<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 16, 2000
TBM HOLDINGS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Florida 0-18707 59-2824411
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
136 Main Street, Westport, Connecticut 06880
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (203) 227-6140
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 16, 2000, TBM Holdings, Inc., a Florida corporation (the
"Company"), through its wholly-owned subsidiary, Long Reach Holdings, Inc., a
Delaware corporation ("LRH"), acquired Lee Engineering Company, Inc., a Rhode
Island corporation ("Lee"), pursuant to a Stock Purchase Agreement (the "Stock
Purchase Agreement"), dated as of May 16, 2000, by and among LRH, Lee and United
Dominion Industries, Inc., a Delaware corporation ("UDI"), the parent
corporation of Lee. Based in Pawtucket, Rhode Island, Lee is a manufacturer of
material handling and ergonomic work positioning equipment, including pallet
stackers and scissor lifts, under the Presto brand name; the Company intends to
continue these operations. This acquisition was effected by LRH's purchase of
all of the outstanding capital stock of Lee from UDI. On May 22, 2000, Lee's
name was changed to Presto Lifts, Inc. The Company's press release issued on
May 18, 2000, relating to the acquisition, is attached to this Form 8-K as
Exhibit 99.
The aggregate consideration paid by the Company in respect of the
acquisition described above was $7.38 million (subject to closing adjustments
as set forth in the Stock Purchase Agreement). The Company used a portion of
its available cash and borrowed an additional $2 million under LRH's line of
credit with Bank One, Texas, N.A. (the "Bank") to fund the payment of the
purchase price.
The consideration for the acquisition was determined through arms'
length negotiations between management of the Company on the one hand and
management of UDI on the other hand, which negotiations took into account Lee's
financial position, operating history, products and sales trends and other
factors relating to Lee's business. Prior to the acquisition, neither Lee nor
UDI had any material relationship with the Company, any affiliates of the
Company, any director or officer of the Company or any associate of any such
director or officer.
Effective upon the closing of the acquisition, LRH amended its
credit agreement with the Bank to, among other things, include Lee as a
Qualifying Subsidiary (as defined) thereunder, to include Lee's eligible
accounts and eligible inventory as part of the permitted borrowing base, and to
include Lee's assets as collateral security for the obligations incurred under
the credit agreement, as amended. In addition, Lee guaranteed the obligations of
LRH under the credit agreement, as amended.
The description contained herein does not purport to be complete
and is qualified in its entirety by reference to the provisions of the Stock
Purchase Agreement and Amendment Two to Loan and Security Agreement, which are
attached as exhibits hereto.
Statements contained in this Current Report on Form 8-K that are
not purely historical are forward-looking statements and are being provided in
reliance upon the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements may be identified, without
limitation, by use of the words "expects," "anticipates,"
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"believes," "estimates," "intends" and similar expressions. All forward-looking
statements are made as of the date hereof and are based on current management
expectations and information available to the Company as of such date. The
Company assumes no obligation to update any forward-looking statement. It is
important to note that actual results could differ materially from historical
results or those contemplated in the forward-looking statements. Forward-looking
statements involve a number of risks and uncertainties and may include trend
information. Readers are cautioned not to place undue reliance on any such
forward-looking statements. For more information about the Company and risks
arising when investing in the Company, investors are directed to the Company's
most recent report on Form 10-KSB and most recent report on Form 10-QSB as
filed with the Securities and Exchange Commission.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
On May 17, 2000, TBM Holdings, Inc. (the "Company") advised
Richard A. Eisner & Company LLP ("Eisner") that the Company had determined not
to retain Eisner to act as its principal independent certified public accountant
to audit the Company's financial statements for the Company's fiscal year
ending December 30, 2000. This determination was recommended by the Company's
audit committee and approved by the Company's board of directors. Eisner has
acted as the Company's principal independent certified public accountant to
audit its financial statements as of June 28, 1998, December 31, 1998, and
January 1, 2000, and for the periods then ended. None of Eisner's reports on the
Company's financial statements during the period it has so acted contained an
adverse opinion or disclaimer of opinion, nor was such opinion modified as to
uncertainty, audit scope or accounting principles. The report dated March 24,
1999 on the audits of the financial statements for December 31, 1998 and June
28, 1998 each contained an explanatory paragraph regarding substantial doubt
existing about the entity's ability to continue as a going concern. The Company
did not have any disagreements with Eisner on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure which, if not resolved to Eisner's satisfaction, would have caused
Eisner to make reference to the subject matter of the disagreement in connection
with its reports. On May 17, 2000, the Company retained KPMG LLP, the
independent accountant for LRH, which was acquired by the Company on February
23, 2000, and Lee, which was acquired by LRH on May 16, 2000, to act as the
Company's principal accountant to audit the Company's financial statements
for the Company's fiscal year ending December 30, 2000.
Eisner has furnished to the Company a letter addressed to the
Securities and Exchange Commission stating that Eisner agrees with the
statements made herein as they pertain to Eisner. A copy of such letter, dated
May 23, 2000, is attached as Exhibit 16 to this Current Report on Form 8-K.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
As of the date of filing this Current Report on Form 8-K, it is
impracticable for the Company to provide the financial statements required by
Item 310(c) of Regulation S-B. In accordance with Item 7(a)(4) of Form 8-K, such
financial statements shall be filed by amendment to this Form 8-K no later than
July 31, 2000.
(b) Pro Forma Financial Information.
As of the date of filing this Current Report on Form 8-K, it is
impracticable for the Company to provide the pro forma financial information
required by Item 310(d) of Regulation S-B. In accordance with Item 7(b)(2) of
Form 8-K, such financial statements shall be filed by amendment to this Form 8-K
no later than July 31, 2000.
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
2 Stock Purchase Agreement, dated as of May 16, 2000, by and
among Long Reach Holdings, Inc., United Dominion Industries,
Inc. and Lee Engineering Company, Inc.(Pursuant to Item 601
(b)(2) of Regulation S-B, schedules and exhibits to the Stock
Purchase Agreement, listed in its Table of Contents, have been
omitted. Such schedules and exhibits shall be provided
supplementally to the Securities and Exchange Commission upon
request.)
10 Amendment Two to Loan and Security Agreement, dated as of May
16, 2000, between Long Reach Holdings, Inc. and Bank One,
Texas, N.A.
16 Letter re Change in Certifying Accountant.
99 Press Release dated May 18, 2000.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TBM HOLDINGS, INC.
By: /s/ William A. Schwartz
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William A. Schwartz
President
Dated: May 24, 2000
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Exhibit Index
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<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
2 Stock Purchase Agreement, dated as of May 16, 2000, by and
among Long Reach Holdings, Inc., United Dominion Industries,
Inc. and Lee Engineering Company, Inc.(Pursuant to Item 601
(b)(2) of Regulation S-B, schedules and exhibits to the Stock
Purchase Agreement, listed in its Table of Contents, have been
omitted. Such schedules and exhibits shall be provided
supplementally to the Securities and Exchange Commission upon
request.)
10 Amendment Two to Loan and Security Agreement, dated as of May
16, 2000, between Long Reach Holdings, Inc. and Bank One,
Texas, N.A.
16 Letter re Change in Certifying Accountant.
99 Press Release dated May 18, 2000.
</TABLE>
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================================================================================
STOCK PURCHASE AGREEMENT
for the Acquisition of
LEE ENGINEERING COMPANY, INC.
(Company)
by
LONG REACH HOLDINGS, INC.
(Buyer)
from UNITED DOMINION INDUSTRIES, INC.
(Seller)
May 16, 2000
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
1. PURCHASE AND SALE OF STOCK........................................................................1
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1.1 Purchase of Stock...............................................................1
1.2 Purchase Price..................................................................1
1.3 Adjustments to Purchase Price and Payment Terms.................................1
1.4 Allocation of Purchase Price....................................................3
2. CLOSING...........................................................................................3
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2.1 Time and Place of Closing.......................................................3
2.2 Seller's Performance at Closing.................................................3
2.3 Buyer's Performance at Closing..................................................4
3. SELLER'S REPRESENTATIONS AND WARRANTIES...........................................................5
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3.1 Title to Stock..................................................................5
3.2 Seller's and the Company's Authority to Execute and Deliver Agreement...........5
3.3 Organization and Corporate Power................................................6
3.4 Certificate of Incorporation and By-laws; Minute Books..........................6
3.5 Due Authorization; Consents.....................................................6
3.6 Capitalization..................................................................6
3.7 Financial Statements............................................................7
3.8 Real Property...................................................................7
3.9 Leases..........................................................................8
3.10 Personal Properties.............................................................8
3.11 Inventories.....................................................................8
3.12 Employment Arrangements.........................................................8
3.13 Material Contracts and Arrangements.............................................9
3.14 Customers; Suppliers...........................................................10
3.15 Accounts Receivable............................................................10
3.16 Permits, Licenses, etc.........................................................11
3.17 Intellectual Property..........................................................11
3.18 Litigation and Compliance with Laws............................................11
3.19 Extraordinary Events...........................................................12
3.20 Insurance Policies.............................................................13
3.21 Powers of Attorney; Bank Accounts..............................................13
3.22 Tax Returns....................................................................13
3.23 Liabilities....................................................................13
3.24 Books and Records..............................................................14
3.25 Conflicts of Interest..........................................................14
3.26 ERISA..........................................................................14
3.27 No Government Authorizations or Approvals Required.............................15
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
3.28 Broker's Fees..................................................................15
3.29 Environmental..................................................................15
3.30 Products Liability.............................................................16
3.31 Information Technology Systems; Year 2000 Compliance...........................17
3.32 Material Information...........................................................17
3.33 Definition of Seller's Knowledge...............................................17
4. BUYER'S REPRESENTATIONS AND WARRANTIES...........................................................18
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4.1 Organization and Corporate Power...............................................18
4.2 Due Authorization; Effect of Transaction.......................................18
4.3 No Government Authorizations or Approvals Required.............................18
4.4 Broker's Fees..................................................................18
4.5 Payment of Purchase Price......................................................18
4.6 Material Information...........................................................18
5. CONDITIONS TO OBLIGATIONS OF SELLER AND BUYER....................................................19
---------------------------------------------
5.1 Withdrawal by Seller...........................................................19
5.2 Withdrawal by Buyer............................................................19
5.3 Notice of Withdrawal...........................................................19
6. COVENANTS OF BUYER, SELLER AND THE COMPANY.......................................................20
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6.1 Access to Records and Properties Prior to the Closing Date.....................20
6.2 Operation of the Business of the Company.......................................20
6.3 Expenses.......................................................................22
6.4 Taxes..........................................................................23
6.5 Parties to be Reasonable; Termination..........................................23
6.6 Notice of Changes..............................................................23
6.7 Preservation of Business.......................................................23
6.8 Litigation.....................................................................23
6.9 No Sale........................................................................23
6.10 Financial Statements...........................................................24
6.11 Presto Dock Lift Product.......................................................24
6.12 Non-Competition................................................................24
6.13 Services of Brad Sparling......................................................25
6.14 401(k) Plan....................................................................25
6.15 Continued Medical Coverage.....................................................25
6.16 Dallas Office..................................................................26
6.17 Access to Properties After the Closing Date....................................26
7. SURVIVAL.........................................................................................27
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7.1 Limited Survival of Representations and Warranties.............................27
7.2 Other..........................................................................27
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
8. INDEMNIFICATION..................................................................................28
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8.1 Indemnification by Seller......................................................28
8.2 Indemnification by Buyer.......................................................29
8.3 Survival of Indemnification; Certain Limitations...............................29
8.4 Notice and Opportunity to Defend...............................................30
9. MISCELLANEOUS....................................................................................30
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9.1 Waiver and Amendment...........................................................30
9.2 Entire Agreement...............................................................30
9.3 Interpretation.................................................................30
9.4 Counterparts...................................................................31
9.5 Notices........................................................................31
9.6 Successors and Assigns.........................................................32
9.7 Governing Law..................................................................32
9.8 Severability...................................................................32
9.9 Publicity......................................................................32
9.10 Further Assurances.............................................................33
9.11 Arbitration....................................................................33
</TABLE>
SCHEDULES
1 Year-End Balance Sheet
3.3 Organization and Corporate Power
3.5 Due Authorization; Consents
3.6 Capitalization
3.7 Financial Statements
3.8 Real Property
3.9 Leases
3.10 Personal Property
3.12 Employment Arrangements
3.13 Material Contracts and Arrangements
3.14 Customers; Suppliers
3.15 Accounts Receivable
3.16 Permits, Licenses, etc.
3.17 Intellectual Property
3.18 Litigation and Compliance with Laws
3.19 Extraordinary Events
3.20 Insurance Policies
3.21 Powers of Attorney; Bank Accounts
3.22 Tax Returns
3.23 Liabilities
3.25 Conflicts of Interest
3.26 ERISA
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3.29 Environmental
3.30 Products Liability
3.31 Information Technology Systems; Year 2000 Compliance
6.13 Services of Brad Sparling
EXHIBITS
A: Form of Opinion of the Seller's Counsel
B: Manufacturing Agreement (Presto Dock Lift)
C: Form of Opinion of Buyer's Counsel
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of May 16, 2000 by
and among United Dominion Industries, Inc., a Delaware corporation ("Seller"),
Lee Engineering Company, Inc., a Rhode Island corporation (the "Company"), and
Long Reach Holdings, Inc., a Delaware corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, Seller owns 1,000 shares of Class A common stock, par value $1
per share, of the Company ("Stock"), constituting one hundred percent (100%) of
the issued and outstanding capital stock of the Company;
WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase
from Seller all of the shares of Stock, subject to the terms and conditions set
forth herein, for the purpose of acquiring the material handling and ergonomic
work positioning equipment manufacturing business conducted by the Company (the
"Business");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Seller, the Company and
Buyer, intending to be legally bound, hereby agree as follows:
1. PURCHASE AND SALE OF STOCK.
1.1 Purchase of Stock. Subject to and in reliance upon the
representations, warranties and agreements herein set forth, and subject to the
terms and conditions herein contained, on the Closing Date (as defined in
Section 2), Seller shall convey, sell, assign, transfer and deliver to Buyer (or
at Buyer's election, a wholly-owned subsidiary of Buyer), and Buyer (or such
subsidiary) shall purchase all of the Stock. Seller shall transfer the Stock
free and clear of any claims, pledges, contracts, title retention agreements,
rights, options, liens, encumbrances, agreements, and charges, taxes or
liabilities related to the Stock (each, a "Claim" and together, "Claims").
1.2 Purchase Price. Buyer shall pay to Seller an amount equal to
Seven Million Three Hundred Six Thousand Dollars ($7,306,000.00) as the
aggregate purchase price for the Stock (the "Purchase Price"), subject to
adjustment as set forth in Section 1.3.
1.3 Adjustments to Purchase Price and Payment Terms.
(a) Year-End Balance Sheet. The Seller has prepared a
year-end balance sheet of the Company as of December 31, 1999 ("Year-End Balance
Sheet") attached hereto as
<PAGE> 7
Schedule 1 which Buyer has reviewed, approved and accepted. The Year-End Balance
Sheet shows a Tangible Net Worth of the Company (the "Tangible Net Worth") as of
December 31, 1999 of Three Million, Two Hundred Fifty-Seven Thousand Dollars
($3,257,000).
(b) Preliminary Balance Sheet. Seller shall prepare or cause
to be prepared and delivered to Buyer a balance sheet of the Company as of the
close of business on March 31, 2000 (the "Preliminary Balance Sheet"). The
Preliminary Balance Sheet shall be prepared from the books and records of the
Company on a basis consistent with the Year-End Balance Sheet. Purchaser's
acceptance of the Preliminary Balance Sheet at Closing shall be conclusive
evidence of its agreement with the Preliminary Balance Sheet and shall be
binding on the parties.
(c) Payment at Closing. At Closing, if the Tangible Net
Worth of the Company reflected on the Preliminary Balance Sheet is greater than
$3,257,000, the Purchase Price to be paid at Closing shall be increased dollar
for dollar by such difference. At Closing, if the Tangible Net Worth of the
Company reflected on the Preliminary Balance Sheet is lower than $3,257,000, the
Purchase Price to be paid at Closing shall be reduced dollar for dollar by such
difference. Buyer shall pay such adjusted Purchase Price to Seller at the
Closing by wire transfer of funds to the domestic bank account designated by
Seller in writing at least three (3) business days prior to the Closing Date,
subject to any required tax withholdings.
(d) Closing Balance Sheet. Within fifteen (15) days after
the Closing, Seller shall prepare or cause to be prepared and delivered to Buyer
a balance sheet of the Company as of the Closing Date (the "Closing Balance
Sheet") on a basis consistent with the preparation of the Preliminary Balance
Sheet. The Closing Balance Sheet shall be derived by adjusting the Preliminary
Balance Sheet for any changes in the assets and liabilities of the Company
during the period from the date of the Preliminary Balance Sheet to the Closing
Date (the "Interim Period") in accordance with the Company's past accounting
practices consistently applied.
(e) Buyer's Response; Physical Inventory; Seller's Reply.
Buyer shall conduct a physical inventory as of the Closing Date at its expense,
and Seller shall have the right to observe such physical inventory. Buyer shall
notify Seller in writing within sixty (60) days after receipt of the Closing
Balance Sheet if Buyer disputes the accuracy of the Closing Balance Sheet and,
if so, what corrections or adjustments to the Closing Balance Sheet Buyer
proposes ("Buyer's Letter"). Buyer's basis for disputing the Closing Balance
Sheet shall be limited to the results of the operations of the Business during
the Interim Period and the results of the physical inventory as of the Closing
Date. Within thirty (30) days after receipt of Buyer's Letter, Seller shall
notify Buyer whether or not it accepts the proposed adjustments and which, if
any, it rejects ("Seller's Letter").
(f) Disputes. If any dispute regarding the Closing Date
Balance sheet arises, Buyer and Seller will attempt in good faith to resolve
such dispute within thirty (30) days after receipt by Buyer of Seller's Letter.
If no agreement can be reached within such time period, the parties shall submit
the issues in dispute to binding arbitration pursuant to Section 9.11. The
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Closing Balance Sheet, with those modifications determined by arbitration to be
appropriate, shall be the final Closing Balance Sheet, shall be binding on the
parties hereto and shall not be subject to judicial review. The parties shall
bear their own expenses in connection with the post-closing adjustments and in
accordance with Section 9.11.
(g) Post-Closing Adjustment and Payment. If the Tangible Net
Worth of the Company reflected on the final Closing Balance Sheet is greater
than the Tangible Net Worth of the Company reflected on the Preliminary Balance
Sheet, Buyer shall pay Seller in immediately available funds such difference. If
the Tangible Net Worth of the Company reflected on the final Closing Balance
Sheet is less than the Tangible Net Worth of the Company reflected on the
Preliminary Balance Sheet, Seller shall pay Buyer in immediately available funds
such difference. Such payments shall be made within two (2) business days after
the Closing Date Balance Sheet is finalized as provided in Sections 1.3(e) and
1.3(f).
1.4 Allocation of Purchase Price. As soon as possible after the
completion of all payments and settlements described in Section 1.3(c) and
1.3(g), Seller shall propose, and Seller and Buyer shall use good faith efforts
to agree on, an allocation of the Purchase Price among the Stock and the
non-competition agreement in amounts according to Section 1060 of the Internal
Revenue Code of 1986, as amended. If Seller and Buyer cannot agree on an
allocation, each shall make its own allocation to the Internal Revenue Service
without regard to the allocation of the other parties.
2. CLOSING.
2.1 Time and Place of Closing. The closing of the purchase and sale
of the Stock shall be effected on or before May 16, 2000, at 10:00 a.m., local
time, at the offices of Levett Rockwood P.C., 33 Riverside Avenue, Westport,
Connecticut 06880, counsel to Buyer, or on such other day or at such other hour
or place as Buyer and Seller shall hereafter mutually agree. Such closing shall
herein be referred to as the "Closing," and the date as of which the Closing
occurs shall herein be referred to as the "Closing Date". The Closing shall be
effective as of the close of business on the Closing Date.
2.2 Seller's Performance at Closing. At the Closing hereunder,
Seller shall deliver (or cause to be delivered) to Buyer:
(a) a certificate or certificates evidencing ownership of one
hundred percent (100%) of the issued and outstanding shares of the Company's
capital stock, with stock powers duly endorsed sufficient to transfer to Buyer
all right, title and interest in and to the Stock to be transferred, sold,
assigned and conveyed by the Seller to Buyer pursuant to the provisions of this
Agreement, free and clear of any and all Claims;
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(b) evidence of good standing and tax clearance (as to income, sales
and use and employment filings) for the Company from the Secretary of State of
Rhode Island and each state listed on Schedule 3.3, each issued within fifteen
(15) days prior to the Closing Date;
(c) a certified copy of resolutions of the Seller's board of
directors or executive committee acting pursuant to authority of the board
authorizing the execution of this Agreement on behalf of Seller and the Company,
the consummation of the transactions described herein, and such other consents
or approvals which counsel for Buyer may reasonably request;
(d) the opinion of in-house counsel for Seller, dated as of the
Closing Date, addressed to Buyer, in the form set forth on Exhibit A, and the
opinion of Smith Helms Mulliss & Moore, L.L.P. regarding the enforceability of
this Agreement dated as of the Closing Date, addressed to Buyer;
(e) a copy of the Company's certificate of incorporation certified
by the Secretary of the State of Rhode Island, together with a copy of the
Company's By-laws, all as amended to date, as certified by the Company;
(f) the Manufacturing Agreement between the Company and the Seller
in substantially the form attached hereto as Exhibit B duly executed by Seller;
(g) a Certificate from the Company that it is not a "United States
Real Property Holding Company" as such term is defined in Section 897(c)(2) of
the Internal Revenue Code, during the applicable period specified in Section
897(c)(1)(A)(ii) of the Internal Revenue Code;.
(h) the resignations of the existing officers of the Company;
(i) all of the books, data, documents, instruments and other records
relating to the Business except for tax records for the period of the Seller's
ownership of the Company's Stock which shall remain with Seller provided copies
are furnished to Buyer and any duplicate records of the Company located at
Seller's corporate headquarters in Charlotte; and
(j) such other documents, instrument or certificates as Buyer or its
counsel shall reasonably request in order to consummate the transactions
contemplated herein.
2.3 Buyer's Performance at Closing. At the Closing hereunder, Buyer
shall deliver (or cause to be delivered) the following:
(a) the amount of $7,306,000 as adjusted pursuant to Section 1.3 by
wire transfer to the bank account designated by Seller;
(b) the Manufacturing Agreement duly executed by the Company;
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(c) a certified copy of resolutions of Buyer's board of directors
authorizing the execution and delivery of this Agreement and the consummation of
the transactions described herein;
(d) the opinion of counsel for Buyer, dated as of the Closing Date,
addressed to Seller in the form set forth on Exhibit C;
(e) a copy of Buyer's certificate of incorporation certified by the
Secretary of the State of Delaware, together with a copy of the Buyer's By-laws,
all as amended to date, as certified by the President and Secretary of the
Company; and
(f) such other documents, instruments and certificates as Seller or
its counsel shall reasonably request in order to consummate the transactions
contemplated herein.
3. SELLER'S REPRESENTATIONS AND WARRANTIES.
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Seller and the Company, jointly and
severally, represent, warrant, covenant and agree with Buyer that as of the date
hereof and at all times through the Closing Date:
3.1 Title to Stock. Seller owns all of the Stock beneficially and of
record, free and clear of all Claims. There is no restriction affecting the
ability of the Seller to transfer the legal and beneficial title and ownership
of the Stock to Buyer and, upon delivery thereof to Buyer pursuant to the terms
of this Agreement, Buyer will acquire record and beneficial title to the Stock,
free and clear of all Claims. There are no tax judgments, liens or other claims
or encumbrances against the Company's assets or against the Seller's assets
which could become a Claim against the Stock. Seller has not at any time in any
manner transferred to any person or entity any rights in or to the Stock or any
portion thereof, including without limitation rights to dividends or
distributions.
3.2 Seller's and the Company's Authority to Execute and Deliver
Agreement. Each of the Seller and the Company has the full legal right and power
and all authority required by law to enter into this Agreement and to perform
its obligations hereunder. Each of the Seller and the Company has duly executed
and delivered this Agreement and this Agreement is the legal, valid and binding
obligation of the Seller and the Company enforceable in accordance with its
terms, subject, however, to applicable bankruptcy, reorganization, fraudulent
conveyance, insolvency, moratorium, and other similar laws relating to or
affecting the enforcement of rights of creditors, now or hereinafter in effect,
and to equitable principals which may limit the availability of particular
remedies.
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3.3 Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Rhode Island, and is duly qualified to do business in each jurisdiction
in which such qualification is required by law. Schedule 3.3 contains a complete
and accurate list of all jurisdictions in which the Company is qualified to do
business. The Company has full corporate power and authority to own and sell its
assets and to carry on the business in which it is engaged. Except as set forth
or described in Schedule 3.3, the Company owns or leases all of the assets which
are utilized to carry on its business. The Company does not own or control any
other entity necessary for carrying on such business and the Company does not
own any subsidiaries.
3.4 Certificate of Incorporation and By-laws; Minute Books. The
Certificate of Incorporation and By-laws of the Company and all amendments
thereto to date have been delivered to Buyer by Seller, and are complete and
correct as of the date hereof. The Company is not in default in any respect in
the performance, observance or fulfillment of any of the terms or conditions of
its Certificate of Incorporation or By-laws. The minute books of the Company
contain, and will contain at the Closing Date, accurate and complete minutes in
all material respects of all meetings and resolutions of its directors and
shareholders during the Seller's ownership of the Stock. During the Seller's
ownership of the Company's Stock, all resolutions of the Company were duly
passed and all meetings of the Company were duly held and the stock certificate
book and register are or at the Closing Date will be complete and accurate in
all material respects and shall reflect all transactions contemplated by this
Agreement.
3.5 Due Authorization; Consents. Except as disclosed on Schedule
3.5, no agreement, instrument or understanding, nor any judgment, writ,
injunction, decree, order, law, rule or regulation to which either Seller or the
Company is a party or by which Seller, the Company or any of their properties is
bound or affected, has been or will be violated or breached by the execution and
delivery of this Agreement or the performance or satisfaction of any agreement
or condition herein contained upon its part to be performed or satisfied. Except
as disclosed in Schedule 3.5, no consent or other authorization is required for
such execution, delivery, performance and satisfaction (whether already obtained
or to be obtained), and to the extent such consents or authorizations have not
been obtained as of the date of this Agreement, Seller shall have obtained all
such consents or authorizations on or before Closing Date.
3.6 Capitalization. The Company's authorized, issued and outstanding
capital consists of the shares set forth in Schedule 3.6. Seller has good and
valid title to one hundred percent (100%) of the outstanding shares of Stock,
which shares are duly authorized, validly issued, fully paid, non-assessable and
free and clear of all Claims. The Company has no, and as of the Closing Date
will not have any, obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interest therein. There
are, and as of the Closing Date, there will be, no shares reserved for issuance.
There are, and as of the Closing Date, there will be, no outstanding
subscriptions, options, warrants, rights, calls or convertible securities, stock
appreciation rights (phantom or otherwise), joint venture, partnership or other
commitments of any nature relating to shares of the capital stock of the
Company. As of the date
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<PAGE> 12
hereof, there is no, and as of the Closing Date there will be no, liability or
indebtedness for dividends or other distributions declared or accumulated but
unpaid with respect to any of such shares of Stock.
3.7 Financial Statements. Seller has delivered to Buyer the
Company's unaudited balance sheets and the related statements of income, for the
fiscal years ended December 31, 1997, 1998 and 1999 (collectively, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with the Company's past practices. The Financial Statements for the
fiscal years ended December 31, 1997 and December 31, 1998, in the opinion of
the Seller and the Company's management, fairly and accurately present the
assets, liabilities, results of operations and equity of the Company at such
dates and for such periods thereof. The Financial Statements for the fiscal year
ended December 31, 1999 fairly and accurately present the assets, liabilities,
results of operations and equity of the Company at such date and for such period
thereof. There has not been any change since the date of the most recent
Financial Statement which has had a material adverse effect on the results of
the operations of the Company, and, to Seller's knowledge, no fact or condition
exists which, in the reasonable judgment of the Seller's and the Company's
management, would cause any material change in the operations or financial
condition of the Company. Schedule 3.7 sets forth all contingent liabilities or
losses, in either case, known to Seller, relating to the Business not
specifically described in the Financial Statements and which are reasonably
anticipated to exceed $5,000 individually or $50,000 in the aggregate other than
contingent liabilities to be incurred in connection with executory contracts.
Seller has disclosed to Buyer all relevant material facts relating to the
preparation of the Financial Statements, including the basis of accounting for
affiliated transactions. During the Seller's ownership of the Stock, the Company
has maintained its books and records in good order, accurately reflected all
transactions to be recorded thereon and in accordance with the Company's past
practices. Such books and records are true and complete and readily available
for the last three fiscal years and the current fiscal year. Since the date of
the most recent Financial Statements, the Company has not entered into any
material transaction, incurred any material liability except in connection with
the transactions described herein or in the ordinary course of business or as
set forth on Schedule 3.7.
3.8 Real Property. The Company has not owned any real property
during Seller's ownership of the Stock. Schedule 3.8 contains a description of
all real property which is or has been used by the Company during Seller's
ownership of the Stock, and a list of all material contracts, agreements,
concessions, leases, and utilities, relating to or affecting such real property
or any interests therein used by the Company, together with all amendments and
supplements thereto and modifications thereof (the "Real Property Agreements").
Seller has delivered to Buyer true and complete copies of the Real Property
Agreements. All of the Real Property Agreements are in full force and effect,
and there are no material defaults thereunder. The Company does not have any fee
interest, leasehold or other interest in real property except as reflected on
Schedule 3.8 hereto. The buildings, plants, improvements and structures located
on the premises described in Schedule 3.8 and the present use thereof materially
comply with all
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<PAGE> 13
zoning laws, ordinances and regulations of governmental authorities having
jurisdiction thereof. The Company has all easements, rights of ingress and
egress, utilities, and outside service arrangements necessary for the conduct of
the Business. No portion of any real property leased by the Company or occupied
by and used by the Company has been condemned, requisitioned or otherwise taken
or claimed by any public authority or private person, and Seller has no
knowledge of any threatened condemnation, requisition or taking.
3.9 Leases. Schedule 3.9 sets forth a complete and accurate list of
each lease to which the Company is a party (whether as lessor or lessee), and
includes the name of each current lessor and lessee, and the dates of such lease
and any amendment thereto. Except as set forth in Schedule 3.9, all leases set
forth in Schedule 3.9 are in full force and effect and are enforceable by the
Company in accordance with their terms. There are no payment defaults or
arrearages and no other material defaults by the Company, or any material
default or arrearages by any other party to such leases, in the performance
required thereunder. No consent is required and none of the rights of the
Company under any such leasehold or other interest in the property will be
impaired by the consummation of the transactions contemplated by this Agreement
except as set forth on Schedule 3.9. The transfer of ownership of the Stock
pursuant to this Agreement will not constitute a default under any lease, except
as set forth in Schedule 3.9.
3.10 Personal Properties. Except as set forth in Schedule 3.10, the
Company owns and has good and valid title to all of the tangible and intangible
personal properties, other than leaseholds referred to in Section 3.9, reflected
upon the most recent Financial Statements or otherwise used by the Company in
the Business if not so reflected, free and clear of all mortgages, liens,
encumbrances, equities, claims and obligations to other persons, of whatever
kind or character. Except as set forth on Schedule 3.10, all such personal
properties are in operating condition, normal wear and tear excepted.
3.11 Inventories. The inventories of the Company acquired after
December 31, 1999, consist of items of a quality and quantity usable and
saleable in the normal course of its business, and the book values at which such
inventories are carried on the Company's books and records reflect the inventory
valuation policy consistently applied by the Company.
3.12 Employment Arrangements. Except as set forth in Schedule 3.12,
the Company has no obligation, contingent or otherwise, under any employment
agreement, collective bargaining or other labor agreement, any agreement
containing severance or termination pay arrangements, deferred compensation
agreement, retainer or consulting arrangements, bonus or profit-sharing plan,
stock option or purchase plan or other employee contract or non-terminable
(whether with or without penalty) arrangements, group life, health, medical,
hospitalization or other insurance plan or program or other employee or fringe
benefit plan, including vacation, sick leave or disability plans or programs.
During the Seller's ownership of the Stock, the Company has maintained full and
complete records regarding its employees, their compensation,
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<PAGE> 14
benefits, length of service and performance, all of which are located at the
Company's principal headquarters. Neither the Company nor any of the employees
of the Company, at any time during the past three years have been subject to,
involved in or, to the knowledge of the Seller, threatened with any union
elections, petitions therefor or other organizational activities other than
those set forth in Schedule 3.12. Except as disclosed on Schedule 3.12 hereto,
the Company does not have a contract or arrangement with a labor union or other
collective bargaining organization, and, to the knowledge of the Seller, is not
involved, directly or indirectly, in any labor dispute, negotiation, pending
grievance or arbitration, whether with individual present or former employees,
agents or representatives, or arising under a collective bargaining agreement,
or unfair labor practice charge arising under the National Labor Relations Act,
or labor or employment related lawsuit, or any charge pending before any
federal, state or local fair employment practice agency or organization, or any
threatened claim involving any of the foregoing, and for the last three years,
there has not been any general or facility-wide strike, work stoppage, or other
labor disturbance, whether by union or non-union employees, relating to the
employees of the Company.
3.13 Material Contracts and Arrangements.
(a) Except as set forth in Schedule 3.13, the Company does not have
any material contract or agreement, whether oral or written, including, without
limiting the generality of the foregoing, any (i) contract or agreement for the
purchase or sale of inventory in excess of $25,000 in any one instance; (ii)
contract or agreement for the purchase or sale of supplies, services or other
items in excess of $25,000 in any one instance; (iii) contract or agreement for
the purchase, sale or lease of any equipment providing for total payments in
excess of $50,000 in any one instance; (iv) indenture, mortgage, note, letter of
credit or other instrument relating to the borrowing of money; (v) contract or
agreement that would limit the Company from entering any lines of business or
any geographical area; (vi) contract or agreement with independent distributors
or sales representatives or similar agreements; or (vii) other contract or
agreement not made in the ordinary course of business. True, correct and
complete copies of each contract listed on Schedule 3.13 have been previously
made available to Buyer. Each of the material contracts set forth in Schedule
3.13 calling for the sale of inventory or performance of services can be
satisfied or performed by the Company. Each of such contracts is in full force
and effect, and, to the knowledge of the Seller, there does not exist any actual
condition or event which, after notice or lapse of time or both, would
constitute a default by the Company or by the other party, to any written or, to
Seller's knowledge, oral contract, agreement, lease, license, commitment,
instrument or obligation. The Company has not received notice of the termination
of any such contract prior to the expiration of the scheduled term thereof and
has no knowledge of the intent of a party to any such contract to do the same.
Except as disclosed on Schedule 3.13 hereto, neither the Company nor the Seller
has entered into any enforceable written or, to Seller's knowledge, oral
agreement containing any prohibition or restriction of competition or
solicitation of customers with any person, corporation, partnership, firm,
association or business organization, entity or enterprise which is now in
effect and would affect Buyer's conduct of the Business. Except as set forth in
Schedule 3.13, no written or, to Seller's knowledge, oral
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<PAGE> 15
contract or agreement to which Seller or the Company is a party or by which
Seller or the Company is bound will become void or otherwise of no effect upon a
sale of the Stock, nor, except as set forth in Schedule 3.13, is any such
contract or agreement terminable at the option of the other party or parties
thereto upon a sale of the Stock, nor is any such contract or agreement, except
as set forth in Schedule 3.13, terminable at the option of the other party or
parties thereto upon prior notice of ninety (90) days or less.
(b) Seller has made available to Buyer true and complete copies of
the following described documents, including all amendments and supplements
thereto and modifications thereof:
(i) Each inspection report, inquiry, demand or request for
information (and each response thereto) received by the Company (other
than those of general application or routinely received within the
ordinary course of business) from any governmental body or
administrative agency for the last three fiscal years and during the
current fiscal year, and each statement, report or other document (other
than those filed on a periodic basis in the ordinary course of business)
filed during the last three fiscal years and the current fiscal year, by
the Company with any federal, state or local governmental body or
administrative agency (including, without limitation, environmental
compliance agencies, the Securities and Exchange Commission, Federal
Trade Commission, Department of Justice, Department of Labor, and
National Labor Relations Board); and
(ii) Responses of attorneys to written inquiries from
Seller's auditors regarding the Company during Seller's ownership of the
Stock.
(iii) Each market survey, management study, engineering
report, real estate appraisal or other special report or study
concerning the Company submitted to the Seller during the last three
fiscal years or the current fiscal year, by any independent business,
marketing, engineering or other consultant.
3.14 Customers; Suppliers. Except as set forth on Schedule 3.14
hereto, since January 1, 2000, Seller has not received notice of any material
change in the relationship or course of dealing between the Company and any of
its suppliers or customers. Listed on Schedule 3.14 are the ten (10) largest
customers and ten (10) largest suppliers (by dollar volume) of the Company for
the last fiscal year.
3.15 Accounts Receivable. All customer and trade notes, fees and
accounts receivable owned by the Company resulted from bona fide transactions in
the ordinary course of business, are not subject to any defense, and to the
Seller's knowledge are collectible (subject to any reserves stated in the
Financial Statements). Since December 31, 1999, there have not been any
writeoffs as uncollectible of any accounts receivable except for writeoffs in
the ordinary course of business and consistent with past practice. Any writeoffs
greater than $5,000 for any single
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<PAGE> 16
customer which occurred after December 31, 1999 and on or before the date hereof
are set forth on Schedule 3.15.
3.16 Permits, Licenses, etc. Except as set forth on Schedule 3.16,
the Company possesses and has the right to use, and at the Closing will possess
and have the right to use, all governmental and private permits, licenses,
consents, waivers, and other authorizations necessary for the operation or
existence of the Company or the Business as now conducted (the "Permits")
without any conflict or alleged conflict or infringement with the rights of
others and subject to no Claim. All such Permits are listed on Schedule 3.16
hereto. Except as set forth on Schedule 3.16, each Permit is in full force and
effect and Seller has no knowledge that any Permit will be terminated, adversely
affected, required to be transferred or otherwise subject to governmental
approval by the transactions contemplated hereby.
3.17 Intellectual Property. Schedule 3.17: (a) lists all trademarks,
service marks, trade names, copyrights, patents, trade secrets, licenses and
other proprietary know-how, inventions or designs, which are owned by the
Company or used by the Company in its business ("Intellectual Property"); (b)
specifies the jurisdictions in or by which any of such Intellectual Property
items have been registered, filed or issued; and (c) contains a description of
all contracts or licenses pursuant to which the Company has authorized any other
person(s) to use such Intellectual Property and any contract, license or
arrangement pursuant to which the Company may use any Intellectual Property it
does not own. Except as set forth in Schedule 3.17, the Company is the sole and
exclusive owner of the Intellectual Property set forth therein and has the sole
and exclusive right to use such Intellectual Property, and there are no, and at
the Closing there will be no, patents, copyrights, trademarks, tradenames,
processes, designs, formulae, inventions, ideas, or concepts which the Company
is prohibited from using without royalty because of the ownership of any such
patents, copyrights, trademarks, tradenames, processes, designs, formulae,
inventions, ideas, or concepts being vested in third parties. In addition, no
written claim or demand of any other person, firm or corporation exists
pertaining to the aforesaid, no proceeding has been instituted, is pending or,
to the knowledge of Seller, threatened which challenges the Company's rights
with respect thereto. No written claims, notices, or demands have been received
by Seller or the Company concerning (i) infringement of any patent, copyright,
or trademark, (ii) any unauthorized use of any name, process, formula,
invention, idea or concept, or (iii) any asserted unfair competition, and to the
knowledge of Seller none of the trademarks, trade names, service marks, patents
or copyrights listed in Schedule 3.17 is subject to any outstanding order,
decree, judgment or stipulation and, none infringes upon or otherwise violates
the rights of others or is being infringed by others.
3.18 Litigation and Compliance with Laws. Except as listed on
Schedule 3.18, there are no suits, grievances, complaints, charges, proceedings,
claims, or investigations now pending by or against, or to the knowledge of
Seller, threatened by or against Seller or the Company or any other officer or
director thereof, at law or in equity, including, without limitation, any
voluntary or involuntary proceedings under any applicable state or federal
bankruptcy laws, or
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before or by any governmental department, office, commission, board, agency,
referee, instrumentality or arbitrator (whether domestic or foreign), which
involves a claim or demand for any judgment, decree, or liability, action or
injunction against an action, whether or not fully covered by insurance, in
connection with the business, affairs, properties or assets of the Company. The
Company is and for the last three years has been in compliance in all material
respects with all applicable laws, governmental rules and regulations applicable
to its business, affairs, properties or assets. There is no outstanding order,
writ, injunction or decree of any court, administrative agency or governmental
body or arbitration tribunal against or, to Seller's knowledge, affecting the
Company or the Company's liabilities, properties, financial condition, or
results of operations. Neither the Company, nor any other officer or director of
the Company, is charged or, to the knowledge of the Seller, threatened with or
is under investigation with respect to, any violation of any provision of any
Federal, state, municipal or other law or administrative rule or regulation
relating to any aspect of the Company's business, affairs, properties or assets
or in default with respect to any judgment, order, writ, injunction, decree,
demand or assessment issued by any court or any Federal, state, municipal or
other governmental agency, board, commission, bureau, instrumentality or
department relating to any aspect of the Company's business, affairs, properties
or assets. Except as listed on Schedule 3.18, the Company has not received, nor
is the Company about to receive, to the knowledge of Seller, any notice, order
or the like from any governmental authority, requiring or recommending the
Company make any change in the operation, method of operation, buildings,
equipment, employees, or any other aspect of the Company.
3.19 Extraordinary Events. Since January 1, 2000, the Company has
conducted its business in the ordinary course of business, and, except as
disclosed in Schedule 3.19 and except for any asset valued individually at
$5,000 or less, has not disposed of any material assets, except inventory held
for sale and sold or to be sold in the ordinary course of business. Since
January 1, 2000, there has not been, except as disclosed in Schedule 3.19, (i)
any adverse change in the condition (financial or otherwise) of the Company, its
properties, liabilities, or results of operations, except changes in the
ordinary course of business which have not in any one case or in the aggregate
been material; (ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties, liabilities, financial
condition or results of operations of the Company; (iii) any change in the
accounting methods or practices, other than as required by law, used to
determine the financial condition of the Company and the results of its
operations, including without limitation, any change in depreciation or
amortization policies or rates theretofore adopted; (iv) any sale, lease,
abandonment or other disposition by the Company of any interest in real property
used in or held for use in the Company, or, other than in the ordinary course of
business, of any machinery, equipment or other operating property used in or
held for use in the Company, or any sale, assignment, transfer, license, or
other disposition by the Company of any patent, trademark, trade name, brand
name, service mark, copyright (or pending application for any patent, trademark
or copyright), invention, process, know-how, formula, pattern, design, trade
secret or interest thereunder or other intangible asset used in or related to
the Company; or (v) any other occurrence, event or condition which has had a
material
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adverse effect on the liabilities, properties, financial condition or results of
operation of the Company.
3.20 Insurance Policies. The Company is self-insured through Seller,
and maintains no outside insurance policies other than those set forth on
Schedule 3.20. The Seller currently maintains sufficient reserves to insure the
Company's business, properties, assets and risks.
3.21 Powers of Attorney; Bank Accounts. Except as set forth in
Schedule 3.21, the Company has no power of attorney outstanding. Schedule 3.21
sets forth the names and addresses of all banks, trust companies, savings and
loan associations or similar financial institutions at which the Company has an
account, lock box or safe deposit box, the account name and account number and
the names of all persons authorized to draw thereon, have access thereto or in
the case of a box, the custodian of the keys to such box.
3.22 Tax Returns. The Company has paid or will pay all taxes
anticipated by the Company which might lawfully be due, to the United States or
any foreign taxing authority or any state, county, city or agency of any of the
foregoing and all assessments received by the Company for all periods ended on
or prior to the Closing Date. For purposes of this Agreement, "Taxes," means
taxes, governmental charges or assessments, duties, penalties, interest and
fines due or which might lawfully be due, to the United States or any foreign
taxing authority or any state, county, city or agency of any of the foregoing.
As of the date hereof, no Taxes payable by the Company are past due. Except as
provided on Schedule 3.22, the Company has not signed any extension agreement
with the Internal Revenue Service or any other government entity or taxing
authority or given a waiver of a statute of limitations with respect to the
payment of Taxes. The Company has filed, will file or will obtain extensions of
time to file all income tax returns and all state, local and foreign, franchise,
sales, use, excise or real property tax returns which are required to be filed
on or before the Closing Date or which relate to Taxes with respect to any
period ended on or before the Closing Date. Except as described in Schedule
3.22, the Federal income tax returns of the Company have not been examined by
the Internal Revenue Service or any state governmental body during the last
three fiscal years or during the current fiscal year. Except as described in
Schedule 3.22, there are no suits, actions, claims, investigations, inquiries or
proceedings now pending or, to the knowledge of Seller, threatened against the
Company. There are no liens or security interests on any of the assets of the
Company that arose in connection with any failure (or alleged failure) to pay
any Taxes. The Company has, and at the Closing will have, paid all unemployment
and disability contributions due and owing, and will have accrued for any
amounts not yet due and owing, in respect of services rendered by employees of
the Company.
3.23 Liabilities. Except as disclosed on Schedule 3.23, to the
knowledge of Seller, the Company does not have any debts or liabilities of any
nature which have had a material adverse effect on the Business, whether accrued
or not, absolute or contingent, due or to become due or otherwise, and there is
no incident or event of which Seller has had notice of any claims for any
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<PAGE> 19
debts or liabilities other than (i) those set forth on its most recent Financial
Statements; and (ii) liabilities subsequently incurred in the ordinary course of
business. No event has occurred which constitutes, or which with the giving of
notice or the passage of time would constitute, a material breach or default in
respect of the terms or conditions of any such liability and no waiver or
forbearance has been granted by any holder of any such liability with respect
thereto.
3.24 Books and Records. During the Seller's ownership of the Stock,
the Company has at all times kept full and complete financial books and records
and has recorded all transactions which should be set forth and reflected, all
in accordance with past practices of the Company consistently applied, and the
Company will continue to do so, without variation in method or procedure until
and including the Closing Date.
3.25 Conflicts of Interest. Except as set forth on Schedule 3.25, no
officer, director or employee of the Company or the Seller, or family member of
any of the foregoing, is presently a party to any transaction with the Company
(other than for services as officers, directors and employees), including,
without limitation, any loan or guarantee, or any contract, agreement or other
arrangement providing for the furnishing of services or goods to or by, or
otherwise requiring payments (directly, indirectly or contingently) to or from,
any such officer, director, employee, family member of any of the foregoing, or
any corporation, partnership, trust or other entity (other than Seller, its
parent corporation, subsidiaries and affiliates) in which any such officer,
director, employee or family member has an interest or is an officer, director,
trustee or partner. Neither the Company nor, to the knowledge of Seller, any
officer, director, employee, or family member of the foregoing, owns, directly
or indirectly, any interest in, or is a director, officer or employee of, any
corporation, partnership, firm, association or business organization, entity or
enterprise which is a competitor, supplier or customer of the Company, nor is in
any way associated with or involved in a business similar to that conducted by
the Company, provided that ownership of not more than five percent (5%) of the
capital stock of any corporation listed on a national securities exchange shall
not be deemed to be ownership of an interest in such corporation for purposes of
this Section 3.25. Neither the Company, nor to the knowledge of Seller, any
officer, director, employee or family member of any of the foregoing, owns, or
has any claim, right or interest in or to, directly or indirectly, in whole or
in part, any property, asset or right, tangible or intangible (including without
limitation, any patent, trademark, tradename, brand name, copyright, pending
application for any patent, trademark or copyright, any invention, process,
know-how, formula, pattern, design or trade secret), which the Company is
presently using.
3.26 ERISA. During Seller's ownership of the Stock, the Company has
complied and currently is in compliance in all respects with the applicable
provisions of the Employee Retirement Security Act of 1974, as amended
("ERISA"), the Internal Revenue Code of 1986, as amended (the "Code") and all
other applicable laws with respect to each Employee Benefit Plan (as defined
below) (and related trust, insurance contract, or fund) or any material fringe
benefit plan or program which is maintained or has been established within the
past three (3) years by
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<PAGE> 20
the Company or to which the Company contributes or is required to contribute.
Schedule 3.26 lists all Welfare Plans (as defined below) and Pension Plans (as
defined below) of the Company currently in effect. The Company does not now nor
during Seller's ownership of the Stock has the Company ever sponsored or
maintained (i) any Pension Plan which is subject to Title IV of ERISA or which
is a "defined benefit" plan as defined in Section 3(35) of ERISA nor (ii) any
Pension Plan which must report to the Pension Benefit Guaranty Corporation
("PBGC"). All documents, reports, descriptions and statements with respect to
any Pension Plan or Welfare Plan which are required to be filed with any
government agency have been timely filed or have been timely distributed to the
appropriate persons, except where such failure to file will not result in a
penalty. Each Pension Plan and related trust is qualified within the meaning of
Sections 401(a) and 501(a) of the Code, respectively. With respect to each
Pension Plan, the Company has obtained a favorable determination letter as to
qualification under Section 401(a) of the Code, and copies have been forwarded
to Buyer. With respect to any Pension Plan or any Welfare Plan, neither the
Company nor any fiduciary of any such plan (as described in Section 3(21)(A) of
ERISA) has been engaged in any transaction in violation of Section 404 of ERISA,
Section 406 of ERISA (for which no exemption exists under Section 408 of ERISA),
or Section 4975(c)(1) of the Code (for which no exemption exists under Section
4975(c)(2) or (d) of the Code) which would subject the Company or any such
fiduciary to any tax, penalty or liability under Section 409 of ERISA or Section
4975 of the Code. The Company has timely made all contributions required under
the terms of any Pension Plan, any Welfare Plan and any related agreement. The
Company is in compliance in all material respects with the terms of its Pension
Plans and Welfare Plans. The Company has taken no action and has not made any
filing with the Internal Revenue Service to terminate any Pension Plan. During
Seller's ownership of the Stock, the Company has not maintained or contributed
to any Welfare Plan for current or future retired or terminated employees, their
spouses or dependents (other than in accordance with Code Section 4980B). For
purposes of this Section, Employee Benefit Plan means any qualified or
non-qualified employee welfare benefit plan (as defined in Section 3(1) of ERISA
("Welfare Plan")) and each employee pension benefit plan (as defined in Section
3(2) of ERISA ("Pension Plan")).
3.27 No Government Authorizations or Approvals Required. No
authorization or approval of, or filing with, any governmental body (other than
routine report filings) is required in connection with Seller's execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
3.28 Broker's Fees. Neither the Seller nor the Company has paid, nor
has Seller or the Company become obligated to pay, directly or indirectly, any
fee or commission to any broker, realtor, finder or intermediary for or on
account of the transactions contemplated herein.
3.29 Environmental. Except as disclosed on Schedule 3.29, the Company
has all material permits, licenses and other authorizations which are required
in respect of the Company under applicable Federal, state and local laws, rules,
regulations, ordinances, programs, permits,
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<PAGE> 21
guidances, orders and consent decrees relating to health, safety and
environmental matters, including but not limited to the Resource Conservation
and Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendment and Reauthorization Act of 1986,
the Toxic Substances Control Act, the Clean Water Act, the River and Harbor Act,
the Water Pollution Control Act, the Safe Drinking Water Act, the Solid Waste
Disposal Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Clean
Air Act, the Occupational Safety and Health Act, and the regulations promulgated
thereunder, as all of the same may be amended from time to time ("Environmental
Laws"). Schedule 3.29 lists all such permits, licenses and authorizations
required under Environmental Laws that the Company has obtained. Except as
disclosed on Schedule 3.29, the Company is, and for the last three years has
been, in material compliance with the terms and conditions of all such required
permits, licenses and authorizations, and all other limitations, restrictions,
conditions, standards, prohibition, requirements, obligations, schedules and
timetables contained in the Environmental Laws. There is no pending civil or
criminal litigation, notice of violation or administrative proceeding relating
in any way to the Environmental Laws (including without limitation, notices,
demand letters or claims under any Environmental Laws) with respect to the
Company. Seller has no knowledge that any civil or criminal litigation, notice
of violation or administrative action relating in any way to the Environmental
Laws with respect to the Company is threatened. Except as disclosed on Schedule
3.29, Seller has no knowledge of any present events, conditions, circumstances,
activities, practices, incidents or actions which could reasonably be expected
to interfere with or prevent continued compliance with any Environmental Law as
in effect on the date hereof by the Company or which may give rise to any
material liability, or otherwise form the basis of any claim, action, suit,
proceeding, hearing or investigation against or involving the Company based on
any violation or alleged violation of any Environmental Law which would have a
material adverse effect on the Business. Schedule 3.29 lists current agreements
of the Company for disposal of materials and wastes (whether or not hazardous)
generated by the Company. Schedule 3.29 lists current practices of the Company
for disposal of hazardous materials and wastes generated by the Company and, to
the knowledge of Seller, all such hazardous materials and wastes have been
disposed of in accordance with such practices. Seller has no knowledge of any
disposal by the Company during Seller's ownership of the Stock, directly or
indirectly, of any materials or wastes to, on or in any site currently listed or
formally proposed to be listed on the National Priorities List under Superfund
or any site listed or formally proposed to be listed as a major or priority
cleanup site under any comparable state law. Seller has made available to Buyer
all environmental reports or assessments which have been performed on behalf of
the Company, or to the knowledge of Seller, on behalf of others, during the
Seller's ownership of the Stock with respect any real property currently leased
by the Company. Copies of all such reports or assessments, other than those
performed on Buyer's behalf, are attached to Schedule 3.29.
3.30 Products Liability. Except as disclosed on Schedule 3.30, no
action, suit, inquiry, proceeding or investigation by or before any court or
governmental or other regulatory or administrative agency or commission is or at
any time during the Seller's ownership of the Stock has been pending or, during
the last three fiscal years or the current fiscal year, to the knowledge
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of Seller, threatened against or involving the Company relating to any product
alleged to have been manufactured or sold by Seller and alleging a systemic
defect in the design, construction or manufacturing of any product line by
Seller.
3.31 Information Technology Systems; Year 2000 Compliance. Except as
described on Schedule 3.31, the Company's information technology systems are in
operating condition, capable of performing the functions for which such systems
are currently and normally used by the Company. Except as described on Schedule
3.31, to Seller's knowledge, the Company possesses all software licenses used in
the Business as presently conducted and such licenses are set forth on Schedule
3.31. Except as described on Schedule 3.31, no area of the Company's business
and operations have been adversely affected by the "Year 2000 Problem" (that is,
computer applications used by the Company have been able to recognize and
perform properly date-sensitive functions involving certain dates prior to, on
and any date after December 31, 1999).
3.32 Material Information. Neither the Financial Statements nor this
Agreement, including the schedules hereto, subject to the knowledge limitations
set forth in this Agreement, contains an untrue statement of material fact or
omits to state a material fact required to be stated therein or which is
necessary to make the statements therein not misleading.
3.33 Definition of Seller's Knowledge. References in this Agreement
to "the knowledge of Seller", "Seller's knowledge", "known to Seller" and
similar statements regarding the knowledge of Seller shall mean the conscious
awareness of facts and circumstances, if any, that Seller became aware of after
inquiry of the following individuals: B. Bernard Burns (Seller's Executive Vice
President and Chief Administrative Officer), J. Milton Childress, II (Seller's
Senior Vice President - Planning and Development), Thomas F. Miller (Seller's
Director - Planning and Development), Brad Sparling (the Company's President),
Robert F. McLaren (the Company's Vice President, Controller), Ginger Sunde
(outside environmental consultant) (with respect to Sections 3.29 and 3.32),
Thomas Gondi (the Company's Marketing Manager) (with respect to Sections 3.12,
3.13, 3.23, 3.25 and 3.32), Wayne Fall (the Company's Director of Manufacturing)
(with respect to Sections 3.12, 3.13, 3.18, 3.23, 3.25, 3.30 and 3.32), Gary
Finocchi (the Company's Director of Materials) (with respect to Sections 3.13,
3.23, 3.25, 3.30 and 3.32), Maureen Cook (the Company's Human Resource Manager)
(with respect to Sections 3.12, 3.13, 3.18, 3.23, 3.25, 3.29 and 3.32), Larry
Mollicone (the Company's Inside Sales Manager) (with respect to Sections 3.12,
3.13, 3.23, 3.25, 3.30 and 3.32), Bob Renaud (the Company's Application
Engineer) (with respect to Sections 3.13, 3.17, 3.23, 3.25, 3.30 and 3.32) and
Mike Mannix (the Company's Quality/ISO Manager) (with respect to Sections 3.13,
3.17, 3.23, 3.25, 3.30 and 3.32).
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4. BUYER'S REPRESENTATIONS AND WARRANTIES.
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer represents, warrants,
covenants and agrees with Seller that as of the date hereof and at all times
through the Closing Date:
4.1 Organization and Corporate Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with the corporate power and authority to execute and deliver and to
perform its obligations hereunder.
4.2 Due Authorization; Effect of Transaction. No provision of
Buyer's Certificate of Incorporation or By-laws, or of any agreement, instrument
or understanding, or any judgment, decree, rule or regulation to which Buyer is
a party or by which it is bound, has been or will be violated by the execution
by Buyer of this Agreement or the performance or satisfaction of any agreement
or condition herein upon its part to be performed or satisfied, and all
requisite corporate and other authorizations and consents for such execution,
delivery, performance and satisfaction have been duly obtained. This Agreement
will be, upon execution and delivery, the legal, valid and binding obligation of
Buyer, enforceable in accordance with its terms, subject, however, to applicable
bankruptcy, reorganization, fraudulent conveyance, insolvency, moratorium, and
other similar laws relating to or affecting the enforcement of rights of
creditors, now or hereinafter in effect, and to equitable principals which may
limit the availability of particular remedies.
4.3 No Government Authorizations or Approvals Required. No
authorization or approval of, or filing with, any governmental body (other than
routine report filings) is required in connection with Buyer's execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
4.4 Broker's Fees. Buyer has not paid, nor has Buyer become
obligated to pay, any fee or commission to any broker, realtor, finder or
intermediary for or on account of the transactions contemplated herein.
4.5 Payment of Purchase Price. Buyer has secured adequate financing
to fund the Purchase Price and Buyer will pay the Purchase Price in accordance
with Article 1.
4.6 Material Information. Neither this Agreement nor the schedules
hereto contains an untrue statement of material fact or omits to state a
material fact required to be stated therein or which is necessary to make the
statements therein not misleading.
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5. CONDITIONS TO OBLIGATIONS OF SELLER AND BUYER.
5.1 Withdrawal by Seller. The obligations of Seller to consummate
the transactions contemplated hereby are subject to the satisfaction, on or
before the Closing Date of the following conditions, each of which may be waived
by Seller, in its sole discretion:
(a) Any of the representations, warranties, covenants and agreements
of Buyer contained in this Agreement do not continue to be true and correct at
all times from the date hereof to the Closing Date, with the same force and
effect as if made on and as of each such date and the Closing Date, and which
have had a material adverse effect on the Buyer, or any of the agreements and
conditions required by this Agreement to be performed or satisfied by Buyer on
or prior to the Closing Date, including, without limitation, those set forth in
Section 2.3 hereof, have not been duly performed or satisfied in all material
respects; and
(b) On the Closing Date, no suit, action, proceeding or governmental
investigation shall be pending seeking to enjoin this Agreement or the
consummation of the transactions contemplated herein, to declare this
transaction or Seller's conduct unlawful, or to obtain monetary damages with
respect to this Agreement.
5.2 Withdrawal by Buyer. The obligations of Buyer to consummate the
transactions contemplated hereby are subject to the satisfaction, on or before
the Closing Date of the following conditions, each of which may be waived by
Buyer in its sole discretion:
(a) Any of the representations, warranties, covenants and agreements
of Seller or the Company contained in this Agreement or otherwise made in
writing by either of them, or on their behalf pursuant hereto, do not continue
to be true and correct at all times from the date hereof to the Closing Date,
with the same force and effect as though made on and as of each such date and
the Closing Date, and which have had a material adverse effect on the Company
and the Business or any of the agreements and conditions to be performed or
satisfied by Seller or the Company hereunder at or prior to the Closing Date,
including, without limitation, those set forth in Section 2.2 hereof, have not
been duly performed or satisfied in all material respects; and
(b) On the Closing Date, no suit, action, proceeding or governmental
investigation shall be pending seeking to enjoin this Agreement or the
consummation of the transactions contemplated herein, to declare this
transaction or Buyer's conduct unlawful, or to obtain monetary damages with
respect to the Agreement.
(c) Since the date of this Agreement, there has not been a material
adverse change in the assets or financial condition of the Company or the
operation of the Business.
5.3 Notice of Withdrawal. If Buyer or Seller shall elect to withdraw
pursuant to this Section 5, Buyer or Seller, as the case may be, shall give
written notice to the other party of such
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election prior to or at the Closing. If such notice is given, this Agreement
shall terminate upon the giving of such notice.
6. COVENANTS OF BUYER, SELLER AND THE COMPANY.
Seller and the Company covenant and agree with Buyer as follows, with
respect to the period between the date hereof and the Closing Date, and with
respect to Sections 6.10, 6.11, 6.12 and 6.13 hereof, after the Closing Date:
6.1 Access to Records and Properties Prior to the Closing Date.
(a) Seller and the Company shall give Buyer, its accountants,
counsel and other representatives access to all of the premises, properties,
books, financial statements, contracts, commitments, records and personnel of
the Company within the parameters approved in advance by Seller and shall cause
the officers of the Company to furnish Buyer with such financial and operating
data and other information with respect to the business and properties of the
Company as Buyer shall from time to time reasonably request. In addition to the
foregoing, Seller agrees that Buyer, at its expense, shall have the right to
have a Phase I environmental audit conducted of the real properties, facilities
and equipment utilized by the Company.
(b) Buyer will keep confidential all materials (including all copies
made thereof) obtained from Seller or Seller's representatives in connection
with the transactions contemplated hereby, unless such information is (i)
otherwise available to the public, (ii) information which Buyer can demonstrate
was developed independently by Buyer, or (iii) information which Buyer received
from a third party legally entitled to it and to transfer it. In the event of
termination of this Agreement, Buyer and its authorized representatives will
promptly return any such information and all copies of such information to
Seller and Buyer's obligations pursuant to this section and pursuant to the
letter agreement from Bernard Burns, Jr. to William J. Sample dated December 8,
1999 and accepted by Buyer on December 9, 1999 (the "Letter Agreement") shall
survive the termination of this Agreement. On the condition that Buyer complies
with its obligations pursuant to this section, this Agreement shall not preclude
Buyer from taking such steps as may be necessary to purchase a competitor of the
Company in the event the transaction contemplated by this Agreement is not
consummated.
6.2 Operation of the Business of the Company. Seller agrees to use
its best efforts to conduct the operations of the Company and to provide
financial support consistent with past practices in the ordinary course of
business, not to enter into any extraordinary transaction or make any transfer
(except in the ordinary course of business) or distribution of Company assets,
to preserve intact its present business organization, to take reasonable steps
to keep available the services of its officers and employees except as
contemplated by this Agreement and to maintain satisfactory relationships with
licensors, licensees, suppliers, contractors, distributors, customers and others
having business relations with it. Without limiting the generality of the
foregoing,
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and except as otherwise expressly provided in this Agreement or with the prior
written consent of Buyer, Seller and the Company agree that the Company shall
not:
(a) keep and maintain its books of account and records other than
consistent with past practices;
(b) amend or change the Company's Certificate of Incorporation or
By-laws;
(c) authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
additional options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any securities convertible into shares of
stock of any class;
(d) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combinations thereof) in respect of its capital stock,
or redeem or otherwise acquire any shares of its capital stock;
(e) (i) create, incur or assume any long-term debt (including
obligations with respect to capital leases), or create, incur, assume, maintain
or permit to exist any short term debt representing indebtedness for borrowed
money other than in the ordinary course of business, (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, other than
as the result of the endorsement of negotiable instruments in the ordinary
course of business consistent with past practices, or (iii) make any loans,
advances or capital contributions to, or investments in, any other person;
(f) except in the ordinary course of business consistent with past
practice or as contemplated by this Agreement, (i) increase in any manner the
compensation for any of its directors, officers or other employees without prior
notification to Buyer, (ii) pay or agree to pay any pension, retirement
allowance or other employee benefits not required or permitted by an existing
plan, agreement or arrangement to any such director, officer or employee,
whether past or present, or (iii) commit itself to any new or renewed pension,
profit-sharing, bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay, retirement or
other employee benefit plan, agreement or arrangement, or to any employment or
consulting agreement (or amendment, renewal other extension thereof) with or for
the benefit of any person, or to amend any of such plans or any of such
agreements in existence on the date hereof without notification of Buyer;
(g) permit any of its current insurance policies to be canceled or
terminated or any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement policies are in full
force and effect providing coverage equal to or greater than the coverage under
those canceled, terminated or lapsed for substantially similar premiums;
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(h) except in the ordinary course of business, amend or terminate
any lease or, except in the ordinary course of business, sell, transfer,
mortgage or otherwise dispose of or encumber, or agree to sell, transfer,
mortgage or otherwise dispose of or encumber, any properties, real personal or
mixed;
(i) except in the ordinary course of business, sell, transfer,
license or otherwise dispose of, or agree to sell, transfer, license or
otherwise dispose of, any Intellectual Property;
(j) enter into any other agreements, commitments or contracts which,
individually or in the aggregate, are material to the Business of the Company,
except agreements, commitments or contract for the purchase, sale or lease of
goods and services in the ordinary course of business, consistent with past
practice and not in excess of current requirements, or otherwise make any
material change in conduct of the Business or operations of the Company;
(k) make any material change in its banking and safety deposit
arrangements;
(l) grant any powers of attorney;
(m) approve or undertake, either as the surviving, disappearing,
acquiring or selling corporation, any merger, consolidation, liquidation, asset
acquisition or disposition or any takeover transaction or furnish or cause to be
furnish any information concerning its business, properties or assets to any
person (other than to Buyer) which is interested in any such transaction;
(n) solicit, encourage, respond to or otherwise entertain any
inquiries or proposals for the acquisition of all or any part of the capital
stock, assets or business of the Company;
(o) take any action which would result in any of the representations
or warranties contained in this Agreement not being true at and as of the time
immediately after such action, or in any of the covenants contained in this
Agreement becoming unperformable in any material respect; or
(p) agree to do any of the foregoing.
6.3 Expenses. Seller and Buyer shall each pay their own costs and
expenses (including, without limitation, the fees and expenses of its
accountants, agents, representatives and counsel) incident to the negotiation,
preparation and carrying out of this Agreement and necessary to its performance
of and compliance with all agreements and conditions contained herein or with
respect to any other aspect of the transactions contemplated by this Agreement,
regardless of whether the transactions contemplated hereby are consummated.
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6.4 Taxes. Buyer and Seller shall each pay one-half of any and all
sales, transfer, conveyance or documentary taxes of any sort other than income
taxes imposed by a governmental authority on or in connection with the sale or
transfer of the Stock from Seller to Buyer and shall cause any appropriate stock
transfer stamps to be affixed at the Closing to the certificates evidencing the
Stock transferred hereunder; provided, however, that Seller shall pay any and
all Canadian sales, transfer, conveyance or documentary taxes.
6.5 Parties to be Reasonable; Termination. Each of the parties
hereto agrees to use reasonable efforts to cause the preconditions to the
Closing to occur in a timely fashion, and to prevent the conditions permitting
any party to withdraw from occurring. If the Closing does not occur on or prior
to May 15, 2000, this Agreement may be terminated by either Buyer or Seller if
the Closing did not occur through no fault of the party seeking termination. The
party asserting its right to terminate this Agreement shall give notice thereof
to the other party to this Agreement stating the grounds therefor. Nothing
herein shall relieve any party from liability for a breach of its obligations
under this Agreement.
6.6 Notice of Changes. Until the Closing, Seller shall notify Buyer
of any material adverse change in the Business as soon as it become apparent to
Seller that any such change has occurred or may occur.
6.7 Preservation of Business. Until the Closing, the Company will
and Seller will cause the Company to use its best efforts to preserve its
business organization intact, and to preserve its goodwill. Without limiting the
generality of the foregoing, the Company will, and the Seller will cause the
Company to, timely perform all obligations required of the Company under the
contracts and permits listed on the Schedules to this Agreement.
6.8 Litigation. Seller will promptly notify Buyer of any lawsuits,
claims, proceedings or investigations which are commenced or, to the knowledge
of Seller, threatened by or against the Company, or commenced or, to the
knowledge of Seller, threatened against (i) any employee, consultant or director
of the Company in connection with the Business, or (ii) Seller in connection
with the Stock.
6.9 No Sale. Until the Closing, or the earlier termination of this
Agreement in accordance with its terms, without the express prior consent of the
other parties to this Agreement, neither the Company, the Seller, the Buyer nor
any of their affiliates, officers, directors, employees, consultants, advisors,
agents, investment bankers, or any family members of any of the foregoing shall,
directly or indirectly, initiate discussions with, engage in negotiations with,
entertain any offer from, or provide any information to any corporation,
partnership, person or other entity or group involving the possible sale,
directly or indirectly, transfer or joint venture of the Company, the Business
or assets or the Stock of the Company to any person or entity other than parties
to this Agreement.
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6.10 Financial Statements. Seller acknowledges that Buyer's
accountants will need to incorporate audited income statements of the Company
for the Company's last two fiscal years and an audited balance sheet of the
Company as of December 31, 1999 (collectively, the "Audited Financial
Statements"), for inclusion in Buyer's Current Report on Form 8-K to be filed
with the Securities and Exchange Commission and thereafter to be incorporated
into Buyer's audited financial statements. Seller agrees that it shall cause
KPMG, Seller's independent certified public accountants ("Seller's Accountants")
(i) to prepare such Audited Financial Statements in accordance with the
requirements of GAAP, Regulation S-X of the Securities and Exchange Commission,
and such other accounting requirements as are applicable to public reporting
companies, (ii) to authorize Buyer and Buyer's accountants to rely on such
Audited Financial Statements and the certification thereof by Seller's
Accountants, and to incorporate such Audited Statements into Buyer's audited
financial statements for inclusion in Buyer's Form 8-K filing and all subsequent
required filings and reporting, and (iii) to otherwise cooperate with Buyer's
accountants in the preparation of pro-formas, interim statements, and other
reports as are reasonably required in connection with Buyer's filing and
reporting obligations. At all times between the date hereof and the Closing
Date, Seller shall cause Seller's Accountants to afford Buyer's accountants
access to (including copies of) the Company's and Seller's Accountants' books
and records and such other information as Buyer's Accountants reasonably request
in order to review such Audited Statements and to incorporate them into Buyer's
audited financial statements. At all times during such review, whether before or
after the Closing, the Seller shall, and shall cause Seller's Accountants to,
cooperate with Buyer's accountants, including taking such actions as Buyer's
accountants reasonably require, in connection with such Audited Financial
Statements. Buyer shall pay the costs of Seller's Accountants in complying with
this section. Seller and Purchaser acknowledge that such Audited Financial
Statements are for Purchaser's reporting purposes only and shall not be used in
and shall have no effect on the Purchase Price nor used as a basis for any claim
of a breach of any representation or warranty.
6.11 Presto Dock Lift Product. For a period of twenty-four months
following the Closing, the Seller shall continue to manufacture for the Company
the Presto Dock Lift (the "Product") in accordance with and pursuant to the
terms and provisions of the Manufacturing Agreement attached hereto as Exhibit
B.
6.12 Non-Competition. Seller agrees that from and for a period of
five years after the Closing (the "Restricted Period"), neither Seller nor any
of Seller's subsidiaries or affiliates will, directly or indirectly, in any
capacity, engage in the business of manufacturing or selling pallet stackers;
provided that if Seller purchases or otherwise acquires a business or entity
that manufactures or sells pallet stackers, Seller will divest the portion of
the business that manufactures or sells pallet stackers within one year after
its purchase or acquisition unless the Restricted Period shall have expired by
that time. Seller acknowledges and agrees that money damages alone may not
adequately compensate the Buyer in the event of a breach of this Section 6.12,
and therefore, Seller covenants and agrees that in addition to all other
remedies available to
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the Buyer at law or in equity, the Buyer shall be entitled to seek injunctive
relief in the enforcement of this provision.
The existence of any claim or cause of action by Seller against the Buyer
whether predicated upon this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Buyer of this Section 6.12, but shall be
litigated separately.
6.13 Services of Brad Sparling. Seller agrees to make the services of
Brad Sparling available to Buyer on a half-time basis for a period of 60 days
after Closing, or for a shorter period if Buyer so notifies Seller in writing.
Buyer agrees to reimburse Seller for half of those costs of employing Mr.
Sparling as listed on Schedule 6.13 for such 60-day or shorter period.
6.14 401(k) Plan. Seller will retain sponsorship of the United
Dominion Industries Compass Plan and the United Dominion Industries Compass Plan
for Hourly Employees (the only two qualified plans in which the employees of the
Company participate) (the "Transferor Plans"). Participation in the Transferor
Plans by employees of the Company shall cease upon the Closing Date. By August
1, 2000, Buyer shall establish a defined contribution plan, and such plan shall,
subject to applicable law and receipt of written assurances reasonably
acceptable to Buyer as to the tax-qualified status of the Transferor Plans,
accept one or more trustee-to-trustee transfers. After Buyer has established its
defined contribution plan, Seller will, upon reasonable assurances from Buyer
that Buyer's plan is tax-qualified, cooperate to transfer the assets of the
affected employees from the Transferor Plans to Buyer's defined contribution
plan in one or more trustee-to-trustee transfers. For purposes of eligibility
and vesting all Company employees shall be credited for their years of service
with Seller or the Company prior to the Closing Date to the same extent such
service has been taken in account under the Transferor Plans.
6.15 Continued Medical Coverage.
(a) Seller agrees that Seller will timely provide all notices and
any continuation of medical, including dental if applicable, coverage and
continued participation in Seller's medical flexible spending account required
to be provided to any of the Company's employees, former employees, or the
beneficiary or dependents of such employees or former employees, under Part VI
of Subtitle B of Title I of ERISA or Section 4980B(f) of the Code (herein
collectively referred to as "COBRA") to the extent such notices and continuation
of health benefit coverage are required and provided by Seller or the Company by
reason of events occurring before or on the Closing Date or by reason of the
transactions contemplated by this Agreement. For the purposes of the foregoing,
Seller agrees that Seller will treat all of such employees (and such employees'
beneficiaries and dependents) as of the Closing Date as having incurred a
"qualifying event" (within the meaning of ERISA Section 603 and Code section
4980B(f)(3)) on the Closing Date. Buyer shall have the right to review and
approve any COBRA notices or other communications, such approval not to be
unreasonably withheld, to the Company's employees covering welfare benefits.
(b) Buyer agrees (i) that, with respect to salaried employees of the
Company,
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within 60 days of Closing, it will cause the Company to adopt welfare plans that
are substantially similar to the plans adopted for employees of the Buyer and
all such salaried Company employees (A) shall be credited for their years of
service with Seller or the Company before the Closing Date; (B) shall be
credited for any deductibles paid and out-of-pocket maximums met at the time of
Closing; and (C) preexisting condition limitations for such employees shall be
waived, each to the same extent that such item has been taken into account,
credited to such employee or waived under Seller's welfare plans; (ii) that,
with respect to hourly employees of the Company, it will use all commercially
reasonable efforts to, and in any event by January 31, 2001 shall, cause the
Company to adopt welfare plans that are substantially similar to the plans
adopted for employees of the Buyer and all such hourly Company employees (A)
shall be credited for their years of service with Seller or the Company before
the Closing Date; (B) shall be credited for any deductibles paid and
out-of-pocket maximums met at the time of Closing; and (C) preexisting condition
limitations for such employees shall be waived, each to the same extent that
such item has been taken into account, credited to such employee or waived under
Seller's welfare plans; (iii) that it will timely pay to or on behalf of all
such employees 102% of premium costs and other direct costs and related payments
for continued health benefit coverage under COBRA for such employees until Buyer
has obtained health benefit coverage for those employees; and (iv) that, to the
extent total aggregate claims and aggregate related costs incurred after Closing
made under such employees' continued health benefit coverage under COBRA exceed
the premiums paid for such employees (less any insurance reimbursement received
by Seller), it will pay Seller such excess amounts within five business days
after the eighteen-month anniversary of the date that the Company's employees
become active participants in the Company's new welfare plan or plans.
(c) Seller shall pay all costs, if any, of the termination of any
employee of the Company who, as of the Closing, becomes an employee of Seller.
6.16 Dallas Office. For a period of ten days after Closing, Buyer and
the Company may use the Company's current office space in Carrollton, Texas.
Thereafter, the oral lease shall be terminated without liability to Buyer or the
Company, and Buyer and the Company shall have vacated such premises.
6.17 Access to Properties After the Closing Date. Buyer and the
Company shall give Seller, its counsel and other representatives reasonable
access to all of the premises of the Company in connection with any
environmental testing, evaluation or remediation occurring on such premises and
in connection therewith shall cause the officers of the Company to furnish
Seller with such information with respect to the business and properties of the
Company as Seller shall from time to time reasonably request. Seller shall bear
no responsibility for any business interruption that occurs as a result of such
environmental testing, evaluation or remediation; provided, however, that Seller
shall consult with the Company regarding such testing, evaluation or
remediation.
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7. SURVIVAL.
7.1 Limited Survival of Representations and Warranties. The
representations and warranties of the parties contained in Articles 3 and 4
shall survive the Closing and expire eighteen (18) months from the Closing,
provided that (a) claims, if any, asserted in writing prior to the expiration of
the representation or warranty to which they related, shall survive until
finally resolved and satisfied in full; (b) claims, if any, which involve the
representations set forth in Section 3.29 or otherwise involve environmental
matters stemming from any activities of the Company or the Seller that occurred
during the Seller's ownership of the Stock shall survive without limitation; (c)
claims, if any, which assert tax liability shall survive for the full period of
the applicable statute of limitations, and until finally resolved and satisfied
in full; (d) claims, if any, that relate to the matters listed under the
headings "Pending Litigation" and "Potential Litigation" on Schedule 3.18 and
the heading "Employment-Related Proceedings" on Schedule 3.12 shall survive
without limitation; and (e) claims, if any, which relate to title of the Stock
or to any alleged ownership of or interest in the Stock or the Company shall
survive without limitation. All claims and actions for indemnity for breach of
any representation or warranty shall be asserted or maintained in writing by a
party hereto on or prior to the expiration of such representation or warranty.
Each of the warranties and representations contained herein is independent of
every other, and no warranty or representation shall in any way limit, restrict,
modify, or be deemed or construed in any way to limit, restrict or modify any
other warranty or representation. Without limiting the foregoing, each and all
of the foregoing warranties and representations shall survive the consummation
and Closing of this transaction. The consummation or Closing of this transaction
in the face of any known breach of any warranty or representation contained
herein shall not be, or be deemed or construed to be, a waiver of such breach,
departure, or variation, unless such breach, departure or variation is
specifically identified and waived in writing by the party to which the warranty
or representation was made.
7.2 Other. Except as otherwise provided herein, all covenants,
agreements and indemnities contained herein shall survive for the full period of
the applicable statute of limitations, and until finally resolved and satisfied
in full, provided however that performance of the covenants contained in
Sections 6.1, 6.2 and 6.5 through 6.9 hereof shall expire on the Closing Date in
accordance with their terms. From and after the Closing Date, except as
otherwise provided herein, all obligations and liabilities of Seller relating to
the Business or the properties, assets or liabilities of the Company as the same
exist at the Closing Date or arise thereafter shall terminate.
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<PAGE> 33
8. INDEMNIFICATION.
8.1 Indemnification by Seller. Seller hereby agrees to indemnify,
defend and hold Buyer, and any of its affiliates (defined as a person or entity
that directly, or indirectly through one or more intermediaries, controls or is
controlled by, or under common control with Buyer) and their respective
officers, directors and employees, harmless from and against any and all
liabilities, damages, losses, proceedings, suits, claims, demands, actions,
assessments, judgments, costs and expenses (including without limitation,
reasonable attorney's fees and disbursements) arising out of, or resulting from:
(i) any breach of any representation and warranty by Seller
or the Company set forth in this Agreement;
(ii) the nonperformance or breach of any agreement, covenant
or obligation to be performed on the part of Seller under this Agreement
whether before or at Closing, or on the part of the Company under this
Agreement before or at Closing and the nonperformance or breach of
Seller's obligations pursuant to Sections 6.10, 6.11, 6.12, 6.13 or 9.10
after the Closing;
(iii) any costs associated with any investigation or
remediation required by an appropriate governmental authority under any
Environmental Law, based on such Environmental Law as in effect at the
time of Closing, from any activities of the Company or the Seller that
occurred during the Seller's ownership of the Stock;
(iv) any costs associated with (A) the remediation of
sediment and soil impacted with hazardous materials in those specific
areas at the Company's facility in Pawtucket, RI from which Delta
Environmental Consultants, Inc. ("Delta") collected sediment and soil
samples (the "Facility") as identified in its Results of Phase II
Sampling Activities report dated May 3, 2000 (the "Report"), which is
attached to Schedule 3.29, but only to the extent required by
Environmental Laws or to any lesser extent deemed in satisfaction of
Environmental Law by any governmental agency charged with enforcing such
law, based on such Environmental Law as in effect at the time of
Closing; for purposes of this provision, "hazardous materials" means
those substances tested for by Delta that exceed applicable cleanup
criteria under Environmental Law, and as identified in the Report; (B)
obtaining a permit or similar approval, to the extent required by
Environmental Law at the time of Closing, for operation of the dry wells
at the Facility identified by Delta in its Report; (C) obtaining a
permit or similar approval, to the extent required by Environmental Law
at the time of Closing, for stormwater discharge on or from the
Facility; (D) obtaining each permit or similar approval, to the extent
required by Environmental Law at the time of Closing, for air emissions
connected with the welding ventilation system, paint booths and parts
washers at the Facility; and (E) updating on a one-time basis the
Facility's Spill
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Prevention Control and Countermeasures Plan and Toxic Organics
Management Plan, to the extent required by Environmental Law at the time
of Closing;
(v) any and all liability in excess of reserves for Federal,
state, local or foreign taxes, charges, fees, levies, or other
assessments in the nature of taxes, including interest or penalties
associated therewith, imposed on the Company or Buyer, as successor to
the Company, for any period prior to Closing;
(vi) the matters listed under the headings "Pending
Litigation" and "Potential Litigation" on Schedule 3.18 and the heading
"Employment-Related Proceedings" on Schedule 3.12; or
(vii) any and all actions, suits, proceedings, claims and
demands incident to any of the foregoing.
Seller reserves all rights to seek indemnification from the Facility's prior
owner and the owner of the property on which the Facility sits for any and all
costs incurred by Seller in providing indemnification to Buyer under Section
8.1(iv) hereof. Seller expressly denies that its provision of indemnification to
Buyer under Section 8.1(iv) hereof is an admission of responsibility for any
matter for which indemnification may be sought by Buyer thereunder.
8.2 Indemnification by Buyer. Buyer hereby agrees to indemnify,
defend and hold Seller, and its successors and assigns, harmless from and
against any and all liabilities, damages, losses, claims, proceedings, suits,
demands, actions, assessments, costs and expenses (including without limitation,
reasonable attorney's fees and disbursements) arising out of, or resulting from,
(i) any breach of any representation and warranty by Buyer set forth in this
Agreement, or (ii) the nonperformance or breach of any agreement, covenant or
obligation to be performed on the part of Buyer under this Agreement or (iii)
the operation of the Business after the Closing or (iv) any and all actions,
suits, proceedings, claims and demands incident to any of the foregoing.
8.3 Survival of Indemnification; Certain Limitations. It is
understood and agreed that these agreements of indemnification shall survive
only in accordance with the time limitations established pursuant to the
provisions of Section 7.1 limiting survival of certain representations and
warranties. Notwithstanding the foregoing, Seller's aggregate obligations under
Section 8.1 and Buyer's aggregate obligations under Section 8.2 shall not exceed
10% of the Purchase Price, provided that no such limitation shall be applicable
for claims by Buyer against Seller with respect to tax matters, environmental
matters, matters listed under the headings "Pending Litigation" and "Potential
Litigation" on Schedule 3.18 or matters relating to ownership of the Stock. The
rights of the Buyer and Seller for indemnification relating to this Agreement or
the transactions contemplated hereby shall be strictly limited to those
contained in this Article 8. The exclusive remedy of Buyer and Seller for any
breach or threatened breach of this Agreement shall be limited to
indemnification as set forth in this Article 8, except for claims for fraud, in
which case Buyer shall have any and all remedies provided by law. In no event
shall Buyer, its
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affiliates, successors or assigns be entitled to claim or seek rescission of the
transactions consummated under this Agreement.
8.4 Notice and Opportunity to Defend. Promptly after the receipt by
Buyer or Seller respectively (an "Indemnified Party"), of notice of any claim or
the commencement of any action or proceeding which such Indemnified Party
recognizes gives rise or may give rise to a claim against the other party (the
"Indemnitor") under this Section 8, the Indemnified Party shall give the
Indemnitor written notice of such claim or the commencement of such action or
proceeding. The Indemnitor shall have the right to compromise or to defend any
such matter, at its expense and by its own counsel, except that no such
compromise shall include any agreement requiring the Indemnified Party to take
any action or to refrain from taking any action without the Indemnified Party's
written consent, which shall not unreasonably be withheld. If the Indemnitor
shall undertake to defend any such asserted liability, it shall promptly notify
the Indemnified Party of its intention to do so, and the Indemnified Party
agrees to cooperate with the Indemnitor and its counsel in the defense of any
such asserted liability. In any event, the Indemnified Party shall have the
right to approve any compromise or settlement sought by the Indemnitor, and the
Indemnitor shall have the right to approve any compromise or settlement sought
by the Indemnified Party, which approval, in either case, shall not be
unreasonably withheld. The Indemnified Party shall have the right to employ its
own counsel in any such action, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Party unless (i) the Indemnitor shall not
in fact have employed counsel reasonably satisfactory to the Indemnified Party;
or (ii) the Indemnified Party shall have reasonably concluded that such action
involves or is likely to involve a customer, supplier or other party with which
the Indemnified Party has or reasonably anticipates having in the following
twelve months, a commercial relationship or that there may be a conflict of
interest between it and the Indemnitor in the conduct of the defense of such
action (in which case the Indemnified Party shall have the right to direct the
defense of the action using counsel reasonably satisfactory to the Indemnitor).
9. MISCELLANEOUS.
9.1 Waiver and Amendment. Any term or provision of this Agreement
may be waived at any time by the party which is entitled to the benefit thereof
and this Agreement may be amended or supplemented at any time only by a written
instrument executed by the party to be charged.
9.2 Entire Agreement. This Agreement and the exhibits and schedules
referred to herein constitute the entire agreement among the parties with
respect to the transactions contemplated hereby and supersede all other prior
arrangements or understandings, whether written or oral, with respect thereto.
9.3 Interpretation. The headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement. The language of all parts of this Agreement is
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<PAGE> 36
the language of both parties hereto and shall in all cases be construed
according to its fair meaning and not for or against either party, regardless of
which party was generally responsible for the preparation of this Agreement.
9.4 Counterparts. For the convenience of the parties, one or more
parties may execute any number of counterparts of this Agreement hereto and all
such executed counterparts together shall be deemed to be an original
instrument.
9.5 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be in writing and
shall be hand delivered, sent by facsimile or by nationally recognized overnight
courier, or by certified or registered mail, postage prepaid, return receipt
requested, at the addresses set forth below:
If to Seller or the Company:
United Dominion Industries, Inc.
2300 One First Union Center
301 South College Street
Charlotte, North Carolina 28202-6039
Attention: Legal Department
Fax No.: (704) 347-6915
Copy to:
Smith Helms Mulliss & Moore
201 North Tryon Street
Charlotte, NC 28202
Attn: Richard Hazlett and Chris Scheurer
Fax: (704) 334-8467
If to Buyer:
Long Reach Holdings, Inc.
136 Main Street
Westport, Connecticut 06880
Attention: William A. Schwartz
Fax No. (203) 227-1050
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Copy to:
Levett Rockwood P.C.
33 Riverside Avenue
Westport, Connecticut 06880
Attention: Cheryl L. Johnson
Fax No. (203) 226-8025
or such other address as any party hereto may, from time to time, designate in a
written notice given in a like manner. Notice given as set out above shall be
deemed effective upon receipt (or refusal to receive).
9.6 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the heirs, personal
representatives, successors and assigns of the parties hereto, and shall not be
assignable by the parties, except that Buyer and Seller may assign any of their
rights or obligations hereunder to a subsidiary or affiliate without consent of
the other party.
9.7 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware, except that
the law of any other relevant state shall be applied if doing so is necessary to
validate any provisions of this Agreement. The parties hereby consent to the
jurisdiction of the state and federal courts located in the State of Delaware
and submit to the jurisdiction of any such court in which any such suit or
proceeding is so instituted, and waive any objections as to venue of such
courts. Notwithstanding any other provisions of this Agreement to the contrary
including the provisions of Section 6.3 hereof, the parties in any action or
legal proceeding brought in connection with this Agreement shall be pay their
own fees and expenses.
9.8 Severability. In the event that any court of competent
jurisdiction shall finally determine that any provision, or any portion thereof,
contained in this Agreement shall be void or unenforceable in any respect, then
such provision shall be deemed limited to the extent that such court determines
it enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall determine any such provision, or portion thereof
wholly unenforceable, the remaining provisions of this Agreement shall
nevertheless remain in full force and effect provided that the severing of such
provision, or portion thereof will not materially change the substance of this
Agreement.
9.9 Publicity. Prior to the Closing, Seller and Buyer shall not
issue any press release or otherwise make any public statement with respect to
the execution of, or the transactions contemplated by, this Agreement without
the prior written consent of the other party, except as may be required by law.
After the Closing, any public statements and press releases shall be made
jointly by Buyer and Seller.
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9.10 Further Assurances. After the Closing, Seller shall from time to
time, at Buyer's request and without further cost or expense to Seller, execute
and deliver such other instruments of conveyance and transfer and take such
other actions as Buyer may reasonably request in order more effectively to sell,
transfer, assign, deliver, convey, and vest, in and to Buyer, title to and
possession of the Stock.
9.11 Arbitration.
(a) Any dispute, controversy or claim arising out of or in
connection with or relating to, this Agreement or any other agreement entered
into pursuant hereto, or the transactions contemplated hereby, (a "Dispute"),
including but not limited to any breach or alleged breach hereof, shall be
determined and settled by arbitration in Wilmington, Delaware pursuant to the
rules then in effect of the American Arbitration Association; provided, however,
that (i) in the event the event the Dispute involves an amount in excess of
$200,000 the Dispute shall be heard by a panel of three arbitrators, and (ii) in
the event the Dispute includes a disagreement under Article 1 of this Agreement
the arbitration panel shall include at least one certified public accountant
acceptable to both parties.
(b) The resolution of such arbitration shall be final and binding on
the parties hereto and enforceable in a court of competent jurisdiction. The
parties hereto hereby irrevocably submit to the nonexclusive jurisdiction of any
court of competent jurisdiction for the purpose of enforcing any arbitration
award.
(c) This section shall not preclude any of the parties hereto from
seeking injunctive or other temporary relief in any court of competent
jurisdiction in the event of a breach or threatened breach of this Agreement or
any related agreement.
(d) Buyer and Seller shall bear their own expenses in conjunction
with any arbitration proceeding, provided that each shall each bear half of the
costs of the arbitrators selected pursuant to subsection (a) of this paragraph.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed by their duly authorized representatives as of the date
first written above.
LONG REACH HOLDINGS, INC.
By: /s/ William A. Schwartz
--------------------------------
Name: William A. Schwartz
Title: Secretary and
Authorized Signatory
LEE ENGINEERING COMPANY, INC.
By: /s/ R.L. Magee
--------------------------------
Name: R.L. Magee
Title: Vice President
and Secretary
By: /s/ William Dries
--------------------------------
Name: William Dries
Title: Vice President
UNITED DOMINION INDUSTRIES, INC.
By:/s/ R.L. Magee
--------------------------------
Name: R.L. Magee
Title: Senior Vice President
and Secretary
By: /s/ William Dries
--------------------------------
Name: William Dries
Title: Senior Vice President
and Chief Financial Officer
S-1
<PAGE> 1
EXHIBIT 10
AMENDMENT TWO TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT TWO TO LOAN AND SECURITY AGREEMENT (this "Amendment"),
dated as of May 16, 2000, is made and entered into by and between BANK ONE,
TEXAS, NATIONAL ASSOCIATION ("LENDER") and LONG REACH HOLDINGS, INC., a Delaware
corporation ("BORROWER").
RECITALS
A. Borrower and Lender entered into that certain Loan and Security
Agreement, dated April 20, 1999, as amended by Amendment One ("AMENDMENT ONE")
dated February 23, 2000 (as amended, the "LOAN AGREEMENT").
B. Borrower is acquiring all of the outstanding capital stock of Lee
Engineering Company, Inc., a Rhode Island corporation, whose name will be
changed at or shortly after closing to Presto Lifts, Inc. (referred to herein as
"SUBSIDIARY").
C. Lender and Borrower desire to amend the Loan Agreement as herein
set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by both parties, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same definitions
assigned to such terms in the Loan Agreement, as amended hereby.
ARTICLE II
Amendments to the Loan Agreement
Section 2.01. Amendment of Definitions. SECTION 1 of the Loan Agreement
is hereby amended by deleting the definitions of "Allowed Kaizen Expenses,"
"Allowed Restructuring Expenses," "Borrowing Base," "Collateral," "Eligible
Accounts," "Eligible Inventory" and "Permitted Liens" in their entirety and
substituting therefor the following:
"'Allowed Kaizen Expenses' means costs and expenses incurred by
Borrower to provide Kaizen consulting and training; provided, that, such
costs and expenses shall not exceed an aggregate $540,000 for calendar
year 2001, $450,000 for calendar year 2002
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and $90,000 for the period from January 1, 2003 through the Termination
Date."
"'Allowed Restructuring Expenses' means costs and expenses
incurred by Borrower related to the merger of Long Reach Holdings, Inc.
into TBM Acquisition I, Inc. during calendar year 2000 and to the
acquisition of the capital stock of Lee Engineering Company, Inc.;
provided, that, such costs and expenses shall not exceed an aggregate
$1,750,000 for calendar year 2000 and an aggregate $750,000 for calendar
year 2001 and no amount in subsequent years."
"'Borrowing Base' means, as of any date, an amount equal to the
sum of: (a) eighty-five percent (85%) (or such lesser percentage as the
Lender may in its sole and absolute discretion determine from time to
time) of Eligible Accounts on such date, PLUS (b) the lesser of (i) the
sum of (A) sixty percent (60%) (or such lesser percentage as the Lender
may in its sole and absolute discretion determine from time to time) of
the value of Eligible Inventory consisting of raw material metal stock
(based upon the lower of cost (computed on a first-in-first-out basis),
fair market value or orderly liquidation as determined by Lender in its
sole discretion), PLUS (B) fifty percent (50%) (or such lesser percentage
as the Lender may in its sole and absolute discretion determine from time
to time) of the value of Eligible Inventory other than metal stock (based
upon the lower of cost (computed on a first-in-first-out basis), fair
market value or orderly liquidation as determined by Lender in its sole
discretion) or (ii) the lesser of (A) $5,000,000, or (B), during the
period from February 23, 2000 through December 31, 2000, one hundred
twenty-five percent (125%) of the then outstanding aggregate advances
against Eligible Accounts (such percentage to be one hundred percent
(100%) after December 31, 2000), MINUS (c) the Financial Accommodation
Reserve, and MINUS (d) the Reserve."
"'Collateral' means and includes all of Borrower's and each
Qualifying Subsidiary's now owned or hereafter acquired assets, whether
tangible or intangible, including without limitation all of Borrower's
and each Qualifying Subsidiary's right, title and interest in and to each
of the following, wherever located and whether now existing or hereafter
arising:
(a) all accounts,
(b) all inventory,
(c) all equipment,
(d) all contract rights,
(e) all general intangibles,
(f) all Intellectual Property,
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(g) all deposit accounts,
(h) all investment property,
(i) all instruments,
(j) all chattel paper,
(k) all goods,
(l) all documents,
(m) all real estate,
(n) all insurance and certificates of insurance pertaining to
any and all items of Collateral,
(o) all files, correspondence, computer programs, tapes,
disks and related data processing software which contain
information identifying or pertaining to any of the
Collateral or any Account Debtor or showing the amounts
thereof or payments thereon or otherwise necessary or
helpful in the realization thereon or the collection
thereof,
(p) all cash deposited with the Lender or any Affiliate
thereof, and
(q) any and all products and cash and non-cash proceeds of
the foregoing (including, but not limited to, any claims
to any items referred to in this definition and any
claims against third parties for loss of, damage to or
destruction of any or all of the Collateral or for
proceeds payable under or unearned premiums with respect
to policies of insurance) in whatever form."
"'Eligible Accounts' shall mean all accounts of Borrower and of a
Qualifying Subsidiary which are deemed by the Lender in the exercise of
its sole and absolute discretion to be eligible for inclusion in the
calculation of the Borrowing Base net of any and all interest, finance
charges, sales tax, fees, returns, discounts, claims, credits, charges,
contra accounts, exchange contracts or other allowances, offsets and
rights of offset, deductions, counterclaims, disputes, rejections,
shortages or other defenses and all credits owed or allowed by Borrower
or a Qualifying Subsidiary upon any of its accounts and further reduced
by the aggregate amount of all reserves, limits and deductions provided
for in this definition and elsewhere in this Agreement. Eligible Accounts
shall not include the following:
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<PAGE> 4
(a) accounts which remain unpaid more than ninety (90) days
past their invoice dates;
(b) accounts which are not due and payable within thirty (30)
days after their invoice dates, except for accounts created by sales made
under sixty (60) day dating terms; provided, however, accounts deemed
eligible due to such dating terms may not exceed at any time the lesser
of (i) $500,000, or (ii) ten percent (10%) of Eligible Accounts;
(c) accounts owing by a single Account Debtor, including a
currently scheduled account, if fifty percent (50%) or more of the
balance owing by said Account Debtor upon all accounts payable by such
Account Debtor is ineligible pursuant to clauses (a) or (b) above;
(d) accounts with respect to which the Account Debtor is an
Affiliate of Borrower or a Qualifying Subsidiary;
(e) accounts with respect to which the obligation of payment by
the Account Debtor is or may be conditional for any reason whatsoever
including, without limitation, accounts arising with respect to goods
that were (i) not sold on an absolute basis, (ii) sold on a bill and hold
sale basis, (iii) sold on a consignment sale basis, (iv) sold on a
guaranteed sale basis, (v) sold on a sale or return basis, or (vi) sold
on the basis of any other similar understanding;
(f) accounts with respect to which the Account Debtor is not a
resident or citizen of, or otherwise located in, the continental United
States of America, or with respect to which the Account Debtor is not
subject to service of process in the continental United States of
America, unless such account is backed in full by an irrevocable letter
of credit in form and substance satisfactory to Lender issued by a
domestic commercial bank acceptable to Lender or backed by acceptable
export insurance; provided, however, that (i) accounts backed by a letter
of credit or insurance may not exceed $1,000,000 in the aggregate, and
(ii) subject to the requirements set forth in PARAGRAPHS (a) through (e)
and (g) through (r) of this definition, (A) accounts owed by Account
Debtors located in Canada may be included in Eligible Accounts up to a
maximum of $250,000 in the aggregate, (B) accounts owed by Account
Debtors located in Puerto Rico may be included in Eligible Accounts up to
a maximum of $50,000 in the aggregate;
(g) accounts in excess of $100,000 in the aggregate with
respect to which the Account Debtor is the United States of America or
any other federal governmental body or any department, agency or
instrumentality of any of the foregoing unless such accounts are duly
assigned to the Lender in compliance with all applicable governmental
requirements (including, without limitation, the Federal Assignment of
Claims Act of
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1940, as amended, if applicable) so that the Lender is recognized by the
Account Debtor to have all of the rights of an assignee of such accounts;
(h) accounts with respect to which Borrower or a Qualifying
Subsidiary is or may be liable to the Account Debtor for goods sold or
services rendered by such Account Debtor, but only to the extent of such
liability to such Account Debtor (i.e. the excess of the aggregate face
amount of accounts of such Account Debtor to Borrower or a Qualifying
Subsidiary over the aggregate liability of Borrower or a Qualifying
Subsidiary to such Account Debtor shall constitute an Eligible Account
unless otherwise excepted under the terms of this definition);
(i) accounts with respect to which the goods giving rise
thereto have not been shipped and delivered to and accepted as
satisfactory by the applicable Account Debtor or with respect to which
the services performed giving rise thereof have not been completed and
accepted as satisfactory by the Account Debtor thereon;
(j) accounts which are not invoiced (and dated as of such
date) and sent to the Account Debtor thereof concurrently with or not
later than five (5) days after the shipment and delivery to and
acceptance by said Account Debtor of the goods giving rise thereto or
the performance of the services giving rise thereto;
(k) accounts with respect to which possession and/or control
of the goods sold giving rise thereto is held, maintained or retained by
Borrower or a Qualifying Subsidiary (or by any agent or custodian of
Borrower or a Qualifying Subsidiary) for the account of or subject to
further and/or future direction from the Account Debtor;
(l) accounts as to which the Lender, at any time or times
hereafter, determines, in good faith, that the prospect of payment or
performance by the Account Debtor is or will be impaired in any material
respect;
(m) accounts of an Account Debtor to the extent, but only to
the extent, that the same exceed a credit limit determined by the Lender
in its reasonable discretion, at any time or times hereafter;
(n) accounts with respect to which the Account Debtor is
located in any state requiring the filing of a Notice of Business
Activities Report or similar report in order to permit Borrower or a
Qualifying Subsidiary to seek judicial enforcement in such state of
payment of such account, unless Borrower or a Qualifying Subsidiary has
qualified to do business in such state or has filed a Notice of Business
Activities Report or equivalent report for the then current year;
(o) accounts which are not subject to a first priority
perfected security interest in favor of Lender;
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<PAGE> 6
(p) accounts that Lender, in its sole discretion, has
determined to be ineligible;
(q) accounts subject to any provision prohibiting assignment
or requiring notice of or consent to such assignment; and
(r) that portion of an account balance owed by a single
Account Debtor which exceeds twenty percent (20%) of total accounts
otherwise deemed eligible hereunder, unless waived in writing by
Lender."
"'Eligible Inventory' means, as at any date of determination,
all inventory owned by and in the possession of Borrower or a Qualifying
Subsidiary and located in the United States of America that Lender, in
its sole and absolute discretion, deems to be eligible for borrowing
purposes; provided, however, that as of February 23, 2000, a reserve of
$100,000 shall be established (the "INITIAL INVENTORY RESERVE") that
shall reduce the amount of Eligible Inventory otherwise determined
hereunder, and as of each calendar month end occurring on or after March
31, 2000, such eligibility reserve shall be increased by $100,000;
provided, further, that when Borrower delivers to Lender an inventory
line item turn report, in form and detail satisfactory to Lender in its
sole discretion, that establishes to Lender's satisfaction the proper
amount of a reserve (the "TURN REPORT RESERVE") against Eligible
Inventory equal to purchased parts raw materials and finished goods on
hand in excess of one year's supply, as demonstrated by historical
sales, such Turn Report Reserve shall be used in place of the Initial
Inventory Reserve (as it may have been increased) as long as such
inventory line item turn report is delivered to Lender within fifteen
days of each fiscal quarter end; otherwise, the Initial Inventory
Reserve shall be reinstated at the amount last used and shall continue
to increase each month end by $100,000. Without limiting the generality
of the foregoing, unless otherwise agreed by Lender, the following is
not Eligible Inventory:
(a) work-in-process;
(b) finished goods subject to a specific purchase order which
do not meet the specifications of such purchase order;
(c) inventory which Lender determines, in its sole and
absolute discretion exercised in good faith, to be unacceptable
for borrowing purposes due to age, quality, type, category,
value and/or quantity;
(d) inventory with respect to which Lender does not have a
valid, first priority and fully perfected security interest;
(e) inventory with respect to which there exists any Lien
(other than a Permitted Lien) in favor of any Person other than
Lender;
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(f) packaging or shipping material or maintenance supplies;
(g) shipping or product labels;
(h) inventory that is obsolete;
(i) inventory that has been returned or repossessed unless
such inventory is in new, unused and saleable condition;
(j) inventory that consists of used goods taken in trade;
(k) inventory produced in violation of the Fair Labor
Standards Act, in particular provisions contained in Title 29
U.S.C. 215 (a)(i);
(l) inventory located in a jurisdiction other than the United
States of America and inventory located at a location for which
Lender does not have a valid landlord's or warehouseman's waiver
or subordination on terms and conditions acceptable to Lender in
its sole discretion; and
(m) inventory located at any location other than those listed
on SCHEDULE 5.1(q), as amended from time to time."
"'Permitted Liens" means: (a) Liens securing taxes, assessments
and other governmental charges or levies (excluding any Lien imposed
pursuant to any of the provisions of ERISA) or the claims of
materialmen, mechanics, carriers, warehousemen or landlords for labor,
materials, supplies or rentals incurred in the ordinary course of
business, but (i) in all cases, only if payment shall not at the time
be required to be made in accordance with SECTION 7.4, and (ii) in the
case of warehousemen or landlords controlling locations where inventory
is located, only if such liens have been waived or subordinated to the
security interest of Lender in a manner satisfactory to Lender; (b)
Liens consisting of deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, obligations under
workers' compensation, unemployment insurance or similar legislation or
under surety or performance bonds, in each case arising in the ordinary
course of business; (c) Liens constituting encumbrances in the nature
of zoning restrictions, easements and rights or restrictions of record
on the use of Borrower's real estate, which in the sole judgment of the
Lender do not materially detract from the value of such real estate or
impair the use thereof in the business of Borrower; (d) Liens of the
Lender arising under this Agreement and the other Loan Documents, (e)
Liens securing Permitted Indebtedness consisting of purchase money
Indebtedness and Liens securing Subordinated Indebtedness, (f) Liens
(not to exceed $100,000 in the aggregate) securing appeal and surety
bonds; and (g) Liens granted by Lee Engineering Company, Inc. to
Rockford Industries, Inc. pursuant to that certain Lease
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<PAGE> 8
Agreement between Lee Engineering Co., Inc. and Rockford Industries, Inc.
dated October 14, 1999."
Section 2.02. Amendment of Section 1. SECTION 1 is further amended by
adding thereto the following definition:
"'Qualifying Subsidiary" means a Subsidiary of Borrower that has
executed and delivered an unlimited guaranty of all Obligations for the
benefit of Lender and a security agreement granting to Lender a security
interest in all of its assets to secure the Obligations, both in form
and substance acceptable to Lender in its sole discretion, and that has
executed, or had executed in the case of termination statements, and
delivered to Lender such financing statements and termination statements
as required by Lender to perfect such security interest as a first
priority security interest subject only to Permitted Liens."
Section 2.03. Amendment of Schedule 5.1(q). Schedule 5.1(q) attached to
the Loan Agreement is amended and restated in its entirety in the form attached
hereto as Schedule 5.1(q).
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<PAGE> 9
ARTICLE III
Conditions Precedent
Section 3.01. Conditions Precedent. The effectiveness of this Amendment
is subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by Lender:
(a) The representations and warranties of Borrower contained
herein shall be true and correct as of the date hereof as if made on the
date hereof;
(b) After giving effect to the provisions of this Amendment,
no Default or Event of Default shall have occurred and be continuing
under the Loan Agreement;
(c) Lender shall have received this Amendment, duly executed
by Borrower and consented to by TBM Holdings, Inc.;
(d) Subsidiary shall have executed and delivered to Lender an
unlimited guaranty of the Obligations and a security agreement granting
Lender a security interest in all of its assets as security for the
Obligations, both in form and substance acceptable to Lender in its sole
discretion;
(e) Lender shall have received an opinion of Borrower's
counsel, in form and substance acceptable to Lender in its sole
discretion;
(f) The purchase of all outstanding capital stock of
Subsidiary by Borrower shall have closed and title to such stock shall
have been acquired by Borrower, subject to no liens, claims or
encumbrances;
(g) Borrower shall have delivered to Lender certified board of
directors resolutions and certificates of incumbency, in such form and
content as is acceptable to Lender in its sole discretion, for both
Borrower and Subsidiary;
(h) Lender shall have received a certified copy of the
articles of incorporation, and all amendments thereto, of Subsidiary,
issued by the Secretary of State of the State of Rhode Island together
with a certificate of existence and good standing for Subsidiary issued
by the such Secretary of State;
(i) Lender shall have received certification by each
jurisdiction in which Subsidiary is qualified (or is required to be
qualified) as a foreign corporation to transact business, to the effect
that Subsidiary is in good standing with respect to payment of
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<PAGE> 10
franchise and similar taxes in such states;
(j) Lender shall have received all financing statements
required by Lender in connection with perfection of Lender's security
interests in the assets of Subsidiary and all termination statements and
other amendments to financing statements required by Lender to make
Lender's security interest in such assets a first priority (and only)
security interest therein subject, however, to the Permitted Liens;
(k) Lender shall have received a copy of the bylaws, and all
amendments thereto, of Subsidiary, certified by the Secretary or
Assistant Secretary of Subsidiary;
(l) Lender shall have received evidence of insurance of the
assets of Subsidiary in compliance with the requirements of the Loan
Agreement and such loss payable endorsements with respect to such
insurance as may be required by Lender;
(m) Lender shall have received an executed landlord's waiver
and consent for Subsidiary's manufacturing facility located in
Pawtucket, Rhode Island; and
(n) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments and other legal matters incident thereto shall be reasonably
satisfactory to Lender and its legal counsel.
ARTICLE IV
Ratifications, Representations, and Warranties
Section 4.01. Ratifications by Borrower. The terms and provisions set
forth in this Amendment shall modify and supersede all inconsistent terms and
provisions set forth in the Loan Agreement and, except as expressly modified and
superseded by this Amendment, the terms and provisions of the Loan Agreement are
ratified and confirmed and shall continue in full force and effect. The Loan
Agreement as amended by this Amendment shall continue to be the legal, valid,
binding and enforceable in accordance with its terms.
Section 4.02. Renewal and Extension of Security Interests and
Assignments. Borrower hereby renews and affirms the liens and security interests
created and granted in the Loan Agreement and all other Loan Documents. Borrower
agrees that this Amendment shall in no manner affect or impair the liens and
security interests securing the Obligations, and that such liens and security
interests shall not in any manner be waived, the purposes of this Amendment
being to modify the Loan Agreement as herein provided, and to carry forward all
liens and security interest securing same, which are acknowledged by Borrower to
be valid and subsisting.
Section 4.03. Representations and Warranties. Borrower represents and
warrants to Lender as follows: (i) the execution, delivery and performance of
this Amendment and any and
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<PAGE> 11
all other Loan Documents executed and/or delivered in connection herewith have
been authorized by all requisite corporate action on the part of Borrower and
will not violate the articles of incorporation or bylaws of Borrower or any
agreement to which Borrower is a party; (ii) no Default or Event of Default
under the Loan Agreement as amended hereby has occurred and is continuing; and
(iii) Borrower is in full compliance with all covenants and agreements contained
in the Loan Agreement, as amended hereby.
ARTICLE V
Miscellaneous
Section 5.01. Survival of Representations and Warranties. All
representations and warranties made in this Amendment or any other Loan Document
furnished in connection with this Amendment shall survive the execution and
delivery of this Amendment and the other Loan Documents, and no investigation by
Lender or any closing shall affect such representations and warranties or the
right of Lender to rely thereon.
Section 5.02. Reference to Loan Agreement. Each of the Loan Documents,
including the Loan Agreement and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Loan Agreement as amended hereby, are hereby
amended so that any reference in such Loan Documents to the Loan Agreement shall
mean a reference to the Loan Agreement as amended hereby.
Section 5.03. Expenses of Lender. Borrower agrees to pay on demand all
costs and expenses incurred by Lender in connection with the preparation,
negotiation and execution of this Amendment and the other Loan Documents
executed pursuant hereto; provided, however, that Lender's legal fees subject to
reimbursement shall be limited to $6,000. Borrower agrees to pay on demand all
costs and expenses incurred by Lender in connection with any and all future
amendments, modifications, and supplements to the Loan Agreement, including,
without limitation, the costs and fees of Lender's legal counsel, and all costs
and expenses incurred by Lender in connection with the enforcement or
preservation of any rights under the Loan Agreement, as amended hereby, or any
other Loan Document, including, without limitation, the reasonable costs and
fees of Lender's legal counsel.
Section 5.04. Severability. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
SECTION 5.05. APPLICABLE LAW. THIS AMENDMENT SHALL BE DEEMED TO HAVE BEEN
MADE AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE
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<PAGE> 12
STATE OF TEXAS AND APPLICABLE FEDERAL LAW.
Section 5.06. Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, assigns, heirs, executors, and legal representatives, except that
none of the parties hereto other than Lender may assign or transfer any of its
rights or obligations hereunder without the prior written consent of Lender.
Section 5.07. Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument. This Amendment may be executed and delivered by facsimile
transmission.
Section 5.08. Headings. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 5.09. Conflicting Provisions. If any provision of the Loan
Agreement as amended hereby conflicts with any provision of any other Loan
Document, the provision in the Loan Agreement shall control.
Section 5.10 Consent to Purchase. By execution of this Amendment, Lender
acknowledges that it has waived the written notification required by Section 9.2
of the Loan Agreement with respect to, and hereby consents to, the acquisition
by Borrower of the outstanding capital stock of Subsidiary.
SECTION 5.11. RELEASE. AS OF THE DATE HEREOF, BORROWER HEREBY
ACKNOWLEDGES THAT BORROWER HAS NO DEFENSE, COUNTERCLAIM, OFFSET,
CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE
ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF BORROWER'S LIABILITY TO REPAY
THE LOAN OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM
LENDER. BORROWER VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES
LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL
POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES,
AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH BORROWER MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND
IRRESPECTIVE OR WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION
OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY LOAN, INCLUDING,
WITHOUT
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<PAGE> 13
LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR
RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE
OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER LOAN DOCUMENTS, AND
NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
SECTION 5.12. ENTIRE AGREEMENT. THIS AMENDMENT, THE LOAN AGREEMENT AND
ALL OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH AND PURSUANT
TO THIS AMENDMENT AND THE LOAN AGREEMENT REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first written above.
<TABLE>
<CAPTION>
<S> <C>
LONG REACH HOLDINGS, INC. BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: /s/William A. Schwartz By: /s/ F.W. McCollum
--------------------------- -----------------------
Name: William A. Schwartz Name: F.W. McCollum
Title: Secretary and Authorized Title: Vice President
Signatory
</TABLE>
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<PAGE> 14
CONSENT AND RATIFICATION
The undersigned (i) consents to the foregoing Amendment, (ii)
acknowledges and agrees that the execution of the foregoing Amendment does not
diminish, waive, or release its obligations under that certain Unlimited
Guaranty dated as of February 23, 2000 executed by the undersigned for the
benefit of Lender and (iii) ratifies and confirms its obligations pursuant to
such Unlimited Guaranty.
TBM HOLDINGS, INC.
By: /s/ William A. Schwartz
------------------------
Its: President
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<PAGE> 1
Exhibit 16
Letter re Change in Certifying Accountant
Richard A. Eisner & Company, LLP
Accountants and Consultants
575 Madison Avenue
New York, New York 10022
May 23, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: TBM Holdings, Inc.
We were previously the independent auditors for TBM Holdings, Inc. and issued
our reports dated February 11, 2000 (with respect to Note J, February 23, 2000)
and dated March 24, 1999 on our audits of the financial statements of TBM
Holdings, Inc. (formerly known as Specialty Retail Group, Inc.) as of January 1,
2000, and December 31, 1998, respectively. On May 17, 2000, we were informed
that we were not reappointed as the Company's independent auditor. We have read
the statements included under Item 4 of Form 8-K of TBM Holdings, Inc. and we
agree with such statements as they concern our firm.
Very truly yours,
/s/ Richard A. Eisner & Company, LLP
- ------------------------------------
Richard A. Eisner & Company, LLP
<PAGE> 1
EXHIBIT 99
Contact: William Schwartz, President
(203) 227-6140
TBM HOLDINGS ANNOUNCES THE ACQUISITION OF
LEE ENGINEERING COMPANY
Westport, Connecticut (May 18, 2000) - TBM Holdings (OTC Bulletin Board:TBMH)
today announced that its subsidiary, Long Reach Holdings, Inc., has completed
the acquisition of Lee Engineering Company. The consideration paid for the
company was $7.38 million cash, subject to closing adjustments.
Lee Engineering is a manufacturer of material handling equipment including
pallet stackers, scissor lifts and dock lifts marketed under the Presto brand
name. The company reported net revenues of approximately $17 million for the
fiscal year ended December 31, 1999. Lee Engineering operates in a single
manufacturing location in Pawtucket, Rhode Island. Immediately following the
closing, the company will be renamed Presto Lifts, Inc.
Anand Sharma, Chairman and CEO of TBMH, noted, "The acquisition of Lee
Engineering as an add on acquisition for Long Reach Holdings reflects our growth
strategy in the material handling industry. There are significant opportunities
to acquire niche manufacturers within the material handling industry which are
complementary to our current product offering."
William Schwartz, President of TBMH, commented, "Lee's product lines are highly
synergistic with Long Reach's Rol-Lift product lines. Our management team will
be working together with the Lee management team to achieve sales channel,
distribution, and operating efficiencies as we assimilate this acquisition.
Additionally, we look forward to introducing the Kaizen process at Lee
Engineering to seek to enhance operating efficiencies."
TBMH will use reasonable efforts to cause the shares purchased in the Company's
June 1999 and February 2000 private placements to be registered with the
Securities and Exchange Commission as soon as practicable. The Company intends
to use all reasonable efforts to file a registration statement covering these
shares with the SEC during the third quarter of 2000; the effectiveness of any
such registration statement is subject to SEC review. Additionally, the Company
will seek to be listed on NASDAQ's SmallCap Market by the end of 2000.
TBMH seeks to acquire underperforming manufacturing companies in the material
handling industry and use the Kaizen Growth Strategy to seek to improve
operating performance and profitability. TBMH believes that its available
capital and bank financing will enable it to pursue these acquisitions.
This press release contains forward looking statements, as defined under the
Private Securities Litigation Reform Act of 1995. Actual results may differ
materially from those anticipated as a result of various risks and
uncertainties, including risks and uncertainties detailed from time to time in
the Company's periodic reports on Forms 10-KSB, 10-QSB and 8-K filed with the
Securities and Exchange Commission. Readers are cautioned not to place undue
reliance on these forward looking statements which speak only as of the date
hereof. TBMH undertakes no obligation to publish revised forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
