<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED December 31, 1995 COMMISSION FILE NUMBER 0-14229
---------------------- -----------
CROWN ANDERSEN INC
----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-1653577
-----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
306 Dividend Drive, Peachtree City, Georgia 30269
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 486-2000
-------------------------
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 filing such
requirements for the past 90 days. Yes X No
--- ---
============================================================================
Class Outstanding at December 31, 1995
----------------------------- --------------------------------
Common Stock, $0.10 Par Value 1,561,635 shares
Page 1 of 11
<PAGE>
CROWN ANDERSEN INC.
-------------------
INDEX
-----
PAGE NO.
--------
Part I. FINANCIAL INFORMATION:
Consolidated Balance Sheets--
December 31, 1995 and September 30, 1995 3
Consolidated Statements of Income--
Three Months Ended December 31, 1995
and 1994 4
Consolidated Statements of Cash Flows--
Three Months Ended December 31, 1995
and 1994 5
Notes to Consolidated Financial Information 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1995
------------- --------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 2,170,455 $ 3,751,637
Receivables:
Trade, less allowance of $172,719 and $166,192 for
possible losses 3,265,850 5,415,756
Other 178,679 92,848
Income taxes 170,614 157,094
Costs and estimated earnings in excess of billings on
uncompleted contracts 6,574,519 5,859,652
Inventories 2,731,083 671,672
Prepaid expenses 41,256 43,018
Current maturities of long-term note receivable 100,000 100,000
Deferred income taxes 289,785 289,785
----------- ------------
TOTAL CURRENT ASSETS 15,522,241 16,381,462
NOTE RECEIVABLE, less current maturities 1,090,000 1,090,000
EQUIPMENT HELD FOR RESALE 1,301,554 1,396,954
PROPERTY AND EQUIPMENT, less accumulated depreciation 1,745,936 1,815,541
DEFERRED INCOME TAXES 157,700 157,700
OTHER ASSETS 140,035 143,035
----------- ------------
$19,957,466 $ 20,984,692
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ - $ -
Accounts payable 2,748,937 $ 4,678,832
Accruals:
Income taxes 86,682 201,000
Compensation 514,967 414,993
Warranty 474,600 476,000
Miscellaneous 373,275 414,125
Billings on uncompleted contracts in excess of cost and
estimated earnings 12,476 190,889
Current maturities of long-term debt 1,110,106 579,987
448,045 327,114
Deferred income taxes ----------- ------------
TOTAL CURRENT LIABILITIES 5,659,088 7,282,940
LONG-TERM DEBT, less current maturities 968,010 621,253
DEFERRED INCOME TAXES 190,970 190,970
----------- ------------
TOTAL LIABILITIES
6,818,068 8,095,163
COMMITMENTS AND CONTINGENCIES ----------- ------------
STOCKHOLDERS' EQUITY:
Common Stock, $.10 par; shares authorized 5,000,000;
outstanding 1,561,635 156,164 156,164
Additional paid-in capital 2,905,801 2,905,801
Retained earnings 9,685,110 9,426,252
Foreign currency translation adjustment 392,323 401,312
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 13,139,398 12,889,529
----------- ------------
$19,957,466 $ 20,984,692
=========== ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
=================================================================
(Unaudited)
<S> <C> <C>
FOR THE THREE MONTHS
ENDED DECEMBER 31,
---------- ----------
1995 1994
---------- ----------
REVENUES:
Contracts $4,674,068 $4,422,009
Sales 541,084 302,374
Other 32,047 4,800
---------- ----------
5,247,199 4,729,183
---------- ----------
COSTS AND EXPENSES:
Cost of contracts and sales 3,945,386 3,745,537
Selling, general and administrative 903,908 727,050
Interest and other (14,854) (43,533)
---------- ----------
4,834,440 4,429,054
---------- ----------
Income from operations before
taxes on income 412,759 300,129
TAXES ON INCOME 153,900 114,700
---------- ----------
NET INCOME
$ 258,859 $ 185,429
========== ==========
AVERAGE SHARES AND EQUIVALENT SHARES
OUTSTANDING 1,561,635 1,561,635
---------- ----------
EARNINGS PER SHARE $0.17 $0.12
---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
---------------------------------
1995 1994
------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations $ 258,859 $ 185,429
Items in income from continuing operations not affecting cash:
Depreciation and amortization 74,700 77,217
Provision for valuation of soil processor unit 90,000 90,000
Deferred income taxes 12,770 -
Loss (gain) on sales of fixed assets 6,399 (21,970)
Cash provided by (used for)
Trade and other receivables 2,058,108 1,190,401
Refundable income taxes (14,535) 96,357
Costs and estimated earnings in excess of billings on
uncompleted contracts (714,867) (2,651,743)
Inventories (1,041,681) 89,385
Prepaid expenses 1,574 64,538
Accounts payable (1,925,452) 1,057,023
Accrued expenses (55,255) (236,885)
Billings on uncompleted contracts in excess of costs and
estimated earnings (178,404) 600,017
Other 1,065 11,334
----------- -----------
Cash provided by (used for) operating activities (1,426,719) 551,103
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds on sale of plastics segment, net of selling and
costs of $254,780 in fiscal 1995 - 4,960,260
Proceeds from sale of fixed assets (4,721) 88,992
Capital expenditures (6,711) (38,670)
----------- -----------
Cash provided by (used for) investing activities (11,432) 5,010,582
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction in notes payable - (340,333)
Reduction in long-term debt (141,062) (140,635)
----------- -----------
Cash used for financing activities (141,062) (480,968)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,969) (1,789)
----------- -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) during the year (1,581,182) 5,078,928
Balance at beginning of year 3,751,637 137,659
----------- -----------
BALANCE AT END OF PERIOD $ 2,170,455 $ 5,216,587
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
===========================================
1. Condensed footnotes:
-------------------
As contemplated by the Securities and Exchange Commission instructions to
Form 10-Q, the following footnotes have been condensed and therefore do not
contain all disclosures required in connection with annual financial
statements. Reference should be made to the notes to Crown Andersen Inc.'s
annual financial statements set forth in its Form 10-K for the year ended
September 30, 1995.
2. Discontinued operations:
-----------------------
During 1994, the Company sold the net assets of Crown and Roanoke to a
single buyer for $7.1 million ($5.9 million in cash and $1.2 million under a
note agreement. This note of $1.2 million bears interest at 7% per annum,
payable in two equal installments each year. The principal is payable in
seven installments over 60 months, requiring two payments of $50,000 each due
on March 30 and September 29, 1996. Four additional payments of $150,000 are
due on March 30, 1997; September 30, 1997; March 29, 1998; and September 29,
1998. The seventh and final principal payment of $490,000 is due on September
29, 1999.
Effective June 30, 1989, the operations of the Company's Struthers
thermo-Flood Corporation (STFC) subsidiary were substantially curtailed due to
continuing financial problems resulting primarily from significant losses on
two waste heat boiler contracts. The STFC technology was sold to the Babcock
& Wilcox on January 19, 1990. During fiscal 1992, STFC vacated the leased
Kansas property after it was discovered that it had been contaminated with
organic solvents prior to the time of the acquisition of STFC by the Company.
STFC filed for Chapter 7 bankruptcy protection on August 12, 1992, and the
trustee completed liquidation of STFC during February, 1994. STFC was
dissolved in fiscal year 1995. Litigation has arisen in connection with the
property formerly leased by STFC. See Note 8.
3. Earnings per share:
------------------
Earnings per share were computed by dividing consolidated net earnings by
the number of shares of common stock outstanding during the period. The stock
options outstanding during 1994 and 1995 were antidilutive and thus did not
affect earnings per share.
4. Stock options:
-------------
As of December 31, 1995, options to purchase 89,000 shares at an average
price of $8.4219 were outstanding under the Company's stock option plan.
The Company also has outstanding purchase warrants of 42,688 shares of
common stock under the Directors Stock Warrant Plan at $9.4874 per share.
5. Revenue recognition:
-------------------
Revenues from contracts are reported on the percentage-of-completion
method. Under this method, the percentage of contract revenue to be
recognized currently is based on the ratio of costs incurred to date to total
estimated contract costs, after giving effect to the most recent estimate of
costs to complete. Revenues other than contracts are recorded when the
product is shipped or the service is rendered to the customers.
6. Inventories:
-----------
Inventories were $2,731,083 and $671,672 as of December 31, 1995 and
September 30, 1995, respectively. The amount of $2,731,083 at December 31,
1995 includes $2,020,000 of incineration equipment acquired from a former
competitor on December 28, 1995. This equipment is compatible with the
Company's existing products. The Company paid $1,000,000 in cash for this
equipment inventory and the balance of $1,020,000 is payable in three
installments over a two-year period under a non-interest bearing promissory
note.
7. Equipment held for resale:
-------------------------
On September 30, 1992, the Company sold a soil processor unit under a
financing-type lease arrangement. As a result of the customer's default, the
Company, during 1994, terminated the lease and repossessed the equipment. On
September 30, 1994, the Company
6
<PAGE>
reclassified this asset as equipment held for resale and reduced its carrying
value from approximately $2.1 million to $1.8 million. As of December 31,
1995, the Company had further reduced the equipment carrying value to $1.3
million.
8. Commitments and contingencies:
------------------------------
There are no significant changes to the information discussed in the
Company's annual report on Form 10K for the year ended September 30, 1995
(Note 11 to the Consoli-dated Financial Statements).
* * *
The financial information included in this report has not been
certified and should not be relied upon to the same extent as certified
financial statements. The financial information included in this report
reflects all adjustments which are, in the opinion of management, necessary
for a fair presentation of the results for the interim period. Nevertheless,
the results shown are for interim periods and are not necessarily indicative
of results to be expected for the year.
7
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Introduction:
------------
Crown Andersen Inc. (Crown Andersen or the Company) is a publicly-traded
holding company for Andersen 2000 Inc. (Andersen) and, through Andersen, owns
all of the outstanding stock of Montair Andersen bv (Montair). As used
herein, unless otherwise indicated, the term "Company" refers to Crown
Andersen and the above-referenced two subsidiaries and "Andersen" refers to
Andersen and Montair.
Late in fiscal 1994, the Company sold the assets of Crown Rotational
Molded Products, Inc. (Crown) and its subsidiary, Roanoke Industries, Inc.
(Roanoke) to Snyder Industries, Inc. The Crown sale was approved by the
shareholders in September, 1994. The Company is no longer involved in the
plastics business. Its two remaining subsidiaries are engaged exclusively in
the pollution control and waste processing equipment businesses.
Liquidity and Capital Resources:
-------------------------------
Cash and cash equivalents of $2,170,455 at December 31, 1995 decreased
$1,581,182 from the September 30, 1995 balance of $3,751,637. The decrease
was primarily attributable to a reduction of accounts payable and a $1,000,000
cash payment made for the purchase of equipment inventory from a former
competitor. Cash used for operating activities amounted to $1,426,719.
Decreases in payables and increases in inventories and costs and estimated
earnings in excess of billings on uncompleted contracts more than offset a
decrease in receivables and net income plus depreciation and amortization of
$423,559. Costs and estimated earnings in excess of billings on uncompleted
contracts increased $714,867, as a result of costs associated with a large
contract which was nearing completion during the first quarter of fiscal 1996.
Cash used for investment activities totaled $11,432 and reflects capital
expenditures (primarily at Montair).
Cash used for financing activities totaled $141,062 and reflects
reduction in long-term debt.
As disclosed in Note 7 to the Consolidated Financial Statements, the
Company repossessed certain equipment sold under a lease arrangement. The
Company has reduced the carrying value of this asset to approximately $1.3
million as of December 31, 1995 and it is reflected as equipment held for
resale in the accompanying consolidated balance sheet. During the first
quarter of 1996, the Company leased this equipment on a short-term basis and
received $5,400. This amount was offset against the net carrying value of the
equipment.
As indicated in Note 8 of the Notes to the Consolidated Financial
Statements, the Company is one of several defendants in a legal action brought
by various holders of Industrial Revenue Bonds issued by the cities of
Winfield and Arkansas City, Kansas concerning the development of industrial
property near Winfield, Kansas. The Company believes that it has meritorious
defenses to the litigation due to the fact that Crown Andersen was not a party
to the bondholder's agreement, such agreement having been entered into by
Struthers Thermo-Flood Corporation ("STFC") prior to STFC being acquired by
the Company. In response to the lawsuit, STFC filed a liquidation proceeding
under Chapter 7 of the Federal Bankruptcy Act. The Trustee in Bankruptcy
abandoned the property on September 17, 1992. The Bankruptcy Court entered an
order of no distribution on February 10, 1994. STFC was dissolved in March
1995. The Company and its counsel believe that there is a strong likelihood
of a favorable outcome with no adverse financial results for
8
<PAGE>
the Company. Another less likely outcome could result in the bondholders
obtaining a judgement against the Company in an amount not exceeding $500,000
plus attorneys' fees. if a judgement were to be rendered against the Company
for such amount, payment would be made using the Company's existing cash
reserves or from funds available under its credit facility.
As of December 31, 1995, the Company had borrowed $0.3 million
against the credit facility of $0.9 million available to the Montair operation
and had issued $1.8 million in letters of credit against its $3.0 million U.S.
line of credit which has expired. Because of profitable operations and $4.5
million received from the sale of the plastics business, the Company has
adequate cash reserves to meet its short-term cash needs. The Company's line
of credit with a U.S. bank expired in May 1995. The Company has paid all
outstanding advances from the U.S. bank. While the bank has not renewed the
agreement, it has allowed $1.8 million of letters of credit to continue
outstanding against the expired line of credit. The Company has had
discussions with this bank and other banks for a replacement line of credit.
Under its expired current loan agreement, the Company was required to
obtain the bank's consent to pay cash dividends or to sell assets which
constitute collateral. The bank did not require compensation for its consent.
Results of Operations:
---------------------
Revenues.
---------
Revenues for the first quarter of fiscal 1996 were $5,247,199 compared
with $4,729,183 for the comparable period of fiscal 1995 and $6,697,584 for
the last quarter of fiscal 1995. Foreign sales (including export sales by
Andersen and sales by the Netherlands subsidiary) were $4.5 million and $4.4
million for the first quarter of fiscal 1996 and 1995, respectively, and
accounted for 85.0% and 93.6% of revenues, respectively.
The increase in revenues of $518,016 (11%) from fiscal 1995 was
attributable to a $487,547 increase at Andersen (94%) and an increase of
$30,469 (6%) at Montair. All changes in revenue are related to the quantity
of product sold, not to pricing changes.
The Company's revenue levels in the United States continued to be
adversely affected by the moratorium on new hazardous waste incineration
facilities in the United States. The Company estimates that U.S. revenues
have been reduced by approximately $2 - $3 million per year as a result of
this moratorium. The Company anticipates that foreign revenues will offset
domestic revenue losses. Because of the uncertainty in changes in United
States regulations, it is impossible to predict changes in demands for the
Company's products in the domestic market.
The Company has been successful and will continue to rely on the
international market to replace some of the lost U.S. business over the next
two years. The Company expects to at least maintain the current revenue
levels in fiscal 1996.
First quarter 1996 revenues decreased $1,450,385 (22%) from the preceding
quarter revenues, primarily as a result of lower revenues of $1,068,857
generated at Andersen. Fourth quarter 1995 revenues reached a record high
level of $6,697,584.
Cost of Sales.
--------------
For the first quarter of fiscal 1996, cost of sales totaled $3,945,386
compared with $3,745,537 in the comparable period of fiscal 1995 and
$5,252,039 in the fourth quarter of fiscal 1995.
9
<PAGE>
The increase in cost of sales of $199,849 (5.3%) from the fiscal 1995
quarter is the result of higher revenues and a margin improvement of 4.0%.
This was largely attributable to operations at Andersen.
First quarter 1996 costs of sales were $1,306,653 lower than in the
fourth quarter of 1995, as a result of lower revenues.
Selling, General and Administrative Costs.
------------------------------------------
Selling, general and administrative costs for the first three months of
fiscal 1996 were $903,908 compared with $727,050 for the first fiscal quarter
of 1995 and $919,301 in the fourth quarter of fiscal 1995. The increase of
$176,858 (24.3%) over the comparable quarter in 1995 is entirely attributable
to U.S. operations and reflects increases in commissions, professional fees,
advertising, and travel expenses. As a percentage of revenues, selling,
general and administrative expenses were 17.2%, 15.4% and 13.7% of revenues
for the fiscal quarters of 1996 and 1995 and the fourth quarter of fiscal
1995. Expenses for the current 1996 quarter decreased $9,383 (2%) from the
preceding fiscal quarter.
Interest and Other (Income) Expenses.
-------------------------------------
Interest and other (income) expenses for the first three months of fiscal
1996 resulted in a credit of $14,854 compared with a credit of $43,533 for the
first quarter of fiscal 1995 and a credit of $124,547 for the fourth quarter
of 1995. The credits in all periods reflect a substantial reduction in net
interest costs as a result of offsetting interest income realized on short-
term investments. The lower credit of $28,679 in the first quarter of fiscal
1996 reflects higher bad debt expense and a gain in disposition of assets
recorded in the first quarter of fiscal 1995. The lower credit of $109,693 in
the current quarter, as compared to the preceding fiscal quarter, reflects
lower interest income in the 1996 quarter and royalty income recorded in the
fourth quarter of fiscal 1995.
Taxes on Income.
----------------
The effective tax rate for the first quarter of fiscal 1996 was 37.3%
compared to 38.2% for the first quarter of fiscal 1995 and 30.2% for the
fourth quarter of fiscal 1995.
Net Income.
-----------
Net income for the first quarter of fiscal 1996 was $258,859 or $0.17 per
share, compared with $185,429 or $0.12 per share for the first quarter of
fiscal 1995 and $453,945 or $0.29 per share for the fourth quarter of fiscal
1995.
The increase in earnings of $73,430 was the result of higher revenues.
Operations at Andersen and Montair contributed equally to this increase.
Earnings decreased $195,086 from the preceding fiscal quarter as a result
of lower revenues, as revenues for the fourth quarter of 1995 reached a
recordsetting level. Operations at Andersen accounted for the entire decline
in earnings.
Shares Outstanding.
-------------------
The average shares and equivalent shares outstanding were 1,561,635 in
the first quarter of fiscal 1996 and 1995 and in the last quarter of fiscal
1995. The unexercised options and warrants are antidilutive for all periods.
10
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
------------------------------------
PART II
OTHER INFORMATION
====================================
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit 10. Asset Purchase Agreement dated December 21, 1995
between the Cleaver-Brooks Division of Aqua-Chem Inc. and
Andersen 2000 Inc.
(b) Exhibit 27. Financial Data Schedules
(c) No reports were filed on Form 8K during the quarter ended
December 31, 1995.
SIGNATURES
==========
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CROWN ANDERSEN INC.
Dated: February 12, 1996 By: /s/ Jack D. Brady
------------------- -----------------------------
Jack D. Brady
Chairman of the Board
(Duly Authorized Officer)
Dated: February 12, 1996 By: /s/ Milton Emmanuelli
------------------- -----------------------------
Milton Emmanuelli
Secretary and Treasurer
(Principal Financial Officer)
11
<PAGE>
EXHIBIT 10
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 28th day of December, 1995, between the CLEAVER-BROOKS Division of AQUA
CHEM. INC., a Wisconsin corporation ("Seller") and ANDERSEN 2000 INC., a
Delaware corporation ("Purchaser").
W I T N E S S E T H
WHEREAS, Seller is engaged in the manufacturing, distribution and sale of
various product lines of boilers and incinerators;
WHEREAS, one of the product lines of Seller is the incineration business
which consists of the Vertical, Fixed Hearth, Stepped Hearth and Rotary Kiln
products more fully described on Exhibit A ("Product Line"); and
WHEREAS, Seller wishes to sell and transfer and Purchaser wishes to
purchase and acquire the Product Line and certain assets associated with the
Product Line, upon the terms hereinafter set
forth;
NOW, THEREFORE, Purchaser and Seller, in consideration of the premises,
which are incorporated and made a part of this Agreement and the agreements
and covenants contained herein and subject to the satisfaction of the
conditions set forth herein, hereby agree as follows:
1. TRANSACTIONS-ON CLOSING DATE.
----------------------------
1.1 Assets to be Purchased and Sold. On the Closing Date (as hereinafter
-------------------------------
defined), Seller shall sell, assign, transfer and convey to Purchaser by bill
of sale and assignment, and Purchaser shall purchase, acquire and accept the
following assets used or held for use by Seller exclusively in the Product
Line (the "Purchased Assets") as the same shall exist on the Closing Date (as
hereinafter defined) where noted:
(a) All inventory and parts set forth in Schedule 1.1(a) ("Inventory");
(b) All patents and patent applications set forth in Schedule 1.1(b)
("Patents");
(c) All forms and tooling set forth in Schedule 1.1 (c) ("Forms and
Tooling");
(d) All rights and interests of the Seller in the design of the
incineration systems included within the Product Line including all
engineering drawings, bills of material and CAD computer files relating
exclusively to the Product Line ("Product Designs");
1
<PAGE>
(e) All existing customer lists, quotation files, list of leads and active
mailing list relating exclusively to the Product Line ("Customer
Information");
(f) All existing files, records and drawings of Seller's previous jobs
which relate exclusively to the Product Line ("Prior Job Files");
(g) All sales literature, photographs, art work and other selling materials
relating exclusively to the Product Line ("Product Information");
(h) Goodwill relating exclusively to the Product Line ("Goodwill").
1.2 Retained Assets. All assets of Seller, other than the Assets referred
---------------
to above in Section 1.1 shall be retained by Seller ("Retained Assets").
1.3 Liabilities Not to be Assumed. Purchaser does not assume, and shall
-----------------------------
not be obligated to pay, perform or discharge any debts, liabilities or
obligations of Seller of any kind or nature, whether actual, contingent or
accrued, known or unknown except as specifically provided for in this
Agreement.
1.4 Purchase Price.
--------------
(a) Basis of Purchase Price. The purchase pi-ice ("Purchase "Price")
-----------------------
for the Assets shall be Two Million, Two Hundred Thousand Dollars ($2,200,000)
which shall be allocated among the Assets as follows:
(1) $1,866,808.00 for Inventory;
(2) $52,048.00 for Patents
(3) $125,000.00 for Forms and Tooling;
(4) $60,000.00 for Product Designs;
(5) $24,036.00 for Customer Information;
(6) $20,000.00 for Prior Job Files;
(7) $25,000.00 for Product Information; and
(8) $27,108.00 for Goodwill.
The parties agree that all applicable tax returns and other applicable
reports to governmental agencies, filed by either Seller or Purchaser insofar
as they involve an allocation of the Purchase Price under this Agreement,
shall be based on and shall be consistent with the provisions of this Section
1.4(a).
2
<PAGE>
(b) Payment of Purchase Price. On the Closing Date, Purchaser shall pay
-------------------------
to Seller the Purchase Price as follows:
(i) One million ($1,000,000.00) on the Closing Date by cashier's check or
wire transfer of immediately available funds; and
(ii) One million Two Hundred Thousand. Dollars ($1, 2 00, 000. 00) to be
paid pursuant to a promissory note in the form attached as Exhibit B
("Promissory Note"), which shall be secured by a purchase money
security interest in the Purchased Assets pursuant to the terms of the
Security Agreement attached hereto as Exhibit C (the "Security
Agreement and a financing statement in the form attached hereto as
Exhibit D ("Financing Statement") and guaranteed by the sole
stockholder of Purchaser in the form of the Guarantee attached hereto
as Exhibit E ("the Guarantee").
2. CLOSING DATE.
------------
The closing (consummation of the transactions contemplated by this
Agreement) shall take place at the offices of Whyte Hirschboeck Dudek S.C. in
Milwaukee, Wisconsin on December 28, 1995 at or at such other time and place
as the parties may agree ("Closing Date").
3. SELLER'S REPRESENTATIONS AND WARRANTIES.
---------------------------------------
For purposes of this Section 3; (a) references to the "knowledge" of Seller
means the actual knowledge of the officers of Seller after making inquiry of
Seller's management personnel, and (b) any fact or matter which is fairly
disclosed on any exhibit or schedule in connection with the making of any
representation or warranty by Seller shall be deemed disclosed for purposes of
the other representations and warranties of Seller, without specific cross
reference in this Agreement.
Seller hereby represents and warrants to the Purchaser as follows:
3.1 Seller's Organization. Seller is a corporation duly organized,
---------------------
validly existing and in good standing under the laws of the State of Delaware,
and has the corporate power to own the Purchased Assets and to operate the
business of the Product Line as it is now being conducted.
3.2 Seller's Authority. The execution and delivery of this Agreement, and
------------------
all documents to be executed and delivered by Seller pursuant to this
Agreement, have been duly and validly authorized by the Board of Directors and
Shareholders of Seller. This Agreement is, and such other documents when
executed and delivered by Seller will be, valid and binding obligations of
Seller enforceable in accordance with their respective terms. The Seller's
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby do not violate any agreement to which the
Seller is a party or by which Seller is bound and Seller's performance of this
Agreement does not require the consent of any third party other than such
consents which have already been obtained.
3
<PAGE>
3.3 Title. Seller has good and marketable title to all the Inventory,
-----
Forms and Tooling which it will sell to Purchaser, free and clear of all
liens, pledges, charges, claims and encumbrances.
3.4 Condition of Assets. Seller makes no representation of warranty as to
-------------------
the physical condition of any of the Purchased Assets and all of the same are
sold in 'as is' condition.
3.5 Litigation and Proceedings. There is no action, suit or proceeding
--------------------------
pending or, to the knowledge of the Seller, threatened against the Seller,
that would prevent the consummation of the transactions contemplated by this
Agreement. There is no suit, action or legal, administrative, arbitrative or
other proceeding pending, nor does Seller have written notice of any
threatened suit, action or legal, administrative, arbitrative or other
proceeding in connection with the Seller's Product Line or Purchased Assets;
and to Seller's knowledge, Seller is not under governmental investigation with
respect to any violation of any law or administrative regulation, federal,
local or state, with respect to its design, manufacture or sale of any of the
items included within the Product Line.
3.6 Compliance with Law. To the knowledge of Seller, Seller and the
-------------------
methods and means employed by it in the manufacturing of the Product Line and
its ownership of the Purchased Assets are in compliance in all material
respects with all applicable federal, state, local and foreign laws,
regulations or orders of any court, or federal, state, municipal or other
governmental department, commission, board, agency or other instrumentality
(including without limitation, laws and regulations applicable to
environmental standards, wages and hours, civil rights and occupational health
and safety).
3.7 Full Disclosure. No representation or warranty by Seller in this
---------------
Agreement and no statement of Seller contained in any certificate, Exhibit,
Schedule or other writing furnished to Purchaser by Seller pursuant to this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary to make the statements herein or therein not
misleading.
4. PURCHASERS REPRESENTATIONS AND WARRANTIES.
------------------------------------------
Purchaser hereby represents and warrants to the Seller as follows:
4.1 Purchaser's Organization. Purchaser is a corporation duly organized,
------------------------
validly existing and in good standing under the laws of the State of Delaware.
4.2 Purchaser's Authority. The execution and delivery of this Agreement,
---------------------
and all documents to be executed and delivered by Purchaser pursuant to this
Agreement, have been duly and validly authorized by the Board of Directors and
Shareholders of Purchaser and the Guarantee has been duly and validly
authorized by the Board of Directors of Purchaser's sole
4
<PAGE>
stockholder. This Agreement is, and such other documents when executed and
delivered by Purchaser will be, valid and binding obligations of Purchaser
enforceable in accordance with their respective terms, and the Guarantee when
executed and delivered will constitute the valid and binding obligation of
Purchaser's sole stockholder enforceable in accordance with its terms. The
Purchaser's execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and the Purchaser's sole stockholder's
execution and delivery of the Guarantee do not violate any agreement to which
either of them are a party or by which either of them are bound and do not
require the consent of any third party other than such consents which have
already been obtained.
4.3 Litigation. There are no actions, suits proceedings pending or, to
----------
the actual knowledge of the Purchaser, threatened against the Purchaser, that
would prevent the consummation of the transactions contemplated by this
Agreement.
4.4 Full Disclosure. No representation or warranty by Purchaser in this
---------------
Agreement and no statement of Purchaser contained in any certificate, Exhibit,
Schedule or other writing furnished to Seller by Purchaser pursuant to this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary to make the statements herein or therein not
misleading.
5. COVENANTS.
---------
5.1 Full Access. From the date hereof to the Closing Date, during
-----------
reasonable times during normal business hours, Seller will give Purchaser and
its representatives access to, and will cooperate as Purchaser may request in
making available to it, all books, records and other information relating
exclusively to the Product Line.
5.2 Access to Books and Records. Following the Closing, upon reasonable
---------------------------
notice and during reasonable times during normal business hours, Purchaser
shall make the books and records available to Seller for inspection by Seller
or its representatives with respect to Seller's operation of the Product Line
prior to the Closing. As used in this Section, the right of inspection
includes the right to make abstracts or copies.
5.3 Covenant to Satisfy Conditions. Seller will use its best efforts to
------------------------------
ensure that the conditions set forth in Section 6 hereof are satisfied,
including, without limitation, the deliveries to Purchaser provided for
therein. Purchaser will use its best efforts to ensure that the conditions
set forth in Section 7 hereof are satisfied, including, without limitation,
the deliveries to Seller provided for therein.
5.4 Supplements to Schedules. From time to time prior to the Closing
------------------------
Date, Seller will promptly supplement or amend the Schedules with respect to
any matter hereafter arising which, if existing or occurring on the date of
this Agreement, would have been required to be set forth or described in the
Schedules, but no such disclosure shall cure any breach of any
5
<PAGE>
warranty or representation which is known by Seller to be inaccurate when
made.
5.5 Publicity. Each party will consult with the other party prior to
---------
issuing any press release or otherwise making any public statement with
respect to the transactions contemplated by this Agreement, and will not issue
any such release or make any such statement over the reasonable objection of
the other party, except as required by law; provided, however, that without
the prior written approval of Seller, Purchaser will not disclose the
existence of the transactions contemplated by this Agreement (except to their
own advisors) until after the Closing Date.
5.6 Glaxo-Wellcome Assignment. Pursuant to the Assignment and Assumption
-------------------------
Agreement in the form attached hereto as Exhibit F, Seller shall assign and
Purchaser shall assume and perform the Glaxo-Wellcome contract. Purchaser and
Seller acknowledge and agree that the aforementioned assignment (or the
subcontract arrangement hereinafter described) is contingent upon obtaining
the consent of Glaxo-Wellcome. If Glaxo-Wellcome will not consent to such
assignment Seller and Purchaser will use their best efforts to accomplish the
anticipated end results of the assignment through the utilization of a
subcontract. In the event that Glaxo-Wellcome refuses to consent to the
assignment or subcontract or if for any other reason whatsoever the Glaxo-
Wellcome contract is not assigned or subcontracted to Purchaser, Seller shall
credit Purchaser with $200,000 against the payment due on December 31, 1996
under the Promissory Note attached hereto as Exhibit B. Purchaser and Seller
hereby acknowledge and agree that damages arising from the inability to
transfer the anticipated economic benefits of the Glaxo-Wellcome contact to
Purchaser would be difficult if not impossible to calculate and that the
crediting of $200,000 against the payments otherwise due constitutes
liquidated damages and not a penalty and shall be Purchaser's sole and
exclusive remedy against Seller with respect thereto.
5.7 Noncompetition.
--------------
(a) Seller hereby covenants and agrees with Purchaser that for the
six (6) year period following the Closing Date, Seller will not
as a principal, agent, owner, trustee, beneficiary,
distributor, partner, co-venturer, shareholder or in any other
capacity: own, operate or manage any entity, business, activity
or enterprise (other than as a 5% or less shareholder of a
publicly held corporation) which is engaged primarily in the
business of manufacturing, designing, marketing, or selling any
of the items included in the Product Line anywhere in the
United States or in any foreign country where Seller has sold
or solicited orders for products -included within the Product
Line during the one year period preceding the Closing Date.
In the event that any provision of this Section is determined
to be invalid by any court of competent jurisdiction, the
provisions of this Section shall be deemed to have been
6
<PAGE>
amended and the parties agree to execute any documents and take
whatever action is necessary to evidence such amendment, so as
to eliminate or modify any such invalid provision and to carry
out the intent of this Section so as to render the terms of
this Section enforceable in all respects as so modified.
(c) Seller acknowledges and agrees that irreparable injury may
result to Purchaser in the event Seller breaches any covenant
contained in this Section, and that the remedy at law for the
breach of any such covenant will be inadequate. Therefore, if
Seller engages in any act in violation of the provisions of
this Section, Purchaser shall be entitled, in addition to such
other remedies as may be available to it at law or under this
Agreement, to injunctive relief to enforce the provisions of
this Section.
(d) Nothing in this Agreement shall prohibit or restrict Seller or
any of its affiliates from engaging any of the other businesses
which it currently operates or in operating such businesses in
the ordinary course.
5.8 Sales and Use Taxes. Purchaser shall be responsible for all sales and
-------------------
use taxes which may be imposed in connection with the sale or use of any of
the Assets sold and transferred by Seller to Purchaser pursuant to this
Agreement.
5.9 Confidentiality. Each party to this Agreement will hold in confidence
---------------
all documents and information concerning the other party furnished to it in
connection with the transactions contemplated by this Agreement and not
otherwise lawfully available to it, and will use such information only in
connection such transactions and, after the consummation of such transactions,
only in the conduct of its business. Neither party will release or disclose
such documents or information to any other person, except to its attorneys,
accountants and other outside consultants in connection with this Agreement,
except to the extent such party demonstrate such information was previously
known by it, in the public domain through no fault of such party, disclosed to
it by a third party having no confidentiality obligation to the other party,
or required by law. If the transactions contemplated by this Agreement are
not consummated, such confidence shall be maintained and such information and
documents shall not be to the detriment of the disclosing party or otherwise
in any manner and all such documents (including copies and extracts thereof)
shall be returned to the disclosing party immediately upon its request.
5.10 Further Assurances. Each party will execute such further documents,
------------------
and perform such further acts as may be necessary to sell, transfer, assign,
convey and deliver the Purchased Assets to Purchaser on the terms herein
contained and to otherwise comply with the terms of this Agreement and to
consummate the transactions contemplated by this Agreement.
7
<PAGE>
5.11 Product Liability Matters. Any product liability claim made by a
-------------------------
customer relating to products invoiced by Seller shall be the sole
responsibility of Seller unless the Purchaser has subsequently improperly
serviced such products and Seller shall indemnify and hold harmless Purchaser
with respect to any such product liability claims. Any product liability
claim made by a customer relating to products invoiced by Purchaser or
improperly serviced by the Purchaser subsequent to the Closing Date shall be
the sole responsibility of Purchaser and Purchaser shall indemnify and hold
harmless Seller with respect to any such product liability claims. Seller and
Purchaser shall each name the other party as an additional insured on their
product liability insurance policy and shall provide documentation of same to
each other on the Closing Date.
5.12 Product Warranty Claim Procedures. Purchaser shall notify Seller of
---------------------------------
any product warranty claim made by a customer relating to products and work
invoiced by Seller. Seller shall be solely responsible for all warranty
claims in connection with products and work invoiced by Seller, including the
V.A. Miami and St. Luke's Milwaukee projects. Purchaser shall be solely
responsible for all warranty claims in connection with all products and work
invoiced by Purchaser. Upon Seller's request, Purchaser shall provide
qualified service personnel to perform warranty work for Seller at a rate of
$650.00 per day, which rate shall remain constant through December 31, 1997.
5.13 Brokerage. Purchaser and Seller each covenant to the other that
---------
neither it nor any of its officers, directors, or employees has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finder's fees in connection with the transactions contemplated by this
Agreement.
5.14 Transportation of Assets. On the Closing Date, Purchaser shall take
------------------------
physical possession of the Purchased Assets Hand shall be solely responsible
for the transportation of the Purchased Assets to Purchaser's facility. Risk
of loss with regard to the Purchased Assets shall remain with Seller until the
Closing Date at which time it shall transfer to Purchaser. Seller shall store
the Inventory without charge until February 28, 1996 after which time
Purchaser shall pay Seller a monthly storage fee of $1,500.00.
5.15 Employment Matters. On or prior to the Closing Date, Purchaser shall
------------------
provide Seller with a list of those engineering, sales or service personnel
Purchaser will offer to employ. No other employees of Seller shall either be
contacted or offered employment with Purchaser.
5.16 Third-Party Claims. The parties shall cooperate with each other with
------------------
respect to the defense of any claim made or litigation commenced by a third
party subsequent to the Closing Date which is not subject to the
indemnification provisions contained in Section 9, and the party seeking
indemnification shall promptly notify and tender defense of any third party
claim to the party providing indemnification.
8
<PAGE>
5.17 Disclaimer. Other than the provisions of this Agreement, the Exhibits
----------
or Schedules hereto, Purchaser acknowledges that Seller is selling the Assets
to Purchaser, and Purchaser has agreed to purchase and accept the Assets, on
an "as is and where is" basis as of the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
------------------------------------------------
The obligations of Purchaser under this Agreement shall, at its option, be
subject to the satisfaction, on or before the Closing Date, of all of the
following conditions:
6.1 Representations and Warranties Accurate. All representations and
---------------------------------------
warranties of Seller contained in this Agreement shall have been true when
made and shall be true at the Closing Date as if such representations and
warranties were made at the Closing Date. Seller shall furnish Purchaser with
an appropriate certificate, dated as of the Closing Date, and signed by a duly
authorized officer of Seller, stating the above in such form as Purchaser may
reasonably request.
6.2 Performance by Seller. Seller shall have performed and complied in
---------------------
all material respects with all agreements and conditions required by this
Agreement to be performed and complied with by Seller prior to or on the
Closing Date, and shall have delivered to Purchaser an appropriate certificate
to that effect,, dated as of the Closing Date, and signed by a duly authorized
officer of Seller.
6.3 Approval. The Board of Directors and Shareholders of Seller shall
--------
have taken all action necessary to approve the transactions called for by this
Agreement and certified copies of any resolutions duly adopted by the Board of
Directors and Shareholders shall have been delivered to Purchaser.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
---------------------------------------------
The obligations of Seller under this Agreement shall, at its option, be
subject to the satisfaction, on or before the Closing Date of all the
following conditions:
7.1 Representations and Warranties Accurate. All representations and
--------------- --- ---------- --------
warranties of Purchaser contained in this Agreement shall have been true when
made and shall be true at the Closing Date as if such representations and
warranties were made at the Closing Date. Purchaser shall furnish Seller with
an appropriate certificate, dated as of the Closing Date, and signed by a duly
authorized officer of Purchaser, stating that the above in such form as Seller
may reasonably request.
7.2 Performance by Purchaser. Purchaser shall have performed and complied
------------------------
in all material respects with all agreements and conditions required by this
Agreement to be performed and complied with by Purchaser prior to or on the
Closing Date and shall have delivered to Seller an appropriate certificate to
that effect, dated as of the Closing Date, and signed by a duly authorized
officer of Purchaser.
9
<PAGE>
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
------------------------------------------
All representations and warranties made in this Agreement by Seller and
Purchaser shall survive the Closing Date for a period of two (2) years.
9. INDEMNIFICATION.
---------------
Seller and Purchaser hereby agree to indemnify each other as hereinafter
set forth; which shall be their sole and exclusive remedy against each other
for the breach or violation of any provision of this Agreement.
9.1 Indemnification by Seller. Seller shall indemnify and hold Purchaser
-------------------------
harmless from and against any loss, cost, expense or damage suffered by
Purchaser (including reasonable attorneys' fees) resulting from or arising out
of the breach of any representation, warranty or covenant made by Seller under
this Agreement, provided, however, that Purchaser gives Seller written
notification of the claim for indemnification prior to the second anniversary
of the Closing Date. Seller's obligations under this Section shall become
effective only after and to the extent that the total amount of claims for
which Purchaser is entitled to indemnification exceeds $25,000.
9.2 Indemnification by Purchaser. Purchaser shall indemnify and hold
----------------------------
Seller harmless from and against any loss, or damage suffered by Seller
(including reasonable attorneys' fees) resulting from or arising out of the
breach of any representation, warranty or covenant made by Purchaser under
this Agreement provided, however, that Seller gives the Purchaser written
notice of the claim for indemnification prior to the second anniversary of the
Closing Date. Except for the obligation to pay the Purchase Price,
Purchaser's obligations under this Section shall become-, effective only after
and to the extent that the total amount of claims for which Seller is entitled
to indemnification exceeds $25,000.
9.3 Notice and Resolution of Claims. An indemnified party hereunder shall
-------------------------------
give notice to the indemnifying party promptly of any claim and within five
(5) days of receipt of notice of any lawsuit for which recovery may be sought
under this Section 9. If such indemnify shall arise from the claim of a third
party, the indemnified party shall tender defense of such claim and cooperate
in the defense of such claim and the indemnifying party shall assume the
defense of any such claim or any litigation resulting from such claim.
The indemnifying Party shall take all steps necessary in the defense or
settlement of such claim or litigation but may not settle such claim on any
terms that do not include a full and final release of the indemnified party
from all liability associated with such claim or litigation.
9.4 Defense of Third Party Claims. Failure by the indemnifying party to
----------------------
acknowledge its assumption of the defense of any claim or litigation by a
third party within fifteen (15) days after notice thereof shall have been
10
<PAGE>
given to the indemnifying party, shall be deemed a waiver by the indemnifying
party to defend such claim or litigation. The indemnified party may defend
against such claim or litigation in such manner as it may deem appropriate and
may settle such claim or litigation on terms as it may deem appropriate.
10. MISCELLANEOUS MATTERS.
---------------------
10.1 Amendment.. This Agreement may not be amended or otherwise altered
----------
except pursuant to an instrument in writing signed by each of the parties.
This Agreement shall inure to the benefit of and shall be binding upon the
respective successors and assigns, provided that no party shall assign any of
its rights, privileges or obligations hereunder without prior written consent
of the other.
10.2 Notices. Any notice, request or instruction to be given hereunder by
-------
any party to the other shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid,
If to Seller: Aqua Chem, Inc.
------------
7800 N. 113th Street
Milwaukee, Wisconsin 53224
Attn: Mr. Rand McNally
with a copy to: Whyte Hirschboeck Dudek S.C.
111 E. Wisconsin Avenue
Suite 2100
Milwaukee, Wisconsin 53202
Attn: James A. Feddersen, Esq.
If to Purchaser: Andersen 2000 Inc.
---------------
306 Dividend Drive
Peachtree City, GA 30269
Attn: Jack Brady
unless Purchaser or Seller shall have given notice as provided herein of a
different address.
11.3 Headings and Schedules. The headings contained in this Agreement are
----------------------
for reference purposes only and are not to be considered in interpreting this
Agreement. The Exhibits and Schedules referred to herein are incorporated
into and are made a part of this Agreement.
11.4 Entire Agreement. This instrument, and the Exhibits and Schedules
----------------
referred to herein, contain the entire agreement between the parties hereto
with respect to the transactions contemplated herein and supersede all
previous written or oral negotiations, commitments and writings.
11
<PAGE>
11.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
11.6 Governing Law. This Agreement shall be governed by, construed and
-------------
enforced in accordance with the laws of the State of Wisconsin.
11.7 Expenses. Each party shall pay its own expenses incident to
--------
preparation for entering into and carrying this Agreement into effect and for
consummating the transactions contemplated herein.
11.8 Assignment. This Agreement shall not be assigned I-,y either party
----------
without the written consent of the other party and any attempted assignment
without such written consent shall be null and void and without legal effect.
11.9 Severability. The parties agree that. if any provision of this
------------
Agreement shall, under any circumstances, be deemed invalid or inoperative,
the Agreement shall be construed with the invalid or inoperative provision
deleted and the rights and obligations of the parties shall be construed and
enforced accordingly.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed and
sealed as of the day and year first above written.
AQUA CHEM, INC.
By:
---------------------------------------
(Print)
--------------------------------
ANDERSEN 2000 INC.
By:
---------------------------------------
(Print)
---------------------------------
12
<PAGE>
EXHIBIT B
PROMISSORY NOTE
$1,200,000 December 28, 1995
FOR VALUE RECEIVED, the undersigned, ANDERSEN 2000 INC., a Delaware
corporation ("Maker") , hereby promises to pay to the order of AQUA CHEM, INC.
("Payee") at 7800 N. 113th Street, Milwaukee, Wisconsin 53224, the principal
amount of One Million Two Hundred Thousand and 00/Dollars, ($1,200,000.00),
without interest exempt in the event of a "Default" as hereinafter defined.
1. Payment Schedule. Maker shall pay the outstanding principal amount of
----------------
this Note in three (3) installments to be paid as follows:
$700,000 to be paid on December 31, 1996
$100,000 to be paid on June 30, 1997
$400,000 to be paid on December 31, 1997
Notwithstanding anything in this Note to the contrary (a) upon Maker's sale of
any kiln which the Maker has purchased from the Payee pursuant to the Asset
Purchase Agreement dated December 15, 1995, the lesser of $600,000 or the
remaining balance due under this Note shall be paid in full, and (b) upon
Maker's sale of the second kiln so purchased from the Payee, the remaining
balance due under this Note shall be paid in full.
2. Default Rate. In the event of a Default, interest hereunder shall
-------
accrue during the period of Default commencing on the date of Default on the
sum of the unpaid principal amount hereunder (whether or not the debt
hereunder is accelerated) at an annual rate adjusted on a daily basis (the
"Default Rate") equal to the sum of the prime rate as announced from time to
time by Bank One, Milwaukee, N.A. plus three percent (3%).
3. Prepayment. Prepayment of this Note may be made in any amount at any
----------
time, without discount, penalty or premium. In the event of a partial
prepayment, the prepaid amount shall be applied first to accrued unpaid
Default interest at the Default Rate and then to principal installments in
the inverse order in which they are due. Any such partial prepayment shall
not defer any succeeding installments of principal unless Payee agrees in
writing.
4. Security. This Note is secured by a Security Agreement dated of even
--------
date herewith.
5. Default. The unpaid principal amount of this Note, plus, in the event
-------
of a Default, all interest accrued therein at the Default Rate shall,
13
<PAGE>
at the option of Payee, become immediately due and payable upon the occurrence
of any of the following events of default ('Default') :
(a) Maker fails to pay when due any principal installment on this Note and
such failure shall continue for ten (10) days; or
(b) Maker (i) becomes insolvent or takes or fails to take any action which
constitutes an admission of its inability to pay its debts when due; or (ii)
makes an assignment for the benefit of its creditors; or (iii) files a
petition in bankruptcy, petitions or applies to any for the appointment of a
custodian, receiver or a trustee for it or a substantial part of its assets or
any such custodianship, receivership or trusteeship continues unstayed or
undischarged for a period of thirty (30) days or more; or (iv) commences any
proceeding (other than a proceeding against a third party) under any state or
federal bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or hereafter
in effect, or has commenced against it any such proceeding which remains
unstayed or undischarged for a period of thirty (30) days or more;
(c) Maker defaults under or fails to observe, keep or perform any covenant,
agreement or condition required by the Security Agreement, the Asset Purchase
Agreement between the Maker and Payee or the Assignment and Assumption
Agreement between the Maker and Aqua-Chem International, Ltd.
6. Deferral; Waiver by Maker. No deferral of time of payment shall be
-------------------------
valid unless Payee consents thereto in writing; if such deferral is granted,
the deferred balance with interest thereon at the Default Rate shall be an
additional obligation under this Note. Maker hereby waives demand,
presentment, dishonor and protest and any notices thereof as well as all other
notices of any
kind.
7. No Waiver by Payee. No delay or omission by Payee to exercise any
------------------
right or remedy hereunder, whether on, before or after the happening of any
Default, shall impair any such right or remedy or shall operate as a waiver
thereof or as a waiver of any such breach or default. No single or partial
exercise by Payee of any right or remedy shall preclude any other or further
exercise thereof, or preclude any other right or remedy. The rights and
remedies herein provided are cumulative and are not exclusive of any other
rights or remedies provided by law or in equity.
8. Governing Law. This Note is executed in and shall be governed by and
--------------
construed in accordance with the internal laws of the State of Wisconsin.
9. Costs of Collection. In the event of a default hereunder, Maker
-------------------
agrees to pay all reasonable costs and expenses of collection, including
reasonable attorneys' fees.
14
<PAGE>
ANDERSEN 2000 INC.
By:
---------------------------------
(Print)
---------------------------
[CORPORATE SEAL]
15
<PAGE>
Exhibit C
Selective Business Security Agreement
16
<PAGE>
Exhibit D
Financing Statements
17
<PAGE>
SCHEDULE A
----------
The collateral consists of all of the Debtors incinerator inventory, parts,
forms and tooling. The collateral was purchased by the Debtor from the
Secured Party and is more fully described in Schedule 1.1(a) and Schedule
1.1(c) to the Asset Purchase Agreement be1tween the Debtor and Secured Party
dated December 28, 1995.
18
<PAGE>
AMENDMENT
---------
THE UNDERSIGNED, Aqua-Chem, Inc. ("Seller") and Andersen 2000 Inc.
("Purchaser") being all of the parties to that certain Asset Purchase
Agreement dated December 28, 1995 (the "Agreement") hereby agree as follows:
1. All capitalized items contained herein but not defined shall have the
meanings ascribed to them in the Agreement.
2. Notwithstanding anything to the contrary in the Agreement or any of
the Exhibits thereto, Purchaser and Seller hereby agree as follows:
a. Section 5.6 of the Agreement is deleted in its entirety.
b. The Glaxo-Wellcome contract shall be retained and completed by
Seller and shall not be assigned or subcontracted to Purchaser.
c. Seller's completion of the Glaxo-Wellcome contract shall not
constitute a violation of Section 5.7 of the Agreement.
d. Seller shall credit Purchaser with $180,000 against the payment
due on December 31, 1996 under the Promissory Note.
e. Purchaser, upon written request of Seller, shall perform any
required warranty work under the Glaxo-Wellcome contract. Seller shall
reimburse Purchaser for the cost of materials and labor (at the rate of
$650.00 per man day) incurred in performing such warranty work which is not
necessitated by defects in Seller's design to the extent the same exceeds
$30,000 and shall reimburse Purchaser for the cost of all materials and labor
(at the rate of $650.00 per man day) incurred in performing such work which is
necessitated by defects in Seller's design.
3. Except to the extent set forth in this Amendment, all provisions of
the Agreement and Exhibits shall continue in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this amendment as of this
3rd day of January, 1996.
AQUA-CHEM, INC.
By:
-------------------------------
ANDERSEN 2000 INC.
By:
-------------------------------
19
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
[TYPE] EX.27
[DESCRIPTION] ART. 5 FDS FOR 1ST QUARTER 10-Q
[TEXT]
<ARTICLE> 5
<MULTIPLIER> 1
<PERIOD-TYPE> 3 MOS
<FISCAL-YEAR-END> SEP. 30, 1996
<PERIOD-END> DEC. 31, 1995
<CASH> 2,170,445
<SECURITIES> 0
<RECEIVABLES> 3,458,569
<ALLOWANCES> 172,719
<INVENTORY> 2,731,083
<CURRENT-ASSETS> 15,522,241
<PP&E> 1,745,936
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,957,466
<CURRENT-LIABILITIES> 5,659,088
<BONDS> 968,010
<COMMON> 156,164
0
0
<OTHER-SE> 12,983,234
<TOTAL-LIABILITY-AND-EQUITY> 19,957,466
<SALES> 5,215,152
<TOTAL-REVENUES> 5,247,199
<CGS> 3,945,386
<TOTAL-COSTS> 4,834,440
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14,854)
<INCOME-PRETAX> 412,759
<INCOME-TAX> 153,900
<INCOME-CONTINUING> 412,759
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 258,859
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
