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FORM 10-K
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION FROM TO
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Commission File Number 1-5091
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FUQUA ENTERPRISES, INC.
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(Exact name of registrant, as specified in its charter)
DELAWARE 13-1988043
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE ATLANTIC CENTER, SUITE 5000
1201 W. PEACHTREE STREET, N.W., ATLANTA, GEORGIA 30309
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(Address of principal executive offices)
Registrant's telephone number, including area code: 404-815-2000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $2.50 par value New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ x ]
The aggregate market value of the voting stock of the registrant (based
upon the closing price on March 15, 1996 on the NYSE) held by non-affiliates
was $57,362,832.
The number of shares of Common Stock outstanding as of March 15, 1996 was
4,478,347.
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DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive Proxy Statement to be filed in
connection with the Annual Meeting of Stockholders to be held on June 1, 1996
(the "Proxy Statement") are incorporated by reference into Part III of this
Report.
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FUQUA ENTERPRISES, INC.
INDEX TO REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995
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Page
No.
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PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Medical Products Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Leather Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . 4
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters . . . . . . . . 5
Item 6. Selected Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . 6
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . 8
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . 8
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . 9
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . 9
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . 9
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K . . . . . . . . . . . . . 10
OTHER SECTIONS
Section F Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . F-1/13
Section S Financial Statement Schedule - Item 14(a) . . . . . . . . . . . . . . . . . . . . . . . . S-1
</TABLE>
iii
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PART I
ITEM 1. BUSINESS
Fuqua Enterprises, Inc. ("Fuqua"), formerly Vista Resources, Inc., was
founded in 1881 and was incorporated in 1900 under the laws of West Virginia.
In 1965, it was reincorporated under Delaware law. Fuqua's principal executive
offices are located at One Atlantic Center, Suite 5000, 1201 W. Peachtree
Street, N.W., Atlanta, Georgia 30309.
During 1995, Fuqua changed its name from Vista Resources, Inc. to Fuqua,
changed the executive management, acquired Basic American Medical Products,
Inc. ("Basic"), and sold its insurance subsidiary, American Southern Insurance
Company ("American Southern"). Additionally, in January 1996, Fuqua made the
decision to discontinue the operations of Kroy Tanning Company, Incorporated
("Kroy"), which had historically been unprofitable. As a result of these
changes, Fuqua through its subsidiaries, is a manufacturer and distributor of
medical equipment and furnishings for the acute, long-term and home health
care markets and also produces a broad line of leathers that are sold to
manufacturers of shoes, handbags, personal leather goods and furniture in both
the United States and foreign markets. FOR FINANCIAL INFORMATION REGARDING
INDUSTRY SEGMENTS AND FOREIGN AND DOMESTIC SALES, SEE NOTE 9 TO FUQUA'S
CONSOLIDATED FINANCIAL STATEMENTS.
On March 13, 1996, Fuqua entered into an agreement to acquire the medical
products operations of Lumex, Inc. (the "Lumex Division") for approximately
$40.7 million. The Lumex Division, whose 1995 net sales are expected to be
approximately $63.0 million, develops and markets a wide range of health care
products including specialty seating, bathroom safety, mobility products,
health care beds and therapeutic support systems. The acquisition transaction
is expected to close in April 1996. The Lumex Division is headquartered in Bay
Shore, Long Island, New York and markets the majority of its products to the
home health care market and the remainder to institutional markets, including
acute care and extended care facilities and dialysis clinics.
MEDICAL PRODUCTS OPERATIONS
Fuqua acquired Basic in November 1995. Basic, through its divisions,
Simmons Healthcare, Omni Manufacturing and SSC Medical (the "Medical Products
Operations"), is a manufacturer and distributor of medical equipment and
furnishings for the acute, long-term and home health care markets. Prior to
the acquisition by Fuqua, Basic was a privately-held company whose principal
shareholder had acquired Basic through a leveraged buyout from Basic's parent
company in 1993.
Basic manufactures electric and manual beds and patient-room furniture,
equipment and furnishings at its facilities located in the United States and
sells these products directly to owners of acute and long-term care facilities.
Additionally, Basic imports, assembles and, through independent distributors
and home medical equipment providers, sells wheelchairs, ambulatory and health
safety aids for the health care and consumer markets. Basic's sales are
principally to customers within the United States and management believes that
Basic is the leading supplier of long-term care facility beds. Also, Basic
competes in the acute care and home health care markets but believes its market
share is relatively small.
Basic encounters significant competition from a number of manufacturers in
each of its product lines and it competes on the basis of product features and
performance, on its ability to provide a full range of products and design
services for owners of long-term care facilities, and its ability to deliver
products and services at competitive prices. Management does not believe
Basic's business is seasonal.
Basic's manufacturing processes include fabrication, assembly and quality
assurance. It purchases raw materials, principally aluminum, steel and wood
from a number of different vendors. Additionally, it purchases electric motors
and electronic controls from independent third parties. Basic believes that it
is not dependent on any one vendor for its supply of raw materials. The impact
of unfavorable raw material price fluctuations on Basic is reduced by its
ability to pass along increases to its customers and the relatively short time
required to design, produce and deliver the order to a long-term care facility.
Basic conducts research and development at its manufacturing facilities.
Amounts expended historically have not been significant; however Basic expects
that these expenditures will be more significant in 1996 and thereafter.
1
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Basic currently holds patents associated with certain products but does not
consider patents a meaningful competitive advantage or essential to its
operations.
Government regulations which affect the health care industry affect Basic.
Medicare and Medicaid provide reimbursement for the cost of medical equipment,
beds and furnishings acquired by owner/operators of acute care and long-term
care facilities and by home health care providers. Accordingly, changes to or
delays in Medicare and Medicaid reimbursement can affect the timing of payment
received by Basic from its customers and can exert downward pressure on prices
which Basic charges its customers for its products. Management believes that
recent changes and improvements in health care cost containment and the current
growth in managed care favor Basic as a low cost producer and as a significant
provider to the growing long-term care and home health care markets.
The United States Food and Drug Administration (the "FDA") regulates the
manufacture and sale of medical devices. Under the various acts which apply,
all medical products are classified as Class I, Class II or Class III devices.
In general Class I devices must comply with certain general controls and with
certain labeling and record keeping requirements. Class II devices have to
comply with general controls and certain performance standards. Class III
devices must receive pre-market approval from the FDA. Basic's products are
classified as Class I and Class II devices. Management believes that it is
presently in material compliance with all applicable regulations promulgated by
the FDA.
Prior to acquisition by Fuqua, Basic funded its working capital needs
through cash flow from operations and by its lines of credit. Fuqua intends to
finance Basic's working capital needs through Fuqua's $60 million Revolving
Credit Facility (the "New Facility"), which management believes will be more
than adequate to cover Basic's working capital needs.
LEATHER OPERATIONS
Fuqua's leather business is conducted through Irving Tanning Company and
its subsidiaries (the "Leather Operations"). Tanned leathers are manufactured
in a wide variety of textures, colors and styles. Products are manufactured to
customers' orders which avoids the necessity of maintaining a large inventory
of finished goods. The Leather Operations sell directly to manufacturers,
using agents and their own sales force.
Until 1990, cowhides were purchased in the raw condition, and all tanning
and other processes necessary to produce the finished leather were performed at
one of the tanneries. In 1990, the Leather Operations began buying hides that
had already undergone the initial chrome tanning process from one principal
supplier, although alternate sources are available. Costs of hides can vary
markedly from year to year and within a year due to supply and demand.
The Leather Operations implemented a modernization and expansion program,
expending over $13,850,000 during the five years through December 31, 1994 for
new buildings, new equipment and rearrangement of production facilities. The
program, which was completed in 1994, has produced greater efficiencies, better
yields, higher and more consistent quality, reduced manufacturing cycle times
and lower inventories than would otherwise have been achieved.
Patents, trademarks, licenses and franchises are not considered important
to the business. The business is not regarded as highly seasonal, although
sales are generally lower in the first and fourth quarters.
Research and development expenditures amounted to approximately $802,000 in
1995, $800,000 in 1994 and $718,000 in 1993.
The tanning industry, like many others in the United States, faces
ever-changing government standards and both state and Federal licensing
procedures. The changing licensing requirements necessitate updating that is
technically complex, and meeting the changing requirements could be costly and
time-consuming. The Town of Hartland, Maine charges the Leather Operations
for approximately 95% of the costs to operate the water treatment facility and
landfill. These expenditures include amounts required to maintain state and
federal water quality and environmental standards. Expenditures for
environmental control purposes with respect to Fuqua's continuing Leather
Operations are not expected to be material in 1996. Fuqua's management believes
that its continuing Leather Operations are operating in substantial compliance
with all relevant environmental regulations.
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In 1995, sales to one customer amounted to $23,662,000 and sales to another
$15,938,000. In 1994, sales to one customer amounted to $20,007,000 and to
another $17,426,000. In 1993, sales to one customer amounted to $18,397,000
and to another $14,180,000. Fuqua's management does not believe that the
continuation of its leather operations is dependent upon a single customer or a
few customers. The Leather Operations have no foreign operations, but about
27% of the Leather Operations' 1995 sales were to customers in foreign
countries, compared to 30% in 1994 and 17% in 1993.
In March 1996, Fuqua entered into an agreement to acquire a 70% interest in
a joint venture which will own a 50% interest in a tannery in China. It is
anticipated that the total investment will be approximately $1,500,000 and will
allow the Leather Operations to produce leathers in China and to market the
products throughout China and Southeast Asia.
The backlog of the Leather Operations' unshipped orders has historically
increased each year, however, the backlog has not proven to be an accurate
predictor of subsequent sales due to the negative impact of competitive
pressures and the rapid changes in retail demand which affect the Leather
Operations' customers.
Fuqua's Leather Operations compete on the basis of quality, price, service
and product performance with many domestic and international producers of
natural leather and, to a lesser extent, synthetic materials used instead of
leather. Foreign competition is intense for the Leather Operations as well as
for other domestic tanneries, in part because foreign tanneries are allowed to
buy United States raw hides, but foreign countries normally do not permit their
raw hides to be exported. Lower labor costs and less stringent environmental
regulations overseas are factors in heightened competition. The Leather
Operations benefit from a dependable water supply, a loyal and stable labor
force and geographical proximity to many customers.
The Leather Operations have historically funded working capital needs
through borrowings of up to $18 million from lines of credit with outside
banks. Beginning in November 1995, these lines of credit were replaced with
the New Facility which management believes is more than adequate to cover the
working capital needs of the Leather Operations.
DISCONTINUED OPERATIONS
Fuqua sold its insurance subsidiary, American Southern, in December 1995
and, as a result, Fuqua no longer has any continuing insurance operations.
American Southern was a multi-line property and casualty company primarily
engaged in the sale of automobile insurance. Additionally, in January 1996,
Fuqua made the decision to discontinue the operations of Kroy, its tanning
operation located in East Wilton, Maine. Separate and distinct from Fuqua's
continuing operations, Kroy produced sheep skin and deer skin leathers which
were sold principally to garment manufacturers. The results of operations and
the estimated loss on disposal of Kroy and American Southern have been
reflected in the 1995 financial statements as discontinued operations.
In connection with Fuqua's decision to discontinue the operations of Kroy,
$4,800,000, before the benefit of income taxes, was accrued by management to
write down assets to their net estimated realizable values and to pay for
obligations, including environmental costs, which may arise in connection with
the wind down of operations and the closing of Kroy's facility in East Wilton,
Maine. SEE NOTE 3 TO FUQUA'S CONSOLIDATED FINANCIAL STATEMENTS FOR FURTHER
DESCRIPTION OF DISCONTINUED OPERATIONS.
EMPLOYEES
As of December 31, 1995, Fuqua and its subsidiaries employed 710 people.
3
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ITEM 2. PROPERTIES
The principal manufacturing and distribution facilities of the Leather
Operations, Medical Products Operations and Fuqua's corporate office,
substantially all of which are fully utilized (except as otherwise indicated)
and suitable for the purpose intended, are as follows:
<TABLE>
<CAPTION>
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Lease
LOCATION SQUARE FEET Expiration Character of Use
Date
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<S> <C> <C> <C>
Atlanta, Georgia 11,783 4-30-2000 Corporate Office
Atlanta, Georgia 50,000 Owned Medical Products Operations' Showroom
Ellsworth, Maine(1) 76,000 Owned Leather Operations' Tannery & Fabrication
East Wilton, Maine(2) 54,100 Owned Leather Operations' Tannery & Fabrication
Fond du Lac, Wisconsin 133,000 Owned Medical Products Operations' Manufacturing
Hartland, Maine 444,000 Owned Leather Operations' Tannery & Fabrication
Lawrenceville, Georgia 50,000 Owned Medical Products Operations' Manufacturing
Toccoa, Georgia 42,000 Month-to-month Medical Products Operations' Manufacturing
Tupelo, Mississippi 45,000 Month-to-month Medical Products Operations' Manufacturing
==================================================================================================================
</TABLE>
(1) Operations at this plant have been suspended for a number of years.
(2) The decision has been made to discontinue operations at this facility
during 1996.
ITEM 3. LEGAL PROCEEDINGS
There were no material legal proceedings pending, other than ordinary
routine litigation incidental to the business, to which Fuqua or any of its
subsidiaries is a party or to which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the three
months ended December 31, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Fuqua as of the date hereof elected to serve
until the next annual meeting of the Board of Directors of Fuqua are as
follows:
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POSITION HELD
NAME AGE OFFICE SINCE
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<S> <C> <C> <C>
J. B. Fuqua 77 Chairman of the Board April 1989
J. Rex Fuqua 46 Vice Chairman of the Board August 1995
Lawrence P. Klamon 59 President and Chief Executive Officer August 1995
John J. Huntz, Jr. 45 Executive Vice President and Chief August 1995
Operating Officer
Brady W. Mullinax, Jr. 42 Vice President-Finance, Treasurer and March 1994
Chief Financial Officer
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</TABLE>
J. Rex Fuqua, Vice Chairman of the Board, is the son of J. B. Fuqua, the
Chairman of the Board.
From July 1989 to March 1991, Mr. J. B. Fuqua served as Senior Chairman of
Fuqua Industries, Inc.; prior to that he was the founder, Chairman of the Board
and Chief Executive Officer of Fuqua Industries, Inc. from September 1965 to
July 1989. Since 1985, Mr. J. Rex Fuqua has served as President and Chief
Executive Officer of Realan Capital Corporation, a privately-held investment
corporation located in Atlanta, Georgia. From 1991 to July 1995, Mr. Klamon
served as Senior Counsel of Alston & Bird, a prominent Atlanta law firm; prior
to that, from 1968 to 1991, he was associated with Fuqua Industries, Inc., a
diversified holding company, rising from General Counsel to President and Chief
Executive Officer and a member of the Board of Directors. From February 1994
to July 1995, Mr. Huntz served as Senior Vice President of Fuqua; from
September 1989 to January 1994, Mr. Huntz served as the Managing Partner of
Noble Ventures International, Inc., a venture investment and advisory firm,
located in Atlanta, Georgia; prior to that, from October 1984 to September
1989, he served as Director of Capital Resources of Arthur Young & Company, an
accounting firm. From January 1994 to March 1994, Mr. Mullinax served as a
financial consultant to Fuqua; and prior to that, from July 1987 to June 1993,
he was a partner with Price Waterhouse, an accounting firm.
4
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
(a) Principal Market
Fuqua's Common Stock is traded on the New York Stock Exchange (symbol
FQE).
(b) Stock Price and Dividend Information
The following table summarizes the high and low market price for 1995
and 1994 as reported in The Wall Street Journal. The closing price of the
Common Stock on March 15, 1996 was $24.00.
<TABLE>
<CAPTION>
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MARKET PRICE OF COMMON STOCK
QUARTER 1995 1994
ENDED HIGH LOW HIGH LOW
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<S> <C> <C> <C> <C>
March 31 $24.50 $20.00 $25.375 $ 20.50
June 30 23.375 18.75 23.25 20.125
September 30 24.75 20.125 23.75 19.50
December 31 24.125 18.25 22.25 19.875
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</TABLE>
Fuqua has not paid cash dividends since 1988, and the Board of
Directors does not anticipate that cash dividends will be paid in the
foreseeable future. Additionally, in November 1995, Fuqua entered into the New
Facility which restricts the amount of dividends which can be paid. SEE NOTE 7
TO FUQUA'S CONSOLIDATED FINANCIAL STATEMENTS.
(c) Approximate Number of Holders of Common Stock:
As of March 15, 1996, there were 842 stockholders of record of Fuqua's
Common Stock.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
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Year ended December 31,
(Dollars in thousands, except share data) 1995(1) 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS(2)
Net sales $ 117,128 $ 118,011 $ 105,785 $ 76,226 $ 57,893
Income from continuing
operations 5,250 5,822(3) 3,775 1,030 1,375
Per share:
Income from continuing
operations $ 1.32 $ 1.51(3) $ .98 $ .27 $ .37
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YEAR-END DATA
Total assets $ 136,762 $ 158,101 $ 140,299 $ 127,227 $ 112,282
Long-term liabilities 22,041 14,445 11,639 10,808 10,018
Stockholders' equity 81,888 64,322 57,378 48,665 42,406
Stockholders' equity per share $ 18.43 $ 17.10 $ 15.31 $ 13.10 $ 11.42
Common shares outstanding 4,442,174 3,762,424 3,748,374 3,713,870 3,712,170
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</TABLE>
Note:
1. Includes Basic for two month period ended December 31, 1995.
2. See footnotes to Consolidated Financial Statements for information on
discontinued operations.
3. Includes $544 ($.14 per share) for favorable adjustment of income tax
contingencies.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
ACQUISITIONS: In November 1995, Fuqua acquired 100% of the common stock of
Basic American Medical Products, Inc. ("Basic"). Basic, through its
divisions, Simmons Healthcare, Omni Manufacturing and SSC Medical, is a
manufacturer and distributor of medical equipment and furnishings for the
acute, long-term and home health care markets. Basic's results of operations
have been included in the consolidated results of Fuqua for the last two months
of 1995 and consisted of net sales of $5,198,000, total costs and expenses
before interest and taxes of $4,797,000 and operating income of $401,000.
On March 13, 1996, Fuqua entered into an agreement to acquire the medical
products operations of Lumex, Inc. (the "Lumex Division") for approximately
$40.7 million. The Lumex Division, whose 1995 net sales are expected to be
approximately $63.0 million, develops and markets a wide range of health care
products including specialty seating, bathroom safety, mobility products,
health care beds and therapeutic support systems. The acquisition transaction
is expected to close in April 1996. The Lumex Division is headquartered in Bay
Shore, Long Island, New York and markets the majority of its products to the
home health care market and the remainder to institutional markets, including
acute care and extended care facilities and dialysis clinics.
Management believes that Basic and the Lumex Division will provide a base
for Fuqua's further expansion in the medical products markets.
LEATHER OPERATIONS: Net sales of the Leather Operations were 5.1% lower in
1995 than in 1994, 1994 amounts were 11.6% above 1993 amounts. The increase
from 1993 to 1994 reflected the addition of new products, improved customer
service, the expansion of sales to certain significant customers, higher demand
for the Leather Operations' exports, and higher selling prices. The decrease
in net sales from 1994 to 1995 reflected volume declines which could not be
offset by price increases. During much of 1995, the demand for leather was
adversely affected by weak retail sales of shoes and other leather products.
Sales to customers in foreign countries were $30,662,000 in 1995, compared to
$34,516,000 in 1994 and $15,510,000 in 1993 and represented 27.4% of total
Leather Operations' sales in 1995. The increases in foreign sales from 1993 to
1994 reflect principally the growth in foreign markets and the success of the
Leather Companies' increased marketing efforts. The decrease in foreign sales
from 1994 to 1995 reflect the decline in retail demand in 1995.
The backlog of the Leather Operations' unshipped orders has historically
increased each year; however, the backlog has not proven to be an accurate
predictor of subsequent sales due to the negative impact of competitive
pressures and the rapid change in retail demand which affect the Leather
Operations' customers.
The gross profit margin percentage was 15.5% in 1995 compared to 14.9% in
1994 and 14.5% in 1993. The increase in 1995 reflects the favorable impact of
falling hide prices during the last half of 1995.
The increase in selling and administrative expenses of the Leather
Operations from $5,989,000 in 1993 to $6,580,000 in 1994 and $6,926,000 in
1995 was almost entirely related to a continued expansion of the sales effort
and higher levels of selling costs on export sales in 1994 and to a lesser
extent in 1995.
Operating profit as a percentage of sales was 9.3% in 1995 and 1994 and was
8.8% in 1993.
CORPORATE OFFICE OPERATIONS: Investment income in 1995 was $828,000 as
compared to $541,000 in 1994 and $552,000 in 1993. The increase resulted from
higher amounts invested in 1995 as compared to 1994 and 1993. Capital gains,
net of losses, included in investment income were $42,000 in 1995, $0 in 1994
and $268,000 in 1993.
General and administrative expenses for corporate office activities in 1995
were $492,000 higher than 1994 and 1994 amounts were $843,000 lower than 1993
amounts, reflecting accruals in 1993 for expenses associated with the decision
in December 1993, to close the New York corporate office and move the
operations to Atlanta and expenditures in 1995 associated with unsuccessful
transactions.
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FINANCING EXPENSES: Interest expense in 1995 was $169,000 higher than 1994 and
1994 amounts were approximately $110,000 higher than in 1993. These increases
principally reflect higher levels of borrowings to support expansion of the
Leather Operations.
In November 1995, Fuqua entered into the New Facility for $60,000,000 which
was provided by three banks. The interest expense under the Facility is based
on matrix pricing which ranges from LIBOR plus 40 to LIBOR plus 70 basis
points. The New Facility replaced, at more favorable rates, borrowings of
approximately $16,000,000 and provides additional capital to support further
corporate development activities.
INCOME TAXES FROM CONTINUING OPERATIONS: The provision for income taxes in
1995, 1994 and 1993 includes both Federal and state income taxes. The combined
Federal and state effective tax rate in 1995 was 33.9% as compared to 31.4% in
1994 and 38.0% in 1993. The effective tax rate in 1994 was favorably impacted
by an adjustment ($544,000 or $.14 per share) for amounts that were no longer
considered necessary for loss contingencies for income taxes. Fuqua's
effective tax rates are consistently below the statutory rates due primarily to
significant sources of investment income that are exempt or substantially
excluded from income taxes and due to favorable tax planning benefits related
to foreign sales.
DIVIDENDS: Fuqua paid no dividends in 1995, 1994 or 1993. At this time, Fuqua
intends to retain all earnings for investments in its current business and for
corporate development opportunities. Additionally, Fuqua's New Facility
restricts the amount of dividends which can be paid.
DISCONTINUED OPERATIONS: During December 1995, Fuqua sold its insurance
subsidiary, American Southern Insurance Company ("American Southern") for
$34,000,000 to Atlantic American Corporation ("Atlantic American"), an
Atlanta, Georgia based publicly-held insurance company. The proceeds from the
sale included cash of $22,648,000 and a note receivable from the purchaser of
$11,352,000. The note bears interest at prime, half of which is payable
quarterly and half of which is payable, together with principal, in October
1996. The term and amount of the note receivable is the same as the note
payable which arose in connection with Fuqua's acquisition of American Southern
in 1991. Management expects that the note payable will be repaid from the
proceeds of the note receivable or, to the extent necessary, repaid with
borrowings under the New Facility. The note payable and related acquisition
agreements provide for indemnification and certain offset rights which, to the
extent claims remain outstanding in October 1996, could result in a delay of
payment of the full amount of the notes payable. The note receivable from
Atlantic American Corporation has similar offset and indemnification rights.
The sale transaction resulted in the earnings of American Southern being
reclassified as discontinued operations and in a loss on disposal from the sale
of $900,000 (net of tax). The loss on disposal arose principally from the
increased cost basis which Fuqua had in the stock as a result of American
Southern's having earned more than it paid in dividends since it was acquired
by Fuqua in 1991.
In January 1996, Fuqua made the decision to discontinue the operations of
Kroy Tanning Company, Incorporated, ("Kroy"), which historically had been
unprofitable. In accordance with generally accepted accounting principles
(Emerging Issues Task Force 95-18), Kroy has been treated as a discontinued
operation in the December 31, 1995 consolidated financial statements. In
connection with Fuqua's decision to discontinue the operations of Kroy,
$4,800,000, before the benefit of income taxes, was accrued at December 31,
1995 to write down assets to their net realizable values and to pay for
obligations, including environmental costs, in connection with the wind down of
operations and the closing of Kroy's facility in East Wilton, Maine. SEE NOTE
3 TO FUQUA'S CONSOLIDATED FINANCIAL STATEMENTS FOR FURTHER DESCRIPTION OF THE
RESULTS OF DISCONTINUED OPERATIONS.
OTHER: In 1993, Fuqua adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes". The cumulative effect at January 1, 1993,
of this accounting change was a benefit of $418,000.
Effective January 1, 1994, Fuqua adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). In accordance with SFAS 115, prior period financial
statements have not been restated to reflect the change in accounting
principle. The cumulative effect on net income as of January 1, 1994 of
adopting SFAS 115 for investments which previously were classified as held to
maturity which were then classified as trading securities was immaterial. The
balance of stockholders' equity as of January 1, 1994 was increased by
$1,238,000, net of income taxes, to reflect the net unrealized gains on
investments previously classified as held to maturity which are now classified
as available for sale.
7
<PAGE> 11
RECENT PRONOUNCEMENTS: In March 1995, the Financial Accounting Standards Board
issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of" ("SFAS 121"), which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
SFAS 121 also addresses the accounting for long-lived assets that are expected
to be disposed. Fuqua will adopt SFAS 121 in the first quarter of 1996 and,
based on current circumstances, does not believe the impact of such adoption
will be material.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation", which encourages companies
to recognize expense for stock-based awards based on their fair market value on
the date of grant. If adopted, Fuqua does not believe that the effect of
adoption will be material.
FINANCIAL CONDITION, LIQUIDITY AND CORPORATE DEVELOPMENT
Fuqua, as a result of the sale of American Southern and having entered into
the New Facility, had at December 31, 1995, $41,550,000 in cash and investments
and over $40,000,000 in unused borrowing capacity. In the event circumstances
warrant, such as with a very large acquisition, Fuqua may look to additional
outside sources for funds. Prior to 1995, Fuqua funded its cash needs with
borrowings by the Leather Operations on lines of credit and by utilizing cash
resources of the corporate office.
LEATHER OPERATIONS: Reflecting the decrease in sales activity, accounts
receivable decreased 8.5% to $13,043,000 at December 31, 1995, as compared to
$14,248,000 in 1994. Year-to-year increases in inventories were .8%, rising to
$16,428,000 in 1995 from $16,298,000 in 1994. In a similar relationship to the
increase in sales, accounts payable and accrued expenses decreased in 1995 by
24.6% to $6,058,000 from $8,038,000 in 1994. The Leather Operations funded
their working capital needs in 1994 with short-term notes payable to banks and
during 1995 with Fuqua's New Facility.
In 1992, Fuqua's Leather Operations completed the first phase of a plant
modernization program that began in 1990. Capital improvements in the first
phase totaled $6,700,000 with $1,600,000 incurred in 1992, $2,200,000 in 1991
and $2,900,000 in 1990. The second phase of the program began in 1993 and was
completed in 1994 and included a new building, automated tanning drums, and
additional drying capacity. Capital expenditures for 1995 were $1,508,000 and
for 1994 were $2,350,000.
The tanning industry, like many others in the United States, faces
ever-changing government standards and both state and Federal licensing
procedures. The changing licensing requirements may necessitate updating
equipment and processes that are technically complex, and meeting the changing
requirements could be costly and time consuming. The Town of Hartland, Maine
charges the Leather Operations for approximately 95% of the costs to operate
the water treatment facility and landfill. These expenditures include amounts
required to maintain state and federal water quality and environmental
standards. Expenditures for environmental control purposes with respect to
Fuqua's continuing Leather Operations are not expected to be material in 1996.
Fuqua's management believes that its continuing Leather Operations are
operating in substantial compliance with all relevant environmental regulations.
OTHER: Fuqua's financial statements are prepared on the basis of historical
cost. While it is difficult to measure the impact of inflation, management
believes that the effects of inflation on Fuqua have not been significant. To
the extent that inflationary pressures have an adverse effect through higher
raw material and asset replacement costs, Fuqua attempts to minimize these
effects through cost reductions and productivity improvements as well as price
increases.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the consolidated financial statements of Fuqua and its
subsidiaries, consisting of the Consolidated Balance Sheets as of December 31,
1995 and 1994 and the related Consolidated Statements of Income, Consolidated
Statements of Cash Flows, and Consolidated Statements of Stockholders' Equity
for each of the years in the three-year period ended December 31, 1995,
together with the Notes to Consolidated Financial Statements. SEE SECTION F,
OF THIS REPORT, WHICH INFORMATION IS INCORPORATED INTO THIS ITEM 8 BY
REFERENCE.
Reference is also made to information set forth in the section entitled
"Summary of Quarterly Data". SEE SECTION F, PAGE F-13 OF THIS REPORT, WHICH
INFORMATION IS INCORPORATED INTO THIS ITEM 8 BY REFERENCE.
8
<PAGE> 12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Identification of Directors
The information regarding directors of Fuqua is set forth under the
section "Election of Directors" in Fuqua's definitive Proxy Statement to be
filed with the Securities and Exchange Commission in connection with the Annual
Meeting of Stockholders pursuant to Regulation 14A of the Securities Exchange
Act of 1934 (the "Proxy Statement"), which section is incorporated herein by
reference.
(b) Identification of Executive Officers
The information regarding executive officers of the Registrant is
included in Part I of this report under the caption "Executive Officers of the
Registrant", which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the information set forth under the caption "Executive
Compensation and Other Information" and "Election of Directors - Fees for
Directors" in the Proxy Statement, which information is incorporated herein by
reference; provided that in no event shall the information set forth under the
caption "Executive Compensation and Other Information - Report on Executive
Compensation" be incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the information set forth under the caption "Ownership
of Common Stock" in the Proxy Statement, which information is incorporated
herein by reference.
Fuqua does not know of any contractual arrangements which may at a
subsequent date result in a change in control of Fuqua.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the information set forth under the caption "Executive
Compensation and Other Information - Transactions with Management" in the Proxy
Statement which information is incorporated herein by reference.
9
<PAGE> 13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The response to this portion of Item 14 is submitted as a separate section
of this report, such section being incorporated herein by reference. (See
Section F)
(a)(2) Schedules
The response to this portion of Item 14 is submitted as a separate section
of this report, such section being incorporated herein by reference. (See
Section S)
(a)(3) Listing of Exhibits
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
--------------------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- -------------- ------------------------------------- -------------------------------- ---------------------------
<S> <C> <C> <C>
2(a) Stock Purchase Agreement among Fuqua, Interim Report on Form 8-K dated Exhibit 2(i)
Concorde Finance & Investment, Inc. October 11, 1991
InterRedec, Inc, InterRedec Southern
Company, Inc. and American Southern
dated September 17,1991
2(b) Agreement and Plan of Merger By and Quarterly Report on Form 10-Q Exhibit 2(a)
Among Basic American Medical Products, for the three months ended
Inc., BA Acquisition Corporation and September 30, 1995
Fuqua and with respect to Articles 7,
12 and 13 thereof, Gene J. Minotto
dated as of October 6, 1995
2(c) Stock Purchase Agreement between Quarterly Report on Form 10-Q Exhibit 2(b)
Atlantic American Corporation and for the three months ended
Fuqua dated as of October 16, 1995 September 30, 1995
2(d) Asset Sale Agreement By and Between
Lumex, Inc., MUL Acquisition Corp. I,
MUL Acquisition Corp. II, and Fuqua
dated March 13, 1996 (Fuqua agrees to
furnish a copy of any omitted schedule
to the Commission upon request)
3(a) Restated Certificate of Incorporation Interim Report on Form 8-K dated Exhibit 3(i)
and Amendments thereto of Fuqua September 7, 1995
3(b) Bylaws of Fuqua, as amended Quarterly Report on Form 10-Q Exhibit 3(b)
for the three months ended
September 30, 1995
4(a) Revolving Credit Agreement between Quarterly Report on Form 10-Q Exhibit 10(b)
SunTrust Bank, Atlanta, Wachovia Bank for the three months ended
of Georgia and Fleet Bank of Maine and September 30, 1995
Fuqua dated November 6, 1995
4(b) Term Loan Agreement by and among
SunTrust Bank, Atlanta, Fuqua and Basic
dated January 18, 1996 (Fuqua agrees to
furnish a copy of any omitted schedules
to the Commission upon request)
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
--------------------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- -------------- ----------------------------------- ------------------------------- -------------------------
<S> <C> <C> <C>
4(c) Agreement between Town of Hartland, Quarterly Report on Form 10-Q Exhibit 4(d)
Maine and Irving Tanning Company for the three months ended
dated September 26, 1994 related to September 30, 1994
General Obligations Bonds
10(a) Management Agreement between Annual Report on Form 10-K Exhibit 10(b)
Fuqua and Fuqua National Corporation for the year ended December 31,
dated April 10, 1989 1989
10(b) Assignment to Fuqua Capital Corpo- Annual Report on Form 10-K Exhibit 10(b)(1)
ration of the Management Agreement for the year ended December 31,
between Fuqua and Fuqua National 1990
Corporation
10(c) First Amendment to Management Agree- Quarterly Report on Form 10-Q Exhibit 10(b)(2)
ment between Fuqua Capital Corpo- for the three months ended
ration and Fuqua dated September 14, September 30, 1994
1994
10(d)* 1989 Stock Option Plan of Fuqua Annual Report on Form 10-K Exhibit 10(c)
for the year ended December 31,
1989
10(e)* 1992 Stock Option Plan of Fuqua Registration Statement on Form Exhibit 28
S-8 (Registration No. 33-54164)
10(f)* 1995 Stock Option Plan for Outside
Directors of Fuqua(1)
10(g)* 1995 Long-Term Incentive Plan of
Fuqua(1)
10(h) Severance Agreement between Fuqua and Quarterly Report on Form 10-Q Exhibit 10(i)
Samuel W. Norwood III dated August 1, for the three months ended
1995 June 30, 1995
10(i) Lease Agreement between Fuqua (Lessee) Annual Report on Form 10-K Exhibit 10(f)
and Sumitomo Life Realty (N.Y.) Inc. for the year ended December 31,
(Lessor) dated January 17, 1990 1990
10(j) First Amendment to the Lease Agreement Annual Report on Form 10-K Exhibit 10(g)
between Fuqua (Lessee) and Sumitomo for the year ended December 31,
Life Realty (N.Y.) Inc. (Lessor) 1990
dated September 6, 1990
10(k) Second Amendment to Lease Agreement Annual Report on Form 10-K Exhibit 10(p)
between Fuqua (Lessee) and Sumitomo for the year ended December 31,
Life Realty (N.Y.) Inc. (Lessor) 1991
dated February 21, 1992
10(l) Third Amendment to Lease Agreement Quarterly Report on Form 10-Q Exhibit 10(i)(1)
between Fuqua (Lessee) and Sumitomo for the three months ended
Life Realty (N.Y.) Inc. (Lessor) September 30, 1994
dated October 28, 1994
</TABLE>
11
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
--------------------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- -------------- --------------------------------------- ----------------------------------- -----------------------
<S> <C> <C> <C>
10(m) Sublease Agreement between Fuqua Annual Report on Form 10-K Exhibit 10(l)
and Fuqua Capital Corporation, for the year ended December 31,
dated October 31, 1994 1994
10(n) Lease Agreement between Empire State Annual Report on Form 10-K Exhibit 10(q)
Building Company (Lessor) and Fuqua for the year ended December 31,
(Lessee) dated March 1, 1993 along 1993
with Lease Modification Agreement
and Space Deletion Agreement
dated February 18, 1994
10(o) Registration Rights Agreement between Quarterly Report on Form 10-Q Exhibit 10(a)
Fuqua and Gene J. Minotto dated for the three months ended
November 8, 1995 September 30, 1995
10(p) Non-negotiable Promissory Note, Interim Report on Form 8-K dated Exhibit 10(i)
dated October 11, 1991, between Fuqua October 11, 1991
and InterRedec Southern Company, Inc.
10(q) Promissory Note between Atlantic American Interim Report on Form 8-K dated Exhibit 10(a)
Corporation and Fuqua dated December 31, December 31, 1995
1995
10(r) Letter of Credit Agreement between First
Union National Bank of Georgia ("First
Union") and Fuqua dated December 8, 1995
(Fuqua agrees to furnish a copy of any
omitted schedule to the Commission upon
request)
10(s) Unconditional Guarantee of Performance
of Fuqua in favor of Super Sagless, Inc.
dated November 15, 1995
11 Statement of Computation of Earnings
per share
21 Subsidiaries of Fuqua
23 Consent of Ernst & Young LLP
24 Powers-of-Attorney
27 Financial Data Schedule (for SEC use only)
27.1 Article 5
</TABLE>
______________________________________________________
12
<PAGE> 16
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(b) Reports on Form 8-K
During the three months ended December 31, 1995, Fuqua filed three
reports on Form 8-K and one report on Form 8-K/A.
(i) The Form 8-K report dated October 6, 1995 reported the
execution of an agreement to acquire Basic and to the
agreement for a $60,000,000 revolving credit facility led by
SunTrust Bank, Atlanta to provide funds for working capital
and acquisitions.
(ii) The Form 8-K report dated November 8, 1995 reported the
acquisition of Basic.
(iii) The Form 8-K/A report dated November 8, 1995 included the
audited financial statements of Basic and pro forma financial
information.
(iv) The Form 8-K report dated December 31, 1995 reported the sale
of American Southern to Atlantic American Corporation as of
December 31, 1995.
(c) Exhibits
The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate
section of this report.
________________________________________________________
* Management contract or compensatory plan required to be filed pursuant to
Item 14(c) of this report.
1. Subject to stockholder approval at the Annual Meeting of Stockholders on
June 1, 1996.
13
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FUQUA ENTERPRISES, INC.
By: s/s Brady W. Mullinax, Jr.
-----------------------------------------------------
Vice President-Finance, Treasurer and Chief Financial
Officer (Principal Financial Officer and
Principal Accounting Officer)
Dated: March 22, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
---------------------------------- ------------------------------------------- -------------------------
<S> <C> <C>
J. B. FUQUA* Chairman of the Board
J. REX FUQUA* Vice Chairman of the Board
W. CLAY HAMNER* Director
FRANK W. HULSE IV* Director
RICHARD C. LAROCHELLE* Director
GENE J. MINOTTO* Director March 22, 1996
CLARK L. REED* Director
D. RAYMOND RIDDLE* Director
President and Chief Executive Officer
/s/ L. P. Klamon (Principal Executive Officer) and
----------------------------- Director
LAWRENCE P. KLAMON
Vice President-Finance, Treasurer, and
/s/ Brady W. Mullinax, Jr. Chief Financial Officer (Principal
----------------------------- Financial Officer and Principal Accounting
BRADY W. MULLINAX, JR. Officer)
FUQUA ENTERPRISES, INC.
* By: s/s Mildred H. Hutcheson
--------------------------
Mildred H. Hutcheson
Attorney-in-fact
</TABLE>
14
<PAGE> 18
FUQUA ENTERPRISES, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1995
ITEM 8
REPORT OF INDEPENDENT AUDITORS
FINANCIAL STATEMENTS
AND
SUPPLEMENTARY DATA
<PAGE> 19
FORM 10-K
FUQUA ENTERPRISES, INC. AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1995
ITEM 8
LIST OF FINANCIAL STATEMENTS
AND
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets as of December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Income
for the years ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Summary of Quarterly Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
</TABLE>
*******
The financial statement schedule under Item 14(a) may be found
under Section S of this report.
(i)
<PAGE> 20
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
of Fuqua Enterprises, Inc.
We have audited the accompanying consolidated balance sheets of Fuqua
Enterprises, Inc. (formerly Vista Resources, Inc.) as of December 31, 1995 and
1994, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1995. Our audits also included the financial statement schedule referred to in
the Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Fuqua Enterprises, Inc. at December 31, 1995 and 1994, and the consolidated
results of its operations and cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
As discussed in Note 1 to the consolidated financial statements, in 1994,
the Company changed its method of accounting for certain investments in debt
and equity securities to comply with Statement of Financial Accounting
Standards No. 115 and, in 1993, the Company changed its method of accounting
for income taxes to comply with Statement of Financial Accounting Standards No.
109.
s/s Ernst & Young LLP
ERNST & YOUNG LLP
Atlanta, Georgia
February 21, 1996,
except for the last
paragraph of Note 2,
as to which the date
is March 13, 1996
F-1
<PAGE> 21
CONSOLIDATED BALANCE SHEETS
Fuqua Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
======================================================================================================================
December 31, (Dollars in thousands) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 29,000 $ 4,231
Investments available for sale 12,550 9,884
Receivables
Trade accounts, less allowance of $200 (1994,$350) 19,102 14,248
Note receivable from sale of subsidiary 11,352 -
Inventories 21,695 16,298
Prepaid expenses and other assets 910 305
Deferred income taxes 3,614 757
---------------------------------
Total Current Assets 98,223 45,723
---------------------------------
Property, plant and equipment 32,303 25,641
Less accumulated depreciation (10,841) (11,065)
---------------------------------
Net Property, Plant and Equipment 21,462 14,576
---------------------------------
Intangible assets, less accumulated amortization of $25 5,013 -
Deferred income taxes 1,066 -
Other assets 95 213
---------------------------------
Total Assets of Continuing Operations 125,859 60,512
Total Assets of Discontinued Operations 10,903 97,589
---------------------------------
Total Assets $136,762 $ 158,101
=================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-2
<PAGE> 22
CONSOLIDATED BALANCE SHEETS - continued
Fuqua Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
======================================================================================================================
December 31, (Dollars in thousands, except share data) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 2,064 $ 11,750
Accounts payable and accrued expenses 18,800 8,038
Accrued income taxes - 1,112
Long-term liabilities due within one year 11,668 1,026
----------------------------------
Total Current Liabilities 32,532 21,926
Long-term liabilities 22,041 14,445
----------------------------------
Total Liabilities of Continuing Operations 54,573 36,371
Total Liabilities of Discontinued Operations 301 57,408
----------------------------------
Total Liabilities 54,874 93,779
----------------------------------
Stockholders' equity
Preference stock, $1 par value:
authorized 8,000,000 shares; none issued - -
Common stock, $2.50 par value:
authorized 20,000,000 shares; issued 1995,
4,443,169 shares; (1994, 3,831,670 shares) 11,108 9,579
Additional paid-in capital 24,074 14,374
Retained earnings 46,698 44,188
Unrealized gains (losses) on investments 28 (2,469)
----------------------------------
81,908 65,672
Treasury stock, at cost: 1995, 995 shares; (1994, 69,246 shares) (20) (1,350)
----------------------------------
Total Stockholders' Equity 81,888 64,322
----------------------------------
Total Liabilities and Stockholders' Equity $ 136,762 $ 158,101
==================================
</TABLE>
F-3
<PAGE> 23
CONSOLIDATED STATEMENTS OF INCOME
Fuqua Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
=======================================================================================================================
Year ended December 31,
(Dollars in thousands, except per share data) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Net sales $117,128 $118,011 $ 105,785
Investment income 828 541 552
-----------------------------------------------------------
Total revenues 117,956 118,552 106,337
-----------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales 98,356 100,446 90,479
Selling, general and administrative expenses 10,757 8,897 9,149
Interest expense 894 725 615
-----------------------------------------------------------
Total costs and expenses 110,007 110,068 100,243
-----------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES 7,949 8,484 6,094
INCOME TAXES 2,699 2,662 2,319
-----------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 5,250 5,822 3,775
-----------------------------------------------------------
DISCONTINUED OPERATIONS:
Income from discontinued operations
(Net of income taxes (benefits) of ($103),
$1,215 and $1,444, respectively) 1,160 3,751 4,268
Loss on disposal of discontinued operations
including earnings net of taxes during the
phase out period (Net of income tax benefits
of $2,753) (3,900) - -
-----------------------------------------------------------
(2,740) 3,751 4,268
-----------------------------------------------------------
Income before cumulative effect of accounting
change 2,510 9,573 8,043
Cumulative effect of accounting change - - 418
-----------------------------------------------------------
NET INCOME $ 2,510 $ 9,573 $ 8,461
-----------------------------------------------------------
PER SHARE:
Income from Continuing Operations $ 1.32 $ 1.51 $ .98
Income before Cumulative Effect of
Accounting Change $ .63 $ 2.48 $ 2.09
Cumulative Effect of Accounting Change - - $ .11
Net Income $ .63 $ 2.48 $ 2.20
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 24
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fuqua Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
=======================================================================================================================
Year ended December 31,
(Dollars in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 5,250 $ 5,822 $ 3,775
Adjustments:
Depreciation and amortization 1,931 1,603 1,326
Deferred income taxes 464 (88) (1,095)
Gain on sales of available for sale investments - - (268)
Cumulative effect of accounting change - - 418
Changes in Assets and Liabilities:
Receivables 886 (716) (3,283)
Inventories (130) (1,889) (2,285)
Other assets (225) 39 141
Income taxes (1,112) (724) 311
Payables, accrued expenses, and other liabilities (1,624) (3,628) 2,198
----------------------------------------------------------
Net cash provided by continuing operations 5,440 419 1,238
----------------------------------------------------------
Income from discontinued operations 1,160 3,751 4,268
Loss on disposal of discontinued operations (3,900) - -
Net items providing cash from discontinued operations (194) 583 1,450
----------------------------------------------------------
Net cash provided by (used in) discontinued operations (2,934) 4,334 5,718
----------------------------------------------------------
Net cash provided by all operations 2,506 4,753 6,956
----------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from the sale of discontinued operations 22,648 - -
Purchase of business, net of cash acquired (2,263) - -
Sales of available for sale investments 3,306 100 3,480
Purchases of available for sale investments (5,272) (6,630) (2,504)
Sales of property, plant and equipment - 31 27
Purchases of property, plant and equipment (1,509) (4,024) (4,922)
Total insurance - (4,525) (2,668)
----------------------------------------------------------
Net cash provided by (used in) investing activities 16,910 (15,048) (6,587)
----------------------------------------------------------
FINANCING ACTIVITIES:
Net increase (decrease) in notes payable (11,750) 5,750 1,000
Payment of long-term liabilities (3,521) (1,273) (1,315)
Additional long-term liabilities 19,615 3,079 2,194
Exercise of stock options 1,009 248 119
Acquired shares for treasury - (190) (60)
----------------------------------------------------------
Net cash provided by financing activities 5,353 7,614 1,938
----------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 24,769 (2,681) 2,307
Increase (Decrease) in Cash and Cash Equivalents
from discontinued operations - 2,445 (211)
Cash and cash equivalents at beginning of year 4,231 4,467 2,371
----------------------------------------------------------
Cash and cash equivalents at end of the year $ 29,000 $ 4,231 $ 4,467
======================================================================================================================
CASH PAID DURING THE YEAR FOR:
Interest $ 2,116 $ 1,185 $ 982
Income taxes 4,515 5,266 3,687
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Contingent payment related to meeting certain earn out
objectives (American Southern) - 1,000 -
Issuance of stock in connection with acquisition 11,550 - -
Assumption of note receivable from sale of American Southern 11,352 - -
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 25
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Fuqua Enterprises, Inc. and Subsidiaries
<TABLE>
<CAPTION>
======================================================================================================================
UNREALIZED
ADDITIONAL GAINS
COMMON PAID-IN RETAINED (LOSSES) ON TREASURY
(Dollars in thousands) STOCK CAPITAL EARNINGS INVESTMENTS STOCK TOTAL
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $ 9,290 $ 13,229 $ 26,154 $ 25 $ (33) $ 48,665
Net income - - 8,461 - - 8,461
Exercise of stock options 220 846 - - (947) 119
Acquired shares for treasury - - - - (60) (60)
Unrealized gains on investments - - - 193 - 193
- ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993 9,510 14,075 34,615 218 (1,040) 57,378
Net income - - 9,573 - - 9,573
Exercise of stock options 69 299 - - (120) 248
Acquired shares for treasury - - - - (190) (190)
Adjustment to beginning balance
for change in accounting
method, net of tax - - - 1,238 - 1,238
Unrealized losses on investments - - - (3,925) - (3,925)
- ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 9,579 14,374 44,188 (2,469) (1,350) 64,322
Net income - - 2,510 - - 2,510
Exercise of stock options 205 871 - - (67) 1,009
Issuance of stock in connection
with acquisition 1,324 8,829 - - 1,397 11,550
Unrealized gains on investments - - - 2,497 - 2,497
- ----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 $ 11,108 $ 24,074 $ 46,698 $ 28 $ (20) $ 81,888
======================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS: Fuqua Enterprises, Inc. ("Fuqua"), formerly Vista Resources, Inc.,
changed its name to Fuqua during 1995. Fuqua also sold its insurance
subsidiary, American Southern Insurance Company ("American Southern") during
1995 and in January 1996, made the decision to discontinue the operations of
Kroy Tanning Company, Incorporated ("Kroy"), which historically had been
unprofitable. Additionally, Fuqua acquired Basic American Medical Products,
Inc. ("Basic" and "Medical Products Operations") in November 1995.
As a result of these changes Fuqua, through its subsidiaries, is a
manufacturer and distributor of medical equipment and furnishings for the
acute, long-term and home health care markets and also produces a broad line of
leathers that are sold to manufacturers of shoes, handbags, personal leather
goods and furniture in both the United States and foreign markets.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Fuqua and all of its subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
ACCOUNTING CHANGES: Effective January 1, 1994, Fuqua adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115"). In accordance with SFAS 115, prior
period financial statements have not been restated to reflect the change in
accounting principle. The cumulative effect on net income as of January 1,
1994 of adopting SFAS 115 for investments which previously were classified as
held to maturity and which were then classified as trading securities was
immaterial. The balance of stockholders' equity as of January 1, 1994 was
increased by $1,238,000, net of income taxes, to reflect the net unrealized
gains on investments previously classified as held to maturity which are now
classified as available for sale. Certain reclassifications have been made to
the 1994 financial statements to conform with the 1995 presentation.
Effective January 1, 1993, Fuqua adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"). This statement requires an asset and liability
approach for financial accounting and reporting of income taxes. Under this
approach, deferred income taxes are recognized for the estimated taxes
ultimately payable or recoverable based on enacted tax law. Changes in enacted
tax rates are reflected in the tax provision as they occur. As permitted by
SFAS 109, Fuqua elected not to restate the financial statements of prior years.
The effect of the change on net income was not material; the cumulative effect
of the change increased net income for the year ended December 31, 1993 by
$418,000 or $.11 per share.
RECENT PRONOUNCEMENTS: In March 1995, the Financial Accounting Standards Board
issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of" ("SFAS 121"), which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
SFAS 121 also addresses the accounting for long-lived assets that are expected
to be disposed. Fuqua will adopt SFAS 121 in the first quarter of 1996 and,
based on current circumstances, does not believe the impact of such adoption
will be material.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation", which encourages companies
to recognize expense for stock-based awards based on their fair market value on
the date of grant. If adopted, Fuqua does not believe that the effect of
adoption will be material.
INCOME PER SHARE: Income per share is based upon 3,962,876 shares in 1995
(1994-3,860,324 and 1993-3,855,648 shares), representing the weighted-average
number of shares outstanding during the year, plus common stock equivalents.
Common stock equivalents include option shares granted under Fuqua's stock
option plans.
FINANCIAL INSTRUMENTS: Financial instruments which potentially subject Fuqua
to concentrations of credit risk are primarily cash equivalents and short-term
investments in investment grade, short-term debt instruments and preferred
stocks. Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of customers in Fuqua's customer
base and their dispersion across different geographic areas. As described in
Note 3, Fuqua received a note in connection with the sale of American Southern
which management believes will be paid in accordance with its terms. Fuqua
maintains an allowance for doubtful accounts based upon the expected
collectibility of its receivables.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments," requires disclosure of
fair value information about financial instruments, whether or not recognized
in the balance sheet, for which it is practicable to estimate that value. In
cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instrument.
SFAS 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts
F-7
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
presented in the footnotes to these financial statements do not represent the
underlying value of Fuqua or of its subsidiaries.
ADVERTISING COSTS: Fuqua, through its subsidiaries, expenses advertising costs
when incurred. The amounts of such costs were insignificant in 1995, 1994 and
1993.
CASH AND CASH EQUIVALENTS: For purposes of the consolidated balance sheets and
statements of cash flows, Fuqua considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents (1995
- - $29,000,000; 1994 - $4,231,000; 1993 - $4,467,000). The cash proceeds of
$22,648,000 from the sale of American Southern on December 31, 1995 were
invested in cash equivalents collateralized by U.S. Treasury obligations. The
carrying amounts reported in the balance sheets for cash and cash equivalents
approximate their fair values.
INVENTORIES: Inventories are stated at the lower of cost or market. Cost is
determined as follows: raw materials and supplies-first-in, first-out; work in
process and finished goods-average.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost. Depreciation is provided principally by the straight-line method over
estimated useful lives which range from 3-30 years.
REVENUE RECOGNITION: Sales are recorded when goods are shipped and billed to
their customers.
RESEARCH AND DEVELOPMENT: The subsidiaries expensed research and development
costs of $802,000, $800,000, and $718,000 in 1995, 1994 and 1993, respectively.
SHORT-TERM BORROWINGS: The weighted average interest rate on short-term
borrowings was 7.4%, 6.8% and 6.0% during 1995, 1994 and 1993, respectively.
USE OF ESTIMATES: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results inevitably will differ from
those estimates, and such differences may be material to the financial
statements.
2. ACQUISITIONS
On November 8, 1995, Fuqua acquired Basic. Basic, whose divisions include
Simmons Healthcare, Omni Manufacturing and SSC Medical, is a manufacturer and
distributor of medical equipment and furnishings for the acute, long-term and
home health care markets.
The purchase price consisted of $2,500,000 in cash and 600,000 shares of
Fuqua's common stock. The transaction was accounted for using the purchase
method; accordingly, the assets and liabilities of Basic have been recorded at
their estimated fair values at the date of acquisition. The excess of purchase
price over the net assets acquired of $5,038,000 has been assigned to goodwill
and will be amortized on a straight-line basis over 30 years.
The results of operations of Basic have been included in the consolidated
financial statements for the two-month period since the date of acquisition.
The following unaudited pro forma summary presents consolidated results from
continuing operations as if the acquisition had occurred on January 1, 1994.
These pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of what would have occurred had the acquisition
been made as of that date or of results which may occur in the future.
<TABLE>
<CAPTION>
ProForma
Year Ended December 31, (Unaudited)
(Dollars in thousands, except per share date) 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 140,589 $141,263
Income from continuing operations 5,440 6,406
Per share:
Income from continuing operations $ 1.22 $ 1.44
</TABLE>
SUBSEQUENT EVENT - ACQUISITION OF LUMEX: On March 12, 1996, Fuqua entered into
an agreement to acquire the medical products operations of Lumex, Inc. (the
"Lumex Division") for approximately $40.7 million. The Lumex Division, whose
1995 net sales are expected to be approximately $63.0 million, develops and
markets a wide range of health care products including specialty seating,
bathroom safety, mobility products, health care beds and therapeutic support
systems. The acquisition transaction is expected to close in April 1996. The
Lumex Division is headquartered in Bay Shore, Long Island, New York and markets
the majority of its products to the home health care market and the remainder
to institutional markets, including acute care and extended care facilities and
dialysis clinics.
3. DISCONTINUED OPERATIONS
In December 1995, Fuqua sold its insurance subsidiary, American Southern, for
$34,000,000 to Atlantic American Corporation, an Atlanta, Georgia based
publicly-held insurance company. The proceeds from the sale included cash of
$22,648,000 and a note receivable from the purchaser of $11,352,000. The note
receivable bears interest at prime, half of which is payable quarterly and half
of which is payable, together with the principal, in October 1996. The note
receivable has indemnification and certain offset rights which are similar to
the provisions of the note payable issued to the seller when Fuqua acquired
American Southern in 1991. The sale transaction resulted in a pretax loss on
disposal of $3,553,000, less earnings (net of taxes) during the phase out
period of the fourth quarter of 1995 of $1,303,000 and less estimated tax
benefits of $1,350,000.
F-8
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
In January, 1996, Fuqua made the decision to discontinue the operations of
Kroy, which historically had been unprofitable. In accordance with generally
accepted accounting principles (Emerging Issues Task Force 95-18), Kroy has
been treated as a discontinued operation in the December 31, 1995 consolidated
financial statements.
The pretax loss on disposal of Kroy is $4,800,000, less estimated tax
benefits of $1,800,000. This accrual provides for reserves necessary to write
down assets (consisting principally of receivables, inventory and property,
plant and equipment) to their net realizable values and to pay for obligations,
including environmental costs, required in connection with the wind down of
operations. In the event an alternative method of disposal does not develop
earlier, management expects to close the East Wilton facility by the fourth
quarter of 1996.
Discontinued operations include management's best estimates of the amounts
expected to be realized from Kroy's assets and future obligations. The amounts
Fuqua will ultimately realize or be obligated for could differ materially in
the near term from the amounts assumed in arriving at the loss on disposal of
Kroy.
The results of operations of American Southern and its subsidiaries through
September 30, 1995 and for Kroy through December 31, 1995 have been classified
as income from discontinued operations as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
(Dollars in thousands)
- ----------------------------------------------------------------
<S> <C> <C> <C>
Revenues $45,932 $49,406 $50,534
Costs and expenses 44,875 44,440 44,822
------- ------- -------
Income before income taxes 1,057 4,966 5,712
Income tax provision
(benefit) (103) 1,215 1,444
------- ------- -------
Income from discontinued
operations $ 1,160 $ 3,751 $ 4,268
======= ======= =======
</TABLE>
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1995 1994
(Dollars in thousands)
- ----------------------------------------------------------------
<S> <C> <C>
Finished goods $ 6,598 $ 3,916
Work in process 6,738 6,400
Raw materials and supplies 8,359 5,982
------- -------
$21,695 $16,298
======= =======
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, 1995 1994
(Dollars in thousands)
- ----------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 257 $ 121
Buildings and improvements 12,803 7,202
Machinery and office equipment 18,399 17,137
Automobiles and trucks 844 1,181
------- -------
$32,303 $25,641
======= =======
</TABLE>
F-9
<PAGE> 29
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31, 1995 1994
(Dollars in thousands)
- ----------------------------------------------------------------
<S> <C> <C>
Accounts payable $ 5,390 $ 4,377
Accrued compensation 1,536 1,365
Accrued insurance 996 659
Accrued profit-sharing plan 381 290
Accrual for discontinued operations 6,147 -
Other accrued expenses 4,350 1,347
------- -------
$18,800 $ 8,038
======= =======
</TABLE>
7. LONG-TERM LIABILITIES
Long-term liabilities consist of the following:
<TABLE>
<CAPTION>
December 31, 1995 1994
(Dollars in thousands)
- ----------------------------------------------------------------
<S> <C> <C>
Revolving Credit Facility, interest at
LIBOR + .5%, due in 1998 $18,500 $ -
Industrial revenue obligations, secured
by improvements, 4.5% to 6.9%, due to
2004 1,335 1,539
Note payable and accrued interest,due
October 11, 1996 - 10,904
Notes payable to bank, secured by
equipment, LIBOR + 1 1/2%, due to
1999 - 1,890
Step down revolver payable in monthly
installments, interest at 8.75%
through April 1997 when balance is
due 745 -
Master draw note with interest
payable at 7.5% through April
1997 when balance is due 937 -
Term note, payable in monthly
installments, interest at 8.75%
through May 2000 120 -
Note payable in monthly installments,
interest at 8% through June 2007,
callable at the option of the
lender within a 90 day period
beginning July 1998, July 2001
or July 2002 360 -
Equipment financing obligations,
10.35%, due to 1996 - 48
Liability for future payments
under employment contracts 44 64
------- --------
$22,041 $ 14,445
======= ========
</TABLE>
The note payable due October 11, 1996, which was issued to the seller in
connection with the acquisition of American Southern, bears interest at the
prime rate. Fifty percent of the interest is payable quarterly and the
remaining fifty percent is due October 11, 1996. In 1995, the balance of the
note was reclassified to long-term debt due within one year. The note is
secured by a letter of credit of equal amount provided by four banks. The note
payable and related acquisition agreements provide for indemnification and
certain offset rights which, to the extent claims remain outstanding in October
1996, could result in delay of payment of the full amount of the note payable.
On November 6, 1995, Fuqua entered into a Revolving Credit Facility
provided by three banks (the "New Facility"). The New Facility is for up to
$60,000,000 for a three-year period to be used for working capital and to
provide funds
F-10
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
for corporate development activities. The interest expense under the New
Facility is based on matrix pricing which ranges from LIBOR plus 40 to LIBOR
plus 70 basis points, plus a charge on the unused commitment of 12.5 to 18.75
basis points. The New Facility replaced, at more favorable rates, borrowings
of approximately $16,000,000 (including short- term borrowings of approximately
$14,000,000) which, as a result, have been classified as long-term debt in
1995. The New Facility includes normal and customary restrictive covenants
regarding funded debt to capital, funded debt to cash flow, interest coverage,
and dividend payments. Management believes that at December 31, 1995, Fuqua is
in compliance with the covenants of the New Facility and with the covenants of
other Fuqua debt agreements.
The aggregate maturity requirements for the next five years in respect to
the current and non-current portions of long-term debt at December 31, 1995
were as follows (dollars in thousands): 1996-$11,668; 1997-$1,964;
1998-$18,735; 1999-$247; 2000-$215; and thereafter $880. The carrying amounts
of long-term liabilities approximate their fair values.
8. CAPITAL STOCK
PREFERENCE STOCK: There are 8,000,000 authorized shares of Preference Stock,
none of which was outstanding or designated as to a particular series at
December 31, 1995.
COMMON STOCK: There are 20,000,000 authorized shares of Common Stock, $2.50 par
value. At December 31, 1995, there were 4,442,174 shares outstanding, at
December 31, 1994 there were 3,762,424, and at December 31, 1993, there were
3,748,374 shares outstanding. In 1995, there were 82,000 shares issued upon
exercise of stock options and 2,250 shares were acquired for the treasury; in
1994, there were 27,675 shares issued upon exercise of stock options and 13,625
shares were acquired for the treasury; in 1993, 88,095 shares were issued upon
exercise of stock options and 53,591 shares were acquired for the treasury. At
December 31, 1995, there were 748,500 shares of common stock reserved in
connection with Fuqua's stock option plans.
In connection with Fuqua's acquisition of Basic in November 1995, Fuqua
issued 600,000 shares of its common stock (including 70,501 shares of treasury
stock) to the majority shareholder of Basic. The shares issued are not
registered under the Securities Act of 1933 and accordingly are restricted as
to resale. Under the terms of the acquisition, there are demand and
"piggyback" registration rights with respect to these shares.
STOCK OPTIONS: On June 29, 1989, the Board of Directors approved a nonqualified
stock option plan for key employees (the "1989 Plan"), reserving 300,000 shares
of Common Stock for issuance under the 1989 Plan. The options are granted at
prices and under terms determined by the Stock Option Committee of the Board of
Directors. All options expire five years from the date of grant.
On January 21, 1992, the Board of Directors approved a stock option plan
(the "1992 Plan"), reserving 300,000 shares of Common Stock for issuance under
the 1992 Plan. The 1992 Plan, which was approved by the stockholders on May
16, 1992, provides for the granting of options to officers, directors, key
employees, consultants, advisors and others providing goods and services to
Fuqua. The options are granted at prices and under terms determined by the
Stock Option Committee of the Board of Directors. All options expire five to
ten years from the date of grant.
In November 1995, the Board of Directors approved the 1995 Long-Term
Incentive Plan (the "Incentive Plan"), reserving 300,000 shares of Common Stock
for issuance under the Incentive Plan. The Incentive Plan which is subject to
approval by the stockholders of Fuqua at the next annual meeting, provides for
the granting of awards to officers and key employees of Fuqua. The awards are
granted at prices and under terms determined by the Stock Option Committee of
the Board of Directors. All awards expire from five to ten years from the date
of grant.
Also in November 1995, the Board of Directors approved the 1995 Stock
Option Plan for Outside Directors (the "Director's Plan"), reserving 50,000
shares of Common Stock for issuance under the Director's Plan. The Director's
Plan is subject to the approval of the stockholders at the next annual meeting.
The options are automatically granted to directors annually.
Further information relating to options follows:
<TABLE>
<CAPTION>
Shares
Year ended December 31, 1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at
beginning of year 217,500 227,175 287,270
Options granted 254,000 20,000 32,000
Options exercised (82,000) (27,675) (88,095)
Options cancelled (5,000) (2,000) (4,000)
------- ------- ---------
Options outstanding at
end of year 384,500 217,500 227,175
======= ======= =======
Options exercisable at
end of year (option price
$8.50 to $21.00 per
share) 228,500 160,750 148,500
Shares available for grant 364,000 263,000 281,000
</TABLE>
All options were granted at the fair market value on date of grant.
F-11
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
9. SALES AND SEGMENT INFORMATION
Fuqua has no foreign operations; sales of the Leather Operations to customers
outside the United States were classified geographically as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
(Dollars in thousands)
- -----------------------------------------------------------
<S> <C> <C> <C>
North America $ 3,075 $ 7,584 $ 3,831
Europe 2,687 3,467 665
Asia 20,967 23,230 10,651
Other 3,933 235 363
------- ------- -------
$30,662 $34,516 $15,510
======= ======= =======
</TABLE>
In 1995, sales of leather to one customer amounted to $23,662,000 and to
another $15,938,000. In 1994, sales of leather to one customer amounted to
$20,007,000 and to another $17,426,000. In 1993, sales of leather to one
customer amounted to $18,397,000 and to another, $14,180,000.
Fuqua's continuing operations are carried on through its subsidiaries which
operate in two distinct business segments, Leather Operations and Medical
Products Operations. The Medical Products Operations became part of Fuqua
through the acquisition of Basic in November 1995.
Operating results and other financial data are presented as follows for each
business segment which at December 31, 1995 remained as continuing operations
of Fuqua:
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
(Dollars in thousands)
- --------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Leather Operations $111,930 $118,011 $105,785
Medical Products
Operations 5,198 - -
-------- -------- --------
Consolidated $117,128 $118,011 $105,785
-------- -------- --------
Operating profit (loss):
Leather Operations $ 10,423 $ 10,985 $ 9,317
Medical Products Operations 401 - -
Corporate (1,981) (1,776) (2,608)
-------- -------- --------
Consolidated $ 8,843 $ 9,209 $ 6,709
-------- -------- --------
Identifiable assets:
Leather Operations $ 81,486 $ 44,724 $ 41,163
Medical Products Operations 26,719 - -
Corporate 17,654 15,788 8,584
-------- -------- --------
Consolidated $125,859 $ 60,512 $ 49,747
-------- -------- --------
Capital expenditures:
Leather Operations $ 1,509 $ 4,024 $ 4,922
Medical Products Operations 619 - -
Corporate - - -
-------- -------- --------
Consolidated $ 2,128 $ 4,024 $ 4,922
-------- -------- --------
Depreciation and Amortization:
Leathers Operations $ 1,582 $ 1,387 $ 1,099
Medical Products Operations 113 - -
Corporate 236 216 227
-------- -------- --------
Consolidated $ 1,931 $ 1,603 $ 1,326
-------- -------- --------
</TABLE>
There were no intersegment sales during 1995, 1994 or 1993.
Operating profit (loss) by segment represents net sales less operating
expenses. No allocation has been made for general corporate expenses, interest
income from corporate investments or any foreign or domestic taxes.
Identifiable assets are tangible and intangible assets used exclusively in the
operations of each business segment. Corporate assets represent cash,
investments and leasehold, furniture and fixtures associated with Fuqua's
corporate office.
10. GENERAL AND ADMINISTRATIVE EXPENSES
In September 1994, Fuqua amended the Management Agreement ("Agreement") with
Fuqua Capital Corporation ("Capital"), a corporation wholly-owned by J. B.
Fuqua, Chairman of the Board, and J. Rex Fuqua, Vice Chairman of the Board.
Under the Agreement, Capital will provide investment services and perform
certain managerial and administrative duties. The term of the Agreement is
through June 1, 2000 and provides for a management fee of $360,000 for each
year of the noncancellable term.
In October 1994, Fuqua amended its lease for corporate office space to extend
the term for five years. Concurrently, Fuqua entered into a new sublease with
a similar five year term with Capital for the portion of space which Capital
uses. The sublease provides that if Fuqua moves out of the space it shares
with Capital, or there is a change in control of Fuqua, Capital has the option
of taking over the area now occupied by Fuqua at terms favorable to Capital.
11. RETIREMENT PLANS
Fuqua adopted a qualified defined contribution plan, effective January 1, 1993,
covering all of the employees of the parent company and the leather
subsidiaries and incorporating the profit-sharing plans of the leather
subsidiaries. This plan contains a profit-sharing component allowed by
Internal Revenue Code Section 401(a), with tax-deferred contributions to each
employee based on his or her compensation and with the total contribution
determined annually by the Board of Directors. The plan also permits employees
to make tax-deferred contributions up to the maximum limits allowed by Internal
Revenue Code Section 401(k), with Fuqua matching a portion of the employee's
contribution under a formula approved annually by the Board of Directors.
Total expense in 1995 was $309,000; in 1994, $372,000 and in 1993, $326,000.
Basic has two defined contribution employee benefit plans for the employees
at its manufacturing facility in Fond du Lac, Wisconsin. One plan allows
employees to make contributions by salary reduction pursuant to Section 401(k)
of the Internal Revenue Code. The other plan is a money purchase plan which
provides for employer contributions equal to 4% of eligible employee salaries.
Employees become eligible to participate in the money purchase plan after 12
months of service.
Employees at Basic's Georgia facilities participate in a profit sharing plan.
This plan provides for discretionary annual contributions by Basic. In
September 1995, Basic adopted an employee benefit plan for its employees at the
Georgia facilities. This plan allows eligible employees to
F-12
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuqua Enterprises, Inc. and Subsidiaries
make contributions by salary reduction pursuant to Section 401(k) of the
Internal Revenue Code.
12. INCOME TAXES
Effective January 1, 1993, Fuqua changed its method of accounting for income
taxes from the deferred method to the liability method required by SFAS 109.
As permitted under the new rules, prior years' financial statements have not
been restated.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of Fuqua's deferred income tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
December 31, 1995 1994
(Dollars in thousands)
- ---------------------------------------------------------
<S> <C> <C>
Deferred income tax liabilities:
Tax over book depreciation $1,851 $ 625
------ ------
Deferred income tax liabilities $1,851 $ 625
====== ======
Deferred income tax assets:
Accrued liabilities $3,243 $ 849
Allowance for doubtful
accounts 80 140
Accrual for discontinued operations 3,189 0
Unrealized investment losses 19 299
Other 0 94
------ ------
Deferred income tax assets 6,531 1,382
------ ------
Net deferred income tax assets $4,680 $ 757
====== ======
</TABLE>
Significant components of the provisions (benefits) for income taxes for
continuing and discontinued operations are as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
(Dollars in thousands)
- --------------------------------------------------------
<S> <C> <C> <C>
Continuing Operations:
Current:
Federal $ 2,016 $2,205 $2,200
State 457 583 509
------- ------ ------
$ 2,473 $2,788 $2,709
======= ====== ======
Deferred:
Federal $ 184 $ (100) $ (317)
State 42 (26) (73)
------- ------ ------
$ 226 $ (126) $ (390)
======= ====== ======
Discontinued Operations: $(2,856) $1,215 $1,444
======= ====== ======
</TABLE>
Effective September 30, 1994, Fuqua made a favorable adjustment for amounts
that were no longer considered necessary for contingencies for income taxes
resulting in a reduction in income tax expense of $544,000 ($0.14 per share).
The provisions for income taxes for continuing operations differ from the
amounts computed by applying the U.S. Federal income statutory tax rates as
follows:
F-13
<PAGE> 33
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
(Dollars in thousands)
- ---------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 34.0%
State income taxes,
net of federal tax benefit 4.0 4.2 4.0
Business tax credits - (.2) -
Dividend credits (1.1) (1.0) (1.0)
Tax-exempt interest (1.5) (.2) -
Write-off of intangibles .2 - -
Foreign sales corporation
benefit (1.7) - -
Adjustment of
estimated liabilities
for prior years - (6.4) -
Other (1.0) - 1.0
----- ---- ----
33.9% 31.4% 38.0%
===== ==== ====
</TABLE>
The provisions (benefits) for income taxes for discontinued operations
differ from those amounts computed by applying the U.S. Federal income
statutory tax rates due principally to tax-free interest at American Southern.
13. INVESTMENTS
All investments at December 31, 1995 and 1994 are classified as available for
sale and are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995 Cost or Gross Gross Estimated
(Dollars in Amortized Unrealized Unrealized Fair
thousands) Cost Gains Losses Value
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale
- ------------------
Corporate Debt
Securities $ 2,524 $ 7 $ (80) $ 2,451
Debt Securities
issued by the
U.S. Treasury 6,010 34 - 6,044
Preferred Stocks 3,964 119 (28) 4,055
------- ------ ------ -------
$12,498 $ 160 $ (108) $12,550
======= ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994 Cost or Gross Gross Estimated
(Dollars in Amortized Unrealized Unrealized Fair
thousands) Cost Gains Losses Value
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for Sale
- ------------------
Corporate Debt
Securities $ 271 $ - $ (18) $ 253
Debt Securities
issued by the
U.S. Treasury 5,988 - (108) 5,880
Preferred Stocks 4,381 18 (648) 3,751
------- ------ ------ ------
$10,640 $ 18 $ (774) $9,884
======= ====== ====== ======
</TABLE>
The proceeds from sales of available for sale securities were $3,306,000
during 1995. In 1995, gross realized gains were $53,000 and gross realized
losses were $11,000 on available for sale investments. The proceeds from sales
of available for sale securities were $100,000 for 1994. There were no gross
realized gains or losses on sales of available for sale securities in 1994.
Cost is determined by specific identification for purposes of calculating
realized gains and losses. There were no transfers of securities to or from
the available for sale or trading categories during 1995 and 1994. There have
been no sales of securities classified as held to maturity during 1995 and
1994.
F-14
<PAGE> 34
SUMMARY OF QUARTERLY DATA
(Unaudited)
<TABLE>
<CAPTION>
======================================================================================================================
March June September December For the
(Dollars in thousands, except per share amounts) 31 30 30 31(3) Year
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995 Net sales $ 24,050 $ 33,692 $ 27,923 $ 31,463 $ 117,128
Income before interest and taxes 1,293 2,496 2,227 2,827 8,843
Income from continuing operations 662 1,349 1,321 1,918 5,250
Income from continuing operations
per share 0.17 0.35 0.34 0.45 1.32
Net income (loss) per share 0.37 0.47 0.17 (0.33) 0.63
1994 Net sales $ 27,233 $ 31,643 $ 30,319 $ 28,816 $ 118,011
Income before interest and taxes 1,437 1,989 2,835 2,948 9,209
Income from continuing operations(1) 788 1,180 2,200 1,654 5,822
Income from continuing operations
per share(1) 0.21 0.31 0.57 0.43 1.51
Net income per share(1) 0.47 0.55 0.74 0.72 2.48
</TABLE>
Notes:
1. Includes $544 ($.14 per share) favorable adjustment in the third quarter of
1994 for amounts that were no longer considered necessary for contingencies
for income taxes.
2. No cash dividends were paid in either year. In 1995 and 1994, per share
amounts are calculated on a discrete quarterly basis and for the year are
based on the weighted-average shares for the four quarters of the year.
3. Includes Basic for the two-month period ended December 31, 1995.
- --------------------------------------------------------------------------------
F-15
<PAGE> 35
FUQUA ENTERPRISES, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1995
ITEM 14(a)
FINANCIAL STATEMENT SCHEDULE
SECTION S
<PAGE> 36
FORM 10-K
FUQUA ENTERPRISES, INC. AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1995
ITEM 14(A)
LIST OF FINANCIAL STATEMENT SCHEDULES
Page
No.
----
Schedule II -- Valuation and Qualifying Accounts . . . . . S-1
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are not applicable and,
therefore, have been omitted.
(i)
<PAGE> 37
Item 14(a)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FUQUA ENTERPRISES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
=============================================================================================================
Col. A Col. B Col. C Col. D Col. E
=============================================================================================================
Additions
---------------------------
(1) (2)
Balance at Charged to Charged to Balance at
Beginning Costs and Other Close
Description of Period Expenses Accounts Deductions of Period
=============================================================================================================
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Allowance for
doubtful accounts $350,000 - - $150,000(a) $200,000
======== ========= ======== ======== ========
Year ended December 31, 1994:
Allowance for
doubtful accounts $335,000 $ 74,483 - $ 59,483(a) $350,000
======== ========= ======== ======== ========
Year ended December 31, 1993:
Allowance for
doubtful accounts $155,000 $ 191,024 - $ 11,024(a) $335,000
======== ========= ======== ======== ========
=============================================================================================================
</TABLE>
(a) Write-off of uncollectible accounts, net of recoveries.
S-1
<PAGE> 1
EXHIBIT 2(d)
ASSET SALE AGREEMENT
BY AND BETWEEN
LUMEX, INC.,
MUL ACQUISITION CORP. I,
MUL ACQUISITION CORP. II
AND
FUQUA ENTERPRISES, INC.
Dated as of March 13, 1996
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I.
ASSETS TO BE ACQUIRED . . . . . . . . . . . 2
1.1. Acquisition and Transfer of Assets . . . . . . . . . . . 2
1.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . . 4
1.3. Assumed Liabilities . . . . . . . . . . . . . . . . . . . 5
1.4. Excluded Liabilities . . . . . . . . . . . . . . . . . . 6
ARTICLE II.
PURCHASE PRICE . . . . . . . . . . . . . 8
2.1. Purchase Price and Payment . . . . . . . . . . . . . . . 8
2.2. Post-Closing Purchase Price Adjustment . . . . . . . . . 8
2.3. Allocation of Purchase Price . . . . . . . . . . . . . . 10
ARTICLE III.
THE CLOSING . . . . . . . . . . . . . . 11
3.1. Closing Date . . . . . . . . . . . . . . . . . . . . . . 11
3.2. Proceedings at Closing . . . . . . . . . . . . . . . . . 11
3.3. Deliveries by the Seller to the Purchasers . . . . . . . 11
3.4. Deliveries by the Purchasers to the Seller . . . . . . . 12
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . . . . . . . 13
4.1. Organization and Good Standing . . . . . . . . . . . . . 13
4.2. Authorization of Agreement . . . . . . . . . . . . . . . 13
4.3. Title to Assets other than Real Property . . . . . . . . 14
4.4. Title to Real Property . . . . . . . . . . . . . . . . . 15
4.5. Consents . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6. Financial Statements . . . . . . . . . . . . . . . . . . 16
4.7. Absence of Certain Developments . . . . . . . . . . . . . 16
4.8. Contracts . . . . . . . . . . . . . . . . . . . . . . . . 18
4.9. Intangible Assets . . . . . . . . . . . . . . . . . . . . 19
4.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.11. Employees and Employee Benefits . . . . . . . . . . . . . 21
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
4.12. Litigation . . . . . . . . . . . . . . . . . . . . . . . 24
4.13. Compliance with Law . . . . . . . . . . . . . . . . . . . 24
4.14. Assets Necessary to Conduct Business . . . . . . . . . . 24
4.15. Environmental Matters . . . . . . . . . . . . . . . . . . 25
4.16. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.17. Products Liability of the Business . . . . . . . . . . . 27
4.18. Safe Medical Devices Act . . . . . . . . . . . . . . . . 27
4.19. Absence of Questionable Payments . . . . . . . . . . . . 28
4.20. Disclosure . . . . . . . . . . . . . . . . . . . . . . . 28
4.21. Compliance with the Immigration Reform and Control Act . 28
4.22. Corporate Expenses . . . . . . . . . . . . . . . . . . . 29
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE
PURCHASERS AND PARENT . . . . . . . . . . . . 29
5.1. Organization and Good Standing . . . . . . . . . . . . . 29
5.2. Authorization of Agreement . . . . . . . . . . . . . . . 29
5.3. Consents . . . . . . . . . . . . . . . . . . . . . . . . 30
5.4. Availability of Funds . . . . . . . . . . . . . . . . . . 30
5.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . 31
5.6. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VI.
COVENANTS OF THE SELLER . . . . . . . . . . . 31
6.1. Cooperation . . . . . . . . . . . . . . . . . . . . . . . 31
6.2. Access to Documents; Opportunity to Ask Questions . . . . 31
6.3. Conduct of Business . . . . . . . . . . . . . . . . . . . 32
6.4. Consents and Conditions; Assignment of Assets . . . . . . 34
6.5. HSR Act Filings . . . . . . . . . . . . . . . . . . . . . 34
6.6. Additional Reports . . . . . . . . . . . . . . . . . . . 34
6.7. Air Bed Contract . . . . . . . . . . . . . . . . . . . . 34
6.8. Other Transactions . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII.
COVENANTS OF THE PURCHASERS . . . . . . . . . . 35
7.1. Cooperation . . . . . . . . . . . . . . . . . . . . . . . 35
7.2. Confidentiality 35
7.3. Consents and Conditions . . . . . . . . . . . . . . . . . 35
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
7.4. HSR Act Filings; Compliance with Antitrust and
Competition Laws . . . . . . . . . . . . . . . . . . . . 35
7.5. Permits, Bonds and Guarantees . . . . . . . . . . . . . . 36
ARTICLE VIII.
COVENANTS RELATING TO EMPLOYMENT AND
EMPLOYEE MATTERS . . . . . . . . . . . . . 36
8.1. Offer of Employment . . . . . . . . . . . . . . . . . . . 36
8.2. Collective Bargaining and Other Agreements . . . . . . . 37
8.3. Employee Benefit Plans . . . . . . . . . . . . . . . . . 37
8.4. Termination Obligations . . . . . . . . . . . . . . . . . 37
8.5. Indemnification . . . . . . . . . . . . . . . . . . . . . 37
8.6 COBRA Coverage . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IX.
CONDITIONS PRECEDENT TO THE PURCHASERS' OBLIGATIONS . . . . . . . . 38
9.1. Representations, Warranties and Covenants . . . . . . . . 39
9.2. HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.3. No Prohibition . . . . . . . . . . . . . . . . . . . . . 39
9.4. Opinion of the Seller's Counsel . . . . . . . . . . . . . 39
9.5. Delivery of Documents . . . . . . . . . . . . . . . . . . 39
9.6. Consents; Permits . . . . . . . . . . . . . . . . . . . . 40
ARTICLE X.
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS . . . . . . . . . 40
10.1. Representations, Warranties and Covenants . . . . . . . . 40
10.2. HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3. No Prohibition . . . . . . . . . . . . . . . . . . . . . 41
10.4. Opinion of the Purchasers' Counsel . . . . . . . . . . . 41
10.5. Delivery of Documents . . . . . . . . . . . . . . . . . . 41
10.6. Consents; Permits . . . . . . . . . . . . . . . . . . . . 41
ARTICLE XI.
ADDITIONAL POST-CLOSING COVENANTS . . . . . . . . 41
11.1. Further Assurances . . . . . . . . . . . . . . . . . . . 41
11.2. Public Announcements . . . . . . . . . . . . . . . . . . 43
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
Page
<S> <C> <C>
11.3. Joint Post-Closing Covenant of the Seller and the
Purchasers . . . . . . . . . . . . . . . . . . . . . . . 43
11.4. Books and Records; Personnel . . . . . . . . . . . . . . 43
11.5. Solicitation of Employees . . . . . . . . . . . . . . . . 44
11.6. Corporate Name . . . . . . . . . . . . . . . . . . . . . 44
11.7. Maintenance of Insurance . . . . . . . . . . . . . . . . 45
ARTICLE XII.
GOVERNMENT CONTRACTS . . . . . . . . . . . . 45
12.1. Government Contracts . . . . . . . . . . . . . . . . . . 45
12.2. Performance Under Nonassigned Contracts . . . . . . . . . 45
12.3. Assignment After Closing . . . . . . . . . . . . . . . . 46
ARTICLE XIII.
INDEMNIFICATION AND RELATED MATTERS . . . . . . . . 46
13.1. Indemnification by the Seller . . . . . . . . . . . . . . 46
13.2. Indemnification by the Purchasers . . . . . . . . . . . . 47
13.3. Determination of Damages and Related Matters . . . . . . 48
13.4. Limitation on Indemnification Liabilities . . . . . . . . 48
13.5. Survival of Representations, Warranties and Covenants . . 49
13.6. Notice of Indemnification . . . . . . . . . . . . . . . . 49
13.7. Defense of Third Party Claims . . . . . . . . . . . . . . 49
13.8. Exclusive Remedy . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XIV.
TERMINATION . . . . . . . . . . . . . . 51
14.1. Termination . . . . . . . . . . . . . . . . . . . . . . . 51
14.2. Liabilities After Termination . . . . . . . . . . . . . . 51
ARTICLE XV.
MISCELLANEOUS . . . . . . . . . . . . . 52
15.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . 52
15.2. Knowledge 59
15.3. Prorations . . . . . . . . . . . . . . . . . . . . . . . 59
15.4. Waiver of Compliance with Bulk Transfer Laws . . . . . . 60
15.5. Entire Agreement . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
(iv)
<PAGE> 6
<TABLE>
<CAPTION>
Page
<S> <C> <C>
15.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . 60
15.7. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . 60
15.8. Expenses . . . . . . . . . . . . . . . . . . . . . . . . 61
15.9. Table of Contents and Headings . . . . . . . . . . . . . 61
15.10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 61
15.11. Severability . . . . . . . . . . . . . . . . . . . . . . 62
15.12. Binding Effect; No Assignment . . . . . . . . . . . . . . 62
15.13. Amendments . . . . . . . . . . . . . . . . . . . . . . . 63
15.14. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . 63
15.15. Counterparts . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
(v)
<PAGE> 7
Exhibits and Schedules
Schedule 1.1(d) --Real Property
Schedule 1.1(e) --Intellectual Property
Schedule 1.1(f) --Permits
Schedule 1.1(g) --Contracts
Schedule 1.2(d) --Excluded Contracts
Schedule 1.2(k) --Other Excluded Assets
Schedule 1.3(b) --Warranty Obligations
Schedule 2.3(a) --Exceptions to GAAP
Schedule 4.4(c) --Title to Real Property
Schedule 4.5 --Consents
Schedule 4.6 --Financial Statements
Schedule 4.7 -- Absence of Certain Business Developments
Schedule 4.8(a) --Breaches or Termination of Material
Contracts
Schedule 4.8(b) --Distributors
Schedule 4.9 --Intangible Property
Schedule 4.11(a) --Employee Plans
Schedule 4.11(f) -- Retiree Welfare Benefits
Schedule 4.11(h) --Employee Matters
Schedule 4.11(i) --Collective Bargaining Matters
Schedule 4.11(j) --Notice of Termination
Schedule 4.12 --Litigation
Schedule 4.13 --Compliance with Law
Schedule 4.14 --Assets Necessary to Conduct Business
Schedule 4.15 --Environmental Matters
Schedule 4.15(h) --Underground Tanks
Schedule 4.17 --Products Liability
Schedule 4.18 --Safe Medical Devices Act
Schedule 4.22 -- Corporate Expenses
Schedule 8.2 --Collective Bargaining and Other
Agreements
Schedule 9.6 --Consents; Permits
Schedule 10.6 --Consents; Permits
Schedule 15.1(a) -- Location
Schedule 15.1(b) -- Permitted Exceptions
Schedule 15.2 -- Knowledge
Exhibit A --Allocation of Purchase Price
Exhibit B -- Covenant Not to Compete
(vi)
<PAGE> 8
ASSET SALE AGREEMENT
ASSET SALE AGREEMENT (the "Agreement"), dated as of
March 13, 1996, by and between Lumex, Inc., a New York corporation
(the "Seller"), MUL Acquisition Corp. I, a Delaware corporation
("Purchaser I") and MUL Acquisition Corp. II, a Delaware
corporation ("Purchaser II") (Purchaser I and Purchaser II are
collectively referred to herein as the "Purchasers") and Fuqua
Enterprises, Inc., a Delaware corporation ("Parent").
W I T N E S S E T H :
WHEREAS, the Seller, through its Lumex division
(the "Division") and an affiliated leasing company, is and has been
engaged in the business of designing, manufacturing, marketing,
selling, leasing and distributing a wide variety of health care
products (the "Business"); and
WHEREAS, Purchaser I is a wholly owned subsidiary
of Parent and Purchaser II is a wholly owned subsidiary of
Purchaser I; and
WHEREAS, the Purchasers desire to purchase, and the
Seller desires to sell, all of the assets and properties of the
Division employed principally in the Business and, as part of such
purchase and sale, the Seller desires to assign, and Purchaser I
desires to assume, certain of the obligations and liabilities of
the Business, subject, in each case, to the exceptions, terms and
conditions set forth herein; and
WHEREAS, capitalized terms used herein are defined
in Section 15.1 hereof;
NOW, THEREFORE, in consideration of the premises
and the mutual representations, warranties, covenants and
agreements hereinafter set forth, and upon the terms and subject to
the conditions hereinafter set forth, the Purchasers and the Seller
hereby agree as follows:
<PAGE> 9
ARTICLE I.
ASSETS TO BE ACQUIRED
1.1. Acquisition and Transfer of Assets. For
the consideration hereinafter provided and upon the terms and
subject to the conditions hereinafter set forth, at the Closing the
Seller shall sell, assign, transfer, convey and deliver to the
Purchasers, and the Purchasers shall purchase, acquire and accept
from the Seller, all of the Seller's right, title and interest in
and to the Business, including, without limitation, in and to all
of the assets, properties, rights, contracts and claims, employed
principally in the Business (except as otherwise specifically set
forth in Section 1.2 hereof), wherever located, whether tangible or
intangible, as the same shall exist as of the Closing (such rights,
title and interest in and to all such assets, properties, rights,
contracts and claims, being collectively referred to herein as the
"Assets"), except that Purchaser II shall only acquire the
Intangible Assets (as hereinafter defined) and Purchaser I shall
acquire all of the other Assets. The Assets shall include, without
limitation, all of the Seller's rights, title and interest in and
to the assets, properties, rights, contracts and claims described
in the following paragraphs (a) through (j) but in each case, only
to the extent principally used in, held for principal use in or
principally related to the Business:
(a) Tangible Personal Property. All
furnishings, furniture, fixtures, office supplies, displays,
vehicles, spare parts, tools, dies, machinery and equipment
and other tangible personal property owned by the Seller or
located on or in any of the Real Property and any and all
assignable warranties of third parties with respect thereto;
(b) Inventories and Supplies. All items
of inventory, including, without limitation, raw materials,
work-in- process, finished goods, supplies and samples owned
or held by the Seller or located on or in any of the Real
Property and any and all assignable warranties of third
parties with respect thereto ("Inventory");
(c) Accounts Receivable. All accounts
and lease receivables and all notes receivable (whether
short-term or long-term) from third parties and all
2
<PAGE> 10
deposits with third parties, together with any unpaid
interest accrued thereon from the respective obligors and any
security or collateral therefor, including recoverable
deposits (collectively, the "Accounts Receivable");
(d) Real Property. All of the Seller's
right, title and interest in the Owned Real Property and the
Leased Real Property, each set forth on Schedule 1.1(d)
hereto (collectively, the "Real Property"), including all
buildings located thereon, any of the fixtures attached
thereto and any Permits relating thereto and any assignable
warranties of third parties with respect thereto;
(e) Intellectual Property and Other
Intangible Property Rights. (i) All patents, copyrights,
tradenames, trademarks, service marks and names (registered
and unregistered), and registrations thereof and applications
therefor including, without limitation, those listed on
Schedule 1.1(e) hereto, (ii) trade secrets, know-how, and
manufacturing, engineering and other technical information,
and (iii) all computer programs, software and databases, in
each case, owned by the Seller or licensed (to the extent
assignable) to the Seller by third parties; provided, that
the Seller retains the right to use "Lumex" in its corporate
name until the time such name is changed in accordance with
Section 11.6 hereof (collectively, the "Intangible Assets");
(f) Permits. All Permits listed on
Schedule 1.1(f) hereto held by the Seller (to the extent
permitted by applicable Law to be transferred);
(g) Contracts. All rights and interests
of the Seller in, to and under the Contracts listed on
Schedule 1.1(g) hereto;
(h) Books and Records. Except as set
forth in Section 1.2(f) hereof, all books, records, mailing,
vendor or customer lists and all files, documents, ledgers,
correspondence and other data relating to the Seller's
operation of the Business;
(i) Therapeutic Support Systems Leases.
All leases and revenue sharing agreements and interest
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currently due and to become due thereon with respect to the
Therapeutic Support Systems product lines; and
(j) Goodwill. All goodwill relating to
the foregoing Assets and the Business.
1.2. Excluded Assets. Notwithstanding anything
to the contrary contained in Section 1.1 hereof, the Seller and the
Purchasers expressly understand and agree that the Seller is not
hereunder selling, assigning, transferring, conveying or delivering
to the Purchasers the following assets, properties, rights,
contracts and claims (collectively, the "Excluded Assets"):
(a) cash, bank accounts, certificates of
deposits, treasury bills, treasury notes and marketable
securities;
(b) any policy of insurance;
(c) except as set forth in Section
1.1(e) hereto, and to the extent not related to the Assets or
used in the Business, any of the Seller's right, title or
interest in or to any name, mark, trade name or trademark,
either alone or in combination, and any and all goodwill
represented thereby and pertaining thereto;
(d) all Contracts set forth on Schedule
1.2(d) hereto and all Contracts that relate solely to the
Excluded Assets or the Excluded Liabilities;
(e) all prepaid charges, sums and fees
pertaining to any of the Excluded Assets or the Excluded
Liabilities;
(f) any books, records or other data
relating to the Seller's ownership or operation of the
Business (i) not regularly located on the premises of the
Business in the ordinary course of the operation thereof, or
(ii) required by applicable Law to be retained by the Seller;
(g) any of the Seller's right, title and
interest under any Contracts, agreements, licenses, Permits,
exemptions, franchises, variances, waivers, consents,
approvals or other authorizations or
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arrangements that are not transferrable without consent
(unless such consent has been obtained);
(h) any claims for refunds or rebates of
any previously paid taxes, levies or duties, including,
without limitation, customs duties;
(i) all deferred income tax assets;
(j) any assets, properties, rights,
contracts or claims relating to, arising out of or in
connection with the Seller's involvement with the operation
of the Seller's Cybex division; and
(k) the other assets listed on Schedule
1.2(k) hereto.
1.3. Assumed Liabilities. Subject to Section
1.4 hereof, as of the Closing, Purchaser I shall assume
responsibility for the performance and satisfaction of the
following, and only the following, liabilities of the Seller
relating to the Business (collectively, the "Assumed Liabilities"
and individually, an "Assumed Liability"):
(a) trade accounts payable (excluding
those accounts that have been paid by the Seller pursuant to
issued checks that remain outstanding) as of the Closing
Date;
(b) warranty obligations and normal
customer returns, adjustments or repairs relating to products
or services sold, performed or provided by the Seller in the
Business, including, without limitation, the warranty matters
that are described in Schedule 1.3(b) hereto;
(c) all product liability obligations to
the extent not Covered by the Seller's Insurance Policies
with respect to products or services sold, performed or
provided prior to Closing;
(d) all accrued but unpaid wages,
commissions, and vacation, holiday and sick pay obligations
(and any payroll taxes thereon) with respect to Employees;
(e) accrued liabilities that are in any
of the categories to be included on the Closing Balance
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Sheet under the heading "Accounts Payable & Accrued
Liabilities" (other than the liabilities described in clauses
(b) through (d) of this Section 1.3);
(f) all lease obligations for Real
Property arising on or after the Closing Date (except as
accrued on the Initial Balance Sheet) (as both landlord and
tenant) and the obligations associated with any warranties or
permits with respect to the Assets that are not Excluded
Assets;
(g) all of the Purchasers' liabilities
with respect to Employees and Transferred Employees as
described under Article VIII hereof;
(h) any and all current or future
Environmental Costs and Liabilities arising out of, related
to or in any way attributable to the current, historic or
future presence of Hazardous Substance contamination at, on,
under or in the facility at the Location, whether known or
unknown as of the Closing Date, including without limitation
any cleanup, response, removal or remedial action
obligations; and
(i) all debts, claims, liabilities,
obligations, damages and expenses (collectively, the
"Liabilities") of every kind and nature, whether known,
unknown, contingent, absolute, determined, indeterminable or
otherwise on the Closing Date, to the extent relating to or
arising from the operation of the Business in the ordinary
course.
1.4. Excluded Liabilities. The Purchasers
shall not assume or become liable for any debts, obligations,
commitments, or liabilities of the Seller, whether known or
unknown, absolute, contingent, or otherwise, whether accrued or
unaccrued and whether or not related to the Assets, except for the
Assumed Liabilities (the obligations and liabilities of the Seller
not assumed by the Purchasers are hereinafter referred to as the
"Excluded Liabilities") including without limitation, the
following:
(a) Any losses, costs, expenses,
damages, claims, demands and judgments of every kind and
nature (including the defense thereof and reasonable
attorneys' and other professional fees) related to, arising
out of, or in connection with the Seller's
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<PAGE> 14
involvement with the operation of the Seller's Cybex
division;
(b) Any losses, costs, expenses, damages
claims, demands and judgments of every kind and nature
(including the defense thereof and reasonable attorneys' and
other professional fees) related to, arising out of, or in
connection with the Seller's failure to comply with the Bulk
Transfer Act or any similar statute as enacted in any
jurisdiction, domestic or foreign in which any of the Assets
are located;
(c) Any liabilities or obligations of
the Seller relating to the Excluded Assets;
(d) Any and all Taxes payable, whether
currently payable or a deferred payable obligation, by the
Seller with respect to the ownership of the Assets or the
operation of the Business on or prior to the Closing Date;
(e) Any and all current and future
Environmental Costs and Liabilities arising out of, related
to or in any way attributable to the ownership or operation
of facilities, premises or properties formerly, but no longer
as of the Closing Date, owned or operated by the Seller or
any affiliated company;
(f) Any of the Seller's obligations,
liabilities, costs or expenses described in Section 15.8
hereof and the matters referred to in paragraphs I and III of
Schedule 4.12;
(g) All events occurring prior to the
Closing Date that are Covered by the Seller's Insurance
Policies (including, without limitation, workers compensation
obligations with respect to occurrences prior to the Closing
Date and product liability obligations with respect to
products or services sold, performed or provided prior to the
Closing Date);
(h) Any indebtedness of the Seller for
borrowed money under a bank credit agreement or industrial
revenue bonds;
(i) Any liabilities or obligations of the
Seller with respect to (i) each of the agreements
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listed in Section 4.7(a)(viii) of Schedule 4.7, and (ii) the
change of control agreements between the Seller and each of
John R. Cowin, dated as of January 20, 1992, and Gene Ryan,
dated as of June 1, 1992;
(j) Any and all liabilities and costs
related to or resulting from the compliance review of the
Seller to be conducted by the Office of Federal Contract
Compliance Programs, notification of which was received by
the Seller in a letter dated May 1, 1995;
(k) Any and all Liabilities with respect
to the Seller's obligations under Article VIII hereof; and
(l) Any and all liabilities, costs and
expenses associated with the removal, remediation, clean up
or other corrective action related to the asbestos in the tar
on the roof of the facility at the Location.
ARTICLE II.
PURCHASE PRICE
2.1. Purchase Price and Payment. The aggregate
purchase price to be paid by the Purchasers to the Seller for the
Assets and the Assumed Liabilities shall be $40,750,000 (the
"Purchase Price"), subject to adjustment as provided in Section 2.2
hereof. The portion of the Purchase Price allocable to the
Intangible Assets pursuant to Section 2.3 hereof shall be paid by
Purchaser II. The balance of the Purchase Price shall be paid by
Purchaser I. Payment of the Purchase Price shall be in U.S.
dollars, and shall be made no later than 11:30 a.m. (New York City
time) on the Closing Date by wire transfer of immediately available
funds to the account or accounts designated by the Seller.
2.2. Post-Closing Purchase Price Adjustment.
(a) As soon as practicable (but in no
event later than 60 days) following the Closing Date, the
Seller shall prepare and deliver to the Purchasers a
statement of net assets to be sold for the Business as of the
Closing Date (the "Closing Balance Sheet"), which shall
include a computation of the Preliminary Net Assets
Adjustment (as defined below). The Closing Balance Sheet
shall be prepared by the Seller in accordance with GAAP
except as set forth in Schedule
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<PAGE> 16
2.3(a) and on a basis consistent with the Initial Balance
Sheet.
(b) The "Preliminary Net Assets
Adjustment" shall equal the amount of Net Assets reflected on
the Initial Balance Sheet minus the amount of Net Assets
reflected on the Closing Balance Sheet. As used herein, "Net
Assets" shall mean the total assets (excluding (i) any assets
that are Excluded Assets and (ii) with respect to the Closing
Balance Sheet only, the Excess Lancaster Inventory) of the
Business less the notes and accounts payable and accrued
liabilities (excluding any accrued liabilities that are
Excluded Liabilities), as reflected on the Initial Balance
Sheet or the Closing Balance Sheet, as the case may be.
(c) Following the Closing Date, the
Purchasers shall afford the Seller and its representatives
access to all books and records relating to the Business and
make available the assistance of any employees of the
Purchasers related to the Business, in each case as is
necessary to enable the Seller to prepare the Closing Balance
Sheet and to calculate the Preliminary Net Assets Adjustment.
(d) The Purchasers and its
representatives shall have a period of 20 days to review the
Closing Balance Sheet and the calculation of the Preliminary
Net Assets Adjustment following delivery of the Closing
Balance Sheet by the Seller. During such period, the Seller
shall afford the Purchasers and its representatives access to
any of its books, records and work papers necessary to enable
the Purchasers and its representatives to review the Closing
Balance Sheet and the calculation of the Preliminary Net
Assets Adjustment. The Purchasers may dispute any amounts
reflected in the Preliminary Net Assets Adjustment by giving
notice in writing to the Seller specifying each of the
disputed items and setting forth in reasonable detail the
basis for such dispute; provided, however, that the
Purchasers may only dispute the calculation of the
Preliminary Net Assets Adjustment to the extent that the
aggregate of all items in dispute would reduce the
Preliminary Net Assets Adjustment by more than $75,000 (in
which case the dispute shall be for all amounts). Failure by
the Purchasers to dispute the amounts reflected in the
Preliminary Net Assets Adjustment within 20 days of delivery
of the Closing Balance Sheet by the
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Seller shall be deemed an acquiescence therein by the
Purchasers. If within 30 days after delivery by the
Purchasers to the Seller of any notice of dispute, the
Purchasers and the Seller are unable to resolve all of such
disputed items, then any remaining items in dispute shall be
submitted to Coopers & Lybrand, or if Coopers & Lybrand is
not available, then an independent nationally recognized
accounting firm other than Ernst & Young LLP (the
"Arbitrator"). The Arbitrator shall determine the remaining
disputed items and report to the Seller and the Purchasers
upon such items. The Arbitrator's decision shall be final,
conclusive and binding on all parties. The fees and
disbursements of the Arbitrator shall be borne equally by the
Purchasers and the Seller. The Preliminary Net Assets
Adjustment if undisputed or deemed undisputed or as
determined in accordance with the procedure outlined above
shall be the "Final Net Assets Adjustment."
(e) If the amount of the Final Net
Assets Adjustment is positive then the Purchase Price shall
be decreased by an amount equal to the Final Net Assets
Adjustment and the Seller shall promptly pay to the
appropriate Purchasers an amount equal to the Final Net
Assets Adjustment in cash.
(f) If the amount of the Final Net
Assets Adjustment is negative then the Purchase Price shall
be increased by such amount and the appropriate Purchasers
shall promptly pay to the Seller an amount equal to the Final
Net Assets Adjustment in cash.
2.3. Allocation of Purchase Price. The
Purchasers and the Seller hereby agree that the Purchase Price
shall be allocated among the Assets in accordance with Section 1060
of the Code in the manner set forth on Exhibit A hereto. Subject
to the requirements of any applicable Tax law, all Tax Returns and
reports filed by the Purchasers and the Seller shall be prepared
consistently with such allocation. In the event of any purchase
price adjustment hereunder, the Purchasers and the Seller agree to
adjust such allocation to reflect such purchase price adjustment
and to file consistently any tax returns and reports required as a
result of such purchase price adjustment.
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ARTICLE III.
THE CLOSING
3.1. Closing Date. The Closing shall take
place at the offices of Weil, Gotshal & Manges LLP, 767 Fifth
Avenue, New York, New York at 10:00 A.M., on the fifth business day
after the conditions set forth in Articles IX and X hereof have
been satisfied or waived, or at such other place and at such other
time and date as may be mutually agreed upon by the Purchasers and
the Seller; provided that the Closing shall not take place prior to
April 1, 1996 without the consent of the Purchasers. The date of
the Closing is referred to in this Agreement as the "Closing Date."
3.2. Proceedings at Closing. All proceedings
to be taken and all documents to be executed and delivered by the
Seller in connection with the consummation of the transactions
contemplated hereby shall be reasonably satisfactory in form and
substance to the Purchasers and its counsel. All proceedings to be
taken and all documents to be executed and delivered by the
Purchasers in connection with the consummation of the transactions
contemplated hereby shall be reasonably satisfactory in form and
substance to the Seller and its counsel. All proceedings to be
taken and all documents to be executed and delivered by all parties
at the Closing shall be deemed to have been taken, executed and
delivered simultaneously, and no proceedings shall be deemed taken
nor any documents executed or delivered until all have been taken,
executed and delivered.
3.3. Deliveries by the Seller to the
Purchasers. At the Closing, the Seller shall deliver, or shall
cause to be delivered, to the Purchasers the following:
(a) executed assignments, patent
assignments, trademark assignments, bills of sale and/or
certificates of title and any other documents, dated the
Closing Date, transferring to the Purchasers all of the
Assets;
(b) an executed assignment and assumption
agreement, in form reasonably acceptable to the Seller and
the Purchasers (the "Assignment and Assumption Agreement");
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(c) an executed Covenant Not to Compete,
substantially in the form of Exhibit B hereto (the "Covenant
Not to Compete");
(d) the certificate referred to in
Section 9.1(c) hereof signed by a duly authorized officer of
the Seller;
(e) the opinion of counsel for the
Seller referred to in Section 9.4 hereof;
(f) a certificate, in a form
reasonably satisfactory to the Purchasers, of the Seller
stating under penalties of perjury the Seller's United States
taxpayer identification number and that the Seller is not a
foreign person within the meaning of Section 1445(b)(2) of
the Code;
(g) a receipt for the Purchase Price;
(h) copies of the consents and waivers
described in Section 9.6 hereof;
(i) copies of good standing certificates
from the appropriate governmental authorities in the
Commonwealth of Pennsylvania and the States of New York,
Tennessee and California;
(j) a bargain and sale deed (the "Deed")
for each Owned Real Property (or the statutory equivalent
thereof in the jurisdiction in which the Owned Real Property
is located);
(k) an Assignment and Assumption of
Leases (the "Lease Assignment") for the Leased Real Property
in form reasonably satisfactory to the Seller and Purchasers;
and
(l) an Assignment and Assumption of
Warranties and Permits (the "W&P Assignment") in form
reasonably satisfactory to the Seller and the Purchasers.
3.4. Deliveries by the Purchasers to the
Seller. At the Closing, the Purchasers shall deliver to the Seller
the following:
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(a) immediately available funds in the
amount of the Purchase Price by wire transfer as provided in
Section 2.1 hereof;
(b) the certificate referred to in
Section 10.1(c) hereof signed by a duly authorized officer of
the Purchasers;
(c) the opinion of counsel for the
Purchasers referred to in Section 10.4 hereof;
(d) the Assignment and Assumption
Agreement duly executed by an authorized officer of the
Purchasers;
(e) executed Lease Assignments and W&P
Assignments; and
(f) any and all transfer affidavits or
certificates required by applicable law in order to
effectuate the recording of the Deeds and the assignment of
the Leased Real Property.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the
Purchasers and Parent as follows:
4.1. Organization and Good Standing. The
Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York and has all
requisite corporate power and authority to carry on its business as
it is now being conducted, and to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby.
The Seller is duly qualified and is in good standing as a foreign
corporation in each of the jurisdictions where it owns or leases
property in connection with the Business, or employs employees with
respect to the Business except where the failure to be so qualified
would not have a Material Adverse Effect.
4.2. Authorization of Agreement. The Seller
has full corporate power and authority to execute and deliver this
Agreement and each other agreement, document, instru-
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ment or certificate contemplated by this Agreement or to be
executed by the Seller in connection with the consummation of the
transactions contemplated by this Agreement (all such other
agreements, documents, instruments and certificates required to be
executed by the Seller being hereinafter referred to, collectively,
as the "Seller Documents"), and to perform fully its obligations
hereunder and thereunder. The execution, delivery and performance
by the Seller of this Agreement and each of the Seller Documents
has been duly authorized by all necessary corporate action on the
part of the Seller. This Agreement has been, and each of the
Seller Documents will be at or prior to the Closing, duly executed
and delivered by the Seller, and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and the Seller Documents when so
executed and delivered will constitute, legal, valid and binding
obligations of the Seller, enforceable against the Seller in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
None of the execution and delivery by the Seller of this Agreement
and the Seller Documents, or the consummation of the transactions
contemplated hereby or thereby, or compliance by the Seller with
any of the provisions hereof or thereof will (i) conflict with, or
result in the breach of, any provision of the certificate of
incorporation or by-laws of the Seller, (ii) conflict with,
violate, result in the breach or termination of, or constitute a
default under any Contract or Order relating to the Business to
which the Seller is a party or by which it or any of the Assets is
bound or subject, (iii) constitute a violation of any Law
applicable to the Seller, or (iv) result in the creation of any
Lien (other than any Lien in favor of the Purchasers) upon any of
the Assets, except, in each case, for violations, conflicts,
breaches or defaults which in the aggregate would not materially
hinder or impair the transactions contemplated hereby or have a
Material Adverse Effect.
4.3. Title to Assets other than Real Property.
(a) The Seller has good and valid title
to or, in the case of leased properties, a valid leasehold
interest in, all the Assets other than the Real Property,
including all of such Assets reflected on the
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Initial Balance Sheet (except Inventory disposed of in the
ordinary course of business after December 31, 1995), free
and clear of all Liens other than Permitted Exceptions. The
Seller owns, has valid leasehold interests in or valid
contractual rights to use, all of the Assets, tangible and
intangible, used by, or necessary for the conduct of the
Business.
(b) The machinery, tools, equipment and
other tangible physical assets included in the Assets are in
good working order, normal wear and tear excepted, are being
used or are useful in the Business at its present level of
activity and are in an operating condition sufficient to
conduct the Business as now being conducted.
4.4. Title to Real Property.
(a) The Seller owns title in fee simple
to the Owned Real Property free and clear of all Liens other
than Permitted Exceptions and, to the Seller's knowledge,
such title to the Owned Real Property is good and marketable,
other than with respect to the facility at the Location as it
relates to the Known Environmental Condition. The Owned Real
Property and the Leased Real Property identified on Schedule
1.1(d) constitute all real property or real property
interests principally used by the Seller in the conduct of
the Business.
(b) The Seller has received no notice of
any default from the landlord or lessor of any of the Leased
Real Property. The Seller has a valid leasehold interest in
all of the Leased Real Property subject to the terms and
conditions of the applicable leases relating thereto, free
and clear of all Liens other than Permitted Exceptions.
(c) Except as set forth on Schedule
4.4(c) hereto, to the Seller's knowledge, with respect to any
of the buildings, structures, improvements and fixtures used
in the Business, owned or leased by the Seller, except for
normal wear and tear, there are no material defects with
respect thereto which would impair the day-to-day use of any
such buildings, structures, improvements or fixtures as
currently used.
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(d) The Seller has in full force and
effect all Permits necessary to use or occupy the Real
Property.
4.5. Consents. No consent, waiver, approval,
or authorization of, or declaration or filing with, or notification
to, any Person or Governmental Body is required on the part of the
Seller in connection with the execution and delivery by the Seller
of this Agreement or the Seller Documents, or the compliance by the
Seller with any of the provisions hereof or thereof, except (i) as
set forth on Schedule 4.5 hereto, (ii) for compliance with the
applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules and regulations promulgated
thereunder (the "HSR Act"), (iii) consents, waivers, approvals,
Orders or Permits, if any, which the Purchasers are required to
obtain and (iv) consents, waivers, approvals, Orders or Permits
whose failure to obtain would not in the aggregate have a Material
Adverse Effect.
4.6. Financial Statements. The Initial Balance
Sheet and the statement of sales and direct operating expenses of
the Business for the fiscal year ended December 31, 1995, copies of
which are attached hereto as Schedule 4.6 (collectively, the
"Financial Statements"), have been prepared in accordance with GAAP
except as set forth in the notes thereto and present fairly the
financial position and results of operations of the Business at the
date and for the period indicated. Accounts Receivable created
since December 31, 1995 have been accrued on the books of the
Business in the ordinary course of business consistent with past
practice and in accordance with GAAP. Since December 31, 1995, the
Inventory has been accrued on the books of the Business in the
ordinary course of business consistent with past practice and in
accordance with GAAP.
4.7. Absence of Certain Developments. (a)
Except as set forth on Schedule 4.7 hereto or as contemplated by
this Agreement, since January 1, 1995, the Seller has conducted the
Business only in the ordinary course and has not with respect to
the Business:
(i) mortgaged, pledged or subjected to lien,
restriction or any other Lien any of the property, businesses
or assets, tangible or intangible, of the Business, except
for Permitted Exceptions;
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(ii) with the exception of the business related
to Therapeutic Support Systems, sold, transferred, leased or
loaned to others or otherwise disposed of any of its assets
(or committed to do any of the foregoing), including the
payment of any loans owed to any affiliate, except for
inventory sold to customers in the ordinary course of
business and consistent with prior practice, or canceled,
waived, released or otherwise compromised any debt or claim,
or any right of significant value, except in the ordinary
course of the Business and consistent with prior practice;
(iii) suffered any damage or destruction
(whether or not covered by insurance) which has had or is
reasonably likely to have a Material Adverse Effect;
(iv) made or committed to make any capital
expenditures or capital additions or betterments with respect
to the Assets or the Business in excess of an aggregate of
$1,000,000;
(v) encountered any labor union organizing
activity with respect to non-union workers, had any actual
or, to the Seller's knowledge, threatened employee strikes,
or, to the Seller's knowledge, any material work stoppages,
slow-downs or lock-outs related to any labor union organizing
activity or any actual or, to the Seller's knowledge,
threatened employee strikes;
(vi) instituted any litigation, action or
proceeding before any court, governmental body or arbitration
tribunal relating to it or its property, except for
litigation, actions or proceedings instituted in the ordinary
course of the Business and consistent with prior practice;
(vii) acquired, or agreed to acquire, by merging
or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by
any other manner, any business or any corporation,
partnership, association or other business organization or
division thereof; or
(viii) increased, or agreed or promised to
increase, the compensation of any officer, employee or agent
of the Seller in the Business, directly or
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indirectly, including by means of any bonus, pension plan,
profit sharing, deferred compensation, savings, insurance,
retirement, or any other employee benefit plan, except in the
ordinary course of the Business and consistent with prior
practice.
(b) Except as set forth on Schedule 4.7 hereto or
as contemplated by this Agreement, since January 1, 1996, the
Seller has conducted the Business only in the ordinary course and
has not with respect to the Business:
(i) incurred any obligation or liability,
absolute, accrued, contingent or otherwise, whether due or to
become due, except liabilities or obligations incurred in the
ordinary course of business and consistent with prior
practice;
(ii) acquired, or agreed to acquire, any assets
which are material, individually or in the aggregate to the
Business; or
(iii) increased promotional or advertising
expenditures except in the ordinary course of the Business
and consistent with prior practice or otherwise changed its
policies or practices with respect thereto in any material
respects.
4.8. Contracts.
(a) Except as set forth on Schedule
4.8(a) hereto, each of the Contracts included in the Assets
is in full force and effect, and, to the knowledge of the
Seller, there exists no breach of, violation of or default
under any of such Contracts by the Seller or any other party
to any of such Contracts or any event which, with notice or
lapse of time, or both, will create a breach or violation
thereof or default thereunder by the Seller or any other
party to any of such Contracts, except for any breaches,
violations or defaults which in the aggregate would not have
a Material Adverse Effect. Except as set forth in Schedule
4.8(a) hereto, there exists no actual or, to the knowledge of
the Seller, threatened termination, cancellation or
limitation of, or any amendment, modification or change to,
any Contract that was not made in the ordinary course of the
Business and that has had or is reasonably likely to have,
individually
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or in the aggregate with similar arrangements, a Material
Adverse Effect.
(b) Schedule 4.8(b) hereto contains a
true and correct list of all persons that are currently
directly authorized to distribute, sell or resell products of
the Business anywhere in the world. As to each distributor
so listed, Schedule 4.8(b) indicates the territory in which
such distributor is directly authorized by the Seller to
distribute such products within such territory or any part
thereof.
4.9. Intangible Assets.
(a) Attached Schedule 4.9 hereto sets
forth a complete and correct list of all patent, copyright
and trademark registrations and applications for any of them
included in the Intangible Assets, together with a complete
list of all written agreements containing licenses granted by
or to the Seller with respect to any of the Intangible
Assets. All such Intangible Assets reflected on Schedule 4.9
as owned by the Seller are owned by the Seller free and clear
of all liens and security interests, except as set forth on
Schedule 4.9. All such Intangible Assets reflected on
Schedule 4.9 used (but not owned) by the Seller under
license, lease or otherwise are used by the Seller pursuant
to terms of binding agreements. Except as set forth on
Schedule 4.9, the transactions contemplated by this Agreement
will not cause a breach or default under any license or
similar agreement relating to the Intangible Assets. The
Seller, with respect to the Business, is not currently in
receipt of any notice of violation of the rights of others in
any trademark, trade name, service mark, copyright, patent,
trade secret, know-how or other intangible asset. To the
Seller's knowledge, the Seller has not disclosed any trade
secrets, know-how, inventions, or other confidential
technical information material to the operation of the
Business to any other party within the last two years except
in the ordinary course of business or in accordance with any
license, lease or similar agreement containing
confidentiality and non-disclosure provisions requiring such
other parties to keep the disclosed information confidential.
To the knowledge of the Seller, no party to whom the Seller
has disclosed such information has breached such obligation
of confidentiality.
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(b) Schedule 4.9 hereto contains a
complete and accurate list of the material computer software
and databases that are owned by the Seller and used in the
Business (the "Owned Software"). Except as set forth on
Schedule 4.9, the Seller has exclusive rights and title to
the Owned Software (including any intellectual property
rights therein), free and clear of all Liens.
(c) Schedule 4.9 hereto contains a
complete and accurate list of all material computer software,
databases and other intellectual property that is used by the
Seller under license in the operation of the Business (other
than commercially available over-the- counter "shrinkwrap"
software) (the "Licensed Software"). Schedule 4.9 also sets
forth a list of all license agreements pursuant to which the
Seller has obtained the right to use the Licensed Software.
Except as described on Schedule 4.9, the Seller has the right
and license to use, sublicense, modify and copy the Licensed
Software in accordance with the terms of its licenses. The
Seller is in full compliance with all material provisions of
any license, lease or other similar agreement pursuant to
which the Seller has rights to use any material Licensed
Software.
(d) The Owned Software and the Licensed
Software constitute all material software used principally in
relation to the Business (the "Company Software"). Schedule
4.9 hereto sets forth a list of all contract programmers,
independent contractors, nonemployee agents and persons or
other entities (other than employees of the Seller) who have
performed material computer programming services for the
Seller in connection with any of the Company Software. To
the knowledge of the Seller, no other person or entity is
infringing any intellectual property rights of the Seller
with respect to the Company Software.
(e) The Seller has ownership of, or
adequate licenses or other valid rights to use, all of the
Intangible Assets not described in subsections (a) through
(e) of this Section 4.9. The Seller's use of such Intangible
Assets does not conflict with, infringe upon, violate or
interfere with any intellectual property rights of any other
Person except for any conflicts, infringements, violations or
interferences which in the aggregate would not have a
Material Adverse Effect.
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4.10. Taxes.
(a) None of the Assets is tax-exempt use
property within the meaning of Section 168(h) of the Code.
None of the Assets is property that is or will be required to
be treated as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986.
(b) The Seller is not a foreign person
within the meaning of Section 1445(b)(2) of the Code.
(c) The Seller has not failed to file a
Tax Return with respect to Taxes or to pay any Taxes shown on
a Tax Return filed, the effect of which would result in the
Purchasers, as the purchasers of the Assets, to become liable
for such Taxes.
4.11. Employees and Employee Benefits.
(a) Identification of plans. Schedule
4.11(a) hereto contains a true and complete list of all the
following arrangements, agreements or plans which are
presently in effect and which cover any Employees, directors,
independent contractors or retired or terminated employees of
the Seller employed or engaged by the Seller in the Business
(collectively, the "Plan Employees"), or any spouses,
dependents, beneficiaries of any Plan Employees
("Beneficiaries"):
(i) Any employee benefit plan as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") maintained by the Seller or
under which the Seller has any obligation;
(ii) Any other pension, profit sharing,
retirement, deferred compensation, stock purchase, stock
option, compensation, incentive, bonus, vacation, severance,
disability, hospitalization, medical, life insurance, or
other employee benefit plan, program or policy maintained by
the Seller or under which the Seller has any obligation; and
(iii) Any employment or severance
contract providing for insurance coverage, severance,
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termination or similar coverage and all written compensation
policies and practices maintained by the Seller.
The plans, programs, policies, or
arrangements described in subparagraph (i), (ii) or (iii) are
hereinafter collectively referred to as the "Employee Benefit
Plans."
(b) For each Employee Benefit Plan, the
Seller has furnished true and complete copies of the
following to the Purchasers: (i) the plan document or other
operative agreement; (ii) all determination letters (or
application for determination if such a letter has not been
received), rulings, opinion letters, information letters, or
advisory opinions issued by the Internal Revenue Service, the
Department of Labor or the Pension Benefit Guaranty
Corporation after December 31, 1989; (iii) Form 5500 annual
reports (including schedules thereto) prepared for any
Employee Benefit Plan with respect to the two most recent
plan years; and (iv) the most recent summary plan
descriptions (and any material modifications thereto) that
have been prepared for any Employee Benefit Plans.
(c) The Employee Benefit Plans and their
related trusts intended to qualify under Sections 401(a) and
501(a) of the Code, respectively, are so qualified and
administered in compliance therewith.
(d) No oral or written representation or
communication with respect to any aspect of the Employee
Benefit Plans has been made to Employees prior to the date
hereof which is not in accordance with the written or
otherwise preexisting terms and provisions of such plans.
(e) All contributions, premiums and
payments required to be made under the terms of any Employee
Benefit Plan (other than those relating to liabilities
assumed by the Purchasers pursuant to Article VIII) have been
made.
(f) Except as disclosed in Schedule
4.11(f) hereto, the Seller has neither maintained in the past
nor currently maintains an Employee Benefit Plan providing
welfare benefits (as defined in Section 3(1) of ERISA) to
Employees after retirement or other separation from service
except to the extent required
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under Part 6 of Title I of ERISA or Code Section 4980B. No
tax under Code Sections 4980B or 5000 has been incurred with
respect to any Employee Benefit Plan and no circumstance
exists which could give rise to such taxes.
(g) All Plan Employees are common law
employees.
(h) Employee matters. Schedule 4.11(h)
hereto contains a correct and complete list of (i) all Plan
Employees whose direct annual compensation exceeds $50,000
and (ii) a list of all other Plan Employees in each job
classification employed by the Seller in the Business.
Except as disclosed in Schedule 4.11(h), the employment of
all Plan Employees is terminable at will by the Seller
without any penalty or severance obligation of any kind on
the part of the Seller.
(i) Collective bargaining matters.
Except as and to the extent set forth in Schedule 4.11(i)
hereto within the last three years: (i) to the knowledge of
the Seller, no attempt to organize any group or all of the
Plan Employees has been made, proposed or threatened; (ii)
the Seller is not a party to any union agreement or
collective bargaining agreement with any labor organization
or employee association applicable to any of the Plan
Employees; (iii) the Seller has not been notified of any
pending or threatened investigations by the U.S. Department
of Labor, Wage and Hour Division, with respect to the Plan
Employees; (iv) the Seller has not been notified of any
pending or threatened labor strike, dispute, slowdown,
stoppage or lockout; (v) to the Seller's knowledge, no union
claims to represent any of the Plan Employees have been made;
and (vi) there is no material grievance against the Seller
with respect to the Business arising out of any collective
bargaining agreement or other grievance procedure.
(j) Notice concerning termination of
employment. Except as set forth in Schedule 4.11(j) hereto,
the Seller has not received any notice prior to the date of
this Agreement hereof that any of the officers or other
senior level personnel of the Seller in respect of the
Business, will terminate or contemplates terminating his or
her employment currently or at any time before or within 60
days after
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the Closing Date or will otherwise not be available to the
Purchasers, or not agree to employment by the Purchasers, on
the same terms and conditions as his or her current
employment by the Seller on the date hereof.
(k) WARN and layoff issues. Within the
twelve months prior to the Closing Date, the Seller has not
with respect to the Business effectuated (i) a "plant
closing," as defined in the Worker Adjustment and Retraining
Notification Act (the "WARN Act"); or (ii) a "mass layoff"
(as defined in the WARN Act); and the Seller has not engaged
in layoffs or employment terminations sufficient in number to
trigger application of any similar state or local Law.
4.12. Litigation. Except as set forth on
Schedule 4.12 hereto, there is no (i) outstanding Order against or
involving the Assets, the Business or the Seller with respect to
the Business, (ii) Legal Proceeding pending, or to the knowledge of
the Seller, threatened against or involving the Assets, the
Business or the Seller with respect to the Business, or (iii) to
the Seller's knowledge, investigation or audit pending or
threatened against or relating to the Assets, the Business or the
Seller with respect to the Business (collectively, "Proceedings"),
which are, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect or would restrict, prohibit, prevent
or seek damages in connection with the consummation of the
transactions contemplated hereby.
4.13. Compliance with Law. Except as set forth
on Schedule 4.13 hereto, the Business is currently operating in
compliance with all applicable Laws, Orders and recorded
restrictive covenants other than non- compliances which in the
aggregate would not have a Material Adverse Effect. Except as set
forth on Schedule 4.13 hereto, the Seller has neither received, nor
knows of the issuance of, any notice of any such violation or
alleged violation.
4.14. Assets Necessary to Conduct Business.
Except as set forth on Schedule 4.14 hereto, the Assets include all
rights, properties, interests in properties and assets reasonably
necessary to permit the Purchasers to carry on the Business
substantially as presently conducted by the Seller (including,
without limitation, the business related to Therapeutic Support
Systems). No affiliate of the Seller holds any assets used in the
Business.
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4.15. Environmental Matters. To the Seller's
knowledge and except as set forth on Schedule 4.15 hereto and
except for the Known Environmental Condition:
(a) There is no Environmental Litigation
(or any Proceeding against any Person whose liability, or any
portion thereof, under any Environmental Laws has or may have
been retained or assumed contractually or by operation of law
by the Seller with respect to the Business) pending or
threatened against the Seller with respect to (i) the
ownership, use, condition or operation of the Business, the
Real Property or any other Asset, or (ii) any violation or
alleged violation of or liability or alleged liability under
any Environmental Law or any Order related to Environmental
Laws with respect to the Business, which could reasonably be
expected to result in the Business incurring material
Environmental Costs and Liabilities.
(b) With respect to the Business, the
operations of the Seller are in material compliance with (i)
Environmental Laws, or (ii) any Order related to
Environmental Laws, with respect to the ownership, use,
condition or operation of the Business, the Real Property or
any other Asset, except for instances of non-compliance which
could not reasonably be expected to result in the Business
incurring material Environmental Costs and Liabilities.
(c) There are no past or present actions,
activities, circumstances, conditions, events or incidents
that could reasonably be expected to form the basis for (i)
any Environmental Litigation against the Seller with respect
to the Business, the Real Property or any other Asset which
could reasonably be expected to result in the Business
incurring material Environmental Costs and Liabilities, or
(ii) any Proceeding against any Person whose liability (or
any portion thereof) under any Environmental Laws has or may
have been retained or assumed contractually or by operation
of law by the Seller with respect to the Business which could
reasonably be expected to result in the Business incurring
material Environmental Costs and Liabilities.
(d) Neither the Seller nor any of its
predecessors, current or former Subsidiaries or anyone
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known to the Seller has used any assets or premises of the
Businesses for the handling, treatment, storage (in excess of
90 days), or disposal of any Hazardous Substances, except in
material compliance with Environmental Laws.
(e) No release, discharge, spillage or
disposal of any Hazardous Substances has occurred or is
occurring at any of the Real Property (excluding the
Location) which could reasonably be expected to have a
Material Adverse Effect.
(f) No soil or water in or under any of
the Real Property (excluding the Location) is contaminated by
any Hazardous Substance which could reasonably be expected to
have a Material Adverse Effect.
(g) All waste containing any Hazardous
Substances generated, used, handled, stored, treated or
disposed of (directly or indirectly) in the operation of the
Business by the Seller, has been disposed of in compliance
with all applicable reporting requirements under any
Environmental Laws, except for instances of noncompliance
which could not reasonably be expected to result in the
Business incurring material Environmental Costs and
Liabilities.
(h) Schedule 4.15(h) lists all
underground tanks presently located at any of the Real
Property.
(i) No building or other improvement
included in the Assets contains any friable
asbestos-containing materials, the presence of which could
reasonably be expected to have a Material Adverse Effect.
(j) No polychlorinated biphenyls (PCB's)
are used or stored on or in any of the Real Property the
presence of which could reasonably be expected to have a
Material Adverse Effect.
(k) The Seller has made available to the
Purchasers all material environmental site assessments and
other environmental studies relating to the investigation of
the possibility of the presence or existence of contamination
from Hazardous Substances
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that are in the Seller's possession, custody or control with
respect to Business, the Assets or any of the Real Property.
4.16. Brokers. Other than Smith Barney Inc.
("Smith Barney"), no person has acted directly or indirectly as a
broker, finder or financial advisor for the Seller in connection
with the negotiations relating to or the transactions contemplated
by this Agreement and no Person other than Smith Barney is entitled
to any fee, commission or like payment in respect thereof based in
any way on any agreement, arrangement or understanding made by or
on behalf of the Seller. The Seller acknowledges that it is
responsible for the payment of the fees of Smith Barney in
connection with the transactions contemplated by this Agreement.
4.17. Products Liability of the Business. Except
as set forth on Schedule 4.17, the Seller has received no written
claim, and, to the knowledge of the Seller, no claim has been
threatened or alleged, that any line or category of products of the
Business manufactured, designed, sold or delivered by the Business
contains any general defect in manufacture or design or that any
product of the Business has failed in any manner that has resulted
in any personal injury (including death) or property damage, in
each case or in the aggregate, which would have a Material Adverse
Effect.
4.18. Safe Medical Devices Act. No products
manufactured, assembled, sold or distributed by the Business are
"medical devices" for the purposes of the United States Safe
Medical Devices Act (the "SMDA") or the Medical Device Amendments
of 1976. Except as set forth on Schedule 4.18, since January 1,
1992, the Seller has received no written notice of any report filed
under the SMDA or any similar state law from any purchaser or end
user of any product of the Business. Except as set forth on
Schedule 4.18, to the knowledge of the Seller, neither the United
States Food and Drug Administration (the "FDA") nor any similar
state agency (i) has commenced or is considering any investigation
or inquiry concerning any product of the Business or (ii) is
considering any rulemaking or other proceeding that would subject
any product of the Business to the SMDA or any similar state law or
to any requirement that the FDA or any state agency approve any
product of the Business as a condition of its sale in the manner
that such product is currently sold in the ordinary course of the
Business. Except as set forth on Schedule 4.18, to the knowledge
of
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the Seller, the products of the Business currently sold by the
Seller substantially conform to all applicable codes and standards
imposed by any United States federal or state governmental agency
and to accepted codes and standards relating to the manufacture,
distribution and sale of medical products in the United States
other than non-compliance which in the aggregate would not have a
Material Adverse Effect.
4.19. Absence of Questionable Payments. Neither
the Seller with respect to the Business nor any director, officer,
agent, employee or other Person acting on behalf of the Seller with
respect to the Business, has used, or authorized the use of, any
corporate or other funds for unlawful contributions, payments,
gifts, or entertainment, or made any unlawful expenditures relating
to political activity to government offices or others or
established or maintained any unlawful or unrecorded funds in
violation of any applicable laws, rules or regulations relating to
foreign trade practices. Neither the Seller with respect to the
Business nor any current director, officer, agent, employee or
other Person acting on behalf of the Seller with respect to the
Business, has accepted or received any unlawful contributions,
payments, gifts, or expenditures.
4.20. Disclosure. The Seller has made available
or caused to be made available to the Purchasers complete and
correct copies of all agreements, instruments and documents set
forth in the Schedules hereto or underlying a disclosure set forth
in the Schedules hereto.
4.21. Compliance with the Immigration Reform and
Control Act. The Seller with respect to the Business is in
compliance with and has not violated the terms and provisions of
the Immigration Reform and Control Act of 1986, or any related laws
promulgated thereunder (the "Immigration Laws") in any material
respects. With respect to each employee (as defined in Section
274a.1(f) of Title 8, Code of Federal Regulations) of the Business
for whom compliance with the Immigration Laws by an employer (as
defined in Section 274a.1(g) of Title 8, Code of Federal
Regulations) is required, the Seller shall supply upon the
Purchasers' request prior to the Closing Date, to the Purchasers
such employee's Form I-9 (Employment Eligibility Verification Form)
and all other records, documents or other papers required to be
retained with the Form I-9 by the employer pursuant to the
Immigration Laws. To the Seller's knowledge, the Seller with
respect to the Business has never been
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the subject of any inspection or investigation relating to its
compliance with or violation of the Immigration Laws, and it has
not been fined or otherwise penalized by reason of any failure to
comply with the Immigration Laws, and there is not any such
proceeding pending or, to the knowledge of the Seller, threatened.
4.22. Corporate Expenses. The expenses under
the heading "Lumex Division Related" in Schedule 4.22 represent all
of the corporate expenses of the Seller that were incremental and
necessary to operate the Business during the year ended December
31, 1995. Corporate expenses, such as officers' salaries,
independent audit fees and expenses relating to maintaining a
public company status are examples of the type of expenses that are
corporate overhead and not necessary to operate the Business.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS AND PARENT
Each of the Purchasers and Parent hereby represents
and warrants to the Seller that:
5.1. Organization and Good Standing. Each of
the Purchasers and Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to
carry on its business as it is now being conducted, and to execute,
deliver and perform this Agreement and to consummate the
transactions contemplated hereby.
5.2. Authorization of Agreement. Each of the
Purchasers and Parent has full corporate power and authority to
execute and deliver this Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement
or to be executed by the Purchasers or Parent in connection with
the consummation of the transactions contemplated by this Agreement
(all such other agreements, documents, instruments and certificates
required to be executed by the Purchasers or Parent being
hereinafter referred to, collectively, as the "Purchasers'
Documents") and to perform fully its obligations hereunder and
thereunder. The execution, delivery and performance by the
Purchasers or Parent of this Agreement and each Purchasers'
Document has been duly authorized by all necessary action on the
part of the Purchasers and/or Parent, as the case may
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be. This Agreement has been, and each of the Purchasers' Documents
will be at or prior to the Closing, duly executed and delivered by
the Purchasers and/or Parent and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and the Purchasers' Documents when so
executed and delivered will constitute, legal, valid and binding
obligations of the Purchasers and/or Parent, as the case may be,
enforceable against the Purchasers and/or Parent in accordance with
their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
None of the execution and delivery by the Purchasers or Parent of
this Agreement and the Purchasers' Documents, or the consummation
of the transactions contemplated hereby or thereby, or compliance
by the Purchasers or Parent with any of the provisions hereof or
thereof, will (i) conflict with, or result in the breach of, any
provision of the certificate of incorporation or by-laws of the
Purchasers or Parent, (ii) conflict with, violate, result in the
breach or termination of, or constitute a default under any
Contract or Order to which either of the Purchasers or Parent is a
party or by which it or any of its properties or assets is bound or
subject, or (iii) constitute a violation of any Law applicable to
the Purchasers or Parent, except, in each case, for violations,
conflicts, breaches or defaults which individually or in the
aggregate would not materially hinder or impair the transactions
contemplated hereby.
5.3. Consents. No consent, waiver, approval,
Order, Permit or authorization of, or declaration or filing with,
or notification to, any Person or Governmental Body is required on
the part of the Purchasers or Parent in connection with the
execution and delivery of this Agreement or the Purchasers'
Documents or the compliance by the Purchasers or Parent with any of
the provisions hereof or thereof, except (i) for compliance with
the HSR Act, (ii) consents, waivers, approvals, Orders or Permits,
if any, which the Seller is required to obtain pursuant to Section
4.5 hereof and (iii) any novations required in connection with the
Government Contracts.
5.4. Availability of Funds.The Purchasers have
available sufficient funds to enable them to consummate the
transactions contemplated by this Agreement.
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5.5. Litigation. There is no Legal Proceeding
pending or, to the knowledge of the Purchasers or Parent,
threatened, that seeks to enjoin or obtain damages in respect of
the consummation of the transactions contemplated by this Agreement
or that questions the validity of this Agreement, the Purchasers'
Documents or any action taken or to be taken by the Purchasers or
Parent in connection with the consummation of the transactions
contemplated hereby or thereby.
5.6. Brokers. No Person has acted directly or
indirectly as a broker, finder or financial advisor for the
Purchasers or Parent in connection with the negotiations relating
to or the transactions contemplated by this Agreement and no Person
is entitled to any fee or commission or like payment in respect
thereof based in any way on agreements, arrangements or
understandings made by or on behalf of the Purchasers or Parent.
ARTICLE VI.
COVENANTS OF THE SELLER
From and after the date hereof and until the
Closing, the Seller hereby covenants and agrees with the Purchasers
that:
6.1. Cooperation. The Seller shall use its
best efforts to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions
hereof and shall take all commercially reasonable steps that are
within its powers to cause to be satisfied those of the conditions
precedent of the obligations of the Purchasers to consummate the
transactions contemplated by this Agreement that are dependent on
any act of the Seller.
6.2. Access to Documents; Opportunity to Ask
Questions. The Seller shall provide the Purchasers with such
information as the Purchasers from time to time reasonably may
request with respect to the Business, and shall permit the
Purchasers and any of the directors, officers, employees, counsel,
representatives, accountants and auditors (collectively, the
"Purchasers' Representatives") reasonable access, during normal
business hours and upon reasonable prior notice, to the properties,
corporate records and books of accounts of the Business, as the
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Purchasers from time to time reasonably may request; provided,
however, that the Seller shall not be obligated to provide the
Purchasers with any information the provision of which may be
prohibited by law or contractual obligation. No disclosure by the
Seller whatsoever during any investigation by the Purchasers shall
constitute an enlargement of or additional warranty or
representation of the Seller beyond those expressly set forth in
this Agreement. All information and access obtained by the
Purchasers in connection with the transactions contemplated by this
Agreement shall be subject to the terms and conditions of the
letter agreement relating to confidentiality, dated as of November
7, 1995, between the Seller and the Parent (the "Confidentiality
Agreement") which Confidentiality Agreement shall terminate on the
Closing Date.
6.3. Conduct of Business.
(a) Except as otherwise may be
contemplated by this Agreement or as the Purchasers otherwise
may consent to in writing (which consent shall not be
unreasonably withheld), the Seller shall cause the Business
to be operated in the ordinary course consistent with past
practice and use reasonable efforts consistent with past
practice to (i) preserve the present business operations,
organization and goodwill of the Business, (ii) keep
available the services of the present employees of the
Business, (iii) preserve the present relationships with
persons having business dealings with the Business, (iv)
maintain all of the assets and properties of the Business in
their current condition, normal wear and tear excepted, and
(v) maintain insurance in such amounts and of such kinds as
is comparable to that in effect on the date hereof (with
insurers of substantially the same or better financial
condition).
(b) Except as otherwise may be
contemplated by this Agreement, required by any of the
documents listed in the Schedules hereto or as the Purchasers
otherwise may consent to in writing (which consent shall not
be unreasonably withheld), the Seller shall not do any of the
following:
(i) (A) increase the rate of
compensation payable or to become payable to any of the
employees or agents of the Business other than in the
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ordinary course of business, (B) amend in any material
respect any bonus, stock option, stock purchase,
profit-sharing, deferred compensation, pension, retirement or
other similar plan or arrangement to or in respect of any
such employee or agent, other than in the ordinary course of
business and as may be required to maintain compliance with
ERISA and/or the Code or (C) enter into any new, or amend in
any material respect any existing, employment, severance or
consulting agreement, sales agency, or other Contract with
respect to the performance of personal services for the
Business, other than in the ordinary course of business and
as may be required to maintain compliance with ERISA and/or
the Code; provided, however, that the Seller may adopt a
severance or salary continuation plan in lieu of the Seller's
severance policy set forth in the Seller's Personnel Policies
and Procedures last revised October 1994, provided that such
plan does not (1) adversely affect the Seller's or the
Purchasers' obligations under Article VIII hereof prior to
such adoption or (2) provide benefits in excess of or expand
eligibility for benefits provided under any severance policy,
plan or arrangement existing on the date of this Agreement
providing similar benefits.
(ii) (A) incur or become subject to,
or agree to incur or become subject to, any material
obligation or liability (contingent or otherwise) relating to
the Business, except (x) normal trade or business obligations
(including Contracts) incurred in the ordinary course of
business and consistent with past practice and (y)
obligations under Contracts listed on any Schedule to this
Agreement, (B) sell, assign, transfer, convey, lease or
otherwise dispose of any of the Assets, other than inventory
of the Business, in the ordinary course of business, (C)
cancel or compromise any material debt or claim or waive or
release any material right relating to the Business or the
Assets, except for adjustments or settlements made in the
ordinary course of business consistent with past practice, or
(D) acquire any material assets relating to the Business
other than in the ordinary course of business.
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6.4. Consents and Conditions; Assignment of
Assets. Subject to Article XII hereof, the Seller shall use its
best efforts to obtain all approvals, consents or waivers from
Persons necessary to assign to the Purchasers all of the Seller's
interest in the Assets or any claim, right or benefit arising
thereunder or resulting therefrom (each, an "Interest") as soon as
practicable; provided, however, that in no event shall the Seller
be obligated to pay any consideration therefor to any third party
from whom such approval, consent or waiver is requested or release
any right, benefit or claim in order to obtain such approval,
consent or waiver.
6.5. HSR Act Filings. As promptly as
practicable after the execution of this Agreement (to the extent a
filing has not already been made), the Seller shall file any
reports or notifications that may be required to be filed under the
HSR Act and shall cooperate with the Purchasers in connection with
such filings or responses to requests for additional information.
6.6. Additional Reports. From the date hereof
through the Closing Date, the Seller will make available to the
Purchasers true and correct copies of all the internal management
and control reports (including aging of accounts receivables,
listings of accounts payable, and inventory control reports) and
financial statements related to the Business and furnished to
management of the Seller.
6.7. Air Bed Contract. The Seller agrees to
consult with the Purchasers with respect to negotiations of the
amendment to the First Amended and Restated Asset Purchase
Agreement, dated as of February 22, 1995, between Airbed
Corporation and Lumex, Inc., and shall not execute an amendment to
such contract without the prior written consent of the Purchasers,
which consent shall not be unreasonably withheld or delayed.
6.8. Other Transactions. Provided that the
Purchasers are not in default under this Agreement, the Seller will
not, and will direct its officers, directors, financial advisors,
accountants, agents, and counsel not to (i) solicit submissions of
proposals or offers from any Person other than the Purchasers
relating to the acquisition of all or any material part of the
Assets (an "Acquisition Proposal"), (ii) participate in any
discussions or negotiations or furnish any non-public information
regarding the Business to any Person other than the Purchasers or
the
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Purchasers' Representatives for the purpose of selling the Assets
other than in the ordinary course of business or encouraging or
facilitating an Acquisition Proposal by any Person other than the
Purchasers, or (iii) enter into any agreement or understanding,
that would have the effect of preventing the consummation of the
transactions contemplated by this Agreement.
ARTICLE VII.
COVENANTS OF THE PURCHASERS
From and after the date hereof, and until the
Closing Date, each of the Purchasers and Parent hereby covenants
and agrees with the Seller that:
7.1. Cooperation. Each of the Purchasers and
Parent shall use its best efforts to cause the consummation of the
transactions contemplated hereby in accordance with the terms and
conditions hereof and shall take all commercially reasonable steps
that are within its powers to cause to be satisfied those of the
conditions precedent to the obligations of the Seller to consummate
the transactions contemplated by this Agreement that are dependent
on any act of the Purchasers or Parent.
7.2. Confidentiality. The Purchasers and
Parent shall comply with the terms of the Confidentiality
Agreement.
7.3. Consents and Conditions. Subject to
Article XII hereof, the Purchasers and Parent shall use their best
efforts to obtain all approvals, consents or waivers from Persons
necessary to assign to the Purchasers all of the Seller's interest
in the Assets or any claim, right or benefit arising thereunder or
resulting therefrom as soon as practicable; provided, however, that
in no event shall the Purchasers or Parent be obligated to pay any
consideration therefor to the third party from whom such approval,
consent or waiver is requested or release any right, benefit or
claim in order to obtain such approval, consent or waiver.
7.4. HSR Act Filings; Compliance with Antitrust
and Competition Laws. As promptly as practicable after the
execution of this Agreement (to the extent a filing has not already
been made), the Purchasers and Parent shall file all reports and
notifications that may be required to be filed
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under the HSR Act and shall cooperate with the Seller in connection
with such filings or responses to requests for additional
information. The Purchasers and Parent shall use their best
efforts to resolve such objections, if any, as the Antitrust
Division of the Department of Justice, the Federal Trade
Commission, state antitrust enforcement authorities or competition
authorities of any other jurisdiction may assert under the
antitrust or competition laws with respect to the transaction
contemplated hereby; provided, however, that Purchasers shall not
be required to commit to and/or effect the sale or other
disposition of such of their assets owned already or acquired by
them pursuant hereto.
7.5. Permits, Bonds and Guarantees. The
Purchasers shall obtain as of the Closing all Permits required by
any Governmental Body to be obtained prior to the Closing with
respect to the operation of the Business or the ownership or
operation of the Assets without any guaranty or liability of the
Seller with respect thereto; provided, however, that, as provided
in Section 1.1 hereof, the Seller shall assign, transfer or convey
to the Purchasers at the Closing those Permits described in one or
more Schedules hereto that are held by the Seller principally in
connection with the Business and that can be assigned without
having to obtain the consent of any Governmental Body with respect
thereto or as to which any required consent has been obtained.
ARTICLE VIII.
COVENANTS RELATING TO EMPLOYMENT AND EMPLOYEE MATTERS
8.1. Offer of Employment.
(a) The Purchasers may offer employment
as of the Closing Date to some or all of the Employees and
upon such terms and conditions as the Purchasers shall
determine in their sole discretion (subject to the assumption
of agreements under Section 8.2 hereof). The Purchasers
shall be solely responsible for all compensation accruing or
to be paid on or after the Closing Date with respect to
Transferred Employees and for any compensation with respect
to which there are accruals on the Closing Balance Sheet.
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(b) The Seller shall provide to the
Purchasers a statement of all accrued entitlements for
Employees as of the Closing Date, including but not limited
to vacation days, wages and other compensation consistent
with the Benefit Arrangements.
8.2. Collective Bargaining and Other
Agreements. Except as set forth in Section 1.4(i), the Purchasers
agree to assume all of the rights and obligations of the Seller
under all collective bargaining agreements, employment agreements
or consulting agreements listed on Schedule 8.2 and which are
applicable to the Employees and in effect on the business day
immediately preceding the Closing Date.
8.3. Employee Benefit Plans.
(a) The Purchasers shall be liable for all claims
incurred on or after the Closing Date by any Transferred
Employee under any "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA (a "Welfare Plan").
(b) The Seller shall be liable for all claims under
any other Employee Benefits Plan that are not the liability
of the Purchasers under Sections 8.2, 8.3(a) or 8.4.
8.4. Termination Obligations. Except as set
forth in Section 1.4(i), the Purchasers shall be liable for all
payments that may be required to be made on or after the Closing
Date to any Employee who is not a Transferred Employee employed by
the Purchasers on substantially the same terms and conditions of
employment as with the Seller under any termination, severance or
similar plan, policy or arrangement of the Seller as a result of
the transactions contemplated herein or any other event involving
such Employees occurring on or after the Closing Date. The Seller
shall be liable for all payments required to be made to any
Transferred Employee on or before the Closing Date under any
termination, severance or similar plan, policy or arrangement of
the Seller.
8.5. Indemnification.
(a) Except as set forth in Section
1.4(i), the Purchasers shall indemnify the Seller from any
liability, loss, damage or expense the Seller may incur
(including reasonable attorneys' fees) with respect to
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any claims of Employees or Transferred Employees (i) arising
out of their employment with the Purchasers, (ii) under any
Law relating to the termination of such Employee's or
Transferred Employee's employment arising as a result of the
actions of the Purchasers on or after the Closing Date and
(iii) in connection with Liabilities assumed by the
Purchasers under this Article VIII.
(b) The Seller shall indemnify the
Purchasers from any liability, loss, damage or expense the
Purchasers may incur (including reasonable attorneys' fees)
with respect to any claims made or incurred prior to the
Closing Date under a Welfare Plan or based upon events,
actions or omissions occurring prior to the Closing Date.
(c) The Seller shall indemnify the
Purchasers from any liability, loss, damage or expense the
Purchasers may incur (including reasonable attorneys' fees)
as a result of claims (or any liens imposed as a result of
such claims) arising out of, resulting from or related to any
Employee Benefit Plan which is not the Purchasers' obligation
under Sections 8.2, 8.3(a) and 8.4, or any similar plan or
arrangement maintained or contributed to by the Seller (or
any entity or person aggregated with the Seller under
Sections 414(b),(c),(m) or (o) of the Code), whether or not
previously disclosed.
8.6 COBRA Coverage. The Purchasers shall be
responsible for complying with the requirements of Code Section
4980B and Part 6 of Title I of ERISA for Transferred Employees and
their beneficiaries having a "qualifying event" (as defined in Code
Section 4980B) on or after the Closing Date, and the Seller shall
be responsible for complying with such requirements for all other
Employees.
ARTICLE IX.
CONDITIONS PRECEDENT TO THE PURCHASERS' OBLIGATIONS
The obligation of the Purchasers to consummate the
purchase of the Assets and the assumption of the Assumed
Liabilities on the Closing Date is, at the option of the
Purchasers, subject to the satisfaction of the following
conditions:
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9.1. Representations, Warranties and Covenants.
(a) Each of the representations and
warranties of the Seller contained herein shall be true and
correct in all respects on and as of the Closing Date with
the same force and effect as though the same had been made on
and as of the Closing Date, it being understood that to the
extent that such representations and warranties were made as
of a specified date the same shall continue on the Closing
Date to be true and correct in all respects as of the
specified date (except, in each case, representations and
warranties that are not qualified by materiality shall be
true in all material respects).
(b) The Seller shall have performed and
complied in all respects with the covenants and provisions of
this Agreement required to be performed or complied with by
it at or prior to the Closing Date (except covenants that are
not qualified by materiality shall have been performed or
complied with in all material respects).
(c) The Purchasers shall have received a
certificate of the Seller, dated as of the Closing Date and
signed by an officer of the Seller, certifying as to the
fulfillment of the conditions set forth in this Section 9.1.
9.2. HSR Act. All applicable waiting periods
in respect of the transactions contemplated by this Agreement under
the HSR Act shall have expired.
9.3. No Prohibition. No Law or Order of any
court or administrative agency shall be in effect which prohibits
the Purchasers from consummating the transactions contemplated
hereby.
9.4. Opinion of the Seller's Counsel. The
Purchasers shall have received an opinion or opinions of counsel
for the Seller, dated the Closing Date in a form reasonably
acceptable to the Purchasers.
9.5. Delivery of Documents. The Seller shall
have executed and delivered to the Purchasers at the Closing bills
of sale, certificates of title, an assignment agreement, patent
assignments, trademark assignments and any
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other documents required to be delivered pursuant to Section 3.3
hereof.
9.6. Consents; Permits. The Seller shall have
obtained all third party or governmental consents, waivers,
approvals and authorizations listed on Schedule 9.6 hereto and the
Seller shall have delivered copies thereof to the Purchasers.
ARTICLE X.
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS
The obligation of the Seller to consummate the
sale, transfer and assignment to the Purchasers of the Assets and
the assignment of the Assumed Liabilities on the Closing Date is,
at the option of the Seller, subject to the satisfaction of the
following conditions.
10.1. Representations, Warranties and Covenants.
(a) Each of the representations and
warranties of the Purchasers and Parent contained herein
shall be true and correct in all respects as of the Closing
Date with the same force and effect as though the same had
been made on and as of the Closing Date, it being understood
that to the extent that such representations and warranties
were made as of a specified date the same shall continue on
the Closing Date to be true and correct in all respects as of
the specified date (except, in each case, representations and
warranties that are not qualified by materiality shall be
true in all material respects).
(b) The Purchasers and Parent shall have
performed and complied in all respects with the covenants and
provisions in this Agreement required herein to be performed
or complied with by it at or prior to the Closing Date
(except covenants that are not qualified by materiality shall
have been performed or complied with in all material
respects).
(c) The Seller shall have received a
certificate of the Purchasers, dated as of the Closing Date
and signed by an officer of the Purchasers, certifying
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as to the fulfillment of the conditions set forth in this
Section 10.1.
10.2. HSR Act. All applicable waiting periods
in respect of the transactions contemplated by this Agreement under
the HSR Act shall have expired.
10.3. No Prohibition. No Law or Order of any
court or administrative agency shall be in effect which prohibits
the Seller from consummating the transactions contemplated hereby.
10.4. Opinion of the Purchasers' Counsel. The
Seller shall have received an opinion or opinions of counsel for
the Purchasers, dated the Closing Date in a form reasonably
acceptable to the Seller.
10.5. Delivery of Documents. The Purchasers
shall have executed and delivered to the Seller, at the Closing an
assumption agreement, and any other documents required to be
delivered pursuant to Section 3.4 hereof.
10.6. Consents; Permits. The Seller shall have
obtained all consents, waivers, approvals and authorizations listed
on Schedule 10.6 hereto.
ARTICLE XI.
ADDITIONAL POST-CLOSING COVENANTS
11.1. Further Assurances.
(a) From time to time after the Closing
Date, each of the Seller and the Purchasers shall, at its
sole cost and expense, at the reasonable request of the
Purchasers, execute and deliver such other and further
instruments of sale, assignment, assumption, transfer and
conveyance and take such other and further action as the
Purchasers may reasonably request in order to vest in the
Purchasers and put the Purchasers in possession of the Assets
and to transfer to the Purchasers any Contracts and rights of
the Seller relating to the Assets and assure to the
Purchasers the benefits thereof, and, at the reasonable
request of the Seller, to give effect to the Purchasers'
assumption of the Assumed Liabilities.
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(b) If, on the Closing Date, (i) the
Seller has not obtained any authorization, approval or
consent (a "Consent") required to transfer, assign or novate
(a "Transfer") any of the Seller's Interest in or to any of
the Assets after having used its best efforts to obtain such
Consent or an attempted Transfer of any of the Assets would
be ineffective or the failure to have such Consent would
adversely affect the Seller's ability to convey any such
Asset, and (ii) the conditions precedent to the Closing set
forth in Article X nevertheless have been satisfied, then
such Assets shall constitute "Deferred Acquired Assets" and
shall not be transferred to the Purchasers at the Closing.
After the Closing, (a) the Seller will (I) continue to use
commercially reasonable efforts to obtain the Consent and/or
to remove any other impediments to the Transfer of each
Deferred Acquired Asset and will Transfer each Deferred
Acquired Asset to the Purchasers within five business days
after the receipt of such Consent and/or removal of such
impediment and (II) until the Transfer with respect to any
Deferred Acquired Asset is accomplished, cooperate with the
Purchasers in any lawful arrangement that is not unduly
economically burdensome (including performance by the Seller
as agent) to provide that the Purchasers shall receive the
benefits of such Deferred Acquired Asset to the same extent
as if it were transferred to the Purchasers at Closing, (III)
until the Transfer with respect to any Deferred Acquired
Asset is accomplished, enforce, at the request and for the
account of the Purchasers, any of the Seller's rights thereto
or interests therein against any other parties thereto
(including the right to terminate any such Deferred Acquired
Asset in accordance with its terms, provided that the
Purchasers pay any cancellation or other fee due upon such
termination) and (b) if and only to the extent that the
Purchasers receive the benefits of a Deferred Acquired Asset,
the Purchasers shall perform the obligations of the Seller
arising with respect to such Deferred Acquired Asset to the
extent that, by reason of consummation of the transactions
contemplated by this Agreement, the Purchasers have control
over the resources necessary to perform such obligations or
reimburse the Seller for the reasonable cost of such
performance. To the extent the Purchasers perform the
obligations of the Seller with respect to any Deferred
Acquired Asset, any account receivable created on account of
such
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performance shall be deemed when created to be an Asset
conveyed hereunder. The Purchasers will act with reasonable
diligence and use commercially reasonable efforts to assist,
and cooperate with, the Seller in obtaining such Consents and
removing any such impediments to the transfer of the Deferred
Acquired Assets.
11.2. Public Announcements. Neither the Seller
(nor any of its affiliates) nor the Purchasers (nor any of their
affiliates) shall make any public statement, including, without
limitation, any press release, with respect to this Agreement and
the transactions contemplated hereby, without the prior written
consent of the other party (which consent may not be unreasonably
withheld or delayed), except as may be required by Law, and except
that following the issuance of press releases by the parties hereto
with respect to the transactions contemplated hereby the parties
may continue routine communications (including discussions
regarding the transactions contemplated hereby) with investors and
analysts.
11.3. Joint Post-Closing Covenant of the Seller
and the Purchasers. The Seller and the Purchasers jointly covenant
and agree that, from and after the Closing Date, the Seller and the
Purchasers will cooperate with each other in defending or
prosecuting any action, suit, proceeding, investigation or audit of
the other relating to (a) the preparation and audit of the Seller's
and the Purchasers' tax returns for all periods up to and including
the Closing Date, and (b) any audit of the Purchasers and/or the
Seller with respect to the sales, transfer and similar taxes
imposed by the laws of any state, relating to the transactions
contemplated by this Agreement. In furtherance hereof, the
Purchasers and the Seller further covenant and agree to respond to
all reasonable inquiries related to such matters and to provide, to
the extent possible, substantiation of transactions and to make
available and furnish appropriate documents and personnel in
connection therewith.
11.4. Books and Records; Personnel. For a
period of seven years after the Closing Date (or such longer period
as may be required by any Governmental Body or ongoing Legal
Proceeding):
(a) Neither the Seller nor the
Purchasers shall dispose of or destroy any of the business
records and files of the Business. If either the Seller or
the
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Purchasers wishes to dispose of or destroy such records and
files after that time, it shall first give 30 days' prior
written notice (the "Notice") to the other party who shall
have the right, at its option and expense, upon prior written
notice to the disposing party within such 30 day period, to
take possession of the records and files within 60 days after
the date of the Notice.
(b) Each party to this Agreement shall
allow the other party and its representatives access to all
business records and files of the Business, during regular
business hours and upon reasonable notice at such other
party's principal place of business or at any location where
such records are stored, and the parties shall have the
right, each at its own expense, to make copies of any such
records and files; provided, however, that any such access or
copying shall be had or done in such a manner so as not to
unreasonably interfere with the normal conduct of the other
party's business or operations (including, without
limitation, matters relating to the confidentiality of such
records and files).
(c) The Purchasers shall make available
to the Seller, upon written request and at the Seller's
expense (i) the Purchasers' personnel to assist the Seller in
locating and obtaining records and files maintained by the
Purchasers and (ii) any of the Purchasers' personnel
previously in the Seller's employ whose assistance or
participation is reasonably required by the Seller in
anticipation of, or preparation for, existing or future
litigation, arbitration, administrative proceeding, tax
return preparation or other matters in which the Seller or
any of its affiliates is involved and which is related to the
Business.
11.5. Solicitation of Employees. For a period
of one year after the date of this Agreement, the Seller shall not,
and shall cause its affiliates not to, cause, induce or encourage
any Transferred Employee to leave the employment of the Purchasers.
11.6. Corporate Name. The Seller consents to
the Purchasers using the name "Lumex" and the Seller will not use
the tradename "Lumex", but will only use the name "Lumex" for
corporate purposes until such time as it shall change its name.
The Seller shall propose at the next annual meeting of its
shareholders that the shareholders
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approve an amendment to the Seller's Certificate of Incorporation
to change its name from "Lumex, Inc." and shall take all necessary
steps within a reasonable time thereafter to effectuate such
change.
11.7. Maintenance of Insurance. For a period of
two years after the Closing Date, the Seller shall maintain
substantially the same workers compensation insurance policy as
exists on the date of this Agreement.
ARTICLE XII.
GOVERNMENT CONTRACTS
12.1. Government Contracts. The parties
acknowledge that, in accordance with FAR (48 C.F.R.) Section
42.1204, the Seller and Purchaser I are required to enter into a
novation agreement or agreements with the United States of America
with respect to contracts numbers V79P-3768; and V797P-3253;
between the Seller and the United States of America (Department of
Veterans Affairs Marketing Center) and contract number GS-27F-3011D
between the Seller and the United States of America (General
Services Administration/FSS National Furniture Center)
(collectively, the "Government Contracts"). The Seller and
Purchaser I will cooperate fully and will use all reasonable
efforts to obtain consents to the assignment, or the novation, of
each of the Government Contracts, and the Seller hereby agrees
expeditiously to take all steps necessary to file requests for, and
to use all reasonable efforts to obtain, approvals of all required
novations or assignments with respect to the Government Contracts.
12.2. Performance Under Nonassigned Contracts.
With respect to any Government Contracts that cannot be assigned to
Purchaser I or novated for the benefit of Purchaser I on the
Closing Date, the performance obligations of the Seller thereunder
shall, to the fullest by applicable law and each such Government
Contract, be deemed to be subcontracted or delegated to Purchaser I
until any such Government Contract has effectively been assigned or
novated. Purchaser I, as a subcontractor or delegate, shall
perform such Government Contracts and the Seller shall, as soon as
practicable, pay over to Purchaser I in full any amounts received
by the Seller as a result of performance by Purchaser I of such
Government Contracts. Prior to the assignment or novation of such
Government Contracts to the Purchasers, the Seller, as the
contracting party, shall
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timely take such action as is reasonably necessary to allow
Purchaser I or any of its Subsidiaries to perform such Government
Contracts, to receive amounts due such Government Contracts and to
protect any rights that may exist or accrue under such Government
Contracts until they are assigned or novated.
12.3. Assignment After Closing. If, after the
Closing Date, the Seller and Purchaser I obtain the necessary
consent for the assignment or novation of a Government Contract for
which an assignment or novation is required, then such Government
Contract shall be deemed to be assigned and transferred to
Purchaser I promptly after the Seller and Purchaser I obtain such
consent or novation. Effective upon the assignment of a Government
Contract to Purchaser I, the Government Contract shall be deemed to
be assumed by Purchaser I provided that the Seller shall reimburse
Purchaser I for any monetary benefit received by the Seller (net of
any actual out-of-pocket costs of the Seller in connection with
such Government Contract) that would have accrued to Purchaser I
had the Government Contract been assigned or novated as of the
Closing Date. Any subcontract or other Government Contract which
the Seller and Purchaser I have theretofore entered into or agreed
upon in respect of such contract shall be terminated effective as
of the date of such assignment.
ARTICLE XIII.
INDEMNIFICATION AND RELATED MATTERS
13.1. Indemnification by the Seller. Subject to
the provisions of this Article XIII, the Seller agrees to indemnify
and hold the Purchasers harmless from and against all Damages
resulting from or arising out of:
(a) the failure of any of the
representations and warranties contained in Article IV of
this Agreement or in the Schedules related thereto to have
been true when made and as of the Closing Date, it being
understood that to the extent that any of such
representations and warranties were made as of a specified
date the same shall apply only to the failure of such
representations and warranties to be true as of such
specified date;
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(b) the failure of the Seller to comply
with any of the covenants contained in this Agreement which
are required to be performed by the Seller; and
(c) the Excluded Liabilities.
13.2. Indemnification by the Purchasers.
(a) Subject to the provisions of this
Article XIII, the Purchasers agree to indemnify and hold the
Seller harmless from and against all Damages resulting from
or arising out of:
(i) the failure of any of the
representations and warranties contained in Article V of this
Agreement to have been true when made and as of the Closing
Date, it being understood that to the extent that any of such
representations and warranties were made as of a specified
date the same shall apply only to the failure of such
representations and warranties to be true as of such
specified date;
(ii) the failure of the Purchasers to
comply with any of the covenants contained in this Agreement
which are required to be performed by the Purchasers;
(iii) the Assumed Liabilities; and
(iv) the operation of the Business or
ownership of the Assets on or after the Closing Date.
(b) The Purchasers shall indemnify,
defend and hold the Seller harmless from and against all
Damages and Environmental Costs and Liabilities arising out
of or relating to known or unknown Hazardous Substance
contamination at the facility at the Location, including, but
not limited to: (i) any cleanup, corrective removal or
remedial actions or property damage arising out of any
condition existing prior to or after the Closing, whether or
not disclosed to or known by the Purchasers or the Seller;
(ii) third party claims (including, not but not limited to,
claims by employees of the Seller) for personal injury
relating or attributable to exposure to Hazardous Substances;
(iii) fines or penalties on account of the presence or
suspected presence of Hazardous Substances contamination
prior to or after the Closing Date;
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(iv) any liability or obligation to modify, restore, change
or improve any of the Assets in order to effectuate
compliance with any applicable regulation or order in effect
as of the Closing Date relating to the presence or suspected
presence of Hazardous Substances contamination.
13.3. Determination of Damages and Related
Matters. In calculating any amount payable to the Purchasers
pursuant to Section 13.1 or payable to the Seller pursuant to
Section 13.2, the Seller or the Purchasers, as the case may be,
shall receive credit for (i) any tax benefit allowable as a result
of the facts giving rise to the claim for indemnification, and (ii)
any insurance recoveries, and no amount shall be included for the
Purchasers' or the Seller's, as the case may be, special,
consequential or punitive damages, unless special, consequential or
punitive damages have been asserted by any third party against the
party seeking indemnification. The Seller and the Purchasers agree
to treat any indemnity payment made pursuant to Section 13.1 or
Section 13.2 as an adjustment to the Purchase Price for federal,
state, local and foreign income tax purposes.
13.4. Limitation on Indemnification Liabilities.
(a) Except as set forth in subsection (b)
below, the indemnifications in favor of the Purchasers
contained in Sections 13.1 (a) and 13.1(b) (a) shall not be
effective until the aggregate dollar amount of all Damages
indemnified against under such Section (not including any
such Damages subject to Section 13.4(b) below) exceeds
$640,000 (the "Threshold Amount"), and then only to the
extent such aggregate amount exceeds the Threshold Amount and
(b) shall terminate once the dollar amount of all Damages
indemnified against under such Section aggregates the
Purchase Price provided that the Threshold Amount shall not
apply to Excluded Liabilities, the representation made in
Section 4.16 hereof or the covenants contained in Section
11.5 hereof and the Covenant Not to Compete.
(b) In the event of a breach of Section
4.22, the indemnifications in favor of the Purchasers
contained in Section 13.1(a) (i) shall not be effective until
the aggregate dollar amount of all Lumex Division Related
Expenses exceeds $250,000, and then only to the
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extent such aggregate amount exceeds such $250,000 and (ii)
shall terminate once the dollar amount of all Damages
indemnified under Sections 13.1(a) and (b) aggregates the
Purchase Price.
13.5. Survival of Representations, Warranties
and Covenants. The parties hereto agree that the representations
and warranties made in this Agreement and the covenants and
agreements contained herein and any indemnification with respect
thereto shall survive for one year after the Closing Date; provided
that (i) such limitation period shall not apply with respect to
claims properly made with reasonable specificity prior to the
expiration of such one year limitation period, (ii) any covenants
and agreements contained herein which by their terms may cover a
period in excess of one year after the Closing Date shall survive
for such specified period and (iii) the indemnification obligations
contained in Sections 13.1(c), 13.2(a)(iii), 13.2(a)(iv) and
13.2(b) shall survive indefinitely (the "Survival Period").
13.6. Notice of Indemnification. In the event
any legal proceeding shall be threatened or instituted or any claim
or demand shall be asserted by any person in respect of which
payment may be sought by one party hereto from the other party
under the provisions of this Article XIII or for breach of any of
the representations and warranties set forth herein, the party
seeking indemnification (the "Indemnitee") shall promptly cause
written notice of the assertion of any such claim of which it has
knowledge which is covered by this indemnity to be forwarded to the
other party (the "Indemnitor"), which notice must be received by
the Indemnitor prior to the expiration of the applicable Survival
Period. Any notice of a claim by reason of any of the
representations, warranties or covenants contained in this
Agreement shall state specifically the representation, warranty or
covenant with respect to which the claim is made, the facts giving
rise to an alleged basis for the claim, and the amount of the
liability asserted against the Indemnitor by reason of the claim.
The failure of the Indemnitee to notify the Indemnitor of a claim
shall not relieve the Indemnitor of any liability that it may have
with respect to such claim, except to the extent the Indemnitor is
prejudiced or adversely affected by such failure.
13.7. Defense of Third Party Claims. Should any
legal proceeding be instituted against the Indemnitee by
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<PAGE> 57
a third party for which the Indemnitee is entitled to
indemnification under this Agreement (a "Third Party Claim"), the
obligations and liabilities of the parties hereunder with respect
to such Third Party Claim shall be subject to the following terms
and conditions:
(a) The Indemnitee shall give the Indemnitor
written notice of any such claim promptly after receipt by the
Indemnitee of notice thereof, and the Indemnitor may undertake the
defense thereof by representatives of its own choosing reasonably
acceptable to the Indemnitee. If the Indemnitee desires to
participate in, but not control, any such defense, it may do so at
its own cost and expense. If, however, the Indemnitor fails or
refuses to undertake the defense of such claim within ten (10) days
after written notice of such claim has been given to the Indemnitor
by the Indemnitee, the Indemnitee shall have the right to undertake
the defense, and, subject to Section 13.7(b) below, settlement of
such claim with counsel of its own choosing. In the circumstances
described in the preceding sentence, the Indemnitee shall, promptly
upon its assumption of the defense of such claim, provide notice as
specified in Section 13.6 which shall be deemed a claim for
indemnification that is not a Third Party Claim for the purposes of
the procedures set forth herein.
(b) No settlement of a Third Party Claim
involving the asserted liability of the Indemnitor under this
Article XIII shall be made without the prior written consent by or
on behalf of the Indemnitor, which consent shall not be
unreasonably withheld or delayed.
13.8. Exclusive Remedy. Except as otherwise
described in Section 14.2, the exclusive remedy available to a
party hereto in respect of the matters covered by Section 13.1 or
Section 13.2 hereof shall be to proceed in the manner and subject
to the limitations contained in this Article XIII.
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ARTICLE XIV.
TERMINATION
14.1. Termination. This Agreement may be
terminated:
(a) by the written agreement of the
Purchasers and the Seller;
(b) by either the Purchasers or the
Seller if there shall be in effect a non-appealable order of
a court of competent jurisdiction permanently prohibiting the
consummation of the transactions contemplated hereby;
(c) by either the Purchasers or the
Seller if the Closing shall not have occurred on or before
May 31, 1996; and
(d) by the Purchasers if any
condemnation, destruction or loss due to fire or other
casualty from the date hereof until the Closing Date is such
that the Business is materially interrupted or curtailed or
the Assets are materially affected; provided that if the
Purchasers nonetheless elect to close, the Seller shall remit
or assign the Seller's rights to all net condemnation
proceeds or third party insurance proceeds to the Purchasers,
and the Seller shall have no further liability or obligations
with respect to such condemnation, destruction or loss.
14.2. Liabilities After Termination. Upon any
termination of this Agreement pursuant to Section 14.1 above, no
party hereto shall thereafter have any further liability or
obligation hereunder other than the Purchasers' obligations
pursuant to Section 7.2 hereof, but no such termination shall
relieve either party hereto of any liability to the other party
hereto for any breach of this Agreement prior to the date of such
termination and each party hereto shall have all rights at law or
in equity, against the other based upon such breach, including,
without limitation, the right to seek specific performance.
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ARTICLE XV.
MISCELLANEOUS
15.1. Definitions. As used in this Agreement,
the following terms have the following meanings (such meanings to
be equally applicable to both the singular and plural forms of the
terms defined):
"Accounts Receivable" has the meaning set forth in
Section 1.1(c) hereof.
"Arbitrator" has the meaning set forth in Section
2.2(d) hereof.
"Assets" has the meaning set forth in Section 1.1
hereof.
"Assignment and Assumption Agreement" has the
meaning set forth in Section 3.3(b) hereof.
"Assumed Liabilities" has the meaning set forth in
Section 1.3 hereof.
"Beneficiaries" has the meaning set forth in
Section 4.11(a) hereof.
"Benefit Arrangement" means each employment or
severance contract or arrangement providing for insurance coverage,
severance, termination or similar coverage and all written
compensation policies and practices maintained by the Seller
covering any Employee or former Employee of the Business.
"Business" has the meaning set forth in the
recitals hereof.
"Closing" means the consummation of the
transactions contemplated by this Agreement.
"Closing Balance Sheet" has the meaning set forth
in Section 2.2(a) hereof.
"Closing Date" has the meaning set forth in Section
3.1 hereof.
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<PAGE> 60
"Code" means the Internal Revenue Code of 1986, as
amended.
"Company Software" has the meaning set forth in
Section 4.9(d) hereof.
"Confidentiality Agreement" has the meaning set
forth in Section 6.2 hereof.
"Contract" means any contract, agreement,
indenture, note, bond, loan, instrument, lease, conditional sale
contract, mortgage, license, franchise, insurance policy,
commitment or other arrangement or agreement.
"Covered by the Seller's Insurance Policies" means
pursuant to the provisions of the Seller's insurance policies,
including deductibles, self-insured retentions and covered losses
in excess of policy limits.
"Damages" means any and all direct or indirect
demands, claims, payments, obligations, recoveries, deficiencies,
fines, penalties, interest, assessments, actions, causes of action,
suits, losses, liabilities, costs, expenses (including without
limitation, (i) interest, penalties and reasonable attorneys' fees
and expenses, (ii) reasonable attorneys' fees and expenses
necessary to enforce rights to indemnification hereunder, and (iii)
consultant's fees and other costs of defense or investigation), and
interest on any amount payable to a third party as a result of the
foregoing.
"Deed" has the meaning set forth in Section 3.3(j)
hereof.
"Division" has the meaning set forth in the
recitals hereof.
"Employee Benefit Plans" has the meaning set forth
in Section 4.11(a) hereof.
"Employees" means all persons employed in the
Business on the day immediately prior to the Closing Date,
including any persons on disability, sick leave, layoff or leave of
absence from the Business.
"Environmental Costs and Liabilities" shall mean
any Damages or Losses (including without limitation, fees,
disbursements, fees and expenses of legal counsel, experts,
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engineers or consultants and the costs of investigation and
feasibility studies, remedial or removal actions, cleanup
activities or other corrective action measures necessary to bring
the facilities into compliance with Laws) arising from, under or
pursuant to Environmental Laws or order or contract with any
Governmental Authority or Person, including without limitation, any
obligation to investigate, remediate or otherwise address Hazardous
Substance.
"Environmental Laws" means any applicable code,
law, order, ordinance, regulation, rule or statute of any
Governmental Authority relating to pollution or protection of human
health or the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface
strata), including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act, as amended,
42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and
other Laws relating to emissions, discharges, releases or
threatened releases of any Hazardous Substance, or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any
Hazardous Substance; but excluding any Laws relating to
occupational health and safety.
"Environmental Litigation" means any Proceeding
against the Seller with respect to the Business or the Assets
(including, without limitation, written notice or other written
communication by any Person alleging potential liability for
investigatory costs, cleanup costs, private or governmental
response or remedial costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based
upon, or resulting from any circumstances or state of facts forming
the basis of any liability or alleged liability under, or violation
or alleged violation of, any Environmental Law.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"Excess Lancaster Inventory" means Inventory at the
Lancaster, Pennsylvania facility the carrying value of which is in
excess of $2,051,472.
"Excluded Assets" has the meaning set forth in
Section 1.2 hereof.
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"Excluded Liabilities" has the meaning set forth in
Section 1.4 hereof.
"FDA" has the meaning set forth in Section 4.18
hereof.
"Final Net Assets Adjustment" has the meaning set
forth in Section 2.2(d) hereof.
"Financial Statements" has the meaning set forth in
Section 4.6 hereof.
"GAAP" means generally accepted accounting
principles in the United States.
"Governmental Authority" means any federal, state,
county, local, foreign or other governmental or public agency,
instrumentality, commission, authority, grand jury, official, board
or body having jurisdiction over the Real Property or the
operations conducted thereon.
"Governmental Body" means any government or
governmental or regulatory body thereof, or political subdivision
thereof, whether federal, state, local or foreign, or any agency or
instrumentality thereof, or any court or arbitrator (public or
private).
"Government Contracts" has the meaning set forth in
Section 12.1 hereof.
"Hazardous Substance" means (i) any hazardous
substance, hazardous material, hazardous waste, regulated substance
or toxic substance (as those terms are defined by any applicable
Environmental Laws) and (ii) any chemicals, pollutants, or
contaminants regulated under or pursuant to Environmental Law or
(iii) petroleum, petroleum products, or oil.
"HSR Act" has the meaning set forth in Section 4.5
hereof.
"Indemnitee" has the meaning set forth in Section
13.6 hereof.
"Indemnitor" has the meaning set forth in Section
13.6 hereof.
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"Initial Balance Sheet" means the audited statement
of net assets to be sold of the Business at December 31, 1995 and
attached hereto as part of Schedule 4.6.
"Intangible Assets" has the meaning set forth in
Section 1.1(e) hereof.
"Interest" has the meaning set forth in Section 6.4
hereof.
"Inventory" has the meaning set forth in Section
1.1(b) hereof.
"Known Environmental Condition" means any
environmental condition related to or otherwise attributable to the
soil and ground water contamination at the Location, as disclosed
by the Seller in the environmental materials made available to the
Purchasers during the diligence process, including, without
limitation, the Site Investigation Work Plan, Site Investigation
Report and the Work Plan for Soil Remediation prepared for Suffolk
County Department of Health Services by Fanning, Phillips and
Molnar, as well as any Phase I or Phase II investigation undertaken
by or on behalf of the Purchasers.
"Law" means any federal, state, local or foreign
law (including common law), statute, code, ordinance, rule,
regulation or other requirement or guideline.
"Lease Assignment" has the meaning set forth in
Section 3.3(k) hereof.
"Leased Real Property" means all the Real Property
leased by the Seller and used exclusively in the Business and set
forth on Schedule 1.1(d).
"Legal Proceeding" means any judicial,
administrative or arbitral action, suit, proceeding (public or
private), claim or governmental proceeding.
"Liabilities" has the meaning set forth in Section
1.3(i) hereof.
"Licensed Software" has the meaning set forth in
Section 4.9(c) hereof.
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"Lien" means any lien, pledge, mortgage, deed of
trust, security interest, claim, lease, charge, option, right of
first refusal, easement, or other real estate declaration,
covenant, condition, restriction or servitude, transfer restriction
under any shareholder or similar agreement, encumbrance or any
other restriction or limitation whatsoever.
"Location" means the property described on Schedule
15.1(a) hereto.
"Material Adverse Effect" means any material
adverse effect on, or any effect that results in a material adverse
change in, the Assets as a whole or the business, financial
condition, results of operations or liabilities of the Business, as
a whole.
"Net Assets" has the meaning set forth in Section
2.2(b) hereof.
"Order" means any order, injunction, judgment,
decree, ruling, writ, assessment or arbitration award.
"Owned Real Property" means all the Real Property
owned in fee or otherwise by the Seller and used principally by the
Business and set forth on Schedule 1.1(d).
"Owned Software" has the meaning set forth in
Section 4.9(b) hereof.
"Parent" has the meaning set forth in the recitals
hereof.
"Permit" means any written approval, authorization,
consent, franchise, license, permit or certificate by any
Governmental Body.
"Permitted Exceptions" means (i) statutory Liens
for current taxes, assessments or other governmental charges not
yet delinquent or the amount or validity of which is being
contested in good faith by appropriate proceedings; (ii)
mechanics', carriers', workers', repairers' and similar Liens
arising or incurred in the ordinary course of business that are not
in the aggregate material to the Business or the Assets; (iii)
zoning, entitlement and other land use and environmental
regulations by Governmental Bodies, provided that such regulations
have not been violated; (iv) such other imperfections in title,
charges, easements, restric-
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tions and encumbrances which are immaterial to the conduct of the
Business; (vi) such exceptions described on Schedule 15.1(b)
hereto; and (vii) such state of facts as would be shown on an
accurate survey of each parcel of Real Property, provided that such
state of facts do not materially restrict, inhibit or limit the
present use of any such Real Property.
"Person" means any individual, corporation,
partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization or Governmental Body.
"Plan Employees" has the meaning set forth in
Section 4.11(a) hereof.
"Preliminary Net Assets Adjustment" has the meaning
set forth in Section 2.2(b) hereof.
"Proceedings" has the meaning set forth in Section
4.12 hereof.
"Purchase Price" has the meaning set forth in
Section 2.1 hereof.
"Purchasers" has the meaning set forth in the
recitals hereof.
"Purchasers' Documents" has the meaning set forth
in Section 5.2 hereof.
"Purchasers' Representatives" has the meaning set
forth in Section 6.2 hereof.
"Real Property" has the meaning set forth in
Section 1.1(d) hereof.
"Seller" has the meaning set forth in the recitals
hereof.
"Seller Documents" has the meaning set forth in
Section 4.2 hereof.
"SMDA" has the meaning set forth in Section 4.18
hereof.
"Smith Barney" has the meaning set forth in Section
4.16 hereof.
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"Survival Period" has the meaning set forth in
Section 13.5 hereof.
"Taxes" or "Tax" means all taxes, fees, charges, or
other amounts, however denominated, including any interest or
penalties thereon or with respect thereto, imposed by any federal,
state, local or foreign government or agency or political
subdivision of any such government, including, without limitation,
income, payroll, withholding, unemployment insurance, social
security, sales and use, excise, franchise, gross receipts, real
and personal property transfer and other similar taxes and
obligations.
"Tax Return" means any return, declaration, report,
claim for refund, information return, statement or other similar
document relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
"Threshold Amount" has the meaning set forth in
Section 13.4 hereof.
"Transferred Employees" means all Employees who
receive and accept offers of employment from the Purchasers on or
after the Closing Date.
"WARN Act" has the meaning set forth in Section
4.11(k) hereof.
"W&P Assignment" has the meaning set forth in
Section 3.3(l) hereof.
"Welfare Plan" has the meaning set forth in Section
8.3(a) hereof.
15.2. Knowledge. As used in this Agreement, the
terms "to the Seller's knowledge" and "to the knowledge of the
Seller," or words to that effect, shall refer to matters of which
any person on Schedule 15.2 has actual knowledge.
15.3. Prorations. The Purchasers and the Seller
hereby agree as follows with regard to prorations applicable to the
consummation of the transactions contemplated hereby. The parties
agree that all operational expenses incurred directly in the
operation of the Business, including, without limitation, utility
bills, the expense of supplies, the expense of fuel, and the like,
shall be
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prorated between the parties as of the Closing Date, and as of such
date shall become the obligation and responsibility of the
Purchasers. Prorations which are to be effected on the Closing
Date shall be made on the Closing Date or, if such prorations
cannot reasonably be made as of the Closing Date, as soon
thereafter as possible and "as of" the Closing Date. In addition,
all pre- paid expenses shall be prorated between the parties as of
the Closing Date. The Purchasers, as of the Closing Date, shall
pay such amounts as may be required to replace all deposits held
with the suppliers of utilities to the Business, and to assist the
Seller as may be reasonably required in obtaining a return of such
deposits put in place by the Seller as of the Closing Date.
All personal and real property taxes and special
and general assessments relating to the Assets shall be prorated by
the parties as of the Closing Date, and all such taxes applicable
to periods of time prior to the Closing Date shall be the sole
obligation, responsibility and expense of the Seller, and shall be
paid by the Seller. All such assessments and taxes applicable to
periods following the Closing Date shall be the sole obligation,
responsibility and expense of the Purchasers.
15.4. Waiver of Compliance with Bulk Transfer
Laws. The Purchasers hereby waive compliance by the Seller with
the provisions of the bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement.
15.5. Entire Agreement. This Agreement (with
its Schedules and Exhibits) contains, and is intended as, a
complete statement of all of the terms and the arrangements between
the parties hereto with respect to the matters provided for herein,
and supersedes any and all previous agreements and understandings
between the parties hereto with respect to those matters.
15.6. Governing Law. This Agreement shall be
governed by and construed in accordance with the law of the State
of New York.
15.7. Transfer Taxes. The Seller shall pay (a)
all transfer and documentary taxes and fees imposed with respect to
instruments of conveyance in the transaction contemplated hereby
and (b) all sales, use, gains, excise and other transfer or similar
taxes on the transfer of the Assets contemplated hereunder. The
Purchasers and the
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<PAGE> 68
Seller shall cooperate with one another in promptly making any
filings in connection with any such taxes. The Purchasers shall
pay all costs of any title insurance coverage or endorsements that
the Purchasers elects to obtain. The Purchasers or the Seller, as
the case may be, shall execute and deliver to the other at the
Closing any certificates or other documents as the other may
reasonably request to perfect any exemption from any such transfer,
documentary, sales, gains, excise or use tax.
15.8. Expenses. Each of the parties hereto
shall bear its own expenses (including, without limitation, fees
and disbursements of its counsel, accountants and other experts),
incurred by it in connection with the preparation, negotiation,
execution, delivery and performance of this Agreement, each of the
other documents and instruments executed in connection with or
contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby.
15.9. Table of Contents and Headings. The table
of contents and section headings of this Agreement are for
reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement.
15.10. Notices. All notices and other
communications under this Agreement shall be in writing and shall
be deemed given when delivered personally or four days after being
mailed by registered mail, return receipt requested, to a party at
the following address (or to such other address as such party may
have specified by notice given to the other party pursuant to this
provision):
If to the Seller, to:
Lumex, Inc.
81 Spence Street
Bay Shore, New York 11706
Telephone: (516) 273-2200
Facsimile: (516) 273-1706
Attention: Robert McNally
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with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
Attention: Jeffrey J. Weinberg, Esq.
If to the Purchasers, to:
Fuqua Enterprises, Inc.
One Atlantic Center
Suite 5000
1201 West Peachtree Street
Atlanta, Georgia 30309
Telephone: (404) 815-2000
Facsimile: (404) 815-4529
Attention: Brady W. Mullinax, Jr.
with a copy to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telephone: (404) 881-7000
Facsimile: (404) 881-7777
Attention: Bryan E. Davis, Esq.
15.11. Severability. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validly or enforceability of any other provision of this
Agreement, each of which shall remain in full force and effect.
15.12. Binding Effect; No Assignment. This
Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns. Nothing in
this Agreement shall create or be deemed to create any third party
beneficiary rights in any person or entity not party to this
Agreement. This Agreement shall not be assignable by any of the
parties hereto without the written consent of the other parties
hereto. Notwithstanding the foregoing, each of the Purchasers may,
without the consent of the other parties hereto, assign and
delegate its obligations and rights hereunder with respect to all
of the Assets and Business or any part thereof to (i) any
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affiliated company of either of the Purchasers, (ii) any successor
of all or substantially all of either of the Purchasers' or
Parent's business by way of merger, consolidation, liquidation,
purchase of assets of the Purchasers or Parent or other form of
acquisition or other form of reorganization, and (iii) any lender
of the Purchasers or Parent as collateral, but no such assignment
shall relieve the Purchasers or Parent of their obligations
hereunder.
15.13. Amendments. This Agreement may be
amended, supplemented or modified, and any provision hereof may be
waived, only pursuant to a written instrument making specific
reference to this Agreement signed by each of the parties hereto.
15.14. Guarantee. In order to induce the Seller
to enter into this Agreement, Parent hereby guarantees the
performance by the Purchasers of all of their obligations under
this Agreement, including any obligation to pay damages incurred by
the Seller as a consequence of breach of this Agreement by either
of the Purchasers.
15.15. Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one
and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have
executed this instrument as of the date and year first above
written.
LUMEX, INC.
By: /s/ J. Raymond Elliott
------------------------------
Name: J. Raymond Elliott
Title: President & CEO
MUL ACQUISITION CORP. I
By: /s/ L. P. Klamon
------------------------------
Name: L. P. Klamon
Title: President
MUL ACQUISITION CORP. II
By: /s/ L. P. Klamon
------------------------------
Name: L. P. Klamon
Title: President
FUQUA ENTERPRISES, INC.
By: /s/ L. P. Klamon
------------------------------
Name: L. P. Klamon
Title: President & CEO
64
<PAGE> 1
EXHIBIT 4(b) EXECUTION COUNTERPART
TERM LOAN AGREEMENT
Dated as of January 18, 1996
By and Among
BASIC AMERICAN MEDICAL PRODUCTS, INC.,
as Borrower,
FUQUA ENTERPRISES, INC.,
as Guarantor,
AND
SUNTRUST BANK, ATLANTA,
as Lender
<PAGE> 2
TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT, dated as of January 18, 1996 (the
"Agreement"), by and among BASIC AMERICAN MEDICAL PRODUCTS, INC., a corporation
organized and existing under the laws of the State of Georgia (the "Borrower"),
SUNTRUST BANK, ATLANTA a banking corporation organized and existing under the
laws of the State of Georgia (the "Lender") and, solely for the limited
purposes of making the representations and warranties set forth in Article IV
and agreeing to be bound by the covenants set forth in Article V below, FUQUA
ENTERPRISES, INC., a corporation organized and existing under the laws of the
State of Delaware (the "Guarantor").
W I T N E S S E T H:
WHEREAS, subject to and upon the terms and conditions herein set forth,
the Lender is willing to make available to the Borrower the credit facility
provided for herein;
NOW THEREFORE, for and in consideration of the sum of $10.00 in hand
paid by the Lender to the Borrower and the Guarantor, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. In addition to the other terms defined herein
and the terms incorporated herein by reference, the following terms used herein
shall have the meanings herein specified (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Adjusted LIBO Rate" shall mean, with respect to each Interest Period
for a Eurodollar Borrowing, the rate obtained by dividing (A) LIBOR for such
Interest Period by (B) a percentage equal to 1 minus the then stated maximum
rate (stated as a decimal) of all reserve requirements (including, without
limitation, any marginal, emergency, supplemental, special or other reserves)
applicable to Lender (or assignee thereof) which is a member bank of the
Federal Reserve System in respect of Eurocurrency liabilities as defined in
Regulation D (or against
<PAGE> 3
any successor category of liabilities as defined in Regulation D). As of the
date of this Agreement, such stated maximum rate is 0.
"Agreement" shall mean this Term Loan Agreement, either as originally
executed or as it may be from time to time supplemented, amended, renewed or
extended.
"Bankruptcy Code" shall mean The Bankruptcy Code of 1978, as amended and
in effect from time to time (11 U.S.C. Section 101 et seq.).
"Base Rate" shall mean (with any change in the Base Rate to be
effective as of the date of change of either of the following rates) the higher
of (i) the rate which the Lender publicly announces from time to time as its
prime lending rate, as in effect from time to time, and (ii) the Federal Funds
Rate, as in effect from time to time, plus one-half of one percent (0.50%) per
annum. The Lender's prime lending rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to customers;
the Lender may make commercial loans or other loans at rates of interest at,
above or below the Lender's prime lending rate.
"Base Rate Borrowing" shall mean the Term Loan when it is bearing
interest at the Base Rate.
"Borrower" shall mean Basic American Medical Products, Inc., a Georgia
corporation, a wholly-owned subsidiary of Fuqua Enterprises, Inc., a Delaware
corporation, its successors and permitted assigns.
"Business Day" shall mean any day excluding Saturday, Sunday and any
other day on which banks are required or authorized to close in Atlanta,
Georgia and, if the applicable Business Day relates to Eurodollar Borrowings,
any day on which trading is not carried on by and between banks in deposits of
the applicable currency in the applicable interbank Eurocurrency market.
"Closing Date" shall mean January 18, 1996, or such later date on which
the Term Loan is advanced hereunder.
"Deed to Secure Debt" shall mean that certain Deed to Secure Debt,
Security Agreement and Assignment of Rents and Leases, dated as of even date
herewith, made by the Borrower in favor of the Lender to secure the Term Loan
and all other obligations arising pursuant to the Loan Documents, either as
originally executed or as hereafter amended or modified.
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"Environmental Indemnity Agreement" shall mean that certain
Environmental Indemnity Agreement, dated as of even date herewith, made by the
Borrower in favor of Lender, either as originally executed or as hereafter
amended, modified or supplemented.
"Eurodollar Borrowing" shall mean the Term Loan when it is bearing
interest at the Adjusted LIBO Rate.
"Event of Default" shall have the meaning set forth in Article VI.
"Federal Funds Rate" shall mean for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with member banks of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business
Day) by the Federal Reserve Bank of Atlanta, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by the Lender from three Federal
funds brokers of recognized standing selected by the Lender.
"Fuqua Credit Agreement" shall mean that certain Credit Agreement,
dated as of November 6, 1995, among the Guarantor, SunTrust Bank, Atlanta, as
Agent, and the lenders named therein or from time to time party thereto, either
as originally executed or as hereafter amended, modified or supplemented.
"Guarantor" shall mean Fuqua Enterprises, Inc., a Delaware corporation.
"Guaranty" shall mean that certain Guaranty Agreement, dated as of even
date herewith, made by the Guarantor in favor of the Lender substantially in
the form of Exhibit "B" attached hereto, either as originally executed or as
hereafter amended, modified or supplemented.
"Interest Period" shall mean, with respect to any Eurodollar Borrowing,
a period of one month; provided, that (i) the first day of an Interest Period
must be a Business Day, and (ii) any Interest Period that would otherwise end
on a day that is not a Business Day shall be extended to the next succeeding
Business Day, unless such Business Day falls in the next calendar month, in
which case the Interest Period shall end on the next preceding Business Day,
and (iii) the last day of each Interest Period shall be the first day of the
next succeeding Interest Period.
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"LIBOR" shall mean, for any Interest Period, with respect to any
Eurodollar Borrowing, the offered rate for deposits in U.S. Dollars, for a
period comparable to the Interest Period and in an amount comparable to the
Term Loan appearing on the Reuters Screen LIBO Page as of 11:00 A.M. (London,
England time) on the day that is two London Business Days prior to the first
day of the Interest Period. If two or more of such rates appear on the Reuters
Screen LIBO Page, the rate for that Interest Period shall be the arithmetic
mean of such rates. If the foregoing rate is unavailable from the Reuters
Screen for any reason, then such rate shall be determined by the Lender from
Telerate Page 3750 or, if such rate is also unavailable on such service, then
on any other interest rate reporting service of recognized standing designated
in writing by the Lender to Borrower; in any such case rounded, if necessary,
to the next higher 1/16 of 1.0%, if the rate is not such a multiple.
"Loan Documents" shall mean and include, as the context requires, this
Agreement, the Note, the Guaranty, the Deed to Secure Debt, the Environmental
Indemnification Agreement and any and all other instruments, certificates,
agreements, documents and writings contemplated hereby or executed in
connection herewith.
"Maturity Date" shall have the meaning set forth in Section 2.01.
"Obligations" shall mean all amounts owing to the Lender pursuant to
the terms of this Agreement or any other Loan Document, including, without
limitation, the Term Loan (including all principal and interest payments due
thereunder), all obligations pursuant to fees, expenses, indemnification and
reimbursement payments, indebtedness, liabilities, and obligations of the
Borrower or the Guarantor, direct or indirect, absolute or contingent,
liquidated or unliquidated, now existing or hereafter arising, together with
all renewals, extensions, modifications or refinancings thereof.
"Person" shall mean any individual, partnership, firm, corporation,
association, joint venture, trust or other entity, or any government or
political subdivision or agency, department or instrumentality thereof.
"Property" shall mean the real property located in Gwinnett County,
Georgia and DeKalb County, Georgia, as more particularly described on Exhibit A
to the Deed to Secure Debt.
"Reserve Percentage" shall mean, for any day, the stated maximum rate
(expressed as a decimal) of all reserves required to be maintained with respect
to liabilities or assets consisting of or including "Eurocurrency liabilities,"
as prescribed by
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Regulation D of the Board of Governors of the Federal Reserve System (or by any
other governmental body having jurisdiction with respect thereto), including,
without limitation, any basic, marginal, emergency, supplemental, special,
transitional or other reserves, the rate so determined to be rounded upward to
the nearest whole multiple of 1/100 of 1%.
"Telerate" shall mean, when used in connection with any designated page
and LIBOR, the display page so designated on the Dow Jones Telerate Service (or
such other page as may replace that page on that service for the purpose of
displaying rates comparable to LIBOR).
"Term Note" or "Note" shall mean a promissory note of the Borrower
payable to the order of the Lender, in substantially the form of Exhibit "A"
hereto, in an original principal amount of $1,763,850, evidencing the Term
Loan, either as originally executed or as it may be from time to time
supplemented, modified, amended, renewed or extended.
ARTICLE II
AMOUNT AND TERMS OF TERM LOAN
SECTION 2.01. Term Loan and Note. The Lender hereby agrees to lend, and
Borrower hereby agrees to borrow on the Closing Date, upon the terms and
conditions set forth in this Agreement, the sum of $1,763,850.00 (the "Term
Loan" or "Loan") to be evidenced by the Term Note. The Term Note shall bear
interest on the outstanding principal balance from the date of the Term Note to
final payment at the rate set forth below and shall mature on January 18, 2001
(the "Maturity Date"), or sooner should the Lender declare the principal and
accrued interest on such Term Note to be immediately due and payable as
provided for hereinafter. Principal on the Term Note shall be payable in
fifty-nine (59) monthly installments of $9,944.44, payable on the last day of
each calendar month, commencing on February 29, 1996 and continuing through
December 31, 2000, with a final payment in the amount of $1,177,128.04 on the
Maturity Date, when the entire unpaid principal balance on the Term Note,
together with all accrued and unpaid interest, shall be due and payable in
full.
SECTION 2.02. Interest on Term Note. (a) Except as otherwise provided
herein, interest shall accrue on the unpaid principal amount of the Term Note
at LIBOR for consecutive Interest Periods of 1 month, plus an additional
fifty-five one-hundredths of one percent (0.55%) per annum.
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(b) If the Borrower shall fail to pay on the due date therefor, whether
by acceleration or otherwise, any principal owing under the Note, then interest
shall accrue on such unpaid principal, and to the extent permitted by law,
unpaid interest, from the due date until and including the date on which such
amount is paid in full at a rate of interest per annum equal to the sum of two
percent (2%) per annum plus the higher of (i) the interest rate otherwise
applicable to the Term Loan and (ii) the Base Rate (the "Default Rate").
SECTION 2.03. Calculation of Interest. Interest payable hereunder shall
be calculated on the basis of the actual days elapsed in a 360 day year.
SECTION 2.04. Use of Proceeds. The proceeds of the Term Loan will be
used by the Borrower solely to repay in full all existing debt secured by the
Property as described on Schedule 2.04 attached hereto (the "Refinanced
Indebtedness").
SECTION 2.05. Interest Rate Not Ascertainable etc. In the event that
the Lender shall have determined (which determination shall be made in
good faith and, absent manifest error, shall be final, conclusive and binding
upon all parties) that on any date for determining the Adjusted LIBO Rate for
any Interest Period, by reason of any changes arising after the date of this
Agreement affecting the London interbank market, or the Lender's position in
such market, adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in the definition of
Adjusted LIBO Rate, then, and in any such event, the Lender shall forthwith
give notice (by telephone confirmed in writing) to Borrower of such
determination and a summary of the basis for such determination. Until the
Lender notifies Borrower that the circumstances giving rise to the suspension
described herein no longer exist (which notice Lender agrees to give to the
Borrower upon Lender obtaining knowledge that such circumstances have ceased to
exist), the obligations of the Lender to make or permit the Term Loan to remain
outstanding past the last day of the then current Interest Period as a LIBOR
Borrowing shall be suspended, and the Term Loan shall bear interest at the Base
Rate.
SECTION 2.06. Illegality.
(a) In the event that Lender shall have determined (which determination
shall be made in good faith and, absent manifest error, shall be final,
conclusive and binding upon all parties) at any time that the making or
continuance of any Eurodollar Borrowing has become unlawful by compliance by
Lender in good faith with any applicable law, governmental rule, regulation,
guideline or order (whether or not having the force of
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law and whether or not failure to comply therewith would be unlawful), then, in
any such event, the Lender shall give prompt notice (by telephone confirmed in
writing) to Borrower of such determination and a summary of the basis for such
determination.
(b) Upon the giving of the notice to Borrower referred to in subsection
(a) above, Lender's obligation to make Eurodollar Borrowings shall be
immediately suspended, and the Term Loan shall be converted to a Base Rate
Borrowing.
SECTION 2.07. Increased Costs. If, after the date hereof, by reason of
(x) the introduction of or any change (including, without limitation, any
change by way of imposition or increase of reserve requirements) in or in the
interpretation of any law or regulation, or (y) the compliance with any
guideline or request from any central bank or other governmental authority or
quasi-governmental authority exercising control over banks or financial
institutions generally (whether or not having the force of law):
(i) Lender shall be subject to any tax, duty or other charge with
respect to the Eurodollar Borrowings, or its obligation to make Eurodollar
Borrowings, or the basis of taxation of payments to Lender of the principal
of or interest on Eurodollar Borrowings or its obligation to make
Eurodollar Borrowings shall have changed (except for changes in the tax on
the overall net income of Lender, or franchise taxes applicable thereto, in
each case, as imposed by the jurisdiction in which Lender's principal
executive office is located); or
(ii) any reserve (including, without limitation, any imposed by the
Board of Governors of the Federal Reserve System), special deposit or
requirement similar against assets of, deposits with or for the account of,
or credit extended by, Lender's applicable lending office shall be imposed
or deemed applicable or any other condition affecting Eurodollar
Borrowings or its obligation to make Eurodollar Borrowings shall be imposed
on Lender or its applicable lending office or the London interbank market;
and as a result thereof there shall be any increase in the cost to Lender of
agreeing to make or making, funding or maintaining Eurodollar Borrowings
(except to the extent already included in the determination of the applicable
Adjusted LIBO Rate for Eurodollar Borrowings) or its obligation to make
Eurodollar Borrowings or there shall be a reduction in the amount received or
receivable by Lender or its applicable lending office, then
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Borrower shall from time to time, upon written notice from and demand by Lender
on Borrower, pay to the Lender for the account of Lender within five Business
Days after the date of such notice and demand, additional amounts sufficient to
indemnify Lender against such increased cost. A certificate as to the amount of
such increased cost, submitted to Borrower by Lender in good faith and
accompanied by a statement prepared by the such Lender describing in reasonable
detail the basis for and calculation of such increased cost, shall constitute
prima facie evidence of the matters contained therein. This Section 2.07 shall
survive the termination of this Agreement and the repayment of the Term Loan
provided that, in the event that the Lender fails to make written demand for
indemnification or compensation pursuant to this Section 2.07 hereof within one
year after the date that the Lender receives actual notice or obtains actual
knowledge of the promulgation of a law, rule, order or interpretation or
occurrence of another event giving rise to a claim pursuant to this Section,
the Borrower shall not have any obligation to pay any amount with respect to
claims accruing prior to the date which is one year preceding such written
demand.
SECTION 2.08. Capital Adequacy. Without limiting any other provision of
this Agreement, in the event that the Lender shall have determined that any
law, treaty, governmental (or quasi-governmental) rule, regulation, guideline
or order regarding capital adequacy not currently in effect or fully applicable
as of the Closing Date, or any change therein or in the interpretation or
application thereof after the Closing Date, or compliance by the Lender with
any request or directive regarding capital adequacy not currently in effect or
fully applicable as of the Closing Date (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful) from a
central bank or governmental authority or body having jurisdiction, does or
shall have the effect of reducing the rate of return on the Lender's capital as
a consequence of its obligations hereunder to a level below that which the
Lender could have achieved but for such law, treaty, rule, regulation,
guideline or order, or such change or compliance (taking into consideration the
Lender's policies with respect to capital adequacy) by an amount deemed by the
Lender to be material, then within ten (10) Business Days after written notice
and demand by the Lender), Borrower shall from time to time pay to the Lender
additional amounts sufficient to compensate the Lender for such reduction (but,
in the case of outstanding Base Rate Borrowings, without duplication of any
amounts already recovered by the Lender by reason of an adjustment in the
applicable Base Rate). Each certificate as to the amount payable under this
Section 2.08 (which certificate shall set forth the basis for requesting such
amounts in reasonable detail), submitted to Borrower by the Lender in good
faith, shall constitute prima facie evidence of the
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matters contained therein. This Section 2.08 shall survive the termination of
this Agreement and the repayment of the Term Loan provided that, in the event
that the Lender fails to make written demand for indemnification or
compensation pursuant to this Section 2.08 hereof within one year after the
date that the Lender receives actual notice or obtains actual knowledge of the
promulgation of a law, rule, order or interpretation or occurrence of another
event giving rise to a claim pursuant to this Section, the Borrower shall not
have any obligation to pay any amount with respect to claims accruing prior to
the date which is one year preceding such written demand.
SECTION 2.09. Prepayment. The Borrower may prepay the Term Loan at any
time in whole or in part, together with all accrued and unpaid interest
thereof; provided that, the Borrower shall give the Lender two days' notice of
any prepayment and such prepayment shall be made on the last day of an Interest
Period. Any partial prepayment of the Term Loan shall be in a minimum amount of
$100,000.00 and in integral multiples thereof and shall be applied to
installments of principal in inverse order of their maturity.
SECTION 2.10. Making of Payments. All payments of principal of, or
interest on, the Note and all other amounts due hereunder shall be made in
immediately available funds to the Lender at its principal office in Atlanta,
Georgia.
ARTICLE III
CONDITIONS TO TERM LOAN
The obligation of the Lender to advance the Term Loan to the Borrower
is subject to the satisfaction of the condition that the Lender shall have
received the following, each dated as of the Closing Date, in form and
substance satisfactory to the Lender:
(a) The duly completed Note;
(b) The duly completed counterpart of this Agreement;
(c) The duly executed Guaranty;
(d) The duly executed Environmental Indemnification Agreement;
(e) The duly executed closing certificate of Borrower and Guarantor in
substantially the form of Exhibit "C" attached hereto and appropriately
completed;
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(f) the duly executed Deed to Secure Debt and accompanying UCC-l
fixture filing and UCC-2 Notice Filing;
(g) title commitments with respect to the Property subject to the Deed
to Secure Debt in an amount and in a form reasonably satisfactory to the
Lender;
(h) as-built surveys of the Property subject to the Deed to Secure Debt
certified to the Lender;
(i) Phase I environmental reports with respect to the Property subject
to the Deed to Secure Debt disclosing only such matters as may be reasonably
acceptable to the Lender, and if necessary, additional Phase II environmental
reports;
(j) certificates of the Secretary or Assistant Secretary of the
Borrower and the Guarantor, respectively, attaching and certifying copies of
the resolutions of the boards of directors approving the transactions
contemplated herein;
(k) certificates of the Secretary or an Assistant Secretary of the
Borrower and the Guarantor, respectively, certifying (i) the name, title and
true signature of each officer of such entities executing the Loan Documents,
and (ii) the bylaws of the Borrower and the Guarantor, respectively;
(l) certified copies of the certificate or articles of incorporation of
the Borrower and the Guarantor, respectively, certified by the Secretary of
State or the Secretary or Assistant Secretary of the Borrower and the
Guarantor, respectively, together with certificates of good standing or
existence, as may be available from the Secretary of State of the jurisdiction
of incorporation or organization of the Borrower and the Guarantor,
respectively;
(m) agreement by the lenders of the Refinanced Indebtedness to accept
payment in full of all obligations outstanding under the Refinanced
Indebtedness and termination of all credit facilities relating thereto and to
release all liens securing such obligations;
(n) the favorable opinion of Alston & Bird, counsel to the Borrower and
the Guarantor, substantially in the form of Exhibit "D" addressed to the
Lender;
(o) Payment of the amount of intangible recording tax due upon
recordation of the Deed to Secure Debt;
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(p) Evidence satisfactory to the Lender that the Guarantor has
acquired 100% of the outstanding stock of the Borrower; and
In addition to the foregoing, the following conditions shall have been
satisfied or shall exist, all to the satisfaction of the Lender, as of the time
the Term Loan is made hereunder:
(x) the Term Loan to be made on the Closing Date and the use of
proceeds thereof shall not contravene, violate or conflict with, or
involve the Lender in a violation of, any law, rule, injunction, or
regulation, or determination of any court of law or other governmental
authority;
(y) all corporate proceedings and all other legal matters in
connection with the authorization, legality, validity and
enforceability of the Loan Documents shall be reasonably satisfactory
in form and substance to the Lender; and
(z) At the time of the making of the Term Loan, all
representations and warranties of the Guarantor and the Borrower set
forth herein shall be true and correct, and after giving effect to the
Term Loan, there shall exist no Default or Event of Default hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Guarantor, on behalf of itself and its Subsidiaries and the
Borrower, each hereby represent and warrant to the Lender as of the Closing
Date that all representations and warranties set forth in Article V of the
Fuqua Credit Agreement, which representations and warranties are, for the
benefit of the Lender, incorporated by reference herein (including the
definition of terms used therein which appear in the other provisions of the
Fuqua Credit Agreement), irrespective of any termination, modification or
amendment or consent or waiver to such representations and warranties or
termination of the Fuqua Credit Agreement are true and correct as if made on
such date; provided that (i) all references to "each Lender", the "Lenders",
the "Required Lenders" or "Agent" shall be deemed to mean the Lender; (ii) all
references to "this Agreement" and any "Note" shall be deemed to mean this
Agreement and the Note rather than the Fuqua Credit Agreement and any note
delivered pursuant thereto; (iii) the words "hereunder" and "hereby" and the
like shall be deemed to
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refer to this Agreement rather than the Fuqua Credit Agreement; (iv) all
references to Closing Date shall mean the Closing Date as defined herein; and
(v) the definition of "Refinanced Indebtedness" and the schedule related
thereto shall be deemed to have the meaning set forth herein.
ARTICLE V
COVENANTS
SECTION 5.01. Incorporation By Reference of the Fuqua Credit Agreement.
The Guarantor and the Borrower hereby covenant and agree that so long as any
Obligations remain unpaid, each will comply with each of the covenants set
forth in Articles VI and VII of the Fuqua Credit Agreement (which for the
purposes hereof the Borrower shall be deemed to be a party thereto), which
covenants are, for the benefit of the Lender, incorporated by reference herein
(including the definitions of the terms used therein which appear in other
provisions of the Fuqua Credit Agreement), irrespective of any termination,
modification, amendment or consent or waiver relating to such covenants or
termination of the Fuqua Credit Agreement; provided that, (i) any reference to
any "Lender" or the "Agent" or the "Required Lenders" shall be deemed to mean
the Lender, (ii) all references to "Borrower" shall be deemed to mean the
Guarantor and the Borrower, as the case may be, and all references to the
"Credit Parties" shall be deemed to refer to the Guarantor and the Borrower
collectively, (iii) the terms "Default" and "Event of Default" shall be deemed
to have the meanings given such terms herein, (iv) all reference to this
"Agreement", any "Note", any "Loan", any "Borrowing" or the "Credit Documents"
shall be deemed to mean this Agreement and the Note, the Term Loan and the Loan
Documents as defined herein.
SECTION 5.02. Effect of Amendment of Fuqua Credit Agreement.
Notwithstanding the foregoing Section 5.01, any modification, amendment or
consent or waiver relating to the covenants or other provisions incorporated
herein from the Fuqua Credit Agreement entered into while the Lender is a party
to the Fuqua Credit Agreement shall be automatically incorporated into or
honored for purposes of this Agreement with the same force and effect.
SECTION 5.03 Termination or Withdrawal of Lender from Fuqua Credit
Agreement. In the event that indebtedness outstanding pursuant to the Fuqua
Credit Agreement is paid in full or the Fuqua Credit Agreement is otherwise
terminated or the Lender is no longer a party thereto, the Borrower, the Lender
and Guarantor agree to negotiate in good faith replacement covenants for this
Agreement. Until such time as appropriate amendments or
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modifications to this Agreement are executed by the parties, however, the
provisions of Section 5.01 shall remain in full force and effect.
SECTION 5.04 Covenants of Guarantor. Although the Guarantor is not a
borrower under this Agreement, as an inducement for the Lender to extend the
Term Loan to the Borrower, the Guarantor hereby covenants and agrees with the
Lender to comply with the covenants described above on the terms and conditions
described above. The Guarantor acknowledges that the Lender has materially
relied on and will continue to materially rely on the representations and
warranties of Guarantor incorporated by reference in Article IV of this
Agreement and on the covenants of Guarantor set forth in Article V of this
Agreement in extending the Commitment to the Borrower.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. Any one or more of the following shall
constitute an Event of Default hereunder:
(a) the Borrower shall default in the payment of any part of the
principal of the Note when the same shall become due and payable or shall
default in the payment of any installment of interest on the Note or any
other amount payable hereunder; or
(b) any representation or warranty made by the Borrower or the
Guarantor in this Agreement, any other Loan Document, or in any report,
certificate or other instrument furnished in connection with this Agreement
or the Note or any other Loan Document shall prove to have been false in
any material respect on the date made or deemed to have been made; or
(c) the Borrower or the Guarantor shall default in the performance of
any of the covenants contained in this Agreement or any other Loan Document
beyond any period of grace provided herein or therein; or
(d) the Borrower shall default in the performance of any other
covenants herein (including covenants incorporated herein) and such default
shall not have been remedied within 30 days after written notice thereof
shall have been given to the Borrower by the Lender; or
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(e) the Borrower or the Guarantor shall commence a voluntary case
concerning itself under the Bankruptcy Code or applicable foreign
bankruptcy laws; or an involuntary case for bankruptcy is commenced against
the Borrower or the Guarantor and the petition is not controverted within
20 days, or is not dismissed within 60 days, after commencement of the
case; or a custodian (as defined in the Bankruptcy Code) or similar
official under applicable foreign bankruptcy laws is appointed for, or
takes charge of, all or any substantial part of the property of the
Borrower or the Guarantor; or the Borrower or the Guarantor commences
proceedings of its own bankruptcy or to be granted a suspension of payments
or any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction, whether now or hereafter in effect,
relating to the Borrower or the Guarantor or there is commenced against the
Borrower or the Guarantor any such proceeding which remains undismissed for
a period of 60 days; or the Borrower or the Guarantor is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any
such case or proceeding is entered; or the Borrower or the Guarantor
suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a
period of 60 days; or the Borrower or the Guarantor makes a general
assignment for the benefit of creditors; or the Borrower or the Guarantor
shall fail to pay, or shall state in writing that it is unable to pay, or
shall be unable to pay, its debts generally as they become due; or the
Borrower or the Guarantor shall call a meeting of its creditors with a view
to arranging a composition or adjustment of its debts; or the Borrower or
the Guarantor shall by any act or failure to act indicate its consent to,
approval of or acquiescence in any of the foregoing; or any corporate
action is taken by the Borrower or the Guarantor for the purpose of
effecting any of the foregoing; or
(f) Borrower or the Guarantor shall have concealed, removed, or
permitted to be concealed or removed, any part of its property, with intent
to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its property which may be fraudulent under
any bankruptcy, fraudulent conveyance or similar law; or shall have made
any transfer of its property to or for the benefit of a creditor at a time
when other creditors similarly situated have not been paid; or shall have
suffered or permitted, while insolvent, any creditor to obtain a Lien upon
any of its property through legal proceedings or
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distraint which is not vacated within thirty days from the date thereof; or
(g) there shall occur an "Event of Default" as such term is defined in
the Fuqua Credit Agreement, including without limitation, the events of
default set forth in Sections 8.05 through 8.12 of Article VIII of the
Fuqua Credit Agreement, which paragraphs are for the benefit of the Lender,
incorporated by reference herein (including the definitions of the terms
used therein which appear in other provisions of the Fuqua Credit
Agreement); irrespective of any termination, modification or amendment or
consent or waiver relating to such events of default or the termination of
the Fuqua Credit Agreement; and provided that (i) all references to the
"Notes" shall be deemed to mean the Note rather than any note delivered
pursuant to the Fuqua Credit Agreement, (ii) all references to the "Agent"
or the "Lenders" shall be deemed to mean the Lender, and (iii) all
references to the "Borrower" shall be deemed to refer to the Guarantor; or
(h) the Guarantor shall cease to own and control 100% of the
outstanding stock of the Borrower; or
(i) the Lender shall cease, for any reason, to have a first priority
lien on, and security title to, the Property pursuant to the Deed to Secure
Debt; or
(j) the Guaranty shall cease to be in full force and effect for any
reason or the Guarantor shall cease to terminate, deny or disaffirm its
liability thereunder.
SECTION 6.02. Remedies on Default.
Upon the occurrence and during the continuation of an Event of Default
(other than an Event of Default described in Section 6.01(e) when the
termination and acceleration described below shall be automatic), the Lender
shall (i) terminate all obligations of the Lender to the Borrower, including,
without limitation, all obligations to advance the Term Loan under this
Agreement, (ii) declare the Note, including, without limitation, principal,
accrued interest and costs of collection (including, without limitation,
reasonable attorneys' fees if collected by or through an attorney at law or in
bankruptcy, receivership or other judicial proceedings) immediately due and
payable, without presentment, demand, protest or any other notice of any kind,
all of which are expressly waived. Upon the occurrence of an Event of Default
and acceleration of the Note as provided in (a) or (b) above, the Lender may
pursue any remedy available under this Agreement, under the Note, or under any
other Loan Document, or available at law or in equity, all of which shall be
cumulative.
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The order and manner in which the rights and remedies of the Lender under the
Loan Documents and otherwise may be exercised shall be determined by the
Lender. All payments with respect to this Agreement received by the Lender
after the occurrence of an Event of Default and acceleration of the Note shall
be applied first, to the costs and expenses actually incurred by the Lender,
second, to the payment of accrued and unpaid fees of the Lender, third, to the
payment of accrued and unpaid interest on the Note, to and including the date
of such application, fourth, to the unpaid principal of the Note, and fifth, to
the payment of all other amounts then owing to the Lender under the Loan
Documents. No application of the payments will cure any Event of Default or
prevent acceleration, or continued acceleration, of amounts payable under the
Loan Documents or prevent the exercise, or continued exercise, of rights or
remedies of the Lender hereunder or under applicable law.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. No Waiver. No delay or failure on the part of the Lender
or any holder of the Note in the exercise of any right, power or privilege
granted under this Agreement, under any other Loan Document, or available at
law or in equity, shall impair any such right, power or privilege or be
construed as a waiver of any Event of Default or any acquiescence therein. No
single or partial exercise of any such right, power or privilege shall preclude
the further exercise of such right, power or privilege. No waiver shall be
valid against the Lender unless made in writing and signed by the Lender, and
then only to the extent expressly specified therein.
SECTION 7.02. Notices. Unless otherwise provided herein, all notices,
requests and other communications provided for hereunder shall be in writing
and shall be given at the address set forth for each party on the signature
pages hereto.
SECTION 7.03. Governinq Law. This Agreement and all other Loan
Documents shall be governed by and interpreted in accordance with the laws of
the State of Georgia.
SECTION 7.04. Successors and Assigns. This Agreement shall bind and
inure to the benefit of the Borrower and the Lender, and their respective
successors and assigns; provided, however, neither the Borrower nor the Lender
shall have no right to assign its rights or obligations hereunder to any
Person. Notwithstanding anything in this Agreement to the contrary, the Lender
shall have the right, but shall not be obligated, to sell
-16-
<PAGE> 18
participations in the loans made pursuant hereto to affiliates of the Lender,
other banks, financial institutions and investors with notice to, and the
consent of the Borrower; provided that no notice to, nor consent of, the
Borrower shall be required for sales of participations to Affiliates of the
Lender; provided, however, that any participant shall have no rights hereunder.
SECTION 7.05. Amendments; Consents. No amendment, modification,
supplement, termination, or waiver of any provision of this Agreement or any
other Loan Document, and no consent to any departure by the Borrower or any
Subsidiary therefrom, may in any event be effective unless in writing signed by
the Lender, and then only in the specific instance and for the specific purpose
given.
SECTION 7.06. Rights Cumulative. All rights, powers and privileges
granted hereunder shall be cumulative to and shall not be exclusive of any
other rights, powers and privileges granted by any other Loan Document or
available at law or in equity.
SECTION 7.07. Set-Off. Upon the occurrence and during the continuation
of an Event of Default, Borrower authorizes Lender, without notice or demand,
to apply any indebtedness due or to become due to Borrower from Lender in
satisfaction of any of the indebtedness, liabilities or obligations of Borrower
under this Agreement, under any other Loan Document or under any other note,
instrument, agreement, document or writing of Borrower held by or executed in
favor of Lender including, without limitation, the right to set-off against any
deposits or other cash collateral of Borrower held by Lender.
SECTION 7.08. Indemnity. Borrower agrees to protect, indemnify and save
harmless Lender, and all directors, officers, employees and agents of Lender,
from and against any and all (i) claims, demands and causes of action of any
nature whatsoever brought by any Person not a party to this and arising from or
related or incident to this Agreement or any other Loan Document, (ii) costs
and expenses incident to the defense of such claims, demands and causes of
action, including, without limitation, attorneys' fees, and (iii) liabilities,
judgments, settlements, penalties and assessments arising from such claims,
demands and causes of action. The indemnity contained in this section shall
survive the termination of this Agreement.
SECTION 7.09. Usury. It is the intent of the parties hereto not to
violate any federal or state law, rule or regulation pertaining either to usury
or to the contracting for or charging or collecting of interest, and Borrower
and Lender agree that, should any provision of this Agreement or of the Note,
or any act
-17-
<PAGE> 19
performed hereunder or thereunder, violate any such law, rule or regulation,
then the excess of interest contracted for or charged or collected over the
maximum lawful rate of interest shall be applied to the outstanding principal
indebtedness due to Lender by Borrower under this Agreement.
SECTION 7.10. Jurisdiction and Venue. Borrower agrees, without power of
revocation, that any civil suit or action brought against it as a result of any
of its obligations under this Agreement or under any other Loan Document may be
brought against it either in the Superior Court of Fulton County, Georgia, or
in the United States District Court for the Northern District of Georgia,
Atlanta Division, and Borrower hereby irrevocably submits to the jurisdiction
of such courts and irrevocably waives, to the fullest extent permitted by law,
any objections that it may now or hereafter have to the laying of the venue of
such civil suit or action and any claim that such civil suit or action has been
brought in an inconvenient forum, and Borrower agrees that final judgment in
any such civil suit or action shall be conclusive and binding upon it and shall
be enforceable against it by suit upon such judgment in any court of competent
jurisdiction.
SECTION 7.11. Holidays. In any case where the date for any action
required to be performed under this Agreement or under any other Loan Document
shall be, in the city where the performance is to be made, not a Business Day,
then such performance may be made on the next succeeding Business Day.
SECTION 7.12. Entire Agreement. This Agreement and the other Loan
Documents executed and delivered contemporaneously herewith, together with the
exhibits and schedules attached hereto and thereto, constitute the entire
understanding of the parties with respect to the subject matter hereof, and any
other prior or contemporaneous agreements, whether written or oral, with
respect thereto including, without limitation, any loan commitment from the
Lender to the Borrower, are expressly superseded hereby.
-18-
<PAGE> 20
WITNESS the hand of the parties hereto through their duly authorized
officers, under seal as of the date first above written.
BORROWER:
BASIC AMERICAN PRODUCTS, INC.
By: JOHN J. HUNTZ, Jr.
----------------------
JOHN HUNTZ, Jr.
(Vice President)
Attest: Mildred Hutcheson
------------------
Mildred H. Hutcheson
Secretary
[Corporate Seal]
Address: 2935 Bankers Industrial Drive
Atlanta, Georgia 30360
Attention: Marc J. Minotto
LENDER:
SUNTRUST BANK, ATLANTA
By: Willem-Jan O. Hattink
----------------------------
Title: Group Vice President
By: Sheila A. Corcoran
----------------------------
Title: Banking Officer
Address: P. O. Box 4418
Atlanta, Georgia 30302
Attention: Sheila Corcoran
-19-
<PAGE> 21
ACCEPTED AND AGREED FOR THE LIMITED PURPOSES SET FORTH ABOVE:
FUQUA ENTERPRISES, INC.
By: /s/ John J. Huntz, Jr.
------------------------------
John J. Huntz Jr.
Executive Vice President and
Chief Operating Officer
Address: One Atlantic Center
Suite 5000
1201 W. Peachtree Street
Atlanta, Georgia 30309-3424
Attention: John J. Huntz, Jr.
<PAGE> 1
First Union National Bank
of Georgia
4570 Ashford Dunwoody Road
Atlanta Georgia 30346
404 865-2561
Fax 404 865-2388
EXHIBIT 10 (r)
LETTER AGREEMENT
December 8, 1995
Fuqua Enterprises, Inc.
One Atlantic Center
1201 West Peachtree Street, N.W.
Suite 5000
Atlanta, GA 3009
Attention: Mr. Brady W. Mullinax, Jr.
Vice President-Finance Treasurer and Chief Financial Officer
Dear Brad:
First Union National Bank of Georgia (the "Issuer") has agreed to issue the
letter of credit described below for the account of Fuqua Enterprises, Inc., a
Delaware corporation (the "Applicant"), pursuant to the terms and conditions
of that certain Application and Agreement for Standby Letter of Credit dated as
of even date herewith (the "Application"), as supplemented by the terms and
conditions of this letter agreement (this "Letter Agreement"). By your
execution below, you acknowledge that the Issuer is issuing the letter of
credit described below in express reliance on the terms hereof which are in
addition to, and not in lieu of the terms of the Application.
The terms of the letter of credit are as follows:
Facility: Irrevocable Standby Letter of Credit, issued in the form
attached as Exhibit "A" (the "Letter of Credit");
Amount: $11,803,914.56 (Eleven million, eight hundred and three
thousand, nine hundred and fourteen dollars and 56/100);
Issuer: First Union National Bank of Georgia;
Applicant: Fuqua Enterprises, lnc.
Term: The letter of credit will expire at the counters of First
Union National Bank of Georgia, Two First Union Center,
T-7, 301 South Tryon Street, Charlotte, NC 28288 on January
1, 1997;
Participation: A risk participation in the letter of credit may be made to
SunTrust Bank, Atlanta, Wachovia Bank of Georgia, N.A., and
Fleet Bank of Maine at the Applicant's request (prior to or
simultaneous with issuance), in an aggregate amount not to
exceed $6 million;
<PAGE> 2
L/C Fee: The letter of credit fee shall be 0.5% per annum, payable in
advance upon issuance, for the entire term of the letter of
credit, calculated upon an actual/actual day count. In the
event risk participations are made as contemplated above, the
participating banks (and the Issuer, on its participating
portion) shall receive 0.45% on the face amount of the
participation, calculated as above, and the Issuer shall
receive 0.05% on the amount of the letter of credit.
Reimbursement Obligation:
The reimbursement obligation of the Applicant shall be governed
by the Application.
Documentation:
As a condition precedent to Issuer's obligation to issue the Letter of Credit,
the Applicant shall deliver the following documents prior to such issuance,
duly executed by the parties thereto:
The Application (Section 7, Security Agreement to be deleted).
Participation Agreement(s) in a form satisfactory to the
Applicant, the Issuer and the participating banks (Form
attached as Exhibit "B").
Opinion of Applicant's counsel that Applicant has the right,
power, and authority to enter into this transaction and
perform all obligations hereunder, that Applicant is duly
authorized, and the documents executed by Applicant as a part
of this transaction are valid, binding, and legally
enforceable in accordance with their respective terms.
This Letter Agreement executed by Applicant.
Financial Covenants:
As long as the Letter of Credit shall remain outstanding or the Applicant shall
have any obligation to the Issuer under the Application or this Letter
Agreement, the Applicant shall:
Maintain a ratio of Consolidated Funded Debt to Total
Capitalization equal to or less than 0.6:1.0, measured as of
the last day of each fiscal quarter of the Applicant.
Maintain an lnterest Coverage Ratio equal to or greater
than 2.0:1.0, measured as of the last day of each fiscal quarter
of Applicant for the immediately preceding four fiscal
quarters ending on such date.
-2-
<PAGE> 3
Maintain a ratio of (i) Consolidated Funded Debt to
(ii) Consolidated EBITDA equal to or less than 3.5:1.0,
measured as of the last day of each fiscal quarter of the
Applicant, and in the case of Consolidated EBITDA, calculated
for the immediately preceding four fiscal quarters ending on
such date.
All capitalized terms used in these Financial Covenants shall have the meaning
ascribed to such terms in that certain Credit Agreement, dated as of November 6,
1995 (the "SunTrust Agreement"), by and among Applicant, SunTrust Bank,
Atlanta, as Agent, and the lenders party thereto (the "Lenders").
Financial Reporting:
As long as the Letter of Credit shall remain outstanding or the Applicant shall
have any obligation to the Issuer under the Application or this Letter
Agreement, the Applicant shall:
Furnish to the Issuer all documents, reports, filings,
and certificates required under Section 6.07 (Financial
Reporting) of the SunTrust Agreement, as and when furnished to
the Lenders thereunder.
Events of Default:
In addition to the Events of Default set forth in the
Application, the Applicant and the Issuer expressly agree that
the following events shall also constitute "Events of Default"
pursuant to the Application:
(a) the occurrence of an "Event of Default" pursuant to
the terms of the SunTrust Agreement; and
(b) the failure of the Applicant to comply with the
terms and conditions of this Letter Agreement.
Remedies:
Upon the occurrence and during the continuance of an
Event of Default under the Application, as supplemented by this
Letter Agreement, in addition to the rights and remedies
afforded pursuant to the Application, at law or in any other
document related hereto, the parties expressly agree that the
Letter of Credit shall be deemed to have been drawn in full,
and the Applicant shall immediately reimburse to the lssuer the
full amount of such deemed drawing, together with any other
amounts owing
<PAGE> 4
hereunder or pursuant to the Applications in U.S.
Dollars, which amount shall be held by the Issuer as cash
collateral for Applicant's obligations pursuant to the
Application and this Letter Agreement. Such collateral shall be
held by Issuer for the pro-rata benefit of the Issuer and
participating banks. In the event that the Letter of Credit
expires or terminates without draw, such amount shall be
immediately returned to the Applicant, together with the
interest thereon.
Miscellaneous:
(a) This Letter Agreement shall be governed by the laws
of the State of Georgia.
(b) This Letter Agreement is incorporated into the
Application and expressly made a part thereof.
(c) All references to the SunTrust Agreement refer to
such agreement as of the date hereof. The portions of the
SunTrust Agreement referenced herein are expressly incorporated
into this Agreement by such reference and shall survive the
termination and repayment of the SunTrust Agreement.
(d) This Letter Agreement may only be amended or
modified by a writing signed by both parties, and in accordance
with the terms of any Participation Agreement then in effect.
(e) This Letter Agreement shall be binding upon the
successors and assigns of the Applicant and inure to the
benefit of the successors and assigns of the Issuer.
<PAGE> 5
If these terms and conditions are acceptable to you, please indicate your
acceptance by executing a copy of this Letter Agreement in the space below, and
return a copy to me.
Sincerely,
FIRST UNION NATIONAL BANK OF GEORGIA
By: /s/ James R. Pryor
--------------------------------
James R. Pryor
Senior Vice President
First Union National Bank of Georgia
ACCEPTED AND AGREED TO
BY:
FUQUA ENTERPRISES, INC.
By: /s/ John J. Huntz, Jr.
---------------------------------
Its: Executive Vice President &
Chief Operating Officer
---------------------------------
Date: 12-3-95
---------------------------------
Attest: /s/ Brady W. Mullinax, Jr.
------------------------------
Its: V.P. Finance, Treasurer, CFO
------------------------------
Date: 2-8-95
------------------------------
- 5 -
<PAGE> 1
EXHIBIT 10 (s)
UNCONDITIONAL GUARANTY OF PERFORMANCE
WHEREAS, BASIC AMERICAN MEDICAL PRODUCTS, INC., a Georgia corporation
(hereinafter called "Basic American"), has acquired from SUPER SAGLESS, INC, a
Delaware corporation (hereinafter called "Super Sagless"), certain assets from
Super Sagless and in connection therewith Basic American and Super Sagless
executed an Agreement for Purchase and Sale of Certain Assets, a Sublease
Agreement and a Master Purchase and Supply Agreement and Basic American
executed in favor of Super Sagless a promissory note in the principal amount of
$687,979.13 and a Security Agreement relating to such promissory note (herein
collectively referred to as the "Agreements"); and
WHEREAS, in connection with the above-referenced transactions, the
undersigned has agreed to execute a guaranty in the form hereof; and
WHEREAS, upon delivery to Super Sagless of this guaranty, Super Sagless
has agreed to forthwith release Gene J. Minotto from his personal guaranty to
Super Sagless;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the undersigned, FUQUA ENTERPRISES, INC., a Delaware corporation
(hereinafter called the "Guarantor"), agrees as follows:
1. During the three-year period after the date hereof and only to the
extent of $1,400,000 in the aggregate, Guarantor hereby unconditionally
guarantees to Super Sagless that all covenants and agreements of Basic
American contained in the Agreements will be duly and promptly observed and
performed. The three-year limitation period of this unconditional guaranty
shall be extended with respect to any specific matter for which Guarantor shall
have received a written claim and demand for payment hereunder prior to the
expiration of such three-year period, but only with respect to such specific
matter and only until such claim shall be resolved.
2. The obligations of the Guarantor shall be performable upon demand of
Super Sagless and shall be unconditional irrespective of the genuineness,
validity, regularity or enforceability of the Agreements, or any other
circumstance which might otherwise constitute a legal or equitable discharge
of a surety or a guarantor; and the Guarantor hereby waives notice of
acceptance of this Unconditional Guaranty of Performance (hereinafter the
"Unconditional Guaranty") and of the incurring by Basic American of any of the
obligations hereinbefore mentioned, all demand whatsoever, and all rights to
require Super Sagless, whether by notice under O.C.G.A Section 10-7-24 (Ga.
Code Ann. Section 103-205) or otherwise, to (a) proceed against Basic
American, or (b) pursue any other remedy it may now or hereafter have against
Basic American.
<PAGE> 2
3. The Guarantor hereby agrees that, at any time or from time to time,
without notice to the Guarantor:
(A) The time for Basic American's performance of or
compliance with any covenant or agreement contained in the
Agreements may be extended or such performance or compliance
may be waived; and
B) The Agreements may be modified or amended by Basic
American and Super Sagless in any respects,
all without affecting the liability of the Guarantor.
4. The Guarantor hereby acknowledges that the withdrawal from, or
termination of, any ownership interest in Basic American by Guarantor shall not
alter, affect or in any way limit the obligations of Guarantor hereunder.
5. The Guarantor expressly represents and acknowledges that the
benefits to Basic American under the Agreements are and will be of direct
economic interest, benefit and advantage to Guarantor.
6. If this Unconditional Guaranty shall be placed in the hands of an
attorney for collection or should it be collected by legal proceedings or
through any probate or bankruptcy court, the Guarantor agrees to pay to Super
Sagless reasonable attorneys' and collection fees.
7. Until each and every one of the covenants and agreements of this
Unconditional Guaranty are fully performed either by Basic American or by the
Guarantor, the Guarantor's obligations hereunder shall not be released, in
whole or in part, by any action or other matter which might, but for this
provision of this instrument, be deemed a legal or equitable discharge of a
surety or guarantor, or by reason of any waiver, extension, modification,
forbearance or delay, or other act or omission of Super Sagless or its failure
to proceed promptly or otherwise, or by reason of any action taken or omitted
by Super Sagless whether or not such action or failure to act varies or
increases the risk of, or affects the rights or remedies of, the Guarantor or by
reason of any further dealings between Basic American and Super Sagless or any
other guarantor, and the Guarantor hereby expressly waives and surrenders any
defense to the liability of the Guarantor based upon any of the foregoing acts,
omissions, things, agreements or waivers or any of them; it being the purpose
and intent of the parties hereto that the covenants, agreements and all
obligations under this Unconditional Guaranty are absolute, unconditional and
irrevocable under any and all circumstances.
8. Super Sagless is relying and is entitled to rely upon each and all
of the provisions of this Unconditional Guaranty; and accordingly, if any
provision or provisions of this instrument should be held to be invalid or
ineffective, then all other provisions shall continue in full force and effect.
- 2 -
<PAGE> 3
9. The Guarantor hereby agrees that in the event of the liquidation,
bankruptcy or dissolution of Basic American this Unconditional Guaranty shall
continue in full force and effect
10. The obligations of the Guarantor hereunder are independent of the
obligations of Basic American, and a separate action or actions for payment,
damages or performance may be brought and prosecuted against the Guarantor
whether or not any action is brought against Basic American, and whether or
not notice be given or demand be made upon Basic American.
11. This Unconditional Guaranty and all rights, obligations and
liabilities arising hereunder shall be construed according to the laws of the
State of Georgia. The Guarantor agrees that this Unconditional Guaranty is
performable in Georgia and consents to the jurisdiction of the courts of such
state.
12. This Unconditional Guaranty and all rights, obligations and
liabilities arising hereunder shall inure to the benefit of and be binding upon
all of the successors and assigns of Guarantor and Super Sagless.
IN WITNESS WHEREOF, this Unconditional Guaranty have been duly executed
and sealed by the undersigned as of the 15th day of November, 1995.
Signed, sealed and deliv- FUQUA ENTEPRlSES, INC.
ered in the presence of:
/s/ John J. Huntz, Jr. By: /s/ L. P. Klamon
- ------------------------ --------------------------
Unofficial Witness Its: President
--------------------------
Pamela M. Pulisfer
- -----------------------
Notary Public
My Commission Expires:
7-21-1998
- ----------------------
<PAGE> 1
EXHIBIT 11
FUQUA ENTERPRISES, INC.
NUMBER OF SHARES USED IN COMPUTING EARNINGS PER SHARE
DECEMBER 31, 1995
PRIMARY EARNINGS PER SHARE:
TREASURY STOCK METHOD:
<TABLE>
<CAPTION>
NUMBER OF
TRADING TOTAL TOTAL
MONTH DAYS HIGH LOW
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
October 22 $ 520.875 $ 513.625
November 21 410.500 403.875
December 20 407.375 402.500
-- --------- ---------
63 $1,338.750 $1,320.000 $2,658.750
== ========= ========= =========
</TABLE>
AVERAGE: $2,658.750 divided by 63 divided by 2 = $21.101
===============================================================================
<TABLE>
<CAPTION>
OPTIONS OPTION
OUTSTANDING SHARES PRICE EXTENSION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
39,250 $ 8.500 $ 333,625
46,250 9.500 439,375
10,000 20.375 203,750
15,000 20.375 305,625
5,000 21.000 105,000
15,000 20.625 309,375
4,000 18.625 74,500
150,000 20.500 3,075,000
100,000 18.375 1,837,500
------- ---------
Total 384,500 $6,683,750
======= =========
- ------------------------------------------------------------------------------------------------------------------------------------
Average Price (above) $ 21.101
----------
Total Option Extension Divided by Average Price 316,748
Options Outstanding 385,500
----------
Common Stock Equivalents 67,752
Average Shares Outstanding (see page 2) 4,191,767
----------
Use for Primary Earnings Per Share 4th Quarter 4,259,519
Primary Shares 3rd Quarter 3,869,891
Primary Shares 2nd Quarter 3,857,212
Primary Shares 1st Quarter 3,864,957
---------
Subtotal 15,851,579
----------
Primary Shares Full Year (Average of Quarters) 3,962,895
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-continued-
1
<PAGE> 2
EXHIBIT 11
FULLY DILUTED EARNINGS PER SHARE:
AVERAGE NUMBER OF SHARES OUTSTANDING:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
BEGINNING ENDING NUMBER SHARES
DATE DATE OF DAYS OUTSTANDING EXTENSION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10-1-95 10-3-95 3 3,834,169 11,502,507
10-4-95 10-13-95 10 3,836,169 38,361,690
10-14-95 10-31-95 18 3,838,488 69,092,784
11-1-95 11-7-95 7 3,839,674 26,877,718
11-8-95 11-30-95 23 4,439,674 102,112,502
12-1-95 12-8-95 8 4,440,674 35,525,392
12-9-95 12-31-95 23 4,442,174 102,170,002
-- -----------
92 385,642,595
== ===========
Average Number of Shares Outstanding:
Fourth Quarter (Extension Divided by Number
of Days) 4,191,767
Third Quarter 3,881,722
Second Quarter 3,854,971
First Quarter 3,863,170
----------
Subtotal 15,791,630
----------
Full Year (Average of Quarters) 3,947,908
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FOURTH FULL
QUARTER YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Closing Price - 12-31-95 $ 18.625 $ 18.625
---------- ---------
Total Option Extension (from page 1) Divided
by Closing Price 358,859 358,859
Options Outstanding 384,500 384,500
---------- ----------
Common Stock Equivalents 25,641 25,641
Average Shares Outstanding (from above) 4,191,767 3,947,908
---------- ----------
Fully Diluted Shares 4,217,408 3,973,549
Less Primary Shares (from page 1) 4,259,520 3,962,895
---------- ----------
Additional Shares (42,112) 10,654
---------- ----------
Percentage (.99%) .27%
</TABLE>
(Note: Anti-dilutive or less than 3.0%; no fully diluted presentation required.)
- --------------------------------------------------------------------------------
2
<PAGE> 1
EXHIBIT 21
FUQUA ENTERPRISES, INC.
SUBSIDIARIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Date of % of
Name of Subsidiary Incorporated Incorporation Ownership
-------------------------------- ------------------- ------------------- ----------------
<S> <C> <C> <C>
Basic American Medical Products, Inc. Georgia 7-30-76 100%
Hancock-Ellsworth Tanners, Inc.* Delaware 2-3-70 100%
Irving Tanning Company Delaware 3-30-62 100%
Vista Leather International Corp. Barbados 7-18-94 100%
Kroy Tanning Company, Incorporated# Delaware 2-2-65 100%
Collagen International Products
Corporation* New York 6-30-70 100%
Seagrave Leather Corporation Maine 10-1-79 100%
Wilton Tanning Company Maine 6-29-59 100%
</TABLE>
* Inactive
# Discontinued
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-36157 and Form S-8 No. 33-54164)
pertaining to the stock option plans of Fuqua Enterprises, Inc. of
our report dated February 21, 1996, except for the last paragraph
of Note 2, with respect to the consolidated financial statements
and schedule of Fuqua Enterprises, Inc. included in the Annual
Report (Form 10-K) for the year ended December 31, 1995.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Atlanta, Georgia
March 20, 1996
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That each of the undersigned,
officers and/or directors of FUQUA ENTERPRISES, INC., a Delaware
corporation (hereinafter called the "Corporation"), does hereby
constitute and appoint Lawrence P. Klamon and Mildred H. Hutcheson,
and each of them, his true and lawful attorneys and agents, with
full power to act without the others, for him and in his name,
place and stead, in any and all capacities, to do any and all acts
and things, and execute in his name any and all instruments, which
said attorneys and agents may deem necessary or advisable in order
to enable the Corporation to comply with the Securities Exchange
Act of 1934, and requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing under
said Act of the Corporation's Form 10-K Annual Report for the year
ending December 31, 1995, including specifically power and
authority to sign his name to said Form 10-K to be filed with the
Securities and Exchange Commission and any amendments thereto, and
to attest the seal of the Corporation thereon and to file the same
with the Securities and Exchange Commission; and the undersigned
does hereby ratify and confirm that said attorneys and agents, and
each of them, shall have, and may exercise, without the others, all
the powers hereby confirmed.
IN WITNESS WHEREOF, each of the undersigned has signed his name
hereto on the 11th day of March, 1996.
<TABLE>
<S> <C>
/s/ J. B. Fuqua /s/ J. Rex Fuqua
---------------------------------------------- -------------------------------------------
J. B. Fuqua, Chairman of the Board of J. Rex Fuqua, Vice Chairman of the
Directors Board of Directors
/s/ L. P. Klamon /s/ Brady W. Mullinax, Jr.
---------------------------------------------- -------------------------------------------
Lawrence P. Klamon, Director, President and Brady W. Mullinax, Jr., Vice
Executive Officer (Principal President-Finance, and
Executive Officer) Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
/s/ W. Clay Hamner /s/ Frank W. Hulse IV
-------------------------------- -----------------------------
W. Clay Hamner, Director Frank W. Hulse IV, Director
/s/ Richard C. Larochelle /s/ Gene J. Minotto
-------------------------------- -----------------------------
Richard C. Larochelle, Director Gene J. Minotto, Director
/s/ Clark L. Reed /s/ D. Raymond Riddle
-------------------------------- -----------------------------
Clark L. Reed, Director D. Raymond, Riddle, Director
</TABLE>
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
DECEMBER 31, 1995 CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN FORM 10-K AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 29,000
<SECURITIES> 12,550
<RECEIVABLES> 19,302
<ALLOWANCES> (200)
<INVENTORY> 21,695
<CURRENT-ASSETS> 98,223
<PP&E> 32,303
<DEPRECIATION> (10,841)
<TOTAL-ASSETS> 136,762
<CURRENT-LIABILITIES> 32,833
<BONDS> 22,041
0
0
<COMMON> 11,108
<OTHER-SE> 70,780
<TOTAL-LIABILITY-AND-EQUITY> 136,762
<SALES> 117,128
<TOTAL-REVENUES> 117,956
<CGS> 98,356
<TOTAL-COSTS> 109,113
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 894
<INCOME-PRETAX> 7,949
<INCOME-TAX> 2,699
<INCOME-CONTINUING> 5,250
<DISCONTINUED> (2,740)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,510
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 0
</TABLE>
