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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): February 19, 1999
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MORGAN PRODUCTS LTD.
(Exact Name of Registrant as Specified in Charter)
Delaware 06-1095650
(State or Other (I.R.S. Employer
Jurisdiction of Incorporation) Identification No.)
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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2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to an Asset Purchase Agreement dated as of December 22, 1998, by
and among Morgan Products Ltd. (the "Company"), Adam Wholesalers, Inc. and
certain subsidiaries of Adam Wholesalers, Inc. (together with Adam Wholesalers,
Inc. "Adam"), as amended (the "Agreement"), on the Effective Date (as defined in
the Agreement), the Company purchased certain of the assets and assumed certain
of the liabilities of Adam used by Adam in its business of distributing windows,
doors and other millwork products. The Company intends to continue using the
purchased assets for such purposes. The purchased assets generally include
substantially all of the fixed assets and inventories of Adam used in its
distribution business.
Under the terms of the Agreement, the purchase price, as generally derived
from the book value of the purchased assets, was approximately $54 million. The
purchase price will be adjusted upward or downward to the extent the value of
Adam's inventory as of the Effective Date is greater or less than the estimated
book value of such inventory prior to the closing date. Such determination is
expected to be made within 20 days following the closing date, as provided in
the Agreement. The Company paid the purchase price in cash on February 19, 1999,
less $2 million that was transferred into an escrow account pending post closing
adjustments.
In order to finance the acquisition of Adam pursuant to the Agreement, as
of February 19, 1999, the Company, the Lenders party thereto and Fleet Capital
Corporation, as agent to the Lenders ("Fleet"), entered into the Second
Amendment (the "Second Amendment") to the Amended and Restated Loan and Security
Agreement, as amended (the "Loan Agreement"; and together with the Second
Amendment, the "Amended Loan Agreement").
The Second Amendment increased the Company's total credit facility to a
maximum of $120 million from $65 million, including an increase in the revolving
credit facility by $35 million to $100 million (including a letter of credit
facility of up to $5 million) and the addition to the credit facility of a term
loan line and a bridge term loan line of $10 million each. Pursuant to the
Second Amendment all loans under the credit facility may be used solely for
payment of the purchase price pursuant to the Agreement, for the Company's
operating and capital needs and for other corporate purposes in a manner
consistent with the provisions of the Amended Loan Agreement and all applicable
laws. The Second Amendment also altered several financial covenants under the
Company's credit facility (which alterations are generally favorable to the
Company) and added certain minimum EBITDA and minimum availability covenants.
The Amended Credit Agreement is effective through January 31, 2004.
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 information that may be required will be
filed as soon as practicable, but not later than 60 days from the date hereof.
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(c) Exhibits
Exhibit No. Description
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2. Asset Purchase Agreement dated December 22, 1998 by and
among Morgan Products Ltd., Adam Wholesalers, Inc. and
certain subsidiaries of Adam Wholesalers, Inc.
99. Second Amendment to the Amended and Restated Loan and
Security Agreement dated as of February 19, 1999 by and among
Morgan Products Ltd., the Lenders party thereto and
Fleet Capital Corporation, 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 behalf by the undersigned
hereunto duly authorized.
MORGAN PRODUCTS LTD.
By: /s/ Mitchell J. Lahr
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Mitchell J. Lahr
Vice President, Chief Financial
Officer and Secretary
DATE: March 2, 1999
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INDEX TO EXHIBITS
Exhibit No. Description
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2. Asset Purchase Agreement dated December 22, 1998 by and
among Morgan Products Ltd., Adam Wholesalers, Inc. and
certain subsidiaries of Adam Wholesalers, Inc.
99. Second Amendment to the Amended and Restated Loan and
Security Agreement dated as of February 19, 1999 by and among
Morgan Products Ltd., the Lenders party thereto and
Fleet Capital Corporation, as agent for the Lenders.
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ASSET PURCHASE AGREEMENT
by and among
MORGAN PRODUCTS LTD.,
ADAM WHOLESALERS, INC.,
and certain
SUBSIDIARIES
OF ADAM WHOLESALERS, INC.
Dated as of December 22, 1998
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TABLE OF CONTENTS
Page No.
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ARTICLE I PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES.............1
Section 1.1 Agreement of Purchase and Sale...............................1
Section 1.2 Assumed Liabilities..........................................2
Section 1.3 Purchase Price; Allocation...................................2
Section 1.4 Purchase Price Adjustment....................................2
Section 1.5 Instruments of Conveyance and Transfer; Further
Assurances; Access...........................................3
ARTICLE II CLOSING...........................................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER.....................4
Section 3.1 Organization; Good Standing; Qualifications..................4
Section 3.2 Authority; Consents; Enforceability..........................4
Section 3.3 Capitalization...............................................5
Section 3.4 Financial Statements.........................................5
Section 3.5 Absence of Certain Changes...................................6
Section 3.6 Material Contracts...........................................7
Section 3.7 Title to Purchased Assets and Related Matters................8
Section 3.8 Real Property................................................8
Section 3.9 Machinery, Equipment, Etc....................................8
Section 3.10 Inventories of the Seller....................................8
Section 3.11 Approvals, Permits and Authorizations........................9
Section 3.12 Compliance with Laws.........................................9
Section 3.13 Taxes........................................................9
Section 3.14 Litigation...................................................9
Section 3.15 Employee Relations...........................................9
Section 3.16 Compensation................................................10
Section 3.17 Trade Name..................................................10
Section 3.18 No Undisclosed Liabilities..................................10
Section 3.19 Certain Transactions........................................10
Section 3.20 Business Generally..........................................11
Section 3.21 Employee Benefits...........................................11
Section 3.22 Suppliers and Customers.....................................11
Section 3.23 Environmental Matters.......................................11
Section 3.24 Misstatements and Omissions.................................12
Section 3.25 Systems; Year 2000 Compliance...............................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER......................13
Section 4.1 Organization and Good Standing..............................13
Section 4.2 Authority; Consents; Enforceability.........................13
Section 4.3 Litigation..................................................14
ARTICLE V PRE-CLOSING COVENANTS OF THE SELLER...............................14
Section 5.1 Provide Access to Information...............................14
Section 5.2 Operation of Business.......................................14
Section 5.3 Retention of Employees......................................15
Section 5.4 Additional Information......................................15
Section 5.5 Publicity...................................................15
Section 5.6 Other Negotiations..........................................15
Section 5.7 Closing Conditions..........................................15
Section 5.8 Environmental Audit.........................................15
Section 5.9 HSR Act.....................................................15
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ARTICLE VI PRE-CLOSING COVENANTS OF THE BUYER...............................16
Section 6.1 Publicity...................................................16
Section 6.2 Closing Conditions..........................................16
Section 6.3 HSR Act.....................................................16
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER................16
Section 7.1 Representations and Warranties..............................16
Section 7.2 Performance of Obligations of the Seller....................16
Section 7.3 Closing Certificate.........................................17
Section 7.4 Opinion of Counsel..........................................17
Section 7.5 Supporting Documents........................................17
Section 7.6 Bill of Sale, Etc...........................................17
Section 7.7 Books and Records...........................................17
Section 7.8 Change of Name of Seller; Use of Seller's
Name by Buyer...............................................17
Section 7.9 Consents....................................................17
Section 7.10 No Litigation...............................................18
Section 7.11 Authorizations..............................................18
Section 7.12 No Material Adverse Change or Undisclosed Liability.........18
Section 7.13 Approval of Legal Matters...................................18
Section 7.14 Bulk Sales Requirements.....................................18
Section 7.15 Satisfactory Review.........................................18
Section 7.16 Adverse Laws................................................18
Section 7.17 Receivables Collection and Returns Agreement................18
Section 7.18 Non-Competition Agreements..................................18
Section 7.19 Employment of Certain Employees.............................19
Section 7.20 Certain Approvals...........................................19
Section 7.21 Escrow Agreement............................................19
Section 7.22 Leases......................................................19
Section 7.23 Hart-Scott-Rodino Waiting Period............................19
Section 7.24 The Stock Transaction.......................................19
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER..............19
Section 8.1 Representations and Warranties..............................19
Section 8.2 Performance of Obligations of the Buyer.....................19
Section 8.3 Closing Certificate.........................................20
Section 8.4 Payment of Purchase Price...................................20
Section 8.5 Supporting Documents........................................20
Section 8.6 Approval of Legal Matters...................................20
Section 8.7 No Litigation...............................................20
Section 8.8 Receivables Collection and Returns Agreement................20
Section 8.9 Hart-Scott-Rodino Waiting Period............................20
Section 8.10 Assignment and Assumption of Liabilities....................20
Section 8.11 The Stock Transaction.......................................20
ARTICLE IX ...................................................................20
TRANSFER TAXES; PRORATION OF CHARGES SURVIVAL OF REPRESENTATIONS
AND WARRANTIES................................................................21
Section 9.1 Certain Taxes and Fees......................................21
Section 9.2 Proration of Certain Charges................................21
Section 9.3 Survival of Representations and Warranties..................21
ARTICLE X INDEMNIFICATION...................................................21
Section 10.1 Agreement to Indemnify by the Seller
Indemnifying Parties........................................21
Section 10.2 Agreement to Indemnify by the Buyer.........................22
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Section 10.3 Procedures Regarding Third Party Claims.....................23
Section 10.4 Certain Limitations.........................................23
ARTICLE XI TERMINATION......................................................23
ARTICLE XII MISCELLANEOUS PROVISIONS........................................24
Section 12.1 Access to Books and Records.................................24
Section 12.2 Confidentiality.............................................24
Section 12.3 Certain Severance Costs.....................................24
Section 12.4 Remedies....................................................24
Section 12.5 Notices.....................................................24
Section 12.6 Parties in Interest; No Third Party Beneficiaries...........26
Section 12.7 Assignability...............................................26
Section 12.8 Entire Agreement; Amendment.................................26
Section 12.9 Governing Law; Arbitration..................................26
Section 12.10 Knowledge...................................................27
Section 12.11 Appointment of Attorney-in Fact.............................27
Section 12.12 Waivers.....................................................27
Section 12.13 Severability................................................28
Section 12.14 Expenses....................................................28
Section 12.15 Schedules...................................................28
Section 12.16 Bulk Sales..................................................28
Section 12.17 Covenant Regarding Net Worth................................28
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of this 22nd day of December, 1998, by and among MORGAN PRODUCTS LTD., a
Delaware corporation (the "Buyer"), ADAM WHOLESALERS, INC., an Ohio corporation
(the "Seller"), and the subsidiaries of the Seller listed on the signature page
to this Agreement (the "Subsidiaries").
W I T N E S S E T H:
WHEREAS, the Seller and the Subsidiaries own and operate assets related to
their collective sash and door business (the "Business"); and
WHEREAS, the Buyer desires to purchase from the Seller and such
Subsidiaries certain of such assets, and to assume certain liabilities related
to the Business, all upon the terms and conditions hereinafter set forth; and
WHEREAS, the Seller is willing to sell, transfer, convey, assign and
deliver (or cause to be sold, transferred, conveyed, assigned and delivered) the
same to the Buyer upon the terms and conditions hereinafter set forth.
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:
ARTICLE I
PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF LIABILITIES
Section 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 such term is defined in Article
2 hereof), 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 and the
Subsidiaries' right, title and interest in and to all the assets of the Seller
and the Subsidiaries described on Schedule 1.1(a) hereto, but excluding,
however, the assets described on Schedule 1.1(b) hereto (the "Excluded Assets")
(said assets, other than the Excluded Assets, constituting the "Purchased
Assets"). The Purchased Assets (excluding the Excluded Assets) constitute all of
the assets used in the Business and 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").
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Section 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 and the Subsidiaries
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 and the Subsidiaries shall retain and remain responsible for, any and all
obligations and liabilities of the Seller and the Subsidiaries of any nature
whatsoever, whether past, current or future, whether accrued, contingent, known
or unknown.
Section 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 of Fifty Four Million One Hundred Eighty Four Thousand Dollars
($54,184,000) (as the same may be adjusted pursuant to Section 1.4 below) (the
"Purchase Price"), Fifty Two Million One Hundred Eighty Four Thousand Dollars
($52,184,000) of which 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) full Business Day prior to the Closing Date (as defined herein)
and Two Million Dollars ($2,000,000) of which (the "Escrowed Funds") shall be
placed in escrow pursuant to an escrow agreement substantially in the form of
Exhibit A attached hereto (the "Escrow Agreement"), and payable to the Seller as
provided in the Escrow Agreement. For purposes of this Agreement, a Business Day
is a day other than a Saturday, a Sunday or a day on which banks are required or
authorized to be closed in the State of Virginia.
(b) Stock Transaction. The Buyer shall also grant to George E.
Thurner, Jr., a primary stockholder of the Seller ("Thurner"), an option to
purchase 300,000 shares of the Buyer's common stock at a price per share of
$3.00 or shall otherwise confer upon Thurner the economic benefit of such a
grant (such transaction to be referred to herein as the "Stock Transaction").
The terms and conditions of the Stock Transaction (as well as documentation with
respect thereto) shall be mutually agreed by the parties hereto in their
reasonable discretion and acting in good faith, at or prior to the Closing.
(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.
Section 1.4 Purchase Price Adjustment. The Purchase Price shall be subject
to adjustment after the Closing as specified in this Section 1.4:
(a) Closing Date Schedule. As promptly as practicable, but in any
event within ten (10) calendar days following the Closing Date, the Buyer and
the Seller shall prepare, jointly and in cooperation with their accountants, a
schedule of Inventory (as defined in Schedule 1.1(a)) of the Business as of the
Closing Date (the "Closing Inventory Schedule"). The parties shall jointly
conduct a physical inventory as of the Closing Date for the purpose of preparing
the Closing Inventory Schedule. The parties shall be permitted to make whatever
tests the parties
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deem necessary to confirm the accuracy of the Inventory Value (as defined in
Schedule 1.4) and the counting procedures used. The Closing Inventory Schedule
shall set forth the information, and shall be prepared in the manner, set forth
in Schedule 1.4 attached hereto.
(b) Cooperation. During the preparation of the Closing Inventory
Schedule and any period of dispute with respect thereto, each of the Seller and
the Buyer shall cooperate with the other party and provide the other party with
access to all books, records and personnel as the other party reasonably
requests.
(c) Disputes. In the event that, by the end of twenty (20) says
following the Closing Date the parties cannot come to final, written agreement
with respect to the conclusive Closing Inventory Schedule, either party may, by
written notice to the other party, submit all unresolved disputes to Ernst &
Young LLP in Chicago, Illinois. The parties shall instruct the arbitrator to
issue its determination within fifteen (15) days of its engagement. The
arbitrator shall determine who shall bear the costs of arbitration and/or in
what proportions. The determination of the arbitrator shall be final, binding
and conclusive upon the parties.
(d) Purchase Price Adjustment.
(i) The Purchase Price shall be adjusted downward by an
amount, if any, by which the Inventory Value, as shown on the final
Closing Inventory Schedule, is less than $42,289,000.
(ii) The Purchase Price shall be adjusted upward by an amount,
if any, by which the Inventory Value, as shown on the final Closing
Inventory Schedule, exceeds $42,289,000.
(e) Payments. Any downward adjustment to the Purchase Price shall be
paid by the Seller to the Buyer within three (3) Business Days of the Closing
Inventory Schedule becoming final and shall be satisfied by the release of such
amount to the Buyer from the Escrowed Funds. If the Escrowed Funds are not
sufficient to fully satisfy such downward adjustment, the Seller shall pay any
such shortfall amount in cash by wire transfer in immediately available funds.
Any upward adjustment to the Purchase Price shall be paid by the Buyer to the
Seller within three (3) Business Days of the Closing Inventory Schedule becoming
final and shall be paid in cash by wire transfer in immediately available funds.
Section 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 B 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.
(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
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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 II
CLOSING
The sale and purchase of the Purchased Assets contemplated hereby shall
take place at a closing (the "Closing") mutually acceptable location, at 10:00
a.m. local time on December 31, 1998 or on the date that is five business days
after all of the conditions to Closing set forth in Articles VII and VIII have
been satisfied or waived by the party so entitled to waive them, (the "Closing
Date") unless another date or place is agreed to in writing by the Seller and
the Buyer. The transactions contemplated by this agreement will take financial
effect (regardless of Closing Date) as of December 31, 1998 (the "Effective
Date") (including, without limitation, valuation of Inventory pursuant to
Section 1.4 as of the Effective Date and income from business for Buyer's
account as of the Effective Date).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLER
The Seller hereby represents and warrants to the Buyer as follows:
Section 3.1 Organization; Good Standing; Qualifications. Each of the
Subsidiaries and the Seller is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation. The
Seller is not and none of the Subsidiaries is qualified as a foreign corporation
in any foreign jurisdiction, nor is the seller or any Subsidiary required by the
nature of the Business and the Purchased Assets to be so qualified.
Section 3.2 Authority; Consents; Enforceability.
(a) Authority. Each of the Subsidiaries and the Seller has full
corporate power and authority to carry on its business as now conducted. Each of
the Subsidiaries and the Seller has full power, authority 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 his, hers or its obligations hereunder and thereunder. The execution and
delivery by the Seller and the Subsidiaries of this Agreement and the other
agreements, documents and instruments contemplated hereby, the consummation by
the Seller and the Subsidiaries of the transactions contemplated hereby and
thereby and the performance by the Seller and the Subsidiaries of their
respective obligations hereunder and thereunder have been duly and validly
authorized by all necessary action, including, without limitation, all necessary
shareholder and corporate action. The execution and delivery by the Seller and
the Subsidiaries 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 and the
Subsidiaries of their respective obligations hereunder and thereunder do not and
will not, except as set forth on Schedule 3.2(a) hereto, (i) conflict with
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or violate any of the provisions of the certificate of incorporation or by-laws,
each as amended, of the Seller or any Subsidiary, (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 Seller, any Subsidiary, 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 or any
Subsidiary 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 or any
Subsidiary is a party or by which the Seller, any Subsidiary 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 in 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, the Subsidiaries 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
and the Subsidiaries of their respective 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 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 or any Subsidiary in connection herewith shall, when so
executed and delivered, constitute, the legal, valid and binding obligations of
the Seller or the Subsidiaries, as the case may be, enforceable against the
Seller or the Subsidiaries, as the case may be, 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.
Section 3.3 Capitalization. All issued and outstanding shares of capital
stock of the Seller are held of record and beneficially by the shareholders of
the Seller listed on Schedule 3.3 hereto in the amounts set forth opposite their
names on Schedule 3.3 free and clear of any Encumbrances. All issued and
outstanding shares of capital stock of the Subsidiaries are held of record and
beneficially by the shareholders of the Subsidiaries listed on Schedule 3.3
hereto in the amounts set forth opposite their names on Schedule 3.3, free and
clear of any Encumbrances. Neither the Subsidiaries not the Seller has any
outstanding subscriptions, options, warrants, calls, contracts, commitments,
convertible securities or other instruments, agreements or arrangements of any
character or nature whatsoever under which any Subsidiary or the Seller is or
may be obligated to issue any shares of its capital stock.
Section 3.4 Financial Statements.
(a) The Seller has delivered to the Buyer as set forth on Schedule
3.4:
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(i) The audited balance sheets of the Business as of December
31, 1997 and 1996, and the related audited statements of income,
stockholders' equity 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 Deloitte &
Touche LLP, the Seller's independent certified public accountants
(collectively, the "Annual Financial Statements"); and
(ii) The unaudited balance sheet of the Business as of October
31, 1998 and the related unaudited statements of income for the ten 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 and the Subsidiaries, (ii) are true, correct and
complete, (iii) fully and fairly present the financial condition and results of
the operations of the Seller and the Subsidiaries as of and for the periods
indicated, and (iv) have been prepared in accordance with generally accepted
accounting principles consistently applied.
Section 3.5 Absence of Certain Changes. Since December 31, 1997 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 termination, amendment, cancellation or waiver of any
material contract (of the type described in Section 3.6 hereof) or any
termination, amendment, cancellation or waiver of any rights or claims of the
Seller or any Subsidiary under any such material contract (except in each case
in the ordinary course of business and consistent with past practices);
(b) Any change in the accounting methods, procedures or practices
followed by the Seller and the Subsidiaries or any change in depreciation or
amortization policies or rates theretofore adopted by the Seller and the
Subsidiaries;
(c) Any material change in policies, operations or practices with
respect to business operations followed by the Seller and the Subsidiaries,
including, without limitation, with respect to selling methods, returns,
discounts, sales incentive programs or other terms of sale, or with respect to
the policies, operations or practices of the Seller and the Subsidiaries
concerning their employees;
(d) Any strikes, work stoppages or other labor disputes involving
the employees of the Business;
(e) Any write-down or write-up of the value of any inventory or
equipment of the Business;
(f) Any forward purchase or sales contracts or commitments;
(g) Any sales contracts or commitments which will be in excess of
the capacity of the Business as of the date of the Closing;
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(h) Any other change in the condition (financial or otherwise),
business operations, assets, earnings, business or prospects of the Business
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
(i) Any agreement, whether in writing or otherwise, by the Seller or
any Subsidiary to take or do any of the actions enumerated in this Section 3.5.
Section 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) INTENTIONALLY LEFT BLANK;
(ii) contracts relating to the leasing (as lessor or lessee)
or to the conditional purchase or sale by the Business of any property,
real, personal or mixed (the "Lease Agreements");
(iii) agreements which restrict the Seller or any Subsidiary
from doing business with any other person or entity in any geographic area
or from producing or selling any product;
(iv) any employment or consulting agreements with respect to
the Business and any confidentiality or non-competition agreements (the
"Confidentiality and Non-Compete Agreements") entered into for the benefit
of the Business ;
(v) any agreements with suppliers to the Business (excluding
purchase orders in the ordinary course);
(vi) any other agreement, understanding or arrangement,
written or oral, which, in the judgment of the Seller, is material to the
Business, the Purchased Assets or the Assumed Liabilities 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 or the
Subsidiaries have in all material respects performed all of their obligations
required to be performed by them to the date hereof, and are 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.
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Section 3.7 Title to Purchased Assets and Related Matters. The Seller or
the Subsidiaries have good 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 in Schedule 3.7, the Purchased
Assets are in the exclusive possession and control of the Seller or a Subsidiary
and no person or entity other than the Seller or a Subsidiary is entitled to
possession of any portion of the Purchased Assets.
Section 3.8 Real Property.
(a) Owned Real Property. The Subsidiaries do not own any real
property. The Seller owns certain real property (indicated on Schedule 3.8(b)
hereto) that the Seller leases to certain of the Subsidiaries for use in
connection with the Business. None of such owned real property is included in
the Purchased Assets.
(b) Leased Premises. Schedule 3.8(b) hereto contains a complete list
of all real property of which the Seller or any Subsidiary is a tenant (herein
collectively the "Leased Premises"). True, correct and complete copies of all
leases of all Leased Premises (the "Leases") have been delivered to the Buyer.
The Leased Premises are in good physical condition and, with respect to each
Lease, no event or condition currently exists which would give rise to a
material repair or restoration obligation if such Lease were to terminate. No
event or condition currently exists which would create a legal or other
impediment to the use of the Leased Premises as currently used, or which would
increase the additional charges or other sums payable by the tenant under any of
the Leases (including, without limitation, any pending tax reassessment or other
special assessment affecting the Leased Premises). The improvements and building
systems that comprise a part of the Leased Premises as to which the tenant is
responsible for the maintenance and repair thereof are in good condition,
maintenance and repair in accordance with the applicable Lease.
Section 3.9 Machinery, Equipment, Etc.
(a) Owned Equipment. Schedule 3.9(a) sets forth a list of all
capitalized Equipment (as defined on Schedule 1.1(a)), owned by the Seller or
any Subsidiary and included in the Purchased Assets (collectively, the "Owned
Equipment").
(b) Leased Equipment. Schedule 3.9(b) contains a list of all leases
or other agreements, whether written or oral, under which the Seller or any
Subsidiary is lessee of or holds or operates any items of Equipment owned by any
third party (collectively the "Leased Equipment").
Section 3.10 Inventories of the Seller. All inventories of the Business
included in the Purchased Assets are listed on Schedule 3.10 hereto and consist
of items of a quality and quantity usable and salable in the normal course of
its 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 listed on Schedule 3.10 are based on the FIFO method
and are stated in accordance with generally accepted accounting principles
consistently applied, at the lower of historic cost or market.
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Section 3.11 Approvals, Permits and Authorizations. Set forth on Schedule
3.11 hereto is a list of all governmental licenses, permits, certificates of
inspection, other authorizations, filings and registrations which are necessary
for the Seller and the Subsidiaries to own the Purchased Assets and to operate
the Business as presently conducted (collectively, the "Authorizations"). Except
as set forth on Schedule 3.11, all Authorizations may be lawfully transferred to
the Buyer as contemplated by this Agreement.
Section 3.12 Compliance with Laws. The Seller and the Subsidiaries have
conducted the Business in compliance in all material respects with, and all of
the Purchased Assets comply in all material respects with all applicable laws,
rules and regulations (including, without limitation, any laws, rules and
regulations relating to anticompetitive practices, contracts, discrimination,
employment, health, safety, and zoning, and Environmental Laws) (collectively,
"Applicable Laws") and, except as set forth in Schedule 3.12, neither the Seller
nor any Subsidiary has received any written notification within the past three
years of any asserted present or past failure by it to comply in all material
respects with Applicable Laws. With respect to the Business and the Leased
Premises, there are no past or present (or, to the best knowledge of the Seller,
future) events, conditions, circumstances, activities, practices, incidents,
actions or plans which may interfere with or prevent compliance in all material
respects or continued compliance in all material respects with the Applicable
Laws.
Section 3.13 Taxes.
(a) All federal, state and local tax returns and reports required as
of the date hereof to be filed by the Seller or any Subsidiary for taxable
periods ending prior to the date hereof have been duly and timely filed by the
Seller or such Subsidiary 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 and all
Subsidiaries for all periods prior to the date hereof have been fully paid
(except to the extent that such failure to pay would not result in an
Encumbrance on the Purchased Assets) or adequately reserved for or, with respect
to Taxes required to be accrued, such Taxes have been properly accrued or will
properly accrue such Taxes in the ordinary course of business consistent with
past practice.
Section 3.14 Litigation. Except as set forth in Schedule 3.14, there are
no actions, suits, claims, investigations or legal or administrative or
arbitration proceedings pending, or to the Seller's knowledge, threatened
against the Seller or any Subsidiary with respect to the Purchased Assets or the
Assumed Liabilities or the Business. The Seller knows of no basis for the
institution of any such suit or proceeding. Neither the Seller nor any
Subsidiary is 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 or any of the Purchased Assets or Assumed
Liabilities.
Section 3.15 Employee Relations. Except as set forth in Schedule 3.15
hereto, as of the date hereof: (a) the Seller is not delinquent in the payment
(i) to or on behalf of any past or
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present employees of any wages, salaries, commissions, bonuses, benefit plan
contributions or other compensation for all periods prior to the Closing Date,
(ii) of any amount which is due and payable to any state or state fund pursuant
to any workers' compensation statute, rule or regulation or any amount which is
due and payable to any workers' compensation claimant or any other party arising
under or with respect to a claim that has been filed under state statutes and
approved in the ordinary course in accordance with the Seller's policies
regarding workers' compensation and/or any applicable state statute or
administrative procedure; (b) there is no unfair labor practice charge or
complaint against the Seller pending before the National Labor Relations Board,
and, to the knowledge of the Seller, none is threatened; (c) there is no labor
strike, dispute, slowdown or stoppage actually in progress or, to the knowledge
of the Seller, threatened against the Seller; (d) there are no collective
bargaining agreements currently in effect between the Seller and labor unions or
organizations representing any employees of the Seller; (e) no collective
bargaining agreement is currently being negotiated by the Seller; (f) to the
best of the Seller's knowledge, there are no union organizational drives in
progress and there has been no formal or informal request to the Seller for
collective bargaining or for an employee election from any union or from the
National Labor Relations Board; (g) no union representation or jurisdictional
dispute or question exists respecting the employees of the Seller; (h) no
grievance or arbitration proceedings are pending and, to the best of the
Seller's knowledge, no claim therefor has been asserted against the Seller; and
(i) no dispute exists between the Seller and any of its sales representatives
or, to the knowledge of the Seller, between any such sales representatives with
respect to territory, commissions, products or any other terms of their
representation.
Section 3.16 Compensation. Schedule 3.16 hereto contains a schedule of all
employees (including sales representatives) and consultants of the Seller,
together with the sex, date of hire, date of birth, zip code, position title and
amount of total compensation paid to each such person for the twelve month
period ended October 31, 1998 and the current aggregate base salary or hourly
rate (including any bonus or commission) for each such person.
Section 3.17 Trade Name. The Seller is the owner of the corporate name
"Adam Wholesalers, Inc." in the States of Ohio, Arizona, Virginia, Kentucky,
West Virginia, Indiana, Missouri, Colorado, New York, New Jersey and
Pennsylvania and, to the knowledge of the Seller, no person uses, or has the
right to use, such name or any derivation thereof in connection with the sale,
marketing or distribution of products or services commonly associated with the
sash and door business.
Section 3.18 No Undisclosed Liabilities. Neither the Seller nor any
Subsidiary has any material liabilities or obligations of any nature, known or
unknown, fixed or contingent, matured or unmatured, other than those that could
not reasonably be expected to have a material adverse effect on the Purchased
Assets, the Assumed Liabilities or the Business.
Section 3.19 Certain Transactions. Excluding the Leases, there are no
material contracts or transactions between Seller or any Subsidiary, on the one
hand, and any of their affiliates, on the other hand, by which Seller or any
Subsidiary purchases goods or services at substantially below fair market value
or by which Seller or any Subsidiary sells goods or services at substantially
above fair market value.
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Section 3.20 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 Business participates, which
could reasonably be expected to have a material adverse effect on the Business,
other than general business and economic conditions affecting the industry
generally.
Section 3.21 Employee Benefits. Schedule 3.21 hereto lists all of the
"employee pension benefit plans" (as defined in Section 3(2) of ERISA) presently
maintained by the Seller or any Subsidiary or to which the Seller or any
Subsidiary contributes or is required to contribute (each such plan being
hereinafter called a "Pension Benefit Plan"). No such Pension Benefit Plan is
subject to Title IV of ERISA or Section 412 of the Code and no such Pension
Benefit Plan is a "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA), except as set forth on Schedule 3.21. No other entity which is a member
of the same controlled group of organizations (within the meaning of Sections
414(b), (c) or (m) of the Code) as the Seller, maintains, contributes to or is
obligated to contribute to any plan that is subject to Title IV of ERISA or
Section 412 of the Code or that is a "multiemployer plan."
Section 3.22 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 3.22
contains, with respect to the periods ended December 31, 1997 and October 31,
1998, a true and complete (i) list of the fifty (50) largest customers (in
dollar volume) of the Seller (ii) list of the twenty-five (25) largest suppliers
(in dollar volume) to the Seller (iii) list and description of all incentive
programs from suppliers in which the Business is eligible to participate and
(iv) list and description of all incentive programs offered by the Business to
its customers, including a list of which customers to which each such incentive
program is offered. No such supplier, customer or other creditor intends or has
threatened, or reasonably could be expected, to terminate or modify any of their
respective relationships with the Business.
Section 3.23 Environmental Matters.
(a) Except as set forth on Schedule 3.23 attached hereto, neither
the Seller nor any Subsidiary has, and to the best of the Seller's knowledge, no
other person has, Released any Hazardous Substances or any other wastes on,
beneath, or adjacent to the Leased Premises or any other property formerly
owned, operated or leased by the Business (the Leased Premises and such other
property collectively referred to herein as the "Property"), except for such
Releases that were and are Released in accordance with Applicable Laws and no
Cleanup has occurred at the Property.
(b) No employee of the Seller or other person has been exposed to
any Hazardous Substances or other substance, generated, produced or used by the
Business which could give rise to any claim (whether or not such claim has been
asserted) against the Seller or any Subsidiary. The Property does not contain
any: (i) underground storage tanks; (ii) asbestos; (iii) equipment using PCBs;
(iv) underground injection wells; or (v) septic tanks in which process
wastewater or any Hazardous Substances have been disposed.
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(c) Neither the Seller nor any Subsidiary has received any notice or
order from any governmental agency or private or public entity advising it that
it is responsible or potentially responsible for any Cleanup (or the costs
thereof) and the Seller has not and no Subsidiary has entered into any agreement
concerning any Cleanup, nor is Seller aware of any facts which might reasonably
give rise to any such notice, order or agreement.
(d) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Cleanup" shall mean all actions required to: (1) cleanup,
remove, treat, remediate and prevent the Release of Hazardous Substances
in the indoor or outdoor environment; (2) perform pre-remedial studies and
investigations and post-remedial monitoring and care; and (3) respond to
any government requests in any way relating to any Cleanup.
(ii) "Environmental Laws" shall mean all foreign, federal,
state and local laws, regulations, rules and ordinances relating to
pollution, protection of the environment or health and safety.
(iii) "Hazardous Substances" shall mean all substances defined
as such by, or regulated as such under, any Environmental Law, including,
but not limited to any petroleum products.
(iv) "Release" shall mean any release, storage, burial,
dumping, spill, emission, discharge, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the indoor or
outdoor environment.
Section 3.24 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 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.
Section 3.25 Systems; Year 2000 Compliance.
(a) The system of internal accounting controls used by the Business
is sufficient to provide reasonable assurances that: (i) financial statements
are prepared in accordance with the books and records of the Business and
generally accepted accounting principles and to maintain accountability for
assets; and (ii) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(b) Except as provided on Schedule 3.25, the software and systems
used by the Business are in all material respects Year 2000 Compliant. Year 2000
Compliant means that the software and systems used by the Business are able to
provide the following functions without any additional processing: (i)
effectively process date information before, during and after January 1, 2000;
(ii) function accurately and without interruption before, during and after
January 1, 2000, without an change
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in operation associated with the advent of the year 2000, the new century or the
leap year in the year 2000; (ii) respond to two-digit year input in a way that
resolves the ambiguity as to the century in a disclosed, defined and
predetermined manner; (iv) process two-digit year information in ways that are
similarly unambiguous as to century; and (v) store and provide output of date
information that are similarly unambiguous as to century.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
Section 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.
Section 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 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 in 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.
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(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.
Section 4.3 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.
ARTICLE V
PRE-CLOSING COVENANTS OF THE SELLER
The Seller hereby covenants and agrees that from and after the date hereof
until the Closing:
Section 5.1 Provide Access to Information. 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 Business, and to
interview personnel, suppliers and customers of the Business, 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, a
review of the fixed assets listing of the Business), Assumed Liabilities and the
Business. 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 as the Buyer shall from time to time reasonably request.
Section 5.2 Operation of Business. The Seller shall (a) maintain the
corporate existence of itself and the Subsidiaries in good standing, (b) operate
the Business substantially as presently operated and only in the ordinary course
and consistent with past operations, (c) use its best efforts to preserve intact
its present business organizations and employees and its relationships with
persons having business dealings with them, (d) comply in all material respects
with all Applicable Laws, (e) maintain its insurance coverages, (f) pay all
Taxes, charges and assessments when due, subject to any valid objection or
contest of such amounts asserted in good faith and adequately reserved against,
(g) make all debt service payments when contractually due and payable, (h) pay
all accounts payable and other current liabilities when due, (i) maintain the
Purchased Assets in good operating condition in accordance with industry
standards taking into account the age thereof, (j) maintain the books and
records of account of the Business in the usual, regular and ordinary manner,
and (k) 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.
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Section 5.3 Retention of Employees. The Seller shall use its reasonable
best efforts to encourage such personnel of the Business as the Buyer may
designate in writing to become employees of the Buyer after the date of the
Closing.
Section 5.4 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 that do or 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
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.
Section 5.5 Publicity. Except as may be required by law or the applicable
rules or regulations of any securities exchange, none of the Subsidiaries nor
the Seller shall make any press release or other public announcement relating to
this Agreement or the transactions contemplated hereby, without the prior
written approval of the Buyer.
Section 5.6 Other Negotiations. Neither the Seller nor any of the
Subsidiaries 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 Subsidiary or any merger or
consolidation or similar transaction involving the Seller or any Subsidiary.
Section 5.7 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.
Section 5.8 Environmental Audit. The Seller shall allow an environmental
auditing firm selected by the Buyer (the "Environmental Auditor") to have access
to the Property in order to conduct an environmental investigation, satisfactory
to the Buyer in scope, of, and to prepare a report with respect to, the Property
(the "Environmental Audit"). The Seller shall provide to the Environmental
Auditor: (i) reasonable access to all its existing records concerning the
matters which are the subject of the Environmental Audit; and (ii) reasonable
access to the employees of the Business and the last known addresses of former
employees of the Business who are most familiar with the matters which are the
subject of the Environmental Audit (the Seller agreeing to use reasonable
efforts to have such former employees respond to any reasonable requests or
inquiries by the Environmental Auditor). The Seller shall otherwise cooperate
with the Environmental Auditor in connection with the Environmental Audit.
Section 5.9 HSR Act. The Seller shall file as soon as possible after the
date hereof with the Federal Trade Commission (the "FTC") and the U.S.
Department of Justice (the "DOJ") the notification and report form required for
the transactions contemplated hereby pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). The Seller shall furnish
to the Buyer such necessary information and reasonable assistance as the Buyer
may request in connection with its own preparation of notification and form
under the
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HSR Act. The Seller agrees to cooperate with the Buyer in promptly responding to
any requests for additional information from the FTC or DOJ.
ARTICLE VI
PRE-CLOSING COVENANTS OF THE BUYER
The Buyer hereby covenants and agrees that, from and after the date hereof
until the Closing:
Section 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.
Section 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.
Section 6.3 HSR Act. The Buyer shall file as soon as possible after the
date hereof with the FTC and the DOJ the notification and report form required
for the transactions contemplated hereby pursuant to the HSR Act. The Buyer
shall furnish to the Seller such necessary information and reasonable assistance
as the Seller may request in connection with its own preparation of notification
and form under the HSR Act. The Buyer agrees to cooperate with the Seller in
promptly responding to any requests for additional information from the FTC or
DOJ.
ARTICLE VII
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:
Section 7.1 Representations and Warranties. The representations and
warranties made by the Seller in this Agreement shall be true and correct 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.
Section 7.2 Performance of Obligations of the Seller. The Seller shall
have performed and complied in all material respects 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.
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Section 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.
Section 7.4 Opinion of Counsel. The Buyer shall have received an opinion
of Cohen, Todd, Kite & Stanford, LLC, counsel to the Seller and the
Subsidiaries, dated the date of the Closing, substantially in the Form of
Exhibit C attached hereto.
Section 7.5 Supporting Documents. The Buyer shall have received the
following:
(a) A copy of the Certificate of Incorporation of the Seller, and
all amendments thereto, each certified as of a recent date by the Secretary or
Assistant Secretary of the Seller;
(b) One or more certificates of the Secretary of State of the state
of the Seller's incorporation 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 and listing all documents of such entity on
file with said official;
(c) 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 the Business and the Purchased Assets are located, and
executed UCC-3 releases with respect to any liens reflected on such Search
Reports with respect to the Purchased Assets (including, without limitation,
liens, if any, placed on the Purchased Assets by Star Bank, N.A.); and
(d) Such reasonable additional supporting documents and other
information as the Buyer or its counsel may reasonably request.
Section 7.6 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.
Section 7.7 Books and Records. The Buyer shall have received copies of all
books and records of, or pertaining to, the Business and the Purchased Assets
and Assumed Liabilities.
Section 7.8 Change of Name of Seller; Use of Seller's Name by Buyer. At
the Closing, the Seller shall deliver to the Buyer all documents, including,
without limitation resolutions of the Board of Directors and the shareholders of
the Seller, necessary to effect a change of corporate name of the Seller after
the Closing to a name other than "Adam Wholesalers, Inc." or any variation
thereof which name shall be sufficiently different from the name of the Buyer
and "Adam Wholesalers, Inc." as to distinguish it upon the records in the office
of the Secretaries of State of the States of Arizona, Virginia, Ohio, Indiana,
Missouri, Colorado, Kentucky, West Virginia, New York, New Jersey and
Pennsylvania from such names.
Section 7.9 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.
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Section 7.10 No Litigation. 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.
Section 7.11 Authorizations. The Buyer shall have received evidence of the
transfer to the Buyer of all Authorizations referred to in Section 3.11 of this
Agreement or the Seller shall have effectively obtained or made on behalf of the
Buyer or assisted the Buyer in obtaining or making, all Authorizations.
Section 7.12 No Material Adverse Change or Undisclosed Liability. 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, and no fact
or condition shall exist or be contemplated or threatened which will, or, in the
Buyer's reasonable judgment, would be reasonably likely to, cause such a change
or development or result in a liability or obligation of the Business not
previously disclosed in writing to the Buyer.
Section 7.13 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.
Section 7.14 Bulk Sales Requirements. The Seller shall comply with all
requirements of applicable bulk sales laws in respect of the transactions
contemplated hereby.
Section 7.15 Satisfactory Review. The Buyer, its accountants, attorneys
and other representatives shall have been given a full opportunity to conduct
the Environmental Audit and a due diligence review of the Business' assets,
liabilities, books and records and to interview the Seller's management
personnel, key customers and suppliers and the Buyer shall have been satisfied
in all respects with the results of such Environmental Audit and review.
Section 7.16 Adverse Laws. No statute, rule, regulation or order shall
have been adopted or promulgated which materially adversely affects the
Purchased Assets, the Assumed Liabilities or the Business.
Section 7.17 Receivables Collection and Returns Agreement. The Seller
shall have executed and delivered to the Buyer the Receivables Collection and
Returns Agreement substantially in the form of Exhibit D (the "Receivables
Collection and Returns Agreement") attached hereto.
Section 7.18 Non-Competition Agreements. Each of (a) the Seller, (b) the
Subsidiaries, (c) each of Thurner and George E. Thurner, III, and (d) each other
shareholder of the Seller or any Subsidiary, who as a result of the transactions
contemplated hereby receive $200,000 or more from the Seller, any Subsidiary or
any other shareholder, shall have executed and delivered to the Buyer the Non-
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Competition Agreement substantially in the form of Exhibit E attached hereto
(the "Non-Competition Agreement").
Section 7.19 Employment of Certain Employees. Those employees of the
Business set forth on Schedule 7.19 hereto to whom the Buyer shall have offered
employment commencing as of the Closing shall have accepted such offers of
employment.
Section 7.20 Certain Approvals. The Board of Directors of the Buyer and
the Buyer's lender shall have approved of and consented to the transactions
contemplated hereby.
Section 7.21 Escrow Agreement. The Seller and the escrow agent shall have
executed and delivered to the Buyer the Escrow Agreement.
Section 7.22 Leases. With respect to Leased Premises under lease from the
Seller or any of the Seller's affiliates, as landlord, such landlords shall have
executed and delivered to the Buyer mutually satisfactory amendments to the
existing leases with respect to the Leased Premises, which amendments to
existing leases shall not contain any terms or conditions that are less
favorable to the tenant than those contained in the applicable existing Lease
(the "New Real Property Leases"), and shall be substantially in the form of
Exhibit G attached hereto.
Section 7.23 Hart-Scott-Rodino Waiting Period. All applicable waiting
periods under the HSR Act shall have expired without any indication by the DOJ
or the FTC that either of them intends to challenge the transactions
contemplated hereby.
Section 7.24 The Stock Transaction. The parties shall have agreed, in
their reasonable discretion and acting in good faith, to all of the terms and
conditions of the Stock Transaction and all documentation necessary therefor
shall have been executed and delivered by Thurner.
ARTICLE VIII
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:
Section 8.1 Representations and Warranties. The representations and
warranties made by the Buyer in this Agreement shall be true and correct 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.
Section 8.2 Performance of Obligations of the Buyer. The Buyer shall have
performed and complied in all material respects 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.
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Section 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.
Section 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 Escrowed Funds pursuant to Section 1.3(a) hereof.
Section 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; and
(c) Copies of all authorizations, consents, approvals, notices,
filings and registrations referred to in Section 4.2(b) hereof.
Section 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.
Section 8.7 No Litigation. 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.
Section 8.8 Receivables Collection and Returns Agreement. The Buyer shall
have executed and delivered to the Seller the Receivables Collection and Returns
Agreement.
Section 8.9 Hart-Scott-Rodino Waiting Period. All applicable waiting
periods under the HSR Act shall have expired without any indication by the DOJ
or the FTC that either of them intends to challenge the transactions
contemplated hereby.
Section 8.10 Assignment and Assumption of Liabilities. The Buyer shall
have executed and delivered to the Seller an assignment and assumption of the
Assumed Liabilities, substantially in the form of Exhibit F attached hereto.
Section 8.11 The Stock Transaction. The parties shall have agreed, in
their reasonable discretion and acting in good faith, to all of the terms and
conditions of the Stock Transaction and all documentation necessary therefor
shall have been executed and delivered by the Buyer.
ARTICLE IX
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TRANSFER TAXES; PRORATION OF CHARGES
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 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 pursuant hereto shall be
borne by the party who is legally responsible for the payment thereof.
Section 9.2 Proration of Certain Charges. The following taxes, charges and
payments ("Charges") shall be prorated on a per diem basis and apportioned
between the Seller and the Buyer as of the date of the Closing: real property,
use, intangible taxes, utility charges, rental or lease charges, license fees,
general assessments imposed with respect to the Purchased Assets and employee
payrolls. 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. At the Closing,
the Buyer and the Seller shall agree upon the amounts of such charges as each
party shall be responsible.
Section 9.3 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 one (1) year with the
exception of the representations and warranties contained in (i) Sections 3.13
and 3.21, which shall survive the Closing until the expiration of the applicable
statutes of limitation plus a period of sixty (60) days, (ii) Sections 3.1, 3.2
and 3.3, which shall survive the Closing in perpetuity, (iii) Section 3.23 which
shall survive the Closing for a period of five (5) years and (iv) Section 3.10
which shall survive until either the parties have agreed to the Closing
Inventory Schedule or any disputes with respect to such Schedule have been
resolved via arbitration as set forth in Section 1.4.
ARTICLE X
INDEMNIFICATION
Section 10.1 Agreement to Indemnify by the Seller Indemnifying Parties.
Subject to the terms and conditions of Section 10.3 hereof, the Seller and each
of the Subsidiaries (collectively, the "Seller Indemnifying Parties") hereby
agrees to jointly and severally indemnify and save the Buyer, its 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 expenses and expert witness fees and expenses) suffered,
sustained, incurred or required to be paid by any Buyer Indemnitee
(collectively, "Buyer's Damages") arising out of , based upon, resulting from,
in connection with or as a result of:
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(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; provided, that, no Buyer's Damages shall be deemed to have occurred,
and no Seller Indemnifying Party shall be liable therefor, under this Section
10.01(a) unless (i) the claim for Buyer's Damages under this Section 10.02(a)
with respect to each individual item of Buyers' Damages shall exceed an amount
equal to $3,000, and (ii) the aggregate amount of all such Buyer's Damages for
which the Seller Indemnifying Parties shall be liable under this Section
10.01(a) shall not exceed the Purchase Price.
(b) the breach or nonfulfillment of any covenant or agreement of the
Seller or any Subsidiary contained in this Agreement or in any other agreement
document or instrument delivered hereunder or pursuant hereto;
(c) any actual, alleged, or threatened Release of Hazardous
Substances with respect to the operation of the Business, except to the extent
caused by the action or inaction of Buyer after the Closing Date;
(d) any Cleanup of Hazardous Substances Released in connection with
the operation of the Business, except to the extent caused by the action or
inaction of Buyer after the Closing Date;
(e) any and all costs of bringing any of the Leased Premises into
compliance with any Environmental Law if such Leased Premises was not in
compliance with any Environmental Laws as of the Closing Date;
(f) the assertion against the Buyer or the Purchased Assets of any
liability or obligation of the Seller, any Subsidiary and/or shareholder of the
Seller or any Subsidiary (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; and
(g) the failure by the Seller or any affiliate of the Seller to
comply with the provisions of applicable bulk sales laws in connection with the
transactions contemplated by this Agreement.
Section 10.2 Agreement to Indemnify by the Buyer. Subject to the terms and
conditions of Section 10.3 hereof, the Buyer hereby agrees to indemnify and save
the Seller and each Subsidiary and their respective affiliates, shareholders,
officers, directors, employees, successors and assigns (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 expenses
and expert witness fees and expenses) suffered, sustained, incurred or required
to be paid by any Seller Indemnitee (collectively, "Seller's Damages") arising
out of, based upon, in connection with or as a result of:
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(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.
Section 10.3 Procedures Regarding Third Party Claims. 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. 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.
Section 10.4 Certain Limitations. The liability of the Indemnifying Party
to the Indemnified Party, as applicable, for claims under this Agreement shall
be limited by the following:
(a) The amount of Buyer's Damages or Seller's Damages, as the case
may be (collectively referred to herein as "Losses"), otherwise recoverable
under this Article X shall be reduced to the extent to which any Federal, state,
local or foreign tax liabilities of the Indemnified Party are reduced for the
current Taxable period by reason of any Loss in respect of which such
Indemnified Party shall be entitled to indemnity under this Agreement.
(b) No Losses shall be recoverable by an Indemnified Party with
respect to any matter which is covered by insurance or another source of
indemnification, to the extent proceeds of such insurance are paid net of any
costs incurred in connection with the collection thereof.
ARTICLE XI
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 on January 31, 1998, or (c) by the Seller if the conditions set forth
in Article 8 hereof shall not have been met by the close of
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business on January 31, 1998. 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 5.5, 6.1 and 12.2 hereto shall survive any termination of this
Agreement. Notwithstanding anything contained in this Agreement to the contrary,
in the event that this Agreement is terminated by any of the parties prior to
the Closing Date, the maximum liability that may be incurred by one party to the
others as a result thereof shall be the non-breaching parties' out-of-pocket
costs and expenses in connection with the transactions contemplated hereby to
such date of termination.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 Access to Books and Records. The Buyer shall, following the
Closing, give, and shall cause to be given, to the Seller and its authorized
representatives such access, during normal business hours and upon prior notice,
to such books and records constituting part of the Purchased Assets as shall be
reasonably necessary for the Seller in connection with the preparation and
filing of the Seller's tax returns for periods prior to the Closing, and to make
extracts and copies of such books and records at the expense of the Seller.
Section 12.2 Confidentiality. Notwithstanding anything herein to the
contrary, each party shall (and hall cause its affiliates to) 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) 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.
Section 12.3 [INTENTIONALLY OMITTED]
Section 12.4 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.
Section 12.5 Notices. All notices, claims, certificates, requests, demands
and other communications hereunder shall be given in writing and shall be
delivered personally or sent by
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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 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, VA 23185
Telecopier No.: (757) 564-1714
Attention: Larry R. Robinette
President and Chief Executive Officer
with a copy to:
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
Post Office Box 6760
Stamford, CT 06904-6760
Telecopier No.: (203) 965-8226
Attention: Frode Jensen, Esq.
Telecopier No.: (203) 965-8226
If to the Seller or any Subsidiary, to:
Adam Wholesalers, Inc.
3005 East Kemper Road
Cincinnati, OH 45241
Telecopier No.: (513) 772-0425
Attention: George E. Thurner, Jr.
in either case, with a copy to:
Cohen, Todd, Kite & Stanford, LLC
525 Vine Street, 16th Floor
Cincinnati, Ohio 45202-3124
Telecopier No.: (513) 421-4020
Attention: Terrence A. Mire
The Buyer and the Seller and the Subsidiaries 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.
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Section 12.6 Parties in Interest; No Third Party Beneficiaries.
(a) Subject to Section 12.7 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 its
affiliates) 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.
Section 12.7 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.
Section 12.8 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. This
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.
Section 12.9 Governing Law; Arbitration.
(a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York. Except solely as set forth in
Section 12.9(b) hereof, each dispute, difference, controversy or claim arising
in connection with or related or incidental to, or question occurring under,
this Agreement or the subject matter hereof shall be finally settled under the
Commercial Arbitration Rules of the American Arbitration Association (the "AAA")
by an arbitral tribunal composed of three (3) arbitrators, at least one (1) of
whom shall be an attorney experienced in corporate transactions, appointed by
agreement of the parties hereto in accordance with said Rules. In the event the
parties hereto fail to agree upon a panel or arbitrators from the first list of
potential arbitrators proposed by the AAA, the AAA will submit a second list in
accordance with said Rules. In the event the parties hereto shall have failed to
agree upon a full panel of arbitrators from said second list, any remaining
arbitrators to be selected shall be appointed by the AAA in accordance with said
Rules. If, at the time of the arbitration, the parties hereto agree in writing
to submit the dispute to a single arbitrator, said single arbitrator shall be
appointed by agreement of the parties in accordance with the foregoing
procedure, or, failing such agreement, by the AAA in accordance with said Rules.
The foregoing arbitration proceedings may be commenced by any party hereto by
notice to all other parties. The venue of such arbitration shall be New York,
New York, or any other place mutually agreed to by all of the parties hereto.
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(b) The parties hereto hereby exclude any right of appeal or request
to modify or vacate the award to any court on the merits of the dispute or
otherwise. The provisions of this Section 12.9 may be enforced in, and any award
may be submitted for confirmation to, any court having jurisdiction over the
award or any of the parties hereto or any of their respective assets, and
judgment on the award (including, without limitation, equitable remedies)
granted in any arbitration hereunder may be entered in any such court. Nothing
contained in this Section 12.9 shall prevent any party hereto from seeking
interim measures of protection in the form of pre-award attachment of assets or
preliminary or temporary equitable relief.
(c) In the event of a dispute between the parties hereto, each party
shall present an offer of settlement that shall address all issues in dispute
such that adoption of such offer of settlement would conclusively settle all
items then in dispute. The arbitral tribunal shall be limited in its decision to
choosing between the offers of settlement presented to it. The decision of the
arbitral tribunal shall be final and binding on all of the parties hereto and
non-appealable. The arbitral tribunal shall decide who shall pay the expenses of
the arbitration, which, in the event the Seller or the Subsidiaries are held
responsible for any portion or all of such expenses prior to the finalization of
the Closing Inventory Schedule, shall be subject to satisfaction by application
of the Escrowed Amount pursuant to the provisions of the Escrow Agreement.
Section 12.10 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 of
the Seller and the Subsidiaries, whether or not so specified in such
representation or warranty.
Section 12.11 Appointment of Attorney-in Fact.
The Seller and each of the Subsidiaries, for itself and its
successors and assigns, hereby irrevocably designates and appoints George E.
Thurner, Jr. as its attorney-in-fact to receive service of summons and other
legal process in any action, suit or proceeding with respect to any matter as to
which they have submitted to jurisdiction pursuant to Section 12.11(a) above, it
being stipulated that service upon such attorney-in-fact shall constitute
service upon the Seller and each Subsidiary or their successors and assigns, as
the case may be. The duration of the above appointment shall be from the date
hereof until the indemnification obligations of the Seller and the Subsidiaries
shall have fully expired and terminated pursuant hereto; provided, however, that
such appointment shall remain in full force and effect so long as any dispute
arising under, in connection with or relating to this Agreement or the
transactions contemplated hereby shall continue. George E. Thurner, Jr. hereby
accepts the foregoing appointment as attorney-in-fact and agrees that it will
not resign from such position without the prior written approval of the Buyer.
Section 12.12 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.
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Section 12.13 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.
Section 12.14 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.
Section 12.15 Schedules. Any information disclosed in one section of the
Seller's disclosure Schedules attached hereto shall be deemed to be disclosed in
all other applicable sections of the Seller's disclosure Schedule; provided,
that, such information has been disclosed with enough particularity and
describes the relevant facts in sufficient and reasonable detail that it could
reasonably be inferred that the inclusion of such disclosure in such additional
schedule or schedules would be warranted.
Section 12.16 Bulk Sales. The Buyer hereby waives compliance by the Seller
with the requirements of any applicable bulk sales laws in connection with the
transactions contemplated by this Agreement.
Section 12.17 Covenant Regarding Net Worth. The Seller hereby agrees that
for and during the one year period beginning as of the Closing Date and ending
on December 31, 1999, the Seller shall maintain a net worth (as shown on
Seller's financial statements) of at least $20,000,000. The Seller shall
provide, upon the Buyer's request, information and data reasonably requested by
the Buyer, which information and information demonstrates the Seller's
compliance with this Section 12.17.
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: /s/ Larry R. Robinette
--------------------------------------
Name: Larry R. Robinette
Title: President & CEO
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
SUBSIDIARIES:
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ADAM WHOLESALERS OF VIRGINIA, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF DAYTON, INC.
By: /s/ George E. Thurner, Jr.
---------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF LOUISVILLE, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF NITRO, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF INDIANAPOLIS, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF ST. LOUIS, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
29
<PAGE> 34
ADAM WHOLESALERS OF CINCINNATI, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF TOLEDO, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF DENVER, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF PHOENIX, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF KIRKWOOD, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
30
<PAGE> 35
ADAM WHOLESALERS OF CARLISLE, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF WOODBURY HEIGHTS, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------------
Name: George E. Thurner, Jr.
Title: President
31
<PAGE> 36
List of Schedules
Schedule 1.1(a) - Purchased Assets
Schedule 1.1(b) - Excluded Assets
Schedule 1.2 - Assumed Liabilities
Schedule 1.3(c) - Allocation of Purchase Price
Schedule 1.4 - Closing Inventory Schedule
Schedule 3.2(a) - Required Authorizations to Agreement
Schedule 3.2(b) - Required Consents to Agreement
Schedule 3.3 - List of Owners of all Issued and
Outstanding Shares of the Seller's Capital
Stock
Schedule 3.4 Financial Statements
Schedule 3.5 - Certain Changes
Schedule 3.6(a) - Material Contracts
Schedule 3.7 - Certain Encumbrances
Schedule 3.8(b) - Leased Premises
Schedule 3.9(a) - Owned Equipment
Schedule 3.9(b) - Leased Equipment
Schedule 3.10 - Inventory
Schedule 3.11 - Authorizations
Schedule 3.12 Compliance with Laws
Schedule 3.14 - Litigation
Schedule 3.15 - Employee Relations
Schedule 3.16 - Compensation
Schedule 3.21 - Pension Benefit Plans
Schedule 3.22 - Suppliers and Customers
Schedule 3.23 - Environmental Matters
Schedule 3.25 Year 2000 Compliance
Schedule 4.2(b) - Required Consents to Agreement
Schedule 7.19 - Employees of the Business
<PAGE> 37
List of Exhibits
Exhibit A - Escrow Agreement
Exhibit B - Bill of Sale and Assignment
Exhibit C - Opinion of Seller's Counsel
Exhibit D - Receivables Collection and Returns
Agreement
Exhibit E - Non-Competition Agreement
Exhibit F - Assignment and Assumption of
Liabilities
Exhibit G - Form of Amendment to Affiliated
Leases
<PAGE> 38
Schedule 1.1(a)
Purchased Assets
The Purchased Assets shall include the following to the extent that
the same are related to the Business:
(a) all machinery, equipment (both mobile and non-mobile), fixtures,
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 (including any of the foregoing purchased subject to
any conditional sales or title retention agreement in favor of any third party),
whether owned, leased or subleased (collectively, the "Equipment");
(b) all Inventory;
(c) all security, utility or similar deposits and prepaid expenses
of the Business to the extent that the same relate to any other Purchased Asset
or Assumed Liability;
(d) all of the rights of the Seller and the Subsidiaries under the
following Material Contracts:
(i) the Lease Agreements
(ii) the Sales Orders
(iii) the Confidentiality and Non-Compete Agreements
(e) all designs, plans, trade secrets, inventions, processes,
procedures, research records, manufacturing know-how and manufacturing formulae,
wherever located of the Business;
(f) all books, records, manuals and other materials, including,
without limitation, all records and materials maintained at any and all offices
and other locations of the Business, all accounting and financial records,
files, computer tapes, advertising matter, catalogues, brochures, price lists,
correspondence, mailing lists, lists of customers and suppliers, distribution
lists, art work, photographs, production data, sales and promotional materials
and records, purchasing materials and records, personnel records, credit
records, manufacturing and quality control records and procedures, blueprints,
research and development files, records, data and laboratory books, patent
disclosures, media materials and plates, sales order files and litigation files,
stationary and business forms, or full and complete copies thereof, as Buyer and
Seller shall agree;
(g) all interest of the Seller and the Subsidiaries in and to their
telephone and telex numbers and all listings pertaining to the Business in all
telephone books and directories;
(h) to the extent their transfer is permitted by law, all
Authorizations; and
(i) all rights to the name "Adam Wholesalers, Inc." and all logos,
tradestyles and variants thereof and all existing and pending registrations or
applications in connection with the foregoing.
<PAGE> 39
Schedule 1.2
Assumed Liabilities
The Buyer shall assume the following liabilities of the Seller and
the Subsidiaries 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 the following Material Contracts to the extent
that such liabilities accrue after the Closing Date:
(i) Purchase or sales orders for the sale of goods or
services by the Business which have been accepted and
not yet filled as of the date hereof (the "Sales
Orders"); and
(ii) the Lease Agreements.
(b) All trade accounts payable (whether or not any invoice therefor has
been received by the Seller or any Subsidiary) due in respect of
Inventory of the Business ordered in the ordinary course of
business, consistent with past practice, which Inventory (the "In
Transit Inventory") has either not yet been shipped out from the
supplier as of the Closing Date or is in transit and has not yet
been delivered as of the Closing Date. On the Closing Date the
Seller shall deliver to the Buyer a true, correct and complete In
Transit Inventory listing.
* Notwithstanding anything to the contrary contained in this Agreement, under no
circumstances will the Buyer be required to assume liability for the following
equipment leases: (i) Lease by and between CFC Investment Company and Adam
Wholesalers of Indianapolis dated 2/27/98; (ii) Lease by and between Ameritech
Credit Corporation and Adam Wholesalers, Inc. dated 5/1/96 and (iii) Lease by
and between Ameritech Credit Corporation and Adam Wholesalers, Inc. dated
8/1/96. Buyer will, however, consider, in its sole discretion, whether to assume
said lease obligations.
<PAGE> 40
Schedule 1.4
Closing Inventory Schedule
1. "Inventory" shall mean, and the Closing Inventory Schedule shall contain,
to the extent related to the Business, all inventories of raw materials,
work in process, finished products, goods, supplies, fuel oil, spare
parts, packing containers, replacement and component parts, and office and
other supplies that:
(a) have been received by the Seller or a Subsidiary and is held at any
location of the Business as of midnight on the Closing Date;
(b) have been returned by customers for credit as of midnight on the
Closing Date; and
(c) are in transit from suppliers and for which title has passed to the
Seller (or a Subsidiary), as of midnight on the Closing Date.
2. The Closing Inventory Schedule shall also contain the Inventory Value, to be
calculated as follows:
(a) All current supplier's catalog Inventory necessary for operations in
the ordinary course of business, consistent with past practice will
be valued at 100% of book value;
(b) All remaining Inventory (it being understood that the Inventory with
no usage during the six (6) month period immediately preceding the
Closing Date shall be presumed to be "not in the current catalog"
unless the Seller produces the current catalog indicating the
contrary) and all damaged/scratched and defective Inventory (whether
or not in the current catalog) will be valued at zero and returned
to the Seller or to the manufacturer thereof in accordance with the
Receivables Collection and Returns Agreement.
(c) Book value will be determined using the first-in, first out (FIFO)
method of accounting for current cost. No cash discounts will be
considered in determining book value. For example, if the supplier's
price of a window is $100 and the supplier allows a 2% discount,
then the book value of the window shall be $100 regardless of
whether Seller took advantage of the discount.
* Notwithstanding anything to the contrary contained in this Agreement, under no
circumstances will the Buyer be required to pay twice for any Inventory. For
example, in no event shall the Buyer be required to pay to the Seller the book
value for any Inventory and also assume a trade payable with respect to the same
Inventory.
<PAGE> 41
MORGAN PRODUCTS LTD.
469 McLaws Circle
Williamsburg, VA 23185
January 28, 1999
Adam Wholesalers, Inc.
3005 E. Kemper Road
Cincinnati, Ohio 45241
Attention: George E. Thurner, Jr., President
Re: Amendment No. 1 to Purchase Agreement
Ladies and Gentlemen:
Reference is made to that certain Asset Purchase Agreement (the "Purchase
Agreement") dated as of December 22, 1998 by and among Morgan Products Ltd.,
Adam Wholesalers, Inc. ("Adam") and certain subsidiaries of Adam listed on the
signature page to the Purchase Agreement. Capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Purchase Agreement.
The parties to this letter (this "Letter Agreement") hereby agree as follows:
1. The date "January 31, 1999" shall be deleted and replaced with the
date "February 19, 1999" in the third and fifth lines of Article XI.
2. The conditions precedent to the obligations of the Buyer set forth
in Sections 7.13, 7.14, 7.16, 7.19, 7.20 (except for the approval
and consent of Buyer's lenders), 7.22 and 7.23 shall be deemed
satisfied and are hereby waived by Buyer for purposes of Articles
VII and XI of the Purchase Agreement. The conditions precedent to
the obligations of the Seller set forth in Sections 8.6 and 8.9
shall be deemed satisfied and are hereby waived by Seller for
purposes of Articles VIII and XI of the Purchase Agreement.
3. A new paragraph shall be added to Article XI as follows:
Notwithstanding the foregoing paragraph, in the event that the
Seller terminates this Agreement pursuant to subsection (c)
above, and all of the conditions precedent to Buyer's
obligations under the Agreement (as set forth in Article VII)
have otherwise been satisfied, fulfilled or waived by the
party entitled to waive them, then the Buyer shall pay to the
Seller an amount equal to $375,000 in immediately available
funds by wire transfer to an account or accounts designated by
Seller. Any amount payable pursuant to this paragraph shall
constitute the Seller's and the Subsidiaries' and Seller
Indemnitees' sole and exclusive remedy for any breach of this
Agreement by the Buyer (except that this limitation of
2
<PAGE> 42
remedy shall not apply to claims for breaches of Section 12.2
of this Agreement relating to confidentiality).
This Letter Agreement amends the Purchase Agreement only to the extent set
forth herein and does not constitute a change, modification or amendment of any
other provision of he Purchase Agreement. From and after the date hereof any and
all references to the Purchase Agreement shall be deemed references to the
Purchase Agreement as amended hereby.
If you are in agreement with the foregoing, please so indicate by
executing below in the spaces provided.
Very truly yours,
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
-------------------------
Name: Larry R. Robinette
Title: President & CEO
Accepted and Agreed:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
SUBSIDIARIES:
ADAM WHOLESALERS OF VIRGINIA, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
3
<PAGE> 43
ADAM WHOLESALERS OF DAYTON, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF LOUISVILLE, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF NITRO, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF INDIANAPOLIS, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF ST. LOUIS, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF CINCINNATI, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
4
<PAGE> 44
ADAM WHOLESALERS OF TOLEDO, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF DENVER, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF PHOENIX, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF KIRKWOOD, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF CARLISLE, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF WOODBURY HEIGHTS, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
5
<PAGE> 45
MORGAN PRODUCTS LTD.
469 McLaws Circle
Williamsburg, VA 23185
February __, 1999
Adam Wholesalers, Inc.
3005 E. Kemper Road
Cincinnati, Ohio 45241
Attention: George E. Thurner, Jr., President
Re: Amendment No. 2 to Purchase Agreement
Ladies and Gentlemen:
Reference is made to that certain Asset Purchase Agreement (the "Purchase
Agreement") dated as of December 22, 1998, as amended, by and among Morgan
Products Ltd., Adam Wholesalers, Inc. ("Adam") and certain subsidiaries of Adam
listed on the signature page to the Purchase Agreement. Capitalized terms used
but not defined herein shall have the meanings assigned to such terms in the
Purchase Agreement.
The parties to this letter (this "Letter Agreement") hereby agree as
follows:
1. The phrase "ten (10) calendar days following the Closing Date" shall be
deleted from Section 1.4(a) and replaced with the phrase "thirty (30) calendar
days following the Effective Date".
2. The phrase "as defined in Schedule 1.1(a)" shall be deleted from
Section 1.4(a) and replaced with the phrase "as defined in Schedule 1.4,1".
3. The second sentence of Article II of the Purchase Agreement is hereby
deleted in its entirety and in place therefor shall be: The Transactions
contemplated by this Agreement will take financial effect (regardless of Closing
Date) as of 12:01 AM on January 1, 1999 (the "Effective Date").
4. The term "Closing Date" shall be deleted and replaced with the term
"Effective Date" in the following locations of the Purchase Agreement where the
term "Closing Date" currently appears:
(i) the fourth and fifth lines of Section 1.4(a);
(ii) the second line of Schedule 1.2(a);
6
<PAGE> 46
(iii) the fifth and sixth lines of Schedule 1.2(b)(Closing Date to be
replaced with Effective Date in line six only at the first instance
where Closing Date appears); and
(iv) the second and third lines of Schedule 1.4,2(b).
5. The phrase "midnight on the Closing Date" shall be deleted and replaced
with the phrase "the Effective Date" in the following locations of the Purchase
Agreement where the phrase "midnight on the Closing Date" currently appears:
(i) the second line of Schedule 1.4,1(a);
(ii) the first and second lines of Schedule 1.4,1(b); and
(iii) the second line of Schedule 1.4,1(c).
6. The phrase "date of the Closing" shall be deleted and replaced with the
phrase "Effective Date" in the following locations of the Purchase Agreement
where the phrase "date of the Closing" currently appears:
(i) the third line of Section 9.2;
(ii) the sixth line of Section 9.2; and
(iii) the seventh and eighth lines of Section 9.2.
7. The last sentence of Schedule 1.2(b) is hereby deleted in its entirety
and in place therefor shall be:
On the Closing Date, the Seller shall deliver to the Buyer a true, correct
and complete In-Transit Inventory Listing as of the Effective Date. The Seller
shall also deliver to the Buyer, at the Closing, a separate in-transit inventory
listing, as of the Closing Date, which shall include all trade accounts payable
(whether or not any invoice therefor has been received by the Seller or any
Subsidiary) due in respect of Inventory of the Business ordered in the ordinary
course of business, consistent with past practice, which Inventory has either
not yet been shipped out from the supplier as of the Closing Date or is in
transit and has not yet been delivered as of the Closing Date.
8. A new Section 1.6 shall be added to the Purchase Agreement as follows:
1.6 Post Closing Schedules.
(a) Preparation. As promptly as practicable, but in any event within
ten (10) calendar days following the Closing Date, the Buyer and the
Seller shall prepare, jointly and in cooperation with their accountants,
the following schedules (the "Post-Closing Schedules"):
(i) Listing as of the Closing Date indicating which of the
uncollected accounts receivable as of the Effective Date
remain uncollected as of the Closing Date;
7
<PAGE> 47
(ii) An accounts payable trial balance of the Business as of
the Closing Date that consists of purchases from the
Effective Date through the Closing Date;
(iii) An accounts receivable trial balance of the Business as
of the Closing Date that consists of sales from the
Effective Date through the Closing Date;
(iv) A detailed listing of expenses of the Business incurred
on behalf of the Buyer from the Effective Date through
the Closing Date (calculated in accordance with GAAP)
(the "Expenses"); and
(v) A listing of cash received by the Business in respect of
sales occurring from the Effective Date through the
Closing Date (the "Cash").
(b) Cooperation. During the preparation of the Post-Closing
Schedules and any period of dispute with respect thereto, each of the
Seller and the Buyer shall cooperate with the other party and provide the
other party with access to all books, records and personnel as the other
party reasonably requests.
(c) Disputes. In the event that, by the end of twenty (20) says
following the Closing Date the parties cannot come to final, written
agreement with respect to the conclusive Post-Closing Schedules, either
party may, by written notice to the other party, submit all unresolved
disputes to Ernst & Young LLP in Chicago, Illinois. The parties shall
instruct the arbitrator to issue its determination within fifteen (15)
days of its engagement. The arbitrator shall determine who shall bear the
costs of arbitration and/or in what proportions. The determination of the
arbitrator shall be final, binding and conclusive upon the parties.
(d) Adjustments.
(i) The Buyer shall pay to the Seller an amount equal to the
Expenses.
(ii) The Seller shall pay to the Buyer an amount equal to the
Cash.
(e) Payments. Payments to be made pursuant to (d) above shall be
paid within three (3) Business Days of the Post-Closing Schedules. Such
amounts shall be paid in cash by wire transfer in immediately available
funds.
This Letter Agreement amends the Purchase Agreement only to the extent set
forth herein and does not constitute a change, modification or amendment of any
other provision of he Purchase Agreement. From and after the date hereof any and
all references to the Purchase Agreement shall be deemed references to the
Purchase Agreement as amended hereby.
8
<PAGE> 48
If you are in agreement with the foregoing, please so indicate by
executing below in the spaces provided.
Very truly yours,
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
-------------------------
Name: Larry R. Robinette
Title: President & CEO
Accepted and Agreed:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
SUBSIDIARIES:
ADAM WHOLESALERS OF VIRGINIA, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
9
<PAGE> 49
ADAM WHOLESALERS OF DAYTON, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF LOUISVILLE, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF NITRO, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF INDIANAPOLIS, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF ST. LOUIS, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF CINCINNATI, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF TOLEDO, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
10
<PAGE> 50
ADAM WHOLESALERS OF DENVER, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF PHOENIX, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF KIRKWOOD, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF CARLISLE, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF WOODBURY HEIGHTS, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------------
Name: George E. Thurner, Jr.
Title: President
11
<PAGE> 51
MORGAN PRODUCTS LTD.
469 McLaws Circle
Williamsburg, VA 23185
February 19, 1999
Adam Wholesalers, Inc.
3005 E. Kemper Road
Cincinnati, Ohio 45241
Attention: George E. Thurner, Jr., President
Re: Amendment No. 3 to Purchase Agreement
Ladies and Gentlemen:
Reference is made to that certain Asset Purchase Agreement (the "Purchase
Agreement") dated as of December 22, 1998, as amended, by and among Morgan
Products Ltd. (the "Buyer"), Adam Wholesalers, Inc. ("Adam") and certain
subsidiaries of Adam listed on the signature page to the Purchase Agreement.
Capitalized terms used but not defined herein shall have the meanings assigned
to such terms in the Purchase Agreement.
The parties to this letter (this "Letter Agreement") hereby agree as
follows:
1. The phrase "thirty (30) calendar days following the Effective Date"
shall be deleted from Section 1.4(a) of the Purchase Agreement and
replaced with the phrase "ten (10) calendar days following the
Closing Date".
2. Schedule 3.1 to the Purchase Agreement is hereby deleted in its
entirety and replaced with Exhibit A attached hereto.
3. Exhibit B attached hereto shall be added to Schedule 3.3 to the
Purchase Agreement.
4. Schedule 3.17 to the Purchase Agreement is hereby deleted in its
entirety and replaced with Exhibit C attached hereto.
5. George E. Thurner, Jr. will accept a payment in cash of Three
Hundred Thousand Dollars ($300,000.00) from the Buyer in lieu and in
full and total satisfaction of a grant of any stock options referred
to in Section 1.3(b) of the Purchase Agreement.
6. The lease by and between CFC Investment Company and Adam Wholesalers
of Indianapolis dated 2/27/98 shall be deemed to be a Material
Contract under the Purchase Agreement and the phrase "(iii) Lease by
and between CFC Investment
<PAGE> 52
Company and Adam Wholesalers of Indianapolis dated 2/27/98; Lease by
and between Ameritech Credit Corporation and Adam Wholesalers, Inc.
dated 5/1/96 and Lease by and between Ameritech Credit Corporation
and Adam dated 8/1/96" shall be added to Schedule 1.2(a) of the
Purchase Agreement.
7. The phrase "* Notwithstanding anything to the contrary contained in
this Agreement, under no circumstances will the Buyer be required to
assume liability for the following equipment leases: (i) Lease by
and between CFC Investment Company and Adam Wholesalers of
Indianapolis dated 2/27/98; (ii) Lease by and between Ameritech
Credit Corporation and Adam Wholesalers, Inc. dated 5/1/96 and (iii)
Lease by and between Ameritech Credit Corporation and Adam
Wholesalers, Inc. dated 8/1/96. Buyer will, however, consider, in
its sole discretion, whether to assume said lease obligations" is
hereby deleted from Schedule 1.2 of the Purchase Agreement.
This Letter Agreement amends the Purchase Agreement only to the extent set
forth herein and does not constitute a change, modification or amendment of any
other provision of the Purchase Agreement. From and after the date hereof any
and all references to the Purchase Agreement shall be deemed references to the
Purchase Agreement as amended hereby.
If you are in agreement with the foregoing, please so indicate by
executing below in the spaces provided.
Very truly yours,
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
-------------------------
Name: Larry R. Robinette
Title: President & CEO
Accepted and Agreed:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
SUBSIDIARIES:
2
<PAGE> 53
ADAM WHOLESALERS OF VIRGINIA, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF DAYTON, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF LOUISVILLE, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF NITRO, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF INDIANAPOLIS, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF ST. LOUIS, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
3
<PAGE> 54
ADAM WHOLESALERS OF CINCINNATI, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF TOLEDO, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF DENVER, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF PHOENIX, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF KIRKWOOD, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
ADAM WHOLESALERS OF CARLISLE, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
4
<PAGE> 55
ADAM WHOLESALERS OF WOODBURY HEIGHTS, INC.
By: /s/ George E. Thurner, Jr.
------------------------------------
Name: George E. Thurner, Jr.
Title: President
5
<PAGE> 1
2/17/99
SECOND AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
SECOND AMENDMENT, dated as of February 19, 1999, to the Amended and
Restated Loan and Security Agreement, dated as of February 3, 1998, among Morgan
Products Ltd. ("Borrower"), a Delaware corporation, the lenders ("Lenders")
named therein and Fleet Capital Corporation, as Agent and Lender.
WHEREAS, Borrower, the lender signatories thereto ("Lenders") and
Fleet Capital Corporation ("FCC"), as agent for such Lenders (FCC, in such
capacity, "Agent"), entered into a certain Amended and Restated Loan and
Security Agreement dated as of February 3, 1998 as amended by a certain First
Amendment to Amended and Restated Loan and Security Agreement dated as of April
20, 1998 among Borrower, Lenders and Agent (said Amended and Restated Loan and
Security Agreement, as so amended, the "Loan Agreement"); and
WHEREAS, Borrower, Lenders and Agent desire to amend certain
provisions of the Loan Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained and contained in the Loan Agreement, the parties
hereto hereby agree as follows:
1. Definitions. Except as otherwise specifically provided for herein, all
capitalized terms used herein without definition shall have the meanings given
them in the Loan Agreement.
2. Additional and Amended Definitions. The following definitions of
"Acquisition", "Acquisition Agreement", "Base Rate Revolving Credit Portion",
"Base Rate Term Portion", "Excess Cash Flow", "LC Percent", "LIBOR Revolving
Credit Portion", "LIBOR Term Portion", "Purchase Documents" and "Second
Amendment Effective Date" are hereby inserted in to Appendix A of the Loan
Agreement. The definitions of "Applicable Margin", "Base Rate Portion",
"Borrowing Base", "EBITDA", "LIBOR Portion", "Maximum Available Amount", "Money
Borrowed", "Notes", "Required Lenders" and "Total Credit Facility" are hereby
deleted and the following are inserted into Appendix A of the Loan Agreement in
their stead:
* * *
"Acquisition - the purchase by Borrower of the businesses and assets
of Adam Wholesalers, Inc. and certain of its Subsidiaries as contemplated by the
Purchase Documents.
Acquisition Agreement - that certain Asset Purchase Agreement by and
among Morgan Products Ltd., Adam Wholesalers, Inc. and certain Subsidiaries of
Adam Wholesalers, Inc., together with any amendment, modification or supplement
thereto.
* * *
<PAGE> 2
Applicable Margin - a percent determined by the ratio of the
Borrower's Money Borrowed to EBITDA for the four consecutive fiscal quarters
ended as of the date of determination then ended, as set forth in Borrower's
annual or quarterly financial statements delivered pursuant to Section 8.1.3 of
the Agreement pursuant to the following schedule:
APPLICABLE MARGIN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Ratio of Money Base Rate LIBOR
Borrowed to Revolving Base Rate Revolving LIBOR Term
EBIDTA Credit Portion Term Portion Credit Portions Portions
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
< 3.0 to 1 0% .25% 1.50% 2.00%
- --------------------------------------------------------------------------------
>= 3.0 to 1, but < 0% .50% 1.75% 2.25%
3.50 to 1
- --------------------------------------------------------------------------------
>= 3.50 to 1, but .25% .75% 2.00% 2.50%
< 4.0 to 1
- --------------------------------------------------------------------------------
>= 4.0 to 1, but < .50% 1.00% 2.25% 2.75%
4.5 to 1
- --------------------------------------------------------------------------------
>= 4.50 to 1, but .75% 1.25% 2.50% 3.00%
< 5.0 to 1
- --------------------------------------------------------------------------------
>= 5.0 to 1, but < 1.00% 1.50% 2.75% 3.25%
5.5 to 1
- --------------------------------------------------------------------------------
>= 5.5 to 1 1.25% 1.75% 3.00% 3.50%
- --------------------------------------------------------------------------------
</TABLE>
As of February 19, 1999 the Applicable Margin shall be .75% (Base
Rate Revolving Credit Portion), 1.25% (Base Rate Term Portion), 2.50% (LIBOR
Revolving Credit Portions) and 3.00% (Term LIBOR Portions). Changes in the
Applicable Margins shall be made quarterly, commencing with the fiscal quarter
ended December 31, 1999 and shall be effective as of the first day of the month
in which Borrower delivers to Agent the financial statements for the applicable
fiscal quarter or year in accordance with Section 8.1.3."
* * *
(a) Base Rate Portion - the Base Rate Term Portion or the Base Rate
Revolving Credit Portion.
(b) Base Rate Revolving Credit Portion - that portion of the
Revolving Credit Loans that is not subject to a LIBOR Option.
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<PAGE> 3
(c) Base Rate Term Portion - that portion of the Term Loan that is
not subject to a LIBOR Option.
* * *
Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
(a) Maximum Available Amount ; 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) Fifty Million Dollars ($50,000,000) and
(B) sixty-five percent (65%) 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 (x) the face amount of all LC
Guaranties and Letters of Credit issued by Agent or Bank and outstanding at such
date, plus (y) any amounts which Agent and/or Lenders may then be obligated to
pay for the account of Borrower under this Agreement.
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.
* * *
Bridge Loan Interest Rate - as of each date within the Original Term
hereof, a percentage equal to the amount set forth opposite such date in the
following schedule:
3
<PAGE> 4
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Date Percentage
---- ----------
- --------------------------------------------------------------------------------
<S> <C>
Second Amendment Effective Date to LIBOR Rate for two months as of the
March 31, 1999 Second Amendment Effective Date plus
4.00%
- --------------------------------------------------------------------------------
April 1, 1999 to June 30, 1999 LIBOR Rate for three months as of
April 1, 1999 plus 5.00%
- --------------------------------------------------------------------------------
July 1, 1999 to September 30, 1999 LIBOR Rate for three months as of
July 1, 1999 plus 6.00%
- --------------------------------------------------------------------------------
October 1, 1999 to December 31, 1999 LIBOR Rate for three months as of
October 1, 1999 plus 7.00%
- --------------------------------------------------------------------------------
January 1, 2000 and Thereafter 18%
- --------------------------------------------------------------------------------
</TABLE>
* * *
EBITDA - with respect to any fiscal period, EBIT plus depreciation
and amortization expense for such period plus, in respect to EBITDA for fiscal
year 1999 only, the amount of any restructuring or other similar charge taken
within such period, in an amount not to exceed Four Million Dollars
($4,000,000), in connection with the Acquisition, plus in respect to EBITDA for
fiscal year 2000 only, the amount of any restructuring or other similar charge
taken within such period, in an amount not to exceed Six Hundred Thousand
Dollars ($600,000), in connection with the Acquisition.
Excess Cash Flow - with respect to any annual fiscal period of
Borrower, fifty percent (50%) of the amount equal to (x) the sum of (i)
Borrower's Consolidated net income for such period plus (ii) Borrower's
Consolidated amortization and depreciation expenses for such period plus (iii)
Borrower's Consolidated other non-cash charges for such period minus (y) the sum
of (i) principal payments to be made by Borrower in respect to Money Borrowed
(other than payments on Revolving Loans) scheduled to be made in such period,
plus (ii) the non-financed portion of Capital Expenditures made by Borrower
within said period (z) plus or minus decreases or increases in Borrower's
Consolidated net working capital (excluding changes in cash and Revolving Credit
Loans) for such period.
* * *
LC Percent - as of any date, the Applicable Margin for LIBOR
Revolving Credit Portions as in effect on such date.
* * *
LIBOR Option - the option granted pursuant to Section 2.1.1 to have
the interest on all or any portion of the principal amount of the Revolving
Credit Loans or the Term Loan based on a LIBOR Rate.
* * *
LIBOR Portion - a LIBOR Revolving Credit Portion and/or a LIBOR Term
Portion.
4
<PAGE> 5
LIBOR Revolving Credit Portion - that portion of the Revolving
Credit Loans specified in a LIBOR Request (including any portion of Revolving
Credit Loans 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 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 2.1.1(B) hereof and the LIBOR Period of
which was commenced and not terminated.
LIBOR Term Portion - that portion of the Term Loan specified in a
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 the Term Loan 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 2.1.1(B) hereof and the LIBOR Period of
which was commenced and not terminated.
* * *
Maximum Available Amount - One Hundred Million Dollars
($100,000,000).
* * *
Money Borrowed - means (i) Indebtedness arising from the lending of
money by any Person to Borrower; (ii) Indebtedness, whether or not in any such
case arising from the lending by any Person of money to Borrower, (A) which is
represented by notes payable or drafts accepted that evidence extensions of
credit, (B) which constitutes obligations evidenced by bonds, debentures, notes
or similar instruments, or (C) upon which interest charges are customarily paid
(other than accounts payable) or that was issued or assumed as full or partial
payment for Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; (iv) reimbursement obligations with respect to letters of credit or
guaranties of letters of credit; (v) the present value of Borrower's obligations
under its existing pension and retirement plans; and (vi) Indebtedness of
Borrower under any guaranty of obligations that would constitute Indebtedness
for Money Borrowed under clauses (i) through (iii) hereof, if owed directly by
Borrower.
* * *
Notes - Collectively, the Revolving Credit Notes, the Term Notes and
the Bridge Term Notes.
* * *
Purchase Documents - the Acquisition Agreement pursuant to which
Adams Wholesalers, Inc. and certain of its Subsidiaries have agreed to sell to
Borrower all of the assets and businesses described therein and all documents
and instruments to be executed or delivered in connection therewith.
* * *
5
<PAGE> 6
Required Lenders - as of any date, Lenders with at least fifty-one
percent (51%) of the aggregate principal amount of Revolving Loan Commitments
and the aggregate outstanding principal balance of the Term Loan and the Bridge
Term Loan.
Second Amendment Effective Date - as defined in Section 17 of the
Second Amendment.
* * *
Total Credit Facility - One Hundred Twenty Million Dollars
($120,000,000)."
* * *
3. Deleted Definitions. The definition of "Acquisition Loans",
"Acquisition Note", "Acquisition Term Loan", "Acquisition Term Note",
"Annualized EBITDA", "Maximum Inventory Amount", "Permitted Acquisitions" and
"Permitted Subordinated Debt" are hereby deleted from the Loan Agreement."
4. Revolving Credit Loans, Term Loan and Bridge Term Loan. The first
paragraph of Section 1 of the Loan Agreement and Sections 1.1 and 1.2 of the
Loan Agreement are hereby deleted and the following are inserted in their stead:
"SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders severally agree to make a Total Credit Facility of up to One
Hundred Twenty Million Dollars ($120,000,000) available upon Borrower's request
therefor, as follows:
1.1 Revolving Credit Loans.
1.1.1. Loans and Reserves. (A) The aggregate amount of the Revolving
Credit Loans to be made by each Lender (such Lender's "Revolving Credit 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 Revolving Credit Loan Commitments is One Hundred Million Dollars
($100,000,000). The percentage equal to the quotient of (x) each Lender's
Revolving Credit Loan Commitment, divided by (y) the aggregate of all Revolving
Credit Loan Commitments, is that Lender's "Revolving Credit Percentage". Subject
to all of the terms and conditions of this Agreement, each Lender agrees, for so
long as no Default or Event of Default exists, to make Revolving Credit 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) the Borrowing Base at such time,
multiplied by (B) such Lender's Revolving Credit Percentage. It is expressly
understood and agreed that Agent and Lenders may use the Borrowing Base as a
maximum ceiling on Revolving Credit Loans outstanding to Borrower at any time.
If the unpaid balance of the Revolving Credit Loans should exceed the ceiling so
determined or any other limitation set forth in this Agreement, such Revolving
Credit Loans shall nevertheless constitute Obligations that are
6
<PAGE> 7
secured by the Collateral and entitled to all the benefits thereof. Unless
otherwise agreed to by Required Lenders, in no event shall Lenders be required
to make a Revolving Credit Loan at any time that there exists a Default or an
Event of Default. Notwithstanding the foregoing provisions of this Section
1.1.1, Agent shall have the right to establish reserves in such amounts, and
with respect to such matters, as Agent shall deem necessary or appropriate,
against the amount of Revolving Credit Loans which Borrower may otherwise
request under this Section 1.1.1, including, without limitation, with respect to
(i) other sums which Agent reasonably believes will be chargeable against
Borrower's Loan Account as Revolving Credit Loans under any Section of this
Agreement; and (ii) matters, events, conditions or contingencies as to which
Agent, in its reasonable discretion, determines reserves should be established
from time to time hereunder, upon such notice to Borrower as is commercially
practical.
(B) The Revolving Credit Loans shall be evidenced by the amended and
restated promissory notes to be executed and delivered by Borrower on or prior
to the Second Amendment Effective Date, the form of which is made a part of the
Loan Agreement and is attached to the Second Amendment as Exhibit A (the
"Revolving Credit Notes"). Each Revolving Credit Note shall be payable to the
order of a Lender and shall represent the obligation of Borrower to pay the
amount of such Lender's Revolving Credit Loan Commitment or, if less, the
aggregate unpaid principal amount of all Revolving Credit Loans made by such
Lender to Borrower with interest thereon as prescribed in Section 2.1.1.
(C) Insofar as Borrower may request and Lenders may be willing in
their sole and absolute discretion to make Revolving Credit Loans to Borrower at
a time when the unpaid balance of Revolving Credit Loans exceeds, or would
exceed with the making of any such Revolving Credit Loan, the Borrowing Base
(the amount by which any such Loan or Loans exceeds the Borrower Base being
herein referred to individually as an "Overadvance" and collectively as
"Overadvances"), Agent shall enter such Overadvances as debits in the Loan
Account. All Overadvances shall be repaid on demand, shall be secured by the
Collateral and shall bear interest as provided in this Agreement for Revolving
Credit Loans generally. Any Overadvance to be made by Lenders pursuant to the
terms hereof shall be made by Lenders ratably in accordance with their Revolving
Credit Percentages. Overadvances in an aggregate amount of One Million Five
Hundred Thousand Dollars ($1,500,000) or less may, prior to occurrence and
continuation of a Default or an Event of Default, be made in the sole and
absolute discretion of Agent. Overadvances in an aggregate amount of more than
One Million Five Hundred Thousand Dollars ($1,500,000) but less than Three
Million Dollars ($3,000,000) may, prior to the occurrence and continuation of a
Default or an Event of Default, be made in the sole and absolute discretion of
Required Lenders. Overadvances in an aggregate amount of Three Million Dollars
($3,000,000) or more and Overadvances to be made after the occurrence, and
during the continuation, of a Default or an Event of Default shall require the
consent of all Lenders. In no event, however, shall any Lender be required to
make Revolving Credit Loans in an amount which exceeds such Lender's Revolving
Credit Percentage multiplied by the remainder of the Maximum Revolving Credit
Loan minus the face amount of all outstanding LC Guaranties and Letters of
Credit. No Overadvance shall be outstanding for a period of more than 30
consecutive days.
1.1.2. Use of Proceeds. The Revolving Credit Loans shall be used
solely for payment of a portion of the purchase price due under the Purchase
Documents, for Borrower's
7
<PAGE> 8
general operating and capital needs and for other corporate purposes in a manner
consistent with the provisions of this Agreement and all applicable laws.
1.2 Term Loan and Bridge Term Loan
1.2.1 Term Loan. On the Second Amendment Effective Date, subject to
the fulfillment or waiver of all conditions precedent to the effectiveness of
this Agreement, each Lender shall make term loans (collectively the "Term Loan")
to Borrower in the aggregate principal amount equal to the amount set forth
below such Lender's name on the signature pages hereof (such Lender's "Term Loan
Commitment"). The percentage equal to the quotient of (x) each Lender's Term
Loan Commitment, divided by (y) the aggregate of all Term Loan Commitments, is
the Lender's "Term Loan Percentage." The aggregate amount of the Term Loan
Commitments is Ten Million Dollars ($10,000,000). The Term Loan shall be
evidenced by promissory notes to be executed and delivered by Borrower to
Lenders on the Second Amendment Effective Date, the form of which is made a part
of the Loan Agreement and is attached to the Second Amendment as Exhibit A-1
(the "Term Note(s)"), shall bear interest as specified in Section 2.1 and shall
be repayable in accordance with the terms of Term Notes. The Term Loan shall be
funded upon the Second Amendment Effective Date. The proceeds of the Term Loan
shall be used by Borrower, solely for purposes for which the proceeds of the
Revolving Credit Loans are authorized to be used.
1.2.2 Bridge Term Loan. On the Second Amendment Effective Date,
subject to the fulfillment or waiver of all conditions precedent to the
effectiveness of this Agreement, each Lender shall make bridge term loans
(collectively the "Bridge Term Loan") to Borrower in the aggregate principal
amount equal to the amount set forth below such Lender's name on the signature
pages hereof (such Lender's "Bridge Term Loan Commitment"). The percentage equal
to the quotient of (x) each Lender's Bridge Term Loan Commitment, divided by (y)
the aggregate of all Bridge Term Loan Commitments, is the Lender's "Bridge Term
Loan Percentage." The aggregate amount of the Bridge Term Loan Commitments is
Ten Million Dollars ($10,000,000). The Bridge Term Loan shall be evidenced by
promissory notes to be executed and delivered by Borrower to Lenders on the
Second Amendment Effective Date, the form of which is made a part of the Loan
Agreement and is attached to the Second Amendment as Exhibit A-2 (the "Bridge
Term Note(s)"), shall bear interest as specified in Section 2.1 and shall be
repayable in accordance with the terms of Bridge Term Notes. The Bridge Term
Loan shall be funded upon the Second Amendment Effective Date. The proceeds of
the Bridge Term Loan shall be used by Borrower, solely for purposes for which
the proceeds of the Revolving Credit Loans are authorized to be used.
5 Interest. Section 2.1.1(A) of the Loan Agreement is hereby deleted
and the following is inserted in its stead:
"2.1.1 Rate of Interest.
(A) Interest shall accrue on the principal amount of the Base Rate
Revolving Credit Portion and the Base Rate Term Portion outstanding at the end
of each day (computed on the basis of calendar year of 360 days and actual days
elapsed) at a fluctuating rate per annum equal to the Applicable Margin plus the
Base Rate. Said rate of interest shall increase or
8
<PAGE> 9
decrease by an amount equal to any increase or decrease in the Base Rate,
effective as of the opening of business on the day that such change in the Base
Rate occurs. If Borrower properly exercises its LIBOR Option as provided in
Section 2.1.1 (B), interest shall accrue on the principal amount of the LIBOR
Revolving Credit Portions and the LIBOR Term Portions outstanding at the end of
each day (computed on the basis of a calendar year of 360 days and actual days
elapsed) at a rate per annum equal to the Applicable Margin plus the LIBOR rate
applicable to each such LIBOR Revolving Credit Portion and LIBOR Term Portion
for the corresponding LIBOR Period. Interest shall accrue on the principal
amount of the Bridge Term Loan outstanding at the end of each day (computed on
the basis of a calendar year of 360 days and actual days elapsed) at a rate
equal to the Bridge Loan Interest Rate as in effect for such date."
6 Letter of Credit and LC Guaranty Fees and Unused Line Fee. Section
2.3 and Section 2.4 of the Loan Agreement is hereby deleted and the following is
inserted in its stead:
"2.3 Letter of Credit and LC Guaranty Fees. As additional
consideration for issuing or causing to be issued, Letters of Credit for
Borrower's account or for issuing its LC Guaranties at Borrower's request
pursuant to Section 1.3 hereof, Borrower agrees to pay fees in respect to each
Letter of Credit or LC Guaranty so issued. Said fees shall be payable on the
date which such Letter of Credit or LC Guaranty is issued and shall be in an
amount equal to the LC Percent of the amount of the Letter of Credit or LC
Guaranty multiplied by a fraction, the numerator of which is the number of days
in the term of the applicable Letter of Credit or LC Guaranty and the
denominator of which is 360. In the event a Letter of Credit or LC Guaranty is
renewed or extended a fee calculated in the manner provided above shall be
payable for any such renewal or extended period. Further, Borrower shall pay
and/or reimburse Agent and/or Lenders all fees and charges paid by Agent or
Lenders on account of any Letter of Credit or LC Guaranty.
2.4 Unused Line Fee. Borrower shall pay to Agent for the
ratable benefit of Lenders an unused line fee equal to one-half percent (1/2%)
per annum of the average daily amount by which the Maximum Available Amount
exceeds the sum of the outstanding principal balance of the Revolving Credit
Loans plus the LC Amount. The unused line fee shall be payable monthly in
arrears on the first day of each calendar month hereafter."
7 Loan Administration. Sections 3.1.1 and 3.1.2 of the Loan
Agreement are hereby deleted and the following are inserted in their stead:
"3.1 Manner of Borrowing Loans. Borrowings under the credit facility
established pursuant to Section 1 hereof shall be as follows:
3.1.1 Loan Requests. A request for a Revolving Credit Loan shall be
made, or shall be deemed to be made, in the following manner: (i) Borrower may
give Agent a Notice of Revolving Credit Loan, in which notice Borrower shall
specify the amount of the proposed borrowing and the proposed borrowing date,
provided, however, that no such request may be made at a time when there exists
a Default or an Event of Default; and (ii) the becoming due of any amount
required to be paid under this Agreement, any Revolving Credit Note, any Term
9
<PAGE> 10
Note or any Bridge Term Note, whether as interest or for any other Obligation,
shall be deemed irrevocably to be a request for a Revolving Credit Loan on the
due date in the amount required to pay such interest or other Obligation. As an
accommodation to Borrower, Agent may permit telephonic requests for loans and
electronic transmittal of instructions, authorizations, agreements or reports to
Agent by Borrower. Unless Borrower specifically directs Agent in writing not to
accept or act upon telephonic or electronic communications from Borrower, Agent
shall have no liability to Borrower for any loss or damage suffered by Borrower
as a result of Agent's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to Agent by
Borrower and Agent shall have no duty to verify the origin of any such
communication or the authority of the person sending it. Except as otherwise
provided in Section 2.1.1(B), each Revolving Credit Loan shall be made on
notice, given not later than 11:00 a.m. (Chicago time) on the Business Day of
the proposed Revolving Credit Loan, by Borrower to Agent, which shall give to
each Lender prompt written notice thereof by telecopy, telex or cable. Each such
notice (a "Notice of Revolving Credit 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 Revolving Credit Loan. Each Lender shall,
not later than 2:00 p.m. (Chicago time) on each requested date, wire to a bank
designated by Agent the amount of that Lender's Revolving Credit Percentage of
the requested Revolving Credit Loan. Agent shall, before 2:30 P.M. (Chicago
time) on the date of the proposed Revolving Credit Loan, subject to the
provisions hereof, wire to a bank designated by Borrower and reasonably
acceptable to Agent, the amount of such Revolving Credit Loan to the extent
received from the Lenders. The failure of any Lender to make the Revolving
Credit Loan to be made by it shall not relieve any other Lender of its
obligation hereunder to make its Revolving Credit Loan. Neither Agent nor any
other Lender shall be responsible for the failure of any other Lender to make
the Revolving Credit Loan or Acquisition 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 Revolving Credit Loan on
behalf of any Lender hereto. In such event, the Lender on behalf of whom Agent
made the Revolving Credit Loan shall reimburse Agent for the amount of Revolving
Credit 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 Revolving Credit Loan for the period from the date
on which said Revolving Credit Loan or Acquisition Loan was made by Agent on
such Lender's behalf until Agent is reimbursed by such Lender, shall be paid to
Agent.
If at any time one or more Lenders refuse or fail to make a
requested Revolving Credit Loan, when all conditions to a Revolving Credit 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 Note(s), Term Note(s) and Bridge Term Note(s) held by the Lender(s) who
so fail or refuse, and to assume such Lender's commitments to make Revolving
Credit Loans and each such Lender shall be obligated to sell and transfer such
Revolving Credit Note, Term Note or Bridge Term Note 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 Note(s), Term Note(s) or Bridge Term
Note(s) so purchased by it. Any such purchase, however, shall not relieve any
such Lender from any breach
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<PAGE> 11
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.
3.1.2. Disbursement. Borrower hereby irrevocably authorizes Agent to
disburse the proceeds of each Revolving Credit Loan requested, or deemed to be
requested, pursuant to this Section 3.1.2 as follows: (i) the proceeds of each
Revolving Credit Loan shall be disbursed by Agent in lawful money of the United
States of America in immediately available funds, in the case of the initial
borrowing, in accordance with the terms of the written disbursement letter from
Borrower, and in the case of each subsequent borrowing, by wire transfer to such
bank account as may be agreed upon by Borrower and Agent from time to time or
elsewhere if pursuant to a written direction from Borrower; and (ii) the
proceeds of each Revolving Credit Loan requested under Section 3.1.1(ii) shall
be disbursed by Agent by way of direct payment of the relevant interest or other
Obligation."
* * *
8 Principal. Section 3.2.1 of the Loan Agreement is hereby deleted
and the following is inserted in its stead:
"3.2.1. Principal. Principal payable on account of Revolving Credit
Loans shall be payable by Borrower to Agent for its benefit and the ratable
benefit of Lenders immediately upon the earliest of (i) the receipt by Agent or
Borrower of any proceeds of any Collateral other than Equipment or real
Property, to the extent of said proceeds, (ii) the occurrence of an Event of
Default in consequence of which Agent or Required Lenders elect to accelerate
the maturity and payment of the Obligations, or (iii) termination of this
Agreement pursuant to Section 4 hereof; provided, however, that if an
Overadvance shall exist at any time, Borrower shall, on demand, repay the
Overadvance; provided, further, that if any such payment pursuant to clause (i)
above would result in the prepayment of any Revolving Credit LIBOR Portion,
Agent, upon request by Borrower, agrees to hold any such proceeds from
Collateral other than Equipment or real Property in trust for the benefit of
Borrower, and shall not apply such proceeds to the outstanding LIBOR Portions
until the earlier of the expiration of the applicable LIBOR Period or the
occurrence of an Event of Default. Any such funds so held in trust shall not
bear interest and may be commingled with Agent's other funds. Principal payable
on account of the Term Loan or the Bridge Term Loan shall be payable by Borrower
to Agent for the ratable benefit of Lenders in accordance with the terms and
conditions of the Term Notes, the Bridge Term Notes and the provisions of this
Agreement."
9 Mandatory Prepayments. Section 3.3 of the Loan Agreement is hereby
deleted the following is inserted in its stead:
"3.3 Mandatory Prepayments.
3.3.1 Proceeds of Sale, Loss, Destruction or Condemnation of
Collateral. Except as provided in Section 6.4.2 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 Bridge
11
<PAGE> 12
Term Loan, or (y) if such Bridge Term Loan is paid in full, the Term Loan or (z)
if the Term Loan is paid in full, the outstanding Revolving Credit Loans 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 of the Bridge Term Loan or the
Term Loan shall be applied to principal installments due under the Bridge Term
Notes or Term Notes, as applicable, in inverse order of maturity. All such
prepayments of the Bridge Term Loan, Term Loan or Revolving Credit Loans shall
be applied pro rata among Lenders. The foregoing notwithstanding, if the
insurance or condemnation proceeds from any such loss or condemnation are Five
Hundred Thousand Dollars ($500,000) 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
disburse 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.
3.3.2. Excess Cash Flow Recapture. Borrower shall prepay the Bridge
Term Loan and Bridge Term Notes in amounts equal to Borrower's Excess Cash Flow
with respect to each fiscal year of Borrower during the Original Term hereof,
such prepayments to be made within 2 Business Days following the earlier of (i)
the due date for delivery by Borrower to Lender of the annual financial
statements required by Section 8.1.3(i) hereof and (ii) the delivery of such
annual statements by Borrower to Lender and each such prepayment shall be
applied to the installments of principal due under the Bridge Term Note in the
inverse order of their maturities until payment thereof in full."
10 Term and Termination. Section 4.1, 4.2.1 and 4.2.2 of the Loan
Agreement is hereby deleted and the following is inserted in its stead:
"4.1 Term of Agreement. Subject to Agent's and Lender's right to cease
making Loans to Borrower after the occurrence, and during the continuation, of
any Default or Event of Default, this Agreement shall be in effect for a period
ending on January 31, 2004 , (the "Original Term").
4.2 Termination.
4.2.1. Termination by Lenders. Any Lender may terminate this
Agreement as of the last day of the Original Term (which definition may not be
amended without the written consent of all Lenders) and Agent or Required
Lenders may terminate this Agreement without notice after the occurrence and
during the continuation of an Event of Default.
4.2.2. Termination by Borrower. (a) Upon at least 90 days prior
written notice to Agent, Borrower may, at its option, terminate this Agreement;
provided, however, no such termination shall be effective until Borrower has
paid all of the Obligations in immediately available funds and all Letters of
Credit and LC Guaranties have expired or have been cash collateralized to
Agent's satisfaction. Any notice of termination given by Borrower shall be
irrevocable unless Required Lenders otherwise agree in writing, and Lenders
shall have no obligation to make any Loans or issue or procure any Letters of
Credit or LC Guaranties on or after the termination date stated in any such
termination notice given pursuant to this Section
12
<PAGE> 13
4.2.2 or pursuant to Section 4.2.1 above in such notice. Borrower may elect to
terminate this Agreement in its entirety only. No section of this Agreement or
type of Loan available hereunder may be terminated singly. The Term Loans, the
Bridge Term Loan and the Revolving Credit Loans may be prepaid in whole or in
part at any time, without penalty or premium, except as otherwise provided in
Section 2.1.1(B)."
11 Year 2000. The following is inserted into the Loan Agreement as
Section 8.1.6:
* * *
"8.1.6 Year 2000. Take all action necessary to assure that at
all times the computer-based systems utilized by Borrower and each of its
Subsidiaries are able to effectively interpret, process and manipulate data,
including dates, including dates before, on and after December 31, 1999. At
Agent's reasonable request, Borrower shall provide to Agent assurance reasonably
satisfactory to Agent that the computer-based systems utilized by Borrower and
each of its Subsidiaries are able to recognize and perform without error
functions involving dates before, on and after December 31, 1999."
12 Mergers; Consolidations; Acquisitions. Section 8.2.1 of the Loan
Agreement is hereby deleted and the following is inserted in its stead:
"8.2.1. Mergers; Consolidations; Acquisitions. Merge or
consolidate, or permit any Subsidiary of Borrower to merge or consolidate, with
any Person; or acquire, or permit any of its Subsidiaries to acquire, all or any
substantial part of the Properties of any Person, except for the Acquisition."
* * *
13. Total Indebtedness. Section 8.2.3 of the Loan Agreement is
hereby deleted and the following is inserted in its stead:
"8.2.3 Total Indebtedness. Create, incur, assume, or suffer to
exist, or permit any Subsidiary of Borrower to create, incur or suffer to exist,
any Indebtedness, except: (i) Obligations owing to Agent and Lenders; (ii)
Indebtedness of any Subsidiary to Borrower; or (iii) accounts payable to trade
creditors which are not more than thirty (30) days past due and current
operating expenses (other than for Money Borrowed) which are not more than
thirty (30) days past due, in each case incurred in the ordinary course of
business and paid within such time period, unless the same are actively being
contested in good faith and, if appropriate, and lawful proceedings and the
Borrower shall have set aside such reserves, if any, with respect thereto as are
required by GAAP and deemed adequate by Borrower and, in respect to reserves
contained on year-end statements, its independent accountants; (iv) obligations
to pay Rentals permitted by Section 8.2.16; (v) Permitted Purchase Money
Indebtedness; (vi) contingent liabilities arising out of endorsements of checks
and other negotiable instruments for deposit or collection in the ordinary
course of business; (vii) Indebtedness to Agent, any Lender or any Affiliate of
either under any interest rate hedging, swap, cap or similar agreement between
Borrower and such Person; (viii) obligations under Capitalized Leases to the
extent not prohibited by any other section of this Section 8.2.3; (ix)
Indebtedness for deferred compensation owed by Borrower to
13
<PAGE> 14
its highly compensated employees; (x) Indebtedness arising in connection with
employee benefit plans entered into or incurred in the ordinary course of
business; (xi) Indebtedness for deferred taxes; (xii) Indebtedness incurred in
obtaining life insurance in respect to the lives of certain highly compensated
employees of Borrower in connection with deferred compensation obligations owed
to such employees; and (xiii) Indebtedness not included in paragraphs (i)
through (xii) above which does not exceed at any time, in the aggregate, the sum
of Two Million Five Hundred Thousand Dollars ($2,500,000)."
* * *
14 Leases. Section 8.2.16 of the Loan Agreement is hereby deleted
and the following is inserted in its stead:
"8.2.16 Leases. Become a lessee under any operating lease of
Property if the aggregate Rentals payable during any current or future period of
twelve (12) consecutive months during the Term hereof under the lease in
question and all other leases under which Borrower is then lessee would exceed
Ten Million Dollars ($10,000,000). The term "Rentals" means, as of the date of
determination all payments which the lessee is required to make by the terms of
any lease, exclusive of payments for taxes, insurance, common area maintenance
and the like."
* * *
15 Capital Expenditures. The following is inserted in to the Loan
Agreement as Section 8.2.17:
"8.2.17. Capital Expenditures. Make Capital Expenditures
(including, without limitation, by way of capitalized leases) which, in the
aggregate, as to Borrower and its Subsidiaries, exceed Three Million Dollars
$3,000,000 during any fiscal year of Borrower."
16 Specific Financial Covenants. Section 8.3 of the Loan Agreement
is hereby deleted and the following is inserted in its stead:
"8.3 Specific Financial Covenants. During the term of this
Agreement, and thereafter for so long as there are any Obligations (other than
contingent indemnity Obligations arising from any claim unknown to Borrower,
Agent or any Lender) to Lenders, Borrower covenants that, unless otherwise
consented to by Required Lenders in writing, it shall:
8.3.1 Money Borrowed to EBITDA Ratio. Have at the end of each fiscal
quarter within the Original Term a ratio of Money Borrowed as at the end of such
fiscal quarter to EBITDA for the fiscal period listed below equal to or less
than the ratio set forth opposite such fiscal period in the following schedule:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Six months ended June 30, 1999 20.00 to 1
Nine months ended September 30, 1999 9.50 to 1
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Four fiscal quarters ended December 31,
1999 and March 31, 2000 6.25 to 1
Four fiscal quarters ended June 30, 2000 5.25 to 1
Four fiscal quarters ended September 30, 2000
4.75 to 1
Four fiscal quarters ended December 31,
2000 and March 31, 2001 3.75 to 1
Four fiscal quarters ended June 30, 2001
and the last day of each fiscal quarter
thereafter 3.50 to 1
</TABLE>
8.3.2 Interest Coverage Ratio. Have at the end of each fiscal
quarter within the Original Term, an Interest Coverage Ratio for the fiscal
period listed below equal to or greater than the ratio set forth opposite such
fiscal quarter in the following schedule:
Period Ratio
------ -----
Three months ended March 31, 1999 .20 to 1
Six months ended June 30, 1999 1.30 to 1
Nine months ended September 30, 1999 1.70 to 1
Four fiscal quarters ended December 31,
1999 1.70 to 1
Four fiscal quarters ended March 31, 2000 1.80 to 1
Four fiscal quarters ended June 30, 2000 2.10 to 1
Four fiscal quarters ended September 30, 2000
2.40 to 1
Four fiscal quarters ended December 31,
2000 and the last day of each fiscal
quarter thereafter 2.50
8.3.3 Fixed Charge Coverage Ratio. Have at the end of each fiscal
quarter within the Original Term, a Fixed Charge Coverage Ratio for the fiscal
period listed below equal to or greater than the ratio set forth opposite such
fiscal period in the following Schedule:
15
<PAGE> 16
<TABLE>
<CAPTION>
Fiscal Period Ratio
------------- -----
<S> <C>
Six months ended June 30, 1999 2.60 to 1
Nine months ended September 30, 1999 5.00 to 1
Four fiscal quarters ended
December 31. 1999 4.00 to 1
Four fiscal quarters ended March 31, 2000 2.50 to 1
Four fiscal quarters ended June 30, 2000 2.00 to 1
Four fiscal quarters ended
September 30, 2000 and December
31, 2000 1.70 to 1
Four fiscal quarters ended March 31, 2001 1.80 to 1
Four fiscal quarters ended June
30, 2001 and the last day of
each fiscal quarter thereafter 2.00 to 1
</TABLE>
8.3.4 Minimum EBITDA. Achieve as of the last day of each of the
fiscal period listed below, an EBITDA for such fiscal period equal to or greater
than the EBITDA set forth opposite such fiscal period in the following
schedule:"
16
<PAGE> 17
<TABLE>
<CAPTION>
Fiscal Period Minimum EBITDA
------------- --------------
<S> <C>
Three months ended March 31, 1999 $300,000
Six months ended June 30, 1999 $4,800,000
Nine months ended September 30, 1999 $10,300,000
Four fiscal quarters ended
December 31, 1999 $12,400,000
Four fiscal quarters ended March 31, 2000 $13,000,000
Four fiscal quarters ended June 30, 2000 $13,800,000
Four fiscal quarters ended
September 30, 2000 $14,600,000
Four fiscal quarters ended
December 31, 2000 $15,400,000
Four fiscal quarters ended March 31, 2001 $16,000,000
Four fiscal quarters ended June
30, 2001 $16,500,000
Four fiscal quarters ended
September 30, 2001 $16,900,000
Four fiscal quarters ended
December 31, 2001 and the last
day of each fiscal quarter
thereafter $17,100,000
</TABLE>
8.3.5 Minimum Availability. Maintain as of any date within the
Original Term on which any principal is outstanding under the Bridge Term Loan,
average Availability for the date of determination and the immediately preceding
twenty-nine (29) days of not less than Ten Million Dollars ($10,000,000)."
17. Conditions Precedent. This Second Amendment shall become
effective upon satisfaction of each of the following conditions precedent:
(A) Agent shall have received each of the following documents, each
in form and substance acceptable to Agent:
(i) Evidence that the insurable assets and business to be
acquired by Borrower pursuant to the Purchase Documents are covered by
Borrower's insurance policies;
(ii) Copies of all filings receipts or acknowledges issued by
any governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Agent, for its benefit and the ratable benefit of Lenders,
in the assets to be acquired by Borrower pursuant to the Purchase Documents and
evidence in a form acceptable to Agent that such Liens constitute valid and
perfected security interest and Liens, having the Lien priority specified in the
Loan Agreement;
(iii) A copy of the Articles or Certificate of Incorporation
of Borrower, and all amendments thereto, certified by the Secretary of State or
other appropriate official of its jurisdiction of incorporation;
(iv) To the extent not previously delivered to Agent, good
standing certificates for Borrower, issued by the Secretary of State or other
appropriate official of Borrowers'
17
<PAGE> 18
jurisdiction of incorporation and each jurisdiction where the conduct of
Borrowers' business activities or the ownership of its Properties necessitates
qualification except where the failure to be so qualified would not have a
material adverse effect on Borrower or its operations or except where Borrower
has previously delivered to Agent such good standing certificates;
(v) 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 Second Amendment and the Other Agreements to be
executed by Borrower and the names of the officer or officers of Borrower
authorized to sign this Second Amendment and the Other Agreements to be executed
by Borrower together with a sample of the true signature of each such officer;
(vi) Opinion of Winthrop, Stimson, Putnam & Roberts;
(vii) Amendment to Patent Assignment and Amendment to
Trademark Assignment;
(viii) Revolving Credit Notes;
(ix) Term Notes;
(x) Bridge Term Notes;
(xi) Purchase Documents; and
(xii) Such other documents, instruments and agreements as
reasonably requested by Agent.
(B) The Acquisition shall have been consummated substantially in
accordance with the terms of the Purchase Documents and without waivers,
amendments or modifications that are not acceptable to Lenders.
The date on which all of the conditions precedent listed in items
(A) and (B) above are satisfied or waived is hereinafter referred to as the
"Second Amendment Effective Date." On the Second Amended Effective Date, Lenders
shall deliver to Borrower the Revolving Credit Notes previously executed by
Borrower, which Notes shall be marked "Amended and Superseded."
18. Exhibits. Exhibits A, A-1, A-2, B, C, D, E, F, G, H, I, J, K, L,
M, N and P of the Loan Agreement are hereby deleted and Exhibits, A, A-1, A-2,
B, C, D, E, F, G, H, I, J, K, L, M, N and P attached to the Second Amendment are
inserted in their stead and hereby made a part of the Loan Agreement.
19. Counterparts. This Amendment may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
18
<PAGE> 19
20. Signature Block. The signature block to the Loan Agreement is
hereby amended to read as the signature block to this Second Amendment.
21. Continuing Effect. Except as otherwise specifically provided for
herein, the Loan Agreement remains in full force and effect.
IN WITNESS WHEREOF, this Second Amendment has been duly executed as
of the date first written above.
MORGAN PRODUCTS LTD. FLEET CAPITAL CORPORATION ("Agent"
and "Lender")
("Borrower")
By: /s/ Sandra J. Evans
By: /s/ Mitchell J. Lahr -------------------------------------
------------------------------
Name: Sandra J. Evans
Name: Mitchell J. Lahr
Title: Senior Vice President
Title: Vice President, Chief
Financial Officer and Secretary Revolving Loan Commitment:
$33,333,340
Term Loan Commitment: $3,333,330
Bridge Term Loan
Commitment:$3,333,330
HARRIS TRUST AND SAVING BANK
("Lender")
By: /s/ David L. Crouch
----------------------------------
Name: David L. Crouch
Title: Vice President
19
<PAGE> 20
Revolving Loan Commitment:
$10,416,660
Term Loan Commitment: $1,041,670
Bridge Term Loan Commitment:
$1,041,670
Address: 111 W. Monroe Street
P.O. Box 755
Chicago, IL 60690
Telecopier: (312)
461-2591
ATTN:________________
NATIONSBANK, N.A.
("Lender")
By: /s/ Byron J. Turner, III
----------------------------------
Name: Byron J. Turner, III
Title: Vice President
Revolving Loan Commitment:
$16,666,660
Term Loan Commitment: $1,666,670
Bride Term Loan Commitment:
$1,666,670
Address: P.O. Box 3406
Atlanta, GA 30302-3406
Telecopier: (404) 607-6437
ATTN:________________
NATIONAL BANK OF CANADA
("Lender")
20
<PAGE> 21
By: /s/ David G. Fuller
----------------------------------
Name: David G. Fuller
Title: Vice President
Revolving Loan Commitment:
$8,333,340
Term Loan Commitment: $833,330
Bridge Term Loan Commitment:
$833,330
Address: 312 Walnut Street
Suite 1900
Cincinnati, OH 45202
Telecopier: (513)
621-0276
ATTN: _______________
FIRSTAR, N.A.
("Lender")
By: /s/ William J. Hronek
----------------------------------
Name: William J. Hronek
Title: Vice President
Revolving Loan Commitment:
$6,250,000
Term Loan Commitment: $625,000
Bridge Term Loan Commitment:$625,000
Address: 425 Walnut Street
8th Floor
Cincinnati, OH 45202
Telecopier: (513) 632-2068
ATTN:________________
21
<PAGE> 22
GREENTREE FINANCIAL SERVICING
CORPORATION
By: /s/ C.A. Gouskos
----------------------------------
Name: C.A. Gouskos
Title: Senior Vice President
Revolving Loan Commitment:
$16,666,660
Term Loan Commitment: $1,666,670
Bridge Term Loan Commitment:
$1,666,670
Address: 100 North Point Center
East
Suite 200
Alpharettpa, GA 30022
Telecopier: (770) 772-3786
ATTN:________________
SOVEREIGN BANK
By: /s/ Joseph Becker
----------------------------------
Name: Joseph Becker
Title: Vice President
Revolving Loan Commitment:
$8,333,340
Term Loan Commitment: $833,330
Bridge Term Loan Commitment:
$833,330
Address: 50 Rowes Wharf
Suite 430
22
<PAGE> 23
Boston, MA 02110
Telecopier: (617) 478-6799
ATTN: _______________
23
