<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
or
[ ] TRANSITION REORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1996
Commission File Number 1-10668
AIR-CURE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1667001
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2727 Allen Parkway, Suite 760 Houston, Texas 77019
---------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 713-285-2700
------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date.
11,498,118
----------
(Shares of common stock outstanding as of November 12, 1996)
================================================================================
<PAGE> 2
AIR-CURE TECHNOLOGIES, INC. AND SUBSIDIARIES
Form 10-Q
For The Quarterly Period Ended
September 30, 1996
Page
PART I - FINANCIAL INFORMATION
- ------ ---------------------
ITEM 1: FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 30,
1996 (unaudited) and December 31, 1995 (audited) 3
Condensed Consolidated Statements of Operations for the
three and nine month periods ended September 30, 1996
and 1995 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 1996 and
1995 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 8
PART II - OTHER INFORMATION 12
- ------- -----------------
<PAGE> 3
AIR-CURE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Current period unaudited)
September 30, December 31,
ASSETS 1996 1995(1)
------------- ------------
Current Assets:
Cash and cash equivalents $ 2,219 $ 2,216
Restricted cash 143 83
Due on contracts and other receivables 16,229 22,926
Costs and estimated earnings in excess of billings
on uncompleted contracts 23,768 19,369
Inventories 3,778 3,944
Refundable income taxes 357 832
Prepaid expenses, deposits and other assets 986 502
Deferred tax asset 465 453
------- -------
Total Current Assets 47,945 50,325
------- -------
Property and Equipment, net 5,123 5,392
------- -------
Other Assets:
Licenses, trademarks and tradenames, net 4,250 4,400
Excess costs over net assets acquired, net 11,840 12,191
Other assets 255 51
------- -------
Total Other Assets 16,345 16,642
------- -------
TOTAL ASSETS $69,413 $72,359
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 8,015 $11,799
Accrued liabilities 16,275 14,892
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,462 815
Current maturities of long-term obligations 3,332 3,347
Income taxes payable 15 124
------- -------
Total Current Liabilities 29,099 30,977
Long-Term Liabilities:
Borrowings under line of credit 13,500 11,499
Long-term obligations, less current maturities 4,169 6,709
Deferred tax liability 257 257
------- -------
Total Liabilities 47,025 49,442
------- -------
Stockholders' Equity:
Preferred stock --- ---
Common stock 11 11
Additional paid-in capital 20,994 20,901
Retained earnings 1,136 1,556
Translation adjustment 247 449
------- -------
Total Stockholders' Equity 22,388 22,917
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $69,413 $72,359
======= =======
(1) The balance sheet at December 31, 1995 is condensed from the audited
financial statements at that date.
See Notes To Condensed Consolidated Financial Statements
3
<PAGE> 4
AIR-CURE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(In thousands, except per share amounts) (Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- -----------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $22,992 $32,627 $72,185 $89,067
Cost of revenues 18,332 26,840 57,389 73,220
------- ------- ------- -------
Gross profit 4,660 5,787 14,796 15,847
Selling, general and administrative expenses 2,655 2,770 7,648 8,296
Sales commissions 520 801 2,222 1,592
Depreciation and amortization 329 257 812 766
Restructuring costs ---- ---- 3,500 ----
------- ------- ------- -------
Operating profit 1,156 1,959 614 5,193
------- ------- ------- -------
Other income (expense):
Interest expense, net (445) (409) (1,299) (1,048)
Miscellaneous, net (4) (5) 40 259
------- ------- ------- -------
Total other expense (449) (414) (1,259) (789)
------- ------- ------- -------
Earnings (loss) before income taxes 707 1,545 (645) 4,404
Income tax provision (benefit) 279 440 (225) 1,050
------- ------- ------- -------
Net earnings (loss) $ 428 $ 1,105 $ (420) $ 3,354
======= ======= ======= =======
Net earnings (loss) per share $ 0.04 $ 0.10 $ (0.04) $ 0.29
======= ======= ======= =======
Weighted average common and common
equivalent shares outstanding 11,568 11,466 11,466 11,454
======= ======= ======= =======
</TABLE>
See Notes To Condensed Consolidated Financial Statements
4
<PAGE> 5
AIR-CURE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(In thousands)
(Unaudited)
1996 1995
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) ($420) $3,354
Adjustments to reconcile net earnings (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 1,238 1,318
Deferred income tax benefit (12) (203)
Changes in assets and liabilities:
Restricted cash (61) 500
Due on contracts and other receivables, net 6,662 (6,284)
Inventories 163 753
Costs and estimated earnings in excess of
billings on uncompleted contracts (4,500) (12,546)
Prepaid expenses, deposits and other assets (362) (711)
Refundable income taxes 475 ---
Accounts payable and accrued liabilities (2,295) 12,098
Billings in excess of costs and estimated earnings
on uncompleted contracts 676 (1,778)
Income taxes payable (108) 755
Other (343) (234)
------ ------
Net cash provided (used) by operating activities 1,113 (2,978)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquired businesses, net of cash acquired (268) (11)
Purchases of property and equipment (384) (765)
------ ------
Net cash used by investing activities (652) (776)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term obligations --- 3,663
Payments of long-term obligations (2,499) (1,643)
Net borrowings under line of credit 2,002 1,099
Distributions to shareholders of pooled company --- (1,133)
Proceeds from exercise of stock options 93 33
------ ------
Net cash used by financing activities (404) 2,019
------ ------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (54) 194
------ ------
Net increase (decrease) in cash and cash equivalents 3 (1,541)
Cash and cash equivalents, beginning of period 2,216 1,541
------ ------
Cash and cash equivalents, end of period $2,219 ---
====== ======
See Notes To Condensed Consolidated Financial Statements
5
<PAGE> 6
AIR-CURE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
Regulation S-X pursuant to the rules and regulations of the United States
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although management believes that the disclosures are
adequate to make the information presented not misleading. These condensed
consolidated financial statements should be read in conjunction with the
financial statements contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 and the accompanying notes and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
In the opinion of management, the unaudited condensed financial statements
contain all adjustments, consisting of only normal recurring adjustments,
necessary to present fairly the financial position as of September 30,1996, the
results of operations for the three and nine month periods ended September 30,
1996 and 1995, and the cash flows for the nine month periods ended September 30,
1996 and 1995. The 1996 interim results are not necessarily indicative of what
actual results will be for the entire year.
Net earnings (loss) per share are computed based on the weighted average number
of shares and dilutive equivalent shares of common stock, including stock
options and warrants, outstanding during each year using the treasury stock
method.
Certain reclassifications have been made to the prior year's financial
statements in order to conform with the classifications adopted for reporting in
fiscal 1996.
NOTE 2 - DUE ON CONTRACTS AND OTHER RECEIVABLES
September 30, December 31,
1996 1995
------------- ------------
Due on contracts and other receivables consist of:
Billings on completed contracts and
contracts in progress $15,345,000 $21,482,000
Retained contract receivables 879,000 1,278,000
Other miscellaneous receivables 195,000 361,000
Allowance for doubtful accounts ( 190,000) ( 195,000)
----------- -----------
$16,229,000 $22,926,000
=========== ===========
6
<PAGE> 7
NOTE 3 - ACCRUED LIABILITIES
September 30, December 31,
1996 1995
------------- ------------
Accrued liabilities consist of:
Job costs $12,144,000 $10,854,000
Warranties 287,000 419,000
Compensation 1,985,000 2,359,000
Miscellaneous 1,859,000 1,260,000
----------- -----------
$16,275,000 $14,892,000
=========== ===========
NOTE 4 - BUSINESS ACQUISITIONS
On December 28, 1995, the Company issued 4,139,305 shares of its common stock in
exchange for all of the outstanding common stock of Allied Industries, Inc.
("Allied"). The merger has been accounted for as a pooling-of-interests and,
accordingly, the Company's consolidated financial statements have been restated
to include the accounts and operations of Allied effective January 28, 1994
(date of inception of Allied).
Effective January 1, 1995, Allied was granted S Corporation tax status.
Accordingly, Allied did not pay U.S. Federal income taxes for the period from
January 1, 1995 through December 28, 1995 (the date of merger). If Allied had
been a C Corporation for the period ended December 28, 1995, an additional
provision for income taxes of $215,000 and $853,000, respectively, would have
been recorded for the three and nine month periods ended September 30, 1995
resulting in a pro forma net earnings for the Company of approximately, $890,000
and $2,501,000 , respectively, and pro forma net earnings per share of $0.08 and
$0.22, respectively.
NOTE 5 - RESTRUCTURING COSTS
A restructuring charge totaling $4,200,000 was taken during the first quarter of
fiscal 1996. The charge includes the estimated future cost of the employment
agreement, including severance, with the former president and chief executive
officer who was replaced in March 1996, and the anticipated cost to implement
management's plan to reduce the Company's overall cost structure including
employee severance, lease and other contract buyouts, inventory and other asset
impairments, excess machinery disposal, and other costs. These charges are
reflected as restructuring costs of $3,500,000 and a reserve of $700,000 which
has been included in cost of revenues.
NOTE 6 - SUBSEQUENT EVENTS
On September 20, 1996, the Company announced that it entered into a definitive
agreement to purchase Ohmstede, Inc. for approximately $52 million. The
acquisition, if consummated, will be accounted for as a purchase. Ohmstede is
the largest manufacturer of shell and tube heat exchangers in the United
States. The Company plans to finance the acquisition with bank financing and a
private placement of subordinated debt.
7
<PAGE> 8
ITEM 2
------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
GENERAL
Air-Cure Technologies, Inc. ("Air-Cure" or the "Company") was formed in April
1990 when the Company purchased substantially all of the assets of Texcel
Filtration Systems, Inc. Since its founding, the Company has experienced
substantial growth, both internally and through acquisitions. The Company
acquired Pipkorn Environmental Technologies, Inc. and Interel Environmental
Technologies, Inc. in 1991, Air-Cure Dynamics, Inc., Air-Cure (Canada)
Technologies, Ltd., Air-Cure Environmental GmbH, and Air-Cure (Singapore) Pte.
Ltd. in 1992, and Amerex Industries, Inc. and VIC Environmental Systems, Inc. in
1994. All of these acquisitions were accounted for under the purchase method of
accounting. For each purchase transaction, the excess of the total acquisition
costs over the fair value of the net assets acquired is being amortized on a
straight-line basis over 25 years. In December 1995, the Company and Allied
merged in a transaction in which Allied became a wholly-owned subsidiary of the
Company. The merger between the Company and Allied was treated as a
pooling-of-interests for accounting purposes. Accordingly, the Company's
historical financial statements have been restated to reflect the combined
operations of the Company and Allied for periods prior to consummation of the
merger.
Most of the Company's revenues are derived from the performance of fixed-price
contracts, which in some cases are subject to adjustment for changes in the
price of raw materials. Revenues from such contracts are recognized using the
percentage of completion method, measured by the percentage of costs incurred to
date to estimated total costs for each contract. The turnover rate of contract
receivables varies from period to period because the Company's business includes
both large and small contracts, and receivable balances depend on individually
negotiated contract terms, retainage amounts, if any, and the timing of
invoicing.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1996 Compared To Three Months Ended September
30, 1995:
Revenues. Revenues for the three month period ended September 30, 1996 totaled
$22,992,000, versus $32,627,000 for the corresponding period in 1995, a
$9,635,000 decrease in revenues. The quarter over quarter decrease in revenue is
due primarily to an unusually high revenue period in 1995 resulting from several
large contracts which were recognized. Revenues from North American operations
for the three month period ended September 30, 1996 and 1995 totaled $19,805,000
and $29,784,000, respectively, with the European and Asian operations combined
totaling $3,187,000 and $2,843,000, respectively. In the first quarter of 1996
the Company announced a restructuring plan to focus on consolidation of its
operations and a desire to enhance margins after the more than 60% increase in
revenues from 1994 to 1995.
8
<PAGE> 9
Gross Profit. Gross profit decreased to $4,660,000 (20% margin) for the three
month period ended September 30, 1996 from $5,787,000 (18% margin) for the same
period in the previous year, as a result of decreased revenues. The gross
profit margin percentage has increased due to sales of a more profitable mix of
products during the period and less pass through business to sub-contractors.
The gross profit from North American operations for the three month period
ended September 30, 1996 and 1995 totaled $3,773,000 (19% margin) and
$5,133,000 (17% margin), respectively, with the European and Asian operations
combined totaling $887,000 (28% margin) and $654,000 (23% margin),
respectively.
Operating Expenses. Selling, general and administrative (S,G&A) expenses for
the three month period ended September 30, 1996 decreased to $2,655,000 from
$2,770,000 for the same period in 1995. The Company's continuing focus on both
restructuring its operations and cost containment contributed to the decline.
Sales commissions totaled $520,000 and $801,000 for the three months ended
September 30, 1996 and 1995, respectively.
Interest. Net interest expense of $445,000 and $409,000 during the third
quarters of 1996 and 1995, respectively, relates to debt for acquisitions and
for the Company's line of credit for working capital purposes. The increase in
the interest expense in 1996 compared to the corresponding period in 1995 is due
to a small increase in the average outstanding balance on the line of credit.
Net Earnings. Net earnings for the three month period ended September 30, 1996,
decreased compared to the corresponding period in 1995 due to (i) a decrease in
revenues at two of the Company's divisions, and (ii) an increase in income tax
expense because Allied, which was taxed as a C corporation in 1996, was not
taxed in 1995 since it was an S corporation. The effective tax rate is higher
than the federal statutory rate due to state income taxes and nondeductible
amortization of intangible assets.
Backlog. The Company's backlog represents revenue which is expected to be
recognized in subsequent periods with respect to contracts which have been
awarded as of the date on which backlog has been calculated. Depending upon the
length of time required to perform its contracts, the Company's results of
operations reflect the volume and pricing of orders received. As of September
30, 1996, the Company had an estimated backlog of work under contracts believed
to be firm of approximately $29,226,000, 15% of which is attributable to one
customer. As of December 31, 1995, the Company had an estimated backlog of
approximately $28,105,000, 20% of which was attributable to a project for one
customer. The Company expects to complete virtually all of its backlog as of
September 30, 1996 within the next twelve months.
Nine Months Ended September 30,1996 Compared To Nine Months Ended September 30,
1995:
Revenues. Revenues for the nine month period ended September 30, 1996 totaled
$72,185,000, a $16,882,000 decrease in revenues from the corresponding period in
1995. The revenue decrease resulted from the above discussed restructuring plan
and unusually high revenue in the 1995 period from several large contracts.
Combined revenues from the Company's European and Asian operations were
$10,560,000 and $7,524,000, respectively, for the nine months ended September
30, 1996 and 1995.
9
<PAGE> 10
Gross profit. Gross profit was $14,796,000 and $15,847,000, respectively, for
the nine month periods ended September 30, 1996 and 1995; however, the gross
margin percentage improved to 21%in fiscal 1996 from 18% in fiscal 1995. The
gross profit from North American operations for the nine months ended
September 30, 1996 and 1995 totaled $11,909,000 (19% margin) and $14,251,000
(17% margin), respectively, with the European and Asian operations totaling
$2,887,000 (27% margin), and $1,596,000 (21% margin), respectively.
Selling, General and Administrative Expenses. S, G &A expenses for the nine
month period ended September 30, 1996 decreased to $7,648,000 from $8,296,000
for the same period in 1995. The Company's focus on both restructuring its
operations and cost containment, including reductions in personnel and office
space, contributed to declines in salary and rent expense.
Restructuring Costs. A restructuring charge totaling $4,200,000 was taken during
the first quarter of fiscal 1996. The charge includes the estimated future cost
of the employment agreement, including severance, with the former president and
chief executive officer who was replaced in March 1996, and the anticipated cost
to implement management's plan to reduce the Company's overall cost structure
including employee severance, lease and other contract buyouts, inventory and
other asset impairments, excess machinery disposal, and other costs. These
charges are reflected as restructuring costs of $3,500,000 and a reserve of
$700,000 which has been included in cost of revenues.
Interest. Interest expense during the first nine months of 1996 was $1,299,000
compared to $1,048,000 for the comparable period in 1995. The increase is
attributable to an increase in the average outstanding borrowings on the
Company's line of credit.
Net Earnings (Loss). Net earnings for the nine months ended September 30, 1996,
decreased over the comparable period in 1995 as a result of (i) the
restructuring charge described in Note 5 to the financial statements which had
a net of tax impact of $2,646,000, (ii) Allied earnings in 1995 were taxed as
an S corporation which had a net tax impact of $853,000 and (iii) a decrease
in revenue in 1996 over 1995 as a result of unusually high revenue in 1995
from several large contracts which had a net tax impact of $275,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $18,846,000 at September 30, 1996, compared to
$19,348,000 at December 31, 1995. Cash and cash equivalents were essentially
constant during such period.
The Company's capital resources consist of cash and cash equivalents generated
by its operating activities and funds available under its line of credit.
During the nine month period ended September 30, 1996, the Company's operating
activities provided cash of $1,113,000. Conversely, during the nine month
period ended September 30, 1995, the Company's operating activities used cash
of $2,978,000.
During the nine month periods ended September 30, 1996 and 1995, $384,000 and
$765,000, respectively, were invested in property and equipment. Cash paid for
acquired businesses, net of cash received totaled $268,000 in 1996. Net
borrowings under the line of credit totaled $2,002,000 and $1,099,000 during the
nine month periods ended September 30, 1996 and 1995, respectively. Payments of
long-term obligations were $2,499,000 and $1,643,000 during the nine month
periods ended September 30, 1996 and 1995, respectively. Proceeds received
relating to the issuance of stock from the exercise of stock options totaled
$93,000 and $33,000 for the nine month periods ended September 30, 1996 and
1995, respectively. During the nine month period ended September 30, 1995,
which was prior to the Allied merger, $1,133,000 of distributions were made to
the shareholders of Allied.
10
<PAGE> 11
The Company's capital requirements consist of its general working capital needs,
capital expenditures and the funds necessary to make the payments required under
the promissory notes. The Company's general working capital requirements consist
of salary costs and related overhead, the purchase price of material and
components and subcontract costs incurred prior to the receipt of corresponding
progress payments under the contract with respect to which such costs are
incurred. Management anticipates that the Company will make approximately
$300,000 in capital expenditures during the last three months of 1996.
Approximately $833,000 in principal payments related to the term loan will be
payable during the last three months of 1996.
On October 18, 1995, the Company entered into a $15,000,000 financing agreement
with Bank of America which was amended on December 29, 1995 to increase the
maximum borrowings to $25,000,000. As amended, the financing consisted of a
$10,000,000 term loan plus a $15,000,000 revolving credit facility. On June 28,
1996, the Company further amended the financing agreement to, among other
things, increase the revolving credit facility to $20,000,000. The term loan and
the line of credit currently bear interest at the prime rate or the Eurodollar
rate plus a calculated interest factor. The term loan, maturing December 31
1998, is payable in 12 quarterly payments of principal and interest, while the
line of credit is due in full in December 1997, with interest payable monthly.
As of September 30, 1996, approximately $6,000,000 was available for borrowing
under the Company's revolving credit facility. As more fully described in Note 6
to the financial statements, the Company is in the process of entering into an
agreement which will extend the term of its credit facilities. Management
expects that funds available under this credit facility, together with cash
generated from operations, will be sufficient to meet the Company's capital
requirements for its general working capital needs, capital expenditures and
debt service requirements for at least the next 12 months.
FORWARD LOOKING STATEMENTS AND ASSUMPTIONS
This Quarterly Report on Form 10-Q may contain or incorporate by reference
certain forward-looking statements, including by way of illustration and not of
limitation, statements relating to liquidity, revenues, expenses and margins.
The Company strongly encourages readers to note that some or all of the
assumptions, upon which such forward-looking statements are based, are beyond
the Company's ability to control or estimate precisely, and may in some cases
be subject to rapid and material changes.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material pending legal proceedings to which the Company is party or
of which any of its property is subject.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Securities Holders.
None.
Item 5. Other Information.
On September 19, 1996, the Company, along with Ohmstede, Inc., executed an
Agreement and Plan of Merger whereby shareholders of Ohmstede, Inc. will
receive total cash consideration of $52 million for all of the outstanding
stock of Ohmstede, Inc. Upon closing of the merger, Ohmstede, Inc. will become
a wholly-owned subsidiary of the Company. A copy of the Agreement and Plan of
Merger and a copy of the Company's news release announcing the acquisition are
attached as exhibits to this Form 10-Q. This summary description of the
transaction does not purport to be complete and is qualified by reference to
the news release and the Agreement and Plan of Merger.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required to be filed by Item 601 of Regulation S-K.
3.1h Certificate of Incorporation of Air-Cure
Technologies, Inc., as amended.
3.2l Certificate of Amendment to Certificate
of Incorporation.
3.3h By-Laws of Air-Cure Technologies, Inc., as amended.
3.4 Certificate of Amendment to Certificate of
Incorporation.
4.1 Omitted.
4.2 Omitted.
4.3l Form of Warrant Agreement between Air-Cure and
Sanders Morris Mundy Inc. dated April 24, 1996.
4.4 Omitted.
4.5c Form of Warrant Agreement between Air-Cure and
Sanders Morris Mundy Inc. dated June 15, 1992.
12
<PAGE> 13
4.6d Form of Warrant Agreement between Air-Cure and
Pennsylvania Merchant Group, Ltd.
10.1f Air-Cure 401(k) Employee Retirement Savings
Program, as amended June 30, 1994.
10.2i Agreement and Plan of Merger, dated
October 13, 1995, among Air-Cure Technologies,
Inc., Air-Cure Acquisition Corporation, Allied
Industries, Inc., Mark E. Johnson and
Pierre S. Melcher.
10.3k Employment Agreement, dated December 29, 1995,
between Air-Cure and Mark E. Johnson.
10.4 k Employment Agreement, dated December 29, 1995,
between Air-Cure and Pierre S. Melcher.
10.5g Amended and Restated 1990 Stock Option Plan, as
amended June 29, 1995.
10.6 Omitted.
10.7f Lease agreement between Halligan and Labbe
Enterprises LLC and Amerex Industries, Inc.,
dated May 25, 1994.
10.8d Employment Agreement, dated December 17, 1992,
between Air-Cure and Michael P. Lawlor.
10.9l Employment Agreement, dated March 1, 1996,
between Air-Cure and Lawrance W. McAfee.
10.10 Omitted.
10.11f Employment Agreement, dated March 1, 1995 between
Air-Cure and John P. Fitzpatrick.
10.12 Omitted.
10.13 Omitted.
10.14 Omitted.
10.15 Omitted.
10.16d Form of Stock Option Agreement.
10.17 Omitted.
10.18 Omitted.
13
<PAGE> 14
10.19b License and Technical Assistance Agreement, dated
August 28, 1991, between Interel Environmental
Technologies, Inc. and Heinrich Luhr Staubtechnik
GmbH & Co.
10.20 Omitted.
10.21 Omitted.
10.22 Omitted.
10.23 Omitted.
10.24g Directors' Stock Option Plan.
10.25l Amendment to Directors' Stock Option Plan.
10.26f Employees Stock Purchase Plan, as amended
December 15, 1994.
10.27e Agreement, dated January 31, 1994, between Air-Cure
Technologies, Inc. and Local Union #486, Sheet
Metal Worker's International Association.
10.28j Credit Agreement dated as of October 18, 1995,
among Air-Cure and Bank of America.
10.29e Agreement and Plan of Merger, dated April 5, 1994,
among Air-Cure Environmental, Inc., Air-Cure
Acquisition Corporation, Amerex, Inc., Amerex
Industries, Inc. and other parties.
10.30e Agreement and Plan of Merger, dated April 28, 1994,
among Air-Cure Environmental, Inc., VIC Acquisition
Corporation, VIC Environmental Systems, Inc. and
Ronald E. Lewis.
10.31 Agreement and Plan of Merger, dated September 19,
1996, among Air-Cure Technologies, Inc., Ohmstede,
Inc. and Air-Cure Acquisition, Inc. (filed
herewith).
20.1 News Release of Air-Cure Technologies, Inc. dated
September 20, 1996. (filed herewith).
27 Financial Data Schedule
- --------------------
a Incorporated by reference. Documents were previously filed as exhibits
to registrant's registration on Form S-18 (File No. 33-37240).
b Incorporated by reference. Documents were previously filed as exhibits
to registrant's registration on Form S-1 (File No. 33-44205).
c Incorporated by reference. Documents were previously filed as exhibits
to registrant's registration on Form S-1 (File No. 33-52012).
d Incorporated by reference. Documents were previously filed as exhibits
to registrant's Annual Report on Form 10-K for fiscal year ending
March 31, 1993 (File No. 1-10668).
14
<PAGE> 15
e Incorporated by reference. Documents were previously filed as exhibits
to registrant's registration statement on Post-Effective Amendment No.
1 to Form S-1 filed on May 5, 1994 (File No. 33-69524).
f Incorporated by reference. Documents were previously filed as exhibits
to registrant's Annual Report on Form 10-K for the year ending
December 31, 1994 (File No. 1-10668).
g Incorporated by reference. Documents were previously filed as exhibits
to registrant's Preliminary Proxy Statement for the Annual Meeting of
Stockholders held on June 29, 1995.
h Incorporated by reference. Documents were previously filed as exhibits
to registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995 (File No. 1-10668).
i Incorporated by reference. Documents were previously filed as exhibits
to registrant's registration statement on Post-Effective Amendment No.
1 to Form S-4 filed on October 20, 1995 (File No. 33-92308).
j Incorporated by reference. Documents were previously filed as exhibits
to registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995 (File No. 1-10668).
k Incorporated by reference. Documents were previously filed as exhibits
to registrant's Annual Report on Form 10-K for the year ending
December 31, 1995 (File No. 1-10668).
l Incorporated by reference. Documents were previously filed as exhibits
to registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996 (File No. 1-10668).
(b) Reports on Form 8-K.
None
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AIR-CURE TECHNOLOGIES, INC.
Date: November 14, 1996 /s/ Lawrance W. McAfee
---------------------------
Lawrance W. McAfee
Executive Vice President,
Chief Financial Officer and
Secretary
Date: November 14, 1996 /s/ David E. Crays
---------------------------
David E. Crays
Corporate Controller and
Assistant Secretary
16
<PAGE> 17
EXHIBIT INDEX
Exhibit 3.4 - Certificate of Amendment to Certificate of
Incorporation.
Exhibit 10.31 - Agreement of Merger
Exhibit 20.1 - Press Release
Exhibit 27 - Financial Data Schedule
<PAGE> 1
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
AIR-CURE TECHNOLOGIES, INC.
Air-Cure Technologies, Inc., a Delaware corporation (the
"Corporation"), does hereby certify that:
1. Article Fourth of the Certificate of Incorporation of the
Corporation is hereby amended in its entirety to read as follows:
"FOURTH: The aggregate number of shares which the Corporation shall
have the authority to issue is 31,000,000 shares, of which 30,000,000 shares
shall be designated Common Stock, par value $.001 per share, and 1,000,000
shares shall be designated Preferred Stock, par value $.01 per share. The
Board of Directors may authorize the issuance from time to time of the
Preferred Stock in one or more series with such designations, preferences,
qualifications, limitations, restrictions and optional or other special rights
(which may differ with respect to each series) as the Board may fix by
resolution. Without limiting the foregoing, the Board of Directors is
authorized to fix with respect to each series:
(1) The number of shares which shall constitute the series and the
name of the series;
(2) The rate and times at which, and the preferences and
conditions under which, dividends shall be payable on shares of the series, and
the status of such dividends as cumulative or non-cumulative and as
participating or non-participating;
(3) The prices, times and terms, if any, at or upon which shares
of the series shall be subject to redemption;
(4) The rights, if any, of holders of shares of the series to
convert such shares into, or to exchange such shares for, shares of any other
class of stock of the Corporation;
(5) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for shares of the series;
(6) The rights and preferences, if any, of the holders of shares
of the series upon any liquidation, dissolution or winding up of the affairs
of, or upon any distribution of the assets of, the Corporation;
<PAGE> 2
(7) The limitations, if any, applicable while such series is
outstanding, on the payment of dividends or making of distributions on, or the
acquisition of, the Common Stock or any other class of stock which does not
rank senior to the shares of the series; and
(8) The voting rights, if any, to be provided for shares of the
series."
2. The forgoing amendment to the Certificate of Incorporation has
been duly adopted in accordance with the provisions of Sections 222 and 242 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment on July 31, 1996.
AIR-CURE TECHNOLOGIES, INC.
/s/ Lawrance W. McAfee
------------------------------------
Lawrance W. McAfee
Executive Vice President
ATTEST:
/s/ David Crays
- -----------------------------------
David Crays, Assistant Secretary
2
<PAGE> 1
Exhibit 10.31
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AIR-CURE TECHNOLOGIES, INC.,
AIR-CURE ACQUISITION, INC.,
AND
OHMSTEDE, INC.
Dated as of September 19, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
----------
SECTION 1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
--------------
SECTION 1.3 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
--------------------
SECTION 1.4 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-------------
SECTION 1.5 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------------
SECTION 1.6 Meeting of Target Corporation Shareholders. . . . . . . . . . . . . . . . . . . . . . . 5
------------------------------------------
SECTION 1.7 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-------
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
REPRESENTATIONS AND WARRANTIES OF TARGET CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
------------------------------
SECTION 2.2 Target Corporation Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---------------------------------
SECTION 2.3 Authority Relative to the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-----------------------------------
SECTION 2.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
------------
SECTION 2.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
----------------------
SECTION 2.6 Regulatory Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
------------------
SECTION 2.7 Financial Statements and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . 8
----------------------------------------
SECTION 2.8 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
------------------
SECTION 2.9 Target Corporation Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-------------------------------
SECTION 2.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
----------
SECTION 2.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-----------
SECTION 2.12 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
----------------------
SECTION 2.13 Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------------------
SECTION 2.14 Patents, Trademarks and Copyrights . . . . . . . . . . . . . . . . . . . . . . . . . . 11
----------------------------------
SECTION 2.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
---------------------
SECTION 2.16 Title to Properties; Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------------------------------
SECTION 2.17 Permits and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--------------------
SECTION 2.18 Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . 13
-------------------------------------
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
REPRESENTATIONS AND WARRANTIES OF
ACQUIRING CORPORATION AND NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.1 Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
--------------------------
SECTION 3.2 Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-------------------------------
SECTION 3.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
------------
SECTION 3.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
----------------------
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
COVENANTS OF TARGET CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.1 Affirmative Covenants of Target Corporation . . . . . . . . . . . . . . . . . . . . . . 15
-------------------------------------------
SECTION 4.2 Negative Covenants of Target Corporation . . . . . . . . . . . . . . . . . . . . . . . 16
----------------------------------------
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 5.1 Access To, and Information Concerning,
--------------------------------------
Properties and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
----------------------
SECTION 5.2 Miscellaneous Agreements and Consents . . . . . . . . . . . . . . . . . . . . . . . . . 20
-------------------------------------
SECTION 5.3 Good Faith Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
------------------
SECTION 5.4 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-----------
SECTION 5.5 HSR Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
----------
SECTION 5.6 Benefit Plans and Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 20
----------------------------------
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 6.1 Conditions to Each Party's Obligation
-------------------------------------
to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------------------
SECTION 6.2 Conditions to the Obligations of Acquiring Corporation
------------------------------------------------------
and Newco to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 21
------------------------------
SECTION 6.3 Conditions to the Obligations of Target Corporation
---------------------------------------------------
to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
--------------------
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
TERMINATION; AMENDMENT; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-----------
SECTION 7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
---------------------
SECTION 7.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
---------
SECTION 7.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
-----------------
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
EXCLUSIVE REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 8.1 Agreement with Respect to Escrow Funds;
---------------------------------------
Indemnity Relating to Certain Tax Items . . . . . .. . . . . . . . . . . . . . . . . . 25
---------------------------------------
SECTION 8.2 Limitations on Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
---------------------
SECTION 8.3 Exclusive Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-----------------------------
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 27
------------------------------------------
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 10.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--------
SECTION 10.2 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
--------------------
SECTION 10.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-------------------
SECTION 10.4 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
----------------------------
SECTION 10.5 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
--------------------------
SECTION 10.6 Waiver; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
----------------
SECTION 10.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
------------------
SECTION 10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
------------
SECTION 10.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-------
SECTION 10.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-------------
SECTION 10.11 Jurisdiction and Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
----------------------
SECTION 10.12 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--------------------
SECTION 10.13 Parties in Interest;
--------------------
No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-------------------------
SECTION 10.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
------------
SECTION 10.15 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
--------------------------
SECTION 10.16 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
-------------------
</TABLE>
iii
<PAGE> 5
EXHIBITS
Exhibit A - Form of Noncompetition Agreements
Exhibit B - Form of Articles of Merger
Exhibit C-1 - Form of Employment Agreement of Will Ohmstede
Exhibit C-2 - Terms of Employment Agreement of John Ohmstede
SCHEDULES
Schedule 1.4(c) - Merger Consideration - Class A Common Stock
Schedule 1.4(d) - Merger Consideration - Class B Common Stock
Schedule 2.1(a) - Authorized to Do Business
Schedule 2.1(b) - Subsidiaries
Schedule 2.2 - Capitalization
Schedule 2.4 - No Violation
Schedule 2.5 - Consents and Approvals
Schedule 2.8 - Absence of Changes
Schedule 2.10 - Litigation
Schedule 2.11 - Tax Matters
Schedule 2.12 - Employee Benefit Plans
Schedule 2.13 - Employment Matters
Schedule 2.14 - Patents, Trademarks and Copyrights
Schedule 2.15 - Environmental Compliance
Schedule 2.16 - Titled Properties and Encumbrances
Schedule 2.17 - Permits and Licenses
Schedule 2.18 - Agreements, Contracts and Commitments
================================================================================
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is entered into as of
September 19, 1996, by and among Air-Cure Technologies, Inc., a Delaware
corporation ("Acquiring Corporation"), Air-Cure Acquisition, Inc., a Texas
corporation ("Newco"), and Ohmstede, Inc., a Texas corporation ("Target
Corporation").
WHEREAS, Acquiring Corporation desires to affiliate with Target
Corporation, and Target Corporation desires to affiliate with Acquiring
Corporation in the manner provided in this Agreement;
WHEREAS, Acquiring Corporation and Target Corporation believe that the
Merger (as defined herein) of Newco, a wholly-owned subsidiary of Acquiring
Corporation, with and into Target Corporation in the manner provided by, and
subject to the terms and conditions set forth in this Agreement, and all
exhibits, schedules and supplements hereto, is desirable and in the best
interests of their respective corporations and shareholders; and
WHEREAS, the respective boards of directors of Acquiring Corporation,
Newco and Target Corporation have approved this Agreement and the proposed
transactions substantially on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the recitals and the respective
representations, warranties and covenants contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the Texas Business Corporation Act, as amended
("TBCA"), Newco shall be merged with and into the Target Corporation (the
"Merger").
SECTION 1.2 Effective Time. As soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VI hereof, and
provided that this Agreement has not been terminated or abandoned pursuant to
Section 7.1 hereof, the Target Corporation and Newco (the "Constituent
Corporations") will cause Articles of Merger to be filed with the Secretary of
State of the State of Texas in the form required by and executed in accordance
with the relevant provisions of the TBCA. The date of such filings or such
other time and date as may be specified in the Articles of Merger shall be the
"Effective Time."
1
<PAGE> 7
SECTION 1.3 Effect of the Merger.
Target Corporation will be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and will
continue to be governed by the laws of the State of Texas, and the separate
corporate existence of Newco shall cease. The Articles of Incorporation and
the Bylaws of Target Corporation in effect at the Effective Time will be the
Articles of Incorporation and Bylaws of the Surviving Corporation, until duly
amended in accordance with their terms and the TBCA. Upon the consummation of
the Merger, the Surviving Corporation shall thereupon and thereafter possess
all assets and property of every description and every interest therein,
wherever located, of the Constituent Corporations as in existence immediately
prior to the Effective Time, and the rights, privileges, immunities, powers,
franchises and authority of each of the Constituent Corporations and all
obligations belonging to and due each of the Constituent Corporations shall be
vested in the Surviving Corporation without further act or deed. Title to any
real estate or any interest therein vested in any Constituent Corporation shall
not revert or in any way be impaired by reason of the Merger. The Surviving
Corporation shall thenceforth be liable for all the obligations of each
Constituent Corporation. Any claim existing, or action or proceeding pending,
by or against any Constituent Corporation, may be prosecuted to judgement, with
right of appeal, as if the Merger had not taken place, or the Surviving
Corporation may be substituted in place of any Constituent Corporation. All
the rights of creditors of each Constituent Corporation shall be preserved
unimpaired, and all liens upon the property of any Constituent Corporation
shall be preserved unimpaired but only as to the property effected by such
liens immediately prior to the Effective Time. The Merger shall have all such
other effects set forth in the TBCA.
SECTION 1.4 Consideration.
(a) Subject to the provisions of this Section 1.4, the aggregate
amount payable with respect to the Target Corporation Class A Common Stock (as
defined below) referenced in Section 1.4(c) and the Target Corporation Class B
Common Stock (as defined below) referenced in Section 1.4(d) shall be (i)
$52,000,000 in cash or immediately available funds (the "Cash Consideration")
and (ii) the Shareholder Assets (as defined below), except to the extent the
Shareholder Assets are distributed to Target Corporation's shareholders prior
to the Closing (the Cash Consideration and the Shareholder Assets being
collectively referred to as the "Merger Consideration"). The "Shareholder
Assets" are defined as: (A) all amounts payable to Target Corporation from C&D
Robotics (as defined below) not exceeding $4,000,000; (B) Target Corporation's
investment and associated equity interest in C&D Robotics not exceeding
$793,925; (C) life insurance policies and their cash surrender value as of the
date of distribution (which cash surrender value was $666,829 as of the Balance
Sheet Date (as defined below)); (D) $600,000 in cash if not otherwise paid
pursuant to Section 4.2(i) hereof; and (E) $978,424 representing federal income
tax deposits set forth on the Balance Sheet and all rights and privileges
incident thereto, including the right to receive any refunds with respect to
such deposits.
2
<PAGE> 8
(b) At Closing, Will Ohmstede and John Ohmstede, respectively,
shall enter into Noncompetition Agreements with Newco in the form attached as
Exhibit A (the "Noncompetition Agreements") with a term of three (3) years
beginning on the earlier to occur of (i) the second anniversary of the Closing
Date or (ii) the date that employment with Target Corporation ceases (the
"Covenant Period"), and such other terms and conditions as are set forth
therein. The amount due as consideration for the Noncompetition Agreement
executed by Will Ohmstede shall be $120,000 per year, payable in monthly
installments of $10,000 commencing on the last day of the first month of the
Covenant Period, and the amount due as consideration for the Noncompetition
Agreement executed by John Ohmstede shall be $95,000 per year, payable in
monthly installments of $7,916.67 commencing on the last day of the first month
of the Covenant Period.
(c) Subject to the terms of Section 1.4(f), each share of Target
Corporation's Class A voting common stock, par value $100 per share ("Target
Corporation Class A Common Stock"), issued and outstanding immediately prior to
the Effective Time, shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and represent the right to
receive the following consideration to the holder of record thereof, without
interest thereon, upon surrender of the certificate representing such Share:
an amount equal to $4,859.82 for each share of Target Corporation Class A
Common Stock held by such holder and a prorata portion of the Shareholder
Assets (based on the total number of outstanding shares of Target Corporation
Class A Common Stock and Target Corporation Class B Common Stock), if any, that
are not distributed to Target Corporation's shareholders before the Closing.
The aggregate amount payable to each holder of Target Corporation Class A
Common Stock and such holder's percentage interest in the undistributed
Shareholder Assets is set forth opposite such holder's name on Schedule 1.4(c).
(d) Subject to the terms of Section 1.4(f), each share of Target
Corporation's Class B non-voting common stock, par value $100 per share
("Target Corporation Class B Common Stock"), issued and outstanding immediately
prior to the Effective Time, shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and represent the
right to receive the following consideration to the holder of record thereof,
without interest thereon, upon surrender of the certificate representing such
Share: an amount equal to $4,859.82 for each share of Target Corporation Class
B Common Stock held by such holder and a prorata portion of the Shareholder
Assets (based on the total number of outstanding shares of Target Corporation
Class A Common Stock and Target Corporation Class B Common Stock), if any, that
are not distributed to Target Corporation's shareholders before the Closing.
The aggregate amount payable to each holder of Target Corporation Class B
Common Stock and such holder's percentage interest in the undistributed
Shareholder Assets is set forth opposite such holder's name on Schedule 1.4(d).
(e) Each share of common stock, $.01 par value per share, of Newco
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one newly and validly issued, fully paid and
non- assessable share of Class A Common Stock of the Surviving Corporation.
3
<PAGE> 9
(f) The Cash Consideration shall be paid in full in immediately
available funds at the Closing; provided, however, that (i) (A) if the amount
payable to Target Corporation from C&D Robotics constitutes any portion of the
Merger Consideration or is distributed to the Target Corporation's shareholders
prior to Closing and (B) such payable constituting a portion of the Merger
Consideration or so distributed exceeds $4,000,000, then the Cash Consideration
payable under Section 1.4(a) shall be reduced dollar-for-dollar by such excess
amount and (ii) if the Target Corporation's Net Worth (as defined below) is
less than $24,400,000 as of September 30, 1996, then the Cash Consideration
payable under Section 1.4(a) shall be reduced dollar-for-dollar by the
difference between $24,400,000 and Target Corporation's Net Worth as of such
date; and provided, further, that $1,000,000 of the Cash Consideration (the
"Escrow Funds") shall be deposited in escrow with Texas Commerce Bank National
Association (the "Escrow Agent") pursuant to a mutually acceptable Escrow
Agreement (the "Escrow Agreement") for the purpose of satisfying claims, if
any, of Acquiring Corporation under Article VIII hereof. Among other mutually
agreed upon terms, the Escrow Agreement shall provide that (i) the Escrow Funds
shall be disbursed in the percentages set forth on Schedule 1.4(c) and Schedule
1.4(d) upon the expiration of one year from the Effective Time unless Acquiring
Corporation shall have exercised its rights under Article VIII and pursuant to
the Escrow Agreement with respect to any claims under such article, (ii) the
Escrow Agent shall invest the Escrow Funds in a money market fund or similar
investment specified by the shareholders of Target Corporation, and the
investment income earned on the Escrow Funds shall be disbursed to the
shareholders of the Target Corporation and to Acquiring Corporation in the
percentages that the Escrow Funds are distributed under the terms of this
Agreement and the Escrow Agreement, and (iii) if upon the expiration of such
one year period the parties have not mutually agreed on the disbursement of the
Escrow Funds because of a claim by Acquiring Corporation under Article VIII
hereof, the Escrow Agent shall interplead such funds into a court of competent
jurisdiction, pending final disposition of Acquiring Corporation's claim. The
Escrow Agreement will provide that Will Ohmstede and John Ohmstede will be
appointed attorneys-in-fact for the shareholders of Target Corporation for the
purpose of the operation of the Escrow Agreement.
In the event that the Shareholder Assets have not been distributed to
Target Corporation's shareholders prior to the Closing, such assets shall be
conveyed concurrently with the Effective Time to Texas Commerce Bank National
Association, as trustee, which shall thereafter distribute the Shareholder
Assets in the percentages set forth on Schedule 1.4(c) and Schedule 1.4(d).
SECTION 1.5 Tax Treatment.
(a) Acquiring Corporation and each shareholder of Target
Corporation shall timely make a joint election (the "338(h)(10) Election")
pursuant to Section 338(h)(10) of the Internal Revenue Code of 1986, as amended
(the "Code"), and Treas. Reg. Section 1.338(h)(10)-1T(d)(1) for federal, state
and local income tax purposes with respect to the Merger such that (i) Target
Corporation will be treated as having sold all of its assets in a single
transaction on the Closing Date before Closing and while an S corporation
pursuant to Section 1361 of the Code and (ii) the
4
<PAGE> 10
shareholders of Target Corporation will recognize no gain or loss with respect
to the sale of its shares of Target Corporation common stock. The shareholders
of the Target Corporation will deliver on the Closing Date a fully executed
Internal Revenue Service Form 8023-A pursuant to the requirements thereof.
Acquiring Corporation shall, within 60 days after the Closing Date, provide to
Will Ohmstede and John Ohmstede, as representatives of Target Corporation's
shareholders, an allocation of the deemed purchase price among Target
Corporation's assets in compliance with Temp. Treas. Reg. Section
1.338(b)-2T(b). Will Ohmstede and John Ohmstede shall, within 30 days after
receipt of such allocation of the deemed purchase price, provide Acquiring
Corporation with either (i) a consent to agree to such allocation or (ii) a
revised proposal for allocation of the deemed purchase price. If the parties
are unable to agree on the proper allocation, they shall retain an independent
accounting or appraisal firm to determine such allocation.
(b) The parties each hereby covenant and agree that they will not
take a position with respect to the allocation of the Cash Consideration (i)
for purposes of any tax return filed with any governmental agency charged with
the collection of any taxes or, for so long as commercially reasonable, for
purposes of any judicial proceeding, that is in any way inconsistent with the
allocation made under Section 1.5(a) or (ii) for financial reporting or
accounting purposes that is in any way inconsistent with such allocation unless
a different allocation for financial reporting or accounting purposes is
required by law, regulation or court order or decree.
SECTION 1.6 Meeting of Target Corporation Shareholders. Target
Corporation shall duly call a meeting of its shareholders in compliance with
the TBCA and the applicable provisions of the Target Corporation's Articles of
Incorporation and Bylaws, such shareholders' meeting to be held not later than
25 days after the date hereof for the purpose of voting upon this Agreement,
the transactions contemplated hereunder and such other matters relating to this
Agreement, if any, as shall be necessary or advisable in the reasonable opinion
of Target Corporation, and Target Corporation shall, through its board of
directors, recommend to its shareholders approval (and not withdraw such
recommendation) of such matters.
SECTION 1.7 Closing. Upon the terms and subject to the conditions
hereof, as soon as practicable after the satisfaction or waiver, if
permissible, of the conditions set forth in Article VI hereof, Target
Corporation and Newco shall execute in the manner required by the TBCA and
deliver duly executed and verified Articles of Merger substantially in the form
attached hereto as Exhibit B, and the parties hereto shall take all such other
and further actions as may be required by law to make the Merger effective.
Prior to the filing referred to in this Section, a closing (the "Closing") will
be held at the office of counsel to the Target Corporation (or such other place
as the parties may agree) for the purpose of confirming all of the foregoing.
For purposes of this Agreement, the date on which the Closing actually occurs
shall be the "Closing Date".
5
<PAGE> 11
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET CORPORATION
Target Corporation makes the representations and warranties set forth
in this Article II to Acquiring Corporation and Newco. Target Corporation has
delivered to Acquiring Corporation and Newco the Schedules to this Agreement
referred to in this Article II on the date hereof. Target Corporation shall,
from time to time through the Closing Date, advise Acquiring Corporation and
Newco as to any change, amendment or supplement to the Schedules which is
necessary to reflect material changes in the subject matter thereof occurring
through the Closing Date.
SECTION 2.1 Organization and Qualification.
(a) Target Corporation is a Texas corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
Target Corporation has all requisite corporate power and authority to carry on
its business as it is now being conducted, and to own, lease and operate its
properties and assets, and to perform all its obligations under the agreements
and instruments to which it is a party or by which it is bound. Target
Corporation is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which the
properties and assets owned, leased or operated by it or the nature of the
business conducted by it make such qualification necessary. Each such
jurisdiction in which the Target Corporation is so qualified is listed on
Schedule 2.1(a).
(b) The Target Corporation has no Subsidiaries.
(c) True, correct and complete copies of the Articles of
Incorporation and Bylaws of Target Corporation and all amendments thereto
through the date of this Agreement have been delivered by Target Corporation to
Acquiring Corporation.
SECTION 2.2 Target Corporation Capitalization. The authorized
capital stock of Target Corporation consists of (i) 1,700 shares of Target
Corporation Class A Common Stock, 1,700 shares of which are issued and
outstanding (ii) 9,000 shares of Target Corporation Class B Common Stock, 9,000
shares of which are issued and outstanding and (iii) 700 shares of $30
convertible preferred stock, par value $720 per share, none of which are issued
and outstanding. Schedule 2.2 lists each holder of Target Corporation Class A
Common Stock and Target Corporation Class B Common Stock and the number of
shares owned by such holders, which represent all capital stock outstanding.
Except as set forth on Schedule 2.2, there are no outstanding subscriptions,
options, phantom stock, convertible securities, rights, warrants, calls,
irrevocable proxies or other agreements or commitments of any kind directly or
indirectly obligating Target Corporation to issue any security of or equity
interest in Target Corporation, or voting agreements or irrevocable proxies or
any agreements (including shareholder agreements) restricting the transfer of
or otherwise relating to any security or equity interest in Target
6
<PAGE> 12
Corporation. All of the Shares have been duly authorized, validly issued and
are fully paid and non-assessable, and are free of preemptive rights. Except
as set forth on Schedule 2.2, all dividends declared prior to the date hereof
have been paid.
SECTION 2.3 Authority Relative to the Agreement. Target Corporation
has full corporate power and authority to execute and deliver this Agreement,
and except for the approval by the Company's shareholders, no further corporate
proceedings on the part of Target Corporation are necessary, to consummate the
transactions contemplated hereby, which have been duly and validly authorized
and approved by its Board of Directors. This Agreement has been duly and
validly executed and delivered by Target Corporation, and this Agreement
constitutes the valid and binding obligation of Target Corporation enforceable
against Target Corporation in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, or other similar laws
relating to creditors' rights generally and general equitable principles, and
subject to such shareholder approvals and such approval as may be required by
the HSR Act (as defined below).
SECTION 2.4 No Violation. Neither the execution, delivery nor
performance of this Agreement, nor the consummation of the transactions
contemplated hereby, will, as of the Effective Time (i) violate any law, order,
writ, judgment, injunction, award, decree, rule, statute, ordinance or
regulation applicable to Target Corporation, (ii) except as set forth on
Schedule 2.4, be in conflict with, result in a breach or termination of any
provision of, cause the acceleration of the maturity of any debt or obligation
pursuant to, constitute a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any security
interest, lien, charge or other encumbrance upon any property of Target
Corporation pursuant to, any terms, conditions or provisions of any note,
license, instrument, indenture, mortgage, deed of trust or other agreement or
understanding or any other restriction of any kind or character, to which
Target Corporation is a party or by which any of the currently owned properties
of Target Corporation are subject or bound, or (iii) conflict with or result in
any breach of any provision of the Articles of Incorporation or By-Laws of the
Target Corporation.
SECTION 2.5 Consents and Approvals. Except as described on Schedule
2.5 hereto, and except for filing a Notification and Report Form pursuant to
the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), no prior consent, approval or
authorization of, or declaration, filing or registration with any person,
domestic or foreign, is required of or by Target Corporation in connection with
the execution, delivery and performance by Target Corporation of this Agreement
and the transactions contemplated hereby.
SECTION 2.6 Regulatory Reports. Target Corporation has filed all
reports, registrations and statements, together with any amendments required to
be made thereto, that are required to be filed with any regulatory authority
having jurisdiction over it.
7
<PAGE> 13
SECTION 2.7 Financial Statements and Related Matters.
(a) Target Corporation has provided Acquiring Corporation with a
true and complete copy of the audited Statements of Assets, Liabilities and
Equity (income tax basis) of Target Corporation for the fiscal years ended
March 31, 1996 and 1995 and the related Statements of Revenue and Expenses
(income tax basis), Retained Earnings (income tax basis), and Cash Flows
(income tax basis), for the fiscal years ended March 31, 1996 and 1995, and
Target Corporation has provided Acquiring Corporation with a true and complete
copy of the unaudited Statements of Assets, Liabilities and Equity (income tax
basis) and the related Statements of Revenue and Expenses (income tax basis),
and Retained Earnings (income tax basis), for each monthly period ending after
March 31, 1996 through and including June 30, 1996 (all of the foregoing
Statements of Assets, Liabilities and Equity and the related Statements of
Revenue and Expenses, Retained Earnings and Cash Flows of Target Corporation
are collectively referred to as the "Target Corporation Financial Statements").
The unaudited Statement of Assets, Liabilities and Equity of Target Corporation
as of June 30, 1996 is hereinafter referred to as the "Balance Sheet". The
Target Corporation Financial Statements have been prepared from the books and
records of the Target Corporation and fairly present, in all material respects,
the assets, liabilities and equity, results of operation and cash flows (to the
extent included therein) of the Target Corporation at the date and for the
periods indicated in accordance with the accounting method used by Target
Corporation and allowed for federal income tax reporting purposes. Acquiring
Corporation, Newco and Target Corporation acknowledge and agree that all
entries relating to "Investment in affiliated company," "Amounts due from
affiliated company," "Amounts due to affiliated company," "Equity in
partnership income (loss)," "Equity in (income) loss of partnership," "Amounts
due from/to affiliate," all of which relate to C&D Robotics, shall be deemed
eliminated from the Target Corporation Financial Statements for purposes of all
representations and warranties set forth in this Agreement. Since June 30,
1996, Target Corporation has not changed any significant accounting method or
practice.
(b) At June 30, 1996, there were no debts, liabilities or
obligations, contingent or otherwise, of Target Corporation, except (a) as set
forth in the Target Corporation Financial Statements, (b) as disclosed in the
schedules hereto or (c) for transactions entered into in the ordinary course of
business.
(c) At the Effective Time, the amounts payable from C&D Robotics
to Target Corporation shall not exceed $4,000,000.
SECTION 2.8 Absence of Changes. Except as and to the extent set
forth on Schedule 2.8, since June 30, 1996 (the "Balance Sheet Date"), Target
Corporation has not, directly or indirectly:
(a) made any amendment to its Articles of Incorporation or Bylaws
or changed the character of its business in any material manner;
8
<PAGE> 14
(b) suffered any material adverse effect in its financial
condition, assets or liabilities;
(c) entered into or amended any agreement, commitment or
transaction, except in the ordinary course of business or except in connection
with the transactions contemplated by this Agreement;
(d) suffered any material damage, destruction or loss to the
business or properties of Target Corporation (whether or not covered by
insurance);
(e) except as otherwise contemplated by this Agreement, made any
declaration, setting aside, or payment of any dividend or other distribution in
the respect of the capital stock of Target Corporation, or any direct or
indirect redemption, purchase or other acquisition by Target Corporation of
such stock;
(f) been subject to any labor dispute or charge of unfair labor
practice (other than routine individual grievances) generally affecting its
business or a material portion thereof;
(g) suffered a loss of any major customer; or
(h) been subject to any other event or condition known to Target
Corporation relating to, and having a materially adverse effect on the
operations, assets or business of Target Corporation (other than events or
conditions which are of general or industry-wide nature or are publicly
available information).
SECTION 2.9 Target Corporation Indebtedness. Target Corporation has
delivered to Acquiring Corporation true and complete copies of all loan
documents (the "Target Corporation Loan Documents") related to the indebtedness
of Target Corporation (the "Target Corporation Indebtedness"), and made
available to Acquiring Corporation all material correspondence concerning the
status of the Target Corporation Indebtedness.
SECTION 2.10 Litigation. Except as set forth on Schedule 2.10, there
are no actions, suits, claims, investigations, reviews or other proceedings
pending or, to the knowledge of Target Corporation, threatened against Target
Corporation or involving any of the properties or assets of Target Corporation,
at law or in equity or before or by any foreign, federal, state, municipal, or
other governmental court, department, commission, board, bureau, agency, or
other instrumentality or person or any board of arbitration or similar entity.
Except as described in Schedule 2.10, Target Corporation is not subject to any
court order, writ, injunction, court decree, settlement agreement, or judgment
against Target Corporation.
SECTION 2.11 Tax Matters. (a) Except as set forth on Schedule 2.11,
Target Corporation has timely filed all federal, state, county, local, and
other excise, franchise, property, severance, payroll, income, capital stock,
sales and use, and other tax returns for all fiscal years ended on
9
<PAGE> 15
or before March 31, 1996, and for any periods thereafter for which returns are
due, and all said returns are true and correct in all material respects.
Except as set forth on Schedule 2.11, Target Corporation has not filed an
extension for any tax return otherwise due. Target Corporation has timely paid
all taxes which have become due or have been assessed against it and all
taxes, penalties and interest which any governmental authority has proposed or
asserted to be owing. Target Corporation has withheld and deposited all
amounts of tax required to be made under applicable laws and regulations.
Except as set forth on Schedule 2.11, provisions and accruals for income taxes,
payroll taxes payable, ad valorem property taxes, sales taxes and all other
taxes and governmental charges required to be paid by Target Corporation have
been calculated and conform with applicable (federal, state, local or other, as
the case may be) tax principles applied on bases consistent with that of
preceding periods, and are adequate to cover Target Corporation's liability for
all periods prior to the date hereof. Except as set forth on Schedule 2.11,
there is no pending audit or tax controversy of Target Corporation, and Target
Corporation has not received any oral or written notice of any proposed audit,
by any governmental authority. All tax liabilities to which the properties of
Target Corporation may have been subjected have been discharged, except for
taxes assessed but not payable. Target Corporation has not granted any
extension to any taxing authority of the limitation period during which any tax
liability may be asserted thereby. Target Corporation has not received any
notice and has no knowledge of any proposal for increasing the assessed value
of any of Target Corporation's properties for tax purposes, or of any pending
proceedings or public improvements which would result in the levy of any
special tax or assessment against any of the Target Corporation's properties.
(b) Target Corporation (i) made an effective, valid and binding S
election pursuant to Section 1362 of the Code effective April 1, 1987, (ii) has
since maintained its status as an S Corporation pursuant to Section 1361 of the
Code without lapse or interruption, and (iii) has made and continuously
maintained elections similar to the federal S election in each state or local
jurisdiction where Target Corporation does business or is required to file a
tax return to the extent such states or jurisdictions permit such elections.
Target Corporation (i) has not adopted or utilized LIFO as a method of
accounting for inventory, and (ii) except with respect to the 338(h)(10)
Election, has no other tax item, election, agreement or adjustment which will
accelerate or trigger income or deferred deductions of Target Corporation as
the result of termination of Target Corporation's status as a S corporation.
SECTION 2.12 Employee Benefit Plans. The Target Corporation has
described in Schedule 2.12 the names and current base salaries and formulas for
calculating bonuses for the fiscal year ending March 31, 1997, for all
executive officers irrespective of their level of compensation. In addition,
Target Corporation has described in Schedule 2.12 the names of certain Target
Corporation employees who receive formula-based bonuses, together with a
statement of the formula used to calculate such bonuses for the fiscal year
ending March 31, 1997. The Target Corporation has delivered to, or upon
request will deliver to, the Acquiring Corporation copies of the health and
life insurance plans, bonus, deferred compensation, pension, profit sharing and
retirement plans and all other employee benefit plans, programs or
10
<PAGE> 16
arrangements providing benefits for employees (or former employees) of the
Target Corporation, all of which are listed on Schedule 2.12 (the "Benefit
Plans"); a copy of the most recent favorable determination letter received with
respect to a Benefit Plan from the Internal Revenue Service (if the plan is a
tax-qualified plan under the Code); the most recent annual report (Form 5500)
filed with the Internal Revenue Service with respect to each Benefit Plan (if
any such report was required); and the most recent summary plan description for
each Benefit Plan for which a summary plan description is required. Except as
set forth on Schedule 2.12, each of the Benefit Plans has been administered and
maintained in material compliance with the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and, if
applicable, the Internal Revenue Code of 1986, as amended (the "Code") and all
other applicable laws. There is no "accumulated funding deficiency" (as such
term is defined in Section 302 of ERISA or Section 412 of the Code) with
respect to a Benefit Plan that is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA, and there has been no application for a
waiver of the minimum funding standards imposed by Code Section 412 with
respect to any such plan. There are no pending or, to the knowledge of the
Target Corporation, threatened claims by or on behalf of the Benefit Plans, the
United States Department of Labor, the Internal Revenue Service, or by any
current or former employee of the Target Corporation or beneficiary of such
current or former employee alleging a breach of any fiduciary duties or a
violation of applicable state or federal law which could result in a material
liability on the part of the Target Corporation or a Benefit Plan under ERISA
or any other law (other than benefit claims and funding obligations in the
ordinary course of business). Except as set forth on Schedule 2.12, Target
Corporation is not a party to any such Multiemployer Pension Plan. With
respect to any multiemployer plan (within the meaning of Section 3(37) of
ERISA) to which Target Corporation or any ERISA Affiliate contributes (or has
at any time contributed or had an obligation to contribute), Target Corporation
and each ERISA Affiliate has or will have, as of the Closing Date, made all
contributions to each multiemployer plan required by the terms of such
multiemployer plan or any collective bargaining agreement. Neither Target
corporation or any ERISA Affiliate has incurred any withdrawal liability
(within the meaning of Part I of Subtitle E of Title IV of ERISA) to any
multiemployer plan. Neither Target Corporation or any ERISA Affiliate has been
notified by the sponsor of a multiemployer plan that such multiemployer plan is
in reorganization or has been terminated, within the meaning of Title IV of
ERISA.
SECTION 2.13 Employment Matters. Except as disclosed on Schedule
2.13, Target Corporation is not a party to any contracts or agreements granting
benefits or rights to employees or consultants, or any conciliation agreement
with the Department of Labor, the Equal Employment Opportunity Commission or
any federal, state or local agency which requires equal employment
opportunities or affirmative action in employment. There are no unfair labor
practice complaints pending against Target Corporation before the National
Labor Relations Board and no similar claims pending before any similar state,
local or foreign agency. There are no strikes, slowdowns, work stoppages,
lockouts, or to the knowledge of the Target Corporation, threats thereof, by or
with respect to any such employees.
11
<PAGE> 17
SECTION 2.14 Patents, Trademarks and Copyrights.
(a) Schedule 2.14 sets forth all material patents,
patent applications, trademarks and service marks (whether registered or
unregistered), trademark applications, and copyrights (collectively,
"Intellectual Property") required by the Target Corporation in its business and
operations. Target Corporation owns or licenses or otherwise has the right to
use the items listed on Schedule 2.14. Except as otherwise indicated on
Schedule 2.14 or in the ordinary course of business, Target Corporation has not
granted to any other person any license to use any Intellectual Property.
(b) Target Corporation is not in receipt of any notice of
any violation of, and to the knowledge of Target Corporation, it is not
violating or infringing upon the rights of any other person or entity in any
Intellectual Property. To the knowledge of Target Corporation, no other person
or entity is infringing any intellectual property rights of Target Corporation
with respect to the Intellectual Property.
SECTION 2.15 Environmental Matters. Except as set forth on Schedule
2.15:
(a) Environmental Conditions. There are no conditions or
circumstances on any property presently or previously owned or leased by Target
Corporation that have resulted or would likely result in a violation of any
Applicable Environmental Laws for which Target Corporation would reasonably
expect to bear liability (as defined below);
(b) Permits, etc. Target Corporation possesses all permits,
licenses, approvals and other authorizations required under Applicable
Environmental Laws to conduct its operations in the manner currently conducted,
the failure of which to possess would have a material adverse effect, and
Target Corporation is operating in material compliance thereunder.
(c) Compliance. The Target Corporation's operations and use of
its assets do not violate in any material respect any applicable federal, state
or local law, statute, ordinance, rule, regulation, order or enforceable notice
requirement pertaining to (i) the condition or protection of air, groundwater,
surface water, soil, natural resources, or other environmental media
(collectively the "environment"), (ii) any activity which affects the
environment, or (iii) the regulation of any pollutants, contaminants, waste,
substances which would adversely affect the environment if improperly managed
or disposed (whether or not hazardous or toxic), including, without limitation,
the Comprehensive Environmental Response Compensation and Liability Act (42
U.S.C. Section 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. App. Section 1801 et seq.), the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 et seq.), the Clean Water Act (33 U.S.C. 1251 et seq.),
the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. Section 2601 et seq.), the Safe Drinking Water Act (42
U.S.C. Section 300f et seq.), the Rivers and Harbors Act (33 U.S.C. Section
401 et seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et seq.) and
analogous, foreign, state and local provisions, as any of the foregoing
12
<PAGE> 18
may have been amended or supplemented from time to time on or prior to the date
hereof (collectively the "Applicable Environmental Laws");
(d) Past Compliance. None of the operations or assets of Target
Corporation has ever been conducted or used by Target Corporation in such a
manner which constitutes a violation in any material respect of any Applicable
Environmental Laws;
(e) Environmental Claims. No written notice has been served on
Target Corporation from any entity, governmental agency or individual regarding
any currently existing, pending or threatened investigation or inquiry related
to alleged violations under any Applicable Environmental Laws;
(f) Renewals. Except for such transfer requirements which are
customary and incidental to transactions of the type contemplated under this
Agreement, Target Corporation does not know of any presently existing facts or
conditions which would prevent it or Acquiring Corporation from renewing any of
its permits, licenses, or other authorizations required pursuant to any
Applicable Environmental Laws to operate and use any of Target Corporation's
assets for its current purposes and uses; and
(g) Asbestos. No asbestos or polychlorinated biphenyls ("PCBs")
are currently being used or have ever been used by Target Corporation in its
operations or on its properties in violation of Applicable Environmental Laws.
SECTION 2.16 Title to Properties; Encumbrances. Except for goods and
other property sold, used or otherwise disposed of in the ordinary course of
business for fair value, Target Corporation has good and indefeasible title to
all of its properties, interests in properties and assets, real and personal,
reflected in the Balance Sheet as owned by Target Corporation. None of such
property is subject to lien, mortgage, pledge, security interest or other
encumbrance except as described in Schedule 2.16 and except for liens for
taxes, assessments or governmental charges or levies which are not delinquent.
SECTION 2.17 Permits and Licenses. Except as set forth in Schedule
2.17, Target Corporation has all permits, licenses, certificates and
authorities from governmental agencies required to conduct its businesses as
they are now being conducted, and the consummation of the transactions
contemplated by this Agreement will not constitute a violation of any permit,
license, certificate or authority from a governmental agency. Such permits are
in full force and effect unimpaired by any act or omission of Target
Corporation, or its employees or agents, have not been suspended or revoked,
and Target Corporation has complied with, and will continue to comply with,
their terms until Closing.
SECTION 2.18 Agreements, Contracts and Commitments. Except as
described in Schedule 2.18, Target Corporation is not a party to and is not
bound by (i) any written or oral
13
<PAGE> 19
contract, agreement of commitment which involves or may involve aggregate
future payments (whether in payment of a debt, as a result of a guarantee or
indemnification, for goods or services or otherwise) by or to Target
Corporation of $100,000 or more, other than (A) purchase orders with the Target
Corporation or other invoices for goods to be sold or services to be performed
by Target Corporation or (B) purchase orders of the Target Corporation or other
invoices for goods to be purchased or services to be performed for Target
Corporation or (ii) any non-competition or secrecy agreement, any loan or
credit agreement, security agreement, indenture, mortgage, pledge, conditional
sale or title retention agreement, lease purchase agreement or other instrument
evidencing indebtedness (other than equipment purchases or lease agreements
entered into in the ordinary course of business), or any sales representative,
alliance, partnership, joint venture, joint operating or similar agreement.
The Target Corporation has not breached any material provision of, and is not
in default in any material respect under the terms of, any such contract,
agreement or commitment described in Schedule 2.18 and to the knowledge of the
Target Corporation, no event has occurred which, after notice or lapse of time
or both, would constitute such a material default under the terms of any such
contract, agreement or commitment. Except as provided in this Agreement or in
the Schedules hereto, the Target Corporation is not a party to any contract or
agreement with its Affiliates, including its officers, directors and
shareholders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
ACQUIRING CORPORATION AND NEWCO
Acquiring Corporation and Newco hereby jointly and severally make the
representations and warranties set forth in this Article III to Target
Corporation.
SECTION 3.1 Organization and Authority.
(a) Acquiring Corporation is a Delaware corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and Newco is a Texas corporation duly organized, validly existing and
in good standing under the laws of the State of Texas. Each of Acquiring
Corporation and Newco has all requisite corporate power and authority to carry
on its business as it is now being conducted, and to own, lease and operate
its properties and assets, and to perform all its obligations under the
agreements and instruments to which it is a party or by which it is bound.
Each of Acquiring Corporation and Newco is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which the properties and assets owned, leased or operated
by it or the nature of the business conducted by it make such qualification
necessary.
(b) True, correct and complete copies of the Articles of
Incorporation and Bylaws of Acquiring Corporation and Newco, with all
amendments thereto through the date of this Agreement, have been delivered by
Acquiring Corporation and Newco to Target Corporation.
14
<PAGE> 20
SECTION 3.2 Authority Relative to Agreement. Acquiring Corporation
and Newco have full corporate power and authority to execute and deliver this
Agreement, and no further corporate proceedings on the part of the Acquiring
Corporation or Newco are necessary to consummate the transactions contemplated
hereby, which have been duly and validly authorized by the Board of Directors
of Acquiring Corporation and the Board of Directors and shareholders of Newco,
respectively. This Agreement has been duly and validly executed and delivered
by Acquiring Corporation and Newco, and this Agreement constitutes the valid
and binding obligation of Acquiring Corporation and Newco enforceable jointly
and severally against Acquiring Corporation and Newco in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to creditors' rights generally and
general equitable principles, and subject to such approval of regulatory
agencies as may be required by the HSR Act.
SECTION 3.3 No Violation. Neither the execution, delivery nor
performance of this Agreement, in its entirety, nor the consummation of all of
the transactions contemplated hereby will, as of the Effective Time, (i)
violate any law, order, writ, judgment, injunction, award, decree, rule,
statute, ordinance or regulation applicable to Acquiring Corporation or Newco,
(ii) be in conflict with, result in a breach or termination of any provision
of, cause the acceleration of the maturity of any debt or obligation pursuant
to, constitute a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any security
interest, lien, charge or other encumbrance upon any property or assets of
Acquiring Corporation or Newco pursuant to any terms, conditions or provisions
of any note, license, instrument, indenture, mortgage, deed of trust or other
agreement or understanding or any other restriction of any kind or character,
to which Acquiring Corporation or Newco is a party or by which any of their
assets or properties are subject or bound, or (iii) conflict with or result in
any breach of any provision of the Articles of Incorporation or Bylaws of the
Acquiring Corporation or Newco.
SECTION 3.4 Consents and Approvals. Except for filing a Notification
and Report Form pursuant to the applicable requirements of the HSR Act, no
prior consent, approval or authorization of, or declaration, filing or
registration with any person, domestic or foreign, is required of or by
Acquiring Corporation or Newco in connection with the execution, delivery and
performance by Acquiring Corporation or Newco of this Agreement and the
transactions contemplated hereby, except the filing of Articles of Merger under
the TBCA.
ARTICLE IV
COVENANTS OF TARGET CORPORATION
SECTION 4.1 Affirmative Covenants of Target Corporation. For so long
as this Agreement is in effect, Target Corporation shall, from the date of this
Agreement to the Closing, except as specifically contemplated by this
Agreement:
15
<PAGE> 21
(a) operate and conduct the businesses of the Target Corporation
in the ordinary course of business;
(b) use reasonable efforts to preserve intact the Target
Corporation's corporate existence, business organization, assets, licenses,
permits, authorizations, and business opportunities;
(c) use reasonable efforts to comply (i) with all material
contractual obligations applicable to the Target Corporation's operations and
(ii) in all material respects with all laws applicable to the Target
Corporation;
(d) use reasonable efforts to maintain all the Target
Corporation's properties in good repair, order and condition, reasonable wear
and tear excepted;
(e) in good faith and in a timely manner (i) cooperate with
Acquiring Corporation and Newco in satisfying the conditions in this Agreement,
(ii) assist Acquiring Corporation and Newco in obtaining as promptly as
possible all consents, approvals, authorizations and rulings, whether
regulatory, corporate or otherwise, as are necessary for Acquiring Corporation
and Newco and Target Corporation (or any of them) to carry out and consummate
the transactions contemplated by this Agreement, and (iii) furnish information
concerning the Target Corporation not previously provided to Acquiring
Corporation required for inclusion in any filings or applications that may be
necessary in that regard;
(f) file promptly the Notification and Report Form pursuant to the
applicable provisions of the HSR Act;
(g) deliver to Newco a list, dated as of the Effective Time,
showing (i) the name of each bank or institution where Target Corporation has
accounts or safe deposit boxes, (ii) the name(s) in which such accounts or
boxes are held and (iii) the name of each person authorized to draw thereon or
have access thereto;
(h) deliver to Newco a list, dated as of the Effective Time,
showing all liabilities and obligations of Target Corporation, except those
arising in the ordinary course of its business, incurred since the Balance
Sheet Date certified by an officer of Target Corporation;
(i) from the date hereof through the Closing Date, update the
Schedules to this Agreement as required by Article II;
(j) hold a shareholder's meeting in accordance with Section 1.6
for the purpose of approving the Merger and related items in compliance with
the TBCA and the applicable provisions of the Target Corporation's Articles of
Incorporation and Bylaws;
16
<PAGE> 22
(k) give prompt written notice to the Acquiring Corporation of the
commencement of any action, suit, proceeding or investigation or the assertion
of any claim or threat to commence any action, suit, proceeding or
investigation, and keep the Acquiring Corporation promptly informed as to any
developments in any pending action, suit, proceeding or investigation; and
(l) give prompt written notice to the Acquiring Corporation of any
material adverse change in the financial condition, operations, assets or
liabilities of the Target Corporation, whether or not occurring in the usual
and ordinary course of its business.
SECTION 4.2 Negative Covenants of Target Corporation. Except with
the prior written consent of Acquiring Corporation or as otherwise specifically
permitted by this Agreement, Target Corporation will not, from the date of this
Agreement to the Closing, directly or indirectly:
(a) make any amendment to its Articles of Incorporation or Bylaws;
(b) make any change in its accounting practices or policies,
including in the methods used in allocating and charging costs, except as may
be required by applicable law or regulation;
(c) make any change in the number of shares of the capital stock
issued and outstanding, or issue, reserve for issuance, grant, sell or
authorize the issuance of any shares of its capital stock or subscriptions,
options, warrants, calls, rights or commitments of any kind relating to the
issuance or sale of or conversion into shares of its capital stock;
(d) incur any borrowings except (i) the refinancing of
indebtedness now outstanding, (ii) the prepayment by customers of amounts due
or to become due for goods sold or services rendered or to be rendered in the
future, (iii) trade payables incurred in the ordinary course of business, (iv)
amounts borrowed under the line of credit described in item 1 of Schedule 2.18,
provided that the maximum amount that can be borrowed under such line of credit
is not increased, or (v) as is otherwise agreed to in writing by Acquiring
Corporation;
(e) contract to create any mortgage, pledge, lien, security
interest or encumbrances, restrictions, or charge of any kind (other than
capital leases and statutory liens for which the obligations secured thereby
shall not become delinquent), except to the extent that such mortgage, pledge,
lien, security interest or encumbrance, restriction or charge of any kind would
secure obligations permitted under Section 4.2(d)(i), (iv) or (v) above;
(f) except in the ordinary course of business, waive any right
under or cancel any contract, lease, commitment, option or agreement;
(g) sell, transfer, distribute, or otherwise dispose of any of its
properties or assets, except in the ordinary course of business and except for
the transfer of (i) all of the Shareholder Assets, and (ii) all of the Target
Corporation's interest and right to receive reimbursement of
17
<PAGE> 23
amounts paid to Serv-Tech, Inc. in settlement of the lawsuit styled Serv-Tech,
Inc. v. Stewart & Stevenson Services, Inc. et. al. (Case No. 90-04285), in each
case to the shareholders of Target Corporation, to which the Acquiring
Corporation and Newco hereby consent;
(h) except in the ordinary course of business, grant any increase
in compensation or pay or agree to pay or accrue any bonus or like benefit to
or for the credit of any director, officer, employee or other person; enter
into any employment, consulting or severance agreement or other agreement with
any director, officer or employee; or adopt, amend or terminate any Benefit
Plan or change or modify the period of vesting or retirement age for any
participant of such a plan;
(i) except for a dividend in an aggregate amount of approximately
$600,000 to be declared and paid on or about September 15, 1996, and except as
contemplated by Section 4.2(g) above, declare, pay or set aside for payment any
dividend or other distribution or payment in respect of shares of its capital
stock;
(j) dissolve, liquidate, reorganize, recapitalize, merge,
consolidate or otherwise make any change in its capital stock, capital
structure, corporate structure or existence;
(k) make any capital expenditure or a series of expenditures of a
similar nature in excess of $200,000 in the aggregate, provided, however, that
in addition thereto Target Corporation may make all budgeted capital
expenditures (not to exceed $600,000) related to an addition to Target
Corporation's Lake Charles, Louisiana plant; or
(l) settle or compromise any liability relating to or arising out
of item H on Schedule 2.12 after September 30, 1996, without the prior consent
of Acquiring Corporation.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Access To, and Information Concerning, Properties and
Records.
(a) During the pendency of the transactions contemplated hereby,
Target Corporation shall, to the extent permitted by law, give Acquiring
Corporation, its legal counsel, accountants and other representatives full
access, upon reasonable request and at reasonable times, throughout the period
prior to the Closing, to all of Target Corporation's properties, books,
contracts, commitments and records, permit Acquiring Corporation and such
representatives to make such inspections (including without limitation with
regard to such currently owned properties, physical
18
<PAGE> 24
inspection of the surface and subsurface thereof) as they may reasonably
require and furnish to Acquiring Corporation and such representatives during
such period all such information concerning Target Corporation and its affairs
as they may reasonably request.
(b) Notwithstanding any other provision of this Agreement, neither
Acquiring Corporation, Newco nor any of their respective agents or
representatives shall perform any investigation or study of the real property
of Target Corporation which may involve the intrusive or destructive sampling
or analysis or chemical testing of any portion of such property or its
improvements, including without limitation, of any soil, water or groundwater
on, under or about such real property ("Phase II Investigation"), without first
(a) submitting to Target Corporation a detailed description of (i) the work to
be performed as part of the Phase II Investigation, (ii) the persons to
undertake such Phase II Investigation, and (iii) the types and amounts of
insurance coverage maintained by such persons, and (b) obtaining the prior
written consent of Target Corporation as to such matters, which shall not be
unreasonably withheld. Target Corporation may grant such consent subject to
such terms, conditions or restrictions as Target Corporation may reasonably
require. In all events, Target Corporation or its representatives shall have
the right, but not the obligation, to observe any and all activities associated
with performance of any agreed Phase II Investigation, and may obtain half of
any samples which Acquiring Corporation, Newco or their representatives may
collect during the Phase II Investigation. In the event Acquiring Corporation,
Newco or their representatives conduct a Phase II Investigation, Acquiring
Corporation and Newco shall cause, at their expense, (x) any
investigation-derived waste generated or created in connection with performance
of the Phase II Investigation (including without limitation, drill cuttings,
purged or developed water, or sample remnants) to be removed from the property,
(y) any wells installed during the Phase II Investigation to be plugged and
abandoned, and (z) the restoration of the property to substantially the same
physical condition which existed before commencement of the Phase II
Investigation, all within seven (7) days after completion of the field
activities related to the Phase II Investigation, and in compliance with
applicable laws and regulations. Each of Acquiring Corporation and Newco shall
be responsible for executing on its own behalf any and all manifests, shipping
documents, plugging and abandoning reports and similar documents in connection
with its obligations under this paragraph. Acquiring Corporation and Newco
agree, jointly and severally, to indemnify and hold Target Corporation harmless
from and against any and all claims, liabilities, damages and causes of action
arising out of Acquiring Corporation's or Newco's inspections of the real or
personal property of Target Corporation, including without limitation, any
Phase II Investigation. All test results associated with any such physical or
environmental inspection shall be held in strictest confidence by Acquiring
Corporation and Newco and shall not be disclosed to any third party unless
compelled to do so by valid legal process.
(c) All information disclosed by Target Corporation to Acquiring
Corporation or Newco shall be held strictly confidential by Acquiring
Corporation, Newco and their representatives and used solely for purposes of
evaluating the transaction contemplated hereby. In the event this Agreement is
terminated pursuant to the provisions of Article VII, upon the written request
of Target Corporation, Acquiring Corporation and Newco agree to return to
19
<PAGE> 25
Target Corporation all copies of such confidential information, together with
all extracts or other reproductions thereof in the possession of Acquiring
Corporation, Newco or their representatives. It is understood that
confidential information shall not include the following:
(i) Information that becomes generally available to the
public other than as a result of a disclosure by Acquiring
Corporation, Newco, their representatives or their agents;
(ii) Information that was in the possession of Acquiring
Corporation, Newco or their representatives prior to disclosure by
Target Corporation, or its representatives or its agents; or
(iii) Information that become available to Acquiring
Corporation, Newco or their representatives on a non-confidential
basis from a source other than Target Corporation, its representative
or its agents.
SECTION 5.2 Miscellaneous Agreements and Consents. Subject to the
terms and conditions of this Agreement, Acquiring Corporation, Newco and Target
Corporation agree to use all reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable laws and regulations, to consummate and make
effective, as soon as practicable after the date hereof, the transactions
contemplated by this Agreement.
SECTION 5.3 Good Faith Efforts. All parties hereto agree that the
parties will use their reasonable good faith efforts to secure all shareholder,
third-party or regulatory approvals necessary to consummate the Merger and
other transactions provided herein and to satisfy the other conditions to
Closing contained herein as soon as reasonably practicable. Each party agrees
to make copies of its respective regulatory filings and related correspondence
to regulatory agencies available to the other parties.
SECTION 5.4 Exclusivity. Target Corporation will not, directly or
indirectly, cause its respective officers, directors, employees, agents or
advisors or other representatives or consultants to (i) directly or indirectly,
solicit or initiate any proposals or offers from any person relating to any
acquisition or purchase of all or a material amount of the assets of, or any
securities of, or any merger, consolidation or business, combination with, the
Target Corporation, or (ii) participate in any negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, any effort or attempt by any other person to do or
seek any of the foregoing.
SECTION 5.5 HSR Filing. Acquiring Corporation hereby agrees to file
the Notification and Report Form pursuant to the applicable provisions of the
HSR Act in a timely manner.
20
<PAGE> 26
SECTION 5.6 Benefit Plans and Employee Matters.
(a) Acquiring Corporation or the Surviving Corporation shall for a
period of at least one year after the Effective Time either maintain the health
care benefit plan of Target Corporation as in effect on the date of this
Agreement or maintain a health care plan providing generally comparable
benefits for the employees and, to the extent required by law, for former
employees of Target Corporation (at such former employees expense to the extent
allowed by law and any controlling plan document).
(b) On and after Closing Date, Acquiring Corporation and the
Surviving Corporation shall be responsible for providing and discharging any
and all notifications, benefits and liabilities to Target Corporation
employees, former employees and government agencies required by the Worker
Adjustment and Retraining Notification Act of 1988, or any other applicable law
including any requirements that may be imposed as a result of the transactions
contemplated by this Agreement. On and after Closing Date, Acquiring
Corporation and the Surviving Corporation shall be responsible for the health
continuation coverage for all "qualified beneficiaries" under any health care
plans sponsored by the Target Corporation and for health continuation coverage
for the employees and former employees of the Target Corporation with respect
to the health care continuation coverage requirements under ERISA or Section
4980B of the Code including any such requirements that may be imposed as a
result of the transactions contemplated by this Agreement.
(c) The parties agree that as soon as practicable after C&D
Robotics establishes a tax-qualified 401(k) Plan after the date hereof, all
assets under Target Corporation's Profit Sharing Plus Plan attributable to
employees of C&D Robotics who previously participated in Target Corporation's
Profit Sharing Plus Plan shall be transferred to such newly-established C&D
Robotics 401(k) Plan.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver of the following conditions prior to the
Effective Time:
(a) the receipt of regulatory approvals and the expiration of any
applicable waiting period with respect thereto;
(b) the Closing will not violate any injunction, order or decree
of any court or governmental body having competent jurisdiction; and
21
<PAGE> 27
(c) the approval of the Merger by Target Corporation's
shareholders entitled to vote thereon in accordance with the TBCA.
SECTION 6.2 Conditions to the Obligations of Acquiring Corporation
and Newco to Effect the Merger. The obligations of Acquiring Corporation and
Newco to effect the Merger are subject to the satisfaction or waiver of the
following conditions prior to the Effective Time:
(a) The representations and warranties of Target Corporation
herein contained shall be accurate in all material respects at the Effective
Time, with the same effect as though made at such date, except as affected by
transactions permitted or contemplated by this Agreement; Target Corporation
shall have performed and complied with all covenants required by this Agreement
to be performed or complied with, in all material respects, by Target
Corporation before the Effective Time; and Target Corporation shall have
delivered to Acquiring Corporation a certificate, dated the Closing Date and
signed by its president and its secretary, to both such effects;
(b) the directors and officers of Target Corporation shall have
delivered to Acquiring Corporation their resignations as directors and officers
of Target Corporation;
(c) all consents, approvals and waivers from third parties with
respect to material agreements and governmental authorities required to be
obtained to consummate the transactions contemplated by this Agreement shall
have been obtained;
(d) Acquiring Corporation shall have received an opinion, dated as
of the Closing Date, from Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., counsel
for Acquiring Corporation and Newco in form and substance satisfactory to
Acquiring Corporation;
(e) Each officer and director of Target Corporation shall have
executed a release of Acquiring Corporation, Newco, Target Corporation and
their respective affiliates with respect to any claim against such entities or
persons existing prior to the Effective Time, other than claims for accrued
salary, bonuses and other compensation and benefits, and under existing
indemnification arrangements;
(f) Target Corporation shall have delivered a certificate of its
chief executive officer and chief financial officer which certifies that the
Target Corporation's pre-tax earnings determined in a manner consistent with
past practice used in the preparation of its financial statements for the
six-month period ending September 30, 1996, after deducting any unaccrued
liability for bonuses payable with respect to such six-month period, were not
less than $4,250,000;
(g) Acquiring Corporation shall have completed the results of its
due diligence investigation of Target Corporation within 25 days after the date
of this Agreement (including, without limitation, any environmental review of
Target Corporation's property) and shall have
22
<PAGE> 28
discovered no event or condition having or that would reasonably be expected to
have a material adverse effect on Target Corporations's financial condition,
operations, assets or liabilities;
(h) Target Corporation shall have obtained a release from all
obligations under its guarantee of an Unsecured Note dated June 30, 1995,
executed by C&D Robotics, as maker, in favor of Wesley Don Cawley, as payee, or
shall have made other arrangements to the reasonable satisfaction of Acquiring
Corporation, under which the Surviving Corporation shall be protected against
any payment responsibility for such guarantee;
(i) Will Ohmstede and John Ohmstede, respectively, shall have
executed and delivered to Surviving Corporation the Noncompetition Agreements;
(j) Will Ohmstede and John Ohmstede, respectively, shall have
executed and delivered to Surviving Corporation the employment agreements in
the form attached hereto as Exhibit C-1 and with the terms attached hereto as
Exhibit C-2, respectively;
(k) The shareholders of Target Corporation shall have executed and
delivered to Acquiring Corporation the Escrow Agreement;
(l) The shareholders of Target Corporation shall have executed and
delivered to Surviving Corporation an indemnity agreement, or shall have made
other arrangements to the reasonable satisfaction of Acquiring Corporation,
under which the Surviving Corporation shall be protected against any payment
responsibility for (i) fifty percent (50%) of any tax imposed under Section
1374(a) of the Code by virtue of the making of the 338(h)(10) Election and (ii)
any liability relating to or arising out of item H on Schedule 2.12;
(m) C&D Robotics or the successor to C&D Robotics shall have
executed and delivered to Surviving Corporation an instrument, under which the
Surviving Corporation shall be released and indemnified from any liability
relating to or arising out of Target Corporation's service as general partner
of C&D Robotics or any ownership or operation thereof; and
(n) The holders of no more than an aggregate of five percent (5%)
of the shares of Target Corporation Class A Common Stock and Target Corporation
Class B Common Stock shall have demanded payment of the fair value of their
shares as dissenting shareholders under the TBCA.
SECTION 6.3 Conditions to the Obligations of Target Corporation to
Effect the Merger. The obligations of Target Corporation to effect the Merger
are subject to the satisfaction or waiver of the following conditions prior to
the Effective Time:
(a) The representations and warranties of Acquiring Corporation
and Newco herein contained shall be accurate in all material respects at the
Effective Time, with the same effect as
23
<PAGE> 29
though made at such date, except as affected by transactions permitted or
contemplated by this Agreement; Acquiring Corporation and Newco shall have
performed and complied with all covenants required by this Agreement to be
performed or complied with, in all material respects, by Acquiring Corporation
and Newco before the Effective Time; and Acquiring Corporation and Newco shall
have delivered to Target Corporation a certificate, dated the Closing Date and
signed by its president and its secretary, to both such effects;
(b) Surviving Corporation and C&D Robotics shall have entered into
a Lease in a form mutually agreeable to the parties thereto with respect to the
premises currently employed by C&D Robotics in the conduct of its business,
with a term of three (3) years and for such rental and upon other terms and
conditions consistent with the past practice of Target Corporation and C&D
Robotics;
(c) Surviving Corporation and C&D Robotics shall have entered into
an Administrative Services Agreement in a form mutually agreeable to the
parties thereto for the provision to C&D Robotics by Surviving Corporation of
certain administrative, payroll and tax services for a period of six (6) months
after the Closing Date, at Surviving Corporation's cost in a manner consistent
with the past practice of Target Corporation and C&D Robotics;
(d) Target Corporation shall have received an opinion, dated as of
the Closing Date, from Porter & Hedges, L.L.P., counsel for Acquiring
Corporation, in form and substance satisfactory to Target Corporation;
(e) receipt of Merger Consideration and all other amounts payable
by the Acquiring Corporation hereunder;
(f) Surviving Corporation shall have executed and delivered the
Noncompetition Agreements to Will Ohmstede and John Ohmstede, respectively;
(g) Surviving Corporation shall have executed and delivered the
employment agreements in the form attached hereto as Exhibit C-1 and with the
terms attached hereto as Exhibit C-2, respectively, to Will Ohmstede and John
Ohmstede, respectively; and
(h) Acquiring Corporation shall have executed and delivered the
Escrow Agreement to the shareholders of Target Corporation.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time notwithstanding
approval thereof by the shareholders of Target Corporation, but prior to the
Effective Time:
24
<PAGE> 30
(a) by mutual written consent duly authorized by the Boards of
Directors of Acquiring Corporation, Newco and Target Corporation;
(b) by Acquiring Corporation if Acquiring Corporation or Newco
learns or becomes aware of a material breach or inaccuracy of any
representation or warranty of Target Corporation contained in Article II and
such breach or inaccuracy is not promptly cured or waived;
(c) by Target Corporation if Target Corporation learns or becomes
aware of a material breach or inaccuracy of any representation or warranty of
Acquiring Corporation contained in Article III and such breach or inaccuracy is
not promptly cured or waived;
(d) by Acquiring Corporation, Newco or Target Corporation if the
Effective Time shall not have occurred, other than through the failure of any
such party to fulfill its obligations hereunder, on or before the expiration of
90 days from the date of this Agreement or such later date agreed to in writing
by Target Corporation, Acquiring Corporation and Newco; provided, however, that
such 90 day period shall automatically be extended for a period of 60 days, if
the delay in the Effective Time relates to the Notification and Report Form
filed pursuant to the HSR Act; or
(e) by Acquiring Corporation, Newco or Target Corporation if any
court of competent jurisdiction in the United States of America or other
(federal or state) governmental body shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have been in effect for a period of thirty (30) days.
SECTION 7.2 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 7.1 hereof, this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party or its directors, officers or shareholders, other than
the provisions of this Section 7.2, Section 5.1 and Section 10.1. Nothing
contained in this Section 7.2 shall relieve any party from liability for any
breach or violation of this Agreement, subject to the provisions of Article
VIII.
SECTION 7.3 Amendment. To the extent permitted by applicable law,
this Agreement may be amended by action taken by or on behalf of the Board of
Directors of Target Corporation at any time before or after adoption of this
Agreement by the shareholders of Target Corporation but, after any submission
of this Agreement to such shareholders for approval, no amendment shall be made
which reduces the Merger Consideration or which materially and adversely
affects the rights of the Target Corporation's shareholders hereunder without
any required approval of such shareholders; provided, however, this Agreement
may not be amended except by an instrument in writing signed on behalf of all
the parties.
25
<PAGE> 31
SECTION 7.4 Extension; Waiver. At any time prior to the Effective
Time, the parties may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto, or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE VIII
EXCLUSIVE REMEDIES
SECTION 8.1 Agreement with Respect to Escrow Funds; Indemnity
Relating to Certain Tax Items.
(a) In the event Acquiring Corporation incurs any losses, damages,
liabilities, claims, demands, judgments, settlements, costs or expenses
(including reasonable attorneys' fees) ("Losses") subsequent to the Closing
resulting from or arising out of (i) any breach of any representation or
warranty of Target Corporation contained herein or (ii) any breach of or
failure to comply with any covenant or agreement of Target Corporation
contained herein, Target Corporation shall notify the Escrow Agent of such
Losses in accordance with the terms of the Escrow Agreement. No reimbursement
or other payment in respect of such Losses shall be made other than pursuant to
the terms of the Escrow Agreement.
(b) Target Corporation shall use commercially reasonable efforts
to cause the shareholders of Target Corporation to execute and deliver an
indemnity agreement to Surviving Corporation, or make other arrangements to the
reasonable satisfaction of Acquiring Corporation, under which the Surviving
Corporation shall be protected against any payment responsibility for (i) fifty
percent (50%) of any tax imposed under Section 1374(a) of the Code by virtue of
the making of the 338(h)(10) Election and (ii) any liability relating to or
arising out of item H on Schedule 2.12.
SECTION 8.2 Limitations on Claims.
(a) Acquiring Corporation's right to recover Losses under Section
8.1 hereof shall be limited as follows:
(i) Acquiring Corporation may make no claim under the
Escrow Agreement for any Losses except and only to the extent that the
amount of the Losses, when added to the aggregate amount of all other
Losses recoverable under this Article VIII, exceeds $100,000; and
26
<PAGE> 32
(ii) Acquiring Corporation shall not recover any Losses
exceeding the amount of the Escrow Funds.
(b) Any Losses recoverable by Acquiring Corporation shall be
limited to the amount of the actual Losses sustained by the Acquiring
Corporation net of any applicable insurance coverage.
(c) Acquiring Corporation shall not be entitled to make any claim
under the Escrow Agreement for recovery of Losses after the first anniversary
of the Closing Date, unless Acquiring Corporation shall assert such claim in
accordance with the Escrow Agreement, and shall specify, in reasonable detail
the specific facts constituting the basis for such claim prior to the first
anniversary of the Closing Date.
SECTION 8.3 Exclusive Rights and Remedies.
(a) Notwithstanding anything to the contrary contained in this
Agreement, the remedies of Acquiring Corporation and Newco under Section 8.1 of
this Agreement shall be Acquiring Corporation's and Newco's sole and exclusive
remedies after the Closing Date with respect to the transactions contemplated
hereby, and the remedies of the parties under Section 8.3(b) of this Agreement
shall be the parties' sole and exclusive remedies prior to the Closing Date
with respect to the transactions contemplated hereby. Without limiting the
generality of the foregoing, except with respect to such remedies specifically
set forth herein, each of Acquiring Corporation and Newco hereby irrevocably
waives and agrees not to sue Target Corporation and its shareholders, officers,
directors, affiliates, employees, heirs, devisees, executors, personal
representatives, agents or representatives ("Target Corporation's Related
Parties") for any and all claims, causes of action, rights of contribution,
cost recovery, losses, liabilities, suits, costs, fees, judgments or expenses
which may hereafter arise, REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY
THE SOLE, CONTRIBUTORY, PASSIVE OR PARTIAL NEGLIGENCE OF ANY OF THE TARGET
CORPORATION'S RELATED PARTIES, in connection with (i) any material, waste or
substance the use, collection, handling, recycling, generation, treatment,
storage, disposal, release or transportation of which (a) by the Target
Corporation or any of its predecessors or (b) at, in, on, under or from any
real or personal property of Target Corporation is or may become regulated or
controlled by any governmental authority, or the improper management or
disposal of which may affect human health or safety or the environment, or (ii)
the compliance by the Target Corporation, or any of its predecessors or any
real or personal property of Target Corporation with Applicable Environmental
Laws.
(b) Prior to the Closing Date, each party to this Agreement shall
have all remedies as may be available to it at law or in equity for the breach
of any material covenant set forth in this Agreement. Prior to the Closing
Date, the exclusive remedy for any material breach or inaccuracy of any
representation or warranty in this Agreement of either Target Corporation,
Acquiring Corporation or Newco shall be termination of this Agreement (i) by
Acquiring Corporation and Newco for any such material breach or inaccuracy by
Target Corporation and
27
<PAGE> 33
(ii) by Target Corporation for any such material breach or inaccuracy by
Acquiring Corporation or Newco, in each case in accordance with Article VII.
Upon termination of this Agreement in accordance with the preceding sentence by
Acquiring Corporation and Newco, Target Corporation shall pay to Acquiring
Corporation and Newco all reasonable out-of-pocket costs and expenses incurred
by them in connection with the transactions contemplated by this Agreement, and
upon termination of this Agreement in accordance with the preceding sentence by
Target Corporation, Acquiring Corporation and Newco shall pay to Target
Corporation all reasonable out-of-pocket costs and expenses incurred by it in
connection with the transactions contemplated by this Agreement; provided,
however, that all such costs and expenses paid to Acquiring Corporation and
Newco, on the one hand, or Target Corporation, on the other hand, under this
Section 8.3(b) shall not exceed $500,000.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
SECTION 9.1 Survival of Representations and Warranties. The parties
hereto agree that their respective representations and warranties contained in
this Agreement shall survive for a period of one year after the Effective Time.
All covenants and agreements contain herein shall survive the Closing without
limitation.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Expenses. All costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by the party
incurring such costs and expenses; provided, the shareholders of Target
Corporation shall be responsible for all legal and other related fees and
expenses incurred in connection with the sale of Target Corporation.
SECTION 10.2 Public Announcements. Any public announcement or
similar publicity with respect to this Agreement or the transactions
contemplated hereby shall be issued, if at all, at such time and in such manner
as the Acquiring Corporation and Target Corporation shall jointly determine,
unless in the reasonable judgment of such party, such release is required by
applicable securities laws, provided the other party shall have a reasonable
opportunity to review such release prior to issuance. Target Corporation and
Acquiring Corporation will consult with each other concerning the means by
which Target Corporation's employees, customers and suppliers and others having
dealings with Target Corporation will be informed of the transactions
contemplated hereby, and Acquiring Corporation shall have the right to be
present for any such communication.
SECTION 10.3 Brokers and Finders. Except for Chase Securities Inc.,
which shall be paid on a pro rata basis according to stock ownership by holders
of Target Corporation Class A Common Stock and Target Corporation Class B
Common Stock, and Sanders Morris Mundy Inc., which has been engaged and shall
be paid by Acquiring Corporation, all negotiations on behalf
28
<PAGE> 34
of Acquiring Corporation, Newco and Target Corporation relating to this
Agreement and the transactions contemplated by this Agreement have been carried
on by the parties hereto and their respective agents directly without the
intervention of any other person in such manner as to give rise to any claim
against Acquiring Corporation, Newco or Target Corporation for financial
advisory fees, brokerage or commission fees, finder's fees or other like
payment in connection with the consummation of the transactions contemplated
hereby.
SECTION 10.4 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and oral, among the parties or any of them with respect to the
subject matter hereof, and (b) shall not be assigned by operation of law or
otherwise, provided that Acquiring Corporation may assign its rights and
obligations or those of Newco to any direct or indirect wholly-owned subsidiary
of Acquiring Corporation, but no such assignment shall relieve Acquiring
Corporation or Newco of its obligations hereunder, and Target Corporation shall
be entitled to look to Acquiring Corporation and Newco for the performance of
all obligations hereunder in the same manner as if Acquiring Corporation or
Newco, as applicable, had not so assigned any of its obligations.
SECTION 10.5 Amendment and Modification. Except as provided
otherwise in this Agreement, this Agreement may be amended, modified,
terminated, rescinded or supplemented only by written agreement of the parties
hereto.
SECTION 10.6 Waiver; Consents. The rights and remedies of the
parties to this Agreement are cumulative and not alternative. Any failure of a
party to comply with any obligation, covenant, agreement or condition herein
may be waived by the party affected thereby only by a written instrument signed
by the party granting such waiver. No waiver, or failure to insist upon strict
compliance, by any party of any condition or any breach of any obligation,
term, covenant, representation, warranty or agreement contained in this
Agreement, in any one or more instances, shall be construed to be a waiver of,
or estoppel with respect to, any other condition or any other breach of the
same or any other obligation, term, covenant, representation, warranty or
agreement. Whenever this Agreement requires or permits consent by or on behalf
of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver.
SECTION 10.7 Further Assurances. From time to time as and when
requested by Acquiring Corporation, or its successors or assigns, Target
Corporation and the officers and directors of Target Corporation shall, and if
necessary use commercially reasonable efforts to cause the shareholders of
Target Corporation to, execute and deliver such further agreements, documents,
deeds, certificates and other instruments and shall take or cause to be taken
such other actions, including those as shall be reasonably necessary to vest or
perfect in or to confirm of record or otherwise Target Corporation's title to
and possession of, all of its property, interests, assets, rights, privileges,
immunities, powers, franchises and authority, as shall be reasonably
29
<PAGE> 35
necessary or advisable to carry out the purposes of and effect the transactions
contemplated by this Agreement.
SECTION 10.8 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 10.9 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by cable, telecopy or telex, or by
registered or certified mail (postage prepaid, return receipt requested), to
the respective parties as follows:
if to Acquiring Corporation or Newco:
Air-Cure Technologies, Inc.
2727 Allen Parkway, #760
Houston, Texas 77019
Telecopy No. (713) 520-8228
with a copy to:
Mr. Richard L. Wynne
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002
Telecopy No. (713) 228-1331
30
<PAGE> 36
if to Target Corporation:
Mr. Will Ohmstede
Ohmstede, Inc.
895 N. Main Street
P. O. Box 2431
Beaumont, Texas 77704-2431
Telecopy No. (409) 833-4102
with a copy to:
Mr. Marcus A. Watts
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
3400 Texas Commerce Tower
Houston, Texas 77002
Telecopy No. (713) 223-3717
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 10.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 10.11 Jurisdiction and Venue. Any process against Acquiring
Corporation, Newco or Target Corporation in, or in connection with, any suit,
action or proceeding arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement may be served personally or by
certified mail at the address set forth in Section 10.9 with the same effect as
though served on it or him personally. Acquiring Corporation, Newco and Target
Corporation hereby irrevocably submit in any suit, action or proceeding arising
out of or relating to this Agreement or any of the transactions contemplated by
this Agreement to the exclusive jurisdiction and venue of the United States
District Court for the Southern District of Texas or any court of the State of
Texas located in Harris County and irrevocably waive any and all objections to
jurisdiction and review or venue that they may have under the laws of Texas or
the United States.
SECTION 10.12 Descriptive Headings. The descriptive headings are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
SECTION 10.13 Parties in Interest; No Third Party Beneficiary. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this
31
<PAGE> 37
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 10.14 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 10.15 Incorporation by Reference. Any and all schedules,
exhibits, annexes, statements, reports, certificates or other documents or
instruments referred to herein or attached hereto are incorporated herein by
reference hereto as though fully set forth at the point referred to in the
Agreement.
SECTION 10.16 Certain Definitions. For the purposes of this
Agreement, the following terms shall have the meanings specified or referred to
below whether or not capitalized when used in this Agreement.
(a) "Affiliate" means, with respect to any person or other entity,
any person or other entity that, directly or indirectly, controls, is
controlled by, or is under common control with, such person or other entity in
question. For the purposes of this definition and the definition of
Subsidiary, "control" (including "controlling," "controlled by" and "under
common control with") as used with respect to any person or other entity, means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person or other entity,
whether through the ownership of voting securities, by contract or otherwise.
(b) "C&D Robotics" means Ohmstede-Cawley, Ltd., doing business as
C&D Robotics.
(c) "Loss" shall have the meaning set forth in Article VIII.
(d) "Target Corporation Net Worth" means, at any date, the total
assets of Target Corporation, minus the total liabilities of Target
Corporation, determined in a manner consistent with past practice used in the
preparation of the Balance Sheet. For the purposes of this calculation, (a)
total assets shall not include any Shareholder Assets (whether or not
previously distributed to Target Corporation's Shareholders) and (b) total
liabilities shall include Target Corporation's unaccrued liability for bonuses
payable to officers and employees of Target Corporation.
(e) "Shares" shall mean collectively all issued and outstanding
shares of Target Corporation Class A Common Stock and Target Corporation Class
B Common Stock.
(f) "Subsidiary" shall mean, when used with reference to an
entity, any corporation, a majority of the outstanding voting securities of
which are owned directly or indirectly by such entity or any partnership, joint
venture or other enterprise in which such entity currently has,
32
<PAGE> 38
directly or indirectly, any controlling equity interest; provided, however that
C&D Robotics shall be deemed not to be a Subsidiary of the Target Corporation
for purposes of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
ACQUIRING CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
NEWCO
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
TARGET CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
33
<PAGE> 39
EXHIBIT C-1
FORM OF EMPLOYMENT AGREEMENT OF WILL OHMSTEDE
<PAGE> 40
EXHIBIT C-2
TERMS OF EMPLOYMENT AGREEMENT OF JOHN OHMSTEDE
Surviving Corporation and John Ohmstede shall have entered into an
Employment Agreement in a form mutually agreeable to the parties thereto for a
period of six (6) months after the Closing Date, with John Ohmstede to receive
his current base salary and benefits, provided that he shall not be entitled to
any bonus under such Employment Agreement.
<PAGE> 41
SCHEDULE 1.4(c)
CASH CONSIDERATION
CLASS A COMMON STOCK
The following table represents the current holders of the outstanding
Class A common stock, the Cash Consideration payable to each holder of Class A
common stock upon surrender of the certificate(s) representing such holder's
Class A common stock, and each holder's percentage interest in the
undistributed Shareholder Assets as of the Closing Date, if any, attributable
to such holder's ownership of Class A common stock.
<TABLE>
<CAPTION>
INTEREST IN
CASH SHAREHOLDER
HOLDERS CONSIDERATION ASSETS
<S> <C> <C>
Robert L. Ohmstede $1,598,880.70 3.075%
Ann L. Ohmstede 1,560,002.20 3.000%
Carol Ohmstede Koshkin 24,299.10 0.047%
Carol Ohmstede Koshkin Trust -0- -0-
Jill Ohmstede Wentworth 24,299.10 0.047%
Jill Ohmstede Wentworth Trust -0- -0-
John Robert Ohmstede 923,365.80 1.776%
John Robert Ohmstede Trust -0- -0-
Estate of June Ohmstede Nelson 2,565,984.90 4.935%
Jan Ohmstede Stein 157,944.15 0.304%
Jan Ohmstede Stein Trust -0- -0-
Harry R. Jones, III 29,158.92 0.056%
Sarah Land Stein -0- -0-
G. E. Ohmstede, Jr. 595,327.95 1.145%
G. E. Ohmstede, Jr. Trust -0- -0-
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
INTEREST IN
CASH SHAREHOLDER
HOLDERS CONSIDERATION ASSETS
<S> <C> <C>
G. E. Ohmstede, III -0- -0-
Allison Ohmstede -0- -0-
August Ohmstede -0- -0-
Will Land Ohmstede 595,327.95 1.145%
Will Land Ohmstede Trust -0- -0-
Kathleen H. Ohmstede -0- -0-
Will Land Ohmstede, Jr. -0- -0-
Christopher H. Ohmstede -0- -0-
Kristen Ohmstede 187,103.07 0.360%
Kristen Ohmstede Trust -0- -0-
TOTAL $8,261,693.60 15.890%
============= =======
</TABLE>
The Cash Consideration paid to each shareholder at Closing will be reduced by
that shareholders pro rata share of the Escrow Funds and by that shareholders
pro rata share of the reduction, if any, of the Cash Consideration in
accordance with Sections 1.4(f)(i) and (ii).
The aggregate Cash Consideration paid to the holders of Target Corporation
Class A Common Stock and Target Corporation Class B Common Stock shall be
52,000,000. Accordingly, the Cash Consideration payable to each shareholder is
subject to rounding adjustments.
<PAGE> 43
SCHEDULE 1.4(d)
CASH CONSIDERATION
CLASS B COMMON STOCK
The following table represents the current holders of the outstanding Class B
common stock, the Cash Consideration payable to each holder of Class B common
stock upon surrender of the certificate(s) representing such holder's Class B
common stock, and each holder's percentage interest in the undistributed
Shareholder Assets as of the Closing Date, if any, attributable to such
holder's ownership of Class B common stock.
<TABLE>
<CAPTION>
INTEREST IN
CASH SHAREHOLDER
HOLDERS CONSIDERATION ASSETS
<S> <C> <C>
Robert L. Ohmstede $1,586,731.20 3.051%
Ann L. Ohmstede 2,378,881.80 4.575%
Carol Ohmstede Koshkin 3,522,557.90 6.774%
Carol Ohmstede Koshkin Trust 2,672,901.00 5.140%
Jill Ohmstede Wentworth 3,522,557.90 6.774%
Jill Ohmstede Wentworth Trust 2,672,901.00 5.140%
John Robert Ohmstede 2,623,496.00 5.045%
John Robert Ohmstede Trust 2,672,901.00 5.140%
Estate of June Ohmstede Nelson 1,292,712.10 2.486%
Jan Ohmstede Stein 4,206,781.60 8.090%
Jan Ohmstede Stein Trust 1,069,160.40 2.056%
Harry R. Jones, III 34,018.74 0.065%
Sarah Land Stein 53,458.02 0.103%
G. E. Ohmstede, Jr. 3,813,136.20 7.333%
G. E. Ohmstede, Jr. Trust 1,069,160.40 2.056%
G. E. Ohmstede, III 53,458.02 0.103%
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
INTEREST IN
CASH SHAREHOLDER
HOLDERS CONSIDERATION ASSETS
<S> <C> <C>
Allison Ohmstede 53,458.02 0.103%
August Ohmstede 53,458.02 0.103%
Will Land Ohmstede 3,502,107.70 6.735%
Will Land Ohmstede Trust 1,069,160.40 2.056%
Kathleen H. Ohmstede 4,859.82 0.009%
Will Land Ohmstede, Jr. 223,551.72 0.430%
Christopher H. Ohmstede 223,551.72 0.430%
Kristen Ohmstede 4,294,258.40 8.258%
Kristen Ohmstede Trust 1,069,160.40 2.056%
TOTAL $43,738,371.00 84.111%
============== =======
</TABLE>
The Cash Consideration paid to each shareholder at Closing will be reduced by
that shareholders pro rata share of the Escrow Funds and by that shareholders
pro rata share of the reduction, if any, of the Cash Consideration in
accordance with Sections 1.4(f)(i) and (ii).
The aggregate Cash Consideration paid to the holders of Target Corporation
Class A Common Stock and Target Corporation Class B Common Stock shall be
52,000,000. Accordingly, the Cash Consideration payable to each shareholder is
subject to rounding adjustments.
<PAGE> 45
SCHEDULE 2.1(a)
AUTHORIZED TO DO BUSINESS
Louisiana
<PAGE> 46
SCHEDULE 2.1(b)
SUBSIDIARIES
None
<PAGE> 47
SCHEDULE 2.2
CAPITALIZATION
1. The following table represents the current holders of the outstanding
Class A common stock and Class B common stock of Target Corporation:
<TABLE>
<CAPTION>
CLASS A CLASS B
HOLDERS SHARES SHARES
<S> <C> <C>
Robert L. Ohmstede 329.000 326.500
Ann L. Ohmstede 321.000 489.500
Carol Ohmstede Koshkin 5.000 724.833
Carol Ohmstede Koshkin Trust -0- 550.000
Jill Ohmstede Wentworth 5.000 724.833
Jill Ohmstede Wentworth Trust -0- 550.000
John Robert Ohmstede 190.000 539.834
John Robert Ohmstede Trust -0- 550.000
Estate of June Ohmstede Nelson 528.000 266.000
Jan Ohmstede Stein 32.500 865.625
Jan Ohmstede Stein Trust -0- 220.000
Harry R. Jones, III 6.000 7.000
Sarah Land Stein -0- 11.000
G. E. Ohmstede, Jr. 122.500 784.625
G. E. Ohmstede, Jr. Trust -0- 220.000
G. E. Ohmstede, III -0- 11.000
Allison Ohmstede -0- 11.000
August Ohmstede -0- 11.000
Will Land Ohmstede 122.500 720.625
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
CLASS A CLASS B
HOLDERS SHARES SHARES
<S> <C> <C>
Will Land Ohmstede Trust -0- 220.000
Kathleen H. Ohmstede -0- 1.000
Will Land Ohmstede, Jr. -0- 46.000
Christopher H. Ohmstede -0- 46.000
Kristen Ohmstede 38.500 883.625
Kristen Ohmstede Trust -0- 220.000
TOTAL 1,700 9,000
===== =====
</TABLE>
2. Before the Closing Date, Target Corporation's Board of Directors plans
to declare and pay dividends of property and cash, or otherwise
distribute, to the Class A shareholders and Class B shareholders of
Target Corporation as follows:
(a) All of the Shareholder Assets; and
(b) All of Target Corporation's interest and right to receive
reimbursement of a legal settlement as contemplated in Section
4.2(g).
3. Buy-Sell Agreement by and between Ohmstede, Inc. and the shareholders
of Ohmstede, Inc. dated August 1994, which Agreement will be
terminated at or prior to Closing.
<PAGE> 49
SCHEDULE 2.4
NO VIOLATION
1. See item 1 on Schedule 2.18.
2. See item 4.f on Schedule 2.18.
<PAGE> 50
SCHEDULE 2.5
CONSENTS AND APPROVALS
1. Those required under the HSR Act.
2. See item 1 on Schedule 2.18.
3. See item 4.f. on Schedule 2.18.
<PAGE> 51
SCHEDULE 2.8
ABSENCE OF CHANGES
1. Amended and Restated Articles of Incorporation of Target Corporation
were filed on August 2, 1996.
2. See item 2 of Schedule 2.2.
<PAGE> 52
SCHEDULE 2.10
LITIGATION
1. Carlton Gene Rineheart, et. al. v. Ciba-Geigy Corporation, et. al.,
(Class Action Petition naming Ohmstede, Inc. as one of many
defendants), 18th Judicial District Court, Parish of Iberville, State
of Louisiana, Case Number 47429, Division A.
2. Georgia Gulf Corporation v. Ohmstede, Inc., M.D. La, Case Number
95-2025.
3. Edgar Ray Keyes and Susan Nolan Keyes v. Ohmstede Mechanical Services,
Inc., Circuit Court of Warren County, Mississippi, Case Number
950095CI.
4. Stanley Savoy v. Ohmstede, Inc., 14th Judicial District Court, Parish
of Calcasieu, State of Louisiana, Case Number 95-2505.
5. Settlement Agreement with Serv-Tech, Inc. referenced in Section 4.2(g)
of this Agreement.
6. Receipt and Release dated June 4, 1996, executed by Glen Whittington.
7. From time to time, Target Corporation has entered into settlement
agreements requiring the payment of immaterial sums.
<PAGE> 53
SCHEDULE 2.11
TAX MATTERS
1. State of Texas sales and use tax audit is currently pending.
2. A visit has been scheduled with a representative of the State of
Florida taxing authority. Target Corporation is not aware of any
items currently in dispute with the State of Florida.
3. Extensions have been filed for the following tax returns of Target
Corporation:
a. 1995 Federal Income Tax Return;
b. 1995 Louisiana Income and Franchise Tax Return; and
c. 1995 Texas Franchise Tax Return.
<PAGE> 54
SCHEDULE 2.12
EMPLOYEE BENEFIT PLANS
A. Base salaries of the executive officers of Target Corporation
as of June 30, 1996 are as follows:
Chairman Emeritus Robert L. Ohmstede $ 75,000
President, CEO Will L. Ohmstede 240,000
Executive V.P., COO* John Ohmstede 185,000
Vice-President G. E. Ohmstede, Jr. 75,000
V.P. - Engineering Mike Hamersly 70,000
V.P. - Marketing B. R. Naidu 72,000
V.P. - Manufacturing Bal Sareen 96,000
V.P. - Finance* Stephen F. Bender 62,000
* John Ohmstede also holds position of Secretary
Stephen F. Bender also holds position of Treasurer
<PAGE> 55
Schedule 2.12
Page 3
B. The following executive officers and employees of Target
Corporation are entitled to receive bonuses calculated based on the formulas
set forth opposite their names for the fiscal year ending March 31, 1997;
provided, however, that John Ohmstede shall not be entitled to any bonus for
the period beginning on the Closing Date through March 31, 1997.
<TABLE>
<CAPTION>
Executive Officer or Employee Bonus Formula
----------------------------- -------------
<S> <C> <C> <C>
1. Will L. Ohmstede 1. Let X = "Ohmstede Bonus Net Profits" as
President and CEO defined below for the FYE 3-31-1997
2. Let Y = the formula bonus for Will L.
Ohmstede, for the FYE 3-31-1997
3. If X is less than $1,500,000, then there will
be no bonus
4. If X is greater than $1,500,000, but less
than $3,000,000, then the bonus will be
calculated by the formula Y = ((X -
1,500,000) * .03) + 15,000
5. If X is greater than $3,000,000, but less
than $7,000,000, then the bonus will be
calculated by the formula Y = ((X -
3,000,000) * .0325) + 60,000
6. If X is greater than $7,000,000, then the
bonus will be $190,000
</TABLE>
<PAGE> 56
Schedule 2.12
Page 3
<TABLE>
<S> <C> <C>
2. John Ohmstede 1. Let X = "Ohmstede Bonus Net Profits" as
Executive Vice President and COO defined below for the FYE 3-31-1997
2. Let Y = the formula bonus for John Ohmstede,
for the FYE 3-31-1997
3. If X is less than $1,500,000, then there will
be no bonus
4. If X is greater than $1,500,000 but less than
$3,000,000, then the bonus will be calculated
by the formula Y = ((X - 1,500,000) * .03) +
15,000
5. If X is greater than $3,000,000, but less
than $7,000,000, then the bonus will be
calculated by the formula Y = ((X -
3,000,000) * .0225) + 60,000
6. If X is greater than $7,000,000, then the
bonus will be $150,000
3. B. R. Naidu 1% of Ohmstede Bonus Net Profits
Vice President and Corporate Marketing
Manager
4. Mike Hamersly 0.75% of Ohmstede Bonus Net Profits
Vice President and Corporate Engineering
Manager
5. Jim Keith 0.375% of Ohmstede Bonus Net Profits
Corporate Purchasing Manager
6. J. J. White, III 0.5% of Ohmstede Bonus Net Profits
Sales Manager
7. Stephen F. Bender 0.5% of Ohmstede Bonus Net Profits
Vice President - Finance and Treasurer
8. George Bienvenu 0.375% of Ohmstede Bonus Net Profits
National Alliance Manager
</TABLE>
<PAGE> 57
Schedule 2.12
Page 4
<TABLE>
<S> <C> <C>
9. Bruce Krueger 5.0% of LaPorte Bonus Net Profits
General Manager - LaPorte
10. Bill Scott 2.0% of LaPorte Bonus Net Profits
Assistant Plant Manager - LaPorte
11. Joseph Helm 1.5% of LaPorte Bonus Net Profits
Quality Control Manager - LaPorte
12. James Wolff 0.25% of LaPorte Bonus Net Profits
Salesman
13. Robert Starkey 5% of St. Gabriel Bonus Net Profits
General Manager - St. Gabriel
14. Albert Jarreau, Jr. 2% of St. Gabriel Bonus Net Profits
Shop Superintendent - St. Gabriel
15. Mike Tracy 1% of St. Gabriel Bonus Net Profits
Engineering Manager - St. Gabriel
16. Bret Montague 0.25% of St. Gabriel Bonus Net Profits
Salesman
17. Bal Sareen 5% of Lake Charles Bonus Net Profits
Corporate Manufacturing and General
Manager - Lake Charles
18. James Finn 2% of Lake Charles Bonus Net Profits
Manufacturing Manager - Lake Charles
19. Calvin Winters 1% of Lake Charles Bonus Net Profits
Shop Superintendent - Lake Charles
20. George Moser 5% of Corpus Christi Bonus Net Profits
General Manager - Corpus Christi
21. Florentino Lopez 1.5% of Corpus Christi Bonus Net Profits
Shop Superintendent - Corpus Christi
22. Irvin Wiser 2.5% of Beaumont Bonus Net Profits
Production Coordinator - Beaumont
</TABLE>
<PAGE> 58
Schedule 2.12
Page 5
<TABLE>
<S> <C>
23. Bal Sareen 5% of Field Service Division Bonus Net Profits
General Manager - Field Services Division
24. James Hughes 2.0% of Field Service Division Bonus Net Profits
Service Manager - Field Services Division
</TABLE>
The foregoing amounts may be adjusted by applying a Safety Index Factor.
For calculating the formula bonuses described above, "net profits of the
Corporation" shall mean the net profits of Ohmstede, Inc., before deducting
discretionary bonuses, formula bonuses, and federal and state income taxes.
"OHMSTEDE BONUS NET PROFITS" means the portion of the net profits of the
Corporation, as defined above, however excluding the net profits attributable
to C&D Robotics.
"LaPORTE BONUS NET PROFITS" means the portion of the net profits of the
Corporation, as defined above, attributable to the LaPorte Plant.
"St. GABRIEL BONUS NET PROFITS" means the portion of the net profits of the
Corporation, as defined above, attributable to the St. Gabriel Plant.
"LAKE CHARLES BONUS NET PROFITS" means the portion of the net profits of the
Corporation, as defined above, attributable to the Lake Charles Plant.
"CORPUS CHRISTI BONUS NET PROFITS" means the portion of the net profits of the
Corporation, as defined above, attributable to the Corpus Christi Plan.
"BEAUMONT BONUS NET PROFITS" means the amount of net profits of the
Corporation, as defined above, attributable to the Beaumont Plant.
"FIELD SERVICE DIVISION BONUS NET PROFITS" means the portion of the net profits
of the Corporation, as defined above, attributable to the Field Service
Division.
"FORMULA BONUS" is that sum computed as a bonus based upon the formulas
provided herein and before applying any dollar limitations thereto.
C. Ohmstede, Inc. Profit Sharing Plus Plan (401(k)/Profit Sharing
Plan)
D. Cafeteria Plan
<PAGE> 59
Schedule 2.12
Page 6
E. Group Insurance Policy (Health and Life)
F. Ohmstede, Inc. Personnel Policy and Procedure Manual
G. Target Corporation has no written severance policy. From time
to time, Target Corporation pays terminated employees one to two weeks
severance pay in its discretion.
H. Annual Reports on Form 5500
1. Health plan 5500's. Target Corporation has no record
of Form 5500's for 1991 or earlier plan years (12/1 -
11/30).
2. Cafeteria Plan. Target Corporation has no record of
Form 5500's for 1992 or earlier plan years (9/1 -
8/31).
I. Target Corporation makes contributions to Multiemployer
Pension Plans as required under the union contracts described in items 1-3 of
Schedule 2.13.
<PAGE> 60
SCHEDULE 2.13
EMPLOYMENT MATTERS
1. Agreement between Ohmstede, Inc. St. Gabriel Plant and International
Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmiths, Forgers
and Helpers AFL-CIO And Its Local No. 582, effective December 2, 1995.
2. Agreement between Ohmstede, Inc. LaPorte, Texas and Oil, Chemical and
Atomic Workers International Union, AFL-CIO And Its Local Union 4-367,
effective June 13, 1995.
3. Agreement between Ohmstede, Inc. Lake Charles Plant and International
Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmith AFL-CIO and
its Local No. 79, effective October 1, 1993.
4. Agreement by Target Corporation to provide retirement benefits to Gene
Ohmstede, Jr. as of October 10, 1994. This obligation terminates upon
consummation of the transactions contemplated by this Agreement.
5. Target Corporation has no written severance policy. From time to
time, Target Corporation pays terminated employees one to two weeks
severance pay in its discretion.
6. See Schedule 2.12.
<PAGE> 61
SCHEDULE 2.14
PATENTS, TRADEMARKS AND COPYRIGHTS
1. U.S. Patents Title
U. S. Patent No. 5,294,220 Machining Apparatus
2. Trademarks
Mark Status
---- ------
Ohmstede (with design) Registered in the U.S. Patent and
Trademark Office on the Principal
Register; Registration No. 1,897,447
Ohmstede (with design) Registered in the Texas Secretary of
State's Office; Registration No.
051840
<PAGE> 62
SCHEDULE 2.15
ENVIRONMENTAL COMPLIANCE
1. The Environmental Protection Agency ("EPA") issued National Pollutant
Discharge Elimination System ("NPDES") Permit No. TX00008184 for the
LaPorte, Texas facility, which has expired by its terms. The Target
Corporations application for authority to discharge under the National
Pollutant Discharge Elimination System is pending before EPA, but the
permit to discharge has not yet been issued. The Target Corporation
possesses Permit No. 01318, issued June 7, 1996 by the Texas National
Resource Conservation Commission.
2. The Target Corporation could not locate a NPDES permit issued by EPA
for its Saint Gabriel, Louisiana facility for the period prior to
August 27, 1996, the date when Louisiana was delegated authority to
implement NPDES permitting for the state of Louisiana. The Target
Corporation possesses Water Discharge Permit No. WP517, issued June
26, 1994 by the Louisiana Department of Environmental Quality.
3. The Target Corporation's Beaumont facility is located within
one-quarter mile of the International Creosote State Superfund Site.
Target Corporation acknowledges that this item 3 does not limit its
representation set forth in Section 2.15(a).
4. The Target Corporation closed settling ponds at its LaPorte, Texas,
Sulfur, Louisiana, and St. Gabriel, Louisiana facilities. The closure
at the LaPorte, Texas site occurred pursuant to an Agreed Order,
issued January 7, 1991, by the Texas Water Commission.
5. The Target Corporation's facilities were constructed at a time when
asbestos and PCBs were commonly incorporated into building materials
and equipment, although Target Corporation does not have specific
knowledge regarding the current or former presence or use of such
materials at or on its properties.
<PAGE> 63
SCHEDULE 2.16
TITLED PROPERTIES AND ENCUMBRANCES
1. Target Corporation's accounts, general intangibles and inventory are
pledged to secure Target Corporation's line of credit with Texas
Commerce Bank National Association, formerly Texas Commerce
Bank-Beaumont, National Association, evidenced by that certain Credit
Agreement dated as of October 16, 1992, as amended by that certain
First Amendment to Credit Agreement dated as of August 31, 1993, that
certain Second Amendment to Credit Agreement dated as of September 30,
1994, that certain Third Amendment to Credit Agreement dated as of
September 30, 1995, and that certain Revolving Promissory Note dated
November 30, 1995 in the maximum principal amount of $8,000,000.
With respect to the foregoing, reference is made to the following
financing statements, as amended and continued, filed in the Texas
Secretary of State's Office and Jefferson County, Texas:
a. Financing Statement Number 91-0125148 filed on June 26, 1991;
b. Financing Statement Number 91-0125149 filed on June 26, 1991;
and
c. Financing Statement Number 94-0162272 filed on August 3, 1994
(Jefferson County).
2. Financing Statement Number 93-0032341 filed in the Texas Secretary of
State's Office on February 18, 1993; (Notice filing related to three
leased copiers). Title to the copiers has been transferred to Target
Corporation by Bills of Sale, and a UCC-3 Termination Statement will
be filed with respect to this Financing Statement.
3. Financing Statement Number 95-0116267 filed in the Texas Secretary of
State's Office on June 12, 1995; (Notice filing related to leased IBM
equipment).
4. Financing Statement Number 96-0002650 filed in the Texas Secretary of
State's Office on January 4, 1996; (Relates to part of goods completed
under a purchase order for which Target Corporation has received
partial payment).
5. Financing Statement Number 94-0161782 filed in Jefferson County,
Texas, on March 7, 1994; (Relates to certain consigned inventory).
<PAGE> 64
Schedule 2.16
Page 2
6. Financing Statement Number 10-2202606 filed in Calcasieu Parish,
Louisiana, on March 7, 1994; (Relates to certain consigned inventory).
7. Financing Statement Number 47-50052 filed in St. James Parish,
Louisiana, on March 8, 1994; (Relates to certain consigned inventory).
<PAGE> 65
SCHEDULE 2.17
PERMITS AND LICENSES
None
<PAGE> 66
SCHEDULE 2.18
AGREEMENTS, CONTRACTS AND COMMITMENTS
1. Target Corporation's accounts, general intangibles and inventory are
pledged to secure Target Corporation's line of credit with Texas
Commerce Bank National Association, formerly Texas Commerce
Bank-Beaumont, National Association, evidenced by that certain Credit
Agreement dated as of October 16, 1992, as amended by that certain
First Amendment to Credit Agreement dated as of August 31, 1993, that
certain Second Amendment to Credit Agreement dated as of September 30,
1994, that certain Third Amendment to Credit Agreement dated as of
September 30, 1995, and that certain Revolving Promissory Note dated
November 30, 1995 in the maximum principal amount of $8,000,000.
2 Consignment Agreement between Bridgeport Brass Corporation, doing
business as Olin Brass, Indianapolis, and Ohmstede, Inc. dated as of
December 22, 1993. (Terminable by either party on 30 days written
notice)
3. Service Agreement (Bulk Gas System) dated January 8, 1992, between MG
Industries and Ohmstede, Inc.
4. Alliance Agreements.
a. Cooperation Agreement between Ohmstede, Inc. and Deutsche
Babcock-Borsig AG dated May 15, 1996.
b. Global Agreement between Bechtel Corporation and Ohmstede,
Inc. dated May 7, 1996. (Terminable by either party on 60
days written notice)
c. Dow/Ohmstede Alliance Agreement between The Dow Chemical
Company and Ohmstede, Inc. (Terminable by either party on 60
days written notice)
d. Term Purchase Agreement dated April 1, 1995, between Amoco
Corporation and Ohmstede, Inc. (Terminable by either party on
30 days written notice)
e. Chevron/Ohmstede Alliance Agreement between Chevron
Corporation and Ohmstede, Inc. dated June 14, 1994.
(Terminable by either party on 60 days written notice)
<PAGE> 67
f. Effective Equipment Acquisition Arrangement dated August 1,
1990, between E. I. DuPont DeNemours and Company and Ohmstede,
Inc. (DuPont is entitled to receive notice of acquisition of
Ohmstede and may terminate agreement upon acquisition of
Ohmstede). [This agreement may have expired.]
5. Sales Representative Agreements.
a. Manufacturer's Agency Agreement between Ohmstede, Inc. and
Torseda Company dated February 15, 1996. (Terminable by
either party upon 60 days written notice)
b. Manufacturer's Agency Agreement between Ohmstede, Inc. and
Alphadec, Inc. dated July 10, 1995. (Terminable by either
party upon 60 days written notice)
c. Manufacturer's Agency Agreement between Ohmstede, Inc. and K&M
International Corporation dated March 3, 1995. (Terminable by
either party upon 60 days written notice)
d. District Sales Agent Contract between Ohmstede, Inc. and KS
Engineering, Inc. dated September 13, 1995. (Terminable by
either party upon 30 days written notice)
e. District Sales Agent Contract between Ohmstede, Inc. and
Draves & Associates, Inc. dated June 9, 1994. (Terminable by
either party upon 30 days written notice)
f. District Sales Agent Contract between Ohmstede, Inc. and MTD
Equipment Company dated March 3, 1994. (Terminable by either
party upon 30 days written notice)
g. Sales Agent Contract between Ohmstede, Inc. and Great Wall
Industrial Company dated December 3, 1989. (Terminable by
either party upon 30 days written notice)
6. Non-Competition Agreement dated June 28, 1993, between C. H. Heist
Corp., Ohmstede Mechanical Services, Inc. and Ohmstede, Inc.
7. See items 1-3 on Schedule 2.13.
8. Guarantee of Unsecured Note dated June 30, 1995 executed by C&D
Robotics, Ltd., as maker, in favor of Wesley Don Cawley, as payee.
<PAGE> 68
Schedule 2.18
Page 3
9. Directors and officers of Target Corporation are entitled to
indemnification by Target Corporation in accordance with the Articles
of Incorporation and Bylaws of Target Corporation.
10. Demand Note dated May 14, 1991 executed by Harry Jones, III, as maker,
in favor of Target Corporation, as payee. This Demand Note is in the
original principal amount of $25,000, and the outstanding balance of
principal and interest was $27,739.92 as of December 11, 1995. Mr.
Jones has indicated verbally that he will pay all outstanding
principal and interest on or before the Closing.
<PAGE> 1
EXHIBIT 20.1
Company Contacts:
Mark Johnson - Chairman, President and Chief Executive Officer
Larry McAfee - Executive Vice President and Chief Financial Officer
Investor Relations:
Doug Poretz
(703)506-1778
AIR-CURE TECHNOLOGIES, INC.
AND OHMSTEDE, INC. ENTER INTO
PURCHASE AGREEMENT
HOUSTON, TEXAS, September 20, 1996 - Air-Cure Technologies, Inc. (NASDAQ:
ATSS), announced today that the Company has entered into a definitive agreement
for the previously announced acquisition of Ohmstede, Inc.
The purchase price for the transaction is approximately $50 million which is to
be financed by a combination of a private placement and funding from Air-Cure's
bank credit facilities. Air-Cure's Chief Financial Officer Larry McAfee stated
"The acquisition is expected to close in October and should immediately
contribute to earnings."
Ohmstede is the largest manufacturer of shell and tube heat exchangers in the
United States. In addition to selling new equipment, a large percentage of
Ohmstede's business involves the repair and refurbishment of existing units.
With five plants situated along the Gulf Coast, Ohmstede services many of the
leading petrochemical and refining companies in the United States.
Air-Cure Technologies, Inc. is a rapidly growing integrated supplier of
manufactured equipment and engineered systems used in the processing, treatment
and movement of gases and liquids. Through facilities located in North
America, Europe and the Far East, the Company operates internationally
providing products and services to a broad base of industrial customers.
# # #
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,219
<SECURITIES> 0
<RECEIVABLES> 16,419
<ALLOWANCES> 190
<INVENTORY> 3,778
<CURRENT-ASSETS> 47,945
<PP&E> 8,119
<DEPRECIATION> 2,996
<TOTAL-ASSETS> 69,413
<CURRENT-LIABILITIES> 29,099
<BONDS> 0
0
0
<COMMON> 11
<OTHER-SE> 22,377
<TOTAL-LIABILITY-AND-EQUITY> 69,413
<SALES> 72,185
<TOTAL-REVENUES> 72,185
<CGS> 57,389
<TOTAL-COSTS> 71,571
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,299
<INCOME-PRETAX> 645
<INCOME-TAX> 225
<INCOME-CONTINUING> (420)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (420)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
