<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------------------------------------------------
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required)
For the fiscal year ended DECEMBER 31, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
Commission file number 0-12640
KAYDON CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3186040
(State or other jurisdiction of incorporation or organization) (IRS Employer ID No.)
</TABLE>
ARBOR SHORELINE OFFICE PARK, 19345 US 19 NORTH, CLEARWATER, FL 33764
(Address of principal executive offices)
Registrant's telephone number, including area code (813) 531-1101
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.10 PER SHARE
(Title of each class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Yes X No
--- ---
Based on the closing sales price of March 23, 1998, the aggregate market value
of the voting stock held by nonaffiliates of the registrant was $1,310,496,609.
The number of shares outstanding of the registrant's common stock, $0.10 par
value was 33,020,387 as of March 23, 1998.
DOCUMENTS INCORPORATED BY REFERENCE AND THE PART(S) OF THIS FORM 10-K INTO WHICH
EACH DOCUMENT IS INCORPORATED:
KAYDON CORPORATION 1997 ANNUAL REPORT TO STOCKHOLDERS - PARTS I, II AND IV
KAYDON CORPORATION PROXY STATEMENT - PART III
<PAGE> 2
KAYDON CORPORATION FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997
INDEX
<TABLE>
<CAPTION>
Part I Page No.
- ------ --------
<S> <C> <C>
Item 1. Business 1 - 10
Item 2. Properties 11 - 13
Item 3. Legal Proceedings 13 - 15
Item 4. Submission of Matters to Vote of Security Holders 15
Part II
- -------
Item 5. Market for the Registrant's Common Equity &
Related Stockholder Matters 16
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 17
Part III
- --------
Item 10. Directors and Executive Officers of the Registrant 18
Item 11. Executive Compensation 19
Item 12. Security Ownership of Certain Beneficial Owners
and Management 19
Item 13. Certain Relationships and Related Transactions 19
Part IV
- -------
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
(a) 1. Financial Statements 20
2. Financial Statement Schedules 20
3. Reference to Exhibits 21
(b) Reports on Form 8-K 21
Signatures 22
(c) 1. Exhibit Index 23 - 26
2. Exhibits 27 - 28
</TABLE>
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PART I
------
Item 1. BUSINESS
--------
a. General Development of Business
Kaydon Corporation (the "Company" or "Kaydon") was formed in October
1983. The company has acquired the following operations from 1986 through 1991:
<TABLE>
<S> <C>
Kaydon Ring & Seal, Inc. 6/30/86
Spirolox 7/17/87
Electro-Tec Corp. 6/23/89
I.D.M. Electronics Ltd. 6/23/89
Cooper Bearing Companies 12/16/91
</TABLE>
Kaydon has made the following acquisitions and dispositions in the past
five years:
On December 4, 1993, Cooper Roller Bearing Company Limited, a wholly
owned subsidiary of Kaydon, acquired the assets of Kenyon Power Transmission
Ltd. ("Kenyon") of Manchester, England. Kenyon manufactures pulleys and drive
components which are complementary to their product offering. Subsequent to the
purchase, Cooper moved the assets to their manufacturing facility.
On January 28, 1994, Kaydon Corporation, through its wholly owned
subsidiary, Kaydon Acquisition VI, Inc., acquired for $7,268,000 certain assets
and liabilities of Industrial Tectonics Inc, the ball division of Axel Johnson,
Inc. Industrial Tectonics Inc, located in Dexter, Michigan, manufactures
specialty balls used in measuring devices, floats, valves, ball point pens and
antifriction bearings. This acquisition was consummated by Kaydon Acquisition
VI, Inc. with loaned funds from Kaydon Corporation.
On January 31, 1995, the Company, through its wholly owned subsidiary,
I.D.M. Electronics Ltd. ("I.D.M."), purchased the assets of D J Molding for
$759,000. I.D.M. moved the assets to its plant in Reading, England after the
purchase.
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On May 1, 1995, Kaydon Corporation sold the majority of its automotive
operation assets. The net sale proceeds of $3,476,000 approximated the book
value of the assets sold. The Company and the buyer also entered into an
operating lease for the facility in which the business was located. The sales of
the automotive business were less than 4% of the consolidated net sales for each
of 1995, 1994 and 1993 with an operating income contribution percentage lower
than the rest of the Company. In addition, on May 17, 1995, Kaydon Corporation
sold the surplus building resulting from the 1993 plant consolidation. The net
sales proceeds of $1,789,000 approximated book value.
On August 31, 1995, Kaydon Corporation, through its wholly owned
subsidiary, Kaydon Acquisition Corp. V, purchased the stock of Seabee
Corporation for approximately $22,753,000, net of cash received. Seabee, located
in Hampton, Iowa, is a manufacturer of large hydraulic cylinders and alloy steel
castings. This acquisition was accounted for using the purchase method of
accounting and, accordingly, the results of operations of Seabee have been
included in the consolidated financial statements since August 31, 1995, the
effective date of the acquisition.
On February 1, 1996, Kaydon Corporation, through its wholly owned
subsidiary, Kaydon Acquisition VII, Inc., purchased the assets of Victor Fluid
Power Co. ("Victor") and Benton Harbor Engineering Co., Inc. ("Benton Harbor")
for $10,699,000. Both companies manufacture hydraulic cylinders and fluid power
components and are complimentary to Seabee Corporation which was purchased in
August, 1995. The Benton Harbor facility was closed in the acquisition process
with the equipment and customer order base being absorbed into Seabee and
Victor. Victor is located in Granite Falls, Minnesota. The acquisition has been
accounted for using the purchase method of accounting and, accordingly, the
results of operations have been included in the 1996 consolidated financial
statements since the date of acquisition.
On March 11, 1997, Kaydon Corporation, through its wholly owned
subsidiary, Kaydon Acquisition Corp. V (d/b/a Seabee Corporation), purchased the
assets of Gold Star Manufacturing, Inc. for $4,449,000. Gold Star is located in
Laurens, Iowa.
On May 29, 1997, Kaydon Corporation, through its wholly owned
subsidiary, Kaydon Acquisition VIII, Inc. purchased the assets of Great Bend
Industries, Inc. for $22,933,000. Great Bend Industries is located in Great
Bend, Kansas. Both companies manufacture custom-designed cylinders and
compliment the prior years' acquisitions of Seabee and Victor in the Kaydon
Fluid Power Products Group. The acquisitions have been accounted for using the
purchase method of
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accounting and, accordingly, the results of operations have been included in the
1997 consolidated financial statements since the dates of acquisition.
b. and c. Financial Information About Industry Segments and Narrative
Description of Business
The Company designs, manufactures and sells custom-engineered products
for a broad and diverse customer base primarily in domestic markets. The
Company's principal products include antifriction bearings, bearing systems and
components, filters and filter housings, specialty retaining rings, specialty
balls, custom rings, shaft seals, hydraulic cylinders, metal castings and
various types of slip-rings. These products are used by customers in a wide
variety of medical, instrumentation, material handling, machine tool
positioning, aerospace, defense, construction and other industrial applications.
The Company is customer-focused and concentrates on providing cost-effective
solutions for its customers through close engineering relationships with leading
manufacturers throughout the world.
Products
Kaydon works closely with its customers to engineer the required
solutions to their design problems. As a custom manufacturer, many diverse
applications are served. Designed solutions are frequently unique to a single
customer or application. Depending upon the nature of the application, the
design may be used over a protracted time period and in large numbers, or it may
be for a single use.
The antifriction bearing products of Kaydon incorporate various types
of rolling elements. The ball, tapered roller and cylindrical roller bearings
manufactured by Kaydon are made in sizes ranging from approximately 1" outside
diameter thin section ball bearings to heavy-duty ball bearings with an outside
diameter of 180 inches. These antifriction products are fabricated from
aluminum, bearing-quality steel, stainless steel or special tool steels. They
often incorporate a broad range of features such as gearing, special sealing
systems and mounting arrangements in combination with other mechanical
components. Typical applications include large-diameter ball bearings for
hydraulic cranes and excavators; thin-section ball bearings for rotating joints
of
3
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industrial robots; lightweight airborne radar bearings; large-diameter aluminum
roller bearings for military vehicle turret systems; and ultra high-precision
roller bearings for gear box applications.
Seabee Corporation, Victor Fluid Power, Inc., Great Bend Industries,
Inc. and Gold Star Manufacturing design and manufacture hydraulic cylinders with
bores ranging from 1.25" to 24" and strokes up to 50' in length. This division
also provides both chrome plating and foundry products of both grey and ductile
steel. In addition, Victor produces a line of high pressure pumps and valves,
railroad wheel presses and hydraulic accumulators. The cylinders are used in
manlifts, waste shredding machines, utility trucks, cranes, motion compensators,
drill equipment and various construction equipment.
Kaydon Ring and Seal, Inc. manufactures metallic medium and large
bore-size rings for low and medium-speed internal combustion engines, steam
engines, pumps and reciprocating compressors. Sealing rings are engineered with
metallic and nonmetallic products used to limit the leakage of fluids and gases
within engines and a wide variety of other mechanical products. Sealing rings
are used in industrial applications, such as: compressors, transmissions,
hydraulic and pneumatic cylinders, and commercial and military aircraft, jet
engines and control apparatus applications. Shaft seals are used to seal gases
or liquids usually under extreme conditions of speed, pressure or temperature.
Shaft seals are fabricated from a variety of materials depending on the
application.
The filtration products of Kaydon include industrial liquid filtration
systems that remove particulate and water from fuels, lubricants and hydraulic
oils in applications ranging from refrigeration units to large power generation
turbines; and special coalescing elements and filter housings for diesel fuel
filtration in both commercial and military applications.
Electro-Tec Corp. and I.D.M. Electronics Ltd. design and manufacture
precision, high-performance slip-rings, slip-ring assemblies, capsules and
related electromechanical devices to meet customers' exact needs and
specifications. Slip-rings are manufactured from injection and transfer- molded
plastics, aluminum and stainless steel castings, bearings and electronic
components and connectors, and are sometimes subjected to an electro-deposition
process. They are used to transmit electrical signals or power between the
rotating and stationary members of an assembly and can be found in combat
vehicles, aircraft inertial guidance systems, telecommunications satellites,
aircraft targeting systems and medical diagnostic equipment.
4
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The Cooper Bearing Companies design and manufacture a range of split
roller bearings, which include both standard and custom-designed lines. Split
bearings are designed specifically to aid the customer in solving problems where
the application of full round bearings would be less desirable. The product is
used in a wide range of applications but particularly those where space and ease
of change are important selection criteria. With the acquisition of the assets
of Kenyon Power Transmission, Cooper now manufactures pulleys and drive
components, which are complimentary products.
Industrial Tectonics Inc manufactures specialty balls from alloyed
steel, plastic, tungsten carbide, glass and an assortment of other materials.
These balls are used in a variety of applications including gauges, measuring
devices, floats, valves, ball point pens and antifriction bearings.
Spirolox designs, manufactures and sells retaining rings and wave
springs for various markets including heavy equipment, aircraft, military,
hydraulic/pneumatic and machinery applications.
Approximately 70 percent of Kaydon's sales are to original equipment
manufacturers, which incorporate the Kaydon products in the products they sell.
Many of the applications for the Company's products also provide the opportunity
for participation in the replacement or spare parts markets.
New Product and Industry Segment Information
The Company has not made any public announcement of, or otherwise made
public information about, a new product or a new industry segment which would
require the investment of a material amount of the Company's assets or which
would otherwise result in a material cost.
Patents, Trademarks, Licenses, Etc.
The Company does not believe that any material part of its business is
dependent on the continued availability of any one or all of its patents or
trademarks.
Seasonal Nature of Business
The Company does not consider its business to be seasonal in nature.
5
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Working Capital Practices
The Company does not believe that it or the industry in general has any
special practices or special conditions affecting working capital items that are
significant for an understanding of the Company's business.
Customers
Kaydon sells its products to over 1,000 companies throughout the world.
The principal customers are generally large manufacturing corporations. During
1997, 1996 and 1995, sales to no single customer exceeded 10% of total sales.
Customers can generally be divided into four major market groups:
Aerospace and Military Equipment, Replacement Parts and Exports, Special
Industrial Machinery and Heavy Industrial Equipment. Sales to these customer
groups for 1997, 1996 and 1995 are set forth in the following table:
Net Sales by Major Market Groups
(in thousands)
<TABLE>
<CAPTION>
=============================================================================================================================
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
Amount % Amount % Amount %
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aerospace and $ 45,412 13.8 $ 46,545 16.0 $ 37,921 16.5
Military Equipment
- -----------------------------------------------------------------------------------------------------------------------------
Replacement Parts 112,426 34.2 101,808 35.0 88,586 38.5
and Exports
- -----------------------------------------------------------------------------------------------------------------------------
Special Industrial 86,564 26.3 75,271 25.9 63,980 27.8
Machinery
- -----------------------------------------------------------------------------------------------------------------------------
Heavy Industrial 84,634 25.7 67,046 23.1 39,437 17.2
Equipment
- -----------------------------------------------------------------------------------------------------------------------------
Total $329,036 100.0% $290,670 100.0% $229,924 100.0%
=============================================================================================================================
</TABLE>
Replacement parts are sold mainly through specialized distributors.
Kaydon had export sales of $25,380,000 in 1997, $22,928,000 in 1996, and
$20,040,000 in 1995, with most of such sales concentrated in Canada, Europe and
Japan.
6
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Marketing
Kaydon's sales organization consists of salespersons and
representatives located throughout the United States, Canada, Europe and Asia.
Salespersons are trained to provide technical assistance to customers, as well
as to provide liaison with factory engineering staffs.
A nationwide network of specialized distributors and agents provides
local availability of Kaydon products to serve the requirements of the
replacement market and small original equipment manufacturers.
Manufacturing
Kaydon manufactures virtually all of the products it sells and utilizes
subcontractors only for occasional specialized services. Kaydon's products
require sophisticated processes and equipment, and many of its products
incorporate unique Kaydon-developed production techniques. Certain satellite and
aircraft-type bearing products must meet extraordinary mechanical tolerances
(for example, within 20 millionths of an inch) and some products such as
slip-rings are assembled in quality-controlled "white room" conditions. Nearly
all of Kaydon's products require high levels of incoming quality control and
process quality control. The manufacturing equipment required for Kaydon's
operations entails a relatively high level of capital investment for any given
level of sales.
Suppliers
Kaydon and its subsidiaries purchase large quantities of raw materials,
mainly bearing-quality steel, special alloy steel, high-grade carbon and filter
media, aluminum alloy and stainless steel castings, plastics, wire and
electrical connectors, from multiple sources. Kaydon purchases large amounts of
certain types of bearing-quality steel from a number of foreign and domestic
suppliers. No significant supply problems have been encountered in recent years
as relationships with suppliers have generally been good.
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Environmental Matters
Reference is made to "Management's Discussion and Analysis" on pages 15
and 16 of Kaydon's 1997 Annual Report to Stockholders which is incorporated
herein by reference.
Employees
On December 31, 1997, Kaydon employed 2,552 employees. Hourly employees
at the Muskegon facilities are represented by the International Association of
Machinists and Aerospace Workers. The current collective bargaining agreement is
effective until December 3, 2000. The Baltimore hourly employees are also
represented by the International Association of Machinists and Aerospace
Workers. The current collective bargaining agreement is effective until December
13, 1998. Greeneville hourly employees are represented by the United
Steelworkers of America, with the current collective bargaining agreement
effective until January 26, 2000. Dexter hourly employees are represented by the
International Union United Automobile, Aerospace and Agricultural Implement
Workers of America, UAW, with the current collective bargaining agreement
effective until November 5, 1999. The hourly employees at Granite Falls are
represented by the International Association of Machinists and Aerospace
Workers, with the current collective bargaining agreement effective until
October 15, 2000. The hourly employees at Great Bend are represented by the
International Association of Machinists and Aerospace Workers, with the current
collective bargaining agreement effective until August 1, 2001. The remaining
domestic factory employees, as well as all office employees, are non-union.
Kaydon provides its employees with a full range of insurance, pension
and deferred compensation benefits. The Company believes its level of total
compensation is competitive when compared with similar jobs within the various
communities in which its operations are located.
8
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Backlog
Kaydon sells certain products on a build-to-order basis that requires
substantial order lead time. This results in a backlog of unshipped, scheduled
orders. Other products are manufactured on the basis of sales projections or
annual blanket purchase orders. Orders for such products are not entered into
backlog until explicit shipping releases are received. Kaydon's backlog was
$155,548,000 at December 31, 1997 and $117,262,000 at December 31, 1996. Based
on experience, management would expect to ship over the following twelve months
about 90 percent of the year-end backlog. Backlog has become less indicative of
future results as the Company has made efforts to shorten manufacturing lead
times, creating a faster response to customer orders.
Competition
Kaydon competes with divisions of SKF Industries, Dover Corporation,
Parker Hannifin Corporation, Commercial Intertech Corporation,
Torrington/Fafnir, Rotek, FAG, EG&G Inc., Litton Poly-Scientific and numerous
other smaller companies.
The markets served by Kaydon are large and extremely competitive. The
major domestic competitors generally produce a wide line of standard products
and do not specialize in custom products. The major domestic bearing
manufacturers nonetheless do offer special-engineered bearings. The markets for
Kaydon's special-machined components, hydraulic cylinders, fabricated products,
filters, rings and seals are very diverse. Consequently, management feels that
the size of the total market for such products cannot be meaningfully estimated.
In all of the markets served by Kaydon, the principal methods of
competition involve price, product performance, engineering support and timely
delivery.
Many of Kaydon's domestic competitors are part of large, worldwide
manufacturing concerns and have significantly greater financial resources. While
foreign competition is intense and growing for all industrial components, the
detailed engineering content and service level
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required by many of its customers have somewhat limited the impact of foreign
competition on domestic business.
Government Contracts and Renegotiation
Various provisions of federal law and regulations require, under
certain circumstances, the renegotiation of military procurement contracts or
the refund of profits determined to be excessive. Based on Kaydon's experience
under such provisions, management believes that no material renegotiation or
refunds (if any) will be required.
d. Information About International Operations
Information with respect to operations by geographic area appears in
Note 15, "Business Segment Information" of the Notes to Consolidated Financial
Statements set forth on page 31 of the Annual Report to Stockholders, which is
incorporated herein by reference. Fluctuating exchange rates and factors beyond
the control of the Company, such as tariffs and foreign economic policies, may
affect future results of foreign operations.
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Item 2. PROPERTIES
The following chart lists the principal locations, activity (use) and
square footage of Kaydon's most significant facilities as of December 31, 1997
and indicates whether the property is owned or leased:
<TABLE>
<CAPTION>
Location Activity Sq. Ft. Owned or
Leased
====================================================================================================================
<S> <C> <C> <C>
Clearwater, FL Corporate Headquarters 11,743 Leased
- --------------------------------------------------------------------------------------------------------------------
Muskegon, MI Manufacturing Facility 232,250 Owned
(Norton Shores)
- --------------------------------------------------------------------------------------------------------------------
Muskegon, MI Rental Property 162,476 Owned
(Norton Shores)
- --------------------------------------------------------------------------------------------------------------------
Newaygo, MI Rental Property 16,800 Owned
- --------------------------------------------------------------------------------------------------------------------
Dexter, MI Manufacturing Facility 56,627 Owned
- --------------------------------------------------------------------------------------------------------------------
Sumter, SC Manufacturing Facility 168,400 Owned
- --------------------------------------------------------------------------------------------------------------------
Sumter, SC Manufacturing Facility 115,200 Owned
- --------------------------------------------------------------------------------------------------------------------
Greeneville, TN Manufacturing Facility 80,700 Owned
- --------------------------------------------------------------------------------------------------------------------
LaGrange, GA Manufacturing Facility 87,000 Owned
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Baltimore, MD Manufacturing Facility 725,000 Owned
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St. Louis, MO Manufacturing Facility 18,500 Leased
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Blacksburg, VA Manufacturing Facility 111,400 Owned
- --------------------------------------------------------------------------------------------------------------------
Virginia Beach, VA Warehouse & Offices 38,568 Owned
- --------------------------------------------------------------------------------------------------------------------
Hampton, IA Manufacturing Facility 298,380 Owned
- --------------------------------------------------------------------------------------------------------------------
Hampton, IA Manufacturing Facility 67,968 Owned
- --------------------------------------------------------------------------------------------------------------------
Hampton, IA Warehouse 14,400 Owned
- --------------------------------------------------------------------------------------------------------------------
Hampton, IA Warehouse 15,600 Owned
- --------------------------------------------------------------------------------------------------------------------
Laurens, IA Manufacturing Facility 42,000 Leased
- --------------------------------------------------------------------------------------------------------------------
Granite Falls, MN Manufacturing Facility 114,000 Leased
- --------------------------------------------------------------------------------------------------------------------
Great Bend, KS Manufacturing Facility 107,000 Leased
- --------------------------------------------------------------------------------------------------------------------
Great Bend, KS Manufacturing Facility 43,000 Leased
- --------------------------------------------------------------------------------------------------------------------
Krefeld, Germany Warehouse 10,032 Leased
- --------------------------------------------------------------------------------------------------------------------
King's Lynn, England Manufacturing Facility 153,000 Owned
- --------------------------------------------------------------------------------------------------------------------
Reading, England Manufacturing Facility 26,000 Leased
- --------------------------------------------------------------------------------------------------------------------
Monterrey, NL, Mexico Manufacturing Facility 32,000 Owned
====================================================================================================================
</TABLE>
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Kaydon owns the manufacturing facility and the leased building located
in Muskegon (Norton Shores), the leased building located in Newaygo, the
manufacturing facilities located in Dexter, Sumter, Greeneville, LaGrange,
Baltimore, Blacksburg, Hampton, Monterrey, Mexico, and King's Lynn, England and
the warehouses located in Hampton and Virginia Beach. The St. Louis property is
leased for a term expiring July 31, 1999. The property in Reading, England, is
leased for a term expiring May 1, 2009. The Krefeld, Germany property is leased
for a term expiring September 30, 1998. The Laurens, Iowa property is leased for
a term expiring December 31, 2003. Kaydon leases two properties in Great Bend,
Kansas, one under a capitalized lease with the option to purchase the property
for nominal consideration upon its expiration of August 1, 2004. The other Great
Bend property is leased for a term expiring May 30, 1998, with four one-year
renewable options which would expire May 30, 2002. The Corporate office located
in Clearwater, Florida is leased for a term expiring May 31, 2001. The
manufacturing facility in Granite Falls, Minnesota is leased for a term expiring
January 30, 1999.
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Kaydon Corporation is the sole shareholder of the following operating
subsidiaries:
<TABLE>
<CAPTION>
Date
Subsidiary Formed/Acquired
---------- ---------------
<S> <C>
Kaydon Ring and Seal, Inc. June 17, 1986
(a Delaware corporation)
Kaydon S.A. de C.V. April 10, 1987
(a Mexico corporation)
Electro-Tec Corp. June 23, 1989
(a Delaware corporation)
I.D.M. Electronics Ltd. June 23, 1989
(a United Kingdom corporation)
Cooper Roller Bearing Company Limited December 16, 1991
(a United Kingdom corporation)
Cooper Split Roller Bearing Corporation December 16, 1991
(a Virginia corporation)
Cooper Geteilte Rollenlager GmbH December 16, 1991
(a Germany corporation)
Industrial Tectonics Inc January 28, 1994
(a Delaware corporation)
Kaydon Acquisition Corp. V
(a Delaware corporation)
d/b/a Seabee Corporation August 31, 1995
d/b/a Gold Star Manufacturing, Inc. March 11, 1997
Kaydon Acquisition VII, Inc.
(a Delaware corporation)
d/b/a Victor Fluid Power, Inc. February 1, 1996
Great Bend Industries, Inc. May 29, 1997
(a Delaware corporation)
</TABLE>
Item 3. LEGAL PROCEEDINGS
The Company, together with other companies, certain former officers,
and certain former directors, has been named as a co-defendant in lawsuits filed
in federal court in New York in 1993. The suits purport to be class actions on
behalf of all persons who have unsatisfied personal injury and property damage
claims against Keene Corporation which filed for bankruptcy under Chapter
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11. The premise of the suits is that assets of Keene were transferred to Bairnco
subsidiaries, of which Kaydon was one in 1983, at less than fair value. The
suits also allege that the Company, among other named defendants, was a
successor to and alter ego of Keene. In 1994, an examiner was appointed by a
bankruptcy court to examine the issues at stake. On September 23, 1994, the
"Preliminary Report of the Examiner" was made public. In the report, the
examiner stated that the alleged fraudulent conveyance claims against the
Company appear to be time-barred by the statute of limitations, subject to
certain possible exceptions which the Company does not believe are significant
or factual. Although the examiner has made certain recommendations regarding a
mechanism to resolve the claims against the Company, the Court has not taken any
action related to the report. Nevertheless, in the Company's opinion, the report
reinforces management's original view that the claims will ultimately not be
sustained. Accordingly, no provision has been reflected in the consolidated
financial statements for any alleged damages. In June 1995, the creditors'
committee filed a complaint in the same bankruptcy court asserting claims
against the Company similar to those previously filed. On June 12, 1996, the
District and Bankruptcy Courts for the Southern District of New York entered an
order confirming the plan of reorganization for Keene Corporation. As a result,
the so-called transactions lawsuit was transferred in April 1997 from the
Bankruptcy Court for the Southern District of New York to the District Court for
that district and the stay of the transactions lawsuit was lifted. On September
15, 1997, in accordance with the schedule established by the judge, the Company
submitted a motion to dismiss the complaint based on the statute of limitations.
All motions, supporting documents and rebuttal were filed on December 15, 1997.
The court has not yet ruled upon the motions. Management believes that the
outcome of this litigation will not have a material adverse effect on the
Company's financial position.
In June, 1996 the Company received a subpoena issued by the U.S.
District Court in Bridgeport, Connecticut on behalf of a grand jury
investigating a May 9, 1996 accident involving a Sikorsky helicopter in which
four persons died. The grand jury has requested and received
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<PAGE> 17
documents and records relating to a bearing manufactured by Kaydon and used in
the Sikorsky helicopter. In addition, the Defense Logistics Agency of the
Defense Contract Management Command and a "Mishap Board" led by Sikorsky
Aircraft Corporation with participation from certain Federal agencies alleged
that product quality problems or deficiencies exist with respect to the bearing
product used in the Sikorsky helicopter described above. The Company was
excluded from participation on this "Mishap Board", however, it independently
evaluated the available evidence and refuted the "Mishap Board" findings in its
report submitted to the Navy. Subsequent incidents have occurred in the
helicopter fleet even though the bearings used were newly manufactured,
inspected and approved by Sikorsky personnel, reinforcing the Company's position
that the bearing quality was not the causative action in the May 9, 1996
accident. During the first half of 1997, the estates of the four deceased
individuals filed civil suits against the Company. For one of the incidents
subsequent to May 9, 1996, which occurred October 19, 1996, the NADEP Cherry
Point Marine Facility distributed a report dated August 21, 1997 analyzing
potential causes for that incident. The Company is currently in the process of
reviewing this report. Management believes it has meritorious defenses against
any claims.
Various other claims, lawsuits and environmental matters arising in the
normal course of business are pending against the Company. Management believes
that the outcome of these matters, including the Sikorsky matter referred to
above, will not have a material adverse effect on the Company's financial
position or results of operations.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1997.
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PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY & RELATED STOCKHOLDER
MATTERS
a. and c. Market Information and Dividends
Information regarding the market price of Kaydon's common stock appears
in the "Quarterly Results of Operations" on page 32 of Kaydon's 1997 Annual
Report to Stockholders, which is incorporated herein by reference. During 1997,
the Company effected a two-for-one stock split; accordingly, all applicable
financial data has been restated to reflect the split. This is the second,
two-for-one split that the Company has initiated with the prior one occurring in
1992. Kaydon's common stock is listed on the New York Stock Exchange ("NYSE")
under the symbol KDN. Kaydon declared cash dividends during 1997, 1996 and 1995
as follows (on a per-share basis):
<TABLE>
<CAPTION>
=================================================================================================================
1997 1996 1995
=================================================================================================================
<S> <C> <C> <C>
March $0.07 $0.06 $0.055
- -----------------------------------------------------------------------------------------------------------------
June 0.07 0.06 0.055
- -----------------------------------------------------------------------------------------------------------------
September 0.07 0.06 0.055
- -----------------------------------------------------------------------------------------------------------------
December 0.09 0.07 0.060
=================================================================================================================
</TABLE>
Effective with the cash dividend declared in September 1997 and paid in January
1998, Kaydon adopted a plan which calls for quarterly cash dividends of $0.09
per share. This recent increase in the dividend amount reflects Kaydon Board of
Directors' continuing confidence in the growing financial strength of the
Company and their expectation of continued earnings growth.
b. Holders
The number of common equity security holders is as follows:
<TABLE>
<CAPTION>
Number of Holders
of Record
Title of Class As of December 31, 1997
- ------------------------------------------------------- -----------------------
<S> <C>
Common Stock, par value $0.10 per share 1,349
</TABLE>
16
<PAGE> 19
Item 6. SELECTED FINANCIAL DATA
Reference is made to "Financial History" on page 14 and "Management's
Discussion and Analysis" on pages 15 and 16 of Kaydon's 1997 Annual Report to
Stockholders, which is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Reference is made to "To Our Stockholders" on pages 2 and 3 and
"Management's Discussion and Analysis" on pages 15 and 16 of Kaydon's 1997
Annual Report to Stockholders, which is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements and related notes
included on pages 18 through 32 of Kaydon's 1997 Annual Report to Stockholders,
which is incorporated herein by reference. Financial statement schedules are
included in Part IV of this filing.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
17
<PAGE> 20
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required with respect to directors of Kaydon is
included in the Proxy Statement for the 1998 Annual Meeting of Stockholders of
Kaydon, which has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The information required with respect to
executive officers of the Company is as follows:
<TABLE>
<CAPTION>
===============================================================================================================
Name and Age of Data Pertaining to
Executive Officer Executive Officers
===============================================================================================================
<S> <C>
Lawrence J. Cawley (63) Chairman of the Board and Chief Financial Officer.
Mr. Cawley was President of the Bearings Division of
Kaydon Corporation from 1985 to 1987. Mr. Cawley
was elected President and Chief Executive Officer of
Kaydon Corporation in 1987. In September 1989,
Mr. Cawley was elected Chairman of the Board and
appointed Chief Financial Officer. In June 1996, Mr.
Cawley relinquished the position of Chief Executive
Officer while retaining his position as Chairman of the
Board and Chief Financial Officer.
- ---------------------------------------------------------------------------------------------------------------
Stephen K. Clough (44) President and Chief Executive Officer. Mr. Clough
joined Kaydon as Vice President of its Automotive
operation in April 1986 and became Vice President
and General Manager of Kaydon's Bearings Division in
1987. Mr. Clough was appointed President and Chief
Operating Officer of Kaydon Corporation and was
elected to the Board of Directors in September 1989.
In June 1996, Mr. Clough relinquished the title of
Chief Operating Officer and was, in turn, elected
Chief Executive Officer.
- ---------------------------------------------------------------------------------------------------------------
John F. Brocci (55) Vice President of Administration and Secretary. Mr.
Brocci has been Vice President of Administration
since joining Kaydon in March, 1989. He was
appointed Secretary in April, 1992. Prior to joining
Kaydon, he was the Operations Manager for the
Sealed Power Division of SPX Corporation.
===============================================================================================================
</TABLE>
18
<PAGE> 21
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 is included in the Proxy Statement
for the 1998 Annual Meeting of Stockholders of Kaydon, which has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is included in the Proxy Statement
for the 1998 Annual Meeting of Stockholders of Kaydon, which has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is included in the Proxy Statement
for the 1998 Annual Meeting of Stockholders of Kaydon, which has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
19
<PAGE> 22
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. 1. Financial Statements
The following consolidated financial statements of the Company
are included in the Annual Report of the registrant to its
stockholders for the year ended December 31, 1997 which is
incorporated herein by reference in Part II, Item 8 of this
report.
<TABLE>
<CAPTION>
Page Number in
Annual Report
to Stockholders
---------------
<S> <C>
Report of Independent Public Accountants 17
Consolidated Balance Sheets
as of December 31, 1997 and 1996 18
Consolidated Statements of Income
for the years ended December 31, 1997, 1996 and 1995 19
Consolidated Statements of Stockholders' Investment
for the years ended December 31, 1997, 1996 and 1995 20
Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1996 and 1995 21
Notes to Consolidated Financial Statements 22 - 32
</TABLE>
2. Financial Statement Schedules
All schedules required by Form 10-K Annual Report have been
omitted because they were inapplicable, the required
information is included in the notes to the consolidated
financial statements or otherwise is not required under
instructions contained in Regulation S-X.
Financial statements of the Company have been omitted since
the Company is primarily an operating company and all
subsidiaries included in the consolidated financial statements
filed are wholly owned subsidiaries.
20
<PAGE> 23
3. Reference to Exhibits
Reference is made to the Exhibit Index which is found on pages
23 through 26 of this Form 10-K.
b. Reports on Form 8-K
No reports on Form 8-K have been filed during the fourth
quarter of 1997.
21
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Kaydon has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
KAYDON CORPORATION
------------------------------------
Registrant
Date: March 27, 1998 By: /s/Lawrence J. Cawley
------------------------------------
Chairman and Chief Financial Officer
Date: March 27, 1998 By: /s/Stephen K. Clough
------------------------------------
Chief Executive Officer and President
Date: March 27, 1998 By: /s/Joseph P. Port
-------------------------------------
Vice President Finance and Corporate
Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of Kaydon and in
the capacities and on the dates indicated.
/s/Gerald J. Breen
---------------------------------------------
Gerald J. Breen - Director March 27, 1998
/s/Brian P. Campbell
---------------------------------------------
Brian P. Campbell - Director March 27, 1998
/s/Lawrence J. Cawley
---------------------------------------------
Lawrence J. Cawley - Chairman March 27, 1998
/s/Stephen K. Clough
---------------------------------------------
Stephen K. Clough - Director March 27, 1998
/s/John H.F. Haskell, Jr.
---------------------------------------------
John H.F. Haskell, Jr. - Director March 27, 1998
22
<PAGE> 25
c. 1. Exhibits Index
--------------
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION INCORPORATED BY REFERENCE TO
- ------- ----------- ----------------------------
<S> <C> <C>
2.1 Stock and Asset Purchase Agreement Exhibit 2 to Kaydon's Registration
between Kaydon Acquisition, Inc. Statement on Form 8-K filed on July 15,
(now Kaydon Ring and Seal, Inc.) and 1986, as amended by the Registration
Koppers Company, Inc., dated June Statement filed on Form 8-K on
26, 1986. September 30, 1986 (SEC File
No. 0-12640).
2.2 Agreement of Purchase and Sale Exhibit 2 to Kaydon's Annual Report on
between Kaydon Corporation and Form 10-K for the year ended December
TRW Automotive Products, Inc., 31, 1987 (SEC File No. 0-12640).
dated as of June 29, 1987.
2.3 Stock Purchase Agreement among Exhibit 2 to Kaydon's Registration
Kaydon Corporation, Kaydon Statement on Form 8-K filed on July 7,
Acquisition Corp. III, Kaydon 1989, as amended by the Registration
Acquisition Corp. IV, KDI Holdings, Statement filed on Form 8-K on
Inc. and KDI Corporation. November 3, 1989 and Registration
Statement filed on Form 8-K on
March 27, 1990 (SEC File No. 0-12640).
2.4 Stock Purchase Agreement among Exhibit 2 to Kaydon's Registration
Kaydon Corporation, Kaydon Statement on Form 8-K filed on December
Acquisition Corp. U.K. Limited, 31, 1991, as amended by the
Murray Ventures PLC and others and Registration Statement filed
William Terence Blaney and others. on Form 8-K on February 28, 1992 (SEC File
No. 0-12640).
2.5 Asset Purchase Agreement among Exhibit 2 to Kaydon's Annual Report on
Kaydon Corporation, Industrial Form 10-K for the year ended December 31,
Tectonics Inc and Axel Johnson, Inc. 1994 (SEC File No. 0-12640).
dated January 28, 1994.
2.6 Stock Purchase Agreement among Exhibit 2.6 to Kaydon's Annual Report on
Kaydon Acquisition Corp. V and the Form 10-K for the year ended December
shareholders of Seabee Corporation. 31, 1995 (SEC File No. 0-12640).
2.7 Asset Purchase Agreement among Exhibit 2.7 to Kaydon's Annual Report on
Kaydon Acquisition VII, Inc., Keynote Form 10-K for the year ended December
Holding Co., Inc, Victor Fluid Power 31, 1996 (SEC File No. 0-12640).
Co. and Benton Harbor Engineering
Co., Inc. dated February 1, 1996.
3.1 Certificate of Incorporation of the Exhibit 3 to Kaydon's Registration
Registrant, dated October 21, 1983. Statement on Form S-1 (No. 2-89399).
3.2 Certificate of Amendment to the Exhibit 3 to Kaydon's Registration
Certificate of Incorporation of the Statement on Form S-1 (No. 2-89399).
Registrant, dated November 23, 1983.
3.3 Certificate of Amendment to the Exhibit 3 to Kaydon's Registration
Certificate of Incorporation of the Statement on Form S-1 (No. 2-89399).
Registrant, dated February 6, 1984.
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION INCORPORATED BY REFERENCE TO
- ------- ----------- ----------------------------
<S> <C> <C>
3.4 Certificate of Correction to the Exhibit 3 to Kaydon's Registration
Certificate of Amendment to the Statement on Form S-1 (No. 2-89399).
Certificate of Incorporation of the
Registrant, dated February 17, 1984.
3.5 Form of Restated Certificate of Exhibit 3 to Kaydon's Registration
Incorporation of the Registrant, dated Statement on Form S-1 (No. 2-89399).
March 1984.
3.6 Amendment to Certificate of Exhibit 3 to Kaydon's Annual Report on
Incorporation of the Registrant, dated Form 10-K for the year ended
February 24, 1987. December 31, 1987 (SEC File No. 0-12640).
3.7 By-Laws of the Registrant, as adopted Exhibit 3 to Kaydon's Registration
on October 27, 1983. Statement on Form S-1 (No. 2-89399).
3.8 Amended By-Laws of the Exhibit 3 to Kaydon's Annual Report on
Registrant, as adopted on February 19, 1986. Form 10-K for the year ended
December 31, 1985 (SEC File No. 0-12640).
3.9 Amendment to the By-Laws of the Exhibit 3 to Kaydon's Annual Report on
Registrant, dated as of September 19, 1989. Form 10-K for the year ended
December 31, 1989 (SEC File No. 0-12640).
3.10 Certificate of Amendment to the Exhibit 3 to Kaydon's Quarterly Report on
Certificate of Incorporation of the Form 10-Q for the quarter ended March
Registrant, dated April 27, 1992. 28, 1992 (SEC File No. 0-12640).
4.1 Form of Stock Certificate for Kaydon Exhibit 3 to Kaydon's Registration
Common Stock. Statement on Form S-1 (No. 2-89399).
4.2 Shareholders Rights Plan dated Exhibit 1 to Kaydon's Registration of
June 21, 1995. Certain Classes of Securities on Form 8-A
filed June 28, 1995 (SEC File No. 0-12640).
10.1 Amended and Restated Revolving Exhibit 4 to Kaydon's Annual Report on
Credit and Term Loan Agreement, Form 10-K for the year ended
dated March 14, 1990. December 31, 1990 (SEC File No. 0-12640).
10.2 First Amendment to the Amended and Exhibit 4 to Kaydon's Annual Report on
Restated Revolving Credit and Term Form 10-K for the year ended
Loan Agreement, dated February 22, December 31, 1991 (SEC File No. 0-12640).
1991.
10.3 Second Amendment to the Amended Exhibit 4.1 to Kaydon's Annual Report on
and Restated Revolving Credit and Form 10-K for the year ended
Term Loan Agreement, dated December 31, 1994 (SEC File
February 28, 1994. No. 0-12640).
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION INCORPORATED BY REFERENCE TO
- ------- ----------- ----------------------------
<S> <C> <C>
10.4 Third Amendment to the Amended Exhibit 4.2 to Kaydon's Annual Report on
and Restated Revolving Credit and Form 10-K for the year ended
Term Loan Agreement, dated March December 31, 1994 (SEC File
29, 1994. No. 0-12640).
10.5 Letter, dated March 22, 1984, Exhibit 4 to Kaydon's Registration
whereby the Registrant undertakes to Statement on Form S-1 (No. 2-89399).
furnish to the Securities and
Exchange Commission, upon request,
a copy of certain instruments as
provided in Item 601(b)(4)(iii)(A) of
Regulation S-K.
10.6 Kaydon Corporation Employee Stock Exhibit 10.1 to Kaydon's Annual Report
Ownership and Thrift Plan as on Form 10-K for the year ended
amended and restated December 14, December 31, 1994 (SEC File No. 0-12640).
1994 effective January 1, 1989.
10.7 Management Incentive Compensation Exhibit 10 to Kaydon's Registration
Plan. Statement on Form S-1 (No. 2-89399).
10.8 Electro-Tec Corporation Employee Exhibit 10.2 to Kaydon's Annual Report
Retirement Benefit Plan as amended on Form 10-K for the year ended
and restated December 14, 1994 December 31, 1994 (SEC File
effective July 1, 1989. No. 0-12640)
10.9 Kaydon Corporation 1993 Stock Exhibit A to Kaydon's Proxy Statement
Option Plan. dated March 10, 1993.
10.10 Kaydon Corporation 1993 Non- Exhibit B to Kaydon's Proxy Statement
Employee Directors Stock Option dated March 10, 1993.
Plan.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS (10.11 AND 10.12 ONLY)
10.11 Kaydon Corporation Supplemental Exhibit 10.11 to Kaydon's Annual Report
Executive Retirement Plan. on Form 10-K for the year ended
December 31, 1995 (SEC File
No. 0-12640).
10.12 Change in Control Compensation Exhibit 10.12 to Kaydon's Annual Report
Agreements Versions A & B. on Form 10-K for the year ended
December31, 1995 (SEC File
No. 0-12640).
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION INCORPORATED BY REFERENCE TO
- ------- ----------- ----------------------------
<S> <C> <C>
10.13 Fluid Power Companies Pension and Exhibit 4.3 to Kaydon's Registration
Retirement Savings Plan. Statement on Form S-8 (No. 333-15903),
as amended by filing with the SEC
pursuant to Rule 424(c) of the Securities
Act of 1933 on November 12, 1996.
10.14 Asset Purchase Agreement among Exhibit 10.14 to Kaydon's Annual Report
Kaydon Acquisition Corp. V and the on Form 10-K for the year ended December
Shareholders of Gold Star 31, 1997 (SEC File
Manufacturing, Inc. dated March 11, 1997. No. 0-12640).
10.15 Restated Revolving Credit Agreement Exhibit 10.15 to Kaydon's Annual Report
dated February 28, 1997. on Form 10-K for the year ended
December 31, 1997 (SEC File
No. 0-12640).
10.16 Asset Purchase Agreement among Exhibit 10.16 to Kaydon's Annual Report
Kaydon Acquisition VIII, Inc. and on Form 10-K for the year ended
Hein-Werner Corporation dated December 31, 1997 (SEC File
May 29, 1997. No. 0-12640).
10.17 Amended By-Laws of the Registrant, Exhibit 10.17 to Kaydon's Annual Report
as adopted May 14, 1997. on Form 10-K for the year ended
December 31, 1997 (SEC File
No. 0-12640).
13 Financial Section of Annual Report to
Stockholders.
21 Subsidiaries of Registrant.
23 Consent of Independent Public
Accountants.
27 Financial Data Schedule (for SEC use only)
</TABLE>
26
<PAGE> 1
EXHIBIT 10.14
ASSET PURCHASE AGREEMENT
Between
KAYDON ACQUISITION CORP. V,
d/b/a Seabee Corporation
And
GOLD STAR MANUFACTURING, INC.
And
AMERICAN CENTRAL INDUSTRIES, INC.
And
FLOYD MEFFERD and LLOYD MEFFERD
March 11, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. SALE AND PURCHASE OF ASSETS................................................................... 1
1.1 Transfer of Assets................................................................... 1
1.2 Assumed Liabilities.................................................................. 3
1.3 Excluded Assets...................................................................... 4
2. PRICE......................................................................................... 4
2.1 Purchase Price....................................................................... 4
2.2 Allocation of Purchase Price......................................................... 5
2.3 Adjustment to Purchase Price......................................................... 5
3. THE CLOSING .................................................................................. 5
3.1 Time and Place....................................................................... 5
3.2 Transfer of Assets................................................................... 5
4. REPRESENTATIONS AND WARRANTIES OF SELLER...................................................... 6
4.1 Organization, Standing, etc. of Seller............................................... 6
4.2 Authorization; Binding Effect........................................................ 6
4.3 Consents; Defaults; Etc.............................................................. 6
4.4 Machinery and Equipment.............................................................. 6
4.5 Intellectual Property and Processes.................................................. 6
4.6 Employment Matters................................................................... 7
4.7 Permits.............................................................................. 7
4.8 Litigation........................................................................... 7
4.9 Certain Tax Matters.................................................................. 8
4.10 Broker, etc.......................................................................... 8
4.11 Title to Assets...................................................................... 8
4.12 Compliance With Laws................................................................. 8
4.13 No Burdensome Restrictions, etc...................................................... 9
4.14 Disclosure........................................................................... 9
4.15 Accuracy of Financial Statements..................................................... 9
4.16 Absence of Changes................................................................... 10
4.17 Leases and Contracts................................................................. 10
4.18 Condition of Inventory............................................................... 10
4.19 Accounts Receivable.................................................................. 11
4.20 Insurance............................................................................ 11
4.21 Labor Matters........................................................................ 11
4.22 Employee Benefit Plans............................................................... 11
</TABLE>
- i -
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
5. REPRESENTATIONS AND WARRANTIES OF BUYER....................................................... 12
5.1 Organization, Standing and Authority of Buyer........................................ 12
5.2 Authorization; Binding Effect........................................................ 12
5.3 Assumption of Assumed Liabilities.................................................... 12
5.4 Consents, Defaults, etc.............................................................. 13
5.5 Disclosure........................................................................... 13
5.6 Financial Capability to Consummate Transactions...................................... 13
6. COVENANTS OF SELLER........................................................................... 13
6.1 Maintenance of Assets; etc........................................................... 13
6.2 Access to Information................................................................ 14
6.3 Seller's Continuing Responsibility for Environmental Matters......................... 14
6.4 Environmental Report................................................................. 14
6.5 Employment........................................................................... 15
7. COVENANTS OF BUYER............................................................................ 16
7.1 Negative Actions..................................................................... 16
7.2 Assumption of Liabilities............................................................ 16
8. CONDITIONS TO OBLIGATION OF BUYER............................................................. 16
8.1 Accuracy of Representations and Warranties........................................... 16
8.2 Performance by Seller................................................................ 16
8.3 Seller's Certificate................................................................. 16
8.4 Opinion of Seller's Counsel.......................................................... 17
8.5 Corporate Documents.................................................................. 18
8.6 Instruments of Transfer and Title Documents.......................................... 18
8.7 Environmental Report................................................................. 18
8.8 Employee Agreements.................................................................. 18
8.9 Board Approval....................................................................... 19
8.10 Sublease............................................................................. 19
9. CONDITIONS TO OBLIGATION OF SELLER............................................................ 19
9.1 Accuracy of Representations.......................................................... 19
9.2 Performance by Buyer................................................................. 19
9.3 Officer's Certificate................................................................ 19
9.4 Opinion of Buyer's Counsel........................................................... 19
9.5 Corporate Documents.................................................................. 20
10. COVENANT NOT TO COMPETE....................................................................... 20
10.1 Non-competition...................................................................... 20
10.2 Enforcement.......................................................................... 20
10.3 Injunctive Relief.................................................................... 21
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
11. ADDITIONAL COVENANTS OF BUYER AND SELLER...................................................... 21
11.1 Further Assurances................................................................... 21
11.2 Bulk Sales Laws...................................................................... 21
11.3 Rights to Intellectual Property...................................................... 21
11.4 Use of Trade Names................................................................... 22
12. SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND COVENANTS; INDEMNIFICATION; ETC........................................................... 22
12.1 Survival of Representations, Warranties and Covenants................................ 22
12.2 Indemnification by Seller............................................................ 22
12.3 Indemnification by Buyer............................................................. 23
12.4 Indemnification Notice etc........................................................... 23
13. EXPENSES...................................................................................... 24
14. NOTICES....................................................................................... 25
15. AMENDMENTS; TERMINATION....................................................................... 25
16. EFFECT OF THIS AGREEMENT; COUNTERPARTS........................................................ 25
17. GOVERNING LAW AND JURISDICTION................................................................ 25
18. ASSIGNMENTS; SUCCESSORS AND ASSIGNS........................................................... 26
19. PRESS RELEASES AND ANNOUNCEMENTS.............................................................. 26
20. CONSTRUCTION.................................................................................. 26
INDEX TO EXHIBITS............................................................................. 28
</TABLE>
-iii-
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and executed as of March 11,
1997, by and between KAYDON ACQUISITION CORP. V, a Delaware corporation doing
business as Seabee Corporation (the "Buyer"), GOLD STAR MANUFACTURING, INC., an
Iowa corporation (the "Seller"), AMERICAN CENTRAL INDUSTRIES, INC., an Iowa
corporation ("ACI"), LLOYD MEFFERD and FLOYD MEFFERD (collectively the
"Mefferds"), with reference to the following facts:
Seller is a wholly-owned subsidiary of ACI (the shareholders of which
are the Mefferds) and wishes to sell to Buyer and Buyer wishes to purchase from
Seller all of the business and the assets relating to Seller's cylinder business
located in Laurens, Iowa (the "Business").
In consideration of the premises and the mutual covenants contained
herein, Seller, ACI, the Mefferds and Buyer agree as follows:
1. SALE AND PURCHASE OF ASSETS
1.1 Transfer of Assets. In reliance on the representations and
warranties contained herein and subject to the terms and conditions hereof,
Seller shall on the Closing Date (as defined in Section 3 herein), sell, convey,
transfer, assign and deliver, free and clear of all liens, mortgages, security
interests, pledges, charges, agreements, restrictions, claims, defects in title
and encumbrances of any kind or description, except for those items listed on
the attached Exhibit 1.1 (collectively referred to herein as "Claims and
Encumbrances"), and Buyer shall purchase from Seller, all of Seller's right,
title and interest in and to the tangible and intangible assets (the "Assets")
of Seller (excluding the assets relating to Seller's auger line described in
Exhibit 1.3 herein, and, at Buyer's option, any Hazardous Substances or
materials located at Seller's facility), including:
(a) Inventories. All inventory, including, without limitation,
all work in process, finished goods and products and raw materials
("Inventory");
(b) Machinery and Equipment. All machinery, equipment, tools,
vehicles, furniture, tooling, fixtures, molds, dies, and all other
tangible property used in the Business, including, without limitation,
the machinery and equipment described on Exhibit 1.1(b) hereto
("Machinery and Equipment").
1
<PAGE> 6
(c) Intangible Personal Property. All intangible personal
property, including (i) all procedures, processes, products, formulae,
scientific, technical and other information, trade secrets, ideas,
licenses, franchises, customer lists, vendor lists, plans,
specifications, designs, drawings, catalogues, manuals, reports,
samples, prototypes, know-how, items in application, development or
other pending status and all similar items which are owned by Seller
and applicable to or used in the operation of the Business
("Intellectual Property"), including, without limitation, the items of
Intellectual Property of Seller described on Exhibit 1.1(c) hereto,
(ii) rights pursuant to all contracts applicable to or used in the
operation of the Business, including, without limitation, the contracts
listed on Exhibit 4.17 hereto, (iii) the leases of real and personal
property applicable to or used in the operation of the Business
described on Exhibit 4.17 hereto, (iv) all computer and automatic
machinery software programs and source disks, program documentation,
tapes, manuals, forms, guides and other materials with respect thereto
applicable to or used in the Business, and (v) to the extent the same
are transferable, all federal, state or local governmental or
regulatory permits, licenses, approvals and franchises which are owned
or have been received by Seller in connection with the operation of the
Business or ownership of the Assets (collectively, "Permits"),
including, without limitation, the Permits which are listed on Exhibit
4.7 hereto;
(d) Patents, Trademarks and Copyrights. All registered and
unregistered trademarks, trademark applications, trade names, service
marks and service names and the goodwill of the Business connected
therewith or symbolized thereby, and all copyrights, patents and patent
applications, including, without limitation, the items listed on the
attached Exhibit 1.1(d).
(e) Records. All accounting information pertaining to the
operations of the Business and all media in which all or any of the
information, knowledge, data or records relating to the Business may be
related or stored, all customer lists, customer files, personnel
records, credit information, pending litigation documents, insurance
documents, pension documents, advertising, promotional and sales
materials, sales data, surveys, account histories, information relating
to sales or servicing of products applicable to, used in or
manufactured by the Business;
2
<PAGE> 7
(f) Miscellaneous Assets. All goodwill of the Business and all
information, supplies, shipping containers, vehicles, gross data,
recorded knowledge, and all warranties inuring to the benefit of Seller
in connection with the Business;
(g) Cash. All prepaid expenses and cash, (except that Buyer
shall not assume any negative cash balance).
(h) Accounts Receivable and Notes Receivable. All accounts
receivable and notes receivable, provided, that any accounts receivable
existing on the books of the Seller attributable to sales to ACI or any
of its subsidiaries shall be paid in full by ACI and its subsidiaries
at or prior to the Closing.
1.2 Assumed Liabilities.
(a) At the Closing, Buyer shall assume only the obligations or
liabilities of Seller listed in Exhibit 1.2 attached hereto, in an
aggregate amount not more than that listed in Exhibit 1.2; provided,
however, that Buyer shall not assume any liabilities or mortgage
obligations relating to any of Seller's real property.
(b) Except for the foregoing liabilities, Buyer shall not
assume any obligation, duty or liability of any nature whatsoever,
fixed or contingent, including, without limitation: (i) any liability
of Seller or its predecessors relating to the generation, management,
handling, transportation, treatment, storage, disposal, delivery,
discharge, release or emission of any Hazardous Substances (as defined
in Section 6.4 of this Agreement) or other substance which requires
investigation, removal, transport or remediation under any federal,
state, or local law or regulation; or any other action, omission or
condition affecting the environment arising from the conduct of the
Business or occurrences prior to the Closing Date, including, without
limitation, those conditions specified on Exhibit 4.12 as described
herein; (ii) any tax liabilities or similar assessments arising from
the conduct of the Business or occurrences prior to the Closing Date or
arising from the transfer of the Assets and consummation of the
transactions contemplated hereby, including, without limitation, any
liabilities for sales, bulk sales, use, transfer, stamp or income
taxes, and any filing, recording or similar fees or charges; (iii) any
liabilities for breach or default by Seller under any contract, lease
or agreement assigned to Buyer hereunder, which accrued prior to the
Closing Date; (iv) any liability with respect to any claim, suit,
3
<PAGE> 8
action or judicial, administrative or arbitration proceeding made or
pending or commenced against Seller at or prior to the Closing Date, or
made or commenced after the Closing Date in respect of any action,
omission or condition occurring or existing prior to the Closing Date;
(v) any undisclosed liabilities, which accrued prior to the Closing
Date; (vi) any collective bargaining agreement, labor or employment
agreement liabilities, any pension plan withdrawal or other liability,
severance liability, funding deficiency, workmen's compensation,
employee life and health insurance or similar liability to any employee
or former employee of Seller, including, without limitation, any such
liability under any multi-employer or single- employer plan, contract
or arrangement, or obligation described in Section 4.23 herein, or any
other liability in respect of any employee attributable to or in
respect of any period prior to the Closing Date, none of which Buyer
will be obligated to continue and (vii) any liabilities relating to
products manufactured by Seller prior to the Closing. Seller shall
discharge and satisfy, when and if due and payable, all liabilities
which are not specifically assumed by Buyer under this Agreement and
shall, upon request of Buyer, give Buyer evidence of such payment.
1.3 Excluded Assets. The Assets shall not include the assets of Seller
relating to Seller's Truespin auger line, and all related assets and inventory,
as listed in Exhibit 1.3 attached hereto.
2. PRICE
2.1 Purchase Price. The purchase price for the Assets (the "Purchase
Price") based on the list of liabilities (excluding accounts payable) attached
as Exhibit 1.2 hereto shall be the assumption of liabilities described in
Exhibit 1.2 in an amount not to exceed the sum of Four Million Nine Hundred
Thousand Dollars ($4,900,000.00).
2.2 Allocation of Purchase Price. The Purchase Price paid for the
respective Assets will be as shown on an allocation exhibit to be provided by
Buyer to Seller prior to the Closing which shall be approved by Seller.
2.3 Adjustment to Purchase Price. It is expected that the Net Current
Assets, as defined below, will be not less than the sum of One Million Ninety
Five Thousand Seven Hundred Fifty Eight Dollars ($1,095,758.00) (based on
Seller's January 31, 1997 balance sheet) as of the Closing. In the event the Net
Current Assets, as defined below, is less than
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this amount as of the Closing, Seller shall reimburse Buyer for the reduction.
Net Current Assets is defined as the sum of accounts receivable and inventory
less assumed accounts payable (listed in Exhibit 2.3 attached hereto), as
determined on the basis of generally accepted accounting principles as of the
end of the day prior to the Closing. Buyer will conduct a final inventory and
prepare a schedule showing its calculation of the Net Current Assets within
fifteen (15) days of the closing and submit the schedule to Seller for review.
Once accepted, any purchase price refund due Buyer will be made within ten (10)
business days. In the event a dispute arises in regard to the Net Current Assets
Schedule, the matter will be referred to a national accounting firm acceptable
to both Buyer and Seller for resolution, whose determination shall be final and
binding, and the fees for which shall be paid by the non-prevailing party.
3. THE CLOSING
3.1 Time and Place. The Closing of the sale and purchase of the
Assets (the "Closing") shall take place at the offices of Buyer at 10:00 a.m. on
March 11, 1997. The delivery of all documents by the parties and the performance
of all acts at the Closing shall be deemed to have occurred simultaneously.
3.2 Transfer of Assets. At the Closing, Seller shall deliver to
Buyer such bills of sale, endorsements, assignments and other good and
sufficient instruments of conveyance and transfer, in form and substance
reasonably satisfactory to Buyer and its counsel, as shall be effective to
convey and transfer to and vest in Buyer title to the Assets, free and clear of
any Claims and Encumbrances, except such Claims and Encumbrances listed on
Exhibit 1.1 attached hereto. Simultaneously with such delivery, Seller shall
take such action as may be necessary or reasonably requested by Buyer to place
Buyer in possession and control of the Assets.
4. REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and
warrants to Buyer as follows:
4.1 Organization, Standing, etc. of Seller. Seller is duly
organized, validly existing and in good standing under the laws of the State of
Iowa, and has all requisite power to own or lease and to operate its properties
and to carry on the Business as conducted with the Assets.
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4.2 Authorization; Binding Effect. This Agreement has been duly
executed and delivered by Seller and constitutes the legally binding obligation
of Seller in accordance with its terms.
4.3 Consents; Defaults; Etc. Except as set forth on the attached
Exhibit 4.3, neither the execution, delivery or performance by Seller of this
Agreement nor the consummation by Seller of the transactions contemplated hereby
(i) is prohibited by, or requires Seller to obtain or make any consent,
authorization, approval, filing or registration under, any law, rule or
regulation, judgment, order, writ, injunction or decree which is binding upon
Seller, or any of the Assets, or (ii) will violate any provision of, result in
any default or acceleration of any obligations under, result in the creation or
imposition of any lien on any of the Assets pursuant to, or require any consent
under, any indenture, lease, mortgage or other agreement to which Seller is a
party or by which Seller or any of the Assets is otherwise bound.
4.4 Machinery and Equipment. Except as listed in Exhibit 4.4 attached
hereto, all Machinery and Equipment has been maintained so as to be, and all of
the Machinery and Equipment is, in good operating condition and repair (ordinary
wear and tear excepted), and there are no repairs which are required to be made
to the Machinery and Equipment, except as listed in Exhibit 4.4.
4.5 Intellectual Property and Processes. Exhibit 1.1(c) includes all
of the Intellectual Property, and Exhibit 1.1.(d) includes all patents,
trademarks and copyrights owned by, used or necessary for use in the Business.
The formulae, manufacturing procedures, processes, know-how and trade secrets
used or necessary for use in the operation of the business are hereinafter
referred to as the "Processes". The United States trademark and patent
registrations listed on the attached Exhibit 1.1(c) and Exhibit 1.1(d) and the
Intellectual Property, Processes and patents which are owned by Seller are owned
free and clear of any license, sublicense, agreement, right, understanding,
judgment, order, decree or stipulation, and Seller has not infringed on or
misappropriated any intellectual property of third parties. To the best of
Seller's knowledge no third party has infringed or misappropriated any
Intellectual Property, patents, trademarks, copyrights or Processes.
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4.6 Employment Matters. Except as listed on the attached Exhibit 4.6,
there is no claim of any employee or any former employee of Seller for any
unpaid compensation or remuneration of any nature, including, without
limitation, contingent salaries, incentive payments, pension benefits (whether
or not vested), (excluding benefits to be paid in the future from pension trusts
established and administered for such purpose by Seller), medical expense
reimbursement, vacation pay, severance payments and any other awards, interests
and payments.
4.7 Permits. Attached as Exhibit 4.7 hereto is a list of all Permits
Seller has obtained in connection with the operation and ownership of the
Assets, and, except Permits that Buyer designates as not to be transferred in
Exhibit 4.7, or which have been designated as non-transferable or transferable
only with consent from a third party or government or regulatory body on Exhibit
4.7, each of the Permits is transferable by Seller without notice to or consent
from any third party or governmental or regulatory body. Seller shall take all
reasonable steps requested by Buyer to enable Buyer to obtain in its own name
any Permit that is not so transferable. The Permits listed on Exhibit 4.7
constitute all of the Permits required to operate the Business as previously
conducted by Seller. Seller is in full compliance with the terms and conditions
of such Permits and no change in the facts or circumstances reported or assumed
in the application for or granting of such Permits exist. Such Permits are in
full force and effect. Except as listed on attached Exhibit 4.7, there are no
proceedings pending or, to the best of Seller's knowledge, threatened which may
result in the revocation, cancellation or suspension, or any adverse
modification, of any Permit.
4.8 Litigation. Except as listed on the attached Exhibit 4.8, there is
no suit, action, proceeding, investigation or inquiry pending or, to the best of
Seller's knowledge, threatened (or any basis therefor), at law or in equity or
before any governmental department, commission, board, body, agency or
instrumentality, domestic or foreign, against Seller which affects or could have
a material effect on the Assets or involves or could involve the validity or
legality of this Agreement or any action taken or to be taken pursuant hereto.
4.9 Certain Tax Matters. Seller has paid, accrued on its Latest
Financial Statements, or will pay when due all income, sales, use, business,
occupation, personal or
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real property or any similar taxes and all taxes of any kind related to any
period prior to the Closing Date, including without limitation, any tax relating
to the wages, benefits or income of any employee, consultant or commission agent
connected with the Assets, whether owed by Seller or by any such employee,
consultant or commission agent.
4.10 Broker, etc. Seller has not employed a finder, broker, agent or
other intermediary in connection with the negotiation or consummation of this
Agreement or any of the transactions contemplated hereby.
4.11 Title to Assets. Except as set forth on the attached Exhibit
4.11, Seller has undivided marketable title, legal and equitable, in and to all
of the Assets being sold under this Agreement. The Assets are owned by Seller
free and clear of any Claims and Encumbrances, except liens for current taxes
and assessments not yet due and payable and those Claims and Encumbrances
described on the attached Exhibit 4.11. All of the Assets are located in
Laurens, Iowa or such other location listed in Exhibit 4.11. The Assets, taken
as a whole, constitute all of the operating properties and assets which are
reasonably necessary for the conduct of the Business as conducted by Seller.
4.12 Compliance With Laws. Except as set forth on Exhibit 4.12, the
Business and the Assets are and have been operated and maintained in compliance
with all applicable governmental laws, rules, regulations, environmental
requirements and ordinances, including, without limitation, laws, regulations
and other requirements (a) relating to pricing of products and antitrust, and
(b) imposed by action of, permits or licenses from, or agreements with any
governmental agency or authority relating to the generation, management,
handling, transportation, treatment, storage, disposal, delivery, discharge,
release or emission of any waste, pollutant or toxic, Hazardous Substance as
defined in Section 6.4 of this Agreement or other substance or other action,
omission or condition affecting the environment, air, soil and water, or
relating to pollution, ground water contamination, the handling, storage or
release into the environment of Hazardous Substances or materials, or the
transportation of hazardous materials (collectively "Environmental Laws and
Regulations") and federal and state occupational safety and health laws and
regulations and the Consumer Products Safety Commission laws and regulations;
and Seller has no notice of any failure to comply therewith, except as set forth
on Exhibit 4.12. Exhibit 4.12 lists each offsite disposal site
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used by Seller presently or used by Seller during the previous ten (10) years.
Except as set forth in Exhibit 4.12, all properties and equipment of Seller have
been and now are free of asbestos, PCB's, methylene chloride, trichloroethylene,
1,2-transdichloroethylene, dioxins, dibenzoforans and "extremely hazardous
substances" as that term is defined in the Toxic Substance Control Act.
4.13 No Burdensome Restrictions, etc. There are no judgments, orders,
writs, injunctions, or decrees to which the Assets are subject and to which
Seller is a party, or which materially adversely affect the Assets, except those
set forth on the attached Exhibit 4.13.
4.14 Disclosure. The representations and warranties contained in this
Agreement and the information contained in the Exhibits hereto, written
documents, financial statements (including the Latest Financial Statements)
provided by Seller to Buyer, and other certificates or instruments delivered by
or on behalf of Seller in connection with the purchase and sale of the Assets
are true and correct in all material respects and do not contain any untrue
statement of a material fact or omit to state a fact necessary to make the
statements contained therein and herein not misleading. Except as set forth in
the attached Exhibit 4.14, there is no fact known to Seller which materially
adversely affects the Assets which has not been set forth in this Agreement or
in the other documents, certificates or instruments delivered by Seller or on
behalf of Seller, specifically for use in connection with the transactions
contemplated by this Agreement.
4.15 Accuracy of Financial Statements. The financial statements of
Seller provided to Buyer including, without limitation, Seller's January 31,
1997 financial statements (the "Latest Financial Statements"), and Seller's
annual financial statements dated December 31, 1994, December 31, 1995 and
December 31, 1996) fairly present the financial condition of Seller and the
results of its operations, as of the dates thereof and for the periods indicated
therein, in accordance with generally accepted accounting principles
consistently applied. As of the Closing Date, and except as set forth on the
attached Exhibit 4.15, Seller shall have no liabilities of any nature required
to be reflected in financial statements under generally accepted accounting
principles that were not shown or provided for in the aggregate on the
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financial statements, and all reserves set forth on the financial statements are
adequate in all material respects.
4.16 Absence of Changes. Since the date of the Latest Financial
Statements, Seller has, and until the Closing Date shall have, operated the
Business in the ordinary and usual course, maintained the Assets in good
condition and repair, reasonable wear and use excepted, and not sold, assigned,
transferred, encumbered or otherwise disposed of, or contracted, agreed or
become bound to sell, assign, transfer, encumber or otherwise dispose of any of
the Assets, other than in the ordinary course of business, and except as
otherwise provided in this Agreement. Since such date, there has been no
material adverse change in the Business, Assets or condition, financial or
otherwise, of Seller nor, to the best of Seller's knowledge, has any such change
threatened to occur, nor has there been any damage, destruction or loss, other
than that fully covered by insurance, of a material nature affecting the
Business, properties or financial condition of Seller.
4.17 Leases and Contracts. Exhibit 4.17 attached hereto includes each
lease of real or personal property and each agreement to which Seller is a party
that involves the sum of Five Thousand Dollars ($5,000.00) or more, including
employment agreements and collective bargaining agreements. Each such lease and
agreement (a) is valid, binding and enforceable, and (b) no event has taken
place which with notice or lapse of time would constitute a breach or default,
or permit termination or modification of such lease or contract. Seller has not
received notice of any default, and, to the best of Seller's knowledge, Seller
is not in default in respect of any such lease or agreement to which it is a
party or by which it is bound.
4.18 Condition of Inventory. All inventory, materials and supplies of
Seller are saleable, not obsolete, or slow moving (except as to Seller's
reserves) in good condition and of merchantable quality for such items in the
Business. The inventory reserves described in the Latest Financial Statements
are adequate in all respects.
4.19 Accounts Receivable. Except as set forth on the attached Exhibit
4.19, all of Seller's accounts receivables of any nature are good and
collectible at the aggregate recorded amounts thereof in the usual and ordinary
course of business and without resort to legal proceedings.
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4.20 Insurance. Exhibit 4.20 attached hereto sets forth all insurance
carriers and policy numbers by policy period as to policies to which Seller has
been a party or beneficiary within the past seven (7) years, including, without
limitation, worker's compensation, liability, casualty and property insurance,
and, except as identified in Exhibit 4.20, all such policies are in full force
and effect, and projected costs and obligations associated with any self-insured
plans are reasonable and accurate estimates of actual costs and obligations.
4.21 Labor Matters. Except as set forth on the attached Exhibit 4.21,
Seller is not subject to any labor grievances, claims of unfair labor practices,
or other material collective bargaining disputes. Exhibit 4.21 lists an employee
census of all employees of Seller, and their date of birth, date of hire, annual
compensation or hourly rate, sex, race and job title.
4.22 Employee Benefit Plans.
(a) Employee Plans. Exhibit 4.22 contains a true, correct and
complete list of all pension, 401(k), benefit, profit sharing,
retirement, deferred compensation, welfare, insurance, disability,
bonus, vacation pay, severance pay and other similar plans, programs
and agreements, whether reduced to writing or not, and any
"multiemployer plan" as such term is defined in Section 4001(a)(3) of
ERISA, relating to the Seller's employees (the "Employee Plans").
(b) Post-Employment Benefits. Except as set forth in Exhibit
4.22, no Employee Plan provides health or life insurance benefits for
former employees .
(c) Defined Benefit Plans. Except as set forth in Exhibit
4.22, Seller does not contribute, is not required to contribute, or
since January 1, 1986 has not been required to contribute to any
"defined benefit plan" as such term is defined in Section 3(35) of
ERISA.
(d) Copies of Employee Plans and Related Documents. Prior to
the Closing, Seller shall have delivered to Buyer true, correct and
complete copies of all Employee Plans which have been reduced to
writing and written descriptions of all Employee Plans which have not
been reduced to writing, and all agreements, including trust agreements
and insurance contracts, related to such Employee Plans, and the
summary plan description and all modifications thereto for each
Employee Plan communicated to Seller's employees.
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(e) Claims and Litigation. Except as set forth on Exhibit
4.22, there are no threatened or pending claims, suits or other
proceedings by present or former employees of Seller, plan
participants, beneficiaries or spouses of any of the above, the
Internal Revenue Service, the Pension Benefit Guaranty Corporation, or
any other person or entity involving any Employee Plan including claims
against the assets of any trust, involving any Employee Plan, or any
rights or benefits thereunder, other than ordinary and usual claims for
benefits by participants or beneficiaries including claims pursuant to
domestic relations orders.
(f) Controlled Group. The Seller is not a member of a
"controlled group of corporations" as defined in Section 1563(a) of
the Internal Revenue Code of 1986, as amended.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants as follows:
5.1 Organization, Standing and Authority of Buyer. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Michigan and has the corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby.
5.2 Authorization; Binding Effect. The execution and delivery by
Buyer of this Agreement and the performance by Buyer of its obligations
hereunder and the consummation by Buyer of the transactions contemplated hereby
have been duly authorized by all necessary action on the part of Buyer. This
Agreement has been duly executed and delivered by a duly authorized officer of
Buyer and constitutes the valid and legally binding obligation of Buyer
enforceable against Buyer in accordance with its terms.
5.3 Assumption of Assumed Liabilities. All of the contracts,
agreements or instruments to be assumed by Buyer pursuant to this Agreement are
valid and binding upon Buyer, and are enforceable against and fully performable
by Buyer in accordance with their terms; and there are no existing facts or
circumstances which would prevent the full and complete performance thereof by
Buyer.
5.4 Consents, Defaults, etc.. Neither the execution, delivery or
performance by Buyer of this Agreement, nor the consummation by Buyer of the
transactions contemplated
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hereby (i) is prohibited by, or requires Buyer to obtain or make any consent,
authorization, approval, filing or registration under, any law, rule or
regulation, judgment, order, writ, injunction or decree which is binding upon
Buyer, or (ii) will violate any provision of, result in any default or
acceleration of any obligations under, or require any consent under, any
indenture, lease, mortgage or other agreement to which Buyer is a party or by
which Buyer is bound.
5.5 Disclosure. The representations and warranties contained in
this Agreement and the information contained in any written documents and other
certificates or instruments delivered by or on behalf of Buyer in connection
with the purchase of the Assets are true and correct in all material respects
and do not contain any untrue statement of a material fact.
5.6 Financial Capability to Consummate Transactions. Buyer has, or
will have on the Closing Date, sufficient financial resources readily available
to enable Buyer to consummate the transactions contemplated in this Agreement on
the terms and conditions contained herein.
6. COVENANTS OF SELLER
Seller covenants and agrees with Buyer that:
6.1 Maintenance of Assets; etc. Seller will, through the Closing
Date, (a) maintain and keep all Machinery and Equipment and other Assets in as
good repair, working order and condition, (b) keep in full force and effect
insurance as necessary to fully insure the Assets, (c) perform in all respects
all its obligations under all of its leases, contracts, commitments and
arrangements, and not amend, alter or modify, other than in the ordinary course
of business of Seller, any provision of any lease, contract, obligation or
commitment to be assumed by Buyer, and (d) do all things reasonably necessary to
avoid any action that would render Seller's representations and warranties
hereunder inaccurate as of the Closing Date.
6.2 Access to Information. Seller will give to Buyer, Buyer's
accountants, counsel, employees and other representatives full access to all of
the properties, books, contracts, commitments, reports and records of Seller
relating to the Business and Assets and will furnish Buyer all such documents,
records and information with respect to the affairs of
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the Business and copies of any working papers relating to that Business as Buyer
shall from time to time reasonably request.
6.3 Seller's Continuing Responsibility for Environmental Matters.
Seller shall at all times retain any and all liabilities arising from the
handling, treatment, storage, transportation, disposal, release or emission of
any Hazardous Substances, toxic materials, pollutants, contaminates or wastes by
Seller or by Seller's agents or contractors. Seller, through and after the
Closing Date, at its sole cost and expense, shall take all actions necessary to
investigate, remove and clean up any substance described in Section 4.12 above
that was released to the environment prior to the Closing at, on or near the
facility at which the Business is located for which an investigative, removal or
cleanup activity is required pursuant to law, rule, regulation, order, agreement
or government action, provided that (i) no such actions shall be taken except
after reasonable advance notice to Buyer; and (ii) any such action shall be
taken in a manner so as to minimize interference with any business conducted at
the facility.
6.4 Environmental Report.
(a) Seller shall prior to closing arrange and pay for a Phase
I environmental assessment of the Seller's real estate that may include
an investigation and analysis of the historical use, storage or
disposal of Hazardous Substances on the real property, and the taking
of samples of soil and groundwater from such locations on the property
as may be selected by Buyer or by an environmental consultant or
engineer acceptable to Buyer (hereinafter "Environmental Report"). The
Environmental Report shall be in form and substance adequate to assess
the environmental condition of Seller's real estate, and shall show
that Seller's real estate contains no Hazardous Substances as defined
herein.
(b) The Environmental Report shall evaluate Seller's real
property for compliance with all federal, state, and local governmental
laws, rules and regulations and shall express an opinion as to
compliance with such laws, rules and regulations and shall state
whether there have been any releases of Hazardous Substances upon,
under, near or adjacent to the real estate. As used in this Agreement
the term "Hazardous Substances" shall mean, without limitation, any
material or substance: (i)
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the presence of which requires investigation, remediation or any other
response under any federal, state or local statute, regulation,
ordinance, order, action, policy, or common law; or (ii) which is or
becomes defined as a "hazardous waste," "hazardous substance,"
"pollutant", or "contaminant" under any federal, state, or local
statute, regulation, rule, or ordinance or amendments thereto
including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss.9601 et seq.)
and/or the Resource Conservation and Recovery Act (42 U.S.C. ss.6901 et
seq.); or (iii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous or dangerous and is or becomes regulated by any governmental
authority, agency, department, commission, board, agency, or
instrumentality of the United States, the State of Iowa or any
political subdivision thereof; or (iv) the presence of which on the
real estate and leased premises causes or threatens to cause a nuisance
or other damage or harm upon the such properties or to other
properties, poses or threatens to pose a hazard to the health or safety
of persons on or about the real estate and leased properties or other
properties, or poses or threatens to pose a harm to the environment or
natural resources wherever they may be located; or (v) the presence of
which on properties other than the real estate and leased premises
could constitute a trespass; or (vi) which contains gasoline, diesel
fuel, or other petroleum hydrocarbons; or (vii) which contains
polychlorinated biphenyls (PCBs), asbestos, urea formaldehyde foam
insulation, radon gas, asbestos or asbestos-containing materials or
lead-based paint.
6.5 Employment. At the Closing, Seller and Buyer shall execute a
Labor Leasing agreement in the form of Exhibit 6.5 attached hereto. The
parties acknowledge that Buyer is not the employer of the employees of Seller
and this Agreement shall not be construed to make Buyer the employer of
Seller's employees. Following termination of the Labor Leasing Agreement,
Seller shall be solely responsible for any obligations relating to severance
pay or other termination compensation.
7. COVENANTS OF BUYER
Buyer covenants and agrees with Seller that:
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7.1 Negative Actions. Between the date hereof and the Closing Date,
Buyer will refrain from taking any action that would render Buyer's
representations and warranties hereunder inaccurate as of the date hereof or the
Closing Date.
7.2 Assumption of Liabilities. Buyer shall execute and deliver to
Seller an instrument of assumption of liabilities in form reasonably
satisfactory to Seller and its counsel pursuant to which Buyer shall agree to
assume and pay the assumed liabilities described in Section 1.2 above.
8. CONDITIONS TO OBLIGATION OF BUYER
The obligation of Buyer to consummate the transactions contemplated
hereby is subject to the satisfaction, or waiver, by Buyer, at or prior to the
Closing, of the following conditions, in the absence of the satisfaction of
which Buyer may terminate this Agreement without liability:
8.1 Accuracy of Representations and Warranties. The representations and
warranties contained herein or otherwise made by or on behalf of Seller in
connection with this Agreement and the transactions contemplated hereby shall
have been true and correct in all material respects on the Closing Date to the
same extent as if made on the Closing Date.
8.2 Performance by Seller. Seller shall have duly performed and
complied in all material respects with all terms, agreements, and conditions
required by this Agreement to be performed or complied with by Seller prior to
or at the Closing.
8.3 Seller's Certificate. Seller shall have delivered to Buyer a
certificate, dated as of the Closing Date, and executed by Seller's executive
officer, to the effect that Seller has duly performed and complied with the
covenants and conditions set forth in Sections 8.1 and 8.2.
8.4 Opinion of Seller's Counsel.
(a) Buyer shall have received from Berg & Howe, counsel for
Seller and ACI, a favorable opinion, dated as of the Closing Date, and
satisfactory in substance and form to Buyer and its counsel, to the
following effect:
(i) Standing, etc. of the Seller. Seller has all requisite
power and authority to own the Assets and to perform Seller's
obligations hereunder and to consummate the transactions
contemplated hereby.
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(ii) Litigation. There is no suit, action, proceeding,
investigation or inquiry pending or, to the best of such counsel's
knowledge, threatened at law or in equity or before any
governmental department, commission, board, body, agency or
instrumentality, domestic or foreign, which materially affects or
could materially affect the Business or Assets or involves or could
involve the validity or legality of this Agreement or any action
taken or to be taken pursuant hereto, nor has any such suit,
action, proceeding, investigation or inquiry been pending within
the three (3) years preceding the date of this Agreement.
(iii) Execution and Delivery. This Agreement has been duly
executed and delivered by Seller and ACI, and constitutes the
legal, valid and binding obligation of Seller and ACI enforceable
against Seller and ACI in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and other similar laws relating to or affecting the
rights of creditors generally, and is subject to general principles
of equity, regardless of whether such enforceability is considered
in a proceeding at law or in equity.
(iv) Consents; Defaults, Etc. Neither the execution,
delivery or performance by Seller and ACI of this Agreement, nor
the consummation by Seller and ACI of the transactions contemplated
hereby (i) is prohibited by, or requires Seller or ACI to obtain or
make any consent, authorization, approval, filing or registration
under, any law, rule or regulation, or, under any judgment, order,
writ, injunction or decree which is binding upon Seller or ACI, or
(ii) will violate any provision of, result in any default or
acceleration of any obligations under, result in the creation or
imposition of any lien on any of the Assets pursuant to, or require
any consent (other than consents identified in such opinion and
duly obtained prior to the Closing) under, any indenture, lease,
mortgage or other agreement to which Seller or ACI is a party or is
otherwise bound.
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(v) Conveyance of Assets. The instruments of conveyance,
transfer and assignment executed and delivered to Buyer have been
duly executed by Seller and are valid and effective to vest in
Buyer all of the right, title and interest of Seller in and to the
Assets as contemplated by the Agreement.
8.5 Corporate Documents. Seller and ACI shall have delivered to Buyer
(a) certificates of good standing from their states of incorporation; and (b)
certified resolutions of the Board of Directors and the stockholder of Seller
and ACI's Board of Directors authorizing this transaction.
8.6 Instruments of Transfer and Title Documents. Seller shall execute
and deliver to Buyer the instruments of transfer described in Section 3.2 above.
8.7 Environmental Report. Buyer shall have received the Environmental
Report identified in Section 6.4 hereof which indicates, in the opinion of the
environmental consultant, that the Seller's real property is not contaminated or
affected by any Hazardous Substances at a level exceeding an applicable clean-up
standard or criteria developed under federal, state, or local law.
8.8 Employee Agreements. Larry Mefferd shall have entered into a
consulting and non-competition agreement with Buyer, and Buyer shall have
entered into employment agreements with Floyd Mefferd and Lloyd Mefferd, in the
forms attached as Exhibit 8.9 hereto.
8.9 Board Approval. Buyer's Board of Directors shall have approved
this Agreement and the transaction described in this Agreement.
8.10 Sublease. Buyer and Seller shall have entered into a sublease of
Seller's real property in the form of Exhibit 8.11 attached hereto, and the
landlord of Seller's real property shall have provided its written consent to
the sublease and a release of its landlord's lien on Seller's personal property
in forms acceptable to Buyer. The Mefferds shall pay the accrued dividend charge
of Three Thousand Three Hundred Thirty Three Dollars and 33/100 ($3,333.33) and
the rent delinquency charge of Nine Thousand Six Hundred Thirty Seven Dollars
and 83/100 ($9,637.83) required by the landlord for these consents.
18
<PAGE> 23
9. CONDITIONS TO OBLIGATION OF SELLER
The obligation of Seller to consummate the transactions contemplated
hereby is subject to the satisfaction, or waiver, by Seller, at or prior to the
Closing, of the following conditions in the absence of the satisfaction of which
Seller may terminate this Agreement without liability:
9.1 Accuracy of Representations. The representations and warranties
contained in this Agreement shall have been true and correct in all material
respects when made and shall be true and correct in all material respects on the
Closing Date to the same extent as if made on the Closing Date.
9.2 Performance by Buyer. Buyer shall have duly performed and
complied with all terms, agreements and conditions required by this Agreement to
be performed or complied with by it prior to or at the Closing.
9.3 Officer's Certificate. Buyer shall have delivered to Seller a
certificate, dated as of the Closing Date and executed by an officer of Buyer,
to the effect that Buyer has duly performed and complied with the covenants and
conditions set forth in Sections 9.1 and 9.2.
9.4 Opinion of Buyer's Counsel. Seller shall have received from
counsel to Buyer, a favorable opinion, dated as of the Closing Date, and
satisfactory in substance and form to Seller and its counsel, to the following
effect:
(a) Standing etc. of the Buyer. Buyer has all requisite
power and authority to consummate the transactions contemplated in the
Agreement and to perform Buyer's obligations contemplated therein;
(b) Consents, Defaults, etc. Neither the execution, delivery
or performance by Buyer of this Agreement, nor the consummation by
Buyer of the transactions contemplated hereby (i) is prohibited by, or
requires Buyer to obtain or make any consent, authorization, approval,
filing or registration under, any law, rule or regulation, or, to the
best of counsel's knowledge after due inquiry, under any judgment,
order, writ, injunction or decree which is binding upon Buyer, or (ii)
will violate any provision of, result in any default or acceleration of
any obligations under, result or require any consent (other than
consents identified in such opinion and duly obtained prior to the
Closing)
19
<PAGE> 24
under any indenture, lease, mortgage or other agreement to which Buyer
is a party or is otherwise bound;
(c) Execution and Delivery. This Agreement has been duly
executed and delivered by Buyer, and constitutes the legal, valid and
binding obligation of Buyer enforceable against Buyer in accordance
with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and other similar
laws relating to or affecting the rights of creditors generally, and is
subject to general principles of equity, regardless of whether such
enforceability is considered in a proceeding at law or in equity.
9.5 Corporate Documents. Buyer shall deliver to Seller (a) a
certificate of good standing from its state of incorporation; and (b) a
certified resolution of the Board of Directors of Buyer authorizing this
transaction.
10. COVENANT NOT TO COMPETE
10.1 Non-competition. In furtherance of the sale of the Assets to
Buyer, for a period of ten (10) years following the Closing, Seller, ACI and the
Mefferds (and Larry Mefferd, by execution of this Agreement for that purpose
only) shall not, nor permit any person or entity then controlled by Seller, ACI
or the Mefferds, acting alone or in combination, to, directly or indirectly,
engage, participate in (as a partner, shareholder, officer, or director,
employee, consultant, agent or otherwise) any business activity which is the
same as, or similar to, or competitive with, the business conducted by Buyer
utilizing the Assets anywhere in the world, nor shall Seller or ACI directly or
indirectly tamper with or induce any employee, agent, salesperson, contractor,
customer, supplier, manufacturer or dealer of Buyer to leave, to stop selling to
or stop buying from Buyer or otherwise to cease dealing with Buyer.
10.2 Enforcement. The provisions of the covenant contained in this
Section 10 are severable and independent and shall be interpreted and applied
consistently with requirements of reasonableness and equity. If any provision of
the covenant contained in this Section 10 shall be held to be invalid or
otherwise unenforceable, in whole or in part, the remainder of the provisions,
or the enforceable parts thereof, shall not be affected thereby.
20
<PAGE> 25
10.3 Injunctive Relief. Buyer, ACI and Seller acknowledge that
compliance by Seller and ACI with the covenant contained in this Section 10 is
necessary to protect the interests of Buyer and that a breach of the covenant
contained in this Section 10 will result in irreparable and continuing damage to
Buyer for which there will be no adequate remedy at law. Seller and ACI hereby
agree, without intending to limit the remedies available to Buyer, that Buyer
and its successors and assigns shall be entitled to injunctive relief (and
attorney fees and costs) with respect to the covenant contained in this Section
10, in addition to such other and further relief as may be appropriate.
11. ADDITIONAL COVENANTS OF BUYER AND SELLER
11.1 Further Assurances. After the Closing, and for no further
consideration, Seller shall perform all other action reasonably requested by
Buyer (including, without limitation, the use of Seller's best efforts) to
enable Buyer to accomplish transfer of registrations, permits, approvals and the
like as contemplated by this Agreement and shall execute, acknowledge and
deliver such assignments, transfers, consents and other documents as Buyer or
its counsel may reasonably request to vest in Buyer, and protect Buyer's right,
title and interest in, and enjoyment of, the Assets intended to be assigned and
transferred to Buyer pursuant to this Agreement.
11.2 Bulk Sales Laws. Buyer waives compliance by Seller and Seller
waives compliance by Buyer with the provisions of any applicable bulk sales,
fraudulent conveyance or other law for the protection of creditors, and Seller
shall indemnify and hold Buyer harmless and reimburse Buyer for, any and all
claims, liabilities or obligations (other than those assumed by Buyer hereunder)
which Buyer may suffer or incur by virtue of noncompliance by Buyer with such
applicable laws under the indemnity provisions of Section 12 herein.
11.3 Rights to Intellectual Property. Seller shall not, at any time
after the Closing Date, use or disclose to any third party any Intellectual
Property or Processes which at such time is not generally known to the public or
recognized as standard practice, or any formulae, scientific and technical
information, manufacturing procedure, know-how, processes, trade secrets or
other confidential information transferred to Buyer pursuant to this Agreement,
without the express prior written consent of Buyer.
21
<PAGE> 26
11.4 Use of Trade Names. Seller agrees that Buyer may, at its
discretion, use Seller's name and any trade names used by Seller, or a phrase
similar thereto in connection with marketing products after the Closing Date.
Seller further agrees that Buyer may use containers, forms and other supplies
which have Seller's name printed thereon after the Closing Date. Seller shall
change its name to a dissimilar name as of the Closing and shall file a
certificate of amendment to its articles of incorporation as of the Closing to
effect this change.
12. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS; INDEMNIFICATION; ETC.
12.1 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants herein and in any Exhibit,
certificate, instrument or document delivered pursuant to this Agreement shall
survive both the Closing and any investigation at any time made for or on behalf
of any party hereto.
12.2 Indemnification by Seller. Seller, ACI and the Mefferds shall,
jointly and severally, indemnify and hold Buyer (and its shareholders,
directors, officers, employees and affiliates) harmless from and against any and
all claims, liabilities (including any strict liabilities with respect to any
Loss specified under clause (iv) below), fines, penalties, natural resource
damages, losses, damages, (including incidental or consequential damages such as
lost profits resulting from any disruption of operation of the Assets), costs
and expenses (including costs and counsel fees) incurred by Buyer from or
related to any of the following (hereinafter called a "Loss" or "Losses"):
(i) any breach by Seller of any representation, warranty,
covenant, obligation or undertaking made by Seller in or pursuant to
this Agreement;
(ii) any claim or liability not arising out of an obligation
assumed by Buyer hereunder and asserted for failure to comply with any
applicable bulk sales, fraudulent conveyance or other laws for the
protection of creditors;
(iii) any product liability claim or other claim for the
breach of any express or implied warranty, and any other claim of
whatever nature, and from all damages resulting therefrom, which may be
made in connection with the sale of products manufactured by Seller
prior to the Closing Date;
22
<PAGE> 27
(iv) any claim or liability relating to the operation of the
Business prior to the Closing Date not assumed by Buyer, including,
without limitation, liability under labor, collective bargaining, or
employment agreements and liability relating to pension, retirement or
other employee benefit plans; or
(v) any claim related to a breach of any environmental
covenants, representations or warranties contained in this Agreement,
or arising out of or related to any actual or alleged spills, disposal,
emissions, leaks, leaching, discharging, or release (as those terms are
defined in their broadest sense by any federal, state or local law,
rule or regulation or order pertaining to the protection of the
environment or public health) of Hazardous Substances prior to the
Closing Date, and including any migration or escape of such Hazardous
Substances onto adjacent lands or properties after the Closing Date.
12.3 Indemnification by Buyer. Buyer shall indemnify and hold
Seller harmless from and against any and all claims, liabilities, losses,
damages, costs and expenses (including reasonable counsel fees) from or related
to (a) any breach by Buyer of any representation, warranty, covenant, obligation
or undertaking made by Buyer in or pursuant to this Agreement, (b) matters
arising solely from the operation of the Business after the Closing Date, other
than liabilities retained by Seller hereunder, and (c) any product liability
claim for injury to persons or property which may be made in connection with the
sale of products manufactured by Buyer after the Closing Date.
12.4 Indemnification Notice, etc.
(a) If any action, suit or proceeding shall be commenced, or
any claim or demand shall be asserted, in respect of which a party
entitled to indemnification pursuant to this Agreement (the
"Indemnitee") demands indemnification under this Section 12, the party
from which such indemnification is demanded under this Section 12 (the
"Indemnitor") shall be notified to that effect with reasonable
promptness and shall have the right to assume entire control of its
defense (including the selection of counsel), subject to the right of
the Indemnitee to participate (with counsel of its choice) in, the
defense, compromise or settlement thereof.
23
<PAGE> 28
(b) The fees and expenses of any counsel chosen by Indemnitee
following acceptance by Indemnitor of its indemnity obligations shall
be at the expense of the Indemnitee unless (i) the employment of such
counsel by the Indemnitee has been specifically authorized by the
Indemnitor, or (ii) the named parties to any such action (including any
impleaded parties) include both the Indemnitor, and the Indemnitee
shall have been advised by its counsel that there may be one or more
good faith legal defenses available to it which are different from or
additional to those available to the Indemnitor.
(c) The Indemnitee shall cooperate fully in all respects with
the Indemnitor in any such defense, compromise or settlement,
including, without limitation, by making available all pertinent
information under its control to the Indemnitor. The Indemnitor will
not compromise or settle any such action, suit, proceeding, claim or
demand without the prior written consent of the Indemnitee; provided,
however, that in the event such consent is withheld, then the
liabilities of the Indemnitor shall be limited to the total sum
representing the amount of the proposed compromise or settlement and
the amount of counsel fees accumulated at the time such consent is
withheld. The Indemnitor shall not be liable for any settlement by
Indemnitee of any action, suit, proceeding, claim or demand, unless the
Indemnitee obtains the prior written consent of the Indemnitor.
13. EXPENSES. Each party hereto shall bear its own expenses, including
the fees of any attorneys, accountants or other engaged by such party, incurred
in connection with
14. NOTICES. All notices, requests, demands and other communications
made hereunder shall be in writing and shall be deemed duly given if and when
delivered by hand, with receipt duly acknowledged, or sent by registered or
certified mail, postage prepaid, as follows, or to such other address or person
as any party may designate by notice to the other party or parties hereunder:
this Agreement and the transactions contemplated hereby, it being understood
that Seller's expenses shall not be paid from the Assets.
24
<PAGE> 29
If to Seller and ACI: Gold Star Manufacturing, Inc.
Highway 10 West
PO Box 164
Laurens, Iowa 50554
ATTENTION: Mr. Floyd Mefferd
If to Buyer: Kaydon Acquisition Corporation V
19345 US 19 North, Suite 500
Clearwater, Florida 34624
ATTENTION: Mr. Stephen Clough
15. AMENDMENTS; TERMINATION. This Agreement cannot be changed or
terminated orally and no waiver of compliance with any provision or condition
hereof and no consent provided for herein shall be effective unless evidenced by
an instrument in writing duly executed by the proper party.
16. EFFECT OF THIS AGREEMENT; COUNTERPARTS. This Agreement (including
the Exhibits hereto) sets forth the entire understanding of the parties and
supersedes any and all prior agreements, arrangements and understandings
relating to the subject matter hereof. The section headings of this Agreement
are for convenience of reference only and do not form a part hereof and do not
in any way modify, interpret or construe the intentions of the parties. This
Agreement may be executed in two or more counterparts, and all such counterparts
shall constitute one and the same instrument.
17. GOVERNING LAW AND JURISDICTION. This Agreement has been made and
entered into under the laws of the State of Iowa and its laws shall control the
interpretation thereof. The parties hereto agree to submit to the personal
jurisdiction of the courts in the State of Iowa to address any suit, action or
proceeding related to this Agreement.
18. ASSIGNMENTS; SUCCESSORS AND ASSIGNS. This Agreement may not be
assigned without the written consent of the other party, except that Buyer may
assign this Agreement to an affiliate in which event Buyer shall remain liable
for the obligations incurred hereunder. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, legal
representatives and assigns.
25
<PAGE> 30
19. PRESS RELEASES AND ANNOUNCEMENTS. No party shall issue any
press release or announcement relating to the subject matter of this Agreement
(prior to the Closing) without the prior written approval of the other party;
provided, however, that any party may make any public disclosure it believes in
good faith is required by law or regulation (in which case the disclosing party
will advise the other party prior to making the disclosure).
20. CONSTRUCTION. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise.
IN WITNESS WHEREOF, each party hereto has executed this Agreement by
its respective duly authorized officer as of the day and year first above
written.
KAYDON ACQUISITION CORP. V
By /s/ Stephen K. Clough
---------------------------------------------
Stephen K. Clough
Its Treasurer
- Buyer
GOLD STAR MANUFACTURING, INC.
By /s/ Floyd R. Mefferd
--------------------------------------------
Its President
--------------------------------------------
- Seller
AMERICAN CENTRAL INDUSTRIES, INC.
By /s/ Floyd R. Mefferd
---------------------------------------------
Its President
--------------------------------------------
26
<PAGE> 31
/s/ Floyd Mefferd
----------------------------------------------------
Floyd Mefferd
/s/ Lloyd Mefferd
----------------------------------------------------
Lloyd Mefferd
/s/ Larry Mefferd
----------------------------------------------------
Larry Mefferd (as to non-competition agreement only)
27
<PAGE> 32
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
1.1 Claims and Encumbrances
1.1(b) Machinery and Equipment
1.1(c) Intellectual Property
1.1(d) Patents
1.2 Latest Financial Statements
1.3 Excluded Assets
2.3 Assumed Accounts Payable
4.3 Consents
4.4 Machinery and equipment requiring repairs
4.6 Employee claims
4.7 Permits
4.8 Litigation
4.11 Title to Assets
4.12 Non-compliance with laws
4.13 Burdensome restrictions
4.15 Unbooked liabilities
4.17 Leases and agreements
4.19 Uncollectible accounts receivable
4.20 Insurance
4.21 Labor matters
4.22 Employee benefit plans
6.5 Labor Leasing Agreement
8.9 Employment and Consulting Agreements
8.11 Sublease
</TABLE>
28
<PAGE> 1
EXHIBIT 10.15
$100,000,000.00
CREDIT AGREEMENT
dated as of
February 28, 1997
among
KAYDON CORPORATION
The Banks Listed Herein
and
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent and a Bank
<PAGE> 2
TABLE OF CONTENTS
CREDIT AGREEMENT
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C>
SECTION 1.01. Definitions........................................................................................1
SECTION 1.02. Accounting Terms and Determinations...............................................................11
SECTION 1.03. Use of Defined Terms..............................................................................11
SECTION 1.04. Terminology.......................................................................................11
SECTION 1.05. References........................................................................................11
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Make Loans.........................................................................12
SECTION 2.02. Method of Borrowing Loans.........................................................................12
SECTION 2.03. Notes.............................................................................................14
SECTION 2.04. Maturity of Loans.................................................................................14
SECTION 2.05. Interest Rates....................................................................................14
SECTION 2.06. Fees..............................................................................................16
SECTION 2.07. Optional Termination or Reduction of Commitments..................................................18
SECTION 2.08. Mandatory Reduction and Termination of Commitments................................................18
SECTION 2.09. Optional Prepayments..............................................................................18
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 2.10. Mandatory Prepayments.............................................................................18
SECTION 2.11. General Provisions as to Payments.................................................................18
SECTION 2.12. Computation of Interest and Fees..................................................................20
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to First Borrowing.....................................................................20
SECTION 3.02. Conditions to All Borrowings......................................................................21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power.....................................................................22
SECTION 4.02. Corporate and Governmental Authorization; No Contravention........................................22
SECTION 4.03. Binding Effect....................................................................................22
SECTION 4.04. Financial Information.............................................................................22
SECTION 4.05. Litigation........................................................................................22
SECTION 4.06. Compliance with ERISA.............................................................................23
SECTION 4.07. Taxes.............................................................................................23
SECTION 4.08. Subsidiaries......................................................................................23
SECTION 4.09. Not an Investment Company.........................................................................23
SECTION 4.10 Public Utility Holding Company Act................................................................23
SECTION 4.11. Ownership of Property; Liens......................................................................24
SECTION 4.12. No Default........................................................................................24
SECTION 4.13. Full Disclosure...................................................................................24
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
SECTION 4.14. Environmental Matters............................................................................24
SECTION 4.15. Compliance with Laws..............................................................................24
SECTION 4.16. Capital Stock.....................................................................................25
SECTION 4.17. Margin Stock......................................................................................25
SECTION 4.18. Insolvency........................................................................................25
ARTICLE V
COVENANTS
SECTION 5.01. Information.......................................................................................25
SECTION 5.02. Inspection of Property, Books and Records.........................................................27
SECTION 5.03. Ratio of Consolidated Total Debt to Total Capitalization. .......................................27
SECTION 5.04. Interest Coverage.................................................................................27
SECTION 5.05. Loans or Advances.................................................................................27
SECTION 5.06. Investments.......................................................................................28
SECTION 5.07. Negative Pledge...................................................................................28
SECTION 5.08. Maintenance of Existence..........................................................................29
SECTION 5.09. Dissolution.......................................................................................29
SECTION 5.10. Consolidations, Mergers and Sales of Assets.......................................................29
SECTION 5.11. Use of Proceeds...................................................................................30
SECTION 5.12. Compliance with Laws; Payment of Taxes............................................................30
SECTION 5.13. Insurance.........................................................................................30
SECTION 5.14. Change in Fiscal Year.............................................................................30
SECTION 5.15. Maintenance of Property...........................................................................30
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
SECTION 5.16. Environmental Notices.............................................................................30
SECTION 5.17. Environmental Matters.............................................................................30
SECTION 5.18. Environmental Release.............................................................................31
SECTION 5.19. Debt..............................................................................................31
SECTION 5.20. Transactions with Affiliates......................................................................31
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default.................................................................................31
SECTION 6.02. Notice of Default.................................................................................34
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment, Powers and Immunities................................................................34
SECTION 7.02. Reliance by Agent.................................................................................34
SECTION 7.03. Defaults..........................................................................................35
SECTION 7.04. Rights of Agent and Its Affiliates as a Bank......................................................35
SECTION 7.05. Indemnification...................................................................................35
SECTION 7.06. Consequential Damages.............................................................................36
SECTION 7.07. Payee of Note Treated as Owner....................................................................36
SECTION 7.08. Non-Reliance on Agent and Other Banks.............................................................36
SECTION 7.09. Failure to Act....................................................................................36
SECTION 7.10. Resignation or Removal of Agent...................................................................36
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
<S> <C>
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair..........................................37
SECTION 8.02. Illegality........................................................................................37
SECTION 8.03. Increased Cost and Reduced Return.................................................................38
SECTION 8.04. Base Rate Loans Substituted for Affected Euro-Dollar Loans........................................39
SECTION 8.05. Compensation......................................................................................40
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices...........................................................................................40
SECTION 9.02. No Waivers........................................................................................40
SECTION 9.03. Expenses; Documentary Taxes; Indemnification......................................................41
SECTION 9.04. Set-Offs; Sharing of Set-Offs.....................................................................41
SECTION 9.05. Amendments and Waivers............................................................................42
SECTION 9.06. Margin Stock Collateral...........................................................................43
SECTION 9.07. Successors and Assigns............................................................................43
SECTION 9.08. Confidentiality...................................................................................45
SECTION 9.09. Representation by Banks...........................................................................45
SECTION 9.10. Obligations Several...............................................................................45
SECTION 9.11. Survival of Certain Obligations...................................................................45
SECTION 9.12. Georgia Law.......................................................................................45
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
SECTION 9.13. Severability......................................................................................45
SECTION 9.14. Interest..........................................................................................46
SECTION 9.15. Interpretation....................................................................................46
SECTION 9.16. Consent to Jurisdiction...........................................................................46
SECTION 9.17. Counterparts......................................................................................46
EXHIBIT A Form of Note
EXHIBIT B-1 Form of Opinion of Counsel for the Borrower
EXHIBIT B-2 Form of Opinion of Florida Counsel for the Borrower
EXHIBIT C Form of Opinion of Special Counsel for the Agent
EXHIBIT D Form of Closing Certificate
EXHIBIT E Form of Secretary's Certificate
EXHIBIT F Form of Compliance Certificate
EXHIBIT G Form of Assignment and Acceptance
EXHIBIT H Form of Notice of Borrowing
Schedule 4.05 - Fraudulent Transfer Litigation and Products Liability Matters
Schedule 4.08 - Subsidiaries
Schedule 5.19 - Existing Debt
</TABLE>
<PAGE> 8
CREDIT AGREEMENT
AGREEMENT dated as of February 28, 1997, among KAYDON
CORPORATION, the BANKS listed on the signature pages hereof and WACHOVIA BANK OF
GEORGIA, N.A., as Agent and as a Bank.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this
Section 1.01 shall, for all purposes of this Agreement and any amendment hereto
(except as herein otherwise expressly provided or unless the context otherwise
requires), have the meanings set forth herein:
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.05(c).
"Affiliate" of any Person means (i) any other Person which
directly, or indirectly through one or more intermediaries, controls such
Person, (ii) any other Person which directly, or indirectly through one or more
intermediaries, is controlled by or is under common control with such Person, or
(iii) any other Person of which such Person owns, directly or indirectly, 20% or
more of the common stock or equivalent equity interests. As used herein, the
term "control" means possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" means Wachovia Bank of Georgia, N.A., a national
banking association organized under the laws of the United States of America, in
its capacity as agent for the Banks hereunder, and its successors and permitted
assigns in such capacity.
"Agent's Letter Agreement" means that certain letter
agreement, dated as of December 11, 1996, between the Borrower and the Agent
relating to the structure of the Loans, and certain fees from time to time
payable by the Borrower to the Agent, together with all amendments and
modifications thereto.
"Agreement" means this Credit Agreement, together with all
amendments and supplements hereto.
"Applicable Unused Fee Rate" has the meaning set forth in
Section 2.06(a).
"Applicable Margin" has the meaning set forth in Section
2.05(a).
"Assignee" has the meaning set forth in Section 9.07(c).
<PAGE> 9
"Assignment and Acceptance" means an Assignment and Acceptance
executed in accordance with Section 9.07(c) in the form attached hereto as
Exhibit G.
"Authority" has the meaning set forth in Section 8.02.
"Bank" means each bank listed on the signature pages hereof as
having a Commitment, and its successors and assigns.
"Base Rate" means for any Base Rate Loan for any day, the rate
per annum equal to the higher as of such day of (i) the Prime Rate or (ii)
one-half of one percent above the Federal Funds Rate for such day. For purposes
of determining the Base Rate for any day, changes in the Prime Rate and the
Federal Funds Rate shall be effective on the date of each such change.
"Base Rate Loan" means a Loan which bears or is to bear
interest at a rate based upon the Base Rate.
"Borrower" means Kaydon Corporation, a Delaware corporation,
and its successors and permitted assigns.
"Borrowing" means a borrowing hereunder consisting of Loans
made to the Borrower at the same time by the Banks pursuant to Article II. A
Borrowing is a "Base Rate Borrowing" if such Loans are Base Rate Loans or a
"Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans.
"Capital Stock" means any nonredeemable capital stock of the
Borrower or any Consolidated Subsidiary (to the extent issued to a Person other
than the Borrower), whether common or preferred.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. ss.9601 et seq. and its implementing
regulations and amendments.
"CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Information System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section
8.02.
"Closing Certificate" has the meaning set forth in Section
3.01(e).
"Closing Date" means February 28, 1997.
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor Federal tax code. Any reference to any provision of the Code shall
also be deemed to be a reference to any successor provision or provisions
thereof.
"Commitment" means, with respect to each Bank, (i) the amount
set forth opposite the name of such Bank on the signature pages hereof, or (ii)
as to any Bank which enters into an
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<PAGE> 10
Assignment and Acceptance (whether as transferor Bank or as Assignee
thereunder), the amount of such Bank's Commitment after giving effect to such
Assignment and Acceptance, in each case as such amount may be reduced from time
to time pursuant to Sections 2.07 and 2.08.
"Compliance Certificate" has the meaning set forth in Section
5.01(c).
"Consolidated Interest Expense" for any period means interest,
whether expensed or capitalized, in respect of Debt of the Borrower or any of
its Consolidated Subsidiaries outstanding during such period.
"Consolidated Net Income" means, for any period, the Net
Income of the Borrower and its Consolidated Subsidiaries determined on a
consolidated basis, but excluding (i) extraordinary items and (ii) any equity
interests of the Borrower or any Subsidiary in the unremitted earnings of any
Person that is not a Subsidiary.
"Consolidated Net Worth" means, at any time, Stockholders'
Equity.
"Consolidated Operating Profits" means, for any period, the
Operating Profits of the Borrower and its Consolidated Subsidiaries.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which, in accordance with GAAP, would be
consolidated with those of the Borrower in its consolidated financial statements
as of such date.
"Consolidated Total Assets" means, at any time, the total
assets of the Borrower and its Consolidated Subsidiaries, determined on a
consolidated basis, as set forth or reflected on the most recent consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries, prepared in
accordance with GAAP.
"Consolidated Total Debt" means at any date the Debt of the
Borrower and its Consolidated Subsidiaries, determined on a consolidated basis
as of such date.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee under capital
leases, (v) all obligations of such Person to reimburse any bank or other Person
in respect of amounts payable under a banker's acceptance, (vi) all Redeemable
Preferred Stock of such Person (in the event such Person is a corporation),
(vii) all obligations (absolute or contingent) of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit or
similar instrument, with an expiration date more than one
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<PAGE> 11
year from such date, (viii) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such Person, and (ix) all
Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived in writing, become an Event of Default.
"Default Rate" means, with respect to any Loan, on any day,
the sum of 2% plus the then highest interest rate (including the Applicable
Margin) which may be applicable to any Loans hereunder (irrespective of whether
any such type of Loans are actually outstanding hereunder).
"Dollars" or "$" means dollars in lawful currency of the
United States of America.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in Georgia are authorized or
required by law to close.
"EBIT" for any period means the sum of: (i) Consolidated Net
Income, (ii) taxes on income, and (iii) Consolidated Interest Expense, all
determined with respect to the Borrower and its Consolidated Subsidiaries on a
consolidated basis for such period and in accordance with GAAP.
"Environmental Authority" means any foreign, federal, state,
local or regional government that exercises any form of jurisdiction or
authority under any Environmental Requirement.
"Environmental Authorizations" means all licenses, permits,
orders, approvals, notices, registrations or other legal prerequisites for
conducting the business of the Borrower or any Subsidiary required by any
Environmental Requirement.
"Environmental Judgments and Orders" means all judgments,
decrees or orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"Environmental Liabilities" means any liabilities, whether
accrued, contingent or otherwise, arising from and in any way associated with
any Environmental Requirements.
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<PAGE> 12
"Environmental Notices" means notice from any Environmental
Authority or by any other person or entity, of possible or alleged noncompliance
with or liability under any Environmental Requirement, including without
limitation any complaints, citations, demands or requests from any Environmental
Authority or from any other person or entity for correction of any violation of
any Environmental Requirement or any investigations concerning any violation of
any Environmental Requirement.
"Environmental Proceedings" means any judicial or
administrative proceedings arising from or in any way associated with any
Environmental Requirement.
"Environmental Releases" means releases as defined in CERCLA
or under any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement
relating to health, safety or the environment and applicable to the Borrower,
any Subsidiary or the Properties, including but not limited to any such
requirement under CERCLA or similar state legislation and all federal, state and
local laws, ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor law. Any reference to any
provision of ERISA shall also be deemed to be a reference to any successor
provision or provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day on
which dealings in Dollar deposits are carried out in the London interbank
market.
"Euro-Dollar Loan" means a Loan which bears or is to bear
interest at a rate based upon the London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.05(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if the day for which
such rate is to be determined is not a Domestic Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Domestic Business Day as so published on the next succeeding Domestic Business
Day, and (ii) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to Wachovia on such day on
such transactions as determined by the Agent.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
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<PAGE> 13
"Fiscal Year" means any fiscal year of the Borrower.
"Fraudulent Transfer Litigation and Products Liability
Matters" means the litigation and products liability matters, as more fully set
forth and described on Schedule 4.05.
"GAAP" means generally accepted accounting principles applied
on a basis consistent with those which, in accordance with Section 1.02, are to
be used in making the calculations for purposes of determining compliance with
the terms of this Agreement.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to provide collateral security, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid
or hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. ss.6901 et seq. and its implementing regulations and amendments,
or in any applicable state or local law or regulation, (b) any "hazardous
substance", "pollutant" or "contaminant", as defined in CERCLA, or in any
applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including crude oil or any fraction thereof,
(d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or
in any applicable state or local law or regulation and (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable state or local law or
regulation, as each such Act, statute or regulation may be amended from time to
time.
"Indicative Rate" means the rate, if any, which the Agent has
provided to the Borrower on the date that the Borrower provides the Agent with a
Notice of Borrowing, as being the Base Rate or Adjusted London Interbank Offered
Rate, effective on the date of such Notice of Borrowing. The Indicative Rate is
not binding on the Agent or any Bank and the interest rate applicable to a
Borrowing may be greater than, equal to or less than the Indicative Rate.
"Interest Coverage Ratio" means the ratio, measured as of the
last day of each Fiscal Quarter, of EBIT for the Fiscal Quarter then ended and
the immediately preceding three Fiscal Quarters to Consolidated Interest Expense
for the Fiscal Quarter then ended and the immediately preceding three Fiscal
Quarters.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the
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<PAGE> 14
first, second, third or sixth month thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period (subject to clause (c) below) which
would otherwise end on a day which is not a Euro-Dollar Business Day
shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month,
in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the appropriate subsequent calendar
month) shall, subject to clause (c) below, end on the last Euro-Dollar
Business Day of the appropriate subsequent calendar month; and
(c) no Interest Period may be selected which begins before the
Termination Date and would otherwise end after the Termination Date.
(2) with respect to each Base Rate Borrowing, the period commencing on the
date of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period (subject to clause (b) below) which
would otherwise end on a day which is not a Domestic Business Day shall
be extended to the next succeeding Domestic Business Day; and
(b) no Interest Period may be selected which begins before the
Termination Date and would otherwise end after the Termination Date.
"Investment" means any investment in any Person, whether by
means of purchase or acquisition of obligations or securities of such Person,
capital contribution to such Person, loan or advance to such Person, making of a
time deposit with such Person, Guarantee or assumption of any obligation of such
Person or otherwise.
"Lending Office" means, as to each Bank, its office located at
its address set forth on the signature pages hereof (or identified on the
signature pages hereof as its Lending Office) or such other office as such Bank
may hereafter designate as its Lending Office by Notice to the Borrower and the
Agent.
"Lien" means, with respect to any asset, any mortgage, deed to
secure debt, deed of trust, lien, pledge, charge, security interest, security
title, preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, servitude or encumbrance of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For the
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
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<PAGE> 15
"Loan" means a Base Rate Loan or a Euro-Dollar Loan and Loans
means Base Rate Loans or Euro-Dollar Loans, or any or all of them, as the
context shall require.
"Loan Documents" means this Agreement, the Notes, any other
document evidencing, relating to or securing the Loans, and any other document
or instrument delivered from time to time in connection with this Agreement, the
Notes or the Loans, as such documents and instruments may be amended or
supplemented from time to time.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.05(c).
"Margin Stock" means "margin stock" as defined in Regulation
G, T, U or X of the Board of Governors of the Federal Reserve System, as in
effect from time to time, together with all official rulings and interpretations
issued thereunder.
"Material Adverse Effect" means with respect to any event,
act, condition or occurrence of whatever nature (including, without limitation,
any adverse change, development or determination in any litigation, arbitration,
or governmental investigation or proceeding (including, without limitation, any
action, proceeding, claim or other matter included in the Fraudulent Transfer
Litigation and Products Liability Matters)), whether singly or in conjunction
with any other event or events, act or acts, condition or conditions, occurrence
or occurrences, whether or not related, a material adverse change in, or a
material adverse effect upon, any of (a) the financial condition, operations,
business, properties or prospects of the Borrower or any of its Consolidated
Subsidiaries, (b) the rights and remedies of the Agent or the Banks under the
Loan Documents, or the ability of the Borrower to perform its obligations under
the Loan Documents to which it is a party, as applicable, or (c) the legality,
validity or enforceability of any Loan Document.
"Multiemployer Plan" shall have the meaning set forth in
Section 4001(a)(3) of ERISA.
"Net Income" means, as applied to any Person for any period,
the aggregate amount of net income of such Person, after taxes, for such period,
as determined in accordance with GAAP.
"Net Proceeds of Capital Stock" means any and all proceeds
(whether cash or non-cash) or other consideration received by the Borrower or a
Consolidated Subsidiary in respect of the issuance of Capital Stock (including,
without limitation, the aggregate amount of any and all Debt converted into
Capital Stock), after deducting therefrom all reasonable and customary costs and
expenses incurred by the Borrower or such Consolidated Subsidiary directly in
connection with the issuance of such Capital Stock.
"Notes" means any or all of the promissory notes of the
Borrower, substantially in the form of Exhibit A hereto, evidencing the
obligation of the Borrower to repay the Loans, together with all amendments,
consolidations, modifications, renewals and supplements thereto and "Note" means
any one of such Notes.
"Notice" means a notice, request or other communication to a
party hereunder which shall be given and deemed effective in accordance with
Section 9.01.
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<PAGE> 16
"Notice of Borrowing" has the meaning set forth in Section
2.02.
"Officer's Certificate" has the meaning set forth in Section
3.01(f).
"Operating Profits" means, as applied to any Person for any
period, the operating income of such Person for such period, as determined in
accordance with GAAP.
"Participant" has the meaning set forth in Section 9.07(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Acquisition" means the acquisition by the Borrower
or any Subsidiary of the Borrower of shares of capital stock of any Person or
assets from any Person, if: (A) in the case of the acquisition of shares of
capital stock of any Person, immediately after giving effect to such acquisition
(i) such Person is a Consolidated Subsidiary; (ii) the Borrower controls such
Person directly or indirectly through a Subsidiary; (iii) no Default shall have
occurred and be continuing; (iv) the line or lines of business engaged in by
such Person are reasonably related, supportive or incidental to the lines of
business engaged in by the Borrower and its Subsidiaries on the Closing Date;
and (v) such acquisition is made on a negotiated basis with the approval of the
Board of Directors of the Person to be acquired and, if necessary, the
shareholders of the Person to be acquired; and (B) in the case of the
acquisition of assets from any Person, immediately after giving effect to such
acquisition: (i) the assets acquired by the Borrower or such Subsidiary of the
Borrower, shall be used by the Borrower or such Subsidiary in a line of business
reasonably related, supportive or incidental to the lines of business engaged in
by the Borrower and its Subsidiaries on the Closing Date; and (ii) no Default
shall have occurred and be continuing.
"Person" means an individual, a corporation, a limited
liability company, a partnership (including without limitation, a joint
venture), an unincorporated association, a trust or any other entity or
organization, including, but not limited to, a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (i) maintained by a member
of the Controlled Group for employees of any member of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding 5 plan years made contributions.
"Prime Rate" refers to that interest rate so denominated and
set by Wachovia from time to time as an interest rate basis for borrowings. The
Prime Rate is but one of several interest rate bases used by Wachovia. Wachovia
lends at interest rates above and below the Prime Rate.
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<PAGE> 17
"Properties" means all real property owned, leased or
otherwise used or occupied by the Borrower or any Subsidiary, wherever located.
"Rate Determination Date" has the meaning set forth in Section
2.05(a).
"Redeemable Preferred Stock" of any Person means any preferred
stock issued by such Person which is at any time prior to the Termination Date
either (i) mandatorily redeemable (by sinking fund or similar payments or
otherwise) or (ii) redeemable at the option of the holder thereof.
"Required Banks" means at any time Banks having at least 66
2/3% of the aggregate amount of the Commitments or, if the Commitments are no
longer in effect, Banks holding at least 66 2/3% of the aggregate outstanding
principal amount of the Notes.
"Stockholders' Equity" means, at any time, the shareholders'
equity of the Borrower and its Consolidated Subsidiaries, as set forth or
reflected on the most recent consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries prepared in accordance with GAAP, but excluding any
Redeemable Preferred Stock of the Borrower or any of its Consolidated
Subsidiaries. Shareholders' equity generally would include, but not be limited
to (i) the par or stated value of all outstanding Capital Stock, (ii) capital
surplus, (iii) retained earnings, and (iv) various deductions such as (A)
purchases of treasury stock, (B) valuation allowances, (C) receivables due from
an employee stock ownership plan, (D) employee stock ownership plan debt
guarantees, and (E) translation adjustments for foreign currency transactions.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by the Borrower.
"Taxes" has the meaning set forth in Section 2.11(c).
"Termination Date" means February 27, 2002.
"Third Parties" means all lessees, sublessees, licensees and
other users of the Properties, excluding those users of the Properties in the
ordinary course of the Borrower's business and on a temporary basis.
"Total Capitalization" means, at any time, the sum of (i)
Consolidated Net Worth, and (ii) Consolidated Total Debt, provided, that for
purposes of this definition only, in determining Consolidated Total Debt,
clauses (vii), (viii) and (ix) of the definition of Debt contained in this
Agreement shall be disregarded.
"Total Unused Commitments" means at any date, an amount equal
to: (i) the aggregate amount of the Commitments of all of the Banks at such
time, less (ii) the aggregate outstanding principal amount of the Loans of all
of the Banks at such time.
"Transferee" has the meaning set forth in Section 9.07(d).
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<PAGE> 18
"Unused Commitment" means at any date, with respect to any
Bank, an amount equal to its Commitment less the aggregate outstanding principal
amount of its Loans.
"Unused Fee Determination Date" has the meaning set forth in
Section 2.06(a).
"Unused Fee Payment Date" means each March 31, June 30,
September 30 and December 31.
"Wachovia" means Wachovia Bank of Georgia, N.A., a national
banking association and its successors.
"Wholly Owned Subsidiary" means any Subsidiary all of the
shares of capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all terms of an accounting character used herein
shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks, unless with respect to any such change concurred in by the
Borrower's independent public accountants or required by GAAP, in determining
compliance with any of the provisions of this Agreement or any of the other Loan
Documents: (i) the Borrower shall have objected to determining such compliance
on such basis at the time of delivery of such financial statements, or (ii) the
Required Banks shall so object in writing within 30 days after the delivery of
such financial statements, in either of which events such calculations shall be
made on a basis consistent with those used in the preparation of the latest
financial statements as to which such objection shall not have been made (which,
if objection is made in respect of the first financial statements delivered
under Section 5.01 hereof, shall mean the financial statements referred to in
Section 4.04).
SECTION 1.03. Use of Defined Terms. All terms defined in this
Agreement shall have the same meanings when used in any of the other Loan
Documents, unless otherwise defined therein or unless the context shall
otherwise require.
SECTION 1.04. Terminology. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural and the plural
shall include the singular. Titles of Articles and Sections in this Agreement
are for convenience only, and neither limit nor amplify the provisions of this
Agreement.
SECTION 1.05. References. Unless otherwise indicated,
references in this Agreement to "Articles", "Exhibits", "Schedules", and
"Sections" are references to articles, exhibits, schedules and sections hereof.
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<PAGE> 19
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Make Loans. Each Bank severally
agrees, on the terms and conditions set forth herein, to make Loans to the
Borrower from time to time before the Termination Date; provided that,
immediately after each such Loan is made, the aggregate outstanding principal
amount of Loans by such Bank shall not exceed the amount of its Commitment,
provided further that the aggregate principal amount of all Loans at any one
time outstanding shall not exceed the aggregate amount of the Commitments of all
of the Banks at such time. Each Euro-Dollar Borrowing under this Section shall
be in an aggregate principal amount of $5,000,000 or any larger multiple of
$1,000,000 and each Base Rate Borrowing under this Section shall be in an
aggregate principal amount of $1,000,000 or any larger multiple of $1,000,000
(except that any such Borrowing may be in the aggregate amount of the Unused
Commitments) and each Borrowing under this Section shall be made from the
several Banks ratably in proportion to their respective Commitments. Within the
foregoing limits, the Borrower may borrow under this Section, repay or, to the
extent permitted by Section 2.09, prepay Loans and reborrow under this Section
at any time before the Termination Date.
SECTION 2.02. Method of Borrowing Loans. (a) The Borrower
shall give the Agent Notice in the form attached hereto as Exhibit H (a "Notice
of Borrowing") prior to 11:00 A.M. (Atlanta, Georgia time) on the Domestic
Business Day of each Base Rate Borrowing and at least 3 Euro-Dollar Business
Days before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Base Rate Borrowing or
a Euro-Dollar Business Day in the case of a Euro-Dollar
Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are
to be Base Rate Loans or Euro-Dollar Loans,
(iv) in the case of a Euro-Dollar Borrowing, the
duration of the Interest Period applicable thereto, subject to
the provisions of the definition of Interest Period; and
(v) the Indicative Rate, if the Borrower has been
advised by the Agent on the date the Borrower provides the
Agent with a Notice of Borrowing of the Base Rate or the
Adjusted London Interbank Offered Rate for the applicable
Interest Period, effective on the date of such Notice of
Borrowing.
(b) Upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Bank of the contents thereof and of such Bank's ratable
share of such Borrowing and such Notice of Borrowing shall not thereafter be
revocable by the Borrower.
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<PAGE> 20
(c) Not later than 12:00 P.M. (Atlanta, Georgia time) on the
date of each Borrowing, each Bank shall (except as provided in subsection (d) of
this Section) make available its ratable share of such Borrowing, in federal or
other funds immediately available in Atlanta, Georgia, to the Agent at its
address referred to in or specified pursuant to Section 9.01. Unless the Agent
determines that any applicable condition specified in Article III has not been
satisfied, the Agent will make the funds so received from the Banks available to
the Borrower at the Agent's aforesaid address. Unless the Agent receives Notice
from a Bank, at the Agent's address referred to in Section 9.01, no later than
4:00 P.M. (local time at such address) on the Domestic Business Day before the
date of a Borrowing, stating that such Bank will not make a Loan in connection
with such Borrowing because a term or condition of this Agreement (including,
without limitation, any condition or term specified on Article III or VIII
hereof) has not been satisfied or such Bank is not otherwise obligated to make
such Loan under the terms of this Agreement (whether pursuant to Article III
hereof, Article VIII hereof or otherwise), the Agent shall be entitled to assume
that such Bank will make a Loan in connection with such Borrowing and, in
reliance on such assumption, the Agent may (but shall not be obligated to) make
available such Bank's ratable share of such Borrowing to the Borrower for the
account of such Bank. If the Agent makes such Bank's ratable share available to
the Borrower and such Bank does not in fact make its ratable share of such
Borrowing available on such date, the Agent shall be entitled to recover such
Bank's ratable share from such Bank or the Borrower (and for such purpose shall
be entitled to charge such amount to any account of the Borrower maintained with
the Agent), together with interest thereon for each day during the period from
the date of such Borrowing until such sum shall be paid in full at a rate per
annum equal to the rate at which the Agent determines that it obtained (or could
have obtained) overnight federal funds to cover such amount for each such day
during such period, provided that any such payment by the Borrower of such
Bank's ratable share and interest thereon shall be without prejudice to any
rights that the Borrower may have against such Bank. If such Bank shall repay to
the Agent such corresponding amount, such amount so repaid shall constitute such
Bank's Loan included in such Borrowing for purposes of this Agreement.
(d) If any Bank makes a new Loan hereunder on a day on which
the Borrower is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the proceeds of its new Loan to make such repayment and
only an amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by such Bank to the
Agent as provided in subsection (c) of this Section, or remitted by the Borrower
to the Agent as provided in Section 2.11, as the case may be.
(e) Notwithstanding anything to the contrary contained in this
Agreement, no Euro-Dollar Borrowing may be made if there shall have occurred a
Default or an Event of Default, which Default or Event of Default shall not have
been cured or waived in writing.
(f) In the event that a Notice of Borrowing fails to specify
whether the Loans comprising such Borrowing are to be Base Rate Loans or
Euro-Dollar Loans, such Loans shall be made as Base Rate Loans. If the Borrower
is otherwise entitled under this Agreement to repay any Loans maturing at the
end of an Interest Period applicable thereto with the proceeds of a new
Borrowing, and the Borrower fails to repay such Loans using its own moneys and
fails to give a Notice of Borrowing in connection with such new Borrowing, a new
Borrowing shall be deemed to be made
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<PAGE> 21
on the date such Loans mature in an amount equal to the principal amount of the
Loans so maturing, and the Loans comprising such new Borrowing shall be Base
Rate Loans.
(g) Notwithstanding anything to the contrary contained herein,
(i) there shall not be more than nine (9) different Interest Periods outstanding
at the same time (for which purpose Interest Periods described in different
numbered clauses of the definition of the term "Interest Period" shall be deemed
to be different Interest Periods even if they are coterminous) and (ii) the
proceeds of any Base Rate Borrowing shall be applied first to repay the unpaid
principal amount of all Base Rate Loans (if any) outstanding immediately before
such Base Rate Borrowing.
SECTION 2.03. Notes. (a) The Loans of each Bank shall be
evidenced by a single Note payable to the order of such Bank for the account of
its Lending Office in an amount equal to the original principal amount of such
Bank's Commitment.
(b) Upon receipt of each Bank's Notes pursuant to Section
3.01, the Agent shall deliver such Notes to such Bank. Each Bank shall record,
and prior to any transfer of its Notes shall endorse on the schedule forming a
part thereof appropriate notations to evidence the date, amount and maturity of,
and effective interest rate for, each Loan made by it, the date and amount of
each payment of principal made by the Borrower with respect thereto and whether,
in the case of such Bank's Note, such Loan is a Base Rate Loan or Euro-Dollar
Loan, and such schedule shall constitute rebuttable presumptive evidence of the
principal amount owing and unpaid on such Bank's Notes; provided that the
failure of any Bank to make, or any error in making, any such recordation or
endorsement shall not affect the obligation of the Borrower hereunder or under
the Notes or the ability of any Bank to assign its Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Notes and to attach to
and make a part of any Note a continuation of any such schedule as and when
required.
SECTION 2.04. Maturity of Loans. Each Loan included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.05. Interest Rates. (a) "Applicable Margin" shall be
determined quarterly based upon the ratio of Consolidated Total Debt to Total
Capitalization (calculated as of the last day of each Fiscal Quarter), as
follows:
<TABLE>
<CAPTION>
Ratio of Consolidated Total
Debt to Total Capitalization Base Rate Loans Euro-Dollar Loans
--------------- -----------------
<S> <C> <C>
Greater than .45 0% .50%
Greater than .35
and equal to or less than .45 0% .40%
Greater than .25
and equal to or less than .35 0% .30%
Less than or equal to .25 0% .25%
</TABLE>
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<PAGE> 22
The Applicable Margin shall be determined effective as of the date (herein, the
"Rate Determination Date") which is 55 days after the last day of the Fiscal
Quarter as of the end of which the foregoing ratio is being determined, based on
the quarterly financial statements for such Fiscal Quarter, and the Applicable
Margin so determined shall remain effective from such Rate Determination Date
until the date which is 55 days after the last day of the Fiscal Quarter in
which such Rate Determination Date falls (which latter date shall be a new Rate
Determination Date); provided that (i) for the period from and including the
Closing Date to but excluding the Rate Determination Date next following the
Closing Date, the Applicable Margin shall be (A) 0% for Base Rate Loans and (B)
.25% for Euro-Dollar Loans, (ii) in the case of any Applicable Margin determined
for the fourth and final Fiscal Quarter of a Fiscal Year, the Rate Determination
Date shall be the date which is 110 days after the last day of such final Fiscal
Quarter and such Applicable Margin shall be determined based upon the annual
audited financial statements for the Fiscal Year ended on the last day of such
final Fiscal Quarter, and (iii) if on any Rate Determination Date the Borrower
shall have failed to deliver to the Banks the financial statements required to
be delivered pursuant to Section 5.01(a) or Section 5.01(b) with respect to the
Fiscal Year or Fiscal Quarter, as the case may be, most recently ended prior to
such Rate Determination Date, then for the period beginning on such Rate
Determination Date and ending on the earlier of (A) the date on which the
Borrower shall deliver to the Banks the financial statements to be delivered
pursuant to Section 5.01(b) with respect to such Fiscal Quarter or any
subsequent Fiscal Quarter, or (B) the date on which the Borrower shall deliver
to the Banks annual financial statements required to be delivered pursuant to
Section 5.01(a) with respect to the Fiscal Year which includes such Fiscal
Quarter or any subsequent Fiscal Year, the Applicable Margin shall be determined
as if the ratio of Consolidated Total Debt to Total Capitalization was more than
.45 at all times during such period. Any change in the Applicable Margin on any
Rate Determination Date shall result in a corresponding change, effective on and
as of such Rate Determination Date, in the interest rate applicable to each Loan
outstanding on such Rate Determination Date, provided that: (i) for Euro-Dollar
Loans, changes in Applicable Margin shall only be effective for Interest Periods
commencing on or after the Rate Determination Date; and (ii) no Applicable
Margin shall be decreased pursuant to this Section 2.05 if a Default is in
existence on the Rate Determination Date.
(b) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until it
becomes due, at a rate per annum equal to the Base Rate for such day plus the
Applicable Margin. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of and, to the extent permitted by
applicable law, overdue interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
Default Rate.
(c) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin plus the
applicable Adjusted London Interbank Offered Rate for such Interest Period;
provided that if any Euro-Dollar Loan shall, as a result of clause (1)(c) of the
definition of Interest Period, have an Interest Period of less than one month,
such Euro-Dollar Loan shall bear interest during such Interest Period at the
rate applicable to Base Rate Loans during such period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than 3 months, at intervals of 3 months after the first day
thereof. Any overdue principal of
15
<PAGE> 23
and, to the extent permitted by applicable law, overdue interest on any
Euro-Dollar Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the Default Rate.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any
Euro-Dollar Loan means for the Interest Period of such Euro-Dollar Loan, the
rate per annum determined on the basis of the rate for deposits in Dollars of
amounts equal or comparable to the principal amount of such Euro-Dollar Loan
offered for a term comparable to such Interest Period, which rate appears on the
display designated as Page "3750" of the Telerate Service (or such other page as
may replace Page 3750 of that service or such other service or services as may
be nominated by the British Banker's Association for the purpose of displaying
London Interbank Offered Rates for U.S. dollar deposits) determined as of 1:00
p.m. New York City time, 2 Euro-Dollar Business Days prior to the first day of
such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank of
the Federal Reserve System in respect of "Eurocurrency liabilities" (or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Euro-Dollar Loans is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of any Bank to United States residents). The Adjusted
London Interbank Offered Rate shall be adjusted automatically on and as of the
effective date of any change in the Euro-Dollar Reserve Percentage.
(d) The Agent shall determine each interest rate applicable to
the Loans hereunder. The Agent shall give prompt Notice to the Borrower and the
Banks by telecopy of each rate of interest so determined, and its determination
thereof shall be conclusive in the absence of manifest error.
(e) After the occurrence and during the continuance of a
Default, the principal amount of the Loans (and, to the extent permitted by
applicable law, all accrued interest thereon) may, at the election of the
Required Banks, bear interest at the Default Rate; provided, however, that
automatically, whether or not the Required Banks elect to do so, any overdue
principal of and, to the extent permitted by law, overdue interest on any Loan
shall bear interest payable on demand, for each day until paid at a rate per
annum equal to the Default Rate.
SECTION 2.06. Fees. (a) The Borrower shall pay to the Agent
for the ratable account of each Bank an unused fee equal to the product of: (i)
the aggregate of the daily average amounts of such Bank's Unused Commitment,
times (ii) a per annum percentage equal to the Applicable Unused Fee Rate. Such
unused fee shall accrue from and including the Closing Date to and including the
Termination Date. Unused fees shall be payable quarterly in arrears on the first
Unused Fee Payment Date following each Unused Fee Determination Date and on the
Termination Date; provided that
16
<PAGE> 24
should the Commitments be terminated at any time prior to the Termination Date
for any reason, the entire accrued and unpaid unused fee shall be paid on the
date of such termination. The "Applicable Unused Fee Rate" shall be determined
quarterly based upon the ratio of Consolidated Total Debt to Total
Capitalization (calculated as of the last day of each Fiscal Quarter) as
follows:
<TABLE>
<CAPTION>
Ratio of Consolidated Total Debt to Applicable
Total Capitalization Unused Fee Rate
------------------------------------ ----------------
<S> <C>
Greater than .45 .20%
Greater than .35
and equal to or less than .45 .150%
Greater than .25
and equal to or less than .35 .1250%
Less than or equal to .25 .10%
</TABLE>
The Applicable Unused Fee Rate shall be determined effective as of the date
(herein, the "Unused Fee Determination Date") which is 55 days after the last
day of the Fiscal Quarter as of the end of which the foregoing ratio is being
determined, based on the quarterly financial statements for such Fiscal Quarter,
and the Applicable Unused Fee Rate so determined shall remain effective from
such Unused Fee Determination Date until the date which is 55 days after the
last day of the Fiscal Quarter in which such Unused Fee Determination Date falls
(which latter date shall be a new Unused Fee Determination Date); provided that
(i) for the period from and including the Closing Date to but excluding the
Unused Fee Determination Date next following the Closing Date, the Applicable
Unused Fee Rate shall be .10%; (ii) in the case of any Applicable Unused Fee
Rate determined for the fourth and final Fiscal Quarter of a Fiscal Year, the
Unused Fee Determination Date shall be the date which is 110 days after the last
day of such final Fiscal Quarter and such Applicable Unused Fee Rate shall be
determined based upon the annual audited financial statements for the Fiscal
Year ended on the last day of such final Fiscal Quarter, and (iii) if on any
Unused Fee Determination Date the Borrower shall have failed to deliver to the
Banks the financial statements required to be delivered pursuant to Section
5.01(a) or Section 5.01(b) with respect to the Fiscal Year or Fiscal Quarter, as
the case may be, most recently ended prior to such Unused Fee Determination
Date, then for the period beginning on such Unused Fee Determination Date and
ending on the earlier of (A) the date on which the Borrower shall deliver to the
Banks the financial statements to be delivered pursuant to Section 5.01(b) with
respect to such Fiscal Quarter or any subsequent Fiscal Quarter, and (B) the
date on which the Borrower shall deliver to the Banks annual financial
statements required to be delivered pursuant to Section 5.01(a) with respect to
the Fiscal Year which includes such Fiscal Quarter or any subsequent Fiscal
Year, the Applicable Unused Fee Rate shall be determined as if the ratio of
Consolidated Total Debt to Total Capitalization was more than .45 at all times
during such period.
(b) The Borrower shall pay to the Agent, for the account and
sole benefit of the Agent, such fees and other amounts at such times as set
forth in the Agent's Letter Agreement.
17
<PAGE> 25
SECTION 2.07. Optional Termination or Reduction of
Commitments. The Borrower may, upon at least 3 Domestic Business Days' Notice to
the Agent, terminate at any time, or proportionately reduce from time to time by
an aggregate amount of at least $5,000,000 or any larger multiple of $1,000,000,
the Commitments; provided, however, no such termination or reduction shall be in
an amount greater than the Total Unused Commitments on the date of such
termination or reduction. If the Commitments are terminated in their entirety,
all accrued fees (as provided under Section 2.06) shall be payable on the
effective date of such termination.
SECTION 2.08. Mandatory Reduction and Termination of
Commitments. The Commitments shall terminate on the Termination Date and any
Loans then outstanding (together with accrued interest thereon) shall be due and
payable on such date.
SECTION 2.09. Optional Prepayments. (a) The Borrower may, upon
Notice provided by the Borrower to the Agent prior to 11:00 A.M. (Atlanta,
Georgia time) on the Domestic Business Day of the prepayment of a Base Rate
Borrowing, prepay any Base Rate Borrowing in whole at any time, or from time to
time in part in amounts aggregating at least $1,000,000 or any larger multiple
of $1,000,000, by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Base Rate Loans of the several
Banks included in such Base Rate Borrowing.
(b) The Borrower may, upon Notice provided by the Borrower to
the Agent prior to 11:00 A.M. (Atlanta, Georgia time) on the Euro-Dollar
Business Day of the prepayment of a Euro-Dollar Borrowing, prepay any
Euro-Dollar Borrowing in whole at any time, or from time to time in part in
amounts aggregating at least $5,000,000 or any larger multiple of $1,000,000, by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment and any and all amounts as provided under Section 8.05
in connection with such prepayment. Each such optional prepayment shall be
applied to prepay ratably the Euro-Dollar Loans of the several Banks included in
such Euro-Dollar Borrowing.
(c) Upon receipt of a notice of prepayment pursuant to this
Section, the Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.10. Mandatory Prepayments. On each date on which the
Commitments are reduced pursuant to Section 2.07 or Section 2.08, the Borrower
shall repay or prepay such principal amount of the outstanding Loans, if any
(together with interest accrued thereon and any amounts due under Section
8.05(a)), as may be necessary so that after such payment the aggregate unpaid
principal amount of the Loans does not exceed the aggregate amount of the
Commitments as then reduced. Each such payment or prepayment shall be applied to
repay or prepay ratably the Loans of the several Banks.
SECTION 2.11. General Provisions as to Payments. (a) The
Borrower shall make each payment of principal of, and interest on, the Loans and
of unused fees hereunder, not later than 11:00 A.M. (Atlanta, Georgia time) on
the date when due, in Federal or other funds immediately
18
<PAGE> 26
available in Atlanta, Georgia, to the Agent at its address referred to in
Section 9.01. The Agent will promptly distribute to each Bank its ratable share
of each such payment received by the Agent for the account of the Banks.
(b) Whenever any payment of principal of, or interest on, the
Base Rate Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(c) All payments of principal, interest and fees and all other
amounts to be made by the Borrower pursuant to this Agreement with respect to
any Loan or fee relating thereto shall be paid without deduction for, and free
from, any tax, imposts, levies, duties, deductions, or withholdings of any
nature now or at anytime hereafter imposed by any governmental authority or by
any taxing authority thereof or therein excluding in the case of each Bank,
taxes imposed on or measured by its net income, and franchise taxes imposed on
it, by the jurisdiction under the laws of which such Bank is organized or any
political subdivision thereof and, in the case of each Bank, taxes imposed on
its income, and franchise taxes imposed on it, by the jurisdiction of such
Bank's applicable Lending Office or any political subdivision thereof (all such
non-excluded taxes, imposts, levies, duties, deductions or withholdings of any
nature being "Taxes"). In the event that the Borrower is required by applicable
law to make any such withholding or deduction of Taxes with respect to any Loan
or fee or other amount, the Borrower shall pay such deduction or withholding to
the applicable taxing authority, shall promptly furnish to any Bank in respect
of which such deduction or withholding is made all receipts and other documents
evidencing such payment and shall pay to such Bank additional amounts as may be
necessary in order that the amount received by such Bank after the required
withholding or other payment shall equal the amount such Bank would have
received had no such withholding or other payment been made. If no withholding
or deduction of Taxes are payable in respect of any Loan or fee relating
thereto, the Borrower shall furnish any Bank, at such Bank's request, a
certificate from each applicable taxing authority or an opinion of counsel
acceptable to such Bank, in either case stating that such payments are exempt
from or not subject to withholding or deduction of Taxes. If the Borrower fails
to provide such original or certified copy of a receipt evidencing payment of
Taxes or certificate(s) or opinion of counsel of exemption, the Borrower hereby
agrees to compensate such Bank for, and indemnify them with respect to, the tax
consequences of the Borrower's failure to provide evidence of tax payments or
tax exemption.
In the event any Bank receives a refund of any Taxes paid by
the Borrower pursuant to this Section 2.11, it will pay to the Borrower the
amount of such refund promptly upon receipt thereof; provided, however, if at
any time thereafter it is required to return such refund, the Borrower shall
promptly repay to it the amount of such refund.
19
<PAGE> 27
Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 2.11 shall be applicable with respect to any Participant,
Assignee or other Transferee, and any calculations required by such provisions
(i) shall be made based upon the circumstances of such Participant, Assignee or
other Transferee, and (ii) constitute a continuing agreement and shall survive
the termination of this Agreement and the payment in full or cancellation of the
Notes.
SECTION 2.12. Computation of Interest and Fees. Interest on
Base Rate Loans shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding the
last day). Interest on Euro-Dollar Loans shall be computed on the basis of a
year of 360 days and paid for the actual number of days elapsed, calculated as
to each Interest Period from and including the first day thereof to but
excluding the last day thereof. Unused fees and any other fees payable hereunder
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to First Borrowing. The obligation of
each Bank to make a Loan on the occasion of the first Borrowing is subject to
the satisfaction of the conditions set forth in Section 3.02 and the following
additional conditions:
(a) receipt by the Agent from each of the parties hereto of
either (i) a duly executed counterpart of this Agreement signed by such party or
(ii) a facsimile transmission stating that such party has duly executed a
counterpart of this Agreement and sent such counterpart to the Agent;
(b) receipt by the Agent of a duly executed Note for the
account of each Bank complying with the provisions of Section 2.03;
(c) receipt by the Agent of opinions (together with any
opinions of local counsel relied on therein) of Lague, Newman & Irish, P.C. and
Buchanan Ingersoll, P.C., counsel for the Borrower, dated as of the Closing
Date, substantially in the forms of Exhibit B-1 and Exhibit B-2 hereto and
covering such additional matters relating to the transactions contemplated
hereby as the Agent or any Bank may reasonably request;
(d) receipt by the Agent of an opinion of Womble, Carlyle,
Sandridge & Rice, PLLC, special counsel for the Agent, dated as of the Closing
Date, substantially in the form of Exhibit C hereto and covering such additional
matters relating to the transactions contemplated hereby as the Agent may
reasonably request;
(e) receipt by the Agent of a certificate (the "Closing
Certificate"), dated as of the Closing Date, substantially in the form of
Exhibit D hereto, signed by the Chairman of the Borrower, to the effect that (i)
no Default has occurred and is continuing on the date of the first Borrowing and
20
<PAGE> 28
(ii) the representations and warranties of the Borrower contained in Article IV
are true on and as of the date of the first Borrowing hereunder;
(f) receipt by the Agent of all documents which the Agent or
any Bank may reasonably request relating to the existence of the Borrower, the
corporate authority for and the validity of this Agreement and the Notes, and
any other matters relevant hereto, all in form and substance satisfactory to the
Agent, including without limitation a certificate of incumbency of the Borrower
(the "Officer's Certificate"), signed by the Secretary or an Assistant Secretary
of the Borrower, substantially in the form of Exhibit E hereto, certifying as to
the names, true signatures and incumbency of the officer or officers of the
Borrower authorized to execute and deliver the Loan Documents, and certified
copies of the following items: (i) the Borrower's Certificate of Incorporation,
(ii) the Borrower's Bylaws, (iii) a certificate of the Secretary of State of the
State of Delaware as to the good standing of the Borrower as a Delaware
corporation, and (iv) the action taken by the Board of Directors of the Borrower
authorizing the Borrower's execution, delivery and performance of this
Agreement, the Notes and the other Loan Documents to which the Borrower is a
party; and
(g) receipt by the Agent of a Notice of Borrowing.
SECTION 3.02. Conditions to All Borrowings. The obligation of
each Bank to make a Loan on the occasion of each Borrowing is subject to the
satisfaction of the following conditions:
(a) receipt by the Agent of Notice of Borrowing as required by
Section 2.02;
(b) the fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of the
Borrower contained in Article IV of this Agreement shall be true on and as of
the date of such Borrowing; and
(d) the fact that, immediately after such Borrowing (i) the
aggregate outstanding principal amount of the Loans of each Bank will not exceed
the amount of its Commitment and (ii) the aggregate outstanding principal amount
of the Loans will not exceed the aggregate amount of the Commitments of all of
the Banks as of such date.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the truth and accuracy of the
facts specified in clauses (b), (c) and (d) of this Section.
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<PAGE> 29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, is duly qualified to transact business
in every jurisdiction where, by the nature of its business, such qualification
is necessary, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement, the Notes and the other Loan Documents (i) are within the Borrower's
corporate powers, (ii) have been duly authorized by all necessary corporate
action, (iii) require no action by or in respect of, or filing with, any
governmental body, agency or official, (iv) do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of incorporation or by-laws of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower or any of its Subsidiaries, and (v) do not result in the creation or
imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of the Borrower enforceable in accordance with its
terms, and the Notes and the other Loan Documents, when executed and delivered
in accordance with this Agreement, will constitute valid and binding obligations
of the Borrower enforceable in accordance with their respective terms, provided
that the enforceability hereof and thereof is subject in each case to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally.
SECTION 4.04. Financial Information. (a) The consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of December
31, 1995 and the related consolidated statements of income, shareholders' equity
and cash flows for the Fiscal Year then ended, reported on by Arthur Andersen
LLP, copies of which have been delivered to each of the Banks, and the unaudited
consolidated financial statements of the Borrower for the interim period ended
September 28, 1996, copies of which have been delivered to each of the Banks,
fairly present, in conformity with GAAP, the consolidated financial position of
the Borrower and its Consolidated Subsidiaries as of such dates and their
consolidated results of operations and cash flows for such periods stated.
(b) Since December 31, 1995 there has been no event, act,
condition or occurrence having a Material Adverse Effect.
SECTION 4.05. Litigation. (a) There is no action, suit or
proceeding pending, or to the knowledge of the Borrower threatened, against or
affecting the Borrower or any of its Subsidiaries before any court or arbitrator
or any governmental body, agency or official which could have a
22
<PAGE> 30
Material Adverse Effect or which in any manner draws into question the validity
or enforceability of, or could impair the ability of the Borrower to perform its
obligations under, this Agreement, the Notes or any of the other Loan Documents.
(b) Schedule 4.05 sets forth: (1) a true, accurate and
complete in every material respect description of the claims, defenses and
status of the Fraudulent Transfer Litigation and Products Liability Matters; and
(2) a true, accurate and complete description of the Borrower's assessment and
analysis of the merits of the claims and defenses in the Fraudulent Transfer
Litigation and Products Liability Matters, the likely outcome of the Fraudulent
Transfer Litigation and Products Liability Matters and the probable liability of
the Borrower, if any, in connection with the Fraudulent Transfer Litigation and
Products Liability Matters.
SECTION 4.06. Compliance with ERISA. (a) The Borrower and each
member of the Controlled Group have fulfilled their obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan and
are in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and have not incurred any liability to the
PBGC or a Plan under Title IV of ERISA.
(b) Neither the Borrower nor any member of the Controlled
Group is or ever has been obligated to contribute to any Multiemployer Plan.
SECTION 4.07. Taxes. There have been filed on behalf of the
Borrower and its Subsidiaries all Federal, state and local income, excise,
property and other tax returns which are required to be filed by them and all
taxes due pursuant to such returns or pursuant to any assessment received by or
on behalf of the Borrower or any Subsidiary have been paid. The charges,
accruals and reserves on the books of the Borrower and its Subsidiaries in
respect of taxes or other governmental charges are, in the opinion of the
Borrower, adequate. United States income tax returns of the Borrower and its
Subsidiaries have been examined and closed through the Fiscal Year ended
December 31, 1990.
SECTION 4.08. Subsidiaries. Each of the Borrower's
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, is duly qualified
to transact business in every jurisdiction where, by the nature of its business,
such qualification is necessary, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. The Borrower has no Subsidiaries except those
Subsidiaries listed on Schedule 4.08, which accurately sets forth each such
Subsidiary's complete name and jurisdiction of incorporation.
SECTION 4.09. Not an Investment Company. Neither the Borrower
nor any of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 4.10 Public Utility Holding Company Act. Neither the
Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an
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"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended.
SECTION 4.11. Ownership of Property; Liens. Each of the
Borrower and its Consolidated Subsidiaries has title to its properties
sufficient for the conduct of its business, and none of such property is subject
to any Lien except as permitted in Section 5.07.
SECTION 4.12. No Default. Neither the Borrower nor any of
its Consolidated Subsidiaries is in default under or with respect to any
agreement, instrument or undertaking to which it is a party or by which it or
any of its property is bound which could have or cause a Material Adverse
Effect. No Default or Event of Default has occurred and is continuing.
SECTION 4.13. Full Disclosure. All information heretofore
furnished by the Borrower to the Agent or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by the Borrower to the Agent or any
Bank will be, true, accurate and complete in every material respect or based on
reasonable estimates on the date as of which such information is stated or
certified. The Borrower has disclosed to the Banks in writing any and all facts
which could have or cause a Material Adverse Effect.
SECTION 4.14. Environmental Matters. (a) Neither the Borrower
nor any Subsidiary is subject to any Environmental Liability which could have or
cause a Material Adverse Effect and neither the Borrower nor any Subsidiary has
been designated as a potentially responsible party under CERCLA or under any
state statute similar to CERCLA. None of the Properties has been identified on
any current or proposed (i) National Priorities List under 40 C.F.R. ss. 300,
(ii) CERCLIS list or (iii) any list arising from a state statute similar to
CERCLA.
(b) No Hazardous Materials have been or are being used,
produced, manufactured, processed, treated, recycled, generated, stored,
disposed of, managed or otherwise handled at, or shipped or transported to or
from the Properties or are otherwise present at, on, in or under the Properties,
or, to the best of the knowledge of the Borrower, at or from any adjacent site
or facility, except for Hazardous Materials, such as cleaning solvents,
pesticides, foundry residuals, plating residuals, grinding residuals and other
materials used, produced, manufactured, processed, treated, recycled, generated,
stored, disposed of, and managed or otherwise handled in the ordinary course of
business in compliance with all applicable Environmental Requirements.
(c) The Borrower, and each of its Subsidiaries and Affiliates,
has procured all Environmental Authorizations necessary for the conduct of its
business, and is in compliance with all Environmental Requirements in connection
with the operation of the Properties and the Borrower's, and each of its
Subsidiarys' and Affiliates', respective businesses.
SECTION 4.15. Compliance with Laws. The Borrower and each
Subsidiary is in compliance with all applicable laws, including, without
limitation, all Environmental Laws, except
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where any failure to comply with any such laws would not, alone or in the
aggregate, have a Material Adverse Effect.
SECTION 4.16. Capital Stock. All Capital Stock, debentures,
bonds, notes and all other securities of the Borrower and its Subsidiaries
presently issued and outstanding are validly and properly issued in accordance
with all applicable laws, including, but not limited to, the "Blue Sky" laws of
all applicable states and the federal securities laws. The issued shares of
Capital Stock of the Borrower's Wholly Owned Subsidiaries are owned by the
Borrower free and clear of any Lien or adverse claim. At least a majority of the
issued shares of capital stock of each of the Borrower's other Subsidiaries
(other than Wholly Owned Subsidiaries) is owned by the Borrower free and clear
of any Lien or adverse claim.
SECTION 4.17. Margin Stock. Neither the Borrower nor any of
its Subsidiaries is engaged principally, or as one of its important activities,
in the business of purchasing or carrying any Margin Stock, and no part of the
proceeds of any Loan will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any Margin
Stock, or be used for any purpose which violates, or which is inconsistent with,
the provisions of Regulation X.
SECTION 4.18. Insolvency. After giving effect to the execution
and delivery of the Loan Documents and the making of the Loans under this
Agreement, the Borrower will not be "insolvent," within the meaning of such term
as used in O.C.G.A. ss. 18-2-22 or as defined in ss. 101 of Title 11 of the
United States Code or Section 2 of the Uniform Fraudulent Transfer Act, or any
other applicable state law pertaining to fraudulent transfers, as each may be
amended from time to time, or be unable to pay its debts generally as such debts
become due, or have an unreasonably small capital to engage in any business or
transaction, whether current or contemplated.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any
Commitment hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to
each of the Banks:
(a) as soon as available and in any event within 100 days
after the end of each Fiscal Year, a consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries as of the end of such Fiscal Year and the
related consolidated statements of income, shareholders' equity and cash flows
for such Fiscal Year, setting forth in each case in comparative form the figures
for the previous fiscal year, all certified by Arthur Andersen LLP or other
independent public accountants of nationally recognized standing, with such
certification to be free of exceptions and qualifications not acceptable to the
Required Banks;
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(b) as soon as available and in any event within 50 days after
the end of each of the first 3 Fiscal Quarters of each Fiscal Year, a
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
of the end of such Fiscal Quarter and the related statement of income and
statement of cash flows for such Fiscal Quarter and for the portion of the
Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case
in comparative form the figures for the corresponding Fiscal Quarter and the
corresponding portion of the previous Fiscal Year, all certified (subject to
normal year-end adjustments) as to fairness of presentation, GAAP and
consistency by the chief financial officer or the chief accounting officer of
the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate,
substantially in the form of Exhibit F (a "Compliance Certificate"), of the
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections 5.03
through 5.05, inclusive, 5.07, 5.10 and 5.19 on the date of such financial
statements and (ii) stating whether any Default exists on the date of such
certificate and, if any Default then exists, setting forth the details thereof
and the action which the Borrower is taking or proposes to take with respect
thereto;
(d) simultaneously with the delivery of each set of annual
financial statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements to the effect
that nothing has come to their attention to cause them to believe that any
Default existed on the date of such financial statements;
(e) within 5 Domestic Business Days after the Borrower becomes
aware of the occurrence of any Default, a certificate of the chief financial
officer or the chief accounting officer of the Borrower setting forth the
details thereof and the action which the Borrower is taking or proposes to take
with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of
the Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto, any registration
statements on Form S-8 or its equivalent and reports made on Forms 3, 4 or 5
under Section 16 of the Securities Exchange Act of 1934, as amended) and annual,
quarterly, current or monthly reports which the Borrower shall have filed with
the Securities and Exchange Commission;
(h) if and when the Borrower or any member of the Controlled
Group (i) gives or is required to give notice to the PBGC of any "reportable
event" (as defined in Section 4043 of ERISA) with respect to any Plan which
might constitute grounds for a termination of such Plan under Title IV of ERISA,
or knows that the plan administrator of any Plan has given or is required to
give notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives notice
of complete or partial withdrawal liability under Title IV
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of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate or appoint a trustee to administer
any Plan, a copy of such notice;
(i) promptly upon the occurrence of any adverse determination,
any settlement offer or any material change or development in any action,
proceeding, claim or other matter included in the Fraudulent Transfer Litigation
and Products Liability Matters, a written report of the chief executive officer
or the chief financial officer setting forth in reasonable detail a description
of such determination, settlement offer, change or development;
(j) promptly after the Borrower knows of the commencement
thereof, notice of any litigation, dispute or proceeding involving a claim
against the Borrower and/or any Subsidiary for $500,000 or more in excess of
amounts covered in full by applicable insurance; and
(k) from time to time such additional information regarding
the Fraudulent Transfer Litigation and Products Liability Matters, and the
financial position or business of the Borrower and its Subsidiaries as the
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Inspection of Property, Books and Records. The
Borrower will (i) keep, and will cause each Subsidiary to keep, proper books of
record and account in which full, true and correct entries in conformity with
GAAP shall be made of all dealings and transactions in relation to its business
and activities; and (ii) permit, and will cause each Subsidiary to permit,
representatives of any Bank at such Bank's expense prior to the occurrence of an
Event of Default and at the Borrower's expense after the occurrence of an Event
of Default to visit and inspect any of their respective properties, to examine
any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants; provided, however: (1) prior to the occurrence
of an Event of Default: (i) representatives of a Bank shall not be entitled to
make abstracts from such books and records; and (ii) representatives of a Bank
shall provide the Borrower with reasonable Notice prior to any such visit or
inspection by such Bank; and (2) any information made available by the Borrower
to a Bank which information is clearly indicated to be confidential information
shall be kept confidential in accordance with Section 9.08. The Borrower agrees
to cooperate and assist in such visits and inspections, in each case at such
reasonable times and as often as may reasonably be desired.
SECTION 5.03. Ratio of Consolidated Total Debt to Total
Capitalization. The ratio of Consolidated Total Debt to Total Capitalization
will at all times be less than 0.55 to 1.00.
SECTION 5.04. Interest Coverage. At the end of each Fiscal
Quarter, commencing with the Fiscal Quarter ending December 31, 1996, the
Interest Coverage Ratio shall at all times be greater than 2.50 to 1.00.
SECTION 5.05. Loans or Advances. Neither the Borrower nor any
of its Subsidiaries shall make loans or advances to any Person except: (i) loans
or advances to employees not exceeding One Million and No/100 Dollars
($1,000,000) in the aggregate outstanding made in the ordinary course of
business and consistently with practices existing on December 31, 1995; (ii)
deposits
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required by government agencies or public utilities; and (iii) loans or advances
to Wholly Owned Subsidiaries; provided that after giving effect to the making of
any loans, advances or deposits permitted by clause (i), (ii) or (iii) of this
Section, no Default shall have occurred and be continuing.
SECTION 5.06. Investments. Neither the Borrower nor any of its
Subsidiaries shall make Investments in any Person except as permitted by Section
5.05 and except Investments in (i) direct obligations of the United States
Government maturing within one year, (ii) certificates of deposit issued by a
commercial bank whose long-term certificates of deposit are rated at least AA or
the equivalent thereof by Standard & Poor's Corporation and Aa or the equivalent
thereof by Moody's Investors Service, Inc., (iii) commercial paper rated A-1 or
the equivalent thereof by Standard & Poor's Corporation or P-1 or the equivalent
thereof by Moody's Investors Service, Inc. and in either case maturing within 6
months after the date of such Investment, (iv) tender bonds the payment of the
principal of and interest on which is fully supported by a letter of credit
issued by a United States bank whose long-term certificates of deposit are rated
at least AA or the equivalent thereof by Standard & Poor's Corporation and Aa or
the equivalent thereof by Moody's Investors Service, Inc.; and/or (v) Permitted
Acquisitions.
SECTION 5.07. Negative Pledge. Neither the Borrower nor any
Consolidated Subsidiary will create, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal amount not
exceeding $8,700,000;
(b) any Lien existing on any asset of any corporation at the
time such corporation becomes a Consolidated Subsidiary and not created in
contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed
for the purpose of financing all or any part of the cost of acquiring or
constructing such asset, provided that: (1) such Lien attaches to such asset
concurrently with or within 18 months after the acquisition or completion of
construction thereof; (2) no proceeds of any Loan are used to finance all or any
part of the cost of acquiring or constructing such asset; (3) the principal
amount of any Debt referred to in this Section 5.07(c) shall not exceed 80% of
the greater of (x) the cost of the newly acquired asset covered thereby to the
Borrower or any of its Subsidiaries acquiring the same or (y) the fair market
value of such asset, as determined by an independent appraiser of recognized
standing reasonably acceptable to the Agent; and (4) each such Lien shall be
confined only to the asset financed by the Debt referred to in this Section
5.07(c) and, if required by the terms of the instrument originally creating such
Lien, other property which is an improvement to, or which is acquired for
specific use in connection with, or which is real property being improved by,
such asset;
(d) any Lien on any asset of any corporation existing at the
time such corporation is merged or consolidated with or into the Borrower or a
Consolidated Subsidiary and not created in contemplation of such event;
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(e) any Lien existing on any asset prior to the acquisition
thereof by the Borrower or a Consolidated Subsidiary and not created in
contemplation of such acquisition;
(f) Liens securing Debt owing by any Subsidiary to the
Borrower;
(g) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any of the
foregoing clauses of this Section, provided that (i) such Debt is not secured by
any additional assets, and (ii) the amount of such Debt secured by any such Lien
is not increased;
(h) Liens incidental to the conduct of its business or the
ownership of its assets which (i) do not secure Debt and (ii) do not in the
aggregate materially detract from the value of its assets or materially impair
the use thereof in the operation of its business;
(i) any Lien on Margin Stock; and
(j) Liens not otherwise permitted by the foregoing clauses of
this Section securing Debt (other than indebtedness represented by the Notes) in
an aggregate principal amount at any time outstanding not to exceed 5% of
Consolidated Net Worth.
SECTION 5.08. Maintenance of Existence. The Borrower shall,
and shall cause each Subsidiary to, maintain its corporate existence and carry
on its business in substantially the same manner and in substantially the same
fields as such business is now carried on and maintained.
SECTION 5.09. Dissolution. Neither the Borrower nor any of its
Subsidiaries shall suffer or permit dissolution or liquidation either in whole
or in part or redeem or retire any shares of its own stock or that of any
Subsidiary, except through corporate reorganization to the extent permitted by
Section 5.10.
SECTION 5.10. Consolidations, Mergers and Sales of Assets. The
Borrower will not, nor will it permit any Subsidiary to, consolidate or merge
with or into, or sell, lease or otherwise transfer all or any substantial part
of its assets to, any other Person, or discontinue or eliminate any business
line or segment, provided that (a) the Borrower may merge with another Person
(including, without limitation, a Subsidiary of the Borrower) if (i) such Person
was organized under the laws of the United States of America or one of its
states, (ii) the Borrower is the corporation surviving such merger and (iii)
immediately after giving effect to such merger, no Default shall have occurred
and be continuing, (b) Subsidiaries of the Borrower may merge with one another,
and (c) the foregoing limitation on the sale, lease or other transfer of assets
and on the discontinuation or elimination of a business line or segment shall
not prohibit, during any Fiscal Quarter, a transfer of assets or the
discontinuance or elimination of a business line or segment (in a single
transaction or in a series of related transactions) unless the aggregate assets
to be so transferred or utilized in a business line or segment to be so
discontinued, when combined with all other assets transferred, and all other
assets utilized in all other business lines or segments discontinued, during
such Fiscal Quarter and the immediately preceding seven Fiscal Quarters, either
(x) constituted more than 5% of Consolidated
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Total Assets at the end of the eighth Fiscal Quarter immediately preceding such
Fiscal Quarter, or (y) contributed more than 5% of Consolidated Operating
Profits during the 8 consecutive Fiscal Quarters immediately preceding such
Fiscal Quarter.
SECTION 5.11. Use of Proceeds. No portion of the proceeds of
the Loans will be used by the Borrower or any Subsidiary (i) in connection with,
either directly or indirectly, any tender offer for, or other acquisition of,
capital stock of any corporation with a view towards obtaining control of such
other corporation (other than in connection with a tender offer for, or other
acquisition of, capital stock that constitutes a Permitted Acquisition), (ii)
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock, or (iii) for any purpose
in violation of any applicable law or regulation.
SECTION 5.12. Compliance with Laws; Payment of Taxes. The
Borrower will, and will cause each of its Subsidiaries and each member of the
Controlled Group to, comply with applicable laws (including but not limited to
ERISA), regulations and similar requirements of governmental authorities
(including but not limited to PBGC), except where the necessity of such
compliance is being contested in good faith through appropriate proceedings
diligently pursued. The Borrower will, and will cause each of its Subsidiaries
to, pay promptly when due all taxes, assessments, governmental charges, claims
for labor, supplies, rent and other obligations which, if unpaid, might become a
lien against the property of the Borrower or any Subsidiary, except liabilities
being contested in good faith by appropriate proceedings diligently pursued and
against which, if requested by the Agent, the Borrower shall have set up
reserves in accordance with GAAP.
SECTION 5.13. Insurance. The Borrower will maintain, and will
cause each of its Subsidiaries to maintain (either in the name of the Borrower
or in such Subsidiary's own name), with financially sound and reputable
insurance companies, insurance on all its Property in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies of established repute engaged in the same or similar business.
SECTION 5.14. Change in Fiscal Year. The Borrower will not
change its Fiscal Year without the consent of the Required Banks.
SECTION 5.15. Maintenance of Property. The Borrower shall, and
shall cause each Subsidiary to, maintain all of its properties and assets in
good condition, repair and working order, ordinary wear and tear excepted.
SECTION 5.16. Environmental Notices. The Borrower shall
furnish to the Banks and the Agent prompt written Notice of all Environmental
Liabilities, pending, threatened or anticipated Environmental Proceedings,
Environmental Notices, Environmental Judgments and Orders, and Environmental
Releases at, on, in, under or in any way affecting the Properties or any
adjacent property, and all facts, events, or conditions that could lead to any
of the foregoing.
SECTION 5.17. Environmental Matters. The Borrower and its
Subsidiaries will not, and will not permit any Third Party to, use, produce,
manufacture, process, treat, recycle, generate,
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store, dispose of, manage at, or otherwise handle or ship or transport to or
from the Properties any Hazardous Materials except for Hazardous Materials such
as cleaning solvents, pesticides, foundry residuals, plating residuals, grinding
residuals and other similar materials used, produced, manufactured, processed,
treated, recycled, generated, stored, disposed, managed or otherwise handled in
the ordinary course of business in compliance with all applicable Environmental
Requirements.
SECTION 5.18. Environmental Release. The Borrower agrees that
upon the occurrence of an Environmental Release at or on any of the Properties
it will act immediately to investigate the extent of, and to take appropriate
remedial action to eliminate, such Environmental Release, whether or not ordered
or otherwise directed to do so by any Environmental Authority.
SECTION 5.19. Debt. No Subsidiary of the Borrower shall at any
time incur, create, assume, or permit to exist any Debt except: (1) Debt owing
to the Borrower or another Subsidiary of the Borrower; (2) Debt outstanding on
the date of this Agreement described on Schedule 5.19; (3) Debt incurred or
assumed for the purpose of financing all or any part of the cost of acquiring or
constructing an asset of such Subsidiary and secured by a Lien permitted under
Section 5.07(c); (4) Debt secured by a Lien permitted under Section 5.07(j); and
(5) Debt, in addition to Debt permitted under clauses (1), (2), (3) and (4) of
this Section 5.19, provided that the aggregate outstanding principal amount of
Debt of all Subsidiaries of the Borrower incurred under this clause (5) shall
not at any time exceed five percent (5%) of Consolidated Net Worth; provided,
further, the aggregate outstanding principal amount of Debt of all Subsidiaries
of the Borrower permitted by the foregoing clauses (2), (3), (4) and (5) of this
Section 5.19 shall not at any time exceed twenty percent (20%) of Consolidated
Net Worth.
SECTION 5.20. Transactions with Affiliates. Neither the
Borrower nor any of its Subsidiaries shall enter into, or be a party to, any
transaction with any Affiliate of the Borrower or such Subsidiary (which
Affiliate is not the Borrower or a Subsidiary), except as permitted by law and
in the ordinary course of business and pursuant to reasonable terms which are
fully disclosed to the Agent and to the Banks, consented to in writing by the
Required Banks, and are no less favorable to Borrower or such Subsidiary than
would be obtained in a comparable arm's length transaction with a Person which
is not an Affiliate.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of
any Loan or shall fail to pay any interest on any Loan within five Domestic
Business Days after such interest shall become due, or shall fail to pay any fee
or other amount payable hereunder within five Domestic Business Days after such
fee or other amount becomes due; or
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(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.01(i), 5.02(ii), 5.03 to 5.11, inclusive, or Section
5.14, 5.19 or 5.20; or
(c) the Borrower shall fail to observe or perform any covenant
or agreement contained or incorporated by reference in this Agreement (other
than those covered by clause (a) or (b) above) for thirty days after the earlier
of (i) the first day on which the Borrower has knowledge of such failure or (ii)
written Notice thereof has been given to the Borrower by the Agent at the
request of any Bank; or
(d) any representation, warranty, certification or statement
made or deemed made by the Borrower in Article IV of this Agreement or in any
certificate, financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect or misleading in any material
respect when made (or deemed made); or
(e) the Borrower or any Subsidiary shall fail to make any
payment in respect of Debt outstanding (other than the Notes) in an aggregate
principal amount in excess of $5,000,000 when due or within any applicable grace
period; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of Debt outstanding of the Borrower or any
Subsidiary in an aggregate principal amount in excess of $5,000,000 or the
mandatory prepayment or purchase of such Debt by the Borrower (or its designee)
or such Subsidiary (or its designee) prior to the scheduled maturity thereof, or
enables (or, with the giving of notice or lapse of time or both, would enable)
the holders of such Debt or any Person acting on such holders' behalf to
accelerate the maturity thereof or require the mandatory prepayment or purchase
thereof prior to the scheduled maturity thereof, without regard to whether such
holders or other Person shall have exercised or waived their right to do so; or
(g) the Borrower or any Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally, or shall admit in writing its
inability, to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect; or
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(i) the Borrower or any member of the Controlled Group shall
fail to pay when due any material amount which it shall have become liable to
pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans shall be filed under Title IV of ERISA by the
Borrower, any member of the Controlled Group, any plan administrator or any
combination of the foregoing or the PBGC shall institute proceedings under Title
IV of ERISA to terminate or to cause a trustee to be appointed to administer any
such Plan or Plans or a proceeding shall be instituted by a fiduciary of any
such Plan or Plans to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any such Plan or Plans must be terminated; or the
Borrower or any other member of the Controlled Group shall enter into,
contribute or be obligated to contribute to, terminate or incur any withdrawal
liability with respect to, a Multiemployer Plan; or
(j) one or more judgments or orders for the payment of money
in an aggregate amount in excess of $500,000 shall be rendered against the
Borrower or any Subsidiary and such judgment or order shall continue unsatisfied
and unstayed for a period of 30 days; or
(k) a federal tax lien shall be filed against the Borrower
under Section 6323 of the Code or a lien of the PBGC shall be filed against the
Borrower or any Subsidiary under Section 4068 of ERISA and in either case such
lien shall remain undischarged for a period of 25 days after the date of filing;
or
(l) (i) any Person or two or more Persons acting in concert
shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange Act of
1934) of 20% or more of the outstanding shares of the voting stock of the
Borrower; or (ii) as of any date a majority of the Board of Directors of the
Borrower consists of individuals who were not either (A) directors of the
Borrower as of the corresponding date of the previous year, (B) selected or
nominated to become directors by the Board of Directors of the Borrower of which
a majority consisted of individuals described in clause (A), or (C) selected or
nominated to become directors by the Board of Directors of the Borrower of which
a majority consisted of individuals described in clause (A) and individuals
described in clause (B);
then, and in every such event, the Agent shall (i) if requested by the Required
Banks, by Notice to the Borrower terminate the Commitments and they shall
thereupon terminate, and (ii) if requested by the Required Banks, by Notice to
the Borrower declare the Notes (together with accrued interest thereon) and all
other amounts payable hereunder and under the other Loan Documents to be, and
the Notes (together will all accrued interest thereon) and all other amounts
payable hereunder and under the other Loan Documents shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower; provided that if
any Event of Default specified in clause (g) or (h) above occurs with respect to
the Borrower, without any notice to the Borrower or any other act by the Agent
or the Banks, the Commitments shall thereupon automatically terminate and the
Notes (together with accrued interest thereon) and all other amounts payable
hereunder and under the other Loan Documents shall automatically become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of
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which are hereby waived by the Borrower. Notwithstanding the foregoing, the
Agent shall have available to it all other remedies at law or equity, and shall
exercise any one or all of them at the request of the Required Banks.
SECTION 6.02. Notice of Default. The Agent shall give Notice
to the Borrower of any Default under Section 6.01(c) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment, Powers and Immunities. Each Bank
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Agent by the terms hereof and thereof, together
with such other powers as are reasonably incidental thereto. The Agent: (a)
shall have no duties or responsibilities except as expressly set forth in this
Agreement and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee for any Bank; (b) shall not be
responsible to the Banks for any recitals, statements, representations or
warranties contained in this Agreement or any other Loan Document, or in any
certificate or other document referred to or provided for in, or received by any
Bank under, this Agreement or any other Loan Document, or for the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or any other document referred to or provided for herein
or therein or for any failure by the Borrower to perform any of its obligations
hereunder or thereunder; (c) shall not be required to initiate or conduct any
litigation or collection proceedings hereunder or under any other Loan Document
except to the extent requested by the Required Banks, and then only on terms and
conditions satisfactory to the Agent, and (d) shall not be responsible for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document or any other document or instrument referred to or provided for herein
or therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care. The
provisions of this Article VII are solely for the benefit of the Agent and the
Banks, and the Borrower shall not have any rights as a third party beneficiary
of any of the provisions hereof. In performing its functions and duties under
this Agreement and under the other Loan Documents, the Agent shall act solely as
agent of the Banks and does not assume and shall not be deemed to have assumed
any obligation towards or relationship of agency or trust with or for the
Borrower. The duties of the Agent shall be ministerial and administrative in
nature, and the Agent shall not have by reason of this Agreement or any other
Loan Document a fiduciary relationship in respect of any Bank.
SECTION 7.02. Reliance by Agent. The Agent shall be entitled
to rely upon any certification, notice or other communication (including any
thereof by telephone, telefax, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper Person
or Persons, and upon advice and statements of legal counsel, independent
accountants
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or other experts selected by the Agent. As to any matters not expressly provided
for by this Agreement or any other Loan Document, the Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and
thereunder in accordance with instructions signed by the Required Banks, and
such instructions of the Required Banks in any action taken or failure to act
pursuant thereto shall be binding on all of the Banks.
SECTION 7.03. Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default or an Event of Default (other than the
non-payment of principal of or interest on the Loans) unless the Agent has
received Notice from a Bank or the Borrower specifying such Default or Event of
Default and stating that such Notice is a "Notice of Default". In the event that
the Agent receives such a Notice of the occurrence of a Default or an Event of
Default, the Agent shall give prompt Notice thereof to the Banks. The Agent
shall give each Bank prompt Notice of each non-payment of principal of or
interest on the Loans, whether or not it has received any notice of the
occurrence of such non-payment. The Agent shall (subject to Section 9.05) take
such action with respect to such Default or Event of Default as shall be
directed by the Required Banks, provided that, unless and until the Agent shall
have received such directions, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Banks.
SECTION 7.04. Rights of Agent and Its Affiliates as a Bank.
With respect to any Loan made by Wachovia or an Affiliate of Wachovia, such
Affiliate and Wachovia in their capacity as a Bank hereunder shall have the same
rights and powers hereunder as any other Bank and may exercise the same as
though it were not an Affiliate of Wachovia (or in Wachovia's case, acting as
the Agent), and the term "Bank" or "Banks" shall, unless the context otherwise
indicates, include such Affiliate of Wachovia or Wachovia in its individual
capacity. Such Affiliate and Wachovia may (without having to account therefor to
any Bank) accept deposits from, lend money to and generally engage in any kind
of banking, trust or other business with the Borrower (and any of its
Affiliates) as if they were not an Affiliate of the Agent or the Agent,
respectively; and such Affiliate and Wachovia may accept fees and other
consideration from the Borrower (in addition to any agency fees and arrangement
fees heretofore agreed to between the Borrower and Wachovia) for services in
connection with this Agreement or any other Loan Document or otherwise without
having to account for the same to the Banks.
SECTION 7.05. Indemnification. Each Bank severally agrees to
indemnify the Agent, to the extent the Agent shall not have been reimbursed by
the Borrower, ratably in accordance with its Commitment, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, counsel fees and disbursements)
or disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Agreement or any other Loan Document or any other documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby (excluding, unless an Event of Default has occurred and is continuing,
the normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or any such other documents; provided, however, that no Bank shall be
liable for any of the foregoing to the extent they arise from the gross
negligence
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or willful misconduct of the Agent. If any indemnity furnished to the Agent for
any purpose shall, in the opinion of the Agent, be insufficient or become
impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished.
SECTION 7.06. CONSEQUENTIAL DAMAGES. THE AGENT SHALL NOT BE
RESPONSIBLE OR LIABLE TO ANY BANK, THE BORROWER OR ANY OTHER PERSON OR ENTITY
FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
SECTION 7.07. Payee of Note Treated as Owner. The Agent may
deem and treat the payee of any Note as the owner thereof for all purposes
hereof unless and until a written Notice of the assignment or transfer thereof
shall have been filed with the Agent and the provisions of Section 9.07(c) have
been satisfied. Any requests, authority or consent of any Person who at the time
of making such request or giving such authority or consent is the holder of any
Note shall be conclusive and binding on any subsequent holder, transferee or
assignee of that Note or of any Note or Notes issued in exchange therefor or
replacement thereof.
SECTION 7.08. Non-Reliance on Agent and Other Banks. Each Bank
agrees that it has, independently and without reliance on the Agent or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own credit analysis of the Borrower and decision to enter into this
Agreement and that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. The Agent shall not be required to keep itself (or any Bank) informed
as to the performance or observance by the Borrower of this Agreement or any of
the other Loan Documents or any other document referred to or provided for
herein or therein or to inspect the properties or books of the Borrower or any
other Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent hereunder or under
the other Loan Documents, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the affairs,
financial condition or business of the Borrower or any other Person (or any of
their Affiliates) which may come into the possession of the Agent.
SECTION 7.09. Failure to Act. Except for action expressly
required of the Agent hereunder or under the other Loan Documents, the Agent
shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its satisfaction by
the Banks of their indemnification obligations under Section 7.05 against any
and all liability and expense which may be incurred by the Agent by reason of
taking, continuing to take, or failing to take any such action.
SECTION 7.10. Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving Notice
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thereof to the Banks and the Borrower and the Agent may be removed at any time
with or without cause by the Required Banks. Upon any such resignation or
removal, the Required Banks shall have the right to appoint a successor Agent.
If no successor Agent shall have been so appointed by the Required Banks and
shall have accepted such appointment within 30 days after the retiring Agent's
notice of resignation or the Required Banks' removal of the retiring Agent, then
the retiring Agent may, on behalf of the Banks, appoint a successor Agent. Any
successor Agent shall be a bank which has a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article VII shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent hereunder.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01. Basis for Determining Interest Rate Inadequate
or Unfair. If on or prior to the first day of any Interest Period:
(a) the Agent determines that deposits in Dollars (in the
applicable amounts) are not being offered in the relevant market for such
Interest Period, or
(b) the Required Banks advise the Agent that the London
Interbank Offered Rate as determined by the Agent will not adequately and fairly
reflect the cost to such Banks of funding the Euro-Dollar Loans for such
Interest Period,
the Agent shall forthwith give Notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
Euro-Dollar Loans shall be suspended. Unless the Borrower notifies the Agent at
least 1 Domestic Business Day before the date of any Borrowing of a Euro-Dollar
Loan for which a Notice of Borrowing has previously been given that it elects
not to borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.
SECTION 8.02. Illegality. If, after the date hereof, the
adoption of any applicable law, rule or regulation, or any change in any
existing or future law, rule or regulation, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof (any
such authority, bank or agency being referred to as an "Authority" and any such
event being referred to as a "Change of Law"), or compliance by any Bank (or its
Lending Office) with any request or directive (whether or not having the force
of law) of any Authority shall make it unlawful or impossible for any Bank (or
its Lending Office) to make, maintain or fund its Euro-Dollar Loans and such
Bank shall so notify the Agent, the Agent shall forthwith give Notice thereof to
the other Banks and the Borrower, whereupon until such Bank notifies the
Borrower and the Agent that the circumstances giving rise to such
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suspension no longer exist, the obligation of such Bank to make Euro-Dollar
Loans shall be suspended. Before giving any Notice to the Agent pursuant to this
Section, such Bank shall designate a different Lending Office if such
designation will avoid the need for giving such Notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank
shall determine that it may not lawfully continue to maintain and fund any of
its outstanding Euro-Dollar Loans to maturity and shall so specify in such
Notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each Euro-Dollar Loan of such Bank, together with accrued
interest thereon and any amount due such Bank pursuant to Section 8.05(a).
Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall
borrow a Base Rate Loan in an equal principal amount from such Bank (on which
interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate
Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If after
the date hereof, a Change of Law or compliance by any Bank (or its Lending
Office) with any request or directive (whether or not having the force of law)
of any Authority:
(i) shall subject any Bank (or its Lending Office)
to any tax, duty or other charge with respect to its
Euro-Dollar Loans, its Notes or its obligation to make
Euro-Dollar Loans, or shall change the basis of taxation of
payments to any Bank (or its Lending Office) of the principal
of or interest on its Euro-Dollar Loans or any other amounts
due under this Agreement in respect of its Euro-Dollar Loans
or its obligation to make Euro-Dollar Loans (except for
changes in the rate of tax on the overall net income of such
Bank or its Lending Office imposed by the jurisdiction in
which such Bank's principal executive office or Lending Office
is located); or
(ii) shall impose, modify or deem applicable any
reserve, special deposit or similar requirement (including,
without limitation, any such requirement imposed by the Board
of Governors of the Federal Reserve System, but excluding with
respect to any Euro-Dollar Loan any such requirement included
in an applicable Euro-Dollar Reserve Percentage) against
assets of, deposits with or for the account of, or credit
extended by, any Bank (or its Lending Office); or
(iii) shall impose on any Bank (or its Lending
Office) or on the London interbank market any other condition
affecting its Euro-Dollar Loans, its Notes or its obligation
to make Euro-Dollar Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Euro-Dollar Loan, or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction.
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(b) If any Bank shall have determined that after the date
hereof the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any existing or future law, rule or regulation, or
any change in the interpretation or administration thereof, or compliance by any
Bank (or its Lending Office) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any Authority, has or would
have the effect of reducing the rate of return on such Bank's capital as a
consequence of its obligations hereunder to a level below that which such Bank
could have achieved but for such adoption, change or compliance (taking into
consideration such Bank's policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time, within 15
days after demand by such Bank, the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent
of any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
(d) The provisions of this Section 8.03 shall be applicable
with respect to any Participant, Assignee or other Transferee, and any
calculations required by such provisions shall be made based upon the
circumstances of such Participant, Assignee or other Transferee.
SECTION 8.04. Base Rate Loans Substituted for Affected
Euro-Dollar Loans. If (i) the obligation of any Bank to make or maintain
Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank
has demanded compensation under Section 8.03, and the Borrower shall, by at
least 5 Euro-Dollar Business Days' prior notice to such Bank through the Agent,
have elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank as
Euro-Dollar Loans shall be made instead as Base Rate Loans (in all cases
interest and principal on such Loans shall be payable contemporaneously with the
related Euro-Dollar Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay such Euro-Dollar
Loans shall be applied to repay its Base Rate Loans instead.
In the event that the Borrower shall elect that the provisions of this Section
shall apply to any Bank, the Borrower shall remain liable for, and shall pay to
such Bank as provided herein, all amounts due such Bank under Section 8.03 in
respect of the period preceding the date of conversion of such Bank's Loans
resulting from the Borrower's election.
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SECTION 8.05. Compensation. Upon the request of any Bank,
delivered to the Borrower and the Agent, the Borrower shall pay to such Bank
such amount or amounts as shall compensate such Bank for any loss, cost or
expense incurred by such Bank as a result of:
(a) any payment or prepayment (pursuant to Section 2.09,
Section 2.10, Section 8.02 or otherwise) of a Euro-Dollar Loan on a date other
than the last day of an Interest Period for such Euro-Dollar Loan;
(b) any failure by the Borrower to prepay a Euro-Dollar Loan
on the date for such prepayment specified in the relevant Notice of prepayment
hereunder; or
(c) any failure by the Borrower to borrow a Euro-Dollar Loan
on the date for the Euro-Dollar Borrowing of which such Euro-Dollar Loan is a
part specified in the applicable Notice of Borrowing delivered pursuant to
Section 2.02;
such compensation to include, without limitation, an amount equal to the excess,
if any, of (x) the amount of interest which would have accrued on the amount so
paid or prepaid or not prepaid or borrowed for the period from the date of such
payment, prepayment or failure to prepay or borrow to the last day of the then
current Interest Period for such Euro-Dollar Loan (or, in the case of a failure
to prepay or borrow, the Interest Period for such Euro-Dollar Loan which would
have commenced on the date of such failure to prepay or borrow) at the
applicable rate of interest for such Euro-Dollar Loan provided for herein over
(y) the amount of interest (as reasonably determined by such Bank) such Bank
would have paid on deposits in Dollars of comparable amounts having terms
comparable to such period placed with it by leading banks in the London
interbank market.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
transmission or similar writing) and shall be given to such party at its address
or telecopy number set forth on the signature pages hereof or such other address
or telecopy number as such party may hereafter specify for the purpose by Notice
to each other party. Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopy number specified in this Section and the telecopy machine used by the
sender provides a written confirmation that such telecopy has been so
transmitted or receipt of such telecopy transmission is otherwise confirmed,
(ii) if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid, and (iii) if
given by any other means, when delivered at the address specified in this
Section; provided that Notices to the Agent under Article II or Article VIII
shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or
any Bank in exercising any right, power or privilege hereunder or under any Note
or other Loan Document shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further
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exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes; Indemnification.
(a) The Borrower shall pay (i) all out-of-pocket expenses of the Agent,
including fees and disbursements of special counsel for the Banks and the Agent,
in connection with the preparation of this Agreement and the other Loan
Documents, any waiver or consent hereunder or thereunder or any amendment hereof
or thereof or any Default or alleged Default hereunder or thereunder and (ii) if
a Default occurs, all out-of-pocket expenses incurred by the Agent or any Bank,
including fees and disbursements of counsel, in connection with such Default and
collection and other enforcement proceedings resulting therefrom, including
out-of-pocket expenses incurred in enforcing this Agreement and the other Loan
Documents.
(b) The Borrower shall indemnify the Agent and each Bank
against any transfer taxes, documentary taxes, assessments or charges made by
any Authority by reason of the execution and delivery of this Agreement or the
other Loan Documents.
(c) The Borrower shall indemnify the Agent, the Banks and each
Affiliate thereof and their respective directors, officers, employees and agents
from, and hold each of them harmless against, any and all losses, liabilities,
claims or damages to which any of them may become subject, insofar as such
losses, liabilities, claims or damages arise out of or result from any actual or
proposed use by the Borrower of the proceeds of any extension of credit by any
Bank hereunder or breach by the Borrower of this Agreement or any other Loan
Document or from investigation, litigation (including, without limitation, any
actions taken by the Agent or any of the Banks to enforce this Agreement or any
of the other Loan Documents) or other proceeding (including, without limitation,
any threatened investigation or proceeding) relating to the foregoing, and the
Borrower shall reimburse the Agent and each Bank, and each Affiliate thereof and
their respective directors, officers, employees and agents, upon demand for any
expenses (including, without limitation, legal fees) incurred in connection with
any such investigation or proceeding; but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified.
SECTION 9.04. Set-Offs; Sharing of Set-Offs. (a) The Borrower
hereby grants to each Bank, as security for the full and punctual payment and
performance of the obligations of the Borrower under this Agreement, a
continuing lien on and security interest in all deposits and other sums credited
by or due from such Bank to the Borrower or subject to withdrawal by the
Borrower; and regardless of the adequacy of any collateral or other means of
obtaining repayment of such obligations, each Bank may at any time upon or after
the occurrence of any Event of Default, and without notice of any type to the
Borrower, set off the whole or any portion or portions of any or all such
deposits and other sums against such obligations, whether or not any other
Person or Persons could also withdraw money therefrom.
(b) Each Bank agrees that if it shall, by exercising any right
of set-off or counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of principal and interest owing with respect to the Notes held
by it which is greater than the proportion received by any
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other Bank in respect of the aggregate amount of all principal and interest
owing with respect to the Notes held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the Notes
held by the other Banks owing to such other Banks, and/or such other adjustments
shall be made, as may be required so that all such payments of principal and
interest with respect to the Notes held by the Banks owing to such other Banks
shall be shared by the Banks pro rata; provided that (i) nothing in this Section
shall impair the right of any Bank to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such exercise to the
payment of indebtedness of the Borrower other than its indebtedness under the
Notes, and (ii) if all or any portion of such payment received by the purchasing
Bank is thereafter recovered from such purchasing Bank, such purchase from each
other Bank shall be rescinded and such other Bank shall repay to the purchasing
Bank the purchase price of such participation to the extent of such recovery
together with an amount equal to such other Bank's ratable share (according to
the proportion of (x) the amount of such other Bank's required repayment to (y)
the total amount so recovered from the purchasing Bank) of any interest or other
amount paid or payable by the purchasing Bank in respect of the total amount so
recovered. The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in a Note, whether or
not acquired pursuant to the foregoing arrangements, may exercise rights of
set-off or counterclaim and other rights with respect to such participation as
fully as if such holder of a participation were a direct creditor of the
Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. (a) Any provision of
this Agreement, the Notes or any other Loan Documents may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Borrower and the Required Banks (and, if the rights or duties of the Agent are
affected thereby, by the Agent); provided that no such amendment or waiver
shall, unless signed by all the Banks, (i) change the Commitment of any Bank or
subject any Bank to any additional obligation, (ii) change the principal of or
rate of interest on any Loan or any fees hereunder, (iii) change the date fixed
for any payment of principal of or interest on any Loan or any fees hereunder,
(iv) change the amount of principal, interest or fees due on any date fixed for
the payment thereof, (v) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the percentage of Banks,
which shall be required for the Banks or any of them to take any action under
this Section or any other provision of this Agreement, (vi) change the manner of
application of any payments made under this Agreement or the Notes, (vii)
release or substitute all or any substantial part of the collateral (if any)
held as security for the Loans, or (viii) release any guaranty given to support
payment of the Loans.
(b) The Borrower will not solicit, request or negotiate for or
with respect to any proposed waiver or amendment of any of the provisions of
this Agreement unless each Bank shall be informed thereof by the Borrower and
shall be afforded an opportunity of considering the same and shall be supplied
by the Borrower with sufficient information to enable it to make an informed
decision with respect thereto. Executed or true and correct copies of any waiver
or consent effected pursuant to the provisions of this Agreement shall be
delivered by the Borrower to each Bank forthwith following the date on which the
same shall have been executed and delivered by the requisite percentage of
Banks. The Borrower will not, directly or indirectly, pay or cause to be paid
any remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any Bank
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(in its capacity as such) as consideration for or as an inducement to the
entering into by such Bank of any waiver or amendment of any of the terms and
provisions of this Agreement unless such remuneration is concurrently paid, on
the same terms, ratably to all such Banks.
SECTION 9.06. Margin Stock Collateral. Each of the Banks
represents to the Agent and each of the other Banks that it in good faith is
not, directly or indirectly (by negative pledge or otherwise), relying upon any
Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 9.07. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided that the Borrower
may not assign or otherwise transfer any of its rights under this Agreement.
(b) Any Bank may at any time sell to one or more Persons (each
a "Participant") participating interests in any Loan owing to such Bank, any
Note held by such Bank, any Commitment hereunder or any other interest of such
Bank hereunder. In the event of any such sale by a Bank of a participating
interest to a Participant, such Bank's obligations under this Agreement shall
remain unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such Note for all purposes
under this Agreement, and the Borrower and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. In no event shall a Bank that sells a
participation be obligated to the Participant to take or refrain from taking any
action hereunder except that such Bank may agree that it will not (except as
provided below), without the consent of the Participant, agree to (i) the change
of any date fixed for the payment of principal of or interest on the related
Loan or Loans, (ii) the change of the amount of any principal, interest or fees
due on any date fixed for the payment thereof with respect to the related Loan
or Loans, (iii) the change of the principal of the related Loan or Loans, (iv)
any change in the rate at which either interest is payable thereon or (if the
Participant is entitled to any part thereof) commitment fee is payable hereunder
from the rate at which the Participant is entitled to receive interest or
commitment fee (as the case may be) in respect of such participation, (v) the
release or substitution of all or any substantial part of the collateral (if
any) held as security for the Loans, or (vi) the release of any guaranty given
to support payment of the Loans. Each Bank selling a participating interest in
any Loan, Note, Commitment or other interest under this Agreement shall, within
10 Domestic Business Days of such sale, provide the Borrower and the Agent with
written notification stating that such sale has occurred and identifying the
Participant and the interest purchased by such Participant. The Borrower agrees
that each Participant shall be entitled to the benefits of Article VIII with
respect to its participation in Loans outstanding from time to time.
(c) Any Bank may at any time assign to one or more banks or
financial institutions (each an "Assignee") all, or a proportionate part of all,
of its rights and obligations under this Agreement, the Notes and the other Loan
Documents, and such Assignee shall assume all such rights and obligations,
pursuant to an Assignment and Acceptance in the form attached hereto as Exhibit
G, executed by such Assignee, such transferor Bank and the Agent (and, in the
case of (i) an Assignee that is not then a Bank or an Affiliate of a Bank; and
(ii) an assignment not made during the existence
43
<PAGE> 51
of a Default, by the Borrower); provided that (i) no interest may be sold by a
Bank pursuant to this paragraph (c) unless the Assignee shall agree to assume
ratably equivalent portions of the transferor Bank's Commitment, (ii) the amount
of the Commitment being assigned pursuant to such assignment (determined as of
the effective date of the assignment) shall be equal to $5,000,000 (or any
larger multiple of $1,000,000), (iii) no interest may be sold by a Bank pursuant
to this paragraph (c) to any Assignee that is not then a Bank or an Affiliate of
a Bank without the consent of the Borrower, which consent shall not be
unreasonably withheld, provided that the Borrower's consent shall not be
necessary with respect to any assignment made during the existence of a Default,
(iv) a Bank may not at any one time have more than two (2) Assignees that are
not then Banks, and (v) no interest may be sold by a Bank pursuant to this
paragraph (c) to any Assignee without the consent of the Agent, which consent
shall not be unreasonably withheld. Upon (A) execution of the Assignment and
Acceptance by such transferor Bank, such Assignee, the Agent and (if applicable)
the Borrower, (B) delivery of an executed copy of the Assignment and Acceptance
to the Borrower and the Agent, (C) payment by such Assignee to such transferor
Bank of an amount equal to the purchase price agreed between such transferor
Bank and such Assignee, and (D) payment by the assigning Bank of a processing
and recordation fee of $2,500 to the Agent, such Assignee shall for all purposes
be a Bank party to this Agreement and shall have all the rights and obligations
of a Bank under this Agreement to the same extent as if it were an original
party hereto with a Commitment as set forth in such instrument of assumption,
and the transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by the Borrower, the
Banks or the Agent shall be required. Upon the consummation of any transfer to
an Assignee pursuant to this paragraph (c), the transferor Bank, the Agent and
the Borrower shall make appropriate arrangements so that, if required, a new
Note is issued to each of such Assignee and such transferor Bank.
(d) Subject to the provisions of Section 9.08, the Borrower
authorizes each Bank to disclose to any Participant, Assignee or other
transferee (each a "Transferee") and any prospective Transferee any and all
financial and other information in such Bank's possession concerning the
Borrower which has been delivered to such Bank by the Borrower pursuant to this
Agreement or which has been delivered to such Bank by the Borrower in connection
with such Bank's credit evaluation prior to entering into this Agreement.
(e) No Transferee shall be entitled to receive any greater
payment under Section 8.03 than the transferor Bank would have been entitled to
receive with respect to the rights transferred, unless such transfer is made
with the Borrower's prior written consent or by reason of the provisions of
Section 8.02 or 8.03 requiring such Bank to designate a different Lending Office
under certain circumstances or at a time when the circumstances giving rise to
such greater payment did not exist.
(f) Anything in this Section 9.07 to the contrary
notwithstanding, any Bank may assign and pledge all or any portion of the Loans
and/or obligations owing to it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and Operating Circular issued by such
Federal Reserve Bank, provided that any payment in respect of such assigned
Loans and/or obligations made by the Borrower to the assigning and/or pledging
Bank in accordance with the terms of this Agreement shall
44
<PAGE> 52
satisfy the Borrower's obligations hereunder in respect of such assigned Loans
and/or obligations to the extent of such payment. No such assignment shall
release the assigning and/or pledging Bank from its obligations hereunder.
SECTION 9.08. Confidentiality. Each Bank agrees to exercise
its best efforts to keep any information delivered or made available by the
Borrower to it which is clearly indicated to be confidential information,
confidential from anyone other than persons employed or retained by such Bank
who are or are expected to become engaged in evaluating, approving, structuring
or administering the Loans; provided, however, that nothing herein shall prevent
any Bank from disclosing such information (i) to any other Bank, (ii) upon the
order of any court or administrative agency, (iii) upon the request or demand of
any regulatory agency or authority having jurisdiction over such Bank, (iv)
which has been publicly disclosed, (v) to the extent reasonably required in
connection with any litigation to which the Agent, any Bank or their respective
Affiliates may be a party, (vi) to the extent reasonably required in connection
with the exercise of any remedy hereunder, (vii) to such Bank's legal counsel
and independent auditors and (viii) to any actual or proposed Participant,
Assignee or other Transferee of all or part of its rights hereunder which has,
prior to any such disclosure, agreed in writing to be bound by the provisions of
this Section 9.08.
SECTION 9.09. Representation by Banks. Each Bank hereby
represents that it is a commercial lender or financial institution which makes
loans in the ordinary course of its business and that it will make its Loans
hereunder for its own account in the ordinary course of such business; provided,
however, that, subject to Section 9.07, the disposition of the Note or Notes
held by that Bank shall at all times be within its exclusive control.
SECTION 9.10. Obligations Several. The obligations of each
Bank hereunder are several, and no Bank shall be responsible for the obligations
or commitment of any other Bank hereunder. Nothing contained in this Agreement
and no action taken by the Banks pursuant hereto shall be deemed to constitute
the Banks to be a partnership, an association, a joint venture or any other kind
of entity. The amounts payable at any time hereunder to each Bank shall be a
separate and independent debt, and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement or any other Loan Document and
it shall not be necessary for any other Bank to be joined as an additional party
in any proceeding for such purpose.
SECTION 9.11. Survival of Certain Obligations. Sections
8.03(a), 8.03(b), 8.05 and 9.03, and the obligations of the Borrower thereunder,
shall survive, and shall continue to be enforceable notwithstanding, the
termination of this Agreement and the Commitments and the payment in full of the
principal of and interest on all Loans.
SECTION 9.12. Georgia Law. This Agreement and each Note shall
be construed in accordance with and governed by the law of the State of Georgia.
SECTION 9.13. Severability. In case any one or more of the
provisions contained in this Agreement, the Notes or any of the other Loan
Documents should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions
45
<PAGE> 53
contained herein and therein shall not in any way be affected or impaired
thereby and shall be enforced to the greatest extent permitted by law.
SECTION 9.14. Interest. In no event shall the amount of
interest due or payable hereunder or under the Notes exceed the maximum rate of
interest allowed by applicable law, and in the event any such payment is
inadvertently made to any Bank by the Borrower or inadvertently received by any
Bank, then such excess sum shall be credited as a payment of principal, unless
the Borrower shall notify such Bank in writing that it elects to have such
excess sum returned forthwith. It is the express intent hereof that the Borrower
not pay and the Banks not receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may legally be paid by the Borrower
under applicable law.
SECTION 9.15. Interpretation. No provision of this Agreement
or any of the other Loan Documents shall be construed against or interpreted to
the disadvantage of any party hereto by any court or other governmental or
judicial authority by reason of such party having or being deemed to have
structured or dictated such provision.
SECTION 9.16. Consent to Jurisdiction. The Borrower (a)
submits to personal jurisdiction in the State of Georgia, the courts thereof and
the United States District Courts sitting therein, for the enforcement of this
Agreement, the Notes and the other Loan Documents, (b) waives any and all
personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
within the State of Georgia for the purpose of litigation to enforce this
Agreement, the Notes or the other Loan Documents, and (c) agrees that service of
process may be made upon it in the manner prescribed in Section 9.01 for the
giving of Notice to the Borrower. Nothing herein contained, however, shall
prevent the Agent from bringing any action or exercising any rights against any
security and against the Borrower personally, and against any assets of the
Borrower, within any other state or jurisdiction.
SECTION 9.17. Counterparts. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
46
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, under seal, by their respective authorized
officers as of the day and year first above written.
KAYDON CORPORATION
By: /s/ (SEAL)
-----------------------------
Title: Chairman
19345 U.S. 19 North, Suite 500
Clearwater, Florida 34624
Attention: Sally Baxter
Telecopy number: (813) 530-9247
Telephone number: (813) 531-1101
[Remainder of page intentionally left blank]
47
<PAGE> 55
COMMITMENTS WACHOVIA BANK OF GEORGIA, N.A., as Agent and as a
Bank
$30,000,000
By: /s/ Tammy Hughes (SEAL)
-----------------------------
Title: Vice President
Lending Office
Wachovia Bank of Georgia, N.A.
Syndication Services
191 Peachtree Street, N.E., Mail Code GA - 0423
Atlanta, Georgia 30303-1757
Attention: Elizabeth Dreiling (27th Floor)
Telecopy number: (404) 332-4005
Telephone number: (404) 332-4008
with a copy to:
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E., Mail Code GA - 3940
Atlanta, Georgia 30303-1757
Attention: Tammy Hughes (26th Floor)
Telecopy number: (404) 332-5016
Telephone number: (404) 332-5134
[Remainder of page intentionally left blank]
48
<PAGE> 56
$15,000,000 NATIONSBANK, N.A. (SOUTH)
By: /s/ Kathryn W. Robinson (SEAL)
------------------------------
Title: Senior Vice President
Lending Office
NationsBank, N.A. (South)
400 North Ashley Drive
2nd Floor
Tampa, Florida 33602-4318
Attention: Miles Dearden
Telecopy number: (813) 224-5948
Telephone number: (813) 224-5194
[Remainder of page intentionally left blank]
49
<PAGE> 57
$15,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Curtis A. Price (SEAL)
-----------------------------
Title: As Agent
Lending Office
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: Curtis A. Price
Telecopy number: (312) 732-2991
Telephone number:(312) 732-1542
[Remainder of page intentionally left blank]
50
<PAGE> 58
$15,000,000 KEYBANK NATIONAL ASSOCIATION
By: /s/ Thomas A. Crandell (SEAL)
-----------------------------
Title: Assistant Vice President
Lending Office
KeyBank National Association
127 Public Square (Mail Code: 0H-01-27-0606)
Cleveland, Ohio 44114-1306
Attention: Thomas A. Crandell, Assistant
Vice President
Telecopy number: (216) 689-4981
Telephone number: (216) 689-3589
[Remainder of page intentionally left blank]
51
<PAGE> 59
$15,000,000 SUNTRUST BANK, TAMPA BAY
By: /s/ Janet P. Sammons (SEAL)
------------------------------
Title: Vice President
Lending Office
SunTrust Bank, Tampa Bay
3601 34th Street North
St. Petersburg, Florida 33713
Attention: Donald J. Campisano
Telecopy number: (813) 892-4810
Telephone number: (813) 892-4953
[Remainder of page intentionally left blank]
52
<PAGE> 60
$10,000,000 THE FIRST NATIONAL BANK OF MARYLAND
By: /s/ (SEAL)
-----------------------------
Title: Vice President
Lending Office
The First National Bank of Maryland
National Division, 18th Floor
25 South Charles Street
Baltimore, Maryland 21201
Attention: William J. Frank (Mail Code: 101-745)
Telecopy number: (410) 545-2047
Telephone number: (410) 244-4206
- ------------------
TOTAL COMMITMENTS:
$100,000,000.00
[Remainder of page intentionally left blank]
53
<PAGE> 61
SCHEDULE 4.05
Fraudulent Transfer and Products Liability Matters
The following matters singly or in conjunction with any other event or
events, act or acts, condition or conditions, occurrence or occurrences, whether
or not related, do not have a Material Adverse Effect:
A. Sikorsky Helicopter
On May 9, 1996, a Sikorsky H-53E helicopter crashed during a
static test flight, resulting in four fatalities of Sikorsky employees. On June
13, 1996, the Navy grounded all H-53E helicopters, pending re-inspection. The
Borrower manufactured the swashplate bearing used in the helicopter. A "Mishap
Board" led by Sikorsky, without the Borrower's participation, attributed the
accident to the bearing manufactured by the Borrower. The Borrower has not been
given a copy of this report and is currently conducting its own review of the
incident. The Borrower has been informed that attorneys representing two of the
deceased pilots have made contact with the Borrower's insurance company, as well
as with Sikorsky and the U.S. Government, seeking information surrounding the
incident. To date, no litigation has been initiated.
On October 19, 1996, another Sikorsky H-53E helicopter
experienced mechanical problems at New River (North Carolina) Air Station.
Disassembly of the swashplate assembly revealed a severely damaged swashplate
bearing with characteristics similar to the bearing which was inspected as a
result of the May 9 incident. The bearing involved in the October 19 mishap was
determined to have been in full compliance with all standards and specifications
and had been specifically approved by Sikorsky and the U.S. Navy. In addition,
there have been two additional incidents with H-53E helicopters since the
October 19, 1996 incident where bearings that have been manufactured, assembled
and inspected under the new procedures in place and which have been certified by
the Navy and Sikorsky as meeting all applicable specifications and requirements
have experienced unacceptable levels of vibration in the swashplate assembly. It
is therefore, the opinion of Borrower's management that since the bearings
involved in the subsequent incidents were in full compliance with all requisite
specifications and exhibited stress characteristics almost identical to the
characteristics as the bearing involved in the May 9, 1996 incident that the
bearing was not a contributing factor to the May 9, 1996, incident.
The Borrower has received a subpoena dated June 10, 1996,
issued by the U.S. District Court in Bridgeport, Connecticut, on behalf of a
Grand Jury investigating the May 9, 1996 accident in Stratford, Connecticut,
involving the H-53E Sikorsky helicopter which resulted in the four fatalities.
The Grand Jury has requested documents and records relating to a bearing
manufactured by Kaydon and used in the H-53E helicopter, and Kaydon has
responded to the subpoena and intends to cooperate with the subpoena process.
<PAGE> 62
Subsequent to the May 9, 1996 incident, the Navy issued an
Order to ground the entire fleet of H-53E helicopters involving approximately
198 aircraft. An intensive program was established involving the U.S. Navy,
Sikorsky and the Borrower to inspect the swashplate assemblies in the grounded
craft and repair or replace components deemed a problem. At this time the
grounded fleet has been reactivated, but approximately five aircraft have been
recently temporarily removed from service after experiencing excessive vibration
in the swashplate assembly and, in one case, a complete failure of the
swashplate assembly (the October 19, 1996 incident at New River).
Potential areas of liability surrounding this entire matter
include:
1. Litigation initiated by the estates of the deceased
pilots involved in the May 9, 1996 incident.
2. Total loss of the H-53E helicopter involved in the
May 9, 1996 incident.
3. Cost associated with the grounding of the H-53E fleet
of helicopters.
4. Potential liability associated with the Grand Jury
investigation involving the May 9, 1996 incident.
The Borrower is cooperating with Sikorsky and the Navy in
investigating circumstances surrounding all of the above incidents. At this
point in time, it is impossible to determine the exact cause of any of the
incidents, however, it is the Borrower's opinion based on all of the facts and
analysis that have been assembled to date that the bearings manufactured by the
Borrower were not the precipitating cause of the failure of the swashplate
assemblies. Since no litigation has been initiated, nor any claim for damages
made by either Sikorsky or the U.S. Navy, it is impossible to quantify whether
any potential liability exists as a result of the May 9, 1996 incident. The
Borrower's aviation product liability insurance will be available to cover the
defense cost, as well as any liability, if any, associated with any litigation
resulting from the four fatalities on May 9, 1996, to the extent of policy
limits. The Borrower believes that it has meritorious defenses to any claim that
may be initiated as a result of the May 9, 1996 incident. Our analysis of the
facts and investigations that have been assembled to date lead us to also
believe that the Borrower would have meritorious defenses to any claims raised
and in addition, it appears highly unlikely that any claim would be raised under
items 2 or 3 above. Since the investigation as to the real cause of the mishaps
is ongoing, the discovery of new facts or the development of new theories of
causation could alter the issue of meritorious defenses.
b. Keene Corporation
The Borrower, together with other companies, certain former
officers, and certain current and former directors, has been named as a
co-defendant in lawsuits filed in federal court in New York in 1993. The suits
purport to be class actions on behalf of all persons who have
2
<PAGE> 63
unsatisfied personal injury and property damage claims against Keene Corporation
which filed for bankruptcy under Chapter 11. The premise of the suits is that
assets of Keene were transferred to Bairnco subsidiaries, of which the Borrower
was one in 1983, at less than fair value. The suits also allege that the
Borrower, among other named defendants, was a successor to and alter ego of
Keene. In 1994, an examiner was appointed by a bankruptcy court to examine the
issues at stake. On September 23, 1994, the "Preliminary Report of the Examiner"
was made public. In the report, the examiner stated that the alleged fraudulent
conveyance claims against the Borrower appear to be time-barred by the statute
of limitations, subject to certain possible exceptions which the Borrower does
not believe are significant or factual. Although the examiner has made certain
recommendations regarding a mechanism to resolve the claims against the
Borrower, the Court has not taken any action related to the report.
Nevertheless, in the Borrower's opinion, the report reinforces management's
original view that the claims will ultimately not be sustained. Accordingly, no
provision has been reflected in the consolidated financial statements for any
alleged damages. In June 1995, the creditors' committee filed a complaint in the
same bankruptcy court asserting claims against the Borrower similar to those
previously filed.
On June 12, 1996, the United States District Court for the
Southern District of New York (the "District Court") issued an order confirming
Keene's plan of reorganization. That order subsequently became final and, on
July 31, 1996, the plan became effective. As a result of the effectiveness of
the plan, (i) the claims asserted in the Adversary proceeding have been
transferred to a creditors' trust established under the plan, and (ii) the
further prosecution of the Huffman and Coleman actions has been enjoined. In
addition, following the confirmation of the plan, pursuant to the Stipulation of
Settlement among the Borrower, Keene, the Committee, the Legal Representative
for Future Claimants and certain corporate and individual defendants in the
Adversary Proceeding, the stay of the Adversary Proceeding expired on August 24,
1996.
On October 7, 1996, the Borrower and certain other corporate
defendants in the Adversary Proceeding filed a motion (the "Motion") with the
District Court to withdraw the reference for the Adversary Proceeding. The
plaintiff in the Adversary Proceeding has consented to the relief sought in the
Motion, and the Motion is now fully submitted before the District Court. We are
unable to predict when the District Court will decide this Motion. Pursuant to
orders entered by the Bankruptcy Court on September 12, 1996 and September 30,
1996, the time within which the Borrower is required to answer, move or
otherwise respond to the complaint in the Adversary Proceeding has been extended
until the date that is thirty days after the date on which the District Court
enters an order granting or denying the relief requested in the Motion.
3
<PAGE> 64
SCHEDULE 4.08
<TABLE>
<CAPTION>
Existing Subsidiaries
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
<S> <C>
Kaydon S.A. De C.V. Mexico
Kaydon International, Inc. Virgin Islands
Kaydon Ring & Seal, Inc. Delaware
Kaydee Corporation Maryland
Kaydon Acquisition Corp. IV Delaware
Electro-Tec Corp. Delaware
Industrial Tectonics Inc. Delaware
Kaydon Acquisition Corp. III Delaware
Kaydon Acquisition Corp. U.K. Limited United Kingdom
IDM Electronics Ltd United Kingdom
Prizerandom Limited United Kingdom
Cooper Roller Bearing Company Limited United Kingdom
The Cooper Split Roller Bearing Corp. Virginia
Cooper Split Roller Bearing Company Ltd. Canada
Cooper Getellte Rollenlager GmbH Germany
Kenyon Power Transmission Ltd. Germany
Kaydon Acquisition Corp. V Delaware
Kaydon Acquisition VII, Inc. Delaware
Kaydon Acquisition VIII, Inc. Delaware
</TABLE>
<PAGE> 65
SCHEDULE 5.19
Existing Debt
The Economic Development Corporation of the City of Sumter Variable
Rate Demand Industrial Development Refunding Revenue Bonds (Sumter IRB) in face
amount of $4,000,000 with a maturity date of April 1, 1997, which IRB is
collateralized with a Letter of Credit issued by NBD Bank, N.A. of Detroit,
Michigan in the amount of $4,350,000 which represents the principal amount of
the IRB plus up to 210 days' estimated interest.
The Economic Development Corporation of the City of Norton Shores
Variable Rate Demand Industrial Development Refunding Revenue Bonds (Norton
Shores IRB) in face amount of $4,000,000 with a maturity date of August 1, 1999,
which IRB is collateralized with a Letter of Credit issued by NBD Bank, N.A. of
Detroit, Michigan in the amount of $4,350,000 which represents the principal
amount of the IRB plus up to 210 days estimated interest.
<PAGE> 66
EXHIBIT A
NOTE
$____________ Atlanta, Georgia
February __, 1997
For value received, KAYDON CORPORATION, a ________
corporation (the "Borrower"), promises to pay to the order of (the "Bank"),
for the account of its Lending Office, the principal sum of ________________
______________________________ and No/100 Dollars ($____________), or such
lesser amount as shall equal the unpaid principal amount of each Loan made by
the Bank to the Borrower pursuant to the Credit Agreement referred to below, on
the dates and in the amounts provided in the Credit Agreement. The Borrower
promises to pay interest on the unpaid principal amount of this Note on the
dates and at the rate or rates provided for in the Credit Agreement. Interest
on any overdue principal of and, to the extent permitted by law, overdue
interest on the principal amount hereof shall bear interest at the Default
Rate, as provided for in the Credit Agreement. All such payments of principal
and interest shall be made in lawful money of the United States in federal or
other immediately available funds at the office of Wachovia Bank of Georgia,
N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303, or such other address
as may be specified from time to time pursuant to the Credit Agreement.
All Loans made by the Bank, the respective maturities thereof,
the interest rates from time to time applicable thereto and all repayments of
the principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make, or any error of the Bank in making, any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This Note is one of the Notes referred to in the Credit
Agreement dated as of February __, 1997, among the Borrower, the banks listed on
the signature pages thereof and their successors and assigns and Wachovia Bank
of Georgia, N.A., as Agent and as a Bank (as the same may be amended or modified
from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment and the repayment hereof and
the acceleration of the maturity hereof.
The Borrower hereby waives presentment, demand, protest,
notice of demand, protest and nonpayment and any other notice required by law
relative hereto, except to the extent as otherwise may be expressly provided for
in the Credit Agreement.
The Borrower agrees, in the event that this note or any
portion hereof is collected by law or through an attorney at law, to pay all
reasonable costs of collection, including, without limitation, reasonable
attorneys' fees.
<PAGE> 67
IN WITNESS WHEREOF, the Borrower has caused this Note to be
duly executed under seal, by its duly authorized officer as of the day and year
first above written.
KAYDON CORPORATION
By:
-----------------------------
Title:
2
<PAGE> 68
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
- ----------------------------------------------------------------------------------------------------
Type Amount Amount of
of Interest of Principal Maturity Notation
Date Loan(1) Rate Loan Repaid Date Made By
- ---- ----- --------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------
(1) I.e., a Base Rate or Euro-Dollar Loan.
3
<PAGE> 69
EXHIBIT B-1
OPINION OF
COUNSEL FOR THE BORROWER
February 28, 1997
To the Banks and the Agent
Referred to Below
c/o Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Re: Credit Agreement dated as of February 28, 1997, among the
Borrower, the Banks listed on the signature pages thereof and
Wachovia Bank of Georgia, N.A., as Agent and as a Bank
Dear Sirs:
We have acted as counsel for KAYDON CORPORATION, a Delaware
corporation (the "Borrower") in connection with the Credit Agreement (the
"Credit Agreement") dated as of February 28, 1997, among the Borrower, the banks
listed on the signature pages thereof and Wachovia Bank of Georgia, N.A., as
Agent and as a Bank. Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion. We have assumed for purposes of our opinions set
forth below that the execution and delivery of the Credit Agreement by each Bank
and by the Agent have been duly authorized by each Bank and by the Agent. As to
questions of fact relating to the Borrower material to such opinions, we have
relied upon representations of appropriate officers of the Borrower.
This opinion letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord of the ABA Section of Business Law
(1991) (the "Accord"). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage, and other
limitations, all as more particularly described in the Accord, and this opinion
letter should be read in conjunction therewith.
<PAGE> 70
Upon the basis of the foregoing, we are of the opinion that:
1. The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
all corporate powers required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes (i) are within the Borrower's corporate powers,
(ii) have been duly authorized by all necessary corporate action, (iii) require
no action by or in respect of, or filing with, any governmental body, agency or
official, (iv) do not contravene, or constitute a default under, any provision
of applicable law or regulation or of the certificate of incorporation or
by-laws of the Borrower or of any agreement, judgment, injunction, order, decree
or other instrument which to our knowledge is binding upon the Borrower and (v)
to our knowledge, except as provided in the Credit Agreement, do not result in
the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement
of the Borrower, enforceable against the Borrower in accordance with its terms,
and the Notes constitute valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms, except (i) the
enforceability thereof may be affected by bankruptcy, insolvency,
reorganization, fraudulent conveyance, voidable preference, moratorium or
similar laws applicable to creditors' rights or the collection of debtors'
obligations generally; (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability; and (iii) the enforceability of certain of the remedial, waiver
and other provisions of the Credit Agreement and the Notes may be further
limited by the laws of the State of Georgia; provided, however such additional
laws do not, in our opinion, substantially interfere with the practical
realization of the benefits expressed in the Credit Agreement and the Notes,
except for the economic consequences of any procedural delay which may result
from such laws.
4. To our knowledge, there is no action, suit or proceeding
pending, or threatened, against or affecting the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision which
in any manner questions the validity or enforceability of the Credit Agreement
or any Note or except as provided in Schedule 4.05 of the Credit Agreement,
which could materially adversely affect the business, consolidated financial
position or consolidated results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
5. Each of the Borrower's Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
6. Neither the Borrower nor any of its Subsidiaries is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
2
<PAGE> 71
7. Neither the Borrower nor any of its Subsidiaries is a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
We are licensed to practice only in the State of Michigan. Our
opinions are limited to matters involving the laws of the State of Michigan, the
federal laws of the United States of America and the laws of the State of
Delaware to the extent provided in Section 10(c) of the Accord.
We express no opinion as to the laws of any jurisdiction wherein
any Bank may be located which limits rates of interest which may be charged or
collected by such Bank other than in paragraph 3 with respect to the State of
Michigan.
This opinion is delivered to you in connection with the
transaction referenced above and may only be relied upon by you or any Assignee,
Participant or other Transferee under the Credit Agreement, without our prior
written consent.
Very truly yours,
3
<PAGE> 72
EXHIBIT C
OPINION OF
WOMBLE, CARLYLE, SANDRIDGE & RICE, PLLC
SPECIAL COUNSEL FOR THE AGENT
[Date as provided in Section 3.01 of the Credit Agreement]
To the Banks and the Agent
Referred to Below
c/o Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Dear Sirs:
We have participated in the preparation of the Credit Agreement
(the "Credit Agreement") dated as of February __, 1997, among KAYDON
CORPORATION, a Delaware corporation (the "Borrower"), the banks listed on the
signature pages thereof (the "Banks") and Wachovia Bank of Georgia, N.A., as
Agent and as a Bank (the "Agent"), and have acted as special counsel for the
Agent for the purpose of rendering this opinion pursuant to Section 3.01(d) of
the Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
This opinion letter is limited by, and is in accordance with, the
January 1, 1992 edition of the Interpretive Standards applicable to Legal
Opinions to Third Parties in Corporate Transactions adopted by the Legal Opinion
Committee of the Corporate and Banking Law Section of the State Bar of Georgia
which Interpretive Standards are incorporated herein by this reference.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, and assuming the due
authorization, execution and delivery of the Credit Agreement and each of the
Notes by or on behalf of the Borrower, we are of the opinion that the Credit
Agreement constitutes a valid and binding agreement of the Borrower and each
Note constitutes valid and binding obligations of the Borrower, in each case
enforceable in accordance with its terms except as: (i) the enforceability
thereof may be affected by bankruptcy, insolvency, reorganization, fraudulent
conveyance, voidable preference, moratorium or similar laws applicable to
creditors' rights or the collection of debtors' obligations generally; (ii)
rights of
<PAGE> 73
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability; and (iii) the enforceability of
certain of the remedial, waiver and other provisions of the Credit Agreement and
the Notes may be further limited by the laws of the State of Georgia; provided,
however, such additional laws do not, in our opinion, substantially interfere
with the practical realization of the benefits expressed in the Credit Agreement
and the Notes, except for the economic consequences of any procedural delay
which may result from such laws.
In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction except the State of Georgia. We
express no opinion as to the effect of the compliance or noncompliance of the
Agent or any of the Banks with any state or federal laws or regulations
applicable to the Agent or any of the Banks by reason of the legal or regulatory
status or the nature of the business of the Agent or any of the Banks.
This opinion is delivered to you in connection with the
transaction referenced above and may only be relied upon by you and any
Assignee, Participant or other Transferee under the Credit Agreement without our
prior written consent.
Very truly yours,
WOMBLE, CARLYLE, SANDRIDGE & RICE, PLLC
By:
-------------------------------------
2
<PAGE> 74
EXHIBIT D
CLOSING CERTIFICATE
OF
KAYDON CORPORATION
Reference is made to the Credit Agreement (the "Credit Agreement")
dated as of February __, 1997, among KAYDON CORPORATION (the "Borrower"),
Wachovia Bank of Georgia, N.A., as Agent and as a Bank, and certain other Banks
listed on the signature pages thereof. Capitalized terms used herein have the
meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 3.01(e) of the Credit Agreement,
___________________, the duly authorized ____________________ of the Borrower,
hereby certifies to the Agent and the Banks that: (i) no Default has occurred
and is continuing on the date hereof; and (ii) the representations and
warranties of the Borrower contained in Article IV of the Credit Agreement are
true on and as of the date hereof.
Certified as of the ___ day of February, 1997.
KAYDON CORPORATION
-------------------------------
Name:
Title:
<PAGE> 75
EXHIBIT E
KAYDON CORPORATION
SECRETARY'S CERTIFICATE
The undersigned, _____________, _______ Secretary of KAYDON
CORPORATION, a Delaware corporation (the "Borrower"), hereby certifies that he
has been duly elected, qualified and is acting in such capacity and that, as
such, he is familiar with the facts herein certified and is duly authorized to
certify the same, and hereby further certifies, in connection with the Credit
Agreement dated as of February __, 1997, among the Borrower, Wachovia Bank of
Georgia, N.A., as Agent and as a Bank, and certain other Banks listed on the
signature pages thereof that:
1. Attached hereto as Exhibit A is a complete and correct copy of
the Certificate of Incorporation of the Borrower as in full force and effect on
the date hereof as certified by the Secretary of State of the State of Delaware,
the Borrower's state of incorporation.
2. Attached hereto as Exhibit B is a complete and correct copy of
the Bylaws of the Borrower as in full force and effect on the date hereof.
3. Attached hereto as Exhibit C is a complete and correct copy of
the resolutions duly adopted by the Board of Directors of the Borrower on
___________ __, 19__ approving, and authorizing the execution and delivery of,
the Credit Agreement, the Notes (as such term is defined in the Credit
Agreement) and the other Loan Documents (as such term is defined in the Credit
Agreement) to which the Borrower is a party. Such resolutions have not been
repealed or amended and are in full force and effect, and no other resolutions
or consents have been adopted by the Board of Directors of the Borrower in
connection therewith.
4. The officers whose names appear below have been duly elected to
and now hold the offices in the Borrower set forth opposite their respective
names and that the signature appearing opposite the name of each of such officer
is authentic and official:
<TABLE>
<CAPTION>
NAME TITLE SAMPLE SIGNATURE
<S> <C> <C>
Lawrence J. Cawley Chairman _________________
__________________ Secretary _________________
</TABLE>
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as
of the ____ day of February __, 1997.
--------------------------------
Name:
Title:
<PAGE> 76
EXHIBIT F
FORM OF COMPLIANCE CERTIFICATE
Reference is made to the Credit Agreement dated as of February __,
1997 (as modified and supplemented and in effect from time to time, the "Credit
Agreement") among Kaydon Corporation, the Banks from time to time parties
thereto and Wachovia Bank of Georgia, N.A., as Agent and as a Bank. Capitalized
terms used herein shall have the meanings ascribed thereto in the Credit
Agreement.
Pursuant to Section 5.01(c) of the Credit Agreement,
_________________, the duly authorized ___________________, of Kaydon
Corporation, hereby certifies to the Agent and the Banks that the information
contained in the Compliance Check List attached hereto is true, accurate and
complete as of _____________, 199___ (the "Compliance Date"), and that no
Default is in existence on and as of the date hereof.
Dated as of _________________.
KAYDON CORPORATION
By:
-----------------------------
Name:
Title:
<PAGE> 77
COMPLIANCE CHECK LIST
KAYDON CORPORATION
_________________, 199__
<TABLE>
<S> <C> <C>
1. Ratio of Consolidated Total Debt to Total Capitalization (Section 5.03)
(a) Consolidated Total Debt $
-------------
(b) Total Capitalization
(i) Stockholders' Equity (shareholder's equity $
excluding any Redeemable Preferred Stock) -------------
(ii) Consolidated Total Debt (same as (a)
above, minus): $
-------------
a. all obligations (absolute or
contingent) to reimburse any
bank or other person in respect
of amounts paid under a letter
of credit with an expiration date
of more than one year $
-------------
b. all debt of others secured by a lien on
any asset of Borrower $
-------------
c. all debt of others guaranteed by Borrower $
-------------
Total for (ii) $
-------------
Sum of (i) and (ii) (Total for (b)) $
-------------
Actual Ratio of (a) to (b)
-------------
Must Be Less Than 0.55 to 1.00
</TABLE>
<PAGE> 78
<TABLE>
<S> <C> <C>
2. Interest Coverage Ratio (Section 5.04)
(a) EBIT
(i) Consolidated Net Income (Net income, excluding
extraordinary items and equity interests of the
Borrower or any Subsidiary in the unremitted
earnings of any Person that is not a Subsidiary) $
-------------
(ii) Taxes on Income; and $
-------------
(iii) Consolidated Interest Expense (interest, whether
expensed or capitalized, in respect of Debt of
the Borrower or any of its Consolidated
Subsidiaries outstanding during such period $
-------------
Total EBIT (sum of i, ii and iii above) $
-------------
(b) Consolidated Interest Expense (same as iii above) $
-------------
Actual Ratio of (a) to (b) -------------
Must Be Greater Than 2.50 to 1.00
3. Loans or Advances (Section 5.05)
(a) Amount of Loans or Advances to Employees $
-------------
(b) Must Not Exceed $1,000,000.00
4. Negative Pledge (Section 5.07)
(a) Total Debt secured by Liens not permitted by
Sections 5.07(a) through (i) $
-------------
(b) Must Not Exceed -5% of Consolidated Net Worth $
-------------
5. Limitation on Sales of Assets (Section 5.10)
(a) Aggregate Assets transferred or utilized in discontinued
business line or segment, for current Fiscal Quarter and
immediately preceding seven Fiscal Quarters $
-------------
</TABLE>
2
<PAGE> 79
<TABLE>
<S> <C> <C>
Limitation:
Such assets must be or contribute less than either:
(i) 5% of Consolidated Total Assets, at the
end of the eighth Fiscal Quarter immediately
preceding such Fiscal Quarter $
or --------------
(ii) 5% of Consolidated Operating Profits
during the 8 consecutive Fiscal Quarters
immediately preceding such Fiscal Quarter $
-------------
6. Debt (Section 5.19)
(a) Debt of Subsidiaries of the Borrower owing to the
Borrower or another Subsidiary of the Borrower $
-------------
(b) Debt of Subsidiaries of the Borrower outstanding
on the date of the Credit Agreement described on
Schedule 5.19 of the Credit Agreement $
-------------
(c) Debt of Subsidiaries of the Borrower incurred or assumed for
the purpose of financing all or any part of the cost of
acquiring or constructing an asset of such Subsidiary and
secured by a Lien permitted under Section 5.07(c) of the Credit
Agreement $
-------------
(d) Debt of Subsidiaries of the Borrower secured by a Lien
in an aggregate principal amount not exceeding 5%
of Consolidated Net Worth $
-------------
(e) Debt of Subsidiaries of the Borrower, in addition to Debt
described in (a), (b), (c) and (d) not to exceed 5%
of Consolidated Net Worth $
-------------
(f) Total of (b), (c), (d) and (e) above $
-------------
Must Not Exceed 20% of Consolidated Net Worth $
-------------
</TABLE>
3
<PAGE> 80
EXHIBIT G
ASSIGNMENT AND ACCEPTANCE
Dated ________________ __, ____
Reference is made to the Credit Agreement dated as of February
__, 1997 (together with all amendments and modifications thereto, the "Credit
Agreement") among KAYDON CORPORATION, a Delaware corporation (the "Borrower"),
the Banks (as defined in the Credit Agreement) and Wachovia Bank of Georgia,
N.A., as Agent (the "Agent"). Terms defined in the Credit Agreement are used
herein with the same meaning.
_____________________________________________________ (the
"Assignor") and _____________________________________________ (the "Assignee")
agree as follows:
1. The Assignor hereby sells and assigns to the Assignee,
without recourse to the Assignor, and the Assignee hereby purchases and assumes
from the Assignor, a ______% interest in and to all of the Assignor's rights and
obligations under the Credit Agreement as of the Effective Date (as defined
below) (including, without limitation, a ______% interest (which on the
Effective Date hereof is $_______________) in the Assignor's Commitment and a
______% interest (which on the Effective Date hereof is $_______________) in the
Loans owing to the Assignor and a ______% interest in the Note held by the
Assignor (which on the Effective Date hereof is $__________________)).
2. The Assignor (i) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement, any other
instrument or document furnished pursuant thereto or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any other Loan Document or any other instrument or document furnished
pursuant thereto, other than that it is the legal and beneficial owner of the
interest being assigned by it hereunder, that such interest is free and clear of
any adverse claim and that as of the date hereof its Commitment (without giving
effect to assignments thereof which have not yet become effective) is
$_________________ and the aggregate outstanding principal amount of Loans owing
to it (without giving effect to assignments thereof which have not yet become
effective) is $_________________; (ii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under the Credit Agreement, any other Loan Document or any other
instrument or document furnished pursuant thereto; and (iii) attaches the
Note[s] referred to in paragraph 1 above and requests that the Agent exchange
such Note[s] as follows: [a new Note dated _______________, ____ in the
principal amount of _________________ payable to the order of the Assignee] [new
Notes as follows: a Note dated _________________, ____ in the principal amount
of $_______________ payable to the order of the Assignor and a Note dated
______________, ____ in the principal amount of $______________ payable to the
order of the Assignee].
<PAGE> 81
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.04(a) thereof (or any more recent financial statements of the
Borrower delivered pursuant to Section 5.01(a) or (b) thereof) and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (ii) agrees
that it will, independently and without reliance upon the Agent, the Assignor or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) confirms that it is a bank
or financial institution; (iv) appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (v) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank; (vi) specifies as
its Lending Office (and address for Notices) the office set forth beneath its
name on the signature pages hereof, (vii) represents and warrants that the
execution, delivery and performance of this Assignment and Acceptance are within
its corporate powers and have been duly authorized by all necessary corporate
action[, and (viii) attaches the forms prescribed by the Internal Revenue
Service of the United States certifying as to the Assignee's status for purposes
of determining exemption from United States withholding taxes with respect to
all payments to be made to the Assignee under the Credit Agreement and the Notes
or such other documents as are necessary to indicate that all such payments are
subject to such taxes at a rate reduced by an applicable tax treaty].(2)
4. The Effective Date for this Assignment and Acceptance shall
be _______________ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for execution and
acceptance by the Agent [and to the Borrower for execution by the Borrower](3).
5. Upon such execution and acceptance by the Agent [and
execution by the Borrower]**, from and after the Effective Date, (i) the
Assignee shall be a party to the Credit Agreement and, to the extent rights and
obligations have been transferred to it by this Assignment and Acceptance, have
the rights and obligations of a Bank thereunder and (ii) the Assignor shall, to
the extent its rights and obligations have been transferred to the Assignee by
this Assignment and Acceptance, relinquish its rights (other than under Section
8.03 and Section 9.03 of the Credit Agreement) and be released from its
obligations under the Credit Agreement.
6. Upon such execution and acceptance by the Agent [and
execution by the Borrower]**, from and after the Effective Date, the Agent shall
make all payments in respect of the interest assigned hereby to the Assignee.
The Assignor and Assignee shall make all appropriate
- ------------------
(2) If the Assignee is organized under the laws of a jurisdiction outside
the United States.
(3) If the Assignee is not a Bank or an Affiliate of a Bank prior to the
Effective Date or if a Default is not in existence on the Effective Date.
2
<PAGE> 82
adjustments in payments for periods prior to such acceptance by the Agent
directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Georgia.
[NAME OF ASSIGNOR]
By:
---------------------------------------
Title:
[NAME OF ASSIGNEE]
By:
---------------------------------------
Title:
Lending Office:
[Address]
WACHOVIA BANK OF GEORGIA, N.A., as Agent
By:
---------------------------------------
Title:
KAYDON CORPORATION(1)
By:
---------------------------------------
Title:
- ------------------
(1) If the Assignee is not a Bank or an Affiliate of a Bank prior to the
Effective Date or if a Default is not in existence on the Effective Date.
3
<PAGE> 83
EXHIBIT H
NOTICE OF BORROWING
February __, 1997
Wachovia Bank of Georgia, N.A., as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Re: Credit Agreement (as amended and modified from time
to time, the "Credit Agreement") dated as of February
__, 1997, by and among Kaydon Corporation, the Banks
from time to time parties thereto, and Wachovia Bank
of Georgia, N.A., as Agent and as a Bank.
Gentlemen:
Unless otherwise defined herein, capitalized terms used herein
shall have the meanings attributable thereto in the Credit Agreement.
This Notice of Borrowing is delivered to you pursuant to
Section 2.02 of the Credit Agreement.
The Borrower hereby requests a [Euro-Dollar Borrowing] [Base
Rate Borrowing] in the aggregate principal amount of $___________ to be made on
________, 19__, and for interest to accrue thereon at the rate established by
the Credit Agreement for [Euro-Dollar Loans] [Base Rate Loans]. The duration of
the Interest Period with respect thereto shall be [1 month] [2 months] [3
months] [6 months] [30 days].
The Indicative Rate, if any, applicable to the Borrowing
described above is _____________.
The Borrower has caused this Notice of Borrowing to be
executed and delivered by its duly authorized officer this ___ day of ____,
199_.
KAYDON CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE> 84
Subject to the terms of the Credit Agreement, the interest
rate applicable to the Borrowing described above is _________.
Date:
WACHOVIA BANK OF GEORGIA, N.A., as Agent
By:
------------------------------
Name:
-----------------------------
Title:
----------------------------
2
<PAGE> 1
EXHIBIT 10.16
PART 1 OF 2
ASSET PURCHASE AGREEMENT
GREAT BEND INDUSTRIES DIVISION
OF
HEIN-WERNER CORPORATION
<PAGE> 2
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. PURCHASE AND SALE OF ASSETS............................................ 1
1.1. Definition of "Business"...................................... 1
1.2. Assets to be Transferred...................................... 1
1.3. Excluded Assets............................................... 3
2. ASSUMPTION OF LIABILITIES.............................................. 3
2.1. Liabilities to be Assumed..................................... 3
2.2. Liabilities Not to be Assumed................................. 4
3. PURCHASE PRICE - PAYMENT............................................... 5
3.1. Purchase Price................................................ 5
3.2. Payment of Purchase Price..................................... 5
3.3. Determination of Net Asset Value.............................. 6
3.4. Prorations.................................................... 8
4. REPRESENTATIONS AND WARRANTIES OF COMPANY.............................. 9
4.1. Corporate..................................................... 9
4.2. Authority..................................................... 9
4.3. No Violation.................................................. 10
4.4. Business Financial Statements................................. 10
4.5. Absence of Certain Changes.................................... 10
4.6. No Litigation................................................. 11
4.7. Compliance With Laws.......................................... 11
4.8. Environmental................................................. 11
4.9. Title to Properties........................................... 12
4.10. Contracts and Commitments..................................... 12
4.11. Employee Benefit Plans........................................ 13
4.12. Employment Compensation....................................... 13
4.13. Trade Rights.................................................. 14
4.14. Major Customers and Suppliers................................. 14
4.15. No Brokers or Finders......................................... 14
4.16. Extraordinary Warranty Expense................................ 15
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT..................... 15
5.1. Corporate..................................................... 15
5.2. Authority..................................................... 15
5.3. No Violation.................................................. 15
5.4. No Brokers or Finders......................................... 16
6. EMPLOYEES - EMPLOYEE BENEFITS - TRANSITION............................. 16
6.1. Business Employees............................................ 16
6.2. Data Processing............................................... 17
6.3. Payroll Tax................................................... 17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
6.4. Employee Benefit Plans........................................ 17
6.5. Continued Supply to Company................................... 17
7. OTHER MATTERS.......................................................... 17
7.1. Environmental Matters......................................... 17
7.2. Escrow Agreement.............................................. 19
7.3. HSR Act Filings............................................... 19
7.4. Access to Information and Records............................. 19
7.5. Collection of Accounts Receivable............................. 20
7.6. Litigation Cooperation........................................ 20
7.7. Product Marking............................................... 21
7.8. Schwing Receivable/Inventory.................................. 21
8. FURTHER COVENANTS OF COMPANY........................................... 21
8.1. Conduct of Business Pending the Closing....................... 21
8.2. Consents...................................................... 22
8.3. Other Action.................................................. 22
8.4. Disclosure.................................................... 22
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS............................ 22
9.1. Representations and Warranties True on the Closing Date....... 23
9.2. Compliance With Agreement..................................... 23
9.3. Hart-Scott-Rodino Waiting Period.............................. 23
9.4. Termination of Lease for Airport Facility..................... 23
9.5. Environmental Report/Environmental Indemnity.................. 23
9.6. Absence of Certain Events/Conditions.......................... 24
10. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS.......................... 24
10.1. Representations and Warranties True on the Closing Date....... 24
10.2. Compliance With Agreement..................................... 24
10.3. Hart-Scott-Rodino Waiting Period.............................. 24
10.4. Environmental Costs........................................... 24
11. INDEMNIFICATION........................................................ 25
11.1. By Company.................................................... 25
11.2. By Buyer and Parent........................................... 25
11.3. Indemnification of Third-Party Claims......................... 25
11.4. Payment....................................................... 26
11.5. Limitations on Indemnification................................ 26
12. CLOSING................................................................ 27
12.1. Documents to be Delivered by Company.......................... 27
12.2. Documents to be Delivered by Buyer............................ 28
13. TERMINATION............................................................ 29
13.1. Right of Termination Without Breach........................... 29
13.2. Termination for Breach........................................ 29
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
14. COVENANT NOT TO COMPETE................................................ 30
14.1. Non-Competition............................................... 30
14.2. Enforcement................................................... 30
14.3. Injunctive Relief............................................. 30
15. RESOLUTION OF DISPUTES................................................. 31
15.1. Arbitration................................................... 31
15.2. Arbitrators................................................... 31
15.3. Procedures; No Appeal......................................... 31
15.4. Authority..................................................... 31
15.5. Entry of Judgment............................................. 31
15.6. Confidentiality............................................... 31
15.7. Continued Performance......................................... 31
15.8. Tolling....................................................... 31
15.9. Escrow Agent Unnecessary...................................... 32
16. MISCELLANEOUS.......................................................... 32
16.1. Further Assurance............................................. 32
16.2. Disclosures and Announcements................................. 32
16.3. Assignment; Parties in Interest............................... 32
16.4. Law Governing Agreement....................................... 32
16.5. Amendment and Modification.................................... 32
16.6. Notice........................................................ 32
16.7. Expenses...................................................... 34
16.8. Entire Agreement.............................................. 34
16.9. Counterparts.................................................. 35
16.10. Headings...................................................... 35
</TABLE>
iii
<PAGE> 5
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement") dated April 9,
1997, by and among KAYDON CORPORATION, a Delaware corporation ("Parent"), KAYDON
ACQUISITION VIII, INC., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Buyer"), and HEIN-WERNER CORPORATION, a Wisconsin corporation
("Company").
RECITALS
A. Company is engaged, through its Great Bend Industries
Division, in the manufacture and sale of hydraulic cylinders.
B. The Great Bend Industries Division business is
carried on at a leased facility located at 8701 6th Street, Great Bend, Kansas
(the "Main Facility") and leased facilities known as buildings H and J in the
Bestec complex of the Westport Addition to the City of Great Bend, Kansas (the
"Airport Facility) (together the Main Facility and the Airport Facility are
sometimes referred to as the "Facilities").
C. Buyer desires to purchase from Company, Parent
desires to cause Buyer to purchase from Company and Company desires to sell to
Buyer, the business and substantially all of the property and assets of
Company's Great Bend Industries Division, as set forth herein.
NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows.
1. PURCHASE AND SALE OF ASSETS
1.1. Definition of "Business". As used herein, the term "Business"
shall mean the business of the Great Bend Industries Division of Company at the
Facilities.
1.2. Assets to be Transferred. Subject to the terms and conditions
of this Agreement, on the Closing Date (as hereinafter defined) Company shall
sell, transfer, convey, assign, and deliver to Buyer, and Buyer shall purchase
and accept, the following assets of the Business owned by Company:
1.2.(a) Leased Real Property. The leases of real property
with respect to the Main Facility (the "Real Property Leases") as
described in Schedule 1.2.(a) with respect to the real property
described thereon (the "Leased Real Property").
1.2.(b) Personal Property. All machinery, equipment,
vehicles, tools, supplies, spare parts, furniture and all other
personal property owned by the Company located at the Facilities not
included in inventory (other than personal property leased pursuant to
Personal Property Leases as hereinafter defined).
<PAGE> 6
1.2.(c) Inventory. All inventories of raw materials,
work-in-process and finished goods of the Business owned by the Company
on the Closing Date, together with related packaging materials
(collectively the "Inventory").
1.2.(d) Personal Property Leases. All leases of machinery,
equipment, vehicles, furniture and other personal property utilized by
the Business at the Facilities (the "Personal Property Leases")
described in Schedule 1.2.(d).
1.2.(e) Trade Rights. Any Trade Rights of the Business owned
by the Company. As used herein, the term "Trade Rights" shall mean and
include: (i) all trademark rights, business identifiers, trade dress,
service marks, trade names, and brand names, all registrations thereof
and applications therefor and all goodwill associated with the
foregoing; (ii) all copyrights, copyright registrations and copyright
applications, and all other rights associated with the foregoing and
the underlying works of authorship; (iii) all patents and patent
applications and all intellectual property rights associated therewith;
(iv) all contracts or agreements granting any right, title, license or
privilege under the intellectual property rights of any third party;
(v) all inventions, mask works and mask work registrations, know-how,
discoveries, improvements, designs, trade secrets, shop and royalty
rights, employee covenants and agreements respecting intellectual
property and non-competition and all other types of intellectual
property; and (vi) all claims for infringement or breach of any of the
foregoing described in Schedule 1.2.(e).
1.2.(f) Contracts. All the Company's rights in, to and under
all contracts, purchase orders and sales orders (hereinafter
"Contracts") of the Business, including but not limited to, the
Contracts listed in Schedule 1.2(f). To the extent that any Contract
for which assignment to Buyer is provided herein is not assignable
without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if such
assignment or attempted assignment would constitute a breach thereof.
Company and Buyer agree to use their reasonable best efforts (without
any requirement on the part of Buyer to pay any money or agree to any
change in the terms of any such Contract) to obtain the consent of such
other party to the assignment of any such Contract to Buyer in all
cases in which such consent is or may be required for such assignment.
If any such consent shall not be obtained, Company agrees to cooperate
with Buyer in any reasonable arrangement designed to provide for Buyer
the benefits intended to be assigned to Buyer under the relevant
Contract.
1.2.(g) Computer Software and Hardware. Except as described
in Section 1.3.(e), all computer hardware of the Business owned by the
Company at the Facilities and all of Company's right, title and
interest, if any, in and to computer software utilized in conjunction
with such computer hardware.
1.2.(h) Literature. All sales literature, promotional
literature, catalogs and similar materials of the Business owned by the
Company.
1.2.(i) Records and Files. All records, files, invoices,
customer lists, blueprints, specifications, designs, drawings,
accounting records, business records, operating data and other data of
the Business owned by the Company.
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<PAGE> 7
1.2.(j) Notes and Accounts Receivable. All notes, drafts and
accounts receivable of the Business, except for those described in
Section 1.3.(f) hereof.
1.2.(k) Licenses; Permits. All licenses, permits and
approvals of the Business, including those described in Schedule
1.2.(k).
1.2.(l) Business Name. Company's right, title and interest in
the name "Great Bend Industries," and all rights to use or allow others
to use such name.
1.3. Excluded Assets. Company shall retain all of its rights,
claims and assets not described in Section 1.2. Without limiting the generality
of the foregoing, and any contrary provisions of Section 1.2 notwithstanding,
Company shall not sell, transfer, assign, convey or deliver to Buyer, and Buyer
will not purchase or accept the following assets of Company:
1.3.(a) Cash and Cash Equivalents. All cash and cash
equivalents, other than petty cash balances at Facilities of the
Business.
1.3.(b) Consideration. The consideration delivered by Buyer
to Company pursuant to this Agreement.
1.3.(c) Tax Credits and Records. Federal, state and local
income and franchise tax credits and tax refund claims and associated
returns and records.
1.3.(d) Insurance. All policies of insurance, including all
prepaid insurance.
1.3.(e) Computer Software and Hardware. The "Symix" software
and all computer hardware utilized in connection with "Symix" listed on
Schedule 1.3.(e).
1.3.(f) Intercompany Receivable. Intercompany accounts
receivable of the Business from the Company or any subsidiary or
affiliate of the Company.
2. ASSUMPTION OF LIABILITIES
2.1. Liabilities to be Assumed. As used in this Agreement, the term
"Liability" shall mean and include any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured. Subject to the
terms and conditions of this Agreement, on the Closing Date, Buyer shall assume
and agree to perform and discharge (and Parent shall cause Buyer to assume and
agree to perform and discharge) the following Liabilities of Company
(collectively the "Assumed Liabilities"):
2.1.(a) Final Closing Balance Sheet Liabilities. The
liabilities and obligations reflected or reserved against on the Final
Closing Business Balance Sheet (as hereinafter defined).
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<PAGE> 8
2.1.(b) Contractual Liabilities. Company's Liabilities
arising from and after the Closing Date under and pursuant to (i) all
purchase orders and sales orders of the Business, (ii) all contracts
described in any of Schedules 1.2.(a), 1.2.(d), 1.2.(f), 4.10.(d),
(iii) all other contracts entered into in the ordinary course of
business of the Business other than contracts relating to employees or
employee benefits which are assumed only to the extent otherwise
expressly assumed under this Agreement.
The Contracts described in this subsection 2.1.(b) above are
hereinafter collectively described as the "Assumed Contracts."
2.1.(c) Liabilities Under Permits and Licenses. Company's
Liabilities arising from and after the Closing Date under all permits
or licenses of and assigned to Buyer at the Closing.
2.1.(d) Product Liability. Except as and to the extent set
forth in Section 2.2.(c), Company's liabilities and obligations arising
out of or relating to or resulting from past and present products of
the Business, for products liability, which term shall include any
liability or obligation of Company for claims made for injury to
person, damage to property or other damage (whether made in product
liability, tort, breach of warranty or otherwise).
2.1.(e) Product Warranty. Companies liabilities and
obligations with respect to products of the Business under and pursuant
to the Business' product warranties.
2.1.(f) Environmental Liabilities. All liability from and
relating to the generation, management, handling, transportation,
treatment, storage, disposal, delivery, discharge, release or emission
of any Hazardous Substances (as hereinafter defined) by Company, or any
action, omission or condition affecting the environment arising from
the conduct of the Business, except to the extent such liability
relates to a Company Off-Site Release (as hereinafter defined) or to
the extent Company retains responsibility pursuant to Company's
indemnification in Section 11.1(d) of this Agreement or pursuant to the
Environmental Indemnity Agreement referred to in Section 9.5 of this
Agreement.
2.1.(g) Other Liabilities. Except as provided in Section
2.1(b) or 2.2, all other Liabilities of the Business incurred in the
ordinary course of business of the Business.
2.2. Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.1, Buyer is not assuming any Liabilities of
Company and all such Liabilities shall be and remain the responsibility of
Company. Notwithstanding the provisions of Section 2.1, Buyer is not assuming
and Company shall not be deemed to have transferred to Buyer the following
Liabilities of Company:
2.2.(a) Income and Franchise Taxes. Any Liability of Company
for Federal income taxes and any state or local income, profit or
franchise taxes (and any penalties or interest due on account thereof)
or any liability for sales, bulk sales use,
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<PAGE> 9
transfer, stamp or document taxes except to the extent reflected or
reserved against on the Final Closing Business Balance Sheet.
2.2.(b) Accounts Payable. Accounts payable of the Business.
2.2.(c) Product Liability. Company's liabilities and
obligations arising out of or relating to or resulting from past and
present products of the Business manufactured and sold prior to the
Closing Date, for products liability, which term shall include any
liability or obligation of Company for claims made for injury to
person, damage to property or other damage (whether made in product
liability, tort, breach of warranty or otherwise), with respect to
occurrences on or prior to April 30, 1998.
2.2.(d) Indebtedness. Any indebtedness for borrowed money for
the Business and the capitalized leases listed on Schedule 2.2.(d)
except the Lease Agreement dated August 1, 1994 between Company and
Central Kansas Development Corporation.
2.2.(e) Intercompany Payables. Intercompany payables of the
Business to the Company or any subsidiary or affiliate of the Company.
2.2.(f) Environmental Liabilities. Liabilities of the Company
relating to a release (as that term is most broadly defined by any
federal, state or local statute pertaining to the protection of the
environment) by the Company of any Hazardous Substances (as hereinafter
defined) prior to Closing at any location other than the Leased Real
Property ("Property"), including but not limited to any liabilities
arising out of the generation, management, handling, transportation,
treatment, storage, disposal, delivery, discharge or emission of
Hazardous Substances not at the Property. Such releases will be
referred to in this Agreement as "Company Off-Site Releases".
3. PURCHASE PRICE - PAYMENT
3.1. Purchase Price. The purchase price (the "Purchase Price") for
the Purchased Assets shall be Twenty Two Million Dollars ($22,000,000) plus or
minus, as the case may be, the difference between Seven Million Eight Thousand
Five Hundred Nine Dollars ($7,008,509) and the Net Asset Value at the Effective
Time.
3.2. Payment of Purchase Price. Buyer and Parent, jointly and
severally, agree to pay the Purchase Price. The Purchase Price shall be paid by
Buyer (and Parent shall cause the Purchase Price to be paid by Buyer) as
follows:
3.2.(a) Assumption of Liabilities. At the Closing, Buyer
shall deliver to Company such documents and instruments as are
reasonably required to evidence the assumption of the Assumed
Liabilities.
3.2.(b) Cash to Escrow Agent. At the Closing, Buyer shall
deliver to the Escrow Agent, under the Escrow Agreement (as defined in
Section 7.2), the sum of Two Million Dollars ($2,000,000).
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<PAGE> 10
3.2.(c) Cash to Company. At the Closing, Buyer shall deliver
to Company the sum of Twenty Two Million Dollars ($22,000,000) less the
amount paid to the Escrow Agent pursuant to Subsection 3.2.(b) above,
plus or minus, as the case may be the difference between Seven Million
Eight Thousand Five Hundred Nine Dollars ($7,008,509) and the Net Asset
Value as reflected on the Estimated Business Closing Balance Sheet.
3.2.(d) Adjustment of Final Cash Purchase Price. On or before
the fifth (5th) business day following the final determination of the
Final Closing Business Balance Sheet (as hereinafter defined) (the
"Settlement Date"): (a) if the Net Asset Value as reflected on the
Estimated Business Closing Balance Sheet exceeds the Net Asset Value as
reflected on the Final Closing Business Balance Sheet, then the Escrow
Agent shall disburse to the Buyer, an amount equal to the sum of the
amount by which the Net Asset Value as reflected on the Estimated
Closing Business Balance Sheet exceeds the Net Asset Value as reflected
on the Final Closing Business Balance Sheet plus interest on such
amount accrued from the Closing Date to the date of payment at a rate
equal to the average interest rate paid on the Escrow Fund during the
period (if the Net Asset Value as reflected on the Estimated Closing
Business Balance Sheet exceeds the Net Asset Value as reflected on the
Final Closing Business Balance Sheet (plus interest on such amount as
aforesaid) by an amount greater than the amount held in Escrow, then
the Buyer shall be entitled, in addition to amounts received from the
Escrow Agent to receive from Company a payment so that the total amount
received from the Escrow Agent, plus the payment from Company to Buyer
shall equal the amount by which the Net Asset Value of Company as
reflected on the Estimated Closing Business Balance Sheet exceeds the
Net Asset Value as reflected on the Final Closing Business Balance
Sheet, plus interest at the average interest rate paid on the Escrow
Fund during the period), (b) if the Net Asset Value as reflected on the
Final Closing Business Balance Sheet exceeds the Net Asset Value as
reflected on the Estimated Closing Business Balance Sheet, then the
Buyer shall pay to the Company an amount equal to the sum of the amount
by which the Net Asset Value as reflected on the Final Closing Business
Balance Sheet exceeds the Net Asset Value as reflected on the Estimated
Closing Business Balance Sheet plus interest on such amount accrued
from the Closing Date to the date of payment at a rate equal to the
average interest rate paid on the Escrow Fund during the period.
3.2.(e) Method of Payment. All payments under this Section
3.2 shall be made in the form of certified or bank cashier's check
payable to the order of the recipient or, at the recipient's option, by
wire transfer of immediately available funds to an account designated
by the recipient not less than forty-eight (48) hours prior to the time
for payment specified herein.
3.3. Determination of Net Asset Value.
3.3.(a) Definition of "Business Balance Sheet". The term
"Business Balance Sheet" as used herein shall mean a schedule in the
form of a corporate balance sheet showing the net book values, as of a
specified time, of the respective categories of assets and liabilities
set forth in the Recent Business Balance Sheet (as defined in
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<PAGE> 11
Section 4.4), but reflecting only the Purchased Assets and the Assumed
Liabilities. Each Business Balance Sheet shall be in form and level of
detail as nearly as possible identical to, and in its accounting
principles and policies consistent in every respect with, the Recent
Business Balance Sheet (except that inventory shall be based on a
physical inventory, except that there shall be no reserve for bad debts
and except that there shall be established a "Warranty Reserve" in the
amount of Two Hundred Fifty Thousand Dollars ($250,000)), and
accompanied by schedules setting forth in reasonable detail all assets
and liabilities included therein. Each Business Balance Sheet or its
accompanying schedules shall contain sufficient detail of the Purchased
Assets and Assumed Liabilities for the determination of Net Asset Value
as defined below.
3.3.(b) Definition of "Net Asset Value." The term "Net Asset
Value" shall mean the dollar amount by which the net book value of the
Purchased Assets exceeds the net book value of the Assumed Liabilities,
both as reflected in the Final Closing Business Balance Sheet or
Estimated Closing Business Balance Sheet, as applicable. Only Purchased
Assets and Assumed Liabilities shall be considered in the calculation
of Net Asset Value.
3.3.(c) Estimated Closing Business Balance Sheet. For
purposes of determining the Net Asset Value and the Purchase Price
payable by the Buyer at the Closing, not less than ten (10) business
days prior to the Closing Date, Company shall, in consultation with the
Buyer, prepare and deliver to Buyer a Business Balance Sheet as of the
close of business on the Closing Date (hereinafter the "Effective
Time") which shall represent Company's reasonable estimate of the Final
Closing Business Balance Sheet (the "Estimated Closing Business Balance
Sheet").
3.3.(d) Final Closing Business Balance Sheet. The Final
Closing Business Balance Sheet prepared as of the Effective Time shall
be prepared as follows:
(i) As of the Effective Time, Company shall take
a physical inventory. Within forty-five (45) days after the
Closing Date, Company shall deliver to Buyer a Business
Balance Sheet as of the Effective Time. Such Business Balance
Sheet shall be accompanied by detailed schedules of the
Purchased Assets (except that there shall be no reserve for
bad debts) and Assumed Liabilities and setting forth the
amount of any adjustment to the Purchase Price to be paid and
by whom pursuant to Section 3.2.(d) hereof.
(ii) Within thirty (30) days following the
delivery of the Business Balance Sheet referred to in (i)
above, Buyer may object to any of the information contained in
said balance sheet or accompanying schedules which could
affect the necessity or amount of any payment by Buyer or
Company pursuant to Section 3.2.(d) hereof. Any such objection
shall be made in writing and shall state Buyer's determination
of the amount of the Net Asset Value.
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<PAGE> 12
(iii) In the event of a dispute or disagreement
relating to the balance sheet or schedules which Buyer and
Company are unable to resolve, either party may elect to have
all such disputes or disagreements resolved by an accounting
firm of nationally recognized standing (the "Third Accounting
Firm") to be mutually selected by Company and Buyer or, if no
agreement is reached, by Company's accountants and Buyer's
accountants. The Third Accounting Firm shall make a resolution
of the Business Balance Sheet as of the Effective Time and the
calculation of Net Asset Value, which shall be final and
binding for purposes of this Article 3. The Third Accounting
Firm shall be instructed to use every reasonable effort to
perform its services within fifteen (15) days of submission of
the balance sheet to it and, in any case, as soon as
practicable after such submission. The fees and expenses for
the services of the Third Accounting Firm shall be shared by
Buyer and Company as follows:
Company shall pay a percentage of such fees and
expenses equal to A/(A+B) and Buyer shall pay a percentage of
such fees and expenses equal to B/(A+B), where A is equal to
the absolute value of the difference (in dollars) between Net
Asset Value as finally determined by the Third Accounting Firm
and Net Asset Value as reflected in the objection prepared and
delivered by Company in accordance with Section 3.3.(d)(ii),
and B is equal to the absolute value of the difference (in
dollars) between Net Asset Value as finally determined by the
Third Accounting Firm and Net Asset Value as reflected in the
report prepared and delivered by Buyer in accordance with
Section 3.3.(d)(i). As used in this Agreement, the term "Final
Closing Business Balance Sheet" shall mean the Business
Balance Sheet as of the Effective Time as finally determined
for purposes of this Article 3, whether by acquiescence of
Company in the figures supplied by Buyer in accordance with
Section 3.3.(d)(i), by negotiation and agreement of the
parties or by the Third Accounting Firm in accordance with
Section 3.3.(d)(iii).
(iv) Buyer and Company agree to permit the other,
their accountants and their respective representatives, during
normal business hours, to have reasonable access to, and to
examine and make copies of, all books and records of the
Business and access to representatives of their accountants,
which documents and access are necessary to prepare and review
the Business Balance Sheet. In addition, Buyer's accountants
shall have the opportunity to observe the taking of the
inventory in connection with the preparation of such balance
sheet.
3.4. Prorations. The following prorations relating to the Purchased
Assets will be made as of the Effective Time, with Company liable to the extent
such items relate to any time period up to and including the Effective Time if
not already taken into account on the Final Closing Business Balance Sheet and
Buyer liable to the extent such items relate to periods subsequent to the
Effective Time. Except as otherwise specifically provided herein, the net amount
of all such prorations will be settled and paid on the Settlement Date as
provided by Section 3.2.(d) hereof:
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<PAGE> 13
3.4.(a) Personal property taxes, real estate taxes and
assessments and other taxes, if any, on or with respect to the
Purchased Assets.
3.4.(b) Rents, additional rents, taxes and other items
payable by Company under any lease, license, permit, contract or other
agreement or arrangement to be assigned to or assumed by Buyer.
3.4.(c) The amount of rents, taxes and charges for sewer,
water, fuel, telephone, electricity and other utilities.
3.4.(d) All other items normally adjusted in connection with
similar transactions.
If the actual expense of any of the above items for the billing period
within which the Effective Time falls is not known on the Settlement Date, the
proration shall be made based on the expense incurred in the previous billing
period, for expenses billed less often than quarterly, and on the average
expense incurred in the preceding three billing periods, for expenses billed
quarterly or more often. Company agrees to furnish Buyer with such documents and
other records as shall be reasonably requested in order to confirm all proration
calculations.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY
Company makes the following representations and warranties to Buyer.
4.1. Corporate.
4.1.(a) Organization. Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Wisconsin.
4.1.(b) Corporate Power. Company has all requisite corporate
power and authority to own, operate and lease its properties, to carry
on its business as and where such is now being conducted, to enter into
this Agreement and the other documents and instruments to be executed
and delivered by Company pursuant hereto and to carry out the
transactions contemplated hereby and thereby.
4.1.(c) No Subsidiaries. No portion of the Business is
conducted by the Company by means of any subsidiary or any other
interest in any corporation, partnership or other entity.
4.2. Authority. The execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by Company
pursuant hereto and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors of Company. No other
or further corporate act or proceeding on the part of Company or its
shareholders is necessary to authorize this Agreement or the other documents and
instruments to be executed and delivered by Company pursuant hereto or the
consummation of the transactions contemplated hereby and thereby. This Agreement
constitutes,
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<PAGE> 14
and when executed and delivered, the other documents and instruments to be
executed and delivered by Company pursuant hereto will constitute, valid binding
agreements of Company, enforceable in accordance with their respective terms,
except as such may be limited by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights generally, and by general equitable principles.
4.3. No Violation. Except as set forth on Schedule 4.3, neither the
execution and delivery of this Agreement or the other documents and instruments
to be executed and delivered by Company pursuant hereto, nor the consummation by
Company of the transactions contemplated hereby and thereby (a) except for
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act"), will require any authorization, consent, approval,
exemption or other action by or notice to any government entity, or (b) subject
to obtaining the necessary consents or giving of notices, will violate or
conflict with, or constitute a default under any term or provision of the
Articles of Incorporation or By-laws of Company or of any contract, commitment,
understanding, arrangement, agreement or restriction of any kind or character to
which Company is a party or by which Company or any of its assets or properties
may be bound or affected.
4.4. Business Financial Statements. Included as Schedule 4.4. are
financial statements of the Business (the "Business Financial Statements"),
consisting of (i) balance sheets of the Business as of December 31, 1995 and as
of December 31, 1996, (the latter such balance sheet sometimes referred to
herein as "Recent Business Balance Sheet"), and (ii) statements of income and
expense of the Business for the years then ended. All of such financial
statements were prepared from and consistent in all respects with, such
financial reports as have been prepared and used by the Company in the ordinary
course in managing the Business and measuring and reporting its operating
results; have been prepared from the financial records of the Company, which
financial records of the Company were compiled in accordance with generally
accepted accounting principles.
4.5. Absence of Certain Changes. Except as and to the extent set
forth in Schedule 4.5, since the date of the Recent Business Balance Sheet there
has not been:
4.5.(a) No Adverse Change. Any material adverse change in the
operations of the Business;
4.5.(b) No Damage. Any material loss, damage or destruction,
whether covered by insurance or not, in connection with or affecting
the Business or the Purchased Assets;
4.5.(c) No Increase in Compensation. Any material increase in
the compensation, salaries or wages payable or to become payable to any
employee or agent of Company who is employed in the Business or whose
compensation is reflected in the Business Financial Statements
(including, without limitation, any material increase in any bonus,
pension, profit sharing, retirement or other plan or commitment);
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<PAGE> 15
4.5.(d) No Labor Disputes. Any material labor dispute or
disturbance, other than routine individual grievances which are not
material to the financial condition or results of operations of the
Business;
4.5.(e) No Disposition of Property. Any material sale, lease
or other transfer or disposition of any material assets of Company that
are Purchased Assets (or would have been Purchased Assets had no sale,
lease, transfer or disposition occurred), except for the sale of
inventory items in the ordinary course of business; or
4.5.(f) No Unusual Events. Any other material event or
condition not in the ordinary course of Company's operation of the
Business.
4.6. No Litigation. Except as set forth in Schedule 4.6 there is no
material action, suit or arbitration proceeding ("Litigation") pending or, to
the knowledge of officers of the Company, threatened against Company or its
directors (in such capacity) that involves the Business, the Purchased Assets or
the Assumed Liabilities. Except as set forth in Schedule 4.6, neither Company,
nor the Purchased Assets nor the Assumed Liabilities is subject to any judgment,
order, writ or injunction of any court, arbitrator or governmental agency
relating to the Business.
4.7. Compliance With Laws. Except as set forth in Schedule 4.7, the
Business (including each and all of its operations, practices, properties and
assets) is in substantial compliance with all material respects with all
applicable federal, state, local and foreign laws, ordinances, orders, rules and
regulations, including, without limitation, those applicable to discrimination
in employment, occupational safety and health, building and sanitation,
employment, retirement and labor relations and product advertising; provided
that there is excepted from this representation and warranty any representation
and warranty with respect to Environmental Laws, which are the subject of
Section 4.8 below. Except as set forth in Schedule 4.7, Company has not received
notice of any violation or alleged violation of, such laws, ordinances, orders,
rules or regulations with respect to the operations of the Business. All reports
required to be filed by Company with respect to the Business with any Government
Entity have been filed, and were accurate and complete when filed.
4.8. Environmental. To the knowledge of officers of the Company and
the President of the Great Bend Industries Division and except as disclosed on
Schedule 4.8 or in the Kejr Reports referred to in Section 7.1 or in the
Environmental Report referred to in Section 7.1, with respect to the Business:
4.8.(a) Company is in substantial compliance in all material
respects with all Environmental Laws (as hereinafter defined).
4.8.(b) Company has received no written communication,
whether from a governmental authority, citizens group, lender, employee
or otherwise, that alleges that Company is not in substantial
compliance in all material respects with any Environmental Law.
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4.8.(c) Company does not currently hold nor is Company
obligated to hold any permits, licenses, registrations or other
federal, state or local governmental authorizations pursuant to the
Environmental Laws.
4.8.(d) Company has not received any written notice of any
civil, criminal or administrative action, claim, demand, investigation
or notice alleging violation of Environmental Laws ("Environmental
Claim") pending or threatened against (i) Company, (ii) any person or
entity whose liability for any Environmental Claim Company has or may
have retained or assumed either contractually or by operation of law,
or (iii) any real or personal property which Company owns, leases or
manages or participates in the management of, or previously owned,
leased or managed, or participated in the management of, or in which
Company holds or has previously held a security interest in connection
with a loan or loan participation, other than such as would not, either
individually or in the aggregate, have a material adverse effect on the
business, results of operations, financial condition, assets or
liabilities of Business.
4.9. Title to Properties. Company has good and marketable title to
all the Purchased Assets, free and clear of all mortgages, liens (statutory or
otherwise), security interests, claims, pledges, licenses, equities, options,
conditional sales contracts, assessments, levies, easements, covenants,
reservations, restrictions, rights-of-way, exceptions, limitations, charges or
encumbrances of any nature whatsoever (collectively, "Liens") except those
described in Schedule 4.9 or the other Schedules hereto; liens which will be
satisfied upon the payment of liabilities reflected or reserved against the
Final Closing Business Balance Sheet; and, in the case of real property, Liens
for taxes not yet due or which are being contested in good faith by appropriate
proceedings (and which have been sufficiently accrued or reserved against in the
Recent Business Balance Sheet), municipal and zoning ordinances and easements
for public utilities, none of which interfere with the use of the property as
currently utilized ("Permitted Real Property Liens") and except that Company is
making no representations or warranties regarding any intellectual property
including patents, trademarks, applications therefor, engineering and production
information and know-how except as set forth in Section 4.13.
4.10. Contracts and Commitments.
4.10.(a) Real Property Leases. Except as set forth in Schedule
1.2.(a), Company has no leases of real property used or held for use in
connection with the Business or the Purchased Assets.
4.10.(b) Personal Property Leases. Except as set forth in
Schedule 1.2.(d), Company has no leases of personal property used or
held for use in connection with the Business or the Purchased Assets
involving consideration or other expenditure in excess of Twenty-Five
Thousand Dollars ($25,000) involving performance over a period of more
than thirty-six (36) months after the Effective Time.
4.10.(c) Collective Bargaining Agreements. Except as set forth
in Schedule 4.10.(c), Company is not a party to any collective
bargaining agreements with any unions, guilds, shop committees or other
collective bargaining groups representing
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or purporting to represent employees of the Business. Copies of all
such agreements have heretofore been delivered to Buyer.
4.10.(d) Other Material Contracts. Company has no lease,
license, contract or commitment of any nature affecting the Business
and involving consideration or other expenditure in excess of
Twenty-Five Thousand Dollars ($25,000), or involving performance over a
period of more than thirty-six (36) months after the Effective Time,
except as described in Schedule 4.10.(d) or in any other Schedule. To
the knowledge of officers of the Company, Company is not in material
default under any contract or agreement identified in Schedules
1.2.(a), 1.2.(d), 4.10.(c) or 4.10.(d).
4.11. Employee Benefit Plans.
4.11.(a) Disclosure. Schedule 4.11.(a) sets forth all pension,
thrift, savings, profit sharing, retirement, incentive bonus or other
bonus, medical, dental, life, accident insurance, benefit, employee
welfare, disability, group insurance, stock purchase, stock option,
stock appreciation, stock bonus, executive or deferred compensation,
hospitalization and other similar fringe or employee benefit plans,
programs and arrangements, and any employment or consulting contracts,
"golden parachutes," collective bargaining agreements, severance
agreements or plans, vacation and sick leave plans, programs,
arrangements and policies, including, without limitation, all "employee
benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), for the benefit of
any persons employed by Company in its operation of the Business
("Business Employees"). The items described in the foregoing sentence
are hereinafter sometimes referred to collectively as "Employee
Plans/Agreements," and each individually as an "Employee
Plan/Agreement." A true and correct description and copies of all the
Employee Plans/Agreements, including all amendments thereto, have
heretofore been provided to Buyer. No Employee Plan/Agreement is a
"multiemployer plan" (as defined in Section 4001 of ERISA) and the
Company has never been a contributing employer to such a multiemployer
plan at a time or in a manner which could expose Buyer, directly or
indirectly, to withdrawal liability.
4.11.(b) Payments and Compliance. With respect to each
Employee Plan/Agreement, (i) all payments due from Company to date have
been made and all amounts properly accrued to date as Liabilities of
Company (and all amounts not yet accrued but which will accrue or
become due with respect to periods of employment prior to the Closing
Date) which have not been paid and will be paid by the Company or will
be reflected in the Final Closing Balance Sheet; (ii) Company has
substantially complied with, and each such Employee Plan/Agreement
conforms in all material respects in form and operation to, all
applicable laws and regulations, including but not limited to ERISA and
the Code, and (iii) there are no actions, suits or claims pending
(other than routine claims for benefits) or threatened with respect to
such Employee Plan/Agreement or against the assets of such Employee
Plan/Agreement.
4.12. Employment Compensation. Schedule 4.12 contains a list of all
Employees of the Business as of a date not more than thirty (30) days prior to
the date hereof. Such list
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is substantially accurate in all material respects. Except (i) as listed on the
attached Schedule 4.12 or in any other Schedule hereto, (ii) to the extent
reflected or reserved against on the Final Closing Business Balance Sheet, or
(iii) pursuant to Employee Plans/Agreements described in Section 4.11.(a), there
is no material claim of any employee or any former employee of Company for any
unpaid compensation or remuneration of any nature, including, without
limitation, contingent salaries, incentive payments, pension benefits (whether
or not vested), (excluding benefits to be paid in the future from pension trusts
established and administered for such purpose by Company), medical expense
reimbursement, vacation pay, severance payments and other awards, interests and
payments.
4.13. Trade Rights. Schedule 4.13 lists all Trade Rights of the type
described in clauses (i), (iii) or (iv) of Section 1.2.(e) which are or were
used, held for use, or acquired or developed for use in the Business, or
developed in the course of conducting the Business or by persons employed in the
Business, specifying whether such Trade Rights are owned, controlled, used or
held (under license or otherwise) by Company, and also indicating which of such
Trade Rights are registered. To the knowledge of officers of the Company, in
order to conduct the Business, as such is currently being conducted or proposed
to be conducted, Company does not require any Trade Rights that it does not
already have. To the knowledge of officers of the Company, Company is not
infringing and has not infringed any Trade Rights of another in the operation of
the Business, nor is any other person infringing the Trade Rights of Company.
Company has not granted any license or made any assignment of any Trade Right
listed on Schedule 4.13, and no other person has any right to use any such Trade
Right. Company does not pay any royalties or other consideration for the right
to use any Trade Rights of others. There is no Litigation pending or to the
knowledge of officers of the Company threatened to challenge Company's right,
title and interest with respect to its continued use and right to preclude
others from using any Trade Rights of Company.
4.14. Major Customers and Suppliers.
4.14.(a) Major Customers. Schedule 4.14.(a) contains a list of
the ten (10) largest customers of the Business for each of the two (2)
most recent fiscal years (determined on the basis of the total dollar
amount of net sales). Officers of the Company have no knowledge or
information of any facts indicating that any of the customers listed on
Schedule 4.14.(a) will not continue to be customers of the Business
after the Closing.
4.14.(b) Major Suppliers. Schedule 4.14.(b) contains a list of
the ten (10) largest suppliers to the Business for each of the two (2)
most recent fiscal years (determined on the basis of the total dollar
amount of purchases). Officers of the Company have no knowledge or
information of any facts indicating that any of the suppliers listed on
Schedule 4.14.(b) will not continue to be suppliers to the Business
after the Closing.
4.15. No Brokers or Finders. Neither Company nor any of its
directors, officers, employees, shareholders or agents have retained, employed
or used any broker or finder in connection with the transaction provided for
herein or in connection with the negotiation thereof.
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4.16. Extraordinary Warranty Expense. Except for the products which
are the subject of the Schwing Disputed Receivable, the Business does not have
any liability under the Business' product warranties for damaged or defective
products (including products not made to allowed tolerances) which have resulted
from recurring similar defects in materials or workmanship (as opposed to
normal, occasional or usual deficiencies), which recurring similar defects are
found in a substantial number of the same products manufactured for a single
customer, which will result in warranty expense exceeding the warranty reserve
set forth on the Final Closing Business Balance Sheet.
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
Buyer and Parent, jointly and severally, make the following
representations and warranties to Company:
5.1. Corporate.
5.1.(a) Organization. Buyer and Parent are each corporations
duly organized, validly existing and in good standing under the laws of
the State of Delaware.
5.1.(b) Corporate Power. Buyer and Parent each have all
requisite corporate power to enter into this Agreement and the other
documents and instruments to be executed and delivered by Buyer and/or
Parent and to carry out the transactions contemplated hereby and
thereby.
5.2. Authority. The execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by Buyer and
Parent pursuant hereto and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of Buyer
and the Board of Directors of Parent. No other corporate act or proceeding on
the part of Buyer or Parent or their shareholders is necessary to authorize this
Agreement or the other documents and instruments to be executed and delivered by
Buyer and/or Parent pursuant hereto or the consummation of the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered, the other documents and instruments to be executed and delivered
by Buyer and/or Parent pursuant hereto will constitute, valid and binding
agreements of Buyer and/or Parent, as the case may be, enforceable in accordance
with their respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally,
and by general equitable principles.
5.3. No Violation. Except as set forth on Schedule 5.3, neither the
execution and delivery of this Agreement or the other documents and instruments
to be executed and delivered by Buyer and/or Parent pursuant hereto, nor the
consummation by Buyer and Parent of the transactions contemplated hereby and
thereby (a) except for applicable requirements of the HSR Act, will require any
authorization, consent, approval, exemption or other action by or notice to any
Government Entity, or (b) subject to obtaining the necessary consents or giving
of Notices, will violate or conflict with, or constitute a default under any
term or provision of the Articles of Incorporation or By-laws of Buyer or of
Parent or of any contract, commitment,
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understanding, arrangement, agreement or restriction of any kind or character to
which Buyer or Parent is a party or by which Buyer or Parent or any of their
respective assets or properties may be bound or affected.
5.4. No Brokers or Finders. Neither Buyer, Parent nor any of their
respective directors, officers, employees or agents have retained, employed or
used any broker or finder in connection with the transaction provided for herein
or in connection with the negotiation thereof.
6. EMPLOYEES - EMPLOYEE BENEFITS - TRANSITION
6.1. Business Employees. Certain of the Company's employees
("Bargaining Unit Employees") are represented by the International Association
of Machinists and Aerospace Workers District No. 70 (the "Union"). The Union and
the Company are parties to a collective bargaining agreement effective June 19,
1995 through June 14, 1998 (the "Collective Bargaining Agreement"). Buyer does
not agree to assume the Collective Bargaining Agreement. Instead, prior to the
Effective Time, Buyer will consult with the Union regarding modifications
desired by Buyer to the Collective Bargaining Agreement to become effective at
such time as Buyer becomes a successor employer under the National Labor
Relations Act. At Buyer's election exercised by notice to the Company at the
Closing, Buyer shall either (i) enter into a new collective bargaining agreement
with the Union incorporating the modifications agreed to by the Buyer and the
Union; or (ii) offer employment to substantially all Bargaining Unit Employees
conditioned upon their acceptance of initial terms and conditions of employment
as established by Buyer; provided, however, that any such initial terms and
conditions of employment shall include the Bargaining Unit Employee's wage rate
at the time of Closing. Buyer represents to the Company that following the
Closing it will comply with any obligations Buyer may have under the National
Labor Relations Act to recognize the Union.
With respect to all other employees of the Business at the
Effective Time (other than employees who were represented by the Union prior to
the Effective Time), all such employees shall become employees of Buyer (it
being understood that Buyer is not making any commitment to maintain such
employees as employees for any specific period of time or at any specific pay or
benefit levels, but at their base hourly or salaried pay rates at the Effective
Time). With respect to all employees of the Business who become employees of the
Buyer at the Effective Time, Buyer shall thereupon be solely responsible for all
pay and benefits with respect to such employees for services rendered after the
Effective Time. With respect to all employees of the Business at the Effective
Time, Buyer shall also pay or otherwise satisfy all properly accrued and
disclosed vacation, holiday and sick time due to employees of the Business at
the Effective Time. After the Effective Time, Buyer shall also be responsible
for any "COBRA" obligations for any current or former employees of the Business
and their dependents.
Buyer agrees to assume full responsibility for compliance with
any plant closing or similar laws, including WARN Act notices, if any, which may
be required as a result of employment losses caused by the transactions provided
for herein or by reason of any events occurring at or after the Effective Time.
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6.2. Data Processing. After the Effective Time and until December
31, 1997, or such earlier date as Buyer shall notify Company of its election to
terminate such assistance and services, Company agrees to provide data
processing assistance and services to the Business as conducted by Buyer after
the Effective Time. Such data processing assistance and services shall be of
substantially the same kind and amount as Company is at the Effective Time
providing to the Business from its Waukesha Headquarters facility. Such
assistance and services shall be provided without charge to Buyer for the period
from the Effective Time through August 12, 1997. For the period August 13, 1997
through August 31, 1997, Buyer shall pay Company the amount of Four Thousand
Nine Hundred Seventy-Four ($4,974) for such assistance and services; such amount
to be due in advance on or before August 13, 1997. Thereafter, Buyer shall pay
Company the amount of Eight Thousand One Hundred Sixteen ($8,116) per month for
such assistance and services; such amount to be paid in advance on the first day
of each month during the continuance of such assistance and services.
6.3. Payroll Tax. Company agrees to make a clean cut-off of payroll
and payroll tax reporting with respect to the Affected Employees paying over to
the federal, state and city governments those amounts respectively withheld or
required to be withheld for employment through the Effective Time. Company also
agrees to issue, by the date prescribed by IRS Regulations, Forms W-2 for wages
paid through the Effective Time. Except as set forth in this Agreement, Buyer
shall be responsible for all payroll and payroll tax obligations after the
Effective Time for Affected Employees.
6.4. Employee Benefit Plans.
6.4.(a) Defined Contribution Plans. Company shall cause the
interest of each of the Business' Employees as of the Effective Time in
the Hein-Werner Retirement and Savings Plan and Trust to be fully
vested and nonforfeitable as of the Effective Time. In all other
respects, each such person shall be treated as any other terminated
participant in accordance with the provisions of said plan.
6.4.(b) No Third-Party Rights. Nothing in this Agreement,
express or implied, is intended to confer upon any of Company's
employees, former employees, collective bargaining representatives, job
applicants, any association or group of such persons or any affected
employees any rights or remedies of any nature or kind whatsoever under
or by reason of this Agreement, including, without limitation, any
rights of employment.
6.5. Continued Supply to Company. Buyer agrees following the
Closing and until Buyer provides at least ninety (90) days notice of its
termination of the arrangement, to continue to supply Company on reasonable
terms and conditions, hydraulic cylinders for use in Company's collision repair
product line.
7. OTHER MATTERS
7.1. Environmental Matters.
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7.1.(a) Environmental Due Diligence. Buyer acknowledges that
Kejr Science Group, Inc. performed an environmental site assessment of
the Main Facility in 1994 (the ("Kejr Reports"). The Buyer shall prior
to closing arrange and pay for an environmental investigation and
assessment (the "Environmental Report"), of the Leased Real Property
("Property") as set forth in Subsection 7.1.(b) below. The
Environmental Report shall be completed prior to Closing and shall be
delivered to Company not later than ten (10) days prior to Closing.
Buyer agrees that it will treat all information obtained from the
Company or otherwise obtained as a result of its review and
investigation of the Business as confidential information, and shall
not, unless otherwise required by law, disclose such information to any
persons other than the parties, their legal counsel, environmental
consultants, and institutional lenders.
7.1.(b) Contents of Environmental Report. The Environmental
Report, as directed by Buyer, shall update and supplement the Kejr
Reports, shall evaluate the Property for compliance with Environmental
Laws, shall express an opinion as to compliance with such laws and more
specifically (i) shall, to the extent feasible, specifically identify
any Hazardous Substances released on the Property by Company or its
predecessors which are then present on, under or adjacent to the
Property ("Identified Company Releases"); (ii) shall, to the extent
feasible, specifically identify any Hazardous Substances released by a
third party which are then present on or under the Property
("Identified Third Party Releases"); and (iii) shall, to the extent
feasible, specifically identify any Company Off-Site Releases.
Notwithstanding the foregoing, the scope and nature of the
Environmental Report and the investigation of the Property conducted by
Buyer is within Buyer's reasonable discretion. In the event Company
believes the investigation or the Environmental Report fails to
adequately characterize Hazardous Substances or their source, or is
otherwise deficient, then Company, at its own cost and expense may
undertake such additional testing, studies or evaluation as Company
deems appropriate.
7.1.(c) Company Cooperation. Company shall cooperate with the
Buyer's consultant as reasonably requested by Buyer to prepare the
Environmental Report, including but not limited to providing reasonable
access to the Property and reasonable access to necessary records. At
Buyer's reasonable request, Company shall arrange interviews with
appropriate employees of the Company.
7.1.(d) Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below.
(i) "Hazardous Substances" shall mean, without
limitation, any material or substance: (i) the presence of
which requires investigation, remediation or any other
response under any federal, state or local statute,
regulation, ordinance, order, action, policy, or common law;
or (ii) which is or becomes defined as a "hazardous waste,"
"hazardous substance," "pollutant", or "contaminant" under any
federal, state, or local statute, regulation, rule, or
ordinance or amendments thereto including, without limitation,
the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. ss.9601 et seq.) and/or the Resource
Conservation
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and Recovery Act (42 U.S.C. ss.6901 et seq.); (iii) which is
toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or otherwise hazardous
or dangerous and is or becomes regulated by any governmental
authority, department, commission, board, agency, or
instrumentality of the United States, the state of Kansas or
any political subdivision thereof; or (iv) the presence of
which on the Property causes or threatens to cause a nuisance
or other damage or harm upon such properties or to other
properties, poses or threatens to pose a hazard to the health
or safety of persons on or about the Property or other
properties, or poses or threatens to pose a harm to the
environment or natural resources wherever they may be located;
or (v) the presence of which on properties other than the
Property could constitute a trespass; or (vi) which contains
gasoline, diesel fuel, or other petroleum hydrocarbons; or
(vii) which contains polychlorinated biphenyls (PCBs),
asbestos, urea formaldehyde foam insulation, radon gas,
asbestos or asbestos-containing materials or lead-based paint.
(ii) "Environmental Laws" shall mean, without
limitation, any federal, state, county or municipal statute,
ordinance, regulations, rule, order, judgment or decree or
common law pursuant to any federal or state court decision
applicable to the Property, including without limitation the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601 et seq.)
("CERCLA"), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. ss. 6901 et seq.), the comparable state
laws relating to Hazardous Materials and the regulations
adopted and publications promulgated pursuant to such federal,
state or local laws and regulations.
7.2. Escrow Agreement. At the Closing, Company and Buyer shall
execute and deliver an Escrow Agreement (the "Escrow Agreement") in the form of
Exhibit 1 hereto.
7.3. HSR Act Filings. To the extent such filings have not been
completed prior to the execution of this Agreement, each of Company and Buyer
shall, in cooperation with the other, file any reports or notifications that may
be required to be filed by it under the HSR Act, with the Federal Trade
Commission and the Antitrust Division of the Department of Justice, and shall
furnish to the other all such information in its possession as may be necessary
for the completion of the reports or notifications to be filed by the other.
Prior to making any communication, written or oral, with the Federal Trade
Commission, the Antitrust Division of the federal Department of Justice or any
other governmental agency or authority or members of their respective staffs
with respect to this Agreement or the transactions contemplated hereby, the
Company shall consult with Buyer.
7.4. Access to Information and Records.
7.4.(a) Prior to Closing. During the period prior to the
Closing, Company shall give Buyer, its counsel, accountants and other
representatives (i) reasonable access during normal business hours to
all of the properties, books, records, contracts and documents of
Company relating to the Business or the Purchased Assets
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or Assumed Liabilities for the purpose of such inspection,
investigation and testing as Buyer deems appropriate (and Company shall
furnish or cause to be furnished to Buyer and its representatives all
information with respect to the Business Buyer may request); and (ii)
reasonable access to employees, agents and representatives of the
Business for the purpose of such meetings and communications as Buyer
reasonably desires; and (iii) with the prior written consent of Company
in each instance and subject to such reasonable terms and conditions as
Company shall require, Company shall arrange for joint visits of
Company and Buyer with the four (4) largest customers (in terms of the
Business' sales to such customers during the preceding twelve (12)
months) of the Business.
7.4.(b) After Closing. After the Closing, each party will
afford the other party, its counsel, accountants and other
representatives, during normal business hours, reasonable access to the
books, records and other data in such party's possession relating
directly or indirectly to the properties, liabilities or operations of
the Business, with respect to periods prior to the Closing, and the
right to make copies and extracts therefrom, to the extent that such
access may be reasonably required by the requesting party for any
proper business purpose. Each party agrees for a period extending eight
(8) years after the Closing not to destroy or otherwise dispose of any
such records without first offering in writing to surrender such
records to the other party, which party shall have ten (10) days after
such offer to agree in writing to take possession thereof.
7.5. Collection of Accounts Receivable. Company shall use its
commercially reasonable efforts to collect for Buyer's account all accounts
receivable balances set forth on the Final Closing Balance Sheet and shall
promptly remit to Buyer all amounts collected. To facilitate collection of
accounts receivable, Buyer agrees to reasonably discharge its obligations under
and pursuant to the Business' product warranties as assumed by Buyer pursuant to
Paragraph 2.1.(e). Company shall apply all accounts receivable payments received
from customers to the specific invoices for which such payments are submitted if
correlation of specific invoices with such payments is reasonably possible and,
if such correlation is not reasonably possible, then such payments shall be
applied to that customer's oldest outstanding accounts receivable balance first.
Buyer shall promptly transfer, assign and deliver to the Company all of Buyer's
right, title and interest in and to any receivables reflected in the Final
Closing Business Balance Sheet which are not collected within one hundred twenty
(120) days following Closing. Buyer shall reasonably assist in collection
efforts following the transfer of such receivables. Buyer will not adjust any
accounts receivable balances reflected on the Final Closing Business Balance
Sheet without the written consent of the Company, which consent shall not be
unreasonably withheld. Notwithstanding anything contained in this Section 7.5 to
the contrary, Company shall undertake collection efforts in substantially the
same manner after the Closing as is customary in the collection of accounts
receivable arising from Company's business prior to the Closing Date, provided
that Company shall not be required to file suit, employ the services of a
collection agency or commence any other official proceeding in order to collect
any delinquent accounts included in Company's accounts receivable.
7.6. Litigation Cooperation. The parties agree after the Closing to
cooperate with one another in connection with any litigation, claim, action or
proceeding involving the Business including without cost (except reimbursement
of out-of-pocket expenses), providing copies of
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drawings and other documents and providing employees as witnesses or otherwise
to assist in such litigation, all as reasonably requested from time to time by
the parties.
7.7. Product Marking. Buyer agrees that with respect to all
products of the Business manufactured or sold after the closing Date that it
will mark such products so that such can be clearly identified as having been
manufactured or sold after the Closing Date.
7.8. Schwing Receivable/Inventory. The Business has for several
years supplied Schwing America ("Schwing") and currently supplies Schwing
several different hydraulic cylinders. There is presently a dispute with Schwing
regarding one of the hydraulic cylinders. Schwing has debited the receivable due
from Schwing to the Business for a portion of the problem and Company
anticipates that at the Effective Time there will be a receivable due from
Schwing in the amount of approximately One Hundred Thousand Dollars ($100,000)
which as a result of the foregoing is disputed by Schwing (the "Schwing Disputed
Receivable"). Schwing has shipped back to the company the product from which the
Schwing Disputed Receivable arose, but such product (the "Schwing Disputed
Product") has not been reflected on the books of the Business as inventory.
Company has agreed to "rework" certain of the Schwing Disputed Product and
subject to Schwing's successful testing of such reworked product, Schwing has
agreed to accept and pay for such reworked product after the Effective Time.
Buyer agrees to reasonably cooperate with Company in reworking (as and to the
extent reasonably requested by Company) the Schwing Disputed Product and
otherwise in assisting Company to collect the Schwing Disputed Receivable. To
the extent such costs are not appropriately billed to, and actually collected
from, Schwing, Company shall promptly, upon the submission of invoices therefor,
reimburse Buyer for Buyer's reasonable cost of labor and material (but not
burden) incurred by Buyer in reworking (as and to the extent reasonably
requested by Company) the Schwing Disputed Product ("Buyer Schwing Reworking
Costs"). At the end of one (1) year following Closing, Company shall pay to
Buyer the amount, if any, of the Schwing Disputed Receivable out of the amount
held in Escrow which is not actually collected within one (1) year following
Closing. Company and Buyer agree that the Schwing Disputed Receivable shall be
reflected on the Estimated Closing Business balance Sheet and the Final Closing
Business Balance Sheet at its full value and that the Schwing Disputed Product
shall not be reflected as inventory on the Estimated Closing Business Balance
Sheet on the Final Closing Business Balance Sheet. The agreement set forth in
this Section 7.8 shall constitute the parties entire agreement of the parties
with respect to the matters which are the subject hereof and shall supersede the
other provisions of this Agreement that may otherwise be applicable.
8. FURTHER COVENANTS OF COMPANY
Company covenants and agrees as follows:
8.1. Conduct of Business Pending the Closing. From the date hereof
until the Closing, except as otherwise approved in writing by the Buyer:
8.1.(a) No Changes. Company will carry on the Business
diligently and substantially in the same manner as heretofore and will
not make or institute any material changes in its methods of purchase,
sale, management, accounting or operation.
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8.1.(b) Maintain Organization. Company will use reasonable
efforts to maintain, preserve, renew and keep in favor and effect the
existence, rights and franchises of the Business and will use
reasonable efforts to preserve the Business intact, to keep available
to Buyer the present officers and employees of the Business, and to
preserve for Buyer its present relationships with suppliers and
customers and others having business relationships with the Business.
8.1.(c) No Breach. Company will not do or omit any act, or
permit any omission to act, which may cause a material breach of any
contract, commitment or obligation material to the Business, or any
breach of any representation, warranty, covenant or agreement made by
Company herein, or which would have required disclosure on Schedule 4.5
had it occurred after the date of the Recent Business Balance Sheet and
prior to the date of this Agreement.
8.1.(d) New Contracts. No contract or commitment will be
entered into, and no purchase of raw materials or supplies and no sale
of goods or services (real, personal, or mixed, tangible or intangible)
will be made, by or on behalf of Company in connection with its
operation of the Business, except contracts, commitments, purchases or
sales which are in the ordinary course of business and consistent with
past practice.
8.1.(e) Maintenance of Property. Company shall use, operate,
maintain and repair all property constituting Purchased Assets
hereunder in a normal business manner.
8.1.(f) Interim Financials. Company will provide Buyer with
interim monthly financial statements of the Business as and when they
are available.
8.2. Consents. Company will use reasonable efforts prior to Closing
to obtain all consents necessary for the consummation of the transactions
contemplated hereby including those described in Schedule 8.2.
8.3. Other Action. Company shall use reasonable efforts to cause
the fulfillment at the earliest practicable date of all of the conditions to the
parties' obligations to consummate the transactions contemplated in this
Agreement.
8.4. Disclosure. Company shall have a continuing obligation to
promptly notify Buyer in writing with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in any Schedule hereto.
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
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9.1. Representations and Warranties True on the Closing Date. Each
of the representations and warranties made by Company in this Agreement, and the
statements contained in the Disclosure Schedule or in any instrument, list,
certificate or writing delivered by Company pursuant to this Agreement, shall be
true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date,
except for any changes permitted by the terms of this Agreement or consented to
in writing by Buyer. Buyer's actions pursuant to Section 6.1 with respect to the
Collective Bargaining Agreement, the Bargaining Unit Employees and other
employees of the Business shall be solely the responsibility of Buyer and Buyer
and/or Parent shall not be entitled to claim that the conditions provided for in
this Section 9.1 has not been satisfied as a result of any event, fact or
circumstance which results directly or indirectly, in whole or in part, from any
actions by Buyer and/or Parent pursuant to Section 6.1 or otherwise.
9.2. Compliance With Agreement. Company shall have in all material
respects performed and complied with all of its agreements and obligations under
this Agreement which are to be performed or complied with by Company prior to or
on the Closing Date, including the delivery of the closing documents specified
in Section 12.1.
9.3. Hart-Scott-Rodino Waiting Period. All applicable waiting
periods related to the HSR Act shall have expired.
9.4. Termination of Lease for Airport Facility. Company shall have
terminated the lease with respect to the Airport Facility and all material,
equipment and other assets of Company shall be removed from the Airport Facility
and all such equipment and assets which are material to Company's operations
shall have been placed into the Main Facility in a functional manner.
9.5. Environmental Report/Environmental Indemnity. Buyer shall have
received either of the following:
9.5.(a) The Environmental Report identified in section 7.1(a)
of this Agreement which does not identify any recognized environmental
conditions ("RECs") (as defined in the ASTM E 1527 Standards on
Environmental Site Assessments for Commercial Real Estate, 2nd. ed.)
which are also Identified Company Releases or which are also Identified
Third Party Releases which Buyer reasonably determines to pose a
substantial risk of material cost, liability or expense to Buyer or a
significant potential for material interference with Buyer's intended
uses or operations at the Property; or
9.5.(b) An Environmental Indemnity Agreement, substantially
in the form attached hereto as Exhibit 2, in which Company agrees to
remediate or otherwise address to the reasonable satisfaction of Buyer
all RECs which are:
(i) Identified Company Releases; and
(ii) Identified Third Party Releases which Buyer
reasonably determines to pose a substantial risk of material
cost, liability or expense to
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Buyer or a significant potential for material interference
with Buyer's intended uses or operations at the Property.
9.6. Absence of Certain Events/Conditions. There shall not have
been, and Buyer shall not have discovered any event, fact or circumstance
(including without limitation fire, flood, explosion, act of God, act of any
government, governmental subdivision or governmental agency, decreased customer
demand or termination or modification of an advantageous contract or business
relationship of the Business, whether or not any such event is covered by
insurance) which shows that there has been, since the date of the Recent
Business Balance Sheet any material adverse change in the assets or operations
of the Business. Buyer's actions pursuant to Section 6.1 with respect to the
Collective Bargaining Agreement, the Bargaining Unit Employees and other
employees of the Business shall be solely the responsibility of Buyer and Buyer
and/or Parent shall not be entitled to claim that the condition provided for in
this Section 9.6 has not been satisfied as a result of any event, fact or
circumstance which results directly or indirectly, in whole or in part, from any
actions by Buyer (and/or Parent) pursuant to Section 6.1 or otherwise.
10. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS
Each and every obligation of Company to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of the
following conditions:
10.1. Representations and Warranties True on the Closing Date. Each
of the representations and warranties made by Buyer and Parent in this Agreement
shall be true and correct in all material respects when made and shall be true
and correct in all material respects at and as of the Closing Date as though
such representations and warranties were made or given on and as of the Closing
Date.
10.2. Compliance With Agreement. Buyer and Parent shall have in all
material respects performed and complied with all of Buyer's and Parent's
agreements and obligations under this Agreement which are to be performed or
complied with by Buyer and Parent prior to or on the Closing Date, including the
delivery of the closing documents specified in Section 12.2.
10.3. Hart-Scott-Rodino Waiting Period. All applicable waiting
periods related to the HSR Act shall have expired.
10.4. Environmental Costs. Company's anticipated expenditures which
would be incurred under and pursuant to the proposed Environmental Indemnity
Agreement referred to in Section 9.5 shall not exceed Fifty Thousand Dollars
($50,000).
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11. INDEMNIFICATION
11.1. By Company. Subject to the terms and conditions of this
Article 11, Company hereby agrees to indemnify, defend and hold harmless Buyer
and Parent, and their respective directors, officers, employees and controlled
and controlling persons (hereinafter "Buyer's affiliates"), from and against all
Claims asserted against, resulting to, imposed upon, or incurred by Buyer,
Parent, Buyer's affiliates, the Business or the Purchased Assets, directly or
indirectly, by reason of, arising out of or resulting from (a) the inaccuracy or
breach of any representation or warranty of Company contained in or made
pursuant to this Agreement; (b) the breach of any covenant of Company contained
in this Agreement; (c) all accounts receivable reflected on the Final Closing
Business Balance Sheet which are not actually collected within one hundred
twenty (120) days following Closing (the "Accounts Receivable Adjustment"), (d)
any Claims initiated by a third party, including, without limitation, any
federal, state or local governmental agency, department or section against Buyer
with respect to any Identified Third Party Releases, provided such Claims are
initiated prior to April 30, 2005, or (e) any Claim of or against Company, the
Purchased Assets or the Business not specifically assumed by Buyer pursuant
hereto. As used in this Article 11, the term "Claim" shall include (i) all
Liabilities; (ii) all losses, damages (including, without limitation,
consequential damages), judgments, awards, settlements, costs and expenses
(including, without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs and attorneys fees and expenses); and
(iii) all demands, claims, actions, costs of investigation, causes of action,
proceedings and assessments, whether or not ultimately determined to be valid.
11.2. By Buyer and Parent. Subject to the terms and conditions of
this Article 11, Buyer and Parent, jointly and severally, hereby agree to
indemnify, defend and hold harmless Company, its directors, officers, employees
and controlling persons, from and against all Claims asserted against, resulting
to, imposed upon or incurred by any such person, directly or indirectly, by
reason of or resulting from (a) the inaccuracy or breach of any representation
or warranty of Buyer and/or Parent contained in or made pursuant to this
Agreement; (b) the breach of any covenant of Buyer and/or Parent contained in
this Agreement; and (c) all Claims of or against Company specifically assumed by
Buyer pursuant hereto, including any Claim under and pursuant to the WARN Act
and any Claim arising out of any liability assumed by Buyer pursuant to
paragraph 2.1 of this Agreement.
11.3. Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other under this Article 11 with
respect to Claims relating to third parties shall be subject to the following
terms and conditions:
11.3.(a) Notice and Defense. The party or parties to be
indemnified (whether one or more, the "Indemnified Party") will give
the party from whom indemnification is sought (the "Indemnifying
Party") prompt written notice of any such Claim, and the Indemnifying
Party will undertake the defense thereof by representatives chosen by
it. So long as the Indemnifying Party is defending any such Claim
actively and in good faith, the Indemnified Party shall not settle such
Claim. The Indemnified Party shall make available to the Indemnifying
Party or its representatives all records and other materials required
by them and in the possession or under the control of the
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Indemnified Party, for the use of the Indemnifying Party and its
representatives in defending any such Claim, and shall in other
respects give reasonable cooperation in such defense.
11.3.(b) Failure to Defend. If the Indemnifying Party, within
a reasonable time after notice of any such Claim, fails to defend such
Claim actively and in good faith, the Indemnified Party will (upon
further notice) have the right to undertake the defense, compromise or
settlement of such Claim or consent to the entry of a judgment with
respect to such Claim, on behalf of and for the account and risk of the
Indemnifying Party, and the Indemnifying Party shall thereafter have no
right to challenge the Indemnified Party's defense, compromise,
settlement or consent to judgment.
11.3.(c) Indemnified Party's Rights. Anything in this Section
11 to the contrary notwithstanding, the Indemnifying Party shall not,
without the written consent of the Indemnified Party, settle or
compromise any Claim or consent to the entry of any judgment which does
not include as an unconditional term thereof the giving by the claimant
or the plaintiff to the Indemnified Party of a release from all
Liability in respect of such Claim.
11.4. Payment. The Indemnifying Party shall promptly pay the
Indemnified Party any amount due under this Article 11, which payment may be
accomplished in whole or in part, at the option of the Indemnified Party, by the
Indemnified Party setting off any amount owed to the Indemnifying Party by the
Indemnified Party. To the extent set-off is made by an Indemnified Party in
satisfaction or partial satisfaction of an indemnity obligation under this
Article 11 that is disputed by the Indemnifying Party, upon a subsequent
determination by final judgment not subject to appeal that all or a portion of
such indemnity obligation was not owed to the Indemnified Party, the Indemnified
Party shall pay the Indemnifying Party the amount which was set off and not owed
together with interest from the date of set-off until the date of such payment
at an annual rate equal to the average annual rate in effect as of the date of
the set-off, on those three maturities of United States Treasury obligations
having a remaining life, as of such date, closest to the period from the date of
the set-off to the date of such judgment. Upon judgment, determination,
settlement or compromise of any third party Claim, the Indemnifying Party shall
pay promptly on behalf of the Indemnified Party, and/or to the Indemnified Party
in reimbursement of any amount theretofore required to be paid by it, the amount
so determined by judgment, determination, settlement or compromise and all other
Claims of the Indemnified Party with respect thereto, unless in the case of a
judgment an appeal is made from the judgment. If the Indemnifying Party desires
to appeal from an adverse judgment, then the Indemnifying Party shall post and
pay the cost of the security or bond to stay execution of the judgment pending
appeal. Upon the payment in full by the Indemnifying Party of such amounts, the
Indemnifying Party shall succeed to the rights of such Indemnified Party, to the
extent not waived in settlement, against the third party who made such third
party Claim.
11.5. Limitations on Indemnification.
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11.5.(a) Time Limitation. No claim or action shall be brought
under this Article 11 for breach of a representation or warranty after
the lapse of two (2) years following the Closing.
11.5.(b) Amount Limitation. An Indemnified Party shall not be
entitled to indemnification under this Article 11 for breach of a
representation or warranty except to the extent the aggregate of the
Indemnifying Party's indemnification obligations to the Indemnified
Party pursuant to this Article 11 (but for this Section 11.5.(b))
exceeds Fifty Thousand Dollars ($50,000).
12. CLOSING
The closing of this transaction ("the Closing") shall take place at the
offices of Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin, at
10:00 A.M. on May 12, 1997, or at such other time and place as the parties
hereto shall agree upon. Such date is referred to in this Agreement as the
"Closing Date".
12.1. Documents to be Delivered by Company. At the Closing, Company
shall deliver to Buyer the following documents, in each case duly executed or
otherwise in proper form:
12.1.(a) Bills of Sale. Bills of sale and such other
instruments of assignment, transfer, conveyance and endorsement as will
be sufficient in the opinion of Buyer and its counsel to transfer,
assign, convey and deliver to Buyer the Purchased Assets as
contemplated hereby.
12.1.(b) Compliance Certificate. A certificate signed by the
chief executive officer of Company that each of the representations and
warranties made by Company in this Agreement is true and correct in all
material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made or given on
and as of the Closing Date (except for any changes permitted by the
terms of this Agreement or consented to in writing by Buyer), and that
Company has performed and complied with all of Company's obligations
under this Agreement which are to be performed or complied with on or
prior to the Closing Date.
12.1.(c) Opinion of Counsel. A written opinion of Foley &
Lardner, counsel to Company, dated as of the Closing Date, addressed to
Buyer, substantially in the form of Exhibit 3 hereto.
12.1.(d) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Company authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
12.1.(e) Escrow Agreement. The Escrow Agreement duly executed
by Company and the Escrow Agent in the form of Exhibit 1 hereto.
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12.1.(f) Other Documents. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Buyer may reasonably request.
12.2. Documents to be Delivered by Buyer. At the Closing, Buyer
shall deliver to Company, and Parent shall cause Buyer to deliver to Company,
the following documents, in each case duly executed or otherwise in proper form:
12.2.(a) Cash Purchase Price. To Company a certified or bank
cashier's check (or wire transfer) as required by Section 3.2.(c)
hereof, and to the Escrow Agent, a certified or bank cashier's check
(or wire transfer) as required by Section 3.2.(c) hereof.
12.2.(b) Assumption of Liabilities. Such undertakings and
instruments of assumption as will be reasonably sufficient in the
opinion of Company and its counsel to evidence the assumption of
Company debts, liabilities and obligations as provided for in Article
2.
12.2.(c) Compliance Certificate. A certificate signed by the
chief executive officer of Buyer that the representations and
warranties made by Buyer in this Agreement are true and correct on and
as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the
Closing Date (except for any changes permitted by the terms of this
Agreement or consented to in writing by Company), and that Buyer has
performed and complied with all of Buyer's obligations under this
Agreement which are to be performed or complied with on or prior to the
Closing Date.
12.2.(d) Opinion of Counsel. A written opinion of Lague,
Newman & Irish, counsel to Buyer and Parent, dated as of the Closing
Date, addressed to Company, in substantially the form of Exhibit 4
hereto.
12.2.(e) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Buyer and Parent authorizing
and approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
12.2.(f) Escrow Agreement. The Escrow Agreement duly executed
by Buyer and the Escrow Agent in the form of Exhibit 1 hereto.
12.2.(g) Other Documents. All other documents, instruments or
writings required to be delivered to Company at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Company may reasonably request.
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13. TERMINATION
13.1. Right of Termination Without Breach. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing:
13.1.(a) by written agreement of Buyer, Parent and Company, or
13.1.(b) by either Buyer and Parent or by Company if the
Closing shall not have occurred on or before June 30, 1997, provided
the terminating party has not, through breach of a representation,
warranty or covenant, prevented the Closing from occurring on or before
such date.
13.2. Termination for Breach.
13.2.(a) Termination by Buyer. If (i) there has been a
material violation or breach by Company of any of the agreements,
representations or warranties contained in this Agreement which has not
been waived in writing by Buyer and Parent, or (ii) there has been a
failure of satisfaction of a condition to the obligations of Buyer and
Parent which has not been so waived, including but not limited to the
provisions of Paragraph 9.5 hereof, or (iii) Company shall have
attempted to terminate this Agreement under this Article 13 or
otherwise without grounds to do so, then Buyer and Parent may, by
written notice to Company at any time prior to the Closing that such
violation, breach, failure or wrongful termination attempt is
continuing, terminate this Agreement with the effect set forth in
Section 13.2.(c) hereof.
13.2.(b) Termination by Company. If (i) there has been a
material violation or breach by Buyer or Parent of any of the
agreements, representations or warranties contained in this Agreement
which has not been waived in writing by Company, or (ii) there has been
a failure of satisfaction of a condition to the obligations of Company
which has not been so waived, or (iii) Buyer and/or Parent shall have
attempted to terminate this Agreement under this Article 13 or
otherwise without grounds to do so, then Company may, by written notice
to Buyer and Parent at any time prior to the Closing that such
violation, breach, failure or wrongful termination attempt is
continuing, terminate this Agreement with the effect set forth in
Section 13.2.(c) hereof.
13.2.(c) Effect of Termination. Termination of this Agreement
pursuant to this Section 13.2 shall not in any way terminate, limit or
restrict the rights and remedies of any party hereto against any other
party which has violated, breached or failed to satisfy any of the
representations, warranties, covenants, agreements, conditions or other
provisions of this Agreement prior to termination hereof. In addition
to the right of any party under common law to redress for any such
breach or violation, each party whose breach or violation has occurred
prior to termination shall jointly and severally indemnify each other
party for whose benefit such representation, warranty, covenant,
agreement or other provision was made ("indemnified party") from and
against all losses, damages (including, without limitation,
consequential damages), costs and expenses (including, without
limitation, interest (including prejudgment interest in any litigated
matter), penalties, court costs, and attorneys fees and expenses)
asserted against,
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resulting to, imposed upon, or incurred by the indemnified party,
directly or indirectly, by reason of, arising out of or resulting from
such breach or violation. Subject to the foregoing, the parties'
obligations under Section 16.7 of this Agreement shall survive
termination.
14. COVENANT NOT TO COMPETE
14.1. Non-Competition. Following the Closing, and for a period of
ten (10) years following the Closing, Company agrees not to directly or
indirectly engage or participate in the business of the manufacture of hydraulic
cylinders for sale to original equipment manufacturers or, as replacement parts
therefor, in competition with the business conducted by Buyer utilizing the
purchased assets and business (a "Competing Business"). Nothing herein shall
prohibit Company from manufacturing hydraulic cylinders for its own use or the
use of subsidiaries and affiliates (and as replacement parts for products
manufactured by the Company, its subsidiaries or affiliates) in substantially
the same manner and to substantially the same extent as Company now manufactures
hydraulic cylinders for its own use or use of its subsidiaries and affiliates.
Nothing herein shall prohibit any person or entity from owning five percent (5%)
or less of a publicly traded company which conducts a business which is
competitive with Buyer's business. The foregoing covenant not to compete shall
not be deemed violated, if in connection with an acquisition by the Company, (i)
it acquires as a part thereof a business engaged in a "Competing Business"
providing that such Competing Business comprises for the twelve (12) months
prior to the acquisition no more than twenty percent (20%) (measured by sales)
of the acquired business and Buyer disposes of such Competing Business within
two (2) years following the acquisition or (ii) it acquires as a part thereof a
business engaged in the manufacture of hydraulic cylinders utilized by the
acquired business, continues such manufacture of hydraulic cylinders for
utilization of the acquired business in substantially the same manner and to
substantially the same extent as at the date of acquisition.
14.2. Enforcement. The provisions of the covenant contained in this
Section 14 are severable and independent and shall be interpreted and applied
consistently with requirements of reasonableness and equity. If any provision of
the covenant contained in this Section 14 shall be held to be invalid or
otherwise unenforceable, in whole or in part, the remainder of the provisions,
or the enforceable parts thereof, shall not be affected thereby.
14.3. Injunctive Relief. Buyer and Company acknowledge that
compliance by Company with the covenant contained in this Section 14 is
necessary to protect the interests of Buyer and that a breach of the covenant
contained in this Section 14 will result in irreparable and continuing damage to
Buyer for which there will be no adequate remedy at law. Company hereby agrees,
without intending to limit the remedies available to Buyer, that Buyer and its
successors and assigns shall be entitled to injunctive relief with respect to
the covenant contained in this Section 14 in addition to such other and further
relief as may be appropriate.
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15. RESOLUTION OF DISPUTES
15.1. Arbitration. Any dispute, controversy or claim arising out of
or relating to this Agreement or any contract or agreement entered into pursuant
hereto or the performance by the parties of its or their terms shall be settled
by binding arbitration held in Milwaukee, Wisconsin in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect.
15.2. Arbitrators. If the matter in controversy (exclusive of
attorney fees and expenses) shall appear, as at the time of the demand for
arbitration, to exceed One Million Dollars ($1,000,000), then the panel to be
appointed shall consist of three neutral arbitrators; otherwise, one neutral
arbitrator.
15.3. Procedures; No Appeal. The arbitrator(s) shall allow such
discovery as the arbitrator(s) determine appropriate under the circumstances and
shall resolve the dispute as expeditiously as practicable, and if reasonably
practicable, within one hundred twenty (120) days after the selection of the
arbitrator(s). The arbitrator(s) shall give the parties written notice of the
decision, with the reasons therefor set out, and shall have thirty (30) days
thereafter to reconsider and modify such decision if any party so requests
within ten (10) days after the decision. Thereafter, the decision of the
arbitrator(s) shall be final, binding, and nonappealable with respect to all
persons, including (without limitation) persons who have failed or refused to
participate in the arbitration process.
15.4. Authority. The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or preliminary
relief, and to allocate responsibility for the costs of the arbitration and to
award recovery of attorneys fees and expenses in such manner as is determined to
be appropriate by the arbitrator(s).
15.5. Entry of Judgment. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject matter
jurisdiction. Company, Buyer and each Shareholder hereby submit to the in
personam jurisdiction of the Federal and State courts in Wisconsin, for the
purpose of confirming any such award and entering judgment thereon.
15.6. Confidentiality. All proceedings under this Article 15, and
all evidence given or discovered pursuant hereto, shall be maintained in
confidence by all parties.
15.7. Continued Performance. The fact that the dispute resolution
procedures specified in this Article 15 shall have been or may be invoked shall
not excuse any party from performing its obligations under this Agreement and
during the pendency of any such procedure all parties shall continue to perform
their respective obligations in good faith, subject to any rights to terminate
this Agreement that may be available to any party and to the right of setoff
provided in Section 11.4 hereof.
15.8. Tolling. All applicable statutes of limitation shall be tolled
while the procedures specified in this Article 15 are pending. The parties will
take such action, if any, required to effectuate such tolling.
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15.9. Escrow Agent Unnecessary. The parties agree that the escrow
agent under and as identified in the Escrow Agreement is not a necessary party
to and shall not be joined in or made party to any arbitration proceeding
commenced under this Article 15.
16. MISCELLANEOUS
16.1. Further Assurance. From time to time, at Buyer's request and
without further consideration, Company will execute and deliver to Buyer such
documents and take such other action as Buyer may reasonably request in order to
consummate more effectively the transactions contemplated hereby and to vest in
Buyer good, valid and marketable title to the business and assets being
transferred hereunder.
16.2. Disclosures and Announcements. Both the timing and the content
of all disclosure to third parties and public announcements concerning the
transactions provided for in this Agreement by either Company, Parent or Buyer
shall be subject to the approval of the other parties in all essential respects,
except that no approval shall be required but prior written notice shall be
given as to any statements and other information which a party may submit to the
Securities and Exchange Commission, any stock exchange or such party's
stockholders or be required to make pursuant to any rule or regulation of the
Securities and Exchange Commission or otherwise required by law.
16.3. Assignment; Parties in Interest.
16.3.(a) Assignment. Except as expressly provided herein, the
rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the
other party.
16.3.(b) Parties in Interest. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the respective
successors and permitted assigns of the parties hereto. Nothing
contained herein shall be deemed to confer upon any other person any
right or remedy under or by reason of this Agreement.
16.4. Law Governing Agreement. This Agreement may not be modified or
terminated orally, and shall be construed and interpreted according to the
internal laws of the State of Delaware, excluding any choice of law rules that
may direct the application of the laws of another jurisdiction.
16.5. Amendment and Modification. Buyer and Company may amend,
modify and supplement this Agreement in such manner as may be agreed upon by
them in writing.
16.6. Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a) personally
delivered; (b) sent by telecopier, facsimile transmission or other electronic
means of transmitting written documents; or (c) sent to the parties at their
respective addresses indicated herein by registered or certified U.S. mail,
return receipt requested and postage prepaid, or by private overnight mail
courier service. The respective addresses to be used for all such notices,
demands or requests are as follows:
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(a) If to Buyer or to Parent, to:
Kaydon Corporation
Arbor Shoreline Office Park
19345 US 19 North, Suite 500
Clearwater, Florida 34624-3148
Attention: Stephen Clough, President
and Chief Executive Officer
Facsimile: 813/524-3629
(with a copy to)
Lague, Newman & Irish
600 Terrace Plaza
P.O. Box 389
Muskegon, Michigan 49443-0389
Facsimile: 616/726-3404
or to such other person or address as Buyer and Parent shall furnish to Company
in writing.
(b) If to Company, to:
Hein-Werner Corporation
2120 Pewaukee Road
Waukesha, WI 53187-1606
Attention: Joseph L. Dindorf, President
and Chief Executive Officer
Facsimile: 414/542-7890
(with a copy to)
Maurice J. McSweeney
Foley & Lardner
777 East Wisconsin Avenue
Suite 3700
Milwaukee, Wisconsin 53202
Facsimile: (414) 297-4900
or to such other person or address as Company shall furnish to Buyer and Parent
in writing.
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent by
overnight courier pursuant to this paragraph, such communication shall be deemed
delivered upon receipt; and if sent by U.S. mail pursuant to this paragraph,
such communication shall be deemed delivered as of the date of delivery
indicated on the receipt issued by the relevant postal service, or, if the
addressee fails or refuses to accept delivery, as
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of the date of such failure or refusal. Any party to this Agreement may change
its address for the purposes of this Agreement by giving notice thereof in
accordance with this Section.
16.7. Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
16.7.(a) Brokerage. Company represents and warrants to Buyer
and Parent, and Buyer and Parent represent and warrant to Company, that
there is no broker involved or in any way connected with the transfer
provided for herein. Buyer and Parent, jointly and severally, agree to
hold Company harmless from and against all claims for brokerage
commissions or finder's fees incurred through any act of Buyer or
Parent in connection with the execution of this Agreement or the
transactions provided for herein. Company agrees to hold Buyer and
Parent harmless from and against all claims for brokerage commissions
or finder's fees incurred through any act of Company in connection with
the execution of this Agreement or the transactions provided for
herein.
16.7.(b) Expenses to be Paid by Buyer. Buyer shall pay, and
Buyer and Parent shall jointly and severally indemnify, defend and hold
Company harmless from and against, each of the following:
(i) Transfer Taxes. Any sales, use, excise,
transfer or other similar tax imposed with respect to the
transactions provided for in this Agreement, and any interest
or penalties related thereto.
(ii) Environmental Audit. The fees and other
expenses relating to the environmental audit performed
pursuant to Section 7.1 hereof.
16.7.(c) Other. Except as otherwise provided herein, each of
the parties shall bear its own expenses and the expenses of its counsel
and other agents in connection with the transactions contemplated
hereby.
16.7.(d) Costs of Litigation or Arbitration. The parties agree
that (subject to the discretion, in an arbitration proceeding, of the
arbitrator as set forth in Section 15.4) the prevailing party in any
action brought with respect to or to enforce any right or remedy under
this Agreement shall be entitled to recover from the other party or
parties all reasonable costs and expenses of any nature whatsoever
incurred by the prevailing party in connection with such action,
including without limitation attorneys' fees and prejudgment interest.
16.8. Entire Agreement. This instrument embodies the entire
agreement between the parties hereto with respect to the transactions
contemplated herein, and there have been and are no agreements, representations
or warranties between the parties other than those set forth or provided for
herein.
34
<PAGE> 39
16.9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.10. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
HEIN-WERNER CORPORATION
By:/s/ Joseph L. Dindorf
-----------------------------------------------------
Joseph L. Dindorf, President and Chief Executive
Officer
KAYDON CORPORATION
By:/s/ Stephen Clough
-----------------------------------------------------
Stephen Clough, President and
Chief Executive Officer
KAYDON ACQUISITION VIII, INC.
By:/s/ Stephen Clough
-----------------------------------------------------
Stephen Clough, Treasurer
35
<PAGE> 40
EXHIBIT 10.16
PART 2 OF 2
ESCROW AGREEMENT
ESCROW AGREEMENT (the "Escrow Agreement"), dated as of the _____ day of
May, 1997, is by and among HEIN-WERNER CORPORATION, a Wisconsin corporation (the
"Company"), KAYDON ACQUISITION VIII, INC., a Delaware corporation (the "Buyer')
and FIRSTAR TRUST COMPANY (the "Escrow Agent").
RECITALS:
A. Pursuant to that certain Asset Purchase Agreement (the
"Purchase Agreement"), dated as of April 9, 1997, by and among, inter alia, the
Kaydon Corporation, Buyer and the Company, the Buyer has agreed to purchase from
the Company the business and substantially all of the assets of the Company's
Great Bend Industries Division.
B. The amount that the Buyer has agreed to pay to the Company as
consideration pursuant to the Purchase Agreement was in part determined and
agreed to by the Buyer on the basis of the estimated Net Asset Value of the
Business, all as set out more fully in the Purchase Agreement.
C. Upon final determination of the Final Closing Business Balance
Sheet of the Company, the Purchase Agreement provides that certain adjustments
to the Purchase Price are to be made and payments made in respect thereof (any
such payment required to be made by the Company being hereinafter referred to as
the "Company Payable Adjustment").
D. The Company Payable Adjustment, if any, is first to be paid
from the Escrow Fund as hereinafter provided.
E. Pursuant to Section 7.8 of the Purchase Agreement, Company has
agreed to reimburse Buyer for "Buyer Schwing Reworking Costs" (as defined in the
Purchase Agreement), if any, and Company and Buyer have agreed to set aside in a
separate fund under this Escrow Agreement the estimated Buyer Schwing Reworking
Costs in the amount of Eleven Thousand Seven Hundred Eighty Dollars ($11,780)
(the "Schwing Rework Fund"). Also, pursuant to Section 7.8 of the Purchase
Agreement, Company has agreed at the end of one (1) year following Closing, to
pay Buyer the amount, if any, of the Schwing Disputed Receivable in the amount
of Eighty-Four Thousand Four Hundred Twenty Dollars ($84,420) which is not
actually collected within one (1) year following Closing (any payment required
to be made by Company as a result of the Schwing Disputed Receivable not being
fully collected being hereinafter referred to as the "Schwing Receivable
Adjustment").
F. Pursuant to Section 11.1(c) of the Purchase Agreement, Company
has agreed to indemnify Buyer for all accounts receivable reflected on the Final
Closing Business Balance Sheet which are not actually collected within one
hundred twenty (120) days following the closing except for the Schwing Disputed
Receivable which is the subject of (E) above (any payment required to be made by
Company being hereinafter referred to as the "Accounts Receivable Adjustment").
<PAGE> 41
G. Pursuant to Sections 11.1(a), (b) and (d) of the Purchase
Agreement, the Company has agreed to indemnify, defend and hold harmless the
Buyer from and against certain other Claims, if any, as defined and set forth in
the Purchase Agreement.
H. The Purchase Agreement contemplates execution and delivery of
this Escrow Agreement providing for the escrow of cash to be held for the
payment, under certain circumstances, of the Company Payable Adjustment, if any,
and of any claim or claims for indemnity, if any, by the Buyer, in accordance
with certain provisions of the Purchase Agreement, and under certain
circumstances, the costs of Response Actions.
I. The Company and the Buyer desire that the Escrow Agent act as
escrow agent, and the Escrow Agent is willing to so act, all upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the above and of the mutual
covenants and agreements herein contained, and of other good and valuable
consideration, the receipt and sufficiency of which the parties hereto hereby
acknowledge, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise specified herein, all defined
terms used but not otherwise defined herein shall have the respective meanings
assigned to them in the Purchase Agreement.
2. Deposits. Pursuant to Section 3.2(b) of the Purchase
Agreement, at the time of the Closing under the Purchase Agreement, the Buyer
shall deposit with the Escrow Agent the amount of Two Million Dollars
($2,000,000) (referred to herein as the "Escrow Fund"), which shall be held by
the Escrow Agent as the object of, and in accordance with, the escrow
arrangement created hereby. Pursuant to Section 3.2 of the Purchase Agreement,
the deposit of the Escrow Fund shall be a credit to the Purchase Price in the
amount of the Escrow Fund.
3. Acknowledgement of Receipt. The Escrow Agent hereby
acknowledges receipt of the Escrow Fund and agrees to act as escrow agent under
this Escrow Agreement.
4. Account. The Escrow Agent shall record the amount initially
credited to such account and all subsequent transactions with respect to such
account pursuant to this Escrow Agreement.
5. Disbursement of Escrow Fund. (a) The Buyer shall be entitled
to payment from the Escrow Fund to the extent Buyer is entitled to indemnity
under Article 11 of the Purchase Agreement, to the extent the Buyer is entitled
to payment under Section 3.2(d) of the Purchase Agreement, and to the extent the
Buyer is entitled to payment under Section 7.8 of the Purchase Agreement.
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<PAGE> 42
(b) On or before the expiration of five (5) days
following the final determination of the Final Closing Business Balance
Sheet in accordance with the Purchase Agreement, (i) if there is a
Company Payable Adjustment, then the Escrow Agent shall distribute to
the Buyer an amount equal to the lesser of (A) the Company Payable
Adjustment, together with interest thereon from the Closing Date to the
date of distribution thereof at a rate equal to the average interest
rate paid on the Escrow Fund during such period, or (B) the Escrow Fund
and all Earnings (as hereinafter defined) thereon, (ii) if there is no
Company Payable Adjustment, then the Escrow Agent shall distribute to
the Company the aggregate sum of Five Hundred Thousand Dollars
($500,000), together with interest thereon from the Closing Date to the
date of distribution thereof at a rate equal to the average interest
rate paid on the Escrow Fund during such period, and (iii) if a Company
Payable Adjustment exists but is less than Five Hundred Thousand
Dollars ($500,000), then the Escrow Agent shall pay an amount equal to
the Company Payable Adjustment, together with interest thereon from the
Closing Date to the date of distribution thereof at a rate equal to the
average interest rate paid on the Escrow Fund during such period, to
the Buyer and an amount equal to the difference between the Company
Payable Adjustment and Five Hundred Thousand Dollars ($500,000),
together with interest thereon from the Closing Date to the date of
distribution thereof at a rate equal to the average interest rate paid
on the Escrow Fund during such period, to the Company. Amounts payable
pursuant to this Section 5(b) shall be paid in accordance with the
terms of (i) a joint written notice of the Buyer and the Company
providing instructions therein or (ii) the issuance of a judgment,
order or decree by any court of competent jurisdiction sitting in the
County of Milwaukee in the State of Wisconsin or the United States
District Court for the Eastern District of Wisconsin.
(c) On 121st day following the closing, (i) if
there is an Accounts Receivable Adjustment, then the Escrow Agent shall
distribute to the Buyer an amount equal to the lesser of (A) the
Accounts Receivable Adjustment, together with interest thereon from the
Closing Date to the date of distribution thereof at a rate equal to the
average interest rate paid on the Escrow Fund during such period, or
(B) the Escrow Fund and all Earnings thereon, (ii) if there is no
Accounts Receivable Adjustment, then the Escrow Agent shall distribute
to the Company the aggregate sum of Nine Hundred Three Thousand Eight
Hundred Dollars ($903,800), together with interest thereon from the
Closing Date to the date of distribution thereof at a rate equal to the
average interest rate paid on the Escrow Fund during such period, and
(iii) if an Accounts Receivable Adjustment exists but is less than Nine
Hundred Three Thousand Eight Hundred Dollars ($903,800), then the
Escrow Agent shall pay an amount equal to the Accounts Receivable
Adjustment, together with interest thereon from the Closing Date to the
date of distribution thereof at a rate equal to the average interest
rate paid on the Escrow Fund during such period, to the Buyer and an
amount equal to the difference between the Accounts Receivable
Adjustment and Nine Hundred Three Thousand Eight Hundred Dollars
($903,800), together with interest thereon from the Closing Date to the
date of distribution thereof at a rate equal to the average interred
rate paid on the Escrow Fund during such period, to the Company.
Amounts payable pursuant to this Section 5(c) shall be paid in
accordance with the terms of (i) a joint written notice of the Buyer
and the Company providing instructions therein or (ii) the issuance of
a judgment, order or decree by any court of competent jurisdiction
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<PAGE> 43
sitting in the County of Milwaukee in the State of Wisconsin or the
United States District Court for the Eastern District of Wisconsin.
(d) On 365th day following the closing, (i) if
there is an Schwing Receivable Adjustment, then the Escrow Agent shall
distribute to the Buyer an amount equal to the lesser of (A) the
Schwing Receivable Adjustment, together with interest thereon from the
Closing Date to the date of distribution thereof at a rate equal to the
average interest rate paid on the Escrow Fund during such period, or
(B) the Escrow Fund and all Earnings thereon, (ii) if there is no
Schwing Receivable Adjustment, then the Escrow Agent shall distribute
to the Company the aggregate sum of Eighty-Four Thousand Four Hundred
Twenty Dollars ($84,420), together with interest thereon from the
Closing Date to the date of distribution thereof at a rate equal to the
average interest rate paid on the Escrow Fund during such period, and
(iii) if an Schwing Receivable Adjustment exists but is less than
Eighty-Four Thousand Four Hundred Twenty Dollars ($84,420), then the
Escrow Agent shall pay an amount equal to the Schwing Receivable
Adjustment, together with interest thereon from the Closing Date to the
date of distribution thereof at a rate equal to the average interest
rate paid on the Escrow Fund during such period, to the Buyer and an
amount equal to the difference between the Schwing Receivable
Adjustment and Eighty-Four Thousand Four Hundred Twenty Dollars
($84,420), together with interest thereon from the Closing Date to the
date of distribution thereof at a rate equal to the average interred
rate paid on the Escrow Fund during such period, to the Company.
Amounts payable pursuant to this Section 5(d) shall be paid in
accordance with the terms of (i) a joint written notice of the Buyer
and the Company providing instructions therein or (ii) the issuance of
a judgment, order or decree by any court of competent jurisdiction
sitting in the County of Milwaukee in the State of Wisconsin or the
United States District Court for the Eastern District of Wisconsin.
(e) If the Buyer shall determine prior to April
30, 1999 that it has a Claim against the Company pursuant to the
provisions of Article 11(a), (b) or (d) of the Purchase Agreement, the
Buyer shall so notify the Escrow Agent and the Company. The Company
shall give notice of objection or consent to such Claim to each of the
Buyer and the Escrow Agent within thirty (30) days after their receipt
of the Buyer's notice, which notice of objection shall consent to or
dispute the matters set forth in the notice of the Claim and shall
specify the amount in dispute, if any. Promptly following delivery by
the Company of a notice of objection or consent or, in the absence of
the delivery by the Company of a notice of objection or consent within
such 30-day period, then the Escrow Agent shall satisfy the undisputed
amount of such Claim promptly following such 30-day period by delivery
to the Buyer, out of the Escrow Fund of an amount equal to either (i)
the amount of such Claim if either (x) a consent is delivered by the
Company or (y) the Company fails to deliver a notice of objection or
consent during such 30-day period or (ii) that portion of the Buyer's
Claim that is not in dispute, if any, in the case a notice of objection
is delivered by the Company. Failure of the Company to deliver a notice
of objection within such 30-day period shall constitute an irrevocable
waiver on the part of the Company of its right to dispute the Claim
made by the Buyer.
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<PAGE> 44
(f) If the Escrow Agent receives a notice of
objection within such thirty-day period, then, concurrently with the
payment to the Buyer of any undisputed amount of such Claim, if any, in
accordance with Section 5(e) hereof, the Escrow Agent shall account for
the amount in dispute as a separate fund (a "Disputed Fund"). If a
notice of objection is timely given and the Company and the Buyer fail
to reach agreement as to the disposition of any Claim within thirty
(30) days after receipt by the Buyer and the Escrow Agent of the notice
of objection, the Company and the Buyer, may proceed to enforce their
respective rights through proceedings in accordance with the Purchase
Agreement. The Escrow Agent shall distribute the amounts accounted for
as a Disputed Fund promptly upon delivery of and in accordance with the
terms of (i) a joint written notice of the Buyer and the Company
providing instructions therein and certifying that the dispute with
respect to any amount deposited in such Disputed Fund has been finally
resolved or (ii) any judgment, order or decree issued by any court of
competent jurisdiction sitting in the County of Milwaukee in the State
of Wisconsin or the United States District Court for the Eastern
District of Wisconsin directing the Escrow Agent as to the proper
distribution of any amount so held. The Company or the Buyer shall
deliver to the Escrow Agent a certified copy of any judgment, order or
decree in any such legal proceedings. The Escrow Agent shall act upon
such judgment, order or decree which has become final in like manner as
though it constituted the joint instructions of the Company and of the
Buyer.
(g) With respect to the Schwing Rework Fund,
Buyer shall be entitled to reimbursement from such fund for Buyer
Schwing Reworking Costs. Buyer may from time to time notify the Escrow
Agent and the Company that it has a claim for reimbursement for Buyer
Schwing Reworking Costs ("Buyer Swing Reworking Costs Claim").
(h) The Company shall give notice of objection
or consent to such claim for Buyer Schwing Reworking Costs Claim to
each of the Buyer and the Escrow Agent within thirty (30) days after
their receipt of the Buyer's notice, which notice of objection shall
consent to or dispute the matters set forth in the notice of a Buyer
Schwing Reworking Costs Claim and shall specify the amount in dispute,
if any. Promptly following delivery by the Company of a notice of
objection or consent or, in the absence of the delivery by the Company
of a notice of objection or consent within such 30-day period, then the
Escrow Agent shall satisfy the undisputed amount of such Buyer Schwing
Reworking Costs Claim promptly following such 30-day period by delivery
to the Buyer, out of the Schwing Rework Fund of an amount equal to
either (i) the amount of such Buyer Schwing Reworking Costs Claim if
either (x) a consent is delivered by the Company or (y) the Company
fails to deliver a notice of objection or consent during such 30-day
period or (ii) that portion of the Buyer Schwing Reworking Costs Claim
that is not in dispute, if any, in the case a notice objection is
delivered by the Company. Failure of the Company to deliver a notice of
objection within such 30-day period shall constitute an irrevocable
waiver on the part of the Company of its right to dispute Buyer Schwing
Reworking Costs Claim made by the Buyer.
(i) If the Escrow Agent receives a notice of
objection within such thirty-day period, then, concurrently with the
payment to the Buyer of any undisputed amount
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<PAGE> 45
of such Claim, if any, in accordance with Section 5(h) hereof, the
Escrow Agent shall account for the amount in dispute as a separate fund
(a "Disputed Fund"). If a notice of objection is timely given and the
Company and the Buyer fail to reach agreement as to the disposition of
any Claim within thirty (30) days after receipt by the Buyer and the
Escrow Agent of the notice of objection, the Company and the Buyer, may
proceed to enforce their respective rights through proceedings in
accordance with the Purchase Agreement. The Escrow Agent shall
distribute the amounts accounted for as a Disputed Fund promptly upon
delivery of and in accordance with the terms of (i) a joint written
notice of the Buyer and the Company providing instructions therein and
certifying that the dispute with respect to any amount deposited in
such Disputed Fund has been finally resolved or (ii) any judgment,
order or decree issued by any court of competent jurisdiction sitting
in the County of Milwaukee in the State of Wisconsin or the United
States District Court for the Eastern District of Wisconsin directing
the Escrow Agent as to the proper distribution of any amount so held.
The Company or the Buyer shall deliver to the Escrow Agent a certified
copy of any judgment, order or decree in any such legal proceedings.
The Escrow Agent shall act upon such judgment, order or decree which
has become final in like manner as though it constituted the joint
instructions of the Company and of the Buyer.
(j) The Escrow Agent shall deliver all money's
remaining in the Escrow Fund together with all earnings at any time
accruing on the Escrow Fund ("Earnings"), less any amounts held as
Disputed Funds, less any amount in the Schwing Rework Fund and less the
amount of Two Hundred Fifty Thousand Dollars ($250,000), to Company at
the close of business on December 31, 1997.
(k) The Escrow Agent shall deliver all moneys
remaining in the Escrow Fund, together with all earnings or other
income at any time accruing on the Escrow Fund ("Earnings"), less any
amounts held as Disputed Funds, to the Company at the close of business
on April 30, 1999; provided, however, that if the Buyer makes a notice
of Claim on or after April 1, 1999 and the Company have neither
objected nor consented to the payment of such Claim by April 30, 1999,
then the amount of such Claim shall be held as Disputed Funds if the
Company gives notice of objection within thirty (30) days after the
date of the Claim.
(l) Upon the release of any Disputed Funds to
the Buyer or the Company, the Buyer or the Company (as applicable) also
shall be entitled to receive all Earnings thereon.
(m) Upon the release of any amount held in a
Disputed Fund that is not paid over to the Buyer, in respect of the
Claim for which such amount was originally deposited in such Disputed
Fund, such amount shall be paid in the following manner and order of
priority:
(A) First, to the Buyer in respect of
indemnification for any other Claim paid or payable to the
Buyer pursuant to Section 5 hereof with respect to which
written notice was given by the Buyer to the Escrow Agent
prior to the close of business on April 30, 1999, and for
which the amount, if any, previously
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<PAGE> 46
paid to the Buyer was less than the amount to which the Buyer
was entitled with respect to such Claim;
(B) Second, to the Disputed Fund in respect of
indemnification of any other disputed Claim for which the
Buyer gave written notice to the Escrow Agent pursuant to
Section 5 hereof prior to the close of business on April 30,
1999, and for which the amount, if any, previously set aside
in a Disputed Fund was less than the amount of the disputed
Claim;
(C) Third, prior to the close of business on
April 30, 1999, to the Escrow Agent to be held or paid in
accordance with the provisions hereof;
(D) Fourth, following the close of business on
April 30, 1999, pursuant to the provisions of Section 5(k)
hereof.
6. Investments. (a) The Escrow Fund and Earnings and the
full amount of any Disputed Funds shall be invested by the Escrow Agent in
short-term government securities, government repurchase agreements, commercial
paper rated the highest grade by Moody's Investors Service, Inc. or by Standard
& Poor's Corporation with a maturity date not later than March 31, 1998, money
market funds invested in the foregoing, short-term certificates of deposit
issued by commercial banks having a combined capital surplus and undivided
profits of not less than One Hundred Million Dollars ($100,000,000) or other
similar short-term highly-liquid investments of equal or greater security as the
foregoing, or in U.S. Treasury Notes having a maturity of date not later than
April 30, 1999, as shall be directed in writing by the Company, with interest
thereon to be accumulated and reinvested until disbursed. In the absence of
instructions from the Company, the Escrow Agent shall invest the Escrow Fund and
Earnings and any Disputed Funds in any of the foregoing instruments. Any
interest or profit realized on any investment of the Escrow Fund and Earnings
and any Disputed Fund, respectively, shall be made part of the Escrow Fund and
Earnings and of such Disputed Fund, respectively, and shall be held and
disbursed in accordance with the provisions of Section 5 of this Escrow
Agreement. Except as otherwise specifically noted herein, the Escrow Agent is
not obligated to render any statements or notices of nonperformance hereunder to
any party hereto, but in its discretion may inform any party hereto, or its
authorized representative, of any matters pertaining to this Escrow Agreement.
(b) Receipt or investment of the Escrow Fund
shall be confirmed by the Escrow Agent as soon as practicable by account
statements unless otherwise indicated any discrepancies shall be noted to the
Escrow Agent within a reasonable time prior to the next account statement.
Failure to inform the Escrow Agent in writing of any discrepancies shall be
deemed confirmation of the description of the Escrow Fund listed on the report,
regardless of any variations from that described herein. Unless otherwise
directed, the Escrow Agent may use a broker-dealer of its own selection,
including a broker-dealer owned by or affiliated with the Escrow Agent or with
any of its affiliates. All brokerage costs and expenses shall be for the account
of the parties hereto. The Escrow Agent shall not be liable for losses on any
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<PAGE> 47
investments, market risk due to premature liquidation, or other actions taken in
compliance with this Escrow Agreement or appropriate written instructions. The
parties shall provide the Escrow Agent with written certification of their
respective taxpayer identification numbers or appropriate foreign taxpayer
exemptions prior to any investment. Failure to provide such information may
subject the non-providing party to a penalty and may cause the Escrow Agent to
be required to withhold tax on any interest payable hereunder. All payments of
income shall be subject to applicable United States withholding regulations as
then in force. Notwithstanding the foregoing, the Escrow Agent may, in its
discretion, accept directions or instruction whether given orally (in person or
by telephone), or by telegraph, cable, radio or facsimile transmission, which in
each case the Escrow Agent reasonably believes to be genuine, but the Escrow
Agent shall not be liable for executing, for failing to execute, or for any
mistake in the execution of, any such order except in case of willful misconduct
or gross negligence.
7. Escrow Agent Not a Party. The parties to this Escrow Agreement
understand and agree that the Escrow Agent is not, and shall in no event be
deemed, (a) a principal, participant or beneficiary of the underlying
transactions giving rise to this Escrow Agreement or (b) a party to, or bound
by, any other agreement out of which this escrow may arise.
8. Obligations of Escrow Agent; Reliance. The Escrow Agent shall
be obligated only for the performance of such duties as are specifically set
forth herein. The Escrow Agent may rely on, and shall be protected in acting or
in refraining from acting based upon, any written notice, request, waiver,
consent, certificate, receipt, authorization, or other paper, document or
instrument that the Escrow Agent reasonably believes to be genuine and to have
been signed or presented by the proper party or parties hereto or their
respective officers, representatives or agents.
9. Interpleader. If the Escrow Agent becomes a party to any
litigation or dispute by reason hereof, it is hereby authorized to deposit with
the clerk of a court of competent jurisdiction any and all cash, securities or
other property held by it pursuant hereto and, thereupon, shall stand fully
relieved and discharged of any further duties hereunder. If the Escrow Agent is
threatened to be made a party to litigation by reason hereof, it is authorized
to interplead all interested parties in any court of competent jurisdiction and
to deposit with the clerk of such court any and all cash, securities or other
property held by it pursuant hereto and, thereupon, shall stand fully relieved
and discharged of any further duties hereunder.
10. Resignation of Escrow Agent. The Escrow Agent may resign for
any reason upon ten (10) days' written notice to the Buyer and to the Company.
Upon the expiration of such ten (10) days' notice, the Escrow Agent may deliver
all cash or property in its possession under this Escrow Agreement to any
successor escrow agent appointed by the other parties hereto or, if no successor
escrow agent has been appointed, to any court of competent jurisdiction in the
County of Milwaukee, State of Wisconsin. Upon such delivery in either case, the
Escrow Agent's obligations hereunder shall cease and terminate. The Escrow
Agent's sole responsibility from the time of the expiration of the ten (10)
days' notice set forth above in this
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<PAGE> 48
paragraph until such termination shall be to keep safely the Escrow Fund and
Earnings and Disputed Funds, if any, and to deliver the same to a person
designated by the appropriate parties executing this Escrow Agreement or in
accordance with the directions of a final order or judgment of a court of
competent jurisdiction.
11. Escrow Agent.
(a) The Escrow Agent shall be entitled to receive
compensation for its regular services as Escrow Agent in accordance with the fee
schedule attached, and shall be reimbursed for all reasonable expenses it incurs
in fulfilling its obligations under this Agreement, including fees and
disbursements of legal counsel. Such compensation and any reimbursement for
expenses shall be paid from time to time as incurred equally by Buyer and
Company. Accounts of disbursements made hereunder shall be promptly made to
Buyer and the Company
(b) In taking any action hereunder, the Escrow Agent
shall be protected in relying upon any notice, paper or other document believed
by it to be genuine or upon any evidence deemed by it to be sufficient, and in
no event shall be liable for any act performed or omitted to be performed by it
hereunder in the absence of gross negligence or willful misconduct. The Escrow
Agent may consult with counsel in connection with its duties hereunder and shall
be fully protected by any act taken, suffered or permitted by it in good faith
in accordance with the advice of such counsel. The Escrow Agent shall not be
bound in any way by any agreement or contract (other than this Escrow Agreement
and the relevant provisions of the Agreement) between any of the parties hereto
or thereto (whether or not it has knowledge thereof) and its only duties or
responsibilities shall be to hold the Escrow Fund and to dispose of it in
accordance with the terms of this Escrow Agreement and the Agreement.
(c) The Escrow Agent hereby accepts its appointment and
agrees to act as Escrow Agent under the terms and conditions of this Escrow
Agreement.
12. Notices. All claims, notices, objections and other
communications hereunder shall be in writing and shall be deemed to have been
duly given on the date delivered or mailed, certified mail, as follows:
If to the Company, to:
Hein-Werner Corporation
2120 Pewaukee Road
Waukesha, Wisconsin 53188
Attention: Joseph L. Dindorf
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<PAGE> 49
With a copy to:
Maurice J. McSweeney
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
If to Buyer, to:
Kaydon Acquisition VIII, Inc.
Arbor Shoreline Office Park
19345 US 19 North, Suite 500
Clearwater, Florida 34624-3148
Attention: John F. Brocci, Secretary
Facsimile: 813/524-3629
With a copy to:
Lague, Newman & Irish
600 Terrace Plaza
P.O. Box 389
Muskegon, Michigan 49443-0389
Facsimile: 616/726-3404
If to Escrow Agent, to:
Firstar Trust Company
Corporate Trust Department
615 East Michigan Street, 4th Floor
Milwaukee, Wisconsin 53202
Attention: William R. Caruso
Facsimile: (414) 276-4226
or to such other or additional persons or addresses as the respective Company,
Buyer or Escrow Agent shall furnish to each of the other parties in writing.
13. Binding Effect. This Escrow Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, successors and assigns.
14. Amendments. This Escrow Agreement may be amended or modified
at any time or from time to time in a writing executed by each of the Company,
Buyer and the Escrow Agent.
-10-
<PAGE> 50
15. Governing Law. This Escrow Agreement shall be construed and
enforced in accordance with the laws applicable to the construction and
enforcement of the Agreement as set forth in Section 15 thereof.
16. Counterparts. This Escrow Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall not be necessary
for every party hereto to sign each counterpart but only that each party shall
sign at least one counterpart.
-11-
<PAGE> 51
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first above written.
HEIN-WERNER CORPORATION
(the "Company")
By: /s/ Joseph L. Dindorf
----------------------------------------
Joseph L. Dindorf, President
KAYDON ACQUISITION VIII, INC.
(the "Buyer")
By: /s/ John F. Brocci
----------------------------------------
John F. Brocci, Secretary
FIRSTAR TRUST COMPANY
(the "Escrow Agent")
By: /s/ William Caruso
----------------------------------------
William Caruso, Assistant Vice President
Attest: /s/ Yvonne Sira
----------------------------------------
Yvonne Sira, Assistant Secretary
-12-
<PAGE> 52
SCHEDULE OF ESCROW AGENT'S CUSTOMARY FEES
ACCEPTANCE FEE:
<TABLE>
<S> <C>
Flat fee payable upon execution of Escrow Agreement. $1,000.00
ADMINISTRATION FEE:
Annual Administration Fee with the first year paid up front. $1,000.00
</TABLE>
SPECIAL OR EXTRAORDINARY SERVICES:
Reimbursement of agent fees incurred by the Escrow Agent, including but not
limited to attorney's fees and expenses incurred with outside counsel if
required.
MISCELLANEOUS:
Out-of-pocket expenses, i.e., postage, stationery, travel expenses, etc.
-13-
<PAGE> 1
EXHIBIT 10.17
KAYDON CORPORATION
(FORMERLY BZ PURCHASE CORPORATION)
BY-LAWS
AS AMENDED AND RESTATED ON MAY 14, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
ARTICLE I - SHAREHOLDERS
1.01 Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 Notice of Meetings; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.04 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.05 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.06 Voting by Ballot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.07 Adjournment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.08 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.09 Organization; Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10 Consent of Stockholders in Lieu of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II - BOARD OF DIRECTORS
2.01 General Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.02 Number and Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.03 Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.04 Annual and Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.05 Special Meetings; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.06 Quorum; Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.07 Adjournment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.08 Action Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.09 Regulations; Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Action by Telephonic Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.11 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 Vacancies and Newly Created Directorships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.15 Reliance on Accounts and Reports, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III - EXECUTIVE COMMITTEE AND OTHER COMMITTEES
3.01 How Constituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.02 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.03 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.04 Quorum and Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.05 Action by Telephonic Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.06 Absent or Disqualified Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.07 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
-i-
<PAGE> 3
ARTICLE III - continued
<TABLE>
<S> <C> <C>
3.08 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.09 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV - OFFICERS
4.01 Executive Officers; Election; Qualifications;
Term of Office; Resignation; Removal Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.02 Powers and Duties of Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V - CAPITAL STOCK
5.01 Certificates of Stock, Uncertificated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.02 Signatures; Facsimile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.03 Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.04 Transfer of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.05 Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.06 Registered Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.07 Transfer Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI - INDEMNIFICATION
6.01 Nature of Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.02 Successful Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.03 Determination That Indemnification is Proper . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.04 Advance Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.05 Procedure for Indemnification of
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.06 Survival; Preservation of Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.07 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.08 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII - OFFICES
7.01 Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.02 Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VIII - GENERAL PROVISIONS
8.01 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.02 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.03 Execution of Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.04 Corporate Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
-ii-
<PAGE> 4
ARTICLE VIII - continued
<TABLE>
<S> <C> <C>
8.05 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.06 Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.07 Sale, Transfer, etc., of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.08 Voting as Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.09 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.10 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.11 Books and Records; Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX - AMENDMENT OF BY-LAWS
9.01 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE X - CONSTRUCTION
10.01 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
-iii-
<PAGE> 5
KAYDON CORPORATION
(Formerly BZ Purchase Corporation)
BY-LAWS
As Amended and Restated on May 14, 1997
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meetings. The annual meeting of the
stockholders of the Corporation for the election of directors and for the
transaction of such other business as properly may come before such meeting
shall be held at such place, either within or without the State of Delaware,
and at 10:00 a.m., local time on the second Tuesday in April (or, if such day
is a legal holiday, then on the next succeeding business day), or at such other
date and hour, as may be fixed from time to time by resolution of the Board of
Directors and set forth in the notice or waiver of notice of the meeting.
[Sections 211(a), (b)]*
Section 1.02. Special Meetings. Special meetings of the
stockholders may be called at any time by the Chairman of the Board, the
President (or, in the event of their absence or disability, by any Vice
President), or by the Board of Directors. A special meeting shall be called by
the Chairman of the Board, the President (or, in the event of their absence or
disability, by any Vice President), or by the Secretary, immediately upon
receipt of a written request therefore by stockholders holding in the aggregate
not less than a majority of the outstanding shares of the Corporation at the
time entitled to vote at any meeting of the stockholders. If such Officers or
the Board of Directors shall fail to call such meeting within 20 days after
receipt of such request, any stockholder executing such request may call such
meeting. Such special meetings of the stockholders shall be held at such
places, within or without the State of Delaware, as shall be specified in the
respective notices or waivers of notice thereof. [Section 211(d)]
Section 1.03. Notice of Meetings; Waiver. The Secretary or
any Assistant Secretary shall cause written notice of the place, date and hour
of each meeting of the stockholders, and, in the case of a special meeting, the
purpose or purposes for which such meeting is called, to be given personally or
by mail, not less than ten nor more than sixty days prior to the meeting, to
each stockholder of record entitled to vote at such meeting. If such notice is
mailed, it shall be deemed to have been given to a stockholder when deposited
in the
__________
* Citations are to the General Corporation Law of the State of Delaware
as in effect as of 1997, and are inserted for reference only, and do
not constitute a part of the By-Laws.
<PAGE> 6
United States mail, postage prepaid, directed to the stockholder at his address
as it appears on the record of stockholders of the Corporation, or if he shall
have filed with the Secretary of the Corporation a written request that notices
to him be mailed to some other address, then directed to him at such other
address. Such further notice shall be given as may be required by law.
No notice of any meeting of stockholders need be given to any
stockholder who submits a signed waiver of notice, whether before or after the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in a written
waiver of notice. The attendance of any stockholder at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the ground that
the meeting is not lawfully called or convened. [Sections 222, 229]
Section 1.04 Quorum. Except as otherwise required by law or
by the Certificate of Incorporation, the presence in person or by proxy of the
holders of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting. [Section 216]
Section 1.05 Voting. If, pursuant to Section 5.05 of these
By-Laws, a record date has been fixed, every holder of record of shares
entitled to vote at a meeting of stockholders shall be entitled to one vote for
each share outstanding in his name on the books of the Corporation at the close
of business on such record date. If no record date has been fixed, then every
holder of record of shares entitled to vote at a meeting of stockholders shall
be entitled to one vote for each share of stock standing in his name on the
books of the Corporation at the close of business on the day next preceding the
day on which notice of the meeting is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. Except as otherwise required by law or by the Certificate of
Incorporation, the vote of a majority of the shares represented in person or by
proxy at any meeting at which a quorum is present shall be sufficient for the
transaction of any business at such meeting. [Sections 212(a), 216]
Section 1.06 Voting by Ballot. No vote of the stockholders
need be taken by written ballot or conducted by inspectors of election, unless
otherwise required by law. Any vote which need not be taken by ballot may be
conducted in any manner approved by the meeting.
Section 1.07. Adjournment. If a quorum is not present at any
meeting of the stockholders, the stockholders present in person or by proxy
shall have the power to adjourn any such meeting from time to time until a
quorum is present. Notice of any adjourned meeting of the stockholders of the
Corporation need not be given if the place, date and hour thereof are announced
at the meeting at which the adjournment is taken, provided, however, that if
the
2
<PAGE> 7
adjournment is for more than thirty days, or if after the adjournment a new
record date for the adjourned meeting is fixed pursuant to Section 5.05 of
these By-Laws, a notice of the adjourned meeting, conforming to the
requirements of Section 1.03 hereof, shall be given to each stockholder of
record entitled to vote at such meeting. At any adjourned meeting at which a
quorum is present, any business may be transacted that might have been
transacted on the original date of the meeting. [Section 222(c)]
Section 1.08. Proxies. Any stockholder entitled to vote at
any meeting of the stockholders or to express consent to or dissent from
corporate action without a meeting may, by a written instrument signed by such
stockholder or his attorney-in-fact, authorize another person or persons to
vote at any such meeting and express such consent or dissent for him by proxy.
No such proxy shall be voted or acted upon after the expiration of three years
from the date of such proxy, unless such proxy provides for a longer period.
Every proxy shall be revocable at the pleasure of the stockholder executing it,
except in those cases where applicable law provides that a proxy shall be
irrevocable. A stockholder may revoke any proxy which is not irrevocable by
attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or by filing another duly executed proxy bearing a
later date with the Secretary. [Section 212(b), (c)]
Section 1.09. Organization; Procedure. At every meeting of
stockholders the presiding Officer shall be the Chairman of the Board, or in
the event of his absence or disability, the President or, in the event of his
absence or disability, a presiding Officer chosen by a majority of the
stockholders present in person or by proxy. The Secretary, or in the event of
his absence or disability, the Assistant Secretary, if any, or if there be no
Assistant Secretary, in the absence of the Secretary, an appointee of the
presiding Officer, shall act as Secretary of the meeting. The order of
business and all other matters of procedure at every meeting of stockholders
may be determined by such presiding Officer.
Section 1.10. Consent of Stockholders in Lieu of Meeting. To
the fullest extent permitted by law, whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in connection with
any corporate action, such action may be taken without a meeting, without prior
notice and without a vote of stockholders, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an Officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested.
3
<PAGE> 8
Every written consent shall bear the date of signature of each
stockholder or member who signs the consent and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
days of the earliest date consent delivered in the manner required by law to
the Corporation, written consents signed by a sufficient number of holders or
members to take action are delivered to the Corporation by the delivery to its
registered office in the State of Delaware, its principal place of business, or
an Officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. [Section 228]
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers. Except as may otherwise be
provided by law, by the Certificate of Incorporation or by these By-Laws, the
property, affairs and business of the Corporation shall be managed by or under
the direction of the Board of Directors and the Board of Directors may exercise
all the powers of the Corporation. [Section 141(a)]
Section 2.02 Number and Term of Office. The number of
directors constituting the entire Board of Directors shall be six, which number
may be modified from time to time by resolution of the Board of Directors, but
in no event shall the number of directors be less than one. Each Director
(whenever elected) shall hold office until his successor has been duly elected
and qualified, or until his earlier death, resignation or removal. [Section
141(b)]
Section 2.03 Election of Directors. Except as otherwise
provided in Sections 2.12 and 2.13 of these By-Laws, the Directors shall be
elected at each annual meeting of the stockholders. If the annual meeting for
the election of Directors is not held on the date designated therefor, the
Directors shall cause the meeting to be held as soon thereafter as convenient.
At each meeting of the stockholders for the election of Directors, provided a
quorum is present, the Directors shall be elected by a plurality of the votes
validly cast in such election. [Sections 211(b), (c), 216]
Section 2.04 Annual and Regular Meetings. The annual meeting
of the Board of Directors for the purpose of electing Officers and for the
transaction of such other business as may come before the meeting shall be held
as soon as possible following adjournment of the annual meeting of the
stockholders at the place of such annual meeting of the stockholders. Notice
of such annual meeting of the Board of Directors need not be given. The Board
of Directors from time to time may by resolution provide for the holding of
regular meetings and fix the place (which may be within or without the State of
Delaware) and the date and hour of such meetings. Notice of regular meetings
need not be given, provided, however, that if the
4
<PAGE> 9
Board of Directors shall fix or change the time or place of any regular
meeting, notice of such action shall be mailed promptly, or sent by telegram,
telex, facsimile or cable, to each Director who shall not have been present at
the meeting at which such action was taken, addressed to him at his usual place
of business, or shall be delivered to him personally. Notice of such action
need not be given to any Director who attends the first regular meeting after
such action is taken without protesting the lack of notice to him, prior to or
at the commencement of such meeting, or to any Director who submits a signed
waiver of notice, whether before or after such meeting. [Section 141(g)]
Section 2.05. Special Meetings; Notice. Special meetings of
the Board of Directors shall be held whenever called by the Chairman of the
Board, the President, or in the event of their absence or disability, by any
Vice President, at such place (within or without the State of Delaware), date
and hour as may be specified in the respective notices or waivers of notice of
such meetings. Special meetings of the Board of Directors may be called on 24
hours' notice, if notice is given to each Director personally or by telephone
or telegram, or on five days' notice, if notice is mailed to each Director,
addressed to him at his usual place of business. Notice of any special meeting
need not be given to any Director who attends such meeting without protesting
the lack of notice to him, prior to or at the commencement of such meeting, or
to any Director who submits a signed waiver of notice, whether before or after
such meeting, and any business may be transacted thereat. [Sections 141(g),
229]
Section 2.06. Quorum; Voting. At all meetings of the Board
of Directors, the presence of a majority of the total authorized number of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the vote of a majority of the Directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors. [Section 141(b)]
Section 2.07. Adjournment. A majority of the Directors
present, whether or not a quorum is present, may adjourn any meeting of the
Board of Directors to another time or place. No notice need be given of any
adjourned meeting unless the time and place of the adjourned meeting are not
announced at the time of adjournment, in which case notice conforming to the
requirements of Section 2.05 shall be given to each Director.
Section 2.08. Action Without a Meeting. Any action required
or permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors. [Section 141(f)]
Section 2.09. Regulations; Manner of Acting. To the extent
consistent with applicable law, the Certificate of Incorporation and these
By-Laws, the Board of Directors may adopt such rules and regulations for the
conduct of meetings of the Board of Directors and for the management of the
property, affairs and business of the Corporation as the Board of
5
<PAGE> 10
Directors may deem appropriate. The Directors shall act only as a Board, and
the individual Directors shall have no power as such.
Section 2.10. Action by Telephonic Communications. Members
of the Board of Directors may participate in a meeting of the Board of
Directors by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this provision shall constitute
presence in person at such meeting. [Section 141(i)]
Section 2.11 Resignation. Any Director may resign at any
time by delivering a written notice of resignation, signed by such Director, to
the Chairman of the Board or the President. Unless otherwise specified
therein, such resignation shall take effect upon delivery. [Section 141(b)]
Section 2.12. Removal of Directors. Any Director may be
removed at any time, either for or without cause, upon the affirmative vote of
the holders of a majority of the outstanding shares of stock of the Corporation
entitled to vote for the election of such Director, cast at a special meeting
of stockholders called for the purpose. Any vacancy in the Board of Directors
caused by any such removal may be filled at such meeting by the stockholders
entitled to vote for the election of the Director so removed. If such
stockholders do not fill such vacancy at such meeting (or in the written
instrument effecting such removal, if such removal was effected by consent
without a meeting), such vacancy may be filled in the manner provided in
Section 2.13 of these By-Laws. [Section 141(b)]
Section 2.13. Vacancies and Newly Created Directorships. If
any vacancies shall occur in the Board of Directors, by reason of death,
resignation, removal or otherwise, or if the authorized number of Directors
shall be increased, the Directors then in office shall continue to act, and
such vacancies and newly created directorships may be filled by a majority of
the Directors then in office, although less than a quorum. A Director elected
to fill a vacancy or a newly created directorship shall hold office until his
successor has been elected and qualified or until his earlier death,
resignation or removal. Any such vacancy or newly created directorship may
also be filled at any time by vote of the stockholders. [Section 223]
Section 2.14. Compensation. The amount, if any, which each
Director shall be entitled to receive as compensation for his services as such
shall be fixed from time to time by resolution of the Board of Directors.
[Section 141(h)]
Section 2.15. Reliance on Accounts and Reports, etc. A
Director, or a member of any Committee designated by the Board of Directors
shall, in the performance of his duties, be fully protected in relying in good
faith upon the records of the Corporation and upon information, opinions,
reports or statements presented to the Corporation by any of the Corporation's
Officers or employees, or Committees designated by the Board of Directors, or
by
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any other person as to the matters the member reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Corporation. [Section 141(e)]
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. How Constituted. The Board of Directors may,
by resolution adopted by a majority of the whole Board, designate one or more
Committees, including an Executive Committee, each such Committee to consist of
such number of Directors as from time to time may be fixed by the Board of
Directors. The Board of Directors may designate one or more Directors as
alternate members of any such Committee, who may replace any absent or
disqualified member or members at any meeting of such Committee. Thereafter,
members (and alternate members, if any) of each such Committee may be
designated at the annual meeting of the Board of Directors. Any such Committee
may be abolished or redesignated from time to time by the Board of Directors.
Each member (and each alternate member) of any such Committee (whether
designated at an annual meeting of the Board of Directors or to fill a vacancy
or otherwise) shall hold office until his successor shall have been designated
or until he shall cease to be a Director, or until his earlier death,
resignation or removal. [Section 141(c)]
Section 3.02. Powers. During the intervals between the
meetings of the Board of Directors, the Executive Committee, except as
otherwise provided in this section, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the property,
affairs and business of the Corporation, including the power to declare
dividends and to authorize the issuance of stock. Each such other Committee,
except as otherwise provided in this section, shall have and may exercise such
powers of the Board of Directors as may be provided by resolution or
resolutions of the Board of Directors. Neither the Executive Committee nor
any such other Committee shall have the power or authority:
(a) to amend the Certificate of Incorporation
(except that a Committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors as provided in
Section 151(a) of the General Corporation Law, fix the
designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other
class or classes or any other series of the same or any other
class or classes of stock of the Corporation or fix the number
of shares of any series of stock or authorize the increase or
decrease of the shares of any series),
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(b) to adopt an agreement of merger or consolidation,
(c) to recommend to the stockholders the sale, lease
or exchange of all or substantially all of the Corporation's
property and assets,
(d) to recommend to the stockholders a dissolution
of the Corporation or a revocation of a dissolution, or
(e) to amend these By-Laws.
The Executive Committee shall have, and any such other Committee may be granted
by the Board of Directors, power to authorize the seal of the Corporation to be
affixed to any or all papers which may require it. [Section 141(c)]
Section 3.03. Proceedings. Each such Committee may fix its
own rules of procedure and may meet at such place (within or without the State
of Delaware), at such time and upon such notice, if any, as it shall determine
from time to time. Each such Committee shall keep minutes of its proceedings
and shall report such proceedings to the Board of Directors at the meeting of
the Board of Directors next following any such proceedings.
Section 3.04. Quorum and Manner of Acting. Except as may be
otherwise provided in the resolution creating such Committee, at all meetings
of any Committee the presence of members (or alternate members) constituting a
majority of the total authorized membership of such Committee shall constitute
a quorum for the transaction of business. The act of the majority of the
members present at any meeting at which a quorum is present shall be the act of
such Committee. Any action required or permitted to be taken at any meeting of
any such Committee may be taken without a meeting, if all members of such
Committee shall consent to such action in writing and such writing or writings
are filed with the minutes of the proceedings of the Committee. The members of
any such Committee shall act only as a Committee, and the individual members of
such Committee shall have no power as such. [Section 141(c)]
Section 3.05. Action by Telephonic Communications. Members
of any Committee designated by the Board of Directors may participate in a
meeting of such Committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
provision shall constitute presence in person at such meeting. [Section
141(i)]
Section 3.06. Absent or Disqualified Members. In the absence
or disqualification of a member of any Committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously
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appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. [Section 141(c)]
Section 3.07. Resignations. Any member (and any alternate
member) of any Committee may resign at any time by delivering a written notice
of resignation, signed by such member, to the Chairman of the Board or the
President. Unless otherwise specified therein, such resignation shall take
effect upon delivery.
Section 3.08. Removal. Any member (and any alternate member)
of any Committee may be removed at any time, either for or without cause, by
resolution adopted by a majority of the whole Board of Directors.
Section 3.09. Vacancies. If any vacancy shall occur in any
Committee, by reason of disqualification, death, resignation, removal or
otherwise, the remaining members (and any alternate members) shall continue to
act, and any such vacancy may be filled by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.01. Executive Officers; Election; Qualifications;
Term of Office; Resignation; Removal Vacancies. The Board of Directors shall
elect a President and Secretary, and it may, if it so determines, choose a
Chairman of the Board and a Vice Chairman of the Board from among its members.
The Board of Directors may also choose one or more Vice Presidents, one or more
Assistant Secretaries, a Treasurer and one or more Assistant Treasurers. Each
such Officer shall hold office until the first meeting of the Board of
Directors after the annual meeting of stockholders next succeeding his
election, and until his successor is elected and qualified or until his earlier
resignation or removal. Any Officer may resign at any time upon written notice
to the corporation. The Board of Directors may remove any Officer with or
without cause at any time, but such removal shall be without prejudice to the
contractual rights of such Officer, if any, with the corporation. Any number
of offices may be held by the same person. Any vacancy occurring in any office
of the corporation by death, resignation, removal or otherwise may be filled
for the unexpired portion of the term by the Board of Directors at any regular
or special meeting.
Section 4.02 Powers and Duties of Executive Officers. The
Officers of the corporation shall have such powers and duties in the management
of the corporation as may be prescribed in a resolution by the Board of
Directors and, to the extent not so provided, as generally pertain to their
respective offices, subject to the control of the Board of Directors.
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The Board of Directors may require any Officer, agent or employee to give
security for the faithful performance of his duties.
ARTICLE V
CAPITAL STOCK
Section 5.01. Certificates of Stock, Uncertificated Shares.
The shares of the Corporation shall be represented by certificates, provided
that the Board of Directors may provide by resolution or resolutions that some
or all of any or all classes or series of the stock of the Corporation shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until each certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock in the Corporation represented by certificates
and upon request every holder of uncertificated shares shall be entitled to
have a certificate signed by, or in the name of the Corporation, by the
President or a Vice President, and by the Treasurer or Controller or an
Assistant Treasurer or Controller, or the Secretary or an Assistant Secretary,
representing the number of shares registered in certificate form. Such
certificate shall be in such form as the Board of Directors may determine, to
the extent consistent with applicable law, the Certificate of Incorporation and
these By-Laws. [Section 158]
Section 5.02. Signatures; Facsimile. All of such signatures
on the certificate may be a facsimile, engraved or printed, to the extent
permitted by law. In case any Officer, transfer agent or registrar who has
signed, or whose facsimile signature has been placed upon a certificate shall
have ceased to be such Officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such Officer, transfer agent or registrar at the date of issue.
[Section 158]
Section 5.03. Lost, Stolen or Destroyed Certificates. The
Board of Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such certificate, setting forth such allegation. The
Board of Directors may require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or
the issuance of any such new certificate. [Section 167]
Section 5.04 Transfer of Stock. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for
shares, duly endorsed or accompanied by appropriate evidence of succession,
assignment or authority to transfer, the Corporation shall issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the
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transaction upon its books. Within a reasonable time after the transfer of
uncertificated stock, the Corporation shall send to the registered owner
thereof a written notice containing the information required to be set forth or
stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the
General Corporation Law of the State of Delaware. Subject to the provisions of
the Certificate of Incorporation and these By-Laws, the Board of Directors may
prescribe such additional rules and regulations as it may deem appropriate
relating to the issuance, transfer and registration of shares of the
Corporation. [Section 151]
Section 5.05 Record Date. In order to determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted by the Board of Directors, and which shall
not be more than sixty nor less than ten days before the date of such meeting.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting,
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the Board
of Directors, and which date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to the corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an Officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights of the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be
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at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. [Section 213]
Section 5.06. Registered Stockholders. Prior to due
surrender of a certificate for registration of transfer, the Corporation may
treat the registered owner as the person exclusively entitled to receive
dividends and other distributions, to vote, to receive notice and otherwise to
exercise all the rights and powers of the owner of the shares represented by
such certificate, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in such shares on the part of any other
person, whether or not the Corporation shall have notice of such claim or
interests. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer if, when the certificates are presented to the Corporation for
transfer or uncertificated shares are requested to be transferred, both the
transferor and transferee request the Corporation to do so. [Section 159]
Section 5.07. Transfer Agent and Registrar. The Board of
Directors may appoint one or more transfer agents and one or more registrars,
and may require all certificates representing shares to bear the signature of
any such transfer agents or registrars.
ARTICLE VI
INDEMNIFICATION
Section 6.01. Nature of Indemnity. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was or has agreed to become a Director or Officer of the Corporation, or
is or was serving or has agreed to serve at the request of the Corporation as a
Director or Officer, of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by
reason of the fact that he is or was or has agreed to become an employee or
agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with
such action, suit or proceeding and any appeal therefrom if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action or
proceeding had no reasonable cause to believe his conduct was unlawful; except
that in the case of an action or suit by or in the right of the Corporation to
procure a judgment in its favor (1) such indemnification shall be limited to
expenses (including attorneys' fees) actually and reasonably incurred by such
person in the
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defense or settlement of such action or suit, and (2) no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the
extent that the Delaware Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful. [Section 145(a)]
Section 6.02. Successful Defense. To the extent that a
Director, Officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Section 6.01 hereof or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith. [Section 145(c)]
Section 6.03. Determination That Indemnification is Proper.
Any indemnification of a Director or Officer of the Corporation under Section
6.01 hereof (unless ordered by a court) shall be made by the Corporation unless
a determination is made that indemnification of the Director or Officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 6.01 hereof. Any indemnification of an employee
or agent of the Corporation under Section 6.01 hereof (unless ordered by a
court) may be made by the Corporation upon a determination the indemnification
of the employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 6.01 hereof. Any such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of Directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested Directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders. [Section 145(d)]
Section 6.04. Advance Payment of Expenses. Expenses incurred
by a Director or Officer in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the Director or Officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate. The
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Board of Directors may authorize the Corporation's counsel to represent such
Director, Officer, employee or agent in any action, suit or proceeding, whether
or not the Corporation is a party to such action, suit or proceeding. [Section
145(e)]
Section 6.05. Procedure for Indemnification of Directors and
Officers. Any indemnification of a Director or Officer of the Corporation
under Section 6.01 and 6.02, or advance of costs, charges and expenses to a
Director or Officer under Section 6.04 of this Article, shall be made promptly,
and in any event within thirty days, upon the written request of the Director
or Officer. If a determination by the Corporation that the Director or Officer
is entitled to indemnification pursuant to this Article is required, and the
Corporation fails to respond within sixty days to a written request for
indemnity, the Corporation shall be deemed to have approved such request. If
the Corporation denies a written request for indemnity or advancement of
expenses, in whole or in part, or if payment in full pursuant to such request
is not made within thirty days, the right to indemnification or advances as
granted by this Article shall be enforceable by the Director or Officer in any
court of competent jurisdiction. Such person's costs and expenses incurred in
connection with successfully establishing his right to indemnification, in
whole or in part, in any such action shall also be indemnified by the
Corporation. It shall be a defense to any such action (other than an action
brought to enforce a claim for the advance of costs, charges and expenses under
Section 6.04 of this Article where the required undertaking, if any, has been
received by the Corporation) that the claimant has not met the standard of
conduct set forth in Section 6.01 of this Article, but the burden of proving
such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, its independent legal counsel,
and its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 6.01
of this Article, nor the fact that there has been an actual determination by
the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
Section 6.06. Survival; Preservation of Other Rights. The
foregoing indemnification provisions shall be deemed to be a contract between
the Corporation and each Director, Officer, employee and agent who serves in
any such capacity at any time while these provision as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a "contract right" may not
be modified retroactively without the consent of such Director, Officer,
employee or agent.
The indemnification provided by this Article VI shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any by-law, agreement, vote
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of stockholders or disinterested Directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
Officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 6.07. Insurance. The Corporation shall purchase and
maintain insurance on behalf of any person who is or was or has agreed to
become a Director or Officer of the Corporation, or is or was serving at the
request of the Corporation as a Director or Officer of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him or on his behalf in any such capacity,
or arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
Article, provided that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 6.08. Severability. If this Article or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each Director
or Officer and may indemnify each employee or agent of the Corporation as to
costs, charges and expenses (including attorneys fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including an action
by or in the right of the Corporation, to the fullest extent permitted by any
applicable portion of this Article that shall not have been invalidated and to
the fullest extent permitted by applicable law.
ARTICLE VII
OFFICES
Section 7.01. Registered Office. The registered office of
the Corporation in the State of Delaware shall be located at the Corporation
Trust Center, 1209 Orange Street, in the City of Wilmington, County of New
Castle.
Section 7.02. Other Offices. The Corporation may maintain
offices or places of business at such other locations within or without the
State of Delaware as the Board of Directors may from time to time determine or
as the business of the Corporation may require.
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ARTICLE VIII
GENERAL PROVISIONS
Section 8.01. Dividends. Subject to any applicable
provisions of law and the Certificate of Incorporation, dividends upon the
shares of the Corporation may be declared by the Board of Directors at any
regular or special meeting of the Board of Directors and any such dividend may
be paid in cash, property, or shares of the Corporation's Capital Stock.
A member of the Board of Directors, or a member of any
Committee designated by the Board of Directors shall be fully protected in
relying in good faith upon the records of the Corporation and upon such
information, opinions, reports or statements presented to the Corporation by
any of its Officers or employees, or Committees of the Board of Directors, or
by any other person as to matters the Director reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Corporation, as to the value and
amount of the assets, liabilities and/or net profits of the Corporation, or any
other facts pertinent to the existence and amount of surplus or other funds
from which dividends might properly be declared and paid. [Sections 172, 173]
Section 8.02. Reserves. There may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may similarly modify or abolish any
such reserve. [Section 171]
Section 8.03. Execution of Instruments. Subject to any
limitation contained in the Certificate of Incorporation or these By-Laws, the
Chairman of the Board or the President may enter into any contract or execute
and deliver any instrument in the name and on behalf of the Corporation and in
the ordinary course of its business. The Board of Directors may, subject to
any limitation contained in the Certificate of Incorporation or these By-Laws,
authorize any Officer or agent to enter into any contract or execute and
deliver any instrument in the name and on behalf of the Corporation. Any such
authorization may be general or limited to specific contracts or instruments.
Section 8.04. Corporate Indebtedness. No loan shall be
contracted on behalf of the Corporation, and no evidence of indebtedness shall
be issued in its name, unless authorized by the Board of Directors. Such
authorization may be general or confined to specific instances. Loans so
authorized may be effected at any time for the Corporation from any bank, trust
company or other institution, or from any firm, corporation or individual. All
bonds, debentures, notes and other obligations or evidences of indebtedness of
the Corporation issued
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for such loans shall be made, executed and delivered as the Board of Directors
shall authorize. When so authorized by the Board of Directors, any part of or
all the properties, including contract rights, assets, business or good will of
the Corporation, whether then owned or thereafter acquired, may be mortgaged,
pledged, hypothecated or conveyed or assigned in trust as security for the
payment of such bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation, and of the interest thereon, by instruments
executed and delivered in the name of the Corporation.
Section 8.05. Deposits. Any funds of the Corporation may be
deposited from time to time in such banks, trust companies or other
depositaries as may be determined by the Board of Directors, or by such
Officers or agents as may be authorized by the Board of Directors to make such
determination.
Section 8.06. Checks. All checks or demands for money and
notes of the Corporation shall be signed by such Officer or Officers or such
agent or agents of the Corporation, and in such manner, as the Board of
Directors from time to time may determine.
Section 8.07. Sale, Transfer, etc., of Securities. To the
extent authorized by the Board of Directors, the Chairman of the Board, the
President, or any Vice President, together with the Secretary or the Treasurer
or any other Officers designated by the Board of Directors may sell, transfer,
endorse, and assign any shares of stock, bonds or other securities owned by or
held in the name of the Corporation, and may make, execute and deliver in the
name of the Corporation, under its corporate seal, any instruments that may be
appropriate to effect any such sale, transfer, endorsement or assignment.
Section 8.08. Voting as Stockholder. Unless otherwise
determined by resolution of the Board of Directors, the Chairman of the Board
or the President shall have full power and authority on behalf of the
Corporation to attend any meeting of stockholders of any corporation in which
the Corporation may hold stock, and to act, vote (or execute proxies to vote)
and exercise in person or by proxy all other rights, powers and privileges
incident to the ownership of such stock. Such Officers acting on behalf of the
Corporation shall have full power and authority to execute any instrument
expressing consent to or dissent from any action of any such corporation
without a meeting. The Board of Directors may by resolution from time to time
confer such power and authority upon any other person or persons.
Section 8.09. Fiscal Year. The fiscal year of the
Corporation shall commence on January 1 of each year (except for the
Corporation's first fiscal year which shall commence on the date of
incorporation) and shall terminate in each case on December 31.
Section 8.10. Seal. The seal of the Corporation shall be
circular in form and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware". The form of such
seal shall be subject to alteration by the
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Board of Directors. The seal may be used by causing it or a facsimile thereof
to be impressed, affixed or reproduced, or may be used in any other lawful
manner.
Section 8.11. Books and Records; Inspection. Except to the
extent otherwise required by law, the books and records of the Corporation
shall be kept at such place or places within or without the State of Delaware
as may be determined from time to time by the Board of Directors.
ARTICLE IX
AMENDMENT OF BY-LAWS
Section 9.01. Amendment. These By-Laws may be amended,
altered or repealed:
(a) by resolution adopted by a majority of the Board
of Directors at any special or regular meeting of the Board if, in the
case of such special meeting only, notice of such amendment,
alteration or repeal is contained in the notice or waiver of notice of
such meeting; or
(b) at any regular or special meeting of the
stockholders if, in the case of such special meeting only, notice of
such amendment, alteration or repeal is contained in the notice or
waiver of notice of such meeting. [Section 109(a)]
ARTICLE X
CONSTRUCTION
Section 10.01. Construction. In the event of any conflict
between the provisions of these By-Laws as in effect from time to time and the
provisions of the Certificate of Incorporation of the Corporation as in effect
from time to time, the provisions of such Certificate of Incorporation shall be
controlling.
I HEREBY CERTIFY that these By-Laws were amended and restated
on May 14, 1997.
/s/ John F. Brocci
-----------------------------
John F. Brocci
Secretary
18
<PAGE> 1
ANNUAL REPORT 1997
(PICTURE)
KAYDON
<PAGE> 2
KAYDON
....designs, manufactures and sells custom-engineered products for a broad and
diverse customer base. Kaydon's principal products include antifriction
bearings, bearing systems and components, filters and filter housings, specialty
retaining rings, specialty balls, custom rings, shaft seals, hydraulic
cylinders, metal castings and various types of slip-rings. These products are
used by our customers in a wide variety of medical, instrumentation, material
handling, machine tool positioning, aerospace, defense, construction and other
industrial applications. Kaydon is customer-focused and concentrates on
providing a cost-effective solution to the customer's problem, through a close
engineering relationship with leading manufacturers throughout the world.
STRATEGY
Kaydon's strategy is to function as an extension of our customers' businesses
through a commitment to identify and provide engineered solutions to design
problems. We seek to blend technical innovation with cost-effective
manufacturing and outstanding service.
We will strive to develop growth opportunities by expanding our range of
technical capabilities through both internal developments and selected
acquisitions. This will permit us to pursue our strategy of custom technical
solutions beyond our current products into expanded product and market areas.
OBJECTIVES
The successful implementation of Kaydon's strategies should result in superior
earnings growth and return on capital. Management's long-term objectives are to
achieve a 15% compound rate of growth in earnings; a minimum 20% return on
stockholders' investment; and a 15% return on total capital employed.
CONTENTS
<TABLE>
<S> <C>
Financial Highlights................................ 1
Letter to Stockholders............................ 2,3
Creating Shareholder Value........................ 4,5
Market Sectors.................................... 6-7
Special Industrial Machinery........................ 8
Replacement Parts & Exports ........................ 9
Aerospace & Military Equipment..................... 10
Heavy Industrial Equipment......................... 11
Directors, Officers and Management................. 12
Financial History.................................. 14
Management Analysis............................. 15,16
Financial Statements............................ 18-21
Notes to Financial Statements................... 22-32
Corporate Information.............................. 33
</TABLE>
- --------------------------------------------------------------------------------
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 -- A CAUTION CONCERNING
FORWARD-LOOKING STATEMENTS.
Under the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995, the company cautions investors that any forward-looking statements or
projections made by the company, including those made in this document, are
subject to risks and uncertainties that may cause actual results to differ
materially from those projected.
- --------------------------------------------------------------------------------
<PAGE> 3
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Percent
Operating Data, Amounts in thousands Change
except per share data (1) 1997 1996 1995 1994 1993 97/96
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $329,036 $290,670 $229,924 $204,695 $184,060 13%
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Income 95,681 78,954 59,286 49,759 44,314 21%
- ---------------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative
Prior Year Effect of
Changes in Accounting Principles 61,666 50,521 38,203 31,226 27,695 22%
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative Prior Year Effect of
Change in Accounting Principles -- -- -- 2,000 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income 61,666 50,521 38,203 29,226 27,695 22%
- ---------------------------------------------------------------------------------------------------------------------------------
Return on Net Sales (2) 18.7% 17.4% 16.6% 15.3% 15.0% --
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings per Share - Diluted (1) (2) 1.86 1.53 1.14 .93 .80 22%
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends per Share (1) 0.30 .25 .23 .21 .19 20%
- ---------------------------------------------------------------------------------------------------------------------------------
Book Value per Share (1) 8.60 7.05 5.74 5.01 4.31 22%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets 383,985 331,538 267,675 243,584 217,422 16%
- ---------------------------------------------------------------------------------------------------------------------------------
Stockholders' Investment 283,596 232,056 187,905 166,570 143,840 22%
- ---------------------------------------------------------------------------------------------------------------------------------
Return on Average
Stockholders' Investment (2) 23.9% 24.1% 21.6% 20.1% 19.8% --
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares
Outstanding Diluted (1) 33,163 33,098 33,481 33,452 34,676 --
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All share and per share data presented has been restated to reflect the
two-for-one stock split effected during 1997. See note #2 to Consolidated
Financial Statements.
(2) Based on income before cumulative prior year effect of change in accounting
principles for FAS 112.
(GRAPH) (GRAPH)
1
<PAGE> 4
TO OUR STOCKHOLDERS
- --------------------------------------------------------------------------------
1997 continued the exceptional performance history for Kaydon as our base
businesses continued to grow and were augmented by two acquisitions in the
second quarter, resulting in a market capitalization in excess of one billion
dollars for the first time in our history. In the last five years we have
achieved a consistent double-digit growth rate in sales and earnings. During the
same time period we have acquired eight new companies with five of them
combining to form an eighty million dollar plus new business in fluid power
components. There is now a broad and stable base for Kaydon as we head toward
the 21st century. Our businesses are strong and serve a broad array of customers
in a multiplicity of markets providing some comfort from the occasional pangs of
a concentrated business orientation. We believe that Kaydon is even better
positioned now than last year to grow profitably and consistently, and if past
is prologue to the future, it bodes well for your company.
RESULTS
Earnings continued to rise at an outstanding pace, reaching $61,666,000
compared to last year's $50,521,000, a gain of 22.1%. Earnings per share were
$1.86 (diluted), an increase of 21.6% over the prior $1.53. Our corporate goal
of 15% compounded growth in earnings per share has been consistently exceeded
and, since 1993 has been 20.2%, which certainly puts Kaydon in the top tier of
performance, regardless of industry.
(PICTURE)
Stephen K. Clough Lawrence J. Cawley
Sales rose 13.2% to $329,036,000 compared to $290,670,000 in 1996 and were
negatively impacted to a minor degree by a work stoppage in our Muskegon bearing
plant which ended in less than three weeks. Sales gains were reached in
virtually all of the product lines we offer and were particularly strong in
cylinders and bearings. We were very pleased with the performance within the
operating plants.
FINANCIAL HIGHLIGHTS
Early in the year we paid off the IRB debt of $8,000,000 leaving Kaydon
with no debt on the balance sheet for the first time in our history. In April
and May we spent a total of $27,382,000 to purchase Great Bend Industries and
Gold Star Manufacturing which we incorporated into our Fluid Power Group. We
also spent $2,013,000 to purchase 73,591 shares of Kaydon stock in accord with
the authorized repurchase plan. A total of 2,976,317 shares are still authorized
for repurchase.
Our total operating cash flow was $71,619,000 while cash flow after
dividends and capital expenditure was $49,638,000. The net result is that our
"cash and securities" position increased again to $96,802,000, a gain of
$13,535,000 over the year in spite of the expenditures mentioned earlier.
In February we completed favorable arrangements for a $100,000,000
revolving credit agreement with our banks. We continue to believe this line
should be maintained even
2
<PAGE> 5
with our strong cash position so that we can be prepared if an exceptional
acquisition opportunity arises.
ACQUISITIONS
Early in the year we completed our fourteenth and fifteenth acquisition as we
purchased Great Bend and Gold Star. These two companies join Seabee and Victor
Fluid Power to make up Kaydon's Fluid Power Products Group. We are now arguably
the most versatile provider of specialty hydraulic cylinders and components in
the United States. Kaydon produces special cylinders with strokes up to 240" in
double and triple acting cylinders with diameters up to 24". We produce
castings; chrome plate rods; harden rods; weld, machine and completely fabricate
hydraulic cylinders used in heavy equipment, cranes, emergency vehicles, ships
and an assortment of applications one normally does not associate with such an
industrial product. We have gone through a product rationalization process,
installed capital equipment and now emphasize customer service which is the
hallmark of Kaydon's success. It is a process that works because it provides
value.
STOCK SPLIT AND DIVIDEND
In September 1997, the Board of Directors approved a two-for-one stock
split. While a stock split of any kind does not change your percentage ownership
of Kaydon, it does in theory improve liquidity and make the buying and selling
of the stock easier and more affordable in round lots of 100 shares.
At the same time, the Board approved a significant increase in the
dividend, raising it 28.6% to $.09 per share or $.36 per share on an annualized
basis. Thus we will have an annual dividend payout to shareholders of
$11,877,120 based on 32,992,000 outstanding shares.
OUTLOOK
We continue to remind you that backlog numbers are not nearly as
significant to Kaydon's business outlook as they were five or more years ago.
Nonetheless, an increase provides more comfort than a decrease and with that
thought in mind, we are pleased to see the backlog increase again for the fifth
consecutive quarter. Our backlog of unshipped orders stands at $155,548,000 at
year end compared to $143,037,000 in the prior quarter and $117,262,000 at this
time last year and was spread across most of Kaydon's individual businesses. It
certainly leaves us in an excellent position for outstanding growth in the first
quarter and with a reasonable economy, another record year for your company.
In closing, we wish you success however you define it, in 1998, and extend
our appreciation and thanks once again to our valued customers, our fellow
employees here at Kaydon, our Directors, and you our stockholders. As in the
past, we will do our best for all of you.
/s/ Lawrence J Cawley
Lawrence J Cawley
Chairman
/s/ Stephen K. Clough
Stephen K. Clough
President & Chief Executive Officer
3
<PAGE> 6
CREATING SHAREHOLDER VALUE
(PICTURE)
Kaydon's objective is to provide increased shareholder value. To that end
we have three essential goals to achieve:
- - 15% Compound Growth In Earnings Per Share
- - 15% Return On Total Capital Employed
- - 20% Return On Equity Or Stockholder Investment
First stated in 1984 when Kaydon became a public company, the goals remain
unchanged although the difficulty of achievement has increased with decreasing
rates of inflation in the economy. As in our engineering effort which is focused
on the customers' needs, we as managers focus on these goals as the embodiment
of creating shareholder value and do not allow ourselves to be distracted by
peripheral issues and buzzwords which change like the seasons. As these two
pages with their charts show, we have been successful thus far and intend to
continue that.
RETURN ON CAPITAL EMPLOYED
Capital employed is the sum of stockholders' investment plus debt, and
represents the real dollars used to support any business. In theory, a
stockholder could invest the money in a totally safe investment such as a
Treasury Bill which in today's environment would return about 6.0% per year.
When factored by the inherent risk in a business, the cost of capital is more
like 10% to 12%. Kaydon's goal of 15% then, is to provide its shareholders a
return that is much better and thereby creates shareholder value, a concept
which is more often talked about than provided. Kaydon has earned a return on
capital that has never fallen below 16% and since 1993 has increased from 17.7%
to 23.6% in 1997. Since we have no debt and are therefore much lower in
financial risk, this level of return is extremely good and is a significant
factor in the gain in shareholder value.
(GRAPH)
4
<PAGE> 7
- --------------------------------------------------------------------------------
EARNINGS PER SHARE
Kaydon has long had a goal to provide a 15% Compound Annual Growth Rate (CAGR)
in earnings per share over a period of time. We have certainly delivered that,
with a CAGR of 20% since our beginning in 1984. That's right up there with the
best of cutting-edge companies and is driven by improved performance in all
operations, plus nine acquisitions in the last five years, of similarly oriented
manufacturing companies, all of which have improved under Kaydon's ownership. It
is this sort of consistent performance that provides increased shareholder
value.
(GRAPH)
RETURN ON EQUITY
Stockholders' investment or equity, is a measure of the original capital
invested in the Corporation in 1984 plus the retained earnings in each
subsequent year. Beginning with approximately $10 million, Kaydon has grown to
have an equity base of more than $283 million at the end of this calendar year.
Our goal of 20% return has been exceeded in every year since 1993. That's a
consistent, long-term performance record that sets Kaydon above the average
company.
(GRAPH)
TOTAL RETURN
(GRAPH)
5
<PAGE> 8
MARKET SECTORS
It is worthwhile to note that in spite of the large impact from
acquisitions in the Fluid Power business, Kaydon's market sector shares did not
change appreciably in 1997. Aerospace & Military alone showed an absolute
decline in sales, albeit only 2%, while all others grew at a rate well in excess
of 10%. All of Kaydon's businesses have a broad mix of customers in an
assortment of industries which reduces industry concentration to a great degree.
Even the Fluid Power Group is surprisingly diverse and installs its products in
places that are not usually associated with fluid power.
- - Special Industrial Machinery
- - Replacement Parts & Exports
- - Aerospace & Military
- - Heavy Industrial Equipment
The photos on pages 8 through 11 are typical applications of the use of Kaydon's
products.
(GRAPH)
(GRAPH)
6
<PAGE> 9
- --------------------------------------------------------------------------------
SPECIAL INDUSTRIAL MACHINERY / 26.3% / $86,564,000
- - MACHINE TOOLS - MATERIAL HANDLING EQUIPMENT - MEDICAL DIAGNOSTIC EQUIPMENT
- - LARGE AIR & GAS COMPRESSORS - ROBOTS
- - SPECIAL MACHINES
ECONOMIC FACTOR
Domestic industrial production levels and capital spending.
TYPICAL APPLICATIONS
Robotic Manipulator Bearings, Gas Transmission Line Compressor Piston and
Sealing Rings, Air Conditioning Compressor Filters, Printing Machine Roll
Bearings, Medical Scanner Bearing Systems, Diesel Engine Piston Ring Sets,
Slip-Rings and Assemblies, Hydraulic Actuators for Drilling Platforms and
Rescue Devices
- --------------------------------------------------------------------------------
REPLACEMENT PARTS & EXPORTS / 34.2% / $112,426,000
- - REPLACEMENT PARTS SOLD TO MAJOR EQUIPMENT USERS, THE UNITED STATES
GOVERNMENT AND THROUGH DISTRIBUTORS, PLUS ALL EXPORT SALES
ECONOMIC FACTOR
Stable business with minor sensitivity to industrial production levels.
TYPICAL APPLICATIONS
Railroad Diesel Replacement Piston Ring Sets, Spare Bearings, Filter
Elements and Shaft Seals for Military Equipment, Distributor Replacement
Bearings and Filter Elements for Original Equipment Applications,
Slip-Rings and Assemblies
- --------------------------------------------------------------------------------
AEROSPACE & MILITARY EQUIPMENT / 13.8% / $45,412,000
- - MILITARY & COMMERCIAL AIRCRAFT
- - RADAR & ORDNANCE EQUIPMENT
ECONOMIC FACTOR
Level of domestic aircraft and defense spending for selected equipment
programs.
TYPICAL APPLICATIONS
Aircraft Jet Engine Shaft Seals & Sealing Rings, Radar & Fire Control
Custom Bearings, Military Vehicle Fuel Filter Systems, Aircraft Landing
Wheel Brake Bearings, Tank Turbine Engine Shaft Seals, Military Turret
Azimuth & Elevation Bearings, Slip-Rings and Assemblies
- --------------------------------------------------------------------------------
HEAVY INDUSTRIAL EQUIPMENT / 25.7% / $84,634,000
- - CONSTRUCTION - MINING - FORESTRY
- - OIL FIELD & POWER GENERATION EQUIPMENT
ECONOMIC FACTOR
Domestic electric power generation and petroleum product production levels.
TYPICAL APPLICATIONS
Hydraulic Excavator Swing Bearings, Road Grader Hydraulic Filter Elements,
Power Generation Lubrication Oil Filter Units, Sealing Rings, Piston Rings,
Slip-Rings and Assemblies Hydraulic Cylinders for Construction Equipment
7
<PAGE> 10
SPECIAL INDUSTRIAL MACHINERY
- --------------------------------------------------------------------------------
This market sector enjoyed modest growth in 1997 rising to $86,564,000 and
commanding 26.3% of our total sales. Virtually all product lines contributed to
the total with only air conditioning filters showing a significant decline.
The medical equipment market continued the growth seen in prior years.
Kaydon has become the premier world-wide supplier of bearings and slip rings
used in Computerized Tomography scanners. This and other medical
instrumentation, such as blood analyzers, have become an important market.
Machine tools have also continued to gain, particularly in index devices,
material handling equipment and table controls. As reported last year, our
hydraulic cylinders continue to make gains in this market sector.
(PICTURE)
As this is the area with our broadest customer base, we expect to see
continuing growth in future years. The medical market will continue to gain as
more diagnostics are made utilizing robotized handling devices to reduce contact
with body fluids such as blood. As industry works to improve its competitive
position, the machine tool business should continue to do well as it has in the
last few years. Our expectations are that we will continue to see similar growth
in future years.
(PICTURE)
8
<PAGE> 11
REPLACEMENT PARTS & EXPORTS
- --------------------------------------------------------------------------------
We continue to emphasize our aftermarket efforts and are quite pleased to
see an absolute rise to $112,426,000 or 34.2% of our total sales. Export sales
increased 11% over the prior year in spite of the strength of the U.S. dollar
reflecting a very significant increase in our aftermarket and the CT Scanner
market.
Direct sales to the Government, which is included in this sector, improved
dramatically year-over-year increasing over 25%. The years of living off spare
parts inventory, which we noted had pretty much ended last year, was clearly not
possible any longer and inventory is being replenished.
Sales to distributors also showed double digit gains across most product
lines. We continue to emphasize service levels to this market and in fact
improved upon an already mid 90% fill rate. Our program to increase sales of the
RK series bearing for heavy industrial product usage did very well in the year
and is up three to four fold from just a few years ago.
(PICTURE)
(PICTURE)
This sector should continue to grow in future years as Kaydon continues to
meet its commitment to broad coverage and high service levels. With an installed
base growing each year, the demand for replacement parts to keep the equipment
operating should be reflected in a growing sales level.
(PICTURE)
9
<PAGE> 12
AEROSPACE AND MILITARY EQUIPMENT
- --------------------------------------------------------------------------------
(PICTURE)
We saw a marginal decline to $45,412,000 or 13.8% of total sales compared
to 16% last year. This will continue to be a valuable market for Kaydon but we
do not anticipate that much change will occur.
There has been consolidation in the supplier base for military products
over the last few years allowing suppliers like Kaydon to gather an increasing
share of a shrinking market. Over the long run, we continue to believe that the
military demand will stabilize somewhere close to its current level with
fluctuations in both directions.
The commercial aerospace business has been quite strong and demand high.
The large increases have sometimes confused our customers' ordering systems,
resulting in large pull-ins and push-outs of specific part numbers making it
difficult to provide the service levels which we aim to provide. Our plants have
responded quite well however, and we believe are performing much better than
some of our competitors while incurring minimal costs in doing so. We expect
that this market will continue at high levels similar to this, for at least the
next two to four years and will then drift into the usual cycle of declining
sales before moving back up to an even higher peak level.
Kaydon operates well in the military and aerospace sector and has the
appropriate quality control procedures and administrative practices to provide
the level of documentation required. The paperwork and recordkeeping required
can be daunting to those dealing with it initially but having done this since
our inception in 1941, we are comfortable with the procedures.
(PICTURE)
10
<PAGE> 13
HEAVY INDUSTRIAL EQUIPMENT
- --------------------------------------------------------------------------------
(PICTURE)
This sector reached a sales level of $84,634,000 and 25.7% of total sales,
fueled by two additional acquisitions in the fluid power area, continuing growth
in the prior acquired businesses and a large rise in turntable bearing usage.
The fluid power businesses have proven to be amenable to our efforts which
improve quality, delivery and service to the customer, thereby providing more
market share. We have seen significant increases in the amount of business
allocated to Kaydon by some of our major customers. At the same time we have
deleted business where we bring nothing special to bear as a "me too" supplier.
The end result is greater sales with higher value added.
The market for bearings used in construction, man-lifts, and off road
equipment was quite strong during the year. Our Mexican plant was expanded and
provided much needed capacity to service this market with excellent quality at
competitive prices. One market area which was not up to par was in the power
generation businesses, both domestic and export. There has been a good deal of
turmoil occurring in power generation as deregulation continues. So-called
"wheeling" puts excessive pressure on the established power companies and in
effect penalizes them for the large capital expenditures that they made years
ago as monopolies responding to the projected needs of their markets. They have
reduced their capital expenditures as a result, which impacts our potential
sales.
(PICTURE)
Kaydon will continue its efforts in serving this market with innovative
products that provide value to the customer. Our expectation is that this market
sector can continue to grow at double digit rates in future years.
(PICTURE)
11
<PAGE> 14
DIRECTORS, OFFICERS & MANAGEMENT
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
[PHOTO]
Gerald J. Breen
President, CEO
Cuyam Corporation
[PHOTO]
Brian P. Campbell
President
TriMas Corporation
[PHOTO]
John H.F. Haskell, Jr.
Managing Director
SBC Warburg Dillon
Read Inc.
[PHOTO]
John F. Brocci
Vice President
Administration and
Secretary
Kaydon Corporation
[PHOTO]
Lawrence J. Cawley
Chairman
Kaydon Corporation
[PHOTO]
Stephen K. Clough
President and Chief
Executive Officer
Kaydon Corporation
[PHOTO]
Joseph P. Port
Vice President Finance
and Corporate Controller
Kaydon Corporation
Harry Bauersfeld, III
Vice President
Operations
Ring & Seal
Thomas A. Bushar
Vice President
General Manager
Filtration
Peter E. Cotter
General Manager
Industrial Tectonics Inc
Jonathan L. Dawe
Director of Finance
Cooper Bearings
David Denny
Operations Manager
I.D.M. Electronics
Glenn F. Dorsey
Director of Product
Development
Electro-Tec
Edwin Gair
Vice President
General Manager
Cooper Bearings
U.K. & U.S.A.
Larry C. Gansen
Vice President
Manufacturing
Fluid Power Products
Group
Richard P. Grochmal
Controller
Ring and Seal
Henry N. Guenther
General Manager
Spirolox
Christopher M. Haggett
Managing Director
I.D.M. Electronics
Martin T. Hoover
Vice President
Sales & Marketing
Industrial Tectonics Inc
Patrick T. Kirk
President
Specialty Products Group
James R. Leibrandt
Controller
Bearings
Christopher D. Marin
Vice President
Sales & Marketing
Fluid Power Products
Group
Joseph M. McIlwain
Controller
Fluid Power Products
Group
Roger K. Miller
Director of Engineering
Filtration
William K. Mosley
Vice President
Engineering
Ring & Seal
Matt Parker, III
Vice President
Sales & Marketing
Filtration
Michael R. Purchase
Vice President
Engineering
Bearings
Arthur H. Ridler
Vice President
General Manager
Ring and Seal
Steve Ridley
Director of Sales
Europe
Cooper Bearings, U.K.J.
Alfonso Salinas
General Manager
Mexico
Sam E. St. Amour
Vice President
Operations
Bearings
Paul M. Schlueter
Vice President
Sales & Marketing
Electro-Tec
Geoffrey M. Scott
Finance Manager
I.D.M. Electronics
Thomas C. Sorrells, III
President
Fluid Power Products
Group
David I. Strohm
Director of M.I.S.
Kaydon Corporation
JoAnna Sutton
Vice President
General Manager
Electro-Tec
Peter M. Walsh
Engineering &
Quality Manager
I.D.M. Electronics
Joseph Vandiver
Vice President
Sales & Marketing
Turntable Bearings
Danny K. Westadt
Controller
Electro-Tec
Robert C. Wilkie, Jr.
Vice President
Sales & Marketing
Bearings
</TABLE>
<PAGE> 15
KAYDON 1997 ANNUAL REPORT
FINANCIAL REVIEW
- ------------------------------------------------------------------------------
<PAGE> 16
FINANCIAL HISTORY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Ten Year Summary 1997 1996 1995 1994(1) 1993 1992 (1) 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL STATEMENT DATA (000 omitted)
INCOME STATEMENT
Net Sales ............................. $329,036 $290,670 $229,924 $204,695 $184,060 $ 183,904 $ 160,989
Gross Profit .......................... 137,260 117,496 88,599 76,150 67,781 66,180 55,981
Operating Income ...................... 95,681 78,954 59,286 49,759 44,314 42,222 39,827
Interest Income (Expense), net ........ 3,780 2,662 2,505 609 142 (1,471) (389)
Provision for Income Taxes ............ 37,795 31,095 23,588 19,142 16,761 15,133 13,983
Net Income ............................ 61,666 50,521 38,203 29,226 27,695 10,374 25,455
BALANCE SHEET
Total Assets .......................... 383,985 331,538 267,675 243,584 217,422 210,967 217,451
Plant & Equipment, net ................ 85,510 76,176 72,345 61,247 60,077 63,513 68,759
Working Capital ....................... 143,763 119,232 91,407 85,886 71,810 56,754 59,171
Capital Employed:
Total Debt .......................... -- 8,000 8,000 8,000 15,312 18,090 40,634
Stockholders' Investment ............ 283,596 232,056 187,905 166,570 143,840 136,076 137,501
-------- -------- -------- -------- -------- -------- --------
Capital Employed ................. 283,596 240,056 195,905 174,570 159,152 154,166 178,135
CASH FLOW DATA
Capital Expenditures, net ............. 12,750 9,320 7,371 6,746 5,088 6,057 11,075
Acquisition of Businesses ............. 27,382 10,699 23,512 7,268 716 -- 42,793
Depreciation & Amortization ........... 12,756 11,749 11,176 10,641 10,264 11,194 9,250
Net Cash Provided by
Operating Activities ................ 71,619 68,225 49,487 44,176 39,237 38,382 35,153
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
PROFITABILITY
Operating Margin ...................... 29.1% 27.2% 25.8% 24.3% 24.1% 23.0% 24.7%
Return on Net Sales ................... 18.7% 17.4% 16.6% 14.3% 15.0% 5.6% 15.8%
Return on Average Assets .............. 17.2% 16.9% 14.9% 12.7% 12.9% 4.8% 12.9%
Return on Average Capital Employed .... 23.6% 23.2% 20.6% 17.5% 17.7% 6.8% 16.1%
Return on Average Stockholders'
Investment .......................... 23.9% 24.1% 21.6% 18.8% 19.8% 7.6% 20.3%
LIQUIDITY
Current Ratio ......................... 3.0 2.8 3.1 3.1 3.1 2.4 2.6
Debt to Debt - Equity Ratio ........... -- 3.3% 4.1% 4.6% 9.6% 11.7% 22.8%
- -------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA (2)
Earnings per Share (Diluted) .......... 1.86 1.53 1.14 0.87 0.80 0.30 0.73
Dividends Declared per Share .......... 0.30 0.25 0.23 0.21 0.19 0.16 0.13
Book Value per Share, net of
treasury stock ...................... 8.60 7.05 5.74 5.01 4.31 3.92 3.97
Market Price per Share, Annual High ... 34-1/8 24-5/8 15-3/4 12-5/8 15-7/8 13-5/16 11-15/16
Market Price per Share, Annual Low .... 20-15/16 14-5/8 11-3/8 9-7/8 9 9-3/4 8
Year End Closing Stock Price .......... 32-5/8 23-9/16 15-3/16 12 10-3/8 11-3/4 11-1/16
- -------------------------------------------------------------------------------------------------------------------------
OTHER
Weighted Average Shares Outstanding
(Diluted) (000 omitted) ............. 33,163 33,098 33,481 33,452 34,626 34,878 34,672
Backlog of Orders on Hand (000 omitted) 155,548 117,262 101,852 88,360 84,385 83,296 93,192
Average Number of Employees ........... 2,473 2,216 1,805 1,703 1,661 1,731 1,441
Net Sales per Employee ................ 133,051 131,169 127,382 120,197 110,813 106,241 111,720
Number of Common Stockholders ......... 1,349 1,415 1,487 1,615 1,742 1,929 2,010
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
Ten Year Summary 1990 1989 1988
- --------------------------------------------------------------------------------
FINANCIAL STATEMENT DATA (000 omitted)
INCOME STATEMENT
<S> <C> <C> <C>
Net Sales ............................. $ 169,442 $ 151,238 $ 135,029
Gross Profit .......................... 59,410 51,426 47,133
Operating Income ...................... 42,648 37,973 35,556
Interest Income (Expense), net ........ (1,878) (2,026) (2,506)
Provision for Income Taxes ............ 14,761 13,100 12,207
Net Income ............................ 26,009 22,847 20,843
BALANCE SHEET
Total Assets .......................... 176,098 153,949 122,425
Plant & Equipment, net ................ 61,931 64,012 48,613
Working Capital ....................... 62,867 42,989 31,921
Capital Employed:
Total Debt .......................... 27,069 29,815 22,457
Stockholders' Investment ............ 113,757 90,686 69,874
-------- -------- --------
Capital Employed ................. 140,826 120,501 92,331
CASH FLOW DATA
Capital Expenditures, net ............. 5,817 9,107 4,839
Acquisition of Businesses ............. -- 22,860 --
Depreciation & Amortization ........... 8,622 7,388 6,407
Net Cash Provided by
Operating Activities ................ 30,072 25,451 23,905
- --------------------------------------------------------------------------------
FINANCIAL RATIOS
PROFITABILITY
Operating Margin ...................... 25.2% 25.1% 26.3%
Return on Net Sales ................... 15.3% 15.1% 15.4%
Return on Average Assets .............. 15.8% 16.5% 17.2%
Return on Average Capital Employed .... 20.8% 22.7% 24.5%
Return on Average Stockholders'
Investment .......................... 25.4% 28.5% 34.7%
LIQUIDITY
Current Ratio ......................... 3.1 2.6 2.3
Debt to Debt - Equity Ratio ........... 19.2% 24.7% 24.3%
- --------------------------------------------------------------------------------
PER SHARE DATA (2)
Earnings per Share (Diluted) .......... 0.76 0.67 0.61
Dividends Declared per Share .......... 0.11 0.08 0.06
Book Value per Share, net of
treasury stock ...................... 3.32 2.66 2.07
Market Price per Share, Annual High ... 9-7/16 9-5/8 8-3/8
Market Price per Share, Annual Low .... 6-13/16 6-23/32 5-11/16
Year End Closing Stock Price .......... 8-1/2 7-15/16 6-23/32
- --------------------------------------------------------------------------------
OTHER
Weighted Average Shares Outstanding
(Diluted) (000 omitted) ............. 34,456 34,360 34,256
Backlog of Orders on Hand (000 omitted) 93,079 97,359 74,128
Average Number of Employees ........... 1,638 1,446 1,265
Net Sales per Employee ................ 103,444 104,591 106,742
Number of Common Stockholders ......... 2,199 2,241 2,519
- --------------------------------------------------------------------------------
</TABLE>
Notes:
(1) Financial results include the impact (net of tax) of the adoption of
the following Statements of Financial Accounting Standards:
1994 Postemployment Benefits - SFAS 112 $ 2,000,000
1992 Postretirement Benefits - SFAS 106 and
Income Taxes - SFAS 109 $15,244,000
(2) All share and per share data presented has been restated to reflect the
two-for-one stock splits effected in 1997 and 1992.
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------------------------------------------------
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
Net sales increased to $329,036,000 in 1997, up 13.2% from
$290,670,000 in 1996. Approximately 6.5% of the growth was generated by the
base businesses of Kaydon while the remaining 6.7% is attributable to the
recent acquisitions of the two fluid power companies purchased in March 1997
and May 1997. Growth was driven in dollars and percentage gains by the bearings
operations and the existing fluid power companies. The backlog of unshipped
orders at year end also increased to $155,548,000, up $12,511,000 from
$143,037,000 in the prior quarter and $117,262,000 at the end of 1996.
Gross profit as a percentage of sales was 41.7% compared to 40.4% in
1996. The increase is primarily attributable to operating efficiencies,
increased volume and continued cost control.
Selling and administrative expenses as a percentage of sales in 1997
was 12.6% compared to 13.3% in 1996. Although expenses increased approximately
7.9% in absolute terms primarily from the effects of acquisitions, spending was
controlled to minimize increases relative to sales growth.
Net interest income this year was $3,780,000, up 42.0% from $2,662,000
in 1996. The net increase was due to the increase in cash and securities of
$13,535,000 and higher interest rates. The reduction of interest expense
resulting from the repayment of Industrial Revenue Bonds also contributed to
the improvement in net interest income.
The effective tax rate of 38.0% remains essentially unchanged from
38.1% in 1996.
1996 COMPARED TO 1995
Net sales increased to $290,670,000, up 26.4% from $229,924,000 in
1995. Approximately 12% of the growth was generated by the base businesses of
Kaydon while the remaining 14% was attributable to the acquisitions of the
three fluid power companies purchased in September 1995 and February 1996.
Virtually all of the Company's divisions contributed to the gain with the
largest percentage increases coming from the slip-ring divisions. The backlog
of unshipped orders at year end also increased to $117,262,000, up $2,793,000
from $114,469,000 in the prior quarter and $101,852,000 at the end of 1995.
Gross profit as a percentage of sales was 40.4% compared to 38.5% in
1995. The increase was primarily attributable to operating efficiencies,
increased volume and continued cost control.
Selling and administrative expenses as a percentage of sales in 1996
was 13.3% compared to 12.7% in 1995. The increase was attributable to the
increase in goodwill amortization from the acquisition of the fluid power
companies and the increase in operating accruals.
Net interest income in 1996 was $2,662,000, essentially flat with the
interest income of $2,505,000 in 1995. There was virtually no change year on
year since any expected increase from larger cash and securities balances was
offset by lower interest rates.
The effective tax rate of 38.1% was essentially unchanged from 38.2%
in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $143,763,000 at December 31, 1997 compared to
$119,232,000 at December 31, 1996, reflecting current ratios of 3.0 and 2.8,
respectively. The increase in working capital reflects the increase in cash and
securities and the 1997 fluid power company acquisition, offset somewhat by
increased accruals. The increase in the current ratio also reflects the
repayment of IRB debt. Cash and securities account for 67.3% of net working
capital compared to 69.8% last year.
Cash and securities on hand exceed total debt by $96,802,000 at
December 31, 1997 compared to $75,267,000 at December 31, 1996 for an increase
of $21,535,000. The Company paid off the $8,000,000 of Industrial Revenue Bonds
in April of 1997 and is currently debt free.
Operating cash flow was a record high at $71,619,000, an increase of
5.0% from $68,225,000 in 1996. The increase is the result of increased earnings
offset by the increase in working capital. Working capital, excluding cash and
securities, increased to 14.3% of sales from 12.4% last year. Net capital
expenditures were $12,750,000 and dividends were $9,231,000 resulting in free
cash flow of $49,638,000 for the year. The Company paid $4,449,000 in March
1997 for the acquisition of Gold Star Manufacturing, Inc. and $22,933,000 for
the acquisition of Great Bend Industries in May 1997. The Company received
$1,560,000 from the exercise of stock options, and, in turn spent $2,013,000 to
repurchase treasury stock on the open market. The Company has now purchased
3,023,683 of the 6,000,000 shares approved for repurchase by the Board of
Directors. On September 23, 1997, the Board of Directors approved a two-for-one
stock split for shareholders of record as of October 7, 1997. The split is
reflected in the stock repurchase program.
Planned capital requirements for 1998 consist principally of capital
expenditures relating to plant and equipment, information systems, cash
dividends to stockholders and the potential purchase of the remaining shares of
the Company's stock approved for repurchase. Planned capital expenditures
relating to environmental issues are not expected to be material, however, such
expenditures could be influenced by the enactment of new or revised
environmental regulations and laws. It is expected that these capital
requirements will be financed by operating activities.
The Company is actively seeking potential acquisitions and, depending
upon the size and structure of such acquisitions, financing may be required.
During 1997, the Company renewed its revolving credit agreement with
its banks and increased its credit line to $100,000,000. The Company also had
in place at December 31, 1997, short-term lines of credit of $27,000,000. No
borrowings existed under the short-term lines of credit or the revolving credit
agreement at December 31, 1997 or December 31, 1996.
OTHER
EFFECT OF FOREIGN CURRENCY TRANSLATION
A portion of the Company's sales, income and cash flows is derived
from its international operations. The financial position and the results of
operations of the Company's foreign subsidiaries (primarily Europe) are
measured using local currency of the countries in which they operate and are
translated into U.S. dollars. Accordingly, the Company's consolidated operating
results and net assets will fluctuate depending upon the strengthening or
weakening of the U.S. dollar. To date, the impact of the fluctuations of
foreign currencies relative to the U.S. dollar has not had a significant impact
on the Company's consolidated financial statements.
15
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
- -------------------------------------------------------------------------------
Supplemental Information on Changing Prices
The impact of inflation on the Company has been moderate over the last
several years and is believed to be consistent with that of the industry as a
whole.
YEAR 2000
The Company has a plan in place to ensure its systems are compliant
with the requirements to process transactions in the year 2000. The proprietary
Company internal system was modified to be year 2000 compliant in 1997. Final
review and testing will be completed by December 31, 1998. The costs for these
modifications were expensed as routine internal programming costs during the
year and were not material. Any additional expenses will also be expensed as
incurred and are not expected to be material.
As part of the Company's long-term objectives for continued operational
improvements and cost management, investments are planned in information
technology. The cost of these investments are estimated at $2.5 to $3.0 million
over the next 18 months. As part of any investment in information systems, year
2000 compliance will be assured. The incremental costs associated with year 2000
modifications related to these investments, if any, will be expensed as incurred
and are not expected to be material.
The Company is also working with its vendors and processing banks to
ensure their systems are year 2000 compliant. All of these costs will be borne
by the vendors and processors.
ENVIRONMENTAL MATTERS
Environmental protection laws continue to affect the Company's
manufacturing operations. The Company has complied with these laws by making
various capital expenditures for pollution control equipment and through plant
operation practices. This compliance has not had, nor does the Company expect
it to have, a material effect on financial results. Of course, the Company
cannot assess the possible effect of compliance with the enactment of future
regulations and laws.
In late 1985, Kaydon entered into discussions with the Michigan
Department of Natural Resources ("MDNR") to develop a remedial cleanup plan for
one of its plant sites in Muskegon, Michigan, which is on the Environmental
Protection Agency's ("EPA") National Priority List. In 1986, Kaydon took
measures necessary to clean up the site according to the plan approved by the
MDNR. These measures included the removal and disposal of contaminated soils
and the drilling of ground water monitoring wells, the results of which have
been continually reported to the MDNR. Management believes that it has worked
with the MDNR and EPA to the letter and spirit of the law. The site is being
evaluated to determine if further action is required. While it is impossible to
forecast the ultimate future cost, management believes, based upon 12 years of
evaluating the site, that such cost will not be material to its operating
results.
LITIGATION
The Company, together with other companies, certain former officers,
and certain former directors, has been named as a co-defendant in lawsuits
filed in federal court in New York in 1993. The suits purport to be class
actions on behalf of all persons who have unsatisfied personal injury and
property damage claims against Keene Corporation which filed for bankruptcy
under Chapter 11. The premise of the suits is that assets of Keene were
transferred to Bairnco subsidiaries, of which Kaydon was one in 1983, at less
than fair value. The suits also allege that the Company, among other named
defendants, was a successor to and alter ego of Keene. In 1994, an examiner was
appointed by a bankruptcy court to examine the issues at stake. On September
23, 1994, the "Preliminary Report of the Examiner" was made public. In the
report, the examiner stated that the alleged fraudulent conveyance claims
against the Company appear to be time-barred by the statute of limitations,
subject to certain possible exceptions which the Company does not believe are
significant or factual. Although the examiner has made certain recommendations
regarding a mechanism to resolve the claims against the Company, the Court has
not taken any action related to the report. Nevertheless, in the Company's
opinion, the report reinforces management's original view that the claims will
ultimately not be sustained. Accordingly, no provision has been reflected in
the consolidated financial statements for any alleged damages. In June 1995,
the creditors' committee filed a complaint in the same bankruptcy court
asserting claims against the Company similar to those previously filed. On June
12, 1996, the District and Bankruptcy Courts for the Southern District of New
York entered an order confirming the plan of reorganization for Keene
Corporation. As a result, the so-called transactions lawsuit was transferred in
April 1997 from the Bankruptcy Court for the Southern District of New York to
the District Court for that district and the stay of the transactions lawsuit
was lifted. On September 15, 1997, in accordance with the schedule established
by the judge, the Company submitted a motion to dismiss the complaint based on
the statute of limitations. All motions, supporting documents and rebuttal were
filed on December 15, 1997. The court has not yet ruled upon the motions.
Management believes that the outcome of this litigation will not have a
material adverse effect on the Company's financial position.
In June, 1996 the Company received a subpoena issued by the U.S.
District Court in Bridgeport, Connecticut on behalf of a grand jury
investigating a May 9, 1996 accident involving a Sikorsky helicopter in which
four persons died. The grand jury has requested and received documents and
records relating to a bearing manufactured by Kaydon and used in the Sikorsky
helicopter. In addition, the Defense Logistics Agency of the Defense Contract
Management Command and a "Mishap Board" led by Sikorsky Aircraft Corporation
with participation from certain Federal agencies alleged that product quality
problems or deficiencies exist with respect to the bearing product used in the
Sikorsky helicopter described above. The Company was excluded from
participation on this "Mishap Board", however, it independently evaluated the
available evidence and refuted the "Mishap Board" findings in its report
submitted to the Navy. Subsequent incidents have occurred in the helicopter
fleet even though the bearings used were newly manufactured, inspected and
approved by Sikorsky personnel, reinforcing the Company's position that the
bearing quality was not the causative action in the May 9, 1996 accident.
During the first half of 1997, the estates of the four deceased individuals
filed civil suits against the Company. For one of the incidents subsequent to
May 9, 1996, which occurred October 19, 1996, the NADEP Cherry Point Marine
Facility distributed a report dated August 21, 1997 analyzing potential causes
for that incident. The Company is currently in the process of reviewing this
report. Management believes it has meritorious defenses against any claims.
Various other claims, lawsuits and environmental matters arising in
the normal course of business are pending against the Company. Management
believes that the outcome of these matters, including the Sikorsky matter
referred to above, will not have a material adverse effect on the Company's
financial position or results of operations.
16
<PAGE> 19
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Kaydon Corporation:
We have audited the accompanying consolidated balance sheets of Kaydon
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of income, stockholders'
investment and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Kaydon Corporation
and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
/s/ Arthur Anderson LLP
Grand Rapids, Michigan,
January 22, 1998
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The consolidated financial statements of Kaydon Corporation and
subsidiaries were prepared by and are the responsibility of management. The
statements have been prepared in conformity with generally accepted accounting
principles appropriate in the circumstances and include amounts that are based
on management's best estimates and judgments.
The Company maintains systems of internal accounting controls designed
to provide reasonable assurance that all transactions are properly recorded in
the Company's books and records, that policies and procedures are adhered to,
and that assets are protected from unauthorized use. The systems of internal
accounting controls are supported by written policies and guidelines and are
complemented by the selection, training, and development of professional
financial managers.
The consolidated financial statements have been audited by the
independent public accounting firm Arthur Andersen LLP. The independent public
accountants conduct a review of internal accounting controls to the extent
required by generally accepted auditing standards and perform such tests and
related procedures as they deem necessary to arrive at an opinion on the
fairness of the financial statements.
The Audit Committee of the Board of Directors, composed solely of
directors from outside the Company, regularly meets with the independent public
accountants and management. The independent public accountants have full and
free access to the Audit Committee.
/s/ Lawrence J. Cawley /s/ Joseph P. Port
- ------------------------------------ --------------------------
Lawrence J. Cawley Joseph P. Port
Chairman and Chief Financial Officer Vice President Finance and
Corporate Controller
17
<PAGE> 20
CONSOLIDATED BALANCE SHEETS
KAYDON CORPORATION AND SUBSIDIARIES DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6
------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................... $ 74,735,000 $ 54,443,000
Marketable securities....................................................... 22,067,000 28,824,000
Accounts receivable, less allowances of
$1,620,000 in 1997 and $1,481,000 in 1996................................. 42,690,000 36,136,000
Inventories................................................................. 60,548,000 53,079,000
Other current assets........................................................ 14,738,000 13,574,000
------------- -------------
Total current assets...................................................... 214,778,000 186,056,000
------------- -------------
Plant and Equipment, at cost:
Land and improvements....................................................... 3,924,000 3,845,000
Buildings and leasehold improvements........................................ 42,162,000 39,849,000
Machinery and equipment..................................................... 152,090,000 136,533,000
------------- -------------
198,176,000 180,227,000
Less - accumulated depreciation and amortization............................ (112,666,000) (104,051,000)
------------- -------------
85,510,000 76,176,000
------------- -------------
Cost in excess of net tangible assets of purchased businesses, net............. 66,687,000 53,696,000
Other assets................................................................... 17,010,000 15,610,000
------------- -------------
$ 383,985,000 $ 331,538,000
============= =============
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable.......................................................... $ 11,574,000 $ 9,784,000
Current portion of long-term debt......................................... -- 4,000,000
Accrued expenses:.........................................................
Salaries and wages................................................... 13,502,000 11,751,000
Employee benefits.................................................... 11,184,000 11,482,000
Income taxes......................................................... 8,560,000 9,567,000
Other accrued expenses............................................... 26,195,000 20,240,000
------------- -------------
Total current liabilities....................................... 71,015,000 66,824,000
------------- -------------
Long-term postretirement and postemployment benefit obligations................ 29,374,000 28,658,000
------------- -------------
Long-term debt................................................................. -- 4,000,000
------------- -------------
Stockholders' Investment:
Preferred stock -
($.10 par value, 2,000,000 shares authorized; none issued)........... -- --
Common stock -
($.10 par value, 98,000,000 shares authorized; 36,180,150 and
18,023,740 shares issued in 1997 and 1996)........................... 3,618,000 1,802,000
Paid-in capital........................................................... 28,854,000 28,380,000
Retained earnings......................................................... 296,069,000 243,616,000
Less -treasury stock, at cost; (3,188,045 and 1,557,227 shares
in 1997 and 1996).................................................... (41,646,000) (39,633,000)
Cumulative translation adjustment......................................... (3,299,000) (2,109,000)
------------- -------------
283,596,000 232,056,000
------------- -------------
$ 383,985,000 $ 331,538,000
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE> 21
CONSOLIDATED STATEMENTS OF INCOME
KAYDON CORPORATION AND SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6 1 9 9 5
------- ------- -------
<S> <C> <C> <C>
Net Sales...................................................... $ 329,036,000 $290,670,000 $229,924,000
Cost of sales............................................. 191,776,000 173,174,000 141,325,000
------------- ------------ ------------
Gross Profit................................................... 137,260,000 117,496,000 88,599,000
Selling and administrative expenses....................... 41,579,000 38,542,000 29,313,000
------------- ------------ -----------
Operating Income............................................... 95,681,000 78,954,000 59,286,000
Interest expense.......................................... (200,000) (348,000) (345,000)
Interest income........................................... 3,980,000 3,010,000 2,850,000
------------- ------------ ------------
Income Before Income Taxes..................................... 99,461,000 81,616,000 61,791,000
Provision for income taxes................................ 37,795,000 31,095,000 23,588,000
------------- ------------ ------------
Net Income..................................................... $ 61,666,000 $ 50,521,000 $ 38,203,000
============= ============ ============
Earnings Per Share - Basic..................................... $ 1.87 $ 1.54 $ 1.15
- Diluted................................... $ 1.86 $ 1.53 $ 1.14
====== ====== ======
Dividends Per Share............................................ $ 0.30 $ 0.25 $ 0.23
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE> 22
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
KAYDON CORPORATION AND SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 1997, 1996
- --------------------------------------------------------------------------------
AND 1995
- --------
<TABLE>
<CAPTION>
Cumulative
Common Paid-in Retained Treasury Translation
Stock Capital Earnings Stock Adjustment Total
----- ------- -------- ----- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994........ $1,754,000 $ 15,762,000 $170,718,000 $ (17,047,000) $(4,617,000) $166,570,000
Net income, 1995............. -- -- 38,203,000 -- -- 38,203,000
Cash dividends declared...... -- -- (7,471,000) -- -- (7,471,000)
Issuance of 92,375 shares
of common stock under
stock option plans...... 9,000 1,937,000 -- -- -- 1,946,000
Purchase of 370,457 shares
of treasury stock....... -- -- -- (10,566,000) -- (10,566,000)
Current year translation
adjustment.............. -- -- -- -- (280,000) (280,000)
Adjustment for minimum
pension liability....... -- -- (497,000) -- -- (497,000)
---------- ------------ ------------ ------------- ----------- ------------
Balance, December 31, 1995........ 1,763,000 17,699,000 200,953,000 (27,613,000) (4,897,000) 187,905,000
Net income, 1996............. -- -- 50,521,000 -- -- 50,521,000
Cash dividends declared...... -- -- (8,247,000) -- -- (8,247,000)
Issuance of 390,575 shares
of common stock under
stock option plans...... 39,000 10,681,000 -- -- -- 10,720,000
Purchase of 293,546 shares
of treasury stock....... -- -- -- (12,020,000) -- (12,020,000)
Current year translation
adjustment.............. -- -- -- -- 2,788,000 2,788,000
Adjustment for minimum
pension liability....... -- -- 389,000 -- -- 389,000
---------- ------------ ------------ ------------- ----------- ------------
Balance, December 31, 1996........ 1,802,000 28,380,000 243,616,000 (39,633,000) (2,109,000) 232,056,000
Net income, 1997............. -- -- 61,666,000 -- -- 61,666,000
Cash dividends declared...... -- -- (9,901,000) -- -- (9,901,000)
Issuance of 132,670 shares
of common stock under
stock option plans...... 9,000 2,281,000 -- -- -- 2,290,000
Purchase of 73,591 shares
of treasury stock....... -- -- -- (2,013,000) -- (2,013,000)
Two-for-one stock split...... 1,807,000 (1,807,000) -- -- -- --
Current year translation
adjustment.............. -- -- -- -- (1,190,000) (1,190,000)
Adjustment for minimum
pension liability....... -- -- 688,000 -- -- 688,000
----------- ------------ ------------ ------------- ----------- ------------
Balance, December 31, 1997........ $ 3,618,000 $ 28,854,000 $296,069,000 (41,646,000) $(3,299,000) $283,596,000
=========== ============ ============ ============= =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE> 23
CONSOLIDATED STATEMENTS OF CASH FLOWS
KAYDON CORPORATION AND SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 1997, 1996
AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income ............................................ $ 61,666,000 $ 50,521,000 $ 38,203,000
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization ................... 12,756,000 11,749,000 11,176,000
Deferred taxes .................................. (2,689,000) (6,811,000) (2,773,000)
Postretirement and postemployment
benefit obligations .......................... 716,000 935,000 (389,000)
Changes in current assets and liabilities, net of
effects of acquisitions of businesses:
Accounts receivable ....................... (3,266,000) (2,524,000) 157,000
Inventories ............................... (2,897,000) 243,000 4,133,000
Other current assets ...................... 744,000 (2,386,000) 374,000
Accounts payable .......................... 172,000 (1,815,000) (1,385,000)
Accrued expenses .......................... 4,417,000 18,313,000 (9,000)
------------- ------------- ------------
Net cash provided by operating activities . 71,619,000 68,225,000 49,487,000
------------- ------------- ------------
Cash Flows from Investing Activities:
Purchases of marketable securities .................... (130,869,000) (104,468,000) (80,478,000)
Maturities of marketable securities ................... 137,626,000 117,995,000 49,219,000
Additions to plant and equipment, net ................. (12,750,000) (9,320,000) (7,371,000)
Acquisitions of businesses, net of cash acquired ...... (27,382,000) (10,699,000) (23,512,000)
Proceeds from sale of surplus building and
automotive operation ............................... -- -- 5,265,000
------------- ------------- ------------
Net cash used in investing activities ..... (33,375,000) (6,492,000) (56,877,000)
------------- ------------- ------------
Cash Flows from Financing Activities:
Cash dividends paid ................................... (9,231,000) (7,906,000) (7,336,000)
Repayment of IRB debt ................................. (8,000,000) -- --
Net payments under lines of credit .................... (31,000) (349,000) --
Proceeds from issuance of common stock ................ 1,560,000 7,765,000 1,637,000
Purchase of treasury stock ............................ (2,013,000) (12,020,000) (10,566,000)
------------- ------------- ------------
Net cash used in financing activities ..... (17,715,000) (12,510,000) (16,265,000)
------------- ------------- ------------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents .................................. (237,000) 412,000 (112,000)
------------- ------------- ------------
Net Increase/(Decrease) in Cash and Cash Equivalents .... 20,292,000 49,635,000 (23,767,000)
Cash and Cash Equivalents - Beginning of Year ........... 54,443,000 4,808,000 28,575,000
------------- ------------- ------------
Cash and Cash Equivalents - End of Year ................. $ 74,735,000 $ 54,443,000 $ 4,808,000
============= ============= ============
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAYDON CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Kaydon
Corporation and its wholly-owned domestic and foreign subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expense during the reporting
period. Actual results could differ from those estimates.
DESCRIPTION OF BUSINESS:
The Company designs, manufactures and sells custom-engineered products
for a broad and diverse customer base primarily in domestic markets. The
Company's principal products include antifriction bearings, bearing systems and
components, filters and filter housings, specialty retaining rings, specialty
balls, custom rings, shaft seals, hydraulic cylinders, metal castings and
various types of slip-rings. These products are used by customers in a wide
variety of medical, instrumentation, material handling, machine tool
positioning, aerospace, defense, construction and other industrial applications.
The Company is customer-focused and concentrates on providing cost-effective
solutions for its customers through close engineering relationships with leading
manufacturers throughout the world.
CASH AND CASH EQUIVALENTS AND MARKETABLE SECURITIES:
The Company's cash equivalents and marketable securities are considered
"held-to-maturity" and are stated at amortized cost which approximates fair
market value at December 31, 1997 and 1996. Cash equivalents have maturity dates
of three months or less from the date of purchase. Marketable securities include
United States Treasury Bills with maturity dates of less than one year. Both
cash equivalents and marketable securities are high-credit quality financial
instruments. The Company's portfolio of cash and cash equivalents and marketable
securities consists of the following at December 31,:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash and cash equivalents:
Cash held in banks ............ $11,969,000 $ 1,828,000
U.S. Treasury Bills ........... 58,276,000 37,515,000
Other cash equivalents......... 4,490,000 15,100,000
----------- -----------
74,735,000 54,443,000
Marketable securities:
U.S. Treasury Bills ........... 22,067,000 28,824,000
----------- -----------
Total ....................... $96,802,000 $83,267,000
=========== ===========
</TABLE>
INVENTORIES:
Inventories are valued at the lower of cost or market and include
material, labor and overhead. Cost is determined using the first-in, first-out
("FIFO") method for all inventories. Inventories are summarized as follows at
December 31,:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Raw material .................... $20,282,000 $15,146,000
Work in process.................. 19,424,000 17,300,000
Finished goods................... 20,842,000 20,633,000
----------- -----------
$60,548,000 $53,079,000
=========== ===========
</TABLE>
PLANT AND EQUIPMENT:
Plant and equipment are stated at cost. The cost is depreciated over
the estimated useful lives of the assets using the straight-line method. Useful
lives vary among the classifications, but generally fall within the following
ranges:
<TABLE>
<S> <C>
Buildings, land improvements and
leasehold improvements............................ 10 - 40 years
Machinery and equipment............................... 3 - 15 years
</TABLE>
22
<PAGE> 25
- -------------------------------------------------------------------------------
Leasehold improvements are amortized over the terms of the respective
leases or over their useful lives, whichever is shorter. Renewals and
betterments are capitalized while maintenance and repairs are charged to
operations in the year incurred.
RESEARCH AND DEVELOPMENT COSTS:
Research and development costs, which are not material to the consolidated
statements of income, are expensed as incurred.
COST IN EXCESS OF NET TANGIBLE ASSETS OF PURCHASED BUSINESSES AND OTHER
LONG-LIVED ASSETS:
Cost in excess of net tangible assets of purchased businesses ("goodwill")
totaling $16,239,000 arose prior to 1971 and is not being amortized since, in
the opinion of management, there has been no diminution in value. Goodwill
acquired after 1970 is being amortized on a straight-line basis over a period
of 20 to 40 years and is stated net of accumulated amortization of $7,091,000
and $5,155,000 at December 31, 1997 and 1996, respectively. The increase in
goodwill during 1997 is primarily due to the acquisition of Gold Star
Manufacturing, Inc. and Great Bend Industries, Inc., as discussed further in
Note 11.
The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining estimated useful lives of goodwill and
other long-lived assets may warrant revision or that the remaining balances may
not be recoverable. When factors indicate that such costs should be evaluated
for possible impairment, the Company uses an estimate of the related business
segment's undiscounted cash flow over the remaining lives of the goodwill and
other long-lived assets to evaluate whether the costs are recoverable.
OTHER ASSETS:
Other assets include, among other items, deferred tax assets and various
intangibles which primarily include noncompete and supply agreements. Deferred
tax assets are further discussed in Note 3. The noncompete and supply
agreements and other intangibles are being amortized on a straight-line basis
ranging from 4 to 15 years. They are stated net of accumulated amortization of
$3,697,000 and $3,368,000 at December 31, 1997 and 1996, respectively.
FOREIGN CURRENCY TRANSLATION:
The financial position and results of operations of the Company's United
Kingdom and German subsidiaries are measured using the local currency as the
functional currency. Assets and liabilities are translated at the exchange rate
in effect at year end. Income statement accounts are translated at the average
rate of exchange in effect during the year. The resulting translation
adjustment is recorded as a separate component of stockholders' investment.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts of financial instruments included in current assets
and current liabilities approximate fair value due to the short-term nature of
these instruments. The stated value of the Company's long-term debt reasonably
approximates fair value.
(2) Common Stock and Earnings Per Share
On September 23, 1997, the Board of Directors approved a two-for-one stock
spilt for stockholders of record on October 7, 1997 and distributed on October
21, 1997. Common stock was increased by $1,807,000 with an offsetting
reduction to additional paid-in capital, to reflect the $.10 par value per
share for each additional share issued.
Where applicable, references in the financial statements with regard to
number of shares of common stock or related per share amounts, including the
stock or related per share amounts, including the stock option plan
information, have been restated to reflect the two-for-one stock spilt.
Effective December 31, 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share". This
statement establishes standards for computing and presenting earnings per
share. Under these standards, basic earnings per share excludes dilution and is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings
per share is computed by dividing net income by the average number of common
shares outstanding plus all potential common shares. Dilutive potential common
shares include all shares which may become contractually issuable. For the
Company, dilutive potential common shares are primarily comprised of shares
issuable under stock option plans. All prior period earnings per share data
presented has been restated to conform to this statement.
23
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
KAYDON CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------
The following table reconciles the numerators and denominators used in the
calculations of basic and diluted earnings per share for each of the last three
years:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Numerators:
- -----------
Numerator for both
basic and diluted
earnings per share,
net income ...................... $61,666,000 $50,521,000 $38,203,000
=========== =========== ===========
Denominators:
- -------------
Denominator for basic
earnings per share,
weighted average
common shares
outstanding ..................... 32,976,000 32,908,000 33,308,000
Potential dilutive shares
resulting from stock
option plans .................... 187,000 190,000 173,000
----------- ----------- -----------
Denominator for diluted
earnings per share .............. 33,163,000 33,098,000 33,481,000
=========== =========== ===========
Earnings Per Share:
- -------------------
Basic ............................. $ 1.87 $ 1.54 $ 1.15
Diluted ........................... $ 1.86 $ 1.53 $ 1.14
=========== =========== ===========
</TABLE>
Options to purchase 194,150 shares of common stock at $33.00 per share were
outstanding during the fourth quarter of 1997, but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.
Options to purchase 416,400 shares of common stock at $21.75 per share were
outstanding during the fourth quarter of 1996, but were not included in the
computation of diluted EPS because the options exercise price was greater than
the average market price of the common shares.
All options were included in 1995 because the options exercise price was
less than the average market price of common shares.
(3) INCOME TAXES
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current:
U.S. Federal ....................... $ 34,360,000 $ 33,381,000 $ 23,426,000
State .............................. 4,494,000 3,717,000 2,632,000
Foreign ............................ 2,767,000 2,061,000 132,000
Rate Change ........................ (125,000) -- --
------------ ------------ ------------
41,496,000 39,159,000 26,190,000
------------ ------------ ------------
Deferred:
U.S. Federal........................ (2,906,000) (7,134,000) (3,088,000)
State .............................. (209,000) (382,000) (247,000)
Foreign ............................ (919,000) (548,000) 733,000
Rate Change ........................ 333,000 -- --
------------ ------------ ------------
(3,701,000) (8,064,000) (2,602,000)
------------ ------------ ------------
$ 37,795,000 $ 31,095,000 $ 23,588,000
============ ============ ============
</TABLE>
In April 1997, the income tax rate in the United Kingdom decreased from 33%
to 31%. The income tax balances were adjusted to reflect the revised rate.
In 1997, 1996 and 1995, the Company's effective tax rates were 38.0%,
38.1%, and 38.2%, respectively, of income before income taxes and differed from
the U.S. federal statutory income tax rate primarily due to the effect of state
income taxes, net of the federal tax benefit.
Cash expended for income taxes totaled $41,546,000 in 1997, $30,974,000 in
1996, and $26,506,000 in 1995.
The tax effect and type of significant temporary differences by component
which gave rise to the net deferred tax asset as of December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Postretirement and
postemployment
benefit obligations ................... $ 12,077,000 $ 11,803,000
Financial accruals and reserves
not currently deductible .............. 13,696,000 10,120,000
Inventory accounting method
and basis differences ................. 6,561,000 6,763,000
Other ................................... 1,630,000 1,446,000
Valuation allowance ..................... -- --
------------ ------------
33,964,000 30,132,000
------------ ------------
Deferred tax liabilities:
Plant and equipment basis
differences, including
depreciation and
amortization .......................... (8,744,000) (8,148,000)
------------ ------------
(8,744,000) (8,148,000)
------------ ------------
$ 25,220,000 $ 21,984,000
============ ============
</TABLE>
24
<PAGE> 27
- --------------------------------------------------------------------------------
The Company has not provided for United States income taxes on
undistributed earnings of foreign subsidiaries. Recording of deferred income
taxes on these undistributed earnings is not required as these earnings have
been permanently reinvested. The amounts subject to U.S. taxation upon
remittance of these earnings as dividends would be substantially offset by
available foreign tax credits.
(4) SHORT-TERM DEBT
The Company has short-term lines of credit with banks totaling $27,000,000
with no outstanding borrowings at December 31, 1997. The rates of interest on
the outstanding balances of each of these lines are at or slightly below the
applicable prime commercial rate (as defined in the respective agreements),
which was 8.5% at December 31, 1997. The weighted average interest rate on
borrowings outstanding during 1997 was approximately 5.88%.
(5) LONG-TERM DEBT
The Company has $100,000,000 of borrowings available under its revolving
credit and term loan agreement, none of which are outstanding at December 31,
1997. The borrowing rate is defined in the agreement and is the prime commercial
rate or lower. The available interest rate at December 31, 1997 was 5.97%.
Commitment fees ranging from .1% to .2% of the unused portion of credit are
charged quarterly.
The Company's long-term debt consists of Industrial Revenue Bonds ("IRB's")
at December 31, 1996, which provided for monthly interest payments at a variable
rate. The IRB's were paid in full on April 1, 1997.
Cash expended for interest on debt totaled $94,000 in 1997, $352,000 in
1996, and $344,000 in 1995.
(6) STOCK-BASED COMPENSATION
The Company has two stock option plans which include the 1993 Stock Option
Plan ("Employee Plan") and the 1993 Non-Employee Directors Plan ("Directors
Plan"). The Company accounts for these plans under APB Opinion No. 25, under
which no compensation cost has been recognized. Had compensation cost for these
plans been determined consistent with SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Net Income:
As reported ......................... $ 61,666,000 $ 50,521,000
Pro forma ........................... $ 60,908,000 $ 50,021,000
Earnings Per Share (Diluted):
As reported ......................... $ 1.86 $ 1.53
Pro forma ........................... $ 1.84 $ 1.51
</TABLE>
The fair value of each option grant in the stock option plans is estimated
on the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions for grants in 1997: risk free interest
rates ranging from 5.8% to 6.8%; expected dividend yields of 1.1%; expected
lives of 4 years; expected volatility of 27.4%. The following assumptions were
used for grants in 1996: risk free interest rates ranging from 5.3% to 6.2%;
expected dividend yields of 1.2%; expected lives of 4 years; expected volatility
of 29.0%. There were no options granted in 1995.
The Company may grant options for up to 2,000,000 shares under the Employee
Plan. The Company has granted options on 1,174,050 shares through December 31,
1997. The Directors Plan has a maximum 200,000 shares available for grant of
which 140,000 remained available for grant at December 31, 1997. Under the
Plans, the purchase price of each option granted will not be less than fair
market value at the date of grant. Options granted become exercisable at the
rate of 25% per year, commencing one year after the date of grant and expiring
five years from the date of grant.
25
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
KAYDON CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------
A summary of stock option information is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ------------------------ ---------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Shares Ex. Price Shares Ex. Price Shares Ex. Price
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of Year .. 1,052,350 $16.70 1,170,100 $10.49 1,356,350 $10.26
Granted ........................... 214,150 $32.00 684,400 $19.51 -- --
Exercised ......................... (132,670) $11.75 (781,150) $ 9.94 (184,750) $ 8.86
Canceled .......................... (17,800) $17.40 (21,000) $13.38 (1,500) $ 9.69
--------- ------ ---------- ------ --------- ------
Outstanding at End of Year ........ 1,116,030 $20.21 1,052,350 $16.70 1,170,100 $10.49
========= ========== =========
Exercisable at End of Year ........ 373,679 $14.95 257,830 $11.48 952,650 $10.22
Weighted Avgerage Fair Value
of Options Granted ............... $ 9.05 $ 5.69 --
</TABLE>
Options outstanding at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Weighted
Weighted Average
Average Remaining
Number of Lowest Highest Exercise Contractual
Options Price Price Price Life (years)
--------- ------ ------- -------- ------------
<S> <C> <C> <C> <C> <C>
Exercise price per share:
Under $20.00:
Exercisable ........... 271,654 $11.00 $ 19.75 $ 12.40 1.72
Non-exercisable ....... 222,126 $11.94 $ 19.75 $ 15.57 2.93
---------
493,780 $11.00 $ 19.75 $ 13.82 2.26
---------
Over $20.00:
Exercisable ........... 102,025 $21.75 $ 21.75 $ 21.75 4.00
Non-exercisable ....... 520,225 $21.75 $ 33.00 $ 25.97 4.39
---------
622,250 $21.75 $ 33.00 $ 25.28 4.32
---------
Total options ........... 1,116,030 $11.00 $ 33.00 $ 20.21 3.41
=========
</TABLE>
(7) SHAREHOLDERS RIGHTS PLAN
On June 21, 1995, the Board of Directors of the Company adopted a
Shareholders Rights Plan which attaches one right to each share of Kaydon Common
Stock to shareholders of record at the close of business on July 7, 1995. When
the right becomes exercisable, each registered holder will be entitled to
purchase from the Company additional common stock having a value of twice the
exercise price upon payment of the exercise price. The exercise price, subject
to adjustment, is fifteen dollars ($15.00) per Right. The Rights will become
exercisable eight days following a public announcement that a person or group of
affiliated or associated persons has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of common stock
(the "Stock Acquisition Date"). The Rights are not exercisable until the Stock
Acquisition Date and will expire at the close of business on July 7, 2000,
unless earlier redeemed by Kaydon.
(8) EMPLOYEE BENEFIT PLANS
The Company maintains several defined benefit pension plans which cover the
majority of all U.S. employees. Benefits paid under these plans are based
generally on employees' years of service and compensation during the final years
of employment. The Company's policy is to fund the minimum amounts required by
the Employee Retirement Income Security Act of 1974. Plan assets consist
principally of publicly traded equity and debt securities which included 160,000
shares of Kaydon Corporation common stock at December 31, 1997 and 1996.
26
<PAGE> 29
- --------------------------------------------------------------------------------
Net pension cost includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Service cost - benefits
earned during the year ........ $ 1,750,000 $ 1,347,000 $ 1,262,000
Interest cost on projected
benefit obligation ............ 3,455,000 2,865,000 2,637,000
Actual return on plan
assets ........................ (15,788,000) (7,162,000) (6,077,000)
Net amortization and
deferral:
Amortization ................ 685,000 397,000 173,000
Deferral of unrecognized
net gain .................. 11,980,000 4,314,000 3,676,000
Curtailment loss
(Note 13) ..................... -- -- 764,000
------------ ------------ ------------
Net pension cost ................ $ 2,082,000 $ 1,761,000 $ 2,435,000
============ ============ ============
</TABLE>
The funded status of the plans as of September 30, 1997 and amounts
recognized in the accompanying consolidated balance sheet as of December 31,
1997 are as follows:
<TABLE>
<CAPTION>
Plans With Plans With
Assets Accumulated
Exceeding Benefits
Accumulated Exceeding
Benefits Assets
----------- ----------
<S> <C> <C>
Accumulated present value of
benefit obligation-
Vested benefits ....................... $(38,277,000) $ (1,989,000)
Nonvested benefits .................... (2,326,000) (1,799,000)
------------ ------------
Accumulated benefit obligation ........... (40,603,000) (3,788,000)
Effect of projected future
salary increases ....................... (4,709,000) (1,057,000)
------------ ------------
Projected benefit obligation ............. (45,312,000) (4,845,000)
Fair value of plan assets ................ 55,793,000 143,000
------------ ------------
Plan assets in excess of (less than)
projected benefit obligation ........... 10,481,000 (4,702,000)
Unrecognized net transition
obligation ............................. 31,000 --
Unrecognized prior service cost .......... 439,000 2,089,000
Unrecognized net (gain) loss ............. (13,921,000) 1,301,000
Adjustments required to recognize
minimum liability ...................... -- (2,493,000)
------------ ------------
Pension costs accrued as of
September 30, 1997 ..................... (2,970,000) (3,805,000)
Provision for fourth quarter 1997 ........ (301,000) (212,000)
Contributions for fourth quarter 1997 .... -- 17,000
------------ ------------
Pension costs accrued as of
December 31, 1997 ...................... $ (3,271,000) $ (4,000,000)
============ ============
</TABLE>
The funded status of the plans as of September 30, 1996 and amounts
recognized in the accompanying consolidated balance sheet as of December 31,
1996 are as follows:
<TABLE>
<CAPTION>
Plans With Plans With
Assets Accumulated
Exceeding Benefits
Accumulated Exceeding
Benefits Assets
------------ ------------
<S> <C> <C>
Accumulated present value of
benefit obligation-
Vested benefits ....................... $(15,207,000) $(22,473,000)
Nonvested benefits .................... (322,000) (3,096,000)
------------ ------------
Accumulated benefit obligation ............ (15,529,000) (25,569,000)
Effect of projected future
salary increases ........................ (4,531,000) (486,000)
------------ ------------
Projected benefit obligation .............. (20,060,000) (26,055,000)
Fair value of plan assets ................. 22,568,000 19,745,000
------------ ------------
Plan assets in excess of (less than)
projected benefit obligation ............ 2,508,000 (6,310,000)
Unrecognized net transition
(asset) obligation ...................... (235,000) 260,000
Unrecognized prior service cost ........... (493,000) 3,504,000
Unrecognized net (gain) loss .............. (2,945,000) 1,410,000
Adjustments required to recognize
minimum liability ....................... -- (4,607,000)
------------ ------------
Pension costs accrued as of
September 30, 1996 ...................... (1,165,000) (5,743,000)
Provision for fourth quarter 1996 ......... (60,000) (380,000)
Contributions for fourth quarter 1996 ..... -- 7,000
------------ ------------
Pension costs accrued as of
December 31, 1996 ....................... $ (1,225,000) $ (6,116,000)
============ ============
</TABLE>
The assumptions used in the determination of net pension cost were as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Discount rate.................... 7.00-7.75% 7.00-7.75% 7.00-7.75%
Rate of salary progression....... 4.50% 4.50% 4.50%
Long-term rate of return
on assets...................... 9.00% 9.00% 9.00%
</TABLE>
The Company and its domestic subsidiaries also offer 401(k) savings plans
in which substantially all of their employees may participate. The majority of
the contributions to the plans are made by the employees.
27
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
KAYDON CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------
(9) OTHER POSTRETIREMENT BENEFITS
The Company provides certain retiree health care and life insurance
benefits covering the majority of U.S. salaried and hourly employees. Employees
are generally eligible for benefits upon retirement or long-term disability and
completion of a specified number of years of credited service. These benefits
are subject to cost-sharing provisions and other limitations. The Company does
not pre-fund these benefits and has the right to modify or terminate certain of
these benefits in the future.
The Company accrues for the cost of providing postretirement benefits for
medical, dental and life insurance coverage over the active service period of
the employee.
The components of net postretirement benefit cost are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Service cost ...................... $ 599,000 $ 670,000 $ 568,000
Interest cost on accumulated
benefit obligation .............. 1,742,000 1,667,000 1,689,000
Amortization of unrecognized
prior service cost .............. (233,000) (218,000) (311,000)
Gain due to curtailment
(Note 13) ....................... -- -- (965,000)
---------- ---------- ----------
Net postretirement
benefit cost .................... $2,108,000 $2,119,000 $ 981,000
========== ========== ==========
</TABLE>
The funded status of the plans at December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees ......................... $(10,757,000) $(10,424,000)
Fully eligible active plan
participants ................... (244,000) (184,000)
Other active plan
participants ................... (15,740,000) (12,891,000)
------------ ------------
Projected benefit
obligation ................. (26,741,000) (23,499,000)
Unrecognized prior service cost ...... (2,322,000) (2,518,000)
Unrecognized net (gain) loss ......... 114,000 (2,215,000)
------------ ------------
Accrued postretirement
benefit obligation ................. $(28,949,000) $(28,232,000)
============ ============
</TABLE>
The accumulated postretirement benefit obligation ("APBO") was actuarially
determined based on assumptions regarding the discount rate and projected future
increases in postretirement benefit costs ("the healthcare cost trend rate").
The assumptions used in the determination of the APBO and the net
postretirement benefit cost were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Discount rate....................... 7.00-7.75% 7.00-7.75% 7.00-7.75%
Healthcare cost trend rates -
Participants under 65
years of age.................... 11.00% 12.00% 13.00%
Participants 65 years
of age and over................. 8.50% 9.00% 9.50%
</TABLE>
The healthcare cost trend rates for participants under the age of 65 and
participants 65 years of age and over are assumed to decrease ratably to 6% by
2002 and remain at that level thereafter. A 1% increase in the healthcare cost
trend rate would have increased the accumulated postretirement benefit
obligation at December 31, 1997 by approximately $3,878,000, and the net
postretirement benefit cost by approximately $454,000 in 1997.
(10) LEASE COMMITMENTS
Total minimum rentals payable under operating leases that have initial or
remaining noncancellable lease terms in excess of one year as of December 31,
1997 are as follows:
Year ending December 31,
<TABLE>
<S> <C>
1998.............................. $ 910,000
1999.............................. 805,000
2000.............................. 646,000
2001.............................. 507,000
2002.............................. 361,000
Thereafter........................ 1,550,000
</TABLE>
Aggregate rental expense charged to operations was $1,607,000, $1,272,000,
and $1,261,000, in 1997, 1996 and 1995, respectively.
28
<PAGE> 31
- --------------------------------------------------------------------------------
(11) ACQUISITIONS
On March 11, 1997, the Company purchased the assets of Gold Star
Manufacturing, Inc. for $4,449,000 and on May 29, 1997, the Company purchased
the assets of Great Bend Industries, Inc. for $22,933,000. Both companies
manufacture custom-designed cylinders and will strengthen and complement the
prior years' acquisitions of Seabee and Victor in the Kaydon Fluid Power
Division. The acquisitions have been accounted for using the purchase method of
accounting and, accordingly, the results of operations have been included in
the 1997 consolidated financial statements since the date of acquisition.
On February 1, 1996, the Company purchased the assets of Victor Fluid
Power Co. ("Victor") and Benton Harbor Engineering Co., Inc. ("Benton Harbor")
for $10,699,000. Both companies manufacture hydraulic cylinders and fluid power
components and are complimentary to Seabee Corporation which was purchased in
August, 1995. The Benton Harbor facility was closed in the acquisition process
with the equipment and customer order base being absorbed into Seabee and
Victor. The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the results of operations have been included in the
1996 consolidated financial statements since the date of acquisition.
On January 31, 1995, the Company, through its U.K. subsidiary, I.D.M.
Electronics, purchased a product line for $759,000. In addition, on August 31,
1995, the Company acquired substantially all of the common stock of Seabee
Corporation ("Seabee") for approximately $22,753,000, net of cash received.
Seabee is a manufacturer of large hydraulic cylinders and alloy steel castings
located in Hampton, Iowa. The acquisition has been accounted for using the
purchase method of accounting and, accordingly, the results of operations of
Seabee have been included in the 1995 consolidated financial statements since
the date of acquisition.
(12) SALE OF AUTOMOTIVE OPERATION AND SURPLUS BUILDING
On May 1, 1995, the Company sold the majority of its automotive
operation assets. The net sale proceeds of $3,476,000 approximated the book
value of the assets sold. The Company and the buyer also entered into an
operating lease for the facility in which the business was located. The sales of
the automotive business were less than 4% of the consolidated net sales for 1995
and the operating income contribution percentage was lower than the rest of the
Company.
During 1995, the Company also sold the surplus building resulting from
the 1993 plant consolidation described in Note 13. The net sale proceeds of
$1,789,000 approximated book value.
(13) PLANT CONSOLIDATIONS
During 1995, the Company authorized and executed its production
facility realignment, completing the consolidation process started during 1993.
These actions included the asset sales described in Note 12. The movement of the
physical location for certain production did not result in the discontinuation
of any product lines. Severance and relocation expenses of approximately
$300,000 were recognized as part of the realignment. The consolidation also
resulted in a $965,000 reduction in the accrued postretirement benefit
obligation, partially offset by a $764,000 increase in accrued pension cost. The
overall effect of the plant consolidation was not significant to the operating
results or financial position of the Company.
29
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
KAYDON CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(14) CONTINGENCIES
The Company, together with other companies, certain former officers,
and certain former directors, has been named as a co-defendant in lawsuits filed
in federal court in New York in 1993. The suits purport to be class actions on
behalf of all persons who have unsatisfied personal injury and property damage
claims against Keene Corporation which filed for bankruptcy under Chapter 11.
The premise of the suits is that assets of Keene were transferred to Bairnco
subsidiaries, of which Kaydon was one in 1983, at less than fair value. The
suits also allege that the Company, among other named defendants, was a
successor to and alter ego of Keene. In 1994, an examiner was appointed by a
bankruptcy court to examine the issues at stake. On September 23, 1994, the
"Preliminary Report of the Examiner" was made public. In the report, the
examiner stated that the alleged fraudulent conveyance claims against the
Company appear to be time-barred by the statute of limitations, subject to
certain possible exceptions which the Company does not believe are significant
or factual. Although the examiner has made certain recommendations regarding a
mechanism to resolve the claims against the Company, the Court has not taken any
action related to the report. Nevertheless, in the Company's opinion, the report
reinforces management's original view that the claims will ultimately not be
sustained. Accordingly, no provision has been reflected in the consolidated
financial statements for any alleged damages. In June 1995, the creditors'
committee filed a complaint in the same bankruptcy court asserting claims
against the Company similar to those previously filed. On June 12, 1996, the
District and Bankruptcy Courts for the Southern District of New York entered an
order confirming the plan of reorganization for Keene Corporation. As a result,
the so-called transactions lawsuit was transferred in April 1997 from the
Bankruptcy Court for the Southern District of New York to the District Court for
that district and the stay of the transactions lawsuit was lifted. On September
15, 1997, in accordance with the schedule established by the judge, the Company
submitted a motion to dismiss the complaint based on the statute of limitations.
All motions, supporting documents and rebuttal were filed on December 15, 1997.
The court has not yet ruled upon the motions. Management believes that the
outcome of this litigation will not have a material adverse effect on the
Company's financial position.
In June, 1996 the Company received a subpoena issued by the U.S.
District Court in Bridgeport, Connecticut on behalf of a grand jury
investigating a May 9, 1996 accident involving a Sikorsky helicopter in which
four persons died. The grand jury has requested and received documents and
records relating to a bearing manufactured by Kaydon and used in the Sikorsky
helicopter. In addition, the Defense Logistics Agency of the Defense Contract
Management Command and a "Mishap Board" led by Sikorsky Aircraft Corporation
with participation from certain Federal agencies alleged that product quality
problems or deficiencies exist with respect to the bearing product used in the
Sikorsky helicopter described above. The Company was excluded from participation
on this "Mishap Board", however, it independently evaluated the available
evidence and refuted the "Mishap Board" findings in its report submitted to the
Navy. Subsequent incidents have occurred in the helicopter fleet even though the
bearings used were newly manufactured, inspected and approved by Sikorsky
personnel, reinforcing the Company's position that the bearing quality was not
the causative action in the May 9, 1996 accident. During the first half of 1997,
the estates of the four deceased individuals filed civil suits against the
Company. For one of the incidents subsequent to May 9, 1996, which occurred
October 19, 1996, the NADEP Cherry Point Marine Facility distributed a report
dated August 21, 1997 analyzing potential causes for that incident. The Company
is currently in the process of reviewing this report. Management believes it has
meritorious defenses against any claims.
Various other claims, lawsuits and environmental matters arising in the
normal course of business are pending against the Company. Management believes
that the outcome of these matters, including the Sikorsky matter referred to
above, will not have a material adverse effect on the Company's financial
position or results of operations.
30
<PAGE> 33
- --------------------------------------------------------------------------------
(15) BUSINESS SEGMENT INFORMATION
The Company operates predominately in one industry segment, the design,
manufacture and sale of custom-engineered products. During 1997, 1996 and 1995,
sales to no single customer exceeded 10% of total sales. Transfers between
geographic areas represent the selling price of sales to affiliates, which is
generally based on cost plus a mark-up. Corporate assets are those assets
maintained for general purposes, principally cash, cash equivalents and
marketable securities. All other assets have been identified with domestic or
foreign operations. Information regarding the Company's operations in the United
States and Europe for 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Year ended December 31, 1997 United States Europe Eliminations Consolidated
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers .... $301,618,000 $ 27,418,000 $ -- $329,036,000
Transfers between geographic areas.. -- 5,581,000 (5,581,000) --
------------ ------------ ------------ ------------
Total sales .................... $301,618,000 $ 32,999,000 $ (5,581,000) $329,036,000
============ ============ ============ ============
Operating income ................... $ 89,598,000 $ 6,083,000 $ -- $ 95,681,000
Interest income, net ............... 3,780,000
------------
Income before income taxes ......... $ 99,461,000
============
Identifiable assets ................ $257,706,000 $ 28,474,000 $ -- $286,180,000
Corporate assets ................... 97,805,000
------------
Total assets ................... $383,985,000
============
<CAPTION>
- -----------------------------------------------------------------------------------------------
Year ended December 31, 1996 United States Europe Eliminations Consolidated
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers .... $263,491,000 $ 27,179,000 $ -- $290,670,000
Transfers between geographic areas.. -- 4,621,000 (4,621,000) --
------------ ------------ ------------ ------------
Total sales .................... $263,491,000 $ 31,800,000 $ (4,621,000) $290,670,000
============ ============ ============ ============
Operating income ................... $ 73,324,000 $ 5,713,000 $ (83,000) $ 78,954,000
Interest income, net ............... 2,662,000
------------
Income before income taxes ......... $ 81,616,000
============
Identifiable assets ................ $206,962,000 $ 40,305,000 $ -- $247,267,000
Corporate assets ................... 84,271,000
------------
Total assets ................... $331,538,000
============
<CAPTION>
- -----------------------------------------------------------------------------------------------
Year ended December 31, 1995 United States Europe Eliminations Consolidated
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers .... $205,342,000 $ 24,582,000 $ -- $229,924,000
Transfers between geographic areas.. -- 3,538,000 (3,538,000) --
------------ ------------ ------------ ------------
Total sales .................... $205,342,000 $ 28,120,000 $ (3,538,000) $229,924,000
============ ============ ============ ============
Operating income ................... $ 55,178,000 $ 4,501,000 $ (393,000) $ 59,286,000
Interest income, net ............... 2,505,000
------------
Income before income taxes ......... $ 61,791,000
============
Identifiable assets ................ $181,070,000 $ 38,376,000 $ -- $219,446,000
Corporate assets ................... 48,229,000
------------
Total assets ................... $267,675,000
============
</TABLE>
31
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
KAYDON CORPORATON AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(16) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Quarters (amounts in thousands except per share data)
- ---------------------------------------------------------------------------------------------------------------------------------
1st 2nd 3rd 4th Total
------------------ ------------------ ------------------ ------------------ ------------------
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales .................... $ 76,531 73,395 84,454 76,131 83,380 69,838 84,671 71,306 329,036 290,670
Gross Profit ................. $ 31,823 28,736 35,574 30,735 34,356 28,382 35,507 29,643 137,260 117,496
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Income ................... $ 13,881 12,280 15,904 13,081 15,770 12,366 16,111 12,794 61,666 50,521
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Earnings Per Share (Diluted).. $ 0.42 0.37 0.48 0.40 0.47 0.37 0.49 0.39 1.86 1.53
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Market Price:
High ...................... $ 23.38 17.50 25.69 23.57 32.03 24.63 34.13 24.13 34.13 24.63
Low ....................... $ 21.00 14.63 20.94 17.25 24.25 19.75 29.25 20.00 20.94 14.63
</TABLE>
Notes
32
<PAGE> 35
CORPORATE INFORMATION
DIRECTORS
Gerald J. Breen
President and C.E.O.
Cuyam Corporation
Brian P. Campbell
President
TriMas Corporation
Lawrence J. Cawley
Chairman
Kaydon Corporation
Stephen K. Clough
President and Chief
Executive Officer
Kaydon Corporation
John H.F. Haskell, Jr.
Managing Director
SBC Warburg Dillon
Read Inc.
CORPORATE OFFICES
KAYDON CORPORATION
Arbor Shoreline Office Park
19345 U.S. 19 North
Clearwater, FL 33764
813-531-1101
FAX 813-530-9247
OPERATING LOCATIONS
Baltimore, Maryland
Blacksburg, Virginia
Dexter, Michigan
Granite Falls, Minnesota
Great Bend, Kansas
Greeneville, Tennessee
Hampton, Iowa
King's Lynn, U.K.
Krefeld, Germany
LaGrange, Georgia
Laurens, Iowa
Monterrey, NL, Mexico
Norton Shores, Michigan
Reading, U.K.
St. Louis, Missouri
Sumter, South Carolina
Virginia Beach, Virginia
TRANSFER AGENT AND
REGISTRAR
Continental Stock Transfer
and Trust Company
2 Broadway
New York, NY 10004
212-509-4000
INDEPENDENT PUBLIC
ACCOUNTANTS
Arthur Andersen LLP
171 Monroe Avenue, N.W.
Grand Rapids, MI 49503
STOCK LISTING
Kaydon common stock is listed on the NYSE and traded under the New York Stock
Exchange Symbol - KDN.
ANNUAL MEETING
The Annual Stockholders' Meeting will be held at the Tampa Airport Marriott
Hotel in Tampa, Florida on April 30, 1998 at 10:00 A.M.
FORM 10-K
Stockholders may obtain a copy of Kaydon's 10-K report to the Securities and
Exchange Commission by writing to the Investor Relations Department.
INVESTOR RELATIONS
INFORMATION
Contact Ms. Shelley Schwemley at the corporate office.
813-531-1101
<PAGE> 36
[KAYDON LETTERHEAD]
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
<TABLE>
<S> <C> <C>
1. Name: Kaydon International, Inc.
Place of Incorporation: United States Virgin Islands
Date of Incorporation: July 16, 1991
2. Name: Kaydon Ring and Seal, Inc.
Place of Incorporation: Delaware
Date of Incorporation: June 30, 1986
3. Name: Kaydon S.A. de C.V.
Place of Incorporation: Nuevo Leon, United Mexican States
Date of Incorporation: April 10, 1987
4. Name: I.D.M. Electronics Ltd.
Place of Incorporation: United Kingdom
Date of Incorporation: July 1, 1957
5. Name: Electro-Tec Corp.
Place of Incorporation: Delaware
Date of Incorporation: October 27, 1967
6. Name: Cooper Roller Bearing Company Limited
Place of Incorporation: United Kingdom
Date of Incorporation: June 16, 1982
7. Name: Cooper Split Roller Bearing Corporation
Place of Incorporation: Virginia
Date of Incorporation: January 1, 1974
8. Name: Cooper Geteilte Rollenlager GmbH
Place of Incorporation: Germany
Date of Incorporation: March 19, 1974
9. Name: Industrial Tectonics Inc
Place of Incorporation: Delaware
Date of Incorporation: November 22, 1991
10. Name: Kaydon Acquisition Corp. V
(d/b/a Seabee Corporation)
(d/b/a Gold Star Manufacturing, Inc.)
Place of Incorporation: Delaware
Date of Incorporation: October 4, 1993
11. Name: Kaydon Acquisition VII, Inc.
(d/b/a Victor Fluid Power, Inc.)
Place of Incorporation: Delaware
Date of Incorporation: September 28, 1995
12. Name: Great Bend Industries, Inc.
Place of Incorporation: Delaware
Date of Incorporation: September 28, 1995
</TABLE>
27
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Kaydon Corporation:
As independent public accountants, we hereby consent to the
incorporation of our report incorporated by reference in this Form 10-K, into
the Company's previously filed Form S-8 Registration Statement Numbers 2-89399,
2-92778, 33-48762, 33-61646, 33-61648 and 333-15903.
/s/ Arthur Andersen LLP
- -----------------------
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF KAYDON CORPORATION FOR THE YEAR ENDED DECEMBER 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 74,735
<SECURITIES> 22,067
<RECEIVABLES> 44,310
<ALLOWANCES> 1,620
<INVENTORY> 60,548
<CURRENT-ASSETS> 214,778
<PP&E> 198,176
<DEPRECIATION> 112,666
<TOTAL-ASSETS> 383,985
<CURRENT-LIABILITIES> 71,015
<BONDS> 0
0
0
<COMMON> 3,618
<OTHER-SE> 279,978
<TOTAL-LIABILITY-AND-EQUITY> 383,985
<SALES> 329,036
<TOTAL-REVENUES> 329,036
<CGS> 191,776
<TOTAL-COSTS> 191,776
<OTHER-EXPENSES> 41,579
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,780)
<INCOME-PRETAX> 99,461
<INCOME-TAX> 37,795
<INCOME-CONTINUING> 61,666
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,666
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 1.86
</TABLE>
