in form and substance satisfactory to it:
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(A) The Tenth Amendment executed by Borrower, each Lender
and Agent;
(B) A Certificate of the Secretary of Borrower, together with true and
correct copies of the Certificate of Incorporation and Bylaws of Borrower, and
all amendments thereto, true and correct copies of the resolutions of the Board
of Directors of Borrower authorizing or ratifying the execution, delivery and
performance of this Tenth Amendment, the Acquisition Term Notes the Revolving
Notes, the other Security Documents and any Other Agreements to be executed in
connection with this Tenth Amendment, and the names of the officer of officers
of each Borrower authorized to sign this Tenth Amendment, the Acquisition Term
Notes, the Revolving Notes, the other Security Documents and Other Agreements to
be executed in connection with this Tenth Amendment, together with a sample of
the true signature of each such officer;
(C) The Acquisition Term Notes evidencing the Five Million Dollars
($5,000,000) Acquisition Term Loan, the proceeds of which are to be used to
fund, in part, the purchase price payable pursuant to the Wahlfeld Acquisition
Documents;
(D) Amended and Restated Revolving Notes (the "Revolving
Notes"). The outstanding Revolving Note previously delivered to
Lenders are hereinafter referred to as the "Original Revolving
Note;"
(E) First Mortgage in respect to the Property referred in
clause (iii) of the definition of Mortgages (the "Oshkosh
Property");
(F) Fully paid mortgagee title insurance policies (or binding
commitments to issue title insurance policies, marked to Agent's satisfaction to
evidence the form of such policies to be delivered after the Closing Date), in
standard ALTA form, issued by a title insurance company satisfactory to Lender,
each in an amount equal to not less than the fair market value of the Oshkosh
Property, insuring that the Mortgages on such real Property shall create a valid
Lien on all such real Property described therein with no exception which Agent
shall not have approved in writing;
(G) An ALTA Survey with respect to the Oshkosh Property;
(H) UCC-1 Financing Statements for filing in the central filing office
of the State of Wisconsin and such other states as Agent reasonably deems
appropriate;
(I) The favorable, written opinion, of Winthrop, Stimson,
Putnam & Roberts, a counsel to Borrower, as to the transactions
21
<PAGE>
contemplated by this Tenth Amendment and any of the other Loan
Documents to be executed in connection with the Tenth Amendment;
(J) Mortgage releases and UCC-3 termination statements from Harris
Trust and Savings Bank in respect to the Oshkosh Property and the Equipment
located thereon;
(K) The Wahlfeld Acquisition Documents; and
(L) Such other documents, instruments and agreements as Agent shall
reasonably request in connection with the foregoing matters.
14.2. Upon the satisfaction of each of the above-listed
conditions precedent, Lenders shall return the Original Revolving
Notes marked "Amended and Superseded."
14.3 The foregoing notwithstanding Agent may elect to waive fulfillment
of the condition precedent listed in Section 14.1(B) and permit this Tenth
Amendment to become effective and permit Borrower to close the acquisition
contemplated by the Wahlfeld Acquisition Documents. In the event that Agent so
elects to waive such condition precedent, then; (i) Borrower agrees to deliver
the Certificate of Secretary referenced to therein to Agent on or prior to
August 1, 1997 and failure to make such delivery shall constitute an Event of
Default; (ii) the Maximum Revolving Credit Loan shall be limited to Sixty-Five
Million Dollars ($65,000,000) until Borrower makes such delivery; (iii) Lenders
shall not be required to make any Acquisition Term Loans until such delivery is
made; (iv) the Lender's Revolving Credit Loan Commitments and Revolving Credit
Percentages in effect prior to the execution of this Tenth Amendment shall
remain in effect until such Certificate of Secretary is delivered to Borrower;
and (v) Borrower may fund the purchase price payable pursuant to the Wahlfeld
Acquisition Documents from the proceeds of Revolving Credit Loans. Upon delivery
of such Certificate of Secretary, Borrower may drawn down the initial $5,000,000
Acquisition Term Loan provided that the proceeds thereof shall be used to the
extent required, to pay down the Revolving Credit Loan in an amount equal to the
purchase price payable under the Wahlfeld Acquisition Documents.
15. Amendment Fee. In order to induce Agent and Lenders to
enter into this Tenth Amendment, Borrower agrees to pay Agent,
for the ratable benefit of Lenders, an amendment fee in the
amount of One Hundred Fifty Thousand Dollars ($150,000).
16. Continuing Effect. Except as otherwise specifically
set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.
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<PAGE>
IN WITNESS WHEREOF, this Tenth Amendment has been duly executed as of
the day and year specified at the beginning hereof.
MORGAN PRODUCTS LTD. ("Borrower")
By: ____________________________________
Name:______________________________
Title:_____________________________
FLEET CAPITAL CORPORATION
("Agent" and "Lender")
By:_____________________________________
Name:______________________________
Title:_____________________________
Revolving Loan Commitment: $48,888,889.22
Acquisition Term Loan Commitment: $6,111,110.78
HARRIS TRUST AND SAVINGS BANK ("Lender")
By:_____________________________________
Name:______________________________
Title:_____________________________
Revolving Loan Commitment: $13,333,333.00
Acquisition Term Loan Commitment: $1,666,667.00
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, ("Lender"), Successor by
Merger to Bank of American Illinois
By:_____________________________________
Name:______________________________
Title:_____________________________
Revolving Loan Commitment: $17,777,777.78
Acquisition Term Loan Commitment: $2,222,222.22
23
<PAGE>
EXHIBIT A-1
SECURED PROMISSORY NOTE
(Acquisition Term Note)
$___________ ___________, 19__
-------------,-----
FOR VALUE RECEIVED, the undersigned hereinafter "Borrower"), hereby
promises to pay to the order of, a ___________________ corporation (hereinafter
"Lender"), or its registered assigns at the office of Fleet Capital Corporation,
as agent for such Lender, or at such other place in the United States of America
as the holder of this Note may designate from time to time in writing, in lawful
money of the United States, in immediately available funds, at the time of
payment, the principal sum of___________________________ Dollars ($_______),
together with interest from and after the date hereof on the unpaid principal
balance outstanding from time to time.
This Secured Promissory Note (the "Note") is one of the Acquisition
Term Notes referred to in, and is issued pursuant to, that certain Loan and
Security Agreement dated as of July 14, 1994 by and among Borrower, the lender
signatories thereto (including Lender) and Fleet Capital Corporation ("FCC") as
Agent for said lenders (FCC in such capacity "Agent") (hereinafter, as amended
from time to time, the "Loan Agreement"), and is entitled to all of the benefits
and security of the Loan Agreement. All of the terms, covenants and conditions
of the Loan Agreement and the Security Documents, as amended from time to time,
are hereby made a part of this Note and are deemed incorporated herein in full.
All capitalized terms used herein, unless otherwise specifically defined in this
Note, shall have the meanings ascribed to them in the Loan Agreement.
For so long as no Event of Default shall have occurred and be
continuing the principal amount and accrued interest of this Note shall be due
and payable on the dates and in the manner hereinafter set forth:
(a) Interest on the unpaid principal balance outstanding from time to
time shall be paid at such interest rates and at such times as are
specified in the Loan Agreement;
(b) Principal shall be due and payable monthly commencing on
__________, 19__, (September 1, 1997 in respect to the first
Acquisition Term Loan), and continuing on the first day of each month
thereafter to and including __________, 200__ in installments of (x)
_____________________ Dollars ($_______) on the first day of each month
for the period from _______________, 199__ to and including _________,
200 and (y) _____________________ Dollars ($________) on the first day
of each month for the period from
<PAGE>
___________, 200__ to and including _____________, 200__;
and
(c) The entire remaining principal amount then outstanding, together
with any and all other amounts due hereunder, shall be due and payable
on the Commitment Termination Date.
Notwithstanding the foregoing, the entire unpaid principal balance and accrued
interest on this Note shall be due and payable immediately upon any termination
of the Loan Agreement pursuant to Section 4 thereof.
This Note shall be subject to mandatory prepayment in accordance with
the provisions of Section 3.9 of the Loan Agreement. Borrower may also prepay
this Note at any time without penalty or premium except as otherwise provided in
Section 3.1(B) of the Loan Agreement.
Upon the occurrence, and during the continuation, of an Event of
Default, this Note shall or may, as provided in the Loan Agreement, become or be
declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note
may only be transferred in accordance with the provisions of the Loan Agreement.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Illinois.
MORGAN PRODUCTS LTD.,
a Delaware corporation
By: _______________________________
Name:_________________________
Title:________________________
2
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