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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): AUGUST 31, 1999
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AZTEC MANUFACTURING CO.
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(Exact name of Registrant as specified in its charter)
TEXAS 0-2733 75-0948250
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(State or other Commission File No. (I.R.S. Employer
jurisdiction of Identification Number)
incorporation or
organization)
400 NORTH TARRANT
CROWLEY, TEXAS 76036
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(Address of principal executive offices,
including zip code)
Registrant's Telephone Number, including Area Code: (817) 297-4361
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 31, 1999, the registrant, Aztec Manufacturing Co., (the "Company"),
pursuant to an Asset Purchase and Sale Agreement with ABB Power T & D Company,
("ABB"), acquired the operating assets of ABB's Compressed Gas Insulation
Transmission Bus Duct division located in Westborough, Massachusetts.
The Company formed a new wholly owned subsidiary, CGIT Westboro, Inc., ("CGIT"),
to acquire the assets. CGIT will be the new operating entity. ABB's CGIT
Division is a leading supplier of compressed gas insulated transmission bus
ducts worldwide for the bulk power transmission industry. The Company intends to
operate CGIT for the same purpose.
The assets of CGIT were acquired for a consideration of $9.9 million subject to
final adjustments. The acquisition will be financed by a draw down against the
Company's revolving loan facility at Bank of America.
FORWARD LOOKING STATEMENTS
This Report contains, and from time to time the Company or certain of its
representatives may make, "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are generally
identified by the use of words such as "anticipate," "expect," "estimate,"
"intend," "should," "may," "believe," and terms with similar meanings. Although
the Company believes that the current views and expectations reflected in these
forward-looking statements are reasonable, those views and expectations, and the
related statements, are inherently subject to risks, uncertainties, and other
factors, many of which are not under the Company's control. Those risks,
uncertainties, and other factors could cause the actual results to differ
materially from these in the forward-looking statements. Those risks,
uncertainties, and factors include, but are not limited to, many of the matters
described in this Report: change in demand, prices and raw material cost,
including zinc which is used in the hot dip galvanizing process; changes in the
economic conditions of the various markets the Company serves, foreign and
domestic, including the market price for oil and natural gas; acquisition
opportunities, adequacy of financing, and availability of experienced management
employees to implement the Company's growth strategy; and customer demand and
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response to products and services offered by the Company. The Company expressly
disclaims any obligations to release publicly any updates or revisions to these
forward-looking statements to reflect any change in its views or expectations.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of business acquired.
It is impractical to provide the required financial statements at the
time of this report. The required statements will be filed on or
before November 14, 1999.
(b) Pro forma financial information.
It is impractical to provide the required financial statements at the
time of this report. The required statements will be filed on or
before November 14, 1999.
(c) Exhibits.
The following exhibits are filed as part of this report.
(1) Asset Purchase and Sales Agreement between ABB Power T & D
Company and Aztec Manufacturing Co. dated August 31, 1999.
(2) Press release of September 1, 1999 announcing the purchase of the
operating assets of ABB Power T & D Company's Compressed Gas
Insulation Transmission Bus Duct business by the Company.
(3) Amendment to the Business Loan Agreement between Bank of America
and the Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AZTEC MANUFACTURING CO.
DATE: 9/13/99 By: /s/ Dana Perry
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Dana Perry
Vice President Finance
Chief Financial Officer
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EXHIBIT 1
ASSET PURCHASE AND SALE AGREEMENT
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ASSET PURCHASE AND SALE AGREEMENT, dated August 31, 1999, by and between
Aztec Manufacturing Co., a Texas corporation ("Buyer"), and ABB Power T&D
Company Inc., a Delaware corporation ("Seller").
WHEREAS, the Buyer desires to purchase from the Seller certain of the
Seller's assets and properties used in Seller's compressed gas insulated
transmission bus ducts business (the "Division"); and
WHEREAS, the Seller is willing to sell, transfer, convey and assign the
same to the Buyer upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and representations hereinafter stated, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
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Transfer of Assets
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On the terms and subject to the conditions of this Agreement at the closing
referred to in Article VII hereof (the "Closing"), the Seller shall transfer,
convey and assign to the Buyer and Buyer shall accept, acquire and purchase all
the right, title and
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interest of the Seller as of the Closing, in the following assets and properties
of the Division (except as provided in Article II and except to the extent such
assets and properties shall have been disposed of in the ordinary course of
business of the Seller during the period from the date hereinabove first written
to the Closing Date) of Seller (collectively, the "Purchased Assets"):
1.1 Fixed Assets.
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The Division's equipment, computers, furniture, and all of its fixed assets
(including without limitation fixed assets described in Schedule 1.1.) and as
may be acquired in the ordinary course of business prior to Closing (the "Fixed
Assets").
1.2 Personal Property - Leased.
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All office equipment leased to the Division (the "Leased Equipment")
(including without limitation the office equipment described in Schedule 1.2)
and as may be acquired in the ordinary course of business prior to Closing.
1.3 Inventory, Etc. The Division's inventories of raw material, supplies
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and spare parts, work in process and finished goods (including without
limitation the inventories described in Schedule 1.3) on hand and in transit to
Seller, as the case may be, at the time of the Closing (the "Inventory").
1.4 Contract Rights. Except as set forth in Schedule 8.17, the Division's
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right, title and interest in, to and under the following contracts
(collectively, the "Contracts"):
1.4.1 The Contracts listed on Schedule 8.17.
1.4.2 All contracts, leases and commitments made in the ordinary
course of business of the Division from the date hereof through the Closing
Date.
1.5 Business Property. Except as set forth on Schedule 1.5, all
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technology, know-how, designs, devices, processes, methods, inventions,
drawings, schematics, specifications, standards, trade secrets and other
proprietary information, and all patents and applications therefor and all
trademarks and tradenames (including without
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limitation the name "Tri-Trap"), trademark and trade name registrations, service
marks and service mark registrations, copyrights and copyright registrations,
the applications therefor and the licenses thereto owned by or licensed to or by
the Seller and used in the business of the Division together with the goodwill
and the business appurtenant thereto (including without limitation the patents
and the patent applications described in Schedule 8.15.1) and all rights to sue
for past infringement of patents, trademarks and copyrights and for prior acts
of misappropriation of trade secrets in each case as are transferred hereunder
or for unfair competition (including all right, title and interest in and to
damages for past infringement of such patents, trademarks and copyrights and for
past acts of misappropriation) and for prior claims for breach of any license
transferred hereunder and related damages.
1.6 Prepaid Expenses. The prepaid expenses of the Division existing as at
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the Closing Date ("Prepaid Expenses"), except prepaid expenses for insurance and
real property taxes.
1.7 Records. The following business and operating records of the
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Division's business relating to the Purchased Assets: customer lists, sales,
purchasing, and technical records and accounting, financial, personnel, payroll
and labor relations records but excluding all Tax (as hereafter defined) records
of Seller and excluding IPB customer and technical records as Seller may require
in connection with products sold by Seller prior to the Closing Date.
1.8 Accounts Receivable. The accounts, notes, and other receivables
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including without limitation amounts due from the Division's customers (whether
recorded as accounts, notes, or other receivables or reductions in accounts
payable) and related deposits, security or collateral therefor (the "Division
Accounts Receivable").
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ARTICLE II
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Assets Not Being Transferred
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Anything contained in Article I hereof to the contrary notwithstanding,
there are expressly excluded from the Purchased Assets, the following:
2.1 The corporate minute books and stock record books of the Seller.
2.2 Cash and cash equivalents of the Seller and the Division on hand and
in banks and all certificates of deposit, commercial paper and marketable
securities owned by the Seller and Seller's bank accounts, lock boxes and the
like.
2.3 All real property legally or beneficially owned or leased by the
Seller, if any, other than the Lease (as defined in Section 8.9).
2.4 All accounts receivable of the Seller (including the IPB accounts
receivable) except Division Accounts Receivable.
2.5 The tradenames, trademarks and logos "ABB", "ABB Power T&D Company
Inc." and "Asea Brown Boveri Inc.", and the like.
2.6 All of Seller's right, title and interest in or arising under or in
connection with any policy of insurance and any certificate issued with respect
thereto, and any rights of subrogation.
2.7 All of the IPB assets of the Division identified in Schedules 2.7 and
2.8 and technology, patents, know-how, designs, drawings, schematics, trade
secrets, trademarks, trade names, service marks, and copyrights in respect of
the IPB assets (collectively, the "Retained IPB Assets").
2.8 [INTENTIONALLY DELETED]
2.9 All motor vehicles leased or owned by Seller.
2.10 All proprietary software owned or licensed to Seller,
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including without limitation "Inform", "People Soft", "Winform" and "ABACUS",
provided nothing in this paragraph shall prevent or prohibit Buyer from
obtaining a license for "Inform" or "People Soft" from the owners of such
software.
ARTICLE III
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Instruments of Conveyance and
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Transfer, Records, Access, Etc.
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3.1 At the Closing, subject to the conditions and provisions hereof, the
Seller shall deliver to the Buyer such bills of sale, assignments and other
good and sufficient instruments of conveyance and transfer, as shall be
effective to vest in the Buyer all of Seller's right, title and interest in and
to the Purchased Assets, and Buyer shall pay and deliver to Seller the Purchase
Price as provided in Article VI, hereof.
3.2 The Buyer shall, following the Closing, give to the Seller and its
authorized representatives such access, during normal business hours and upon
reasonable prior notice, to such books and records constituting part of the
Purchased Assets, and also to provide such reasonable assistance, as Seller may
reasonably request in connection with (a) the preparation and filing of tax
returns of the Seller and (b) the verification of any claim of the Buyer for
indemnification by the Seller under this Agreement, and to make extracts and
copies of such books and records at the expense of the Seller. The Buyer agrees
that it shall not for a period of five (5) years destroy or cause to be
destroyed any such books or records without first obtaining the express written
consent of the Seller. In any event , Buyer shall give Seller at least sixty
(60) days' prior written
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notice of its intent to destroy any books or records of the Division. If Seller
desires to retain any such records Seller shall give notice thereof within such
sixty (60) day period to Buyer and Buyer shall make such books and records
available to Seller at Seller's expense for relocation to Seller's facility. The
provisions of this Section 3.2 shall survive Closing hereunder.
ARTICLE IV
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Assumption of Liabilities
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Liabilities Being Assumed. Simultaneously with the transfer, conveyance
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and assignment to the Buyer of the Purchased Assets, the Buyer shall assume the
following liabilities and obligations of the Seller (the "Assumed Liabilities"):
4.1 All liabilities and obligations of the Seller reflected in the Balance
Sheet and the Closing Balance Sheet. A list of liabilities reflected in the July
31, 1999 Balance Sheet has been provided to Buyer.
4.2 All obligations and liabilities of the Seller in respect of the
Contracts, bids, customer proposals and all other products sold and services
rendered by the Division in the ordinary course of business prior to the
Closing, except in respect of the Retained IPB Assets.
4.3 All liabilities and obligations arising in respect of the Purchased
Assets including litigation, suits, claims, demands or governmental proceedings,
based on facts arising on or after the Closing Date, including without
limitation in respect of products sold or services rendered by, or on behalf of,
Buyer on or after the Closing.
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4.4 All warranty obligations of the Seller in respect of the Division,
except IPB warranty obligations referred to in Section 10.2, hereof.
4.5 All workmen's compensation liabilities arising from occurrences in
respect of the business of the Division accruing on and after the Closing Date.
ARTICLE V
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Obligations Not Being Assumed
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Any liability of Seller other than the Assumed Liabilities, including the
following, shall remain the responsibility of Seller (the "Excluded
Liabilities"):
5.1 All obligations and liabilities for Taxes arising in connection with
the Seller's possession, use, ownership or operation of the Purchased Assets
prior to the Closing Date, or, except as provided in Article XIV hereof, from
the sale of the Purchased Assets hereunder. As used herein, the terms "Tax" or
"Taxes" means all federal, foreign, state, county, local or other net or gross
income, gross receipts, sales, use, ad valorem, value-added, franchise,
production, severance, windfall profit, withholding, payroll, employment, excise
or similar Taxes, assessments, duties, fees, levies or other governmental
charges (together with any interest or penalties thereon).
5.2 All liabilities, if any, to persons for bodily injury or property
damage occurring in connection with products sold or services rendered by the
Division prior to the Closing Date.
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5.3 Any and all claims, liabilities or obligations that arise or
result from all employment practices, decisions, actions, or proceedings
undertaken by Seller prior to the Closing Date in connection with persons
employed or seeking to be employed by the Division, including without limitation
any and all claims, liabilities or obligations that arise out of or result from
(a) (i) employment and labor agreements, (ii) employee manuals, policies,
procedures and work-related rules or (iii) pension, savings, retirement, health,
life, disability, severance, bonus, incentive compensation, stock option or
other equity-based or other employee benefit or fringe benefit plans, (b) any
National Labor Relations Board ("NLRB") proceedings, (c) unfunded pension
liability for vested and non-vested employees and (d) any liability for federal
and state income Tax, by reason of Seller's failure, through any act or omission
of Seller prior to the Closing Date, to comply with the requirements of COBRA
(as such term is hereinafter defined) with respect to any "qualified
beneficiary" (as defined in COBRA). As used herein, the term "COBRA" means the
applicable provisions of the Code, ERISA and the Public Health Service Act
enacted by Sections 10001 through 10003 of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (P.L. 99-272). As used herein, the term "Code" means
the Internal Revenue Code of 1986, as amended. As used herein, the term "ERISA"
means the Employee Retirement Income Security Act of 1974, as amended.
5.4 Any legal, accounting, brokerage, finder's fees, or other expenses of
whatsoever kind or nature incurred by Seller or any partner, affiliate,
director, employee
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or officer of Seller or the Division as a result of the execution of this
Agreement or the consummation of the transactions contemplated hereby.
5.5 Any and all liabilities or obligations of Seller arising out of the
litigation, actions, suits, proceedings and claims listed on Schedule 8.7
hereof.
5.6 Except as expressly provided in Article XIV, any and all liabilities
or obligations of Seller arising out of or related to this Agreement.
ARTICLE VI
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Purchase Price and Payment and Related Matters
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6.1 The consideration for the Purchased Assets and for Seller's non-
competition covenant contained in Subsection 10.7 hereto is as follows (the
"Purchase Price"):
6.1.1 An amount to be paid in cash at Closing by wire transfer of
immediately available federal funds equal to the "Net Book Value" (determined as
set forth in Schedules 6.1.1 and 6.2.2) of the Division at the Closing Date, as
estimated by Seller in good faith (utilizing, among other things, the July 31,
1999 unaudited balance sheet or the most recent unaudited balance sheet of the
Division available at the time such estimate is made ("Estimated Net Book
Value"), notified to Buyer within three (3) days prior to the Closing Date,
adjusted as provided in Subsection 6.2.2 hereof, plus seven million five hundred
thousand U.S. Dollars ($7,500,000). For purposes of this Agreement "Net Book
Value" shall be determined as set forth in Schedules 6.1.1 and
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6.2.2 pursuant to the Accounting Principles (as defined in Schedule 6.1.1).
Seller shall provide to Buyer at least 3 days prior to closing Seller's account
information for wire transfer purposes.
6.1.2 An amount in U.S. Dollars equal to 3.1% of all payments (net of
transportation and taxes) received by the Division or Buyer after the Closing
Date in respect of all purchase orders (collectively, the "Order"), received by
Buyer Seller, or the Division between July 27, 1999 and January 1, 2000, for the
Southern California Edison ("SCE"), East/West and crossover bus duct replacement
project whether placed directly by SCE or its suppliers or contractors. Buyer
agrees to make each such payment to Seller automatically within ten (10) days
following receipt of payment under the Order, without the necessity on the part
of Seller to issue an invoice or other notice requesting payment. Buyer agrees
to give Seller written notice of each Order including therein the amount,
delivery schedule and such other information as Seller may reasonably request.
Seller agrees to use its reasonable commercial efforts to obtain the Order prior
to January 1, 2000.
6.2 Purchase Price Adjustment.
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6.2.1 Inventory Adjustment. Seller and Buyer agree that a physical
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audit of the inventory has been taken and that the Inventory has been valued in
a manner consistent with Seller's valuation thereof as of the date of the
Financial Statements (as defined in Section 8.11 hereof), and in accordance with
the Accounting Principles. The Seller shall afford the Buyer and its
representatives reasonable opportunity to review the accounts of the Division in
respect of the Financial Statements, the Net Book Value and the Closing Balance
Sheet, together with supporting detail.
6.2.2 Net Book Value Adjustment.
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Within thirty (30) days following the Closing Date, Seller
shall prepare pursuant to the Accounting Principles and deliver to Buyer a
balance sheet as
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of the close of business on the Closing Date which shall reflect among other
things the (i) adjustment to inventory resulting from the physical audit
conducted pursuant to Subsection 6.2.1 hereof (the "Closing Balance Sheet") and
(ii) Seller's determination of the Net Book Value as at the Closing Date (the
"Closing Book Value"). The Closing Balance Sheet shall be prepared in a manner
consistent with the preparation of the Reference Balance Sheet (as defined in
Schedule 6.2.2). Unless the Buyer shall give written notice to the Seller of any
objection (the "Objection") to the Closing Balance Sheet or the determination of
Closing Book Value on or before fifteen (15) days after its receipt thereof, the
Buyer will be deemed to have accepted the Closing Balance Sheet and such
determination. The Objection, if any, shall specify in reasonable detail the
items as to which the Buyer objects and the basis of each such Objection and the
Buyer's determination of the Closing Book Value based upon the Objection. If the
Objection cannot be satisfied by negotiation between the parties within fifteen
(15) days after Seller's receipt of the Objection, the Objection will be
referred for arbitration to Arthur Andersen, Boston, or, if such firm is unable
or unwilling to act, such other independent accounting firm as shall be agreed
upon by the parties hereto in writing (in either case, the "Accounting
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Arbitrator"). The Accounting Arbitrator will be instructed to select, at its
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discretion, the individual member of its firm who will have primary
responsibility for this matter and will be instructed to reach a determination
within fifteen (15) days from the date of referral. The Accounting Arbitrator
will be instructed further that it must choose either the Seller's determination
of the Closing Book Value or the Buyer's determination of the Closing Book
Value. The decision of the Accounting Arbitrator will be final and binding upon
the parties and enforceable as an arbitration award pursuant to the Uniform
Arbitration Act and the Federal Arbitration Act. The Accounting Arbitrator
shall have no power to alter or amend the provisions, terms or conditions of
this Agreement or to render a determination inconsistent with the same. The
fees and expenses of the Accounting Arbitrator engaged pursuant to this
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Subsection shall be borne by the party whose position the Accounting Arbitrator
does not choose.
6.2.3 If the Closing Book Value as determined pursuant to Subsection 6.2.2
above, exceeds the Estimated Net Book Value paid by Buyer at Closing then the
Buyer shall pay to the Seller an amount in cash equal to such excess within ten
(10) days following such determination. If the Closing Book Value as determined
pursuant to Section 6.2.2, above, is less than the Estimated Net Book Value paid
by Buyer at Closing, then the Seller shall pay to the Buyer an amount in cash
equal to such difference within ten (10) days following such determination, in
either case, with interest from and including the Closing Date to, but excluding
the date of payment, at the prime rate in effect on the Closing Date as reported
by Citibank, N.A.
6.3 Allocation of Purchase Price. Buyer and Seller agree to allocate the
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Purchase Price in accordance with the rules under Section 1060 of the the United
States Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury
Regulations promulgated thereunder. Such allocation shall be mutually agreed
upon between the parties. The parties agree to act in accordance with the
computations and allocations as determined pursuant to this Section in any
relevant tax returns or filings, including any forms or reports required to be
filed pursuant to Section 1060 of the Code (including without limitation, IRS
Form 8594, Asset Acquisition Statement under Section 1060), the Treasury
Regulations or any provision of local, state and foreign law ("1060 Forms"), to
cooperate reasonably in the preparation of any 1060 Forms and to file such forms
with the applicable taxing authority in the manner required by applicable law.
ARTICLE VII
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The Closing shall take place at the offices of Seller, Raleigh, North
Carolina, at 10:00 a.m. local time on August 31, 1999 or such later date, but
not later than September 3, 1999, as the parties shall mutually agree (the
"Closing Date").
ARTICLE VIII
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Representations and Warranties of the Seller
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Except as set forth in any Schedule hereto, Seller represents and warrants
to the Buyer as follows:
8.1 Organization, Good Standing and Power. The Seller is a corporation
-------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware, it is qualified to do business in the States in which the
nature of its business requires it to be so qualified, except to the extent that
the failure, if any, to qualify would not be likely to have a material adverse
effect on the Purchased Assets. Seller is in good standing in the States in
which it is qualified, has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and to enter into this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. Seller is not
in default with respect to any order of any court, governmental authority or
arbitration board or tribunal to which Seller is a party or is subject to the
extent the same applies to the Purchased Assets.
8.2 Authority.
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8.2.1 The execution and delivery of this Agreement and the
consummation of the transaction as herein contemplated have been duly and
validly
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authorized by all necessary corporate action of the Seller and this Agreement
constitutes the legal, valid and enforceable binding obligation of the Seller
and is enforceable against the Seller in accordance with its terms.
8.2.2 Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor compliance by the
Seller with any of the provisions hereof will (i) violate or result in a breach
of any provision of the Certificate of Incorporation or By-Laws of Seller, (ii)
violate any judgment, order, writ, injunction or decree of any court,
administrative agency or governmental body applicable to the Purchased Assets,
(iii) result in a material violation or breach of any of the terms of, or result
in the acceleration of any obligation of the Seller under, or constitute an
unpermitted assignment or a material default under, any indenture, mortgage,
agreement or instrument by which any of the Purchased Assets are bound, or (iv)
result in the creation or imposition of any lien, charge, claim or encumbrance
of any nature upon any of the Purchased Assets, except as may be created by this
Agreement.
8.2.3 Except as set forth in Schedule 8.2.3, execution and delivery
of this Agreement by Seller will not require any authorization, consent,
approval of or filing with any governmental or regulatory authority or any third
party.
8.3 Tax Matters. All federal, state, local and foreign tax returns and
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tax reports required to be filed by the Seller (either individually or on a
consolidated basis) for periods or portions of periods ending on or prior to the
Closing have been or will be filed by the Seller with the appropriate taxing
authorities in all jurisdictions in which such returns and reports are required
to be filed and all Taxes due and payable by the Seller for all periods or
portions of periods ending on or prior to the Closing Date have been or will be
timely paid. Except as set forth in Schedule 8.3, no deficiency in payment of
any Taxes for any period has been asserted by any taxing body and remains
unsettled at the date hereof, there are no pending or threatened actions for the
assessment or
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collection of Taxes against Seller and there are no liens for Taxes on any of
the Purchased Assets.
8.4 Personal Property and Related Matters.
-------------------------------------
The Seller has good and marketable title to or valid or subsisting
leasehold interests, as the case may be, in the Purchased Assets, free and clear
of all liens, charges, security interests or encumbrances of any kind or
character, except (i) liens, charges, security interests or encumbrances set
forth in Schedule 8.4, (ii) liens for taxes not yet due and payable, (iii)
imperfections of title or encumbrances which do not materially detract from the
value, or materially interfere with the use, of such property, (iv) liens which
would not be likely to have a material adverse effect on the business of the
Division taken as a whole and (v) with respect to the transaction contemplated
hereby, defects in title arising as a result of non-compliance with the
applicable bulk transfers provisions of the Uniform Commercial Code of States in
which such property is located.
8.5 Operation and Condition of Personal Property/Exclusion of Warranties.
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No part of the Division's business is operated by Seller through any person or
entity other than Seller. The Purchased Assets comprise all assets used in the
business of the Division as now being conducted. The personal property included
in the Purchased Assets is (i) adequate for the purposes for which such property
is currently being used, and (ii) Seller knows of no facts or circumstances
which would be likely to have a material adverse effect upon the use or
operation of such personal property as currently used or operated and the
equipment which is included in the Purchased Assets is in good operating
condition and repair and is suitable for the purposes for which it is being
used, normal wear and tear excepted. Except as set forth herein, SELLER HAS NOT
MADE, DOES NOT MAKE AND HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, AS TO THE
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CONDITION, QUALITY, DURABILITY, SUITABILITY, MERCHANTABILITY, FITNESS FOR USE,
FITNESS FOR A PARTICULAR PURPOSE OR AS TO ANY OTHER MATTER WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO ANY OF THE PURCHASED ASSETS.
8.6 Personal Property - Leased. Schedule 1.2 contains a list and brief
--------------------------
description of applicable leases or other agreements having an annual lease
payment value in excess of $5,000, under which the Seller is lessee of any items
of office equipment, office furniture or fixtures or other property owned by any
third party to be transferred hereunder. Except as set forth in Schedule 1.2,
all said leases are in full force and effect in accordance with their terms and
to Seller's knowledge no lessor or other party under any of said leases is in
default of its material obligations thereunder.
8.7 Compliance with Regulations, Permits, Etc./Litigation. Other than as
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disclosed in Part I of Schedule 8.7, Seller is not in violation of any
applicable federal, state, or local laws or regulations or any orders, rules,
writs, judgments, injunctions, decrees or ordinances, applicable to the
Purchased Assets, except for such violations which would not be likely to have a
material adverse effect on the Purchased Assets taken as a whole. Except as set
forth on Part II of Schedule 8.7, there are no claims, suits or litigation
pending or to Seller's knowledge threatened against Seller before any federal,
state or local court or governmental or regulatory authority, domestic or
foreign, or before any arbitrator of any nature, brought by or against Seller or
any of its officers, directors, employees, or agents involving, affecting or
relating to any of the Purchased Assets or the transactions contemplated by this
Agreement. Except as set forth on Part II of Schedule 8.7, neither Seller nor
any of the Purchased Assets is subject to any
16
<PAGE>
order, writ, judgment, award, injunction or decree of any federal, state or
local court or governmental or regulatory authority, domestic or foreign, or any
arbitrator of any nature, that affects the Purchased Assets, or that would be
reasonably likely to interfere with the transactions contemplated by this
Agreement.
8.8 Inventories. Inventories which form a part of the Purchased Assets,
-----------
with immaterial exceptions allowed, are usable or saleable in the normal course
of the Division's business. The Inventory consists of all items of inventory
held by or in transit to Seller for use in the Division's business.
8.9 Lease. A true, correct and complete copy of the Lease described on
-----
Schedule 8.9 has been delivered to the Buyer. The Lease covers certain premises
in Westboro, Massachusetts (the "Leased Premises"), and is in full force and
effect according to its terms. To Seller's knowledge the Lease is valid and
binding upon Lessor and Seller is not in material default thereunder and, to the
knowledge of Seller, there are no facts or circumstances which through the
passage of time or the giving of notice, or both, would constitute a default by
Seller under the Lease. Seller has not received notice of any default by Seller
under the Lease.
8.10 Brokers' or Finders' Fees, Etc. Seller has not retained any agent,
------------------------------
broker or investment banker in connection with the transactions contemplated by
this Agreement and no agent, broker, investment banker, person or firm acting on
behalf of the Seller or any firm or corporation affiliated with the Seller is or
will be entitled to any brokers' or finders' fee or any other commission or
similar fee directly or indirectly from Buyer hereto in connection with any of
the transactions contemplated hereby.
8.11 Financial Statements. Attached as Schedule 8.11 are true and
---------------------
complete copies of the unaudited interim financial statements of the Division
consisting of a balance sheet, as at March 31, 1999, and related statements of
income and cash flows for the three months ended March 31, 1999 (the "Financial
Statements"). Except
17
<PAGE>
as otherwise set forth in the Financial Statements or in the notes contained
therein, or in Schedule 8.11, all of the Financial Statements (i) were prepared
in accordance with the Accounting Principles and (ii) present fairly the
Division's financial condition and results of operations as at the relevant
dates thereof and for the periods covered hereby.
8.12 Disclaimer of Other Representations and Warranties; Best Knowledge;
-------------------------------------------------------------------
Disclosure. (a) Seller does not make, and has not made, any representations
- ----------
or warranties relating to Seller, the Division, or the business of the Division,
the Purchased Assets or otherwise in connection with the transactions
contemplated hereby other than those expressly set out herein which are made by
Seller. Without limiting the generality of the foregoing, Seller has not made,
and shall not be deemed to have made, any representations or warranties in any
communication or document relating to the business of the Division or Seller,
including without limitation in an information memorandum, if any ("Information
Memorandum") whether prepared or transmitted by Seller, the Division or a
representative of either Seller or the Division and supplied to Buyer prior to
the date hereof or in any presentation regarding the business of the Division
(collectively, the "Communications"), and no statement contained in any
Communications shall be deemed a representation or warranty hereunder or
otherwise. It is understood that any estimates, forecasts, projections or other
predictions, any data, any financial information and any documents, memoranda or
offering materials or presentations, including but not limited to the
Communications, are not and shall not be deemed to be or include representations
or warranties of Seller. No person has been authorized by Seller or the Division
to make any representation or warranty relating to Seller, the Division, the
business of the Division or otherwise, in connection with the transactions
contemplated hereby and, if made, such representation or warranty must not be
relied upon as having been authorized by Seller or any affiliate or
representative of Seller.
18
<PAGE>
(b) Whenever a representation or warranty made by Seller herein refers to
the knowledge of Seller, such knowledge shall be deemed to consist only of facts
or circumstances that are actually known by any of those individuals listed on
Schedule 8.12. Seller has not undertaken, nor shall Seller have any duty to
- -------------
undertake, any investigation concerning any matter as to which a representation
or warranty is made as to Seller's knowledge.
(c) Notwithstanding anything to the contrary contained in this Agreement
or in any of the Schedules, any information disclosed in one Schedule shall be
deemed to be disclosed in all Schedules. Certain information set forth in the
Schedules is included solely for informational purposes and may not be required
to be disclosed pursuant to this Agreement. The disclosure of any information
shall not be deemed to constitute an acknowledgment that such information is
required to be disclosed in connection with the representations and warranties
made by Seller in this Agreement or that it is material, nor shall such
information be deemed to establish a standard of materiality.
8.13 Absence of Certain Changes or Events. Except as set forth in
------------------------------------
Schedule 8.13, since March 31, 1999, there has not been (i) any material adverse
change in the business, operations, properties or financial condition of the
Division, and to Seller's knowledge no factor or condition exists and no event
has occurred that would be likely to result in any such change, (ii) any
material loss, damage, or other casualty to the Purchased Assets (other than any
for which insurance awards have been received or are receivable, net of self-
retention amounts) or (iii) any loss of the employment, services or benefits of
any key employee of the Division. Since March 31, 1999, Seller has operated the
Division's business in the ordinary course of business consistent with
19
<PAGE>
past practice and has not: (i) incurred or failed to pay or satisfy any material
obligation or liability (whether accrued, contingent or otherwise) except in the
ordinary course of business consistent with past practice, (ii) incurred or
failed to discharge or satisfy any encumbrance other than encumbrances arising
in the ordinary course of business that do not, individually or in the
aggregate, materially interfere with the use, operation, enjoyment or
marketability of any of the Purchased Assets, (iii) sold or transferred any of
the assets of the Division or canceled any debts or claims or waived any rights
material to the operations of the Division's business other than in the ordinary
course of business consistent with past practice, (iv) defaulted on any material
obligation, (v) entered into any transaction material to the Division's
business, or materially amended or terminated any arrangement material to the
Division's business or relating to the Division's business, except in the
ordinary course of business consistent with past practice, or (vi) entered into
any agreement or made any commitment to do any of the foregoing.
8.14 Accounts Receivable. All Division Accounts Receivable included in
-------------------
the Purchased Assets have arisen in the ordinary course of business and
represent bona fide receivables incurred by the applicable account debtor for
goods ordered or held subject to delivery instructions or heretofore shipped or
delivered pursuant to a purchase order or a contract of sale or for services
heretofore performed or to be performed by the Division. Seller has previously
provided Buyer a true, complete and correct list of Division Accounts
Receivable, and an aging of all such Division Accounts
20
<PAGE>
Receivable, in each case as at March 31, 1999, showing amounts due in 30-day
aging categories.
8.15 Business Property Rights.
------------------------
8.15.1 Schedule 8.15.1 hereof sets forth (i) all computer software,
patents, and registrations for trademarks, trade names, service marks and
copyrights which are owned bv or licensed to the Seller and used in the
Division's business, as well as all applications pending on said date for
patents or for trademark, trade name, service mark or copyright registrations,
owned by Seller; and (ii) all licenses granted by or to Seller in respect of the
business of the Division which are owned by Seller and used in the Division's
business (collectively "Business Property Rights") and except as set forth in
Schedule 1.5, constitute all such proprietary rights owned or held by Seller and
applicable to the Division's Business.
8.15.2 Except as set forth in Schedule 8.15.2 hereof, no person or entity
has made or, to the Seller's knowledge, threatened to make any claims that
Seller is in violation of or infringes any other proprietary or trade rights of
any third party. To the Seller's knowledge, no third party is in violation of or
is infringing upon any Business Property Rights.
8.16 Licenses and Permits. To Seller's knowledge Schedule 8.16 hereof
--------------------
sets forth a true, correct and complete list of all of the material licenses,
permits, franchises, authorizations, registrations, approvals and certificates
of occupancy (or their equivalent) issued or granted with respect to the
Division's business by the government of the United States or of any state,
city, municipality, county or town
21
<PAGE>
thereof, or of any foreign jurisdiction, or any department, agency, board
division, subdivision, or procuring office, commission, bureau or
instrumentality of any of the foregoing (the "Licenses and Permits"), and all
pending applications therefor. Except as set forth on Schedule 8.16, and except
for immaterial exceptions which would not be likely to have a material adverse
effect on the business of the Division, each of the Licenses and Permits has
been duly obtained, is valid and in full force and effect, and is not subject to
any pending or, to the Seller's knowledge, threatened administrative or judicial
proceeding to revoke, cancel, suspend or declare such License and Permit invalid
in any respect.
8.17 Contracts. Schedule 8.17 hereof sets forth a true and complete list
---------
of all material contracts having a value in excess of US$ 15,000, relating to
the business of the Division as at the date hereof, including but not limited
to: (i) leases and agreements concerning the Division's machinery, equipment or
real estate; (ii) employment, consulting, collective bargaining or other similar
arrangements relating to or for the benefit of current, future or former
employees, agents, and independent contractors or consultants; (iii) agreements
and instruments relating to the borrowing of money or obtaining of or extension
of credit, (iv) brokerage or finder's agreements; (v) contracts involving a
sharing of profits or expenses; (vi) unexecuted acquisition or divestiture
agreements; (vii) service agreements, manufacturer's representative, or
distributorship agreements; (viii) arrangements limiting or restraining Seller
from engaging or competing in any lines of business or with any person or
entity; (ix) documents granting a power of attorney and; (x) contracts with
customers (including
22
<PAGE>
any open purchase orders and commitments). Schedule 8.17 lists for each customer
(a) the method of billing, (b) revenues in excess of billing, (c) open purchase
orders and (d) percentage of completion.
All of the Contracts are in full force and effect and are valid, binding
and enforceable against the Seller in accordance with their respective terms.
Seller and, to its knowledge, each other party to the Contracts has
substantially performed all material obligations required to be performed by it
to date under, and Seller is not in material default in performance thereunder
and to Seller's knowledge no event has occurred which, with due notice or lapse
of time or both, would constitute such a default. Seller has delivered to Buyer
or its representatives true and complete originals or copies of all the
Contracts.
8.18 Customers and Suppliers. Seller has not received notice that, nor
-----------------------
does Seller have any knowledge that, any customer of the Division has or plans
to discontinue doing, or, except as set forth in Schedule 8.18, substantially
reduce the amount of, business with Seller. No supplier or subcontractor to the
Division has reduced its shipments except upon orders issued by Seller, or to
Seller's knowledge threatened to discontinue supplying such items or services to
the Division. Seller has not received notice that, nor does Seller have any
knowledge that, any supplier or subcontractor to the Division has or plans to
discontinue doing, or except as set forth in Schedule 8.18 substantially reduce
the amount of, business with Seller.
23
<PAGE>
8.19 Labor and Employment Matters. Except as set forth in Schedule 8.19
----------------------------
hereof in respect of the Division's business (i) Seller is not a party to any
employment agreements with employees that are not terminable at will, or that
provide for the payment of any bonus or commission, (ii) Seller is not a party
to any agreement, policy or practice that requires it to pay termination or
severance pay to salaried, non-exempt or hourly employees (other than as
required by law), (iii) Seller is not a party to any collective bargaining
agreement or other labor union contract and to Seller's knowledge there are no
activities or proceedings of any labor union to organize any such employees, and
(iv) Seller is not a party to or subject to any conciliation agreements, consent
decrees or settlements with respect the Division's business or its employees.
Seller has furnished to Buyer complete and correct copies of all such agreements
(the "Employment and Labor Agreements"). To Seller's knowledge the Employment
and Labor Agreements are in full force and effect pursuant to their respective
terms, and there are no grievances outstanding under any collective bargaining
agreements, if any, which form a part of the Employment Agreements.
Except as set forth in Schedule 8.19 hereof, in respect of the Division's
business (i) Seller is in material compliance with all applicable laws relating
to employment and employment practices, wages, hours and terms and conditions of
employment, (ii) there is no unfair labor practice charge or complaint pending
before the NLRB relating to Seller, or, to Seller's knowledge, threatened
against Seller, (iii) there is no labor strike, material slowdown or material
work stoppage or lockout pending or, to Seller's knowledge, threatened against
or affecting Seller, and Seller has not experienced any
24
<PAGE>
strike, material slowdown or material work stoppage, lockout or other collective
labor action by or with respect to employees of Seller for the last three (3)
years, (iv) there is no representation, claim or petition pending before the
NLRB or any similar foreign agency, (v) there are no charges with respect to or
relating to Seller pending before the Equal Employment Opportunity Commission or
any state, local or foreign agency responsible for the prevention of unlawful
employment practices, and (vi) Seller has not received notice from any national,
state, local or foreign agency responsible for the enforcement of labor or
employment laws of an intention to conduct an investigation of it and to
Seller's knowledge no such investigation is in progress.
Seller has furnished Buyer with a complete and accurate copy of its current
employee benefits handbook.
8.20 No Other Agreements to Sell the Purchased Assets. Seller has no
------------------------------------------------
commitment or legal obligation to any person, other than Buyer pursuant to the
terms and conditions hereof, to sell, assign, transfer or effect a sale of any
of the Purchased Assets (other than in the ordinary course of business), to
effect any merger, consolidation, liquidation, dissolution or other
reorganization of Seller, or to enter into any agreement or cause the entering
into of an agreement with respect to any of the foregoing.
8.21 Environmental Matters. Except as set forth in Schedule 8.21, to
---------------------
Seller's knowledge, each of the representations set forth in Subsections (a)
through (e) of this Section is true with respect to the Leased Premises, except
to the extent that the
25
<PAGE>
failure of such representation to be true would not be likely to have a material
adverse effect on the business of the Division taken as a whole:
(a) The Leased Premises and the soil and groundwater thereunder do not
contain any Hazardous Materials (as hereinafter defined), except in
compliance with applicable Environmental Laws.
(b) The Leased Premises and all operations at the Leased Premises are in
compliance with all Environmental Laws.
(c) Neither the Seller nor any affiliate of the Seller has received any
governmental complaint, notice of violation, alleged violation or
investigation or notice of potential responsibility arising under any
applicable Environmental Laws with respect to the Leased Premises nor
to Seller's knowledge has any governmental authority threatened to
give, send or serve any such complaint or notice to or upon Seller or
any affiliate of Seller.
(d) Hazardous Materials have not been transferred from the Leased Premises
except in compliance with all applicable Environmental Laws.
(e) There are no governmental, administrative actions or judicial
proceedings pending under any Environmental Laws to which the Seller
is named as a party in respect of the Leased Premises, nor are there
any consent decrees or other decrees, consent orders, administrative
orders or other orders, under any applicable Environmental Laws in
respect of the Leased Premises.
26
<PAGE>
(f) To Seller's knowledge, there are no underground or above-ground
storage tanks at the Leased Premises, except in compliance with
applicable Environmental Laws.
As used herein, the term "Environmental Laws" shall mean all applicable
laws and regulations (federal, state, and local) relating to pollution or to the
protection of public safety, public health, public welfare, industrial hygiene,
or the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) in effect on the date hereof,
including without limitation (i) those laws and regulations in effect on the
date hereof relating to the Release or threatened Release of Hazardous Materials
and to the manufacture, generation, management, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials and
(ii) judicial and administrative interpretations of such Environmental Laws.
As used herein, the term "Hazardous Material" shall mean (i) any chemicals,
materials, wastes or substances that are defined, regulated, determined or
identified as toxic or hazardous in any Environmental Law (including, without
limitation, substances defined as "hazardous substances," "hazardous materials,"
or "hazardous waste," "pollutant or contaminant," "petroleum" or "natural gas
liquids" in CERCLA, the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, or comparable state and local statutes or in the
regulations adopted pursuant to said statutes), and (ii) any asbestos,
polychlorinated biphenyls, urea formaldehyde,
27
<PAGE>
petroleum, petroleum products, oil, solid waste, pollutants, and other
contaminants regulated under any Environmental Law.
As used herein, the term "Release" shall mean emitting, depositing,
leaking, spilling, pumping, pouring, emptying, discharging, injecting, escaping,
leaching, dumping or disposing.
As used herein the term "CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act, as amended to date.
ARTICLE IX
----------
Representations and Warranties of the Buyer
-------------------------------------------
The Buyer represents and warrants to the Seller as follows:
9.1 Organization, Standing and Power. The Buyer is a corporation duly
--------------------------------
organized and validly existing and in good standing under the laws of the State
of Texas, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
9.2 Authority. The execution and delivery of this Agreement and the
---------
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Buyer and this
Agreement is valid, binding upon and enforceable against the Buyer in accordance
with its terms. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby nor compliance by the Buyer
with any of the provisions hereof will (i) conflict with or result in a breach
of any provision of its Articles
28
<PAGE>
of Incorporation or By-Laws or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Buyer or any of its properties or
assets. No consent or approval by any governmental authority is required in
connection with the execution and delivery by the Buyer of this Agreement or the
consummation by the Buyer of the transactions contemplated hereby.
9.3 Brokers' or Finders' Fees, Etc. No agent, broker, investment banker,
-------------------------------
person or firm acting on behalf of the Buyer or firm or corporation affiliated
with the Buyer or under its authority is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly from
Seller in connection with any of the transactions contemplated hereby.
9.4 No Litigation. There is no lawsuit, claim, action, proceeding or
-------------
investigation pending or, to the Buyer's knowledge, threatened against the
Buyer, its properties or businesses, which could reasonably be expected to have
a material adverse effect on the properties or business of the Buyer or restrict
the ability of the Buyer to consummate the transactions contemplated hereby and
otherwise perform hereunder.
9.5 Accuracy on Closing Date. Each representation and warranty set
------------------------
forth in Article IX and all information contained in any certificate delivered
by or on behalf of the Buyer pursuant to this Agreement will be true and correct
in all material respects as of the time of the Closing as though then made,
except (a) as affected by the transactions expressly contemplated by this
Agreement and (b) to the extent that such representation and warranty relates
solely to an earlier date.
29
<PAGE>
ARTICLE X
---------
Certain Covenants and Agreements
--------------------------------
10.1 Employees. Simultaneously with the Closing Buyer shall employ all
---------
individuals currently employed by Seller immediately prior to Closing, on
substantially similar compensation and reasonably similar benefits as provided
to such employees prior to Closing and agrees to provide such individuals with
health and medical benefit coverage effective upon the Closing Date, giving
credit for deductibles and out-of-pocket expenses met in the calendar year in
which the Closing occurs and waiving pre-existing conditions exclusions and
waiting period. Seller has provided Buyer a list which (i) identifies each
person who is employed by the Seller, (ii) sets forth the base, incentive and
other monetary compensation of each such person and (iii) describes any existing
employment contract. Seller and Buyer agree that the provisions of this
Agreement shall not give rise to any third party beneficiary rights in respect
of any employees of the Division or their respective dependents. Buyer agrees to
give employees of the Division credit for service with the Seller for vesting
purposes only under Buyer's benefit plans.
10.2 Warranty Work. Buyer agrees to perform all warranty work in
-------------
respect of IPB products sold by the Division prior to the Closing
Date pursuant to a warranty service agreement in form and substance
reasonably acceptable to the parties and their respective counsel
(the "IPB Warranty Service Agreement").
10.3 Seller and Seller Affiliate Obligations.
---------------------------------------
(a) Prior to, but effective as of, the Closing, Buyer shall assume, and
Buyer shall use its best efforts to obtain the unconditional release and
discharge of Seller and any legal entity controlling, controlled by or under
common control with Seller (each an
30
<PAGE>
"Affiliate") in respect of all obligations of Seller or any Affiliate under the
bond described on Schedule 10.3, attached arising out of or relating to the
business of the Division, so that Seller and its Affiliates are relieved of all
liability with respect to such obligations. To the extent that Seller and its
Affiliates are not so relieved of such obligations, Buyer shall defend,
indemnify and hold harmless Seller and such Affiliates against and in respect of
such obligations, and liabilities arising in respect thereof, as provided in
Article 13.
(b) Notwithstanding anything in Article 13 to the contrary, if at any time
after the Closing demand shall be made of Seller or any Affiliate for payment or
performance of any obligation referred to in paragraph (a) above, Seller shall
notify Buyer of such demand and Buyer shall pay or perform on behalf of Seller
or such Affiliate in accordance with the requirements of such obligation as
specified in such notice. Failing such payment or performance by Buyer, unless
Buyer (i) is contesting such liability diligently by appropriate proceedings
instituted in good faith, (ii) has agreed to Seller's satisfaction to indemnify
Seller and its Affiliates on a current basis for any increased costs, including
but not limited to defense costs and any increased liability, and (iii) is so
indemnifying Seller and its Affiliates on a current basis, Seller or the
relevant Affiliates of Seller may make such payment or provide such performance
and, in such event, Buyer shall promptly, upon Seller's written demand,
reimburse Seller or such Affiliate for the full amount of such payment or pay
Seller's or such Affiliate's cost of such performance, as applicable, plus
interest to the date of reimburse by Buyer at the publicly announced base
interest rate of Citibank N.A. in effect from time to time during such period
and shall indemnify and hold harmless Seller and such Affiliate from all
liabilities, costs and expenses, including reasonable attorneys' fees, incurred
by Seller or such Affiliate in connection with such payment or performance, as
applicable.
10.4 Non-Solicitation. If this Agreement is terminated, Buyer shall not,
----------------
for a period of three (3) years thereafter, directly or indirectly solicit,
encourage, entice or
31
<PAGE>
induce any person who is an employee of Seller as at the date hereof, to
terminate his or her employment with Seller and employ such person. In addition
to all other remedies available to Seller at law, Seller shall be entitled to
equitable relief, including without limitation, injunction, in the event of a
breach of the provisions of this Section 10.4.
10.5 Announcement. Neither Seller nor Buyer shall make any announcement
------------
or issue any press release or public statement with respect to this Agreement,
its terms or the transactions contemplated hereby, without the prior consent of
the other, which consent shall not be unreasonably withheld or delayed, except
as may be required by applicable law or stock exchange regulations.
10.6 Best Efforts. Buyer and Seller shall each use its best efforts to
------------
fulfill or obtain the fulfillment of their respective conditions of the Closing,
including, without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered.
10.7 Restrictive Covenants.
---------------------
10.7.1 Non-Raid. Except as provided on Schedule 10.7.1, Seller
covenants and agrees that it shall not, for a period of three years from and
after the Closing Date, working alone or in conjunction with one or more other
persons or entities, for compensation or not, recruit or otherwise directly
solicit or induce any person who is an employee of the Division within 3 months
prior to the Closing Date, or who is an employee of Buyer, to terminate their
employment with, or otherwise cease or reduce their relationship with, the
Division or Buyer, as the case may be, provided that Buyer understands and
agrees that Seller or its affiliates have had discussions with certain
individuals not including employees identified in Section 11.7, hereof,
regarding
32
<PAGE>
employment opportunities with Seller or such affiliate and that Sean Noel and
any other employee as to whom Buyer consents may elect to accept employment
opportunities with Seller or such Seller affiliate without violating this
Section 10.7.1; and further provided that the parties understand and agree that
the employee of the Division indentified on Schedule 10.7.1 (the "Retained
Employee") will continue in the employment of the Seller or a Seller affiliate
on and after the Closing.
10.7.2 Noncompetition. Seller covenants and agrees that it shall not, for a
period of three years from and after the Closing Date, working alone or in
conjunction with one or more other persons or entities, for compensation or not,
permit Seller's name to be used by or engage in or carry on, directly or
indirectly, either for itself or as a member of a partnership or other entity or
as a stockholder, member, investor, agent, associate or consultant of any
person, partnership, corporation, limited liability company or other entity
(other than Buyer or a subsidiary or affiliate of Buyer), the manufacturing and
selling of single phase metal enclosed SF6 gas bus for any circuit in excess of
25 meters in length but only for as long as such business is carried on by (i)
Buyer and/or any of its subsidiaries or (ii) any person, corporation, limited
liability company, partnership or other entity deriving title from Buyer and/or
any of its subsidiaries to all or substantially all of the assets and good will
of the Division's business acquired hereunder (by merger, sale of assets or
otherwise), except that the provisions of this Section 10.7.2 shall not apply in
the event of a breach by Seller of, or any action by a subsequent transferee
which if taken by the Buyer would constitute a breach of, the provisions of
Section 10.8, hereof:
33
<PAGE>
Notwithstanding the foregoing, the prohibitions set forth in this Section
shall not be deemed to prevent Seller from (i) using ABB manufactured bus within
a contract for the supply of a gas insulated substation (ii) engaging in any
business heretofor engaged in by it (other than the manufacturing and selling of
single phase metal enclosed SF6 gas bus for any circuit which is in excess of 25
meters in length), (iii) acquiring any company or the stock or assets thereof
which is engaged in the manufacturing and selling of single phase metal enclosed
SF6 gas bus for any circuit in excess of 25 meters in length but only if such
activities do not constitute the primary business of the company to be so
acquired or (iv) purchasing or holding any passive equity interest of five
percent (5%) or less in any such entity.
10.7.3 Injunctive Relief. Seller acknowledges that a breach of Sections
-----------------
10.7.1 and 10.7.2 hereof would cause irreparable damage to Buyer, and in the
event of its actual or threatened breach of the provisions of Section 10.7.1 or
10.7.2 hereof, Buyer shall be entitled to a temporary restraining order and an
injunction restraining Seller from breaching such covenants. Nothing shall be
construed as prohibiting Buyer from pursuing any other available remedies for
such breach or threatened breach, including the recovery of damages from Seller.
Seller acknowledges that the restrictions set forth in Sections 10.7.1, and
10.7.2 hereof are reasonable in scope and duration, given the nature of the
business of Buyer.
10.7.4 Reformation. If, in any judicial proceeding, the court shall refuse
-----------
to enforce any of the separate covenants contained in Sections 10.7.1 or 10
.7.2, hereof, because (i) the time limit is too long or (ii) it is more
extensive (whether as to geographic area, scope of business or otherwise) than
necessary to protect the Buyer
34
<PAGE>
under the provisions of Sections 10.7.1 or 10.7.2, hereof, the parties agree
that such time limitation in the case of (i), above, or geographic area, scope
of business or other aspect in the case of (ii), above, shall be deemed reduced
to the extent necessary to permit enforcement by the court of such covenants.
10.8 No Subsequent Sale. Buyer agrees that for a period of two (2) years
------------------
following Closing, it will not re-sell the Purchased Assets or the Division or
agree to sell any equity interest in the legal entity owning the Purchased
Assets or operating the Division to any of the entities identified in Schedule
10.8, attached ("restricted party"), or to any entity in which any such
restricted party owns, directly or indirectly, a controlling interest. Nothing
contained herein shall be construed as restricting Buyer's ability to merge or
consolidate with, or sell all or substantially all of its assets to, any person
or entity, and any such merger, consolidation or sale shall not constitute a
breach of this Section 10.8.
10.9 Marketing and Sales Assistance. For a period of one year following
------------------------------
Closing, Seller agrees to assist Buyer at no cost to Buyer with respect to
Buyer's efforts to establish its marketing and sales organization by introducing
Buyer's representatives to Seller's representatives and agents in respect of the
business of the Division in the markets identified in Schedule 10.9, Part I,
attached. In addition, Seller agrees to provide to Buyer the services from time
to time of its direct sales force on a transition basis for a period of one year
at a cost to Buyer equal to the standard incentive for such direct sales force
as set forth in Schedule 10.9, Part II, attached, provided that Buyer hereby
agrees to indemnify Seller and hold it harmless in respect of all loss, cost,
expense, claims, suits and liability arising from or in connection with the sale
of each of Buyer's products or services by such direct sales force.
10.10 ABB Projects. Commencing on the date of Closing hereunder for a
------------
period of two (2) years following the date of Closing hereunder, Seller and
Seller
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Affiliates shall issue requests for proposal to Buyer for ABB projects which
require the supply of single circuit, single phase metal enclosed SF6 bus in
excess of 25 meters in length.
10.11 Right of First Refusal. For two (2) years following the Closing
----------------------
Date Seller shall have a right of first refusal in respect of any bona fide
---- ----
third party offer received by Buyer to sell the Purchased Assets or any part
thereof. Buyer shall provide Seller true and correct copies of all offers
received by Buyer for the Purchased Assets and written notice of Buyer's intent
to accept such offer. Seller shall have fifteen (15) business days following its
receipt thereof to give Buyer notice of its exercise of its right of first
refusal to purchase the Purchased Assets or such part as may be the subject of
the third party offer, upon the terms and subject to the conditions set forth in
the third party offer.
10.12 Conduct of the Business.
------------------------
10.12.1 Affirmative Covenants. On and after the date hereof and
---------------------
until the Closing Date or the date, if any, on which this Agreement is earlier
terminated pursuant to Article XV hereof (the "Termination Date"), Seller shall:
(i) conduct the operations of the Division's business
according to its ordinary and usual course of business consistent
with past practice; and
(ii) use reasonable commercial efforts to preserve intact
the Division's business' organization and goodwill, to keep available
the
36
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services of its employees, and to maintain satisfactory relationships
with suppliers, distributors, licensors, licensees, customers,
employees and others having business relationships with Seller.
10.12.2 Negative Covenants. Without limiting the generality of the
------------------
foregoing, except in the normal course of business or otherwise consistent with
past practices and except for actions to be taken in connection with any of the
transactions contemplated hereby, without Buyer's prior written consent, Seller
shall not on or after the date hereof and until the earlier of the Closing Date
or the Termination Date:
(i) make any material change in the conduct of the
Division's business or enter into any transaction other than in the
ordinary course of business consistent with past practice;
(ii) make any sale, transfer, or other conveyance of the
Purchased Assets or any part thereof, except in the normal course of
business and dispositions of inventory or worn-out or obsolete
equipment and machinery for fair or reasonable value in the ordinary
course of business consistent with past practice;
(iii) subject any of the Purchased Assets to any
encumbrance;
37
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(iv) pay, lend or advance any amount to, or sell, transfer
or lease any properties or assets to, or enter into any agreement or
arrangement with, any of its affiliates;
(v) settle, release or forgive any claim or waive any
right thereto;
(vi) make, enter into, modify, amend in any material
respect or terminate any of the Contracts, bids or expenditures
involving an expenditure of more than $100,000;
(vii) change the Seller's method of accounting with respect
to the Division's business;
(viii) commit to do any of the foregoing.
10.13 Access to Books and Records. Seller shall afford to Buyer, and to
---------------------------
the accountants, counsel, agents and representatives (collectively,
"Representatives" ) of Buyer, upon reasonable notice, reasonable access during
normal business hours, throughout the period from the date hereof through the
earlier of the Closing Date or the Termination Date to the properties,
contracts, books and records of the Division. Buyer shall, and shall cause its
Representatives to conduct its review of books and records of the Division in
such a manner as not to interfere with the business of the Division.
10.14 Acquisition Proposals. Until the earlier of the Closing Date or the
----------------------
Termination Date, Seller shall not, directly or indirectly, through any officer,
director, agent, representative (including, without limitation, investment
bankers, attorneys and accountants) or otherwise, except in the ordinary course
of business (i) solicit, initiate or
38
<PAGE>
encourage submission of inquiries, proposals or offers from any person,
corporation, partnership or other entity or group other than Buyer (a "Third
Party"), relating to any acquisition or purchase of all or a portion of the
Purchased Assets or any equity interest in Seller; or (ii) participate in any
discussions or negotiations regarding, or except in the ordinary course of
business furnish to any Third Party any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any Third Party to do or seek any of the
foregoing. Seller agrees to give Buyer reasonable notice of any unsolicited
offers to buy the Purchased Assets received by Seller in writing.
10.15 Further Assurances. Each party hereto will at any time, and
------------------
from time to time after the Closing Date, upon the reasonable request of the
other party hereto, execute, acknowledge and deliver, at such other party's cost
and expense, all such further deeds, assignments, transfers, conveyances, powers
of attorney and assurances, and take all such further action, as may be required
to carry out or effectuate the terms of this Agreement, and to transfer and vest
title to any Purchased Asset being transferred hereunder in the Buyer.
10.16 [INTENTIONALLY DELETED]
-----------------------------
10.17 Accounts Receivable. Seller has provided Buyer a list of Division
-------------------
Accounts Receivable and accounts in respect of revenue in excess of billing as
at July 31, 1999 and shall provide to Buyer promptly following Closing a list of
Division Accounts Receivable and accounts in respect of revenue in excess of
billing as at the Closing Date (collectively, the "Accounts Receivable List"),
identifying in reasonable
39
<PAGE>
detail the account obligors and the amount of each receivable or account in
respect of revenue in exess of billing. If Seller receives a payment after the
Closing Date of any item on the Accounts Receivable List, Seller shall promptly
deliver such payment or the instrument of payment with proper endorsements to
Buyer. On and following the Closing Date, Buyer and Seller shall cooperate
reasonably in notifying account obligors of the transfer to Buyer of the items
on the Accounts Receivable List , and instructing such obligors that payments in
respect thereof should be made to Buyer. Buyer shall make reasonable commercial
efforts (which shall not include the obligation to initiate collection actions)
to collect the items on the Accounts Receivable List . All amounts received by
Buyer from an account obligor shall be applied first to the reduction of the
oldest applicable account receivable shown on the Accounts Receivable List
(unless customer shall specifically identify a payment to another receivable).
Seller agrees that if payment for each of the shown on the Accounts Receivable
List is not received by Buyer on or before a date 180 days following the date on
which each such receivable is due, Seller shall upon Buyer's written request
(which request shall specify in reasonable detail the item on the Accounts
Receivable List which has not been paid) repurchase such unpaid item on the
Accounts Receivable List within 7 business days following receipt of Buyer's
request. If Seller shall not repurchase the item on the Accounts Receivable List
in respect of which Buyer shall have given notice to Seller within such 7
business days, the amount due in respect of such repurchase shall bear interest
at 10% per annum. Simultaneously with any payment by Seller under this Section
10.17, Buyer shall sell, transfer and convey to Seller the item on the Accounts
Receivable List and shall execute and deliver an instrument reasonably
satisfactory to
40
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Seller evidencing such assignment. Upon repurchase of any item on the Accounts
Receivable List hereunder Seller may in its discretion take any action it deems
necessary or appropriate to collect such item on the Accounts Receivable List.
Provided that Seller shall have no obligation hereunder to repurchase any item
on the Accounts Receivable List (i) in respect of which Buyer shall have made
compromises or settlements with account obligors and (ii) until the aggregate of
the reserve for bad debt provided for in the Closing Balance Sheet shall have
been fully applied.
10.18 Warranty Matters. Seller has delivered to Buyer a list of the
----------------
warranty obligations of the Division as at July 31, 1999, and promptly following
Closing hereunder Seller shall deliver to Buyer a list of warranty obligations
of the Division to be reflected as a warranty reserve or accrual (the "Warranty
Reserve") in the Closing Balance Sheet, identifying in reasonable detail in each
case and as to each customer the warranty obligation and the duration thereof
(the "Warranty Obligation List"). To the extent that within 3 years from the
date hereof, or with respect to SCE Serrano station projects within the period
ending on the expiration of the applicable warranty as reflected on the Warranty
Obligation List, an amount equal to the aggregate of the Warranty Reserve is
expended by Buyer to meet the warranty obligations identified in the Warranty
Obligations List, Seller shall indemnify Buyer as provided in Section 13.2.4,
hereof, provided that warranty expense allocable to the Warranty Reserve shall
not include payments made to customers to settle non-warranty claims, sales
policy adjustments and similar claims. In the event that Buyer gives Seller
notice of a claim under this Section 10.18, Buyer shall provide in reasonable
detail a list of the payments made in respect of the Warranty Reserve,
identifying the customers, the warranty work
41
<PAGE>
performed, the locations at which the work was performed, the costs and expenses
incurred by Buyer in performance of such work and such other information as
Seller shall reasonably request.
10.19 Consents. Seller shall use reasonable commercial efforts to obtain
--------
prior to closing the consents of the contracting parties listed in Schedule
10.19 to the assignment of the Contracts selected by Buyer and listed in
Schedule 10.19. In the absence of a consent necessary to the assignment of a
Contract, Buyer shall act as a subcontractor for the performance of such
Contracts and shall be responsible for all of the costs, liabilities and
obligations arising under or in respect of such Contracts.
10.20 Post-Closing Guarantee. In the event that "Orders for Year 2000
----------------------
Revenue" (as hereafter defined) do not equal or exceed twelve million three
hundred seventy thousand U.S. Dollars ($12,370,000), Seller agrees to pay Buyer
an amount in U.S. Dollars equal to the positive result, if any, obtained
pursuant to the following formula: $1,360,000 minus ("Orders for Year 2000
Revenue" multiplied by 0.11). For purposes of the Section 10.20, "Orders for
Year 2000 Revenue" means an amount in U.S. Dollars equal to the revenue which
would be generated in the "Calendar Year 2000" (as hereafter defined) in respect
of the business of the Division based on customer orders (i) existing as at the
Closing Date, or (ii) received thereafter by Buyer, in each case determined
pursuant to Seller's revenue recognition principles, including its book and bill
and percentage of completion revenue recognition principles. For this purpose
"revenue" shall include all contract payments, cancellation and similar fees and
damage payments. For the sake of further clarity, Buyer and Seller agree that
the U.S. Dollar value of "Orders for Year 2000 Revenue" shall be determined as
at the date of receipt of each order without reference to Buyer's or its
suppliers' subsequent acts or
42
<PAGE>
omissions, Buyer's failure to perform under any such order or Buyer's actual
revenue recognition, and no payment obligation shall arise., Buyer shall be free
to determine its actual revenue recognition for the year 2000 for purposes other
than for the purpose of determining Seller's obligation under this Section
10.20, pursuant to such accounting principles as Buyer may elect. Buyer and
Seller agree that the Division's order backlog as at the date of this Agreement
will generate "Orders for Year 2000 Revenue" equal to $1,500,000 (Seller's
calculation in respect of which has been provided to Buyer).
Seller will not be obligated to make any payment under this Section 10.20,
to the extent that the result equals US$1,000 or less.
For purposes of this Section 10.20 "Calendar Year 2000" means January 1, 2000 to
and including December 31, 2000; provided, however, with respect to any orders
received prior to December 31, 2000 for which delivery obligations have been
extended, revenues generated by February 28, 2001 shall be included in the
computation of revenues for the calendar year 2000.
Buyer agrees to provide to Seller a copy of each customer order within 15
days following its receipt of each such order. Within 15 days following its
receipt of each such order Seller will give Buyer notice of Seller's calculation
in respect of each such order of the "Orders for Year 2000 Revenue", in
reasonable detail. In addition Seller shall give Buyer notice of the aggregate
amount of "Orders for Year 2000 Revenue" on March 15, 2001, and Seller's
calculation in reasonable detail of the amount due, if any, under this Section.
Buyer shall provide Seller with such information as Seller shall reasonably
request in connection with this Section 10.20 and shall permit Seller and its
representatives to audit the books and records of Buyer to verify the purchase
orders received, the calculation of "Orders for Year 2000 Revenue" and the
amount due hereunder, if any. Unless the Buyer shall notify Seller of any
objection to Seller's determination of the amount due and indicate Buyer's
calculation of the amount due, if
43
<PAGE>
any, in reasonable detail within ten (10) days following its receipt of Seller's
notification of the amount due, Buyer shall be deemed to have accepted Seller's
determination of the amount due under this Section 10.20. If the parties can not
resolve any dispute regarding the calculation of "Orders for Year 2000 Revenue"
or the amount due under this Section, either party may submit such dispute to
arbitration before the Accounting Arbitrator. The principles and procedures
applicable to arbitration of disputes under Section 6.2.2 hereof shall be
applicable to the arbitration of any dispute submitted under this Section.
10.21 Contract License If Buyer discontinues production of contacts under
U.S. Patent 4,501,466 Buyer shall grant Seller a license commencing at the time
of such discontinuation, to produce, manufacture, use and sell and to have
produced or manufactured such contacts under such patent at a reasonable market
royalty rate to be agreed by the parties.
ARTICLE XI
----------
Conditions of Obligations of the Buyer
--------------------------------------
The obligations of Buyer to perform this Agreement are subject to the
following conditions unless waived by Buyer.
11.1 Representations and Warranties. The representations and warranties
------------------------------
of the Seller set forth in Article VIII hereof shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, and the Buyer shall have received a
certificate signed by an officer of the Seller to that effect at the Closing.
11.2 Bill of Sale, Etc. The Buyer shall have received from the Seller a
-----------------
duly executed bill or bills of sale (the "Bill of Sale"), assignments, and
instruments in form and substance mutually agreeable to the parties and their
respective counsel, to effect
44
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the transfers, conveyances and assignments to the Buyer referred to in Article
I, free and clear of all, liens, charges, security interests or encumbrances of
any kind or character, other than under liens for taxes not yet due and payable
and as otherwise provided in Article VIII hereof.
11.3 Corporate Action. The Buyer shall have received certified copies of
----------------
resolutions duly adopted by the Board of Directors of the Seller, approving the
transaction contemplated hereby and authorizing the execution, delivery and
performance by Seller of this Agreement and the instruments contemplated thereby
and certificates as to the incumbency and authority of officers of Seller
executing any instrument or other document delivered in connection with such
transaction.
11.4 Opinion of Counsel for the Seller. The Buyer shall have received an
---------------------------------
opinion of counsel for the Seller, dated the date of the Closing and addressed
to the Buyer in form reasonably acceptable to Buyer and its counsel.
11.5 Approval of Legal Matters. The form of all instruments,
-------------------------
certificates, deeds, agreements and documents to be executed and/or delivered by
the Seller to the Buyer pursuant to this Agreement and all legal matters in
respect to the transactions as herein contemplated shall have been approved by
Kelly, Hart & Hallman, P.C., counsel to the Buyer, the giving of which approval
shall not be unreasonably withheld or delayed.
11.6 No Litigation. No action, suit or other proceeding shall be pending
-------------
before any court, tribunal or governmental authority seeking or threatening to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement, or seeking to obtain substantial damages in respect thereof, or
involving a claim that consummation thereof would result in the violation of any
law, decree or regulation of any governmental authority having appropriate
jurisdiction.
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11.7 Employment Contracts. Buyer shall have entered into employment
--------------------
contracts with each of Mel Hopkins, Bill Estes and Gary Bowman on terms and
conditions mutually acceptable to the parties, to be effective on the Closing
Date.
11.8 Contact Purchase Agreement. Seller shall extend the current purchase
--------------------------
order for the supply of contacts between the CGIT division of Seller and the
power circuit breaker division of Seller (the "Contact Purchase Agreement") on
terms and conditions mutually agreeable to Buyer and Seller.
ARTICLE XII
-----------
Conditions of Obligations of the Seller
---------------------------------------
The obligations of the Seller to perform this Agreement are subject to the
satisfaction of the following conditions unless waived by the Seller:
12.1 Representations and Warranties. The representations and warranties of
------------------------------
the Buyer set forth in Article IX hereof shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing as
though made on and as of the Closing, and Seller shall have received a
certificate signed by an officer of the Buyer to that effect at Closing.
12.2 Assumption Agreement to the Seller. The Seller shall have received a
----------------------------------
duly executed instrument of assumption reasonably acceptable to Seller and its
counsel containing terms and conditions reasonably acceptable to Seller and its
counsel, whereby the Buyer shall assume the Assumed Obligations specified in
Article IV (the "Assumption Agreement").
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12.3 Various Agreements. Seller shall have received an agreement pursuant
------------------
to which Buyer shall perform warranty work on behalf of Seller in respect of the
IPB Business in the form and substance reasonably acceptable to Buyer and its
counsel (the "IPB Warranty Service Agreement") and the Contact Purchase
Agreement, executed in each case by Buyer.
12.4 Corporate Action. Seller shall have received certified copies of
----------------
resolutions duly adopted by the Board of Directors of the Buyer, approving the
transaction contemplated hereby and authorizing the execution, delivery and
performance by Buyer of this Agreement, the Assumption Agreement and the other
agreements contemplated hereby and certificates as to the incumbency and
authority of officers of Buyer executing this Agreement, the Assumption
Agreement, and any instrument, agreement or other document executed or delivered
by Buyer in connection with the transaction contemplated hereby.
12.5 Opinion of Counsel. The Seller shall have received an opinion of
------------------
counsel for the Buyer, dated the date of the Closing and addressed to the
Seller, reasonably acceptable to Seller and its counsel.
12.6 Approval of Legal Matters. The form of certificates, instruments,
-------------------------
agreements and documents to be executed and/or delivered by the Buyer to the
Seller pursuant to this Agreement and all legal matters in respect to the
transactions as herein contemplated shall have been approved by E. Barry Lyon,
Esq., counsel to the Seller, the giving of which approval shall not be
unreasonably withheld or delayed.
12.7 No Litigation. No action, suit or other proceeding shall be pending
-------------
before any court, tribunal or governmental authority seeking or threatening to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement, or seeking to obtain substantial damages in respect thereof, or
involving a claim that
47
<PAGE>
consummation thereof would result in the violation of any law, decree or
regulation of any governmental authority having appropriate jurisdiction.
12.8 Board of Director Approval. The Board of Directors of Seller shall
--------------------------
have approved this Agreement and the transaction contemplated hereby.
12.9 Agreements. Buyer shall have performed and complied with all its
----------
undertakings and agreements required by this Agreement to be performed or
complied with by Buyer prior to or at the Closing.
ARTICLE XIII
------------
Survival of Representations and Warranties;
Indemnification, Etc.
--------------------
13.1 Survival. Except as otherwise provided in Section 13.4.3, hereof, all
--------
representations and warranties made by either party to this Agreement shall
survive the Closing to and shall terminate on May 31, 2001 (the "Survival
Date").
13.2 Seller's Agreement to Indemnify. Subject to the terms and conditions
-------------------------------
hereof, the Seller hereby agrees to indemnify and save the Buyer harmless
against, and in respect of:
13.2.1 Any and all liabilities incurred by the Buyer as a result of
the breach of any covenant (except pursuant to Section 10.18 hereof),
representation or warranty of the Seller contained in this Agreement.
13.2.2 Noncompliance with any applicable bulk sales or similar law in
respect of the Purchased Assets.
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13.2.3 Claims for personal injury and property damage asserted
against Buyer to the extent arising from the conduct of the Division's business
prior to the Closing Date.
13.2.4 Claims made by Buyer under Section 10.18 hereof.
13.2.5 Claims in respect of the Excluded Liabilities.
13.2.6 All claims, actions, damages, losses or obligations, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred by the Buyer in connection with any action, suit, proceeding,
demand, claim, assessment or judgment incident to the matters indemnified
against in this Subpart 13.2.
13.3 Buyer's Agreement to Indemnify. Subject to the terms and conditions,
------------------------------
hereof, Buyer hereby agrees to indemnify and save the Seller harmless against,
and in respect of:
13.3.1 The assertion against Seller of any claim, liability or
obligation whether contractual or otherwise assumed by Buyer pursuant to this
Agreement or any of the agreements and instruments contemplated hereby including
without limitation the Assumed Liabilities.
13.3.2 Any and all claims asserted against Seller arising from or in
connection with the conduct of Buyer's business and the sale, lease, use or
omission to use any of the Purchased Assets on and after the Closing Date.
13.3.3 Any and all liabilities incurred by the Seller as a result of
the breach of any representation, warranty or covenant of the Buyer contained in
this Agreement.
13.3.4 All claims, actions, damages, losses, liabilities or
obligations, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred by the Seller in connection with any
action, suit, proceeding, demand, claim,
49
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assessment or judgment incident to any of the matters indemnified against in
this Subpart 13.3.
13.4 Limitations on Indemnification.
------------------------------
13.4.1 Except with respect to claims under Section 13.2.1 or 13.2.5
for breach of the covenants set forth in Sections 10.17 and 14.1 (c), which
shall not be limited, Seller shall not be required to indemnify Buyer under
Subpart 13.2, hereof unless the aggregate of all amounts due thereunder exceeds
$100,000, in which event Seller shall be responsible only for such indemnifiable
amounts in excess of $100,000, provided Seller shall have no liability for any
amount which exceeds, and its liability hereunder shall be limited to, a maximum
of five (5) million US Dollars.
13.4.2 Any indemnifiable liability or reimbursement under this
Article XIII shall be limited to the actual damages sustained by the indemnified
party net of any applicable insurance coverage payments received, other
reimbursement or tax benefit to the indemnified party. Any indemnity payment
made under this Agreement shall be treated as an adjustment to the Purchase
Price for Tax purposes.
13.4.3 No claim, demand, suit, or cause of action ( hereafter
collectively "claims") shall lie against the Seller under this Agreement (a) as
to claims for breach of representations and warranty (i) under Section 8.3, on
and after the applicable statute of limitations and (ii) otherwise on and after
the Survival Date, except that claims under Sections 8.2.1 and 8.4 shall survive
indefinitely and (b) as to claims under Section 13.2.4, on and after the third
anniversary of the Closing Date or with respect to SCE Serrano Station projects,
on and after the expiration of the applicable warranty period as reflected on
the Warranty Obligation List and (c) all other claims on and after the Survival
Date, unless prior to such date the Buyer shall give the Seller written notice
of the existence of any such claim which notice shall set forth in reasonable
detail the facts which form the basis of such claim.
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13.5 Notice of Claim. The obligations and liabilities of the parties
---------------
hereunder with respect to claims under Article XIII shall be subject to the
following terms and conditions:
13.5.1 Each party agrees to give the other prompt written notice of
any claim by it for indemnity under this Article XIII, or in respect to any
matter arising out of this Agreement or the transactions contemplated hereby,
stating the nature and basis of said claim, and the amount thereof, to the
extent known. If a claim for indemnity hereunder is based upon the initiation of
any action, suit or legal proceeding, the notice shall include a copy of any
pleadings served upon the party giving such notice.
13.6 Conduct of Defense. Subject to rights of or duties to any insurer or
------------------
other third Person having liability therefor, the indemnifying party shall have
the right after acknowledging to the indemnified party its obligation to provide
indemnity hereunder to assume the control of the defense, compromise or
settlement of any such action, suit, proceeding, claim, liability, demand or
assessment, including, at its own expense, employment of counsel and at any time
thereafter to exercise on behalf of the indemnified party any rights which may
mitigate any of the foregoing. The indemnified party will, at its own expense,
make available to the indemnifying party such of its employees whose assistance,
testimony or presence is necessary to assist the indemnifying party in
evaluating and in defending any such action, suit, proceeding, claim, liability,
demand or assessment, provided, however, that any such access shall be conducted
in such a manner as not to interfere unreasonably with the operations of the
business of the indemnified party.
ARTICLE XIV
-----------
Costs of Transaction/Transfer Taxes, Etc.
-----------------------------------------
51
<PAGE>
Transfer Taxes, Etc. (a) The Seller agrees that all fees and
---------------------
expenses incurred by it in connection with this Agreement and the transaction as
contemplated herein shall be borne by it and the Buyer agrees that all fees and
expenses incurred by it in connection with this Agreement and the transaction as
contemplated herein shall be borne by it,
(b) The parties agree that inasmuch as the Purchased Assets include
substantially all of the operating assets of the Seller's CGIT Division, the
sale and purchase of the Purchased Assets may be exempt from sales and use taxes
in the jurisdictions in which the Purchased Assets are located pursuant to the
bulk sale or occasional sale provisions in the applicable statutes in such
jurisdictions. Except as set forth in Section 18.5, all Parties hereto shall
treat the transfer of the Purchased Assets provided for herein as a bulk or
occasional sale for all purposes; provided, however, that to the extent it shall
be determined after the date of this Agreement that the sale by the Seller and
the purchase by Buyer of all or any portion of the Purchased Assets is subject
to a sale, use or other transfer tax, then, notwithstanding any other provision
of this Agreement, such tax shall be paid one-half by Seller and one-half by
Buyer.
(c) Buyer shall pay all registration, filing or recording fees imposed on
or incident to the recording or perfection of Buyer's interest in any of the
Purchased Assets.
(d) The parties shall prorate real and personal property taxes and similar
terms based on the number of days in the proration period before and after the
Closing Date.
(e) The Parties shall reasonably cooperate with each other in the
preparation, execution and filing of any Tax Returns that may be required in
connection with such transfer taxes.
52
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ARTICLE XV
----------
Termination
-----------
15.1 Termination. Anything herein or elsewhere to the contrary
-----------
notwithstanding, this Agreement may be terminated at any time after the date
hereof but not later than the Closing:
15.1.1 by the mutual consent of Seller and Buyer; or
15.1.2 by Buyer at any time after September 3,, 1999 if, by that
date, the conditions set forth in Article XI hereof shall not have been
fulfilled or waived; or
15.1.3 by Seller at any time after September 3, 1999 if, by that
date, the conditions set forth in Article XII hereof shall not have been
fulfilled or waived.
15.2 Procedure Upon and Effect of Termination. In the event of any
----------------------------------------
termination pursuant to Section 15.1 hereof, written notice thereof shall
forthwith be given by one party to the other and the transactions contemplated
hereby shall thereupon be terminated and abandoned, without further action by
Buyer or Seller and there shall be no liability on the part of Buyer or Seller
or any of their respective partners, officers, directors or shareholders, except
for the material breach of any covenant contained herein that is within the
control of the party in breach.
15.3 Confidentiality. In the event of any termination pursuant to Section
---------------
15.1 hereof, Buyer agrees not to use and it shall return, or at the request of
Seller, destroy
53
<PAGE>
all of Seller's financial, employee and technical information received by Buyer
or its representatives in connection with the transaction contemplated hereby.
ARTICLE XVI
-----------
Required Filings
----------------
Filings and Consents. Each of Seller and Buyer, as promptly as practicable
--------------------
following the date hereof (i) will make, or cause to be made, all such filings
and submissions under laws, rules and regulations applicable to it, or to its
subsidiaries and affiliates, as may be required for it to consummate the
transactions contemplated hereby in accordance with the terms of this Agreement,
including, without limitation, all notifications and information required to be
filed or supplied pursuant to the Hart Scott Rodino Antitrust Improvements Act
of 1976, as amended, if any, in connection with the sale and transfer of the
Purchased Assets pursuant to this Agreement; (ii) will use reasonable commercial
efforts to obtain authorizations, approvals, consents and waivers from all
persons and governmental authorities necessary or advisable to be obtained by
it, or its subsidiaries or affiliates, in order to consummate such transfer; and
(iii) will use reasonable commercial efforts to take, or cause to be taken, all
other actions necessary, proper or advisable in order for it to fulfill its
obligations hereunder. Seller and Buyer will coordinate and cooperate with one
another in exchanging such information and supplying such reasonable assistance
as may be reasonably requested by each in connection with the foregoing.
54
<PAGE>
ARTICLE XVII
------------
Use of the Designations and Logos
---------------------------------
Buyer has not been granted any license to use and shall not use the names
or designations "ABB", "Asea Brown Boveri" or " ABB Power T&D". To the extent
that the designations "ABB" or "Asea Brown Boveri", "ABB Power T&D" or similar
logos or trademarks appear on any signs or displays in, on or about any
buildings or premises, motor vehicles, trailers, rolling stock or equipment,
catalogs, brochures, artwork, advertising material or packaging material, the
Buyer will completely remove or obliterate said designations, and logos
therefrom and will cover such designations and logos on business forms,
stationery or similar material as soon as practicable but in no event later than
one hundred twenty (120) days following the Closing Date. Nothing contained
herein shall prohibit the use by Buyer of the name "Tri-Trap".
ARTICLE XVIII
-------------
Miscellaneous
-------------
18.1 Parties in Interest. This Agreement will be binding upon, inure to
-------------------
the benefit of, and be enforceable by, the respective successors and assigns of
the parties hereto; provided that the Seller's indemnities hereunder shall not
be assignable by Buyer whether expressly or by operation of law, without
Seller's written consent first obtained and any purported assignment without
such consent shall be null and void and without force and affect provided that
Buyer may upon notice to Seller assign its right,
55
<PAGE>
title and interest in and to this Agreement and the agreements contemplated
hereby collectively (the "Agreements") to a direct or indirect wholly-owned
subsidiary of Buyer (without the right to further assign) provided that such
subsidiary shall be and shall agree to be bound by the terms and conditions of
each such Agreement provided that no assignment shall relieve Buyer of any
obligation arising under any such Agreement and Buyer shall remain directly
liable as a principal, (not as a surety) for the performance of all terms and
conditions of any such assignment.
18.2 Entire Agreement; Amendments. This Agreement, together with the
----------------------------
Schedules attached hereto, contains the entire understanding of the parties with
respect to its subject matter. There are no representations, promises,
warranties, covenants or undertakings other than as expressly provided for
herein. Except as to the Confidentiality Agreement, this Agreement terminates
and supersedes all prior agreements and understandings between the parties with
respect to its subject matter. This Agreement may be amended only by a written
instrument duly executed by the parties.
18.3 Headings. The Article and Section headings contained in the Agreement
--------
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
18.4 Notices. All notices, claims, certificates, requests, demands and
-------
other communications hereunder will be given in writing and will be deemed to
have been duly given if delivered personally or mailed (by registered or
certified mail, postage prepaid) as follows:
If to the Buyer, to: Aztec Manufacturing Co.
400 N. Tarrant
PO Box 668
Crowley, Texas 76036
Attn.: L.C. Martin, Chairman and CEO
56
<PAGE>
With a copy to: F. Richard Bernasek, Esq.
Kelly, Hart & Hallman
201 Main Street, Suite 2500
Fort Worth, TX 76102
If to the Seller, to: ABB Power T&D Company Inc.
940 Main Campus Drive
Raleigh, NC 27606
Attn.: Anders Westin
With a copy to: E. Barry Lyon, Esq.
Assistant General Counsel
Asea Brown Boveri Inc.
501 Merritt 7
Norwalk, CT 06851
or to such other address as the person to whom notice is to be given may have
furnished to the others in writing in accordance
herewith.
18.5 Bulk Sales Laws. The parties hereto hereby waive compliance with the
---------------
provisions of the "bulk sales laws" of any state which may be applicable to the
transactions contemplated hereby.
18.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
18.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, without regard to its choice
of law provisions.
18.8 Gender. Any reference to the masculine gender shall be deemed to
------
include the feminine and neuter genders unless the context otherwise requires.
57
<PAGE>
18.9 Waivers. Any party to this Agreement may, by written notice to the
-------
other parties hereto, waive a breach of any provisions of this Agreement. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
18.10 Risk of Loss. Risk of loss of the Purchased Assets shall pass to
------------
the Buyer upon Closing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
ABB POWER T&D COMPANY INC.
By: /s/ ANDERS S. WESTIN
-------------------------------
Its: Senior Vice President & CFO
-----------------------------
AZTEC MANUFACTURING CO.
By: /s/ L. C. MARTIN
-------------------------------
Its: Chairman of Board & CEO
-----------------------------
58
<PAGE>
EXHIBIT 2
[LETTERHEAD OF AZTEC MANUFACTURING CO. APPEARS HERE]
- --------------------------------------------------------------------------------
For Further Information Contact:
Dana Perry, VP and CFO
Aztec Manufacturing Co.
817-297-4361
For Release 9/1/99, 10:30AM Eastern Release #99-08
Aztec Manufacturing Co. Completes Purchase of Electrical Products Company
Crowley, Texas, September 1, 1999 -- Aztec Manufacturing Co. (NYSE-AZZ) today
announced that it has completed the purchase of the operating assets of ABB
Power T & D's Compressed Gas Insulation Transmission Bus Duct Division, located
in Westborough, Massachusetts. Aztec previously announced on July 20, 1999,
that it had signed an agreement to purchase the company.
L.C. Martin, Chairman and CEO of Aztec, said, "This addition to Aztec's
Manufactured Products Segment will generate approximately $12 million in annual
revenue and should be immediately accretive to our earnings. The business now
will operate under the name CGIT Westboro, Inc."
CGIT provides the global electrical utility industry with a compact, reliable
and economical alternative to conventional underground cable systems and
overhead lines for power transmission. CGIT pioneered the technology that uses
SF6 gas as an insulator for transmitting bulk electrical power. Founded in
1960, CGIT has built a strong reputation as a leading worldwide supplier of
compressed gas insulated bus ducts.
Mr. Martin noted that CGIT's operations would remain in Westborough under the
current management team. "Aztec is committed to a smooth and orderly
transition, and we will maintain a strong working relationship with ABB.
Customers will receive the same level of service and support they enjoyed under
the ABB organization."
ABB Power T & D Company is a unit of ABB Ltd. Zurich, Switzerland. ABB, with
U.S. headquarters in Norwalk, Connecticut, serves customers in the power
generation, transmission and distribution; oil, gas and petrochemical;
industrial products and contracting; and financial services industries. In
1998, ABB had U.S. orders of approximately $6.1 billion and employed about
20,000 at facilities in 41 states. ABB
<PAGE>
Group reported worldwide orders of $31 billion in 1998. ABB employs
approximately 160,000 people in more than 100 countries.
Aztec is a manufacturer of electrical and tubular products that serve a broad
range of customers in the industrial, power generation and petroleum industries.
In addition, the company is a leading provider of galvanizing services in the
United States. Aztec reported record revenues of approximately $81 million for
the year ending February 28, 1999.
Forward-looking statements in this release involve a number of risks and
uncertainties that may cause actual results to differ materially from expected
results. These risks and uncertainties are described in detail in the Company's
filings with the Securities and Exchange Commission.
###
<PAGE>
Exhibit 3
SEVENTH AMENDMENT TO BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This SEVENTH AMENDMENT TO BUSINESS LOAN AGREEMENT (RECEIVABLES AND
INVENTORY) (this "Amendment") is executed and entered into on August 26, 1999,
---------
by and between Bank of America, N.A. (successor by merger to Bank of America,
Texas, N.A., the "Bank") and Aztec Manufacturing Co. (the "Borrower").
---- --------
RECITALS:
A. The Borrower and the Bank are parties to that certain Business Loan
Agreement (Receivables and Inventory) dated as of June 28, 1996 (as amended and
as the same may be further amended, renewed, extended, restated, or otherwise
modified from time to time, the "Loan Agreement") pursuant to which the Bank
--------------
agreed to provide to the Borrower a secured revolving credit facility and a
secured term loan facility.
B. The indebtedness of the Borrower to the Bank pursuant to the Loan
Agreement is secured by liens on the Borrower's property as described in that
certain Security Agreement: Receivables, Inventory and Equipment (Borrower);
C. Each subsidiary of the Borrower is a Pledging Party and a Guarantor
under the terms of the Loan Agreement.
D. The Borrower has requested that the Bank provide additional loans to
the Borrower as set forth herein and amend certain provisions of the Loan
Agreement, and, subject to satisfaction of the conditions set forth herein, the
Bank is willing to make such additional loans available to the Borrower and
amend the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1
Definitions
-----------
Section 1.1 Definitions. Unless otherwise defined in this Amendment, each
-----------
capitalized term used in this Amendment has the meaning given to such term in
the Loan Agreement (as amended by this Amendment).
<PAGE>
ARTICLE 2
Amendments
----------
Section 2.1 Amendment to subsection 1.1(a) of the Loan Agreement.
----------------------------------------------------
Effective as of the date hereof, subsection 1.1(a) of the Loan Agreement is
-----------------
hereby amended and restated to read in its entirety as follows:
(a) Twenty-Two Million Dollars ($22,000,000.00), or
Section 2.2 Amendment to Section 1.4 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 1.4 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
1.4 "Pledging Party" means the Borrower and each subsidiary of the
--------------
Borrower who is party to a security agreement in favor of the Bank pledging
to the Bank such subsidiary's accounts, inventory, equipment, and other
related assets; provided, however, that Pledging Party shall also mean and
-------- -------
include CGIT Westboro, Inc. ("CGIT") from and after the date of the
acquisition of CGIT by the Borrower, CGIT to execute and deliver to the
Bank a guaranty, security agreement, financing statements and such other
documents (including, without limitation, an officer's certificate as to
CGIT's charter documents, resolutions and authorized signatures) required
by the Bank to create and perfect a security interest in CGIT's accounts,
inventory, equipment, and other related assets within ninety (90) days of
the Borrower's acquisition of CGIT.
Section 2.3 Amendment to Section 2.14 of the Loan Agreement. Effective as
-----------------------------------------------
of the date hereof, Section 2.14 of the Loan Agreement is hereby amended and
------------
restated to read in its entirety as follows:
2.14 Libor Rate. The Borrower may elect to have all or portions of
----------
the principal balance of the loans bear interest at a rate equal to the
lesser of (i) the Maximum Rate or (ii) the Libor Rate plus (i) the
----
Applicable Libor Margin (as determined as provided in clause (j) below)
with respect to the Line of Credit or (ii) one and one-quarter percent
(1.25%) with respect to the Term Loans (the "Eurodollar Rate"), subject to
---------------
the following requirements:
(a) The interest period during which the Eurodollar Rate will
be in effect will be (i) 1, 2, 3, or 6 months with respect to the Line
of Credit or (ii) 1, 2, 3, 6, or 12 months with respect to the Term
Loans. The last day of the interest period will be determined by the
Bank using the practices of the London interbank market.
(b) Each Eurodollar Rate portion under a loan will be for an
amount not less than Five Hundred Thousand Dollars ($500,000.00) or an
integral multiple thereof.
(c) The Borrower shall irrevocably request a Eurodollar Rate
portion no later than 11:00 a.m. Dallas, Texas time two (2) banking
days before the commencement of the interest period.
2
<PAGE>
(d) The "LIBOR Rate" means the interest rate determined by
----------
the following formula, rounded upward to the nearest 1/100 of one
percent. (All amounts in the calculation will be determined by the
Bank as of the first day of the interest period.)
LIBOR Rate = London Rate
------------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Rate" means the interest rate (rounded upward to
-----------
the nearest 1/16th of one percent) at which the Bank's London
Branch, London, Great Britain, would offer U.S. dollar deposits
for the applicable interest period to other major banks in the
London interbank market at approximately 11:00 a.m. London time
two (2) banking days prior to the commencement of the interest
period.
(ii) "Reserve Percentage" means the total of the maximum
------------------
reserve percentages for determining the reserves to be maintained
by member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D,
rounded upward to the nearest 1/100 of one percent. The
percentage will be expressed as a decimal, and will include, but
not be limited to, marginal, emergency, supplemental, special,
and other reserve percentages.
(e) The Borrower may not elect an Eurodollar Rate with respect
to any portion of the principal balance of any loan which is scheduled
to be repaid before the last day of the applicable interest period.
(f) Any portion of the principal balance of a loan already
bearing interest at the Eurodollar Rate will not be converted to a
different rate during its interest period.
(g) Each prepayment of an Eurodollar Rate portion will be
accompanied by the amount of accrued interest on the amount prepaid,
and a prepayment fee equal to the amount (if any) by which
(i) the additional interest which would have been payable
on the amount prepaid had it not been paid until the last day of
the interest period, exceeds
(ii) the interest which would have been recoverable by the
Bank by placing the amount prepaid on deposit in the London
interbank market for a period starting on the date on which it
was prepaid and ending on the last day of the interest period for
such portion.
(h) The Bank will have no obligation to accept an election for
an Eurodollar Rate portion if any of the following described events
has occurred and is continuing:
3
<PAGE>
(i) Dollar deposits in the principal amount, and for
periods equal to the interest period, of an Eurodollar Rate
portion are not available in the London interbank market; or
(ii) The Eurodollar Rate does not accurately reflect the
cost of an Eurodollar Rate portion.
(i) If at any time during any applicable interest period the
Eurodollar Rate shall exceed the Maximum Rate and thereafter the
Eurodollar Rate shall become less than the Maximum Rate, the rate of
interest payable shall be the Maximum Rate until the Bank shall have
received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during
the period of time the Eurodollar Rate exceeded the Maximum Rate.
(j) Prior to receipt of the Compliance Certificate to be
delivered with the Borrower's financial statements for the fiscal
quarter ending September 30, 1999, the margin over the Libor Rate for
the Line of Credit shall be One and a quarter percent (1.25%);
thereafter, the "Applicable Libor Margin" shall be determined in
accordance with the following table:
<TABLE>
<CAPTION>
=================================================
RATIO OF TOTAL
LIABILITIES TO
TANGIBLE NET LIBOR RATE
WORTH MARGIN
<S> <C>
Less than 1.25 to 1.00 0.875%
-------------------------------------------------
Greater than or equal to 1.00%
1.25 to 1.00 but less
than 2.01 to 1.00
-------------------------------------------------
Greater than or equal to 1.125%
2.01 to 1.00 but less
than 2.76 to 1.00
-------------------------------------------------
Greater than or equal to 1.25%
2.76 to 1.00
=================================================
</TABLE>
Upon delivery of the Compliance Certificate pursuant to
subsection 8.2(g) after the end of each fiscal quarter commencing with
-----------------
such Compliance Certificate delivered for the fiscal quarter ending
November 30, 1999, the Applicable Libor Margin shall automatically be
adjusted to the rate corresponding to the Ratio of Total Liabilities
to Tangible Net Worth of Borrower set forth in the table above, such
automatic adjustment to take effect prospectively the third Business
Day after receipt by the Bank of the Compliance Certificate (the
"Adjustment Date"). If Borrower fails to deliver such Compliance
---------------
Certificate with respect to any fiscal quarter which
4
<PAGE>
sets forth such ratio within the period of time required by subsection
----------
8.2(g), the Applicable Libor Margin shall automatically be adjusted to
------
one and one quarter percent (1.25%) per annum. The automatic
adjustments provided for in the preceding sentence shall take effect
on the last day that the Compliance Certificate was required to be
delivered and shall remain in effect until subsequently adjusted in
accordance herewith upon the delivery of such Compliance Certificate.
Section 2.4 Amendment to Section 4.2 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 4.2 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
4.2 Personal Property Supporting Guaranty. The obligations of
-------------------------------------
Aztec Industries, Inc., Aztec Industries, Inc. - Moss Point, Automatic
Processing, Incorporated, The Calvert Company, Inc., Gulf Coast
Galvanizing, Inc., Arkgalv, Inc., Arbor-Crowley, Inc., Aztec Group Company,
Aztec Holdings, Inc., Aztec Manufacturing Partnership, Ltd., Aztec
Manufacturing-Waskom Partnership, Ltd., Rig-A-Lite Partnership, Ltd.,
Atkinson Industries, Inc., Arizona Galvanizing, Inc., Hobson Galvanizing,
Inc., International Galvanizers Partnership, Ltd., and Drilling Rig
Electrical Systems Partnership, Ltd. (collectively, the "Guarantors") to
----------
the Bank will be secured by all equipment, fixtures, inventory, accounts,
receivables and related assets the Guarantors now own or will own in the
future, as further defined in the security agreement executed by the
Guarantors; provided that the tem "Guarantors" shall include CGIT upon its
--------
execution of a guaranty within ninety (90) days of the acquisition of CGIT
by the Borrower as provided by Section 1.4 of this Agreement.
-----------
Section 2.5 Amendment to Section 8.1 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.1 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.1 Use of Proceeds. To use the proceeds of the Line of Credit
---------------
only for the general working capital needs of the Borrower and its subsidiaries
and to finance acquisitions permitted hereby, including,without limitation, the
---------
acquisition of CGIT.
Section 2.6 Amendment to Section 8.4 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.4 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.4 Tangible Net Worth. To maintain on a consolidated basis
------------------
Tangible Net Worth equal to at least Eleven Million Dollars ($11,000,000,
plus fifty percent (50%) of the Borrower's positive net income for each
fiscal quarter of the Borrower ending after June 30, 1999 (no reductions to
be made for any losses). As used herein, the term "Tangible Net Worth"
------------------
means the gross book value of the Borrower's assets (excluding goodwill,
patents, trademarks, trade names, organization expense, treasury stock,
unamortized debt discount and expense, deferred research and development
costs, deferred marketing expenses, and other like intangibles, and monies
due from affiliates, officers, directors or shareholders of the Borrower)
less total liabilities, including but not limited to accrued and deferred
income taxes, and any reserves against assets.
5
<PAGE>
Section 2.7 Amendment to Section 8.5 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.5 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.5 Current and Long Term Liabilities to Tangible Net Worth. To
-------------------------------------------------------
maintain on a consolidated basis a ratio of long term debt and Current
Liabilities to Tangible Net Worth not exceeding 4.50 to 1.00 for the period
from the date of the Sixth Amendment to this Agreement through February 28,
2000, 3.00 to 1.00 thereafter through February 28, 2001, or 2.00 to 1.00
thereafter.
Section 2.8 Amendment to Section 8.6 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.6 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.6 Cash Flow Ratio. To maintain on a consolidated basis a Cash
---------------
Flow Ratio of at least 1.6:1.0. As used herein, the term "Cash Flow Ratio"
---------------
means the ratio of Cash Flow to the current portion of long term debt plus
interest expense. "Cash Flow" is defined as net income from operations
---------
(before extraordinary or nonrecurring gains or losses), minus taxes, plus
depreciation, amortization and other non-cash charges, plus interest
expense, minus dividends. This ratio will be calculated at the end of each
fiscal quarter, using the results of that quarter and each of the 3
immediately preceding quarters. The current portion of long term debt will
be measured as of the last day of the fiscal quarter preceding the date of
calculation.
Section 2.9 Amendment to Section 8.11 of the Loan Agreement. Effective as
-----------------------------------------------
of the date hereof, Section 8.1l of the Loan Agreement is hereby amended and
------------
restated to read in its entirety as follows:
8.11 Treasury Stock. Not to purchase, redeem, or otherwise acquire
--------------
for value any of its shares, or create any sinking fund in relation
thereto.
Section 2.10 Amendment to Section 8.22 of the Loan Agreement. Effective
-----------------------------------------------
as of the date hereof, clause (c) of Section 8.22 of the Loan Agreement is
------------
hereby amended and restated to read in its entirety as follows:
(c) enter into any consolidation, merger, pool, joint
venture, syndicate, or other combination or purchase or
acquire all or substantially all the assets of another
business, except for such transaction if (i) the Borrower or
applicable Guarantor is the surviving entity; (ii) no default
exists hereunder or would result therefrom and before, and
after giving effect to, the proposed acquisition, the
representations and warranties set forth herein shall be true
and correct; and (iii) Borrower delivers to the Bank an
Environmental Questionnaire and Disclosure Statement in form
and disclosing such information as is acceptable to the Bank
relating to the assets or entity to be acquired prior to the
acquisition.
6
<PAGE>
Section 2.11 Amendment to Article 8 of the Loan Agreement. Effective as
--------------------------------------------
of the date hereof, Article 8 of the Loan Agreement is hereby amended by adding
---------
thereto new Sections 8.24 to read in its entirety as follows:
-------------
8.25 Funded Debt to EBITDA. To maintain on a consolidated basis
---------------------
at the end of each of the Borrower's fiscal quarters ending after the date
of the Sixth Amendment to this Agreement a ratio of Funded Debt to EBITDA
for the four consecutive fiscal quarters then ended not exceeding 3.00 to
1.00. As used herein, the term "Funded Debt" means all debt of the Borrower
-----------
and its Subsidiaries for borrowed money (including capital lease
obligations) and the term "EBITDA" means: (i) net income from operations
------
(before extraordinary or non-recurring gains or losses); plus (ii) any
----
provision for income or franchise taxes deducted in determining net income;
plus (iii) interest expense deducted in determining net income; plus (iv)
---- ----
depreciation and amortization expense deducted in determining net income;
plus (v) other non cash charges deducted in determining net income.
----
ARTICLE 3
Conditions Precedent
--------------------
Section 3.1 Items to be Delivered By Borrower. Prior to or simultaneously
---------------------------------
with execution and delivery of this Amendment, the Borrower shall deliver, or
cause to be delivered, to the Bank the following:
1 Officer's Certificates. Due certification by the corporate
----------------------
secretary (or other duly authorized officer acceptable to the Bank) of the
Borrower and each other Pledging Party (or the general partner of any
Pledging Party) (a) attaching a copy of resolutions duly adopted by its
board of directors approving the terms and conditions contained in this
Amendment, (b) certifying that the certificate of incorporation, bylaws,
certificate of limited partnership, and other constituent documents of the
Borrower, such other Pledging Party, or its general partner (as applicable)
as previously certified to the Bank remain in full force and effect without
amendment, and (c) including a certification of incumbency of all officers
who are authorized to act in respect of the corporate resolutions
referenced above, including the name, office, and signature of each such
officer.
2 Amendment Documents. Each agreement, certificate, document,
-------------------
or instrument required by the Bank to be executed or delivered by the
Borrower or any other Pledging Party in connection with this Amendment (the
"Amendment Documents"), duly executed or delivered by the parties thereto.
-------------------
Section 3.2 Other Conditions. The effectiveness of this Amendment is
----------------
subject to the satisfaction of each of the additional following conditions
precedent:
1 Continued Effect of Representations and Warranties. All
--------------------------------------------------
representations and warranties contained in any loan document (including,
without limitation, the Loan Agreement, as amended hereby; all of such loan
documents are referred to collectively herein as the "Loan Documents")
--------------
shall be true, correct, and complete in all material respects (as
7
<PAGE>
determined by the Bank in its sole discretion) except as disclosed
otherwise to the Bank in writing and as acceptable to the Bank or
representations specifically relating to a prior date or no longer relevant
due to the occurrence of an event or circumstances specifically permitted
hereunder or by any other Loan Document;
2 Absence of Default. No default or event of default shall have
------------------
occurred and be continuing (after giving effect to this Amendment);
3 Corporate Proceedings. All corporate proceedings taken in
---------------------
connection with the transactions contemplated by this Amendment and all
other agreements, documents, and instruments executed and/or delivered
pursuant hereto, and all legal matters incident thereto, shall be
satisfactory to the Bank and its legal counsel; and
4 Additional Information. The Bank shall have received such
----------------------
additional agreements, certificates, documents, instruments, and
information as the Bank or its legal counsel, Jenkens & Gilchrist, a
Professional Corporation, may reasonably request to effect the transactions
contemplated hereby.
ARTICLE 4
Representations and Warranties
------------------------------
Section 4.1 Representations and Warranties. The Borrower hereby
------------------------------
represents and warrants to the Bank that, as of the date of and after giving
effect to this Amendment: (a) the execution, delivery, and performance of this
Amendment and any and all other Amendment Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of the Borrower and will not violate the Borrower's certificate of
incorporation or bylaws; (b) all representations and warranties set forth in the
Loan Agreement and in the Loan Documents are true and correct in all material
respects as if made again on and as of such date (except as disclosed otherwise
to the Bank in writing and as acceptable to the Bank or representations
specifically relating to a prior date or no longer relevant due to the
occurrence of an event or circumstances specifically permitted hereunder or by
any other Loan Document); (c) no default or event of default has occurred and is
continuing; and (d) the Loan Agreement and the other Loan Documents (as amended
by this Amendment) are and remain legal, valid, binding, and enforceable
obligations of the Borrower.
ARTICLE 5
Miscellaneous
-------------
8
<PAGE>
Section 5.1 Governing Law. THIS AMENDMENT, AND ALL DOCUMENTS AND
-------------
INSTRUMENTS EXECUTED IN CONNECTION HEREWITH, SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF TEXAS, PROVIDED THAT TO THE EXTENT FEDERAL
--------
LAW WOULD ALLOW A HIGHER RATE OF INTEREST THAN WOULD BE ALLOWED BY THE LAWS OF
THE STATE OF TEXAS, THEN WITH RESPECT TO THE PROVISIONS OF ANY LAW WHICH
PURPORTS TO LIMIT THE AMOUNT OF INTEREST THAT MAY BE CONTRACTED FOR, CHARGED OR
RECEIVED IN CONNECTION WITH ANY OF THE OBLIGATIONS, SUCH FEDERAL LAW SHALL
APPLY.
Section 5.2 Agreement Remains in Effect; No Waiver. Except as expressly
--------------------------------------
provided herein, all terms and provisions of the Loan Agreement and the other
Loan Documents shall remain unchanged and in full force and effect and are
hereby ratified and confirmed. No delay or omission by the Bank in exercising
any power, right, or remedy shall impair such power, right, or remedy or be
construed as a waiver thereof or an acquiescence therein, and no single or
partial exercise of any such power, right, or remedy shall preclude other or
further exercise thereof or the exercise of any other power, right, or remedy
under the Loan Agreement, the Loan Documents, or otherwise.
Section 5.3 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made in this Amendment or any other Loan Document
shall survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Bank or any closing shall affect the
representations and warranties or the right of the Bank to rely upon them.
Section 5.4 Reference to Loan Agreement and Loan Documents. Each of the
----------------------------------------------
Loan Documents, including the Loan Agreement, the Amendment Documents, and any
and all other agreements, documents, or instruments now or hereafter executed
and/or delivered pursuant to the terms hereof or pursuant to the terms of the
Loan Agreement, as amended hereby, are hereby amended so that any reference in
the Loan Documents to the Loan Agreement shall mean a reference to the Loan
Agreement as amended hereby, and the term "loan documents" as used in the Loan
Agreement and as used in any of the other Loan Documents includes, without
limitation, the Amendment Documents.
Section 5.5 Severability. Any provision of this Amendment held by a court
------------
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.6 Successors and Assigns. This Amendment is binding upon and
----------------------
shall inure to the benefit of the Borrower, the Bank, and their respective
successors in interest and assigns. The Borrower may not assign any right,
power, duty, or obligation hereunder without the prior written consent of the
Bank.
Section 5.7 Headings. The headings, captions, and arrangements used in
--------
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
9
<PAGE>
Section 5.8 Expenses of the Bank. As provided in the Loan Agreement, the
--------------------
Borrower agrees to pay on demand all reasonable, third party out-of-pocket costs
and expenses incurred by the Bank in connection with the preparation,
negotiation, and execution of this Amendment, the Amendment Documents, or the
other Loan Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the
reasonable fees of the Bank's legal counsel, and all reasonable costs and
expenses incurred by the Bank in connection with the enforcement or preservation
of any rights under the Loan Agreement, as amended hereby, or any other Loan
Document, including, without limitation, the reasonable costs and fees of the
Bank's legal counsel.
Section 5.9 Counterparts. This Amendment may be executed simultaneously
------------
in one or more multiple originals, each of which shall be deemed an original,
but all of which together shall constitute one and the same agreement.
THIS AMENDMENT, TOGETHER WITH THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Amendment to
be executed and delivered by their duly authorized officers effective as of the
date first written above.
BORROWER:
--------
AZTEC MANUFACTURING CO.
By: /s/ DANA PERRY
-----------------------------
Name: Dana Perry
-----------------------------
Title: Vice President & CFO
-----------------------------
BANK:
----
BANK OF AMERICA, N.A. (successor by
merger to Bank of America, Texas, N.A.)
By: /s/ VINCENT A. LIBERIO
-----------------------------
Name: Vincent A. Liberio
-----------------------------
Title: Senior Vice President
-----------------------------
10
<PAGE>
REAFFIRMATION OF AGREEMENTS
---------------------------
Each of the undersigned hereby consents to the Borrower and the Bank
entering into the foregoing Amendment and agrees that (a) the Business Loan
Continuing Guaranty (the "Guaranty"), the Security Agreement: Receivables,
--------
Inventory and Equipment (Guarantors) (the "Security Agreement"), and other Loan
------------------
Documents to which it is a party shall remain in full force and effect and shall
continue to be the legal, valid, and binding obligation of the undersigned
enforceable against it in accordance with their respective terms, and (b) the
obligations secured and/or evidenced by the Guaranty, the Security Agreement,
and the other Loan Documents to which the undersigned is a party include,
without limitation, all indebtedness, liabilities, and obligations of the
Borrower pursuant to the terms of the Loan Agreement as amended by this
Amendment.
AZTEC INDUSTRIES, INC. AZTEC INDUSTRIES INC. - MOSS POINT
By: /s/ DANA PERRY By: /s/ DANA PERRY
---------------------------- -----------------------------
Name: Dana Perry Name: Dana Perry
-------------------- ----------------------
Title: Vice President & CFO Title: Vice President & CFO
-------------------- ----------------------
AUTOMATIC PROCESSING THE CALVERT COMPANY, INC.
INCORPORATED
By: /s/ DANA PERRY By: /s/ DANA PERRY
---------------------------- -----------------------------
Name: Dana Perry Name: Dana Perry
-------------------- ----------------------
Title: Vice President & CFO Title: Vice President & CFO
-------------------- ----------------------
GULF COAST GALVANIZING, INC. ARKGALV, INC.
By: /s/ DANA PERRY By: /s/ DANA PERRY
---------------------------- -----------------------------
Name: Dana Perry Name: Dana Perry
-------------------- ----------------------
Title: Vice President & CFO Title: Vice President & CFO
-------------------- ----------------------
AZTEC GROUP COMPANY AZTEC HOLDINGS, INC.
By: /s/ DANA PERRY By: /s/ DANA PERRY
---------------------------- -----------------------------
Name: Dana Perry Name: Dana Perry
-------------------- ----------------------
Title: Vice President & CFO Title: Vice President & CFO
-------------------- ----------------------
<PAGE>
AZTEC MANUFACTURING AZTEC MANUFACTURING-WASKOM
PARTNERSHIP, LTD. PARTNERSHIP, LTD.
By: /s/ DANA PERRY By: /s/ DANA PERRY
---------------------------- -----------------------------
Name: Dana Perry Name: Dana Perry
-------------------- ----------------------
Title: Vice President & CFO Title: Vice President & CFO
-------------------- ----------------------
RIG-A-LITE PARTNERSHIP, LTD. ARBOR-CROWLEY, INC.
By: /s/ DANA PERRY By: /s/ DANA PERRY
---------------------------- -----------------------------
Name: Dana Perry Name: Dana Perry
-------------------- ----------------------
Title: Vice President & CFO Title: Vice President & CFO
-------------------- ----------------------
ARIZONA GALVANIZING, INC. ATKINSON INDUSTRIES, INC.
By: /s/ DANA PERRY By: /s/ DANA PERRY
---------------------------- -----------------------------
Name: Dana Perry Name: Dana Perry
-------------------- ----------------------
Title: Vice President & CFO Title: Vice President & CFO
-------------------- ----------------------
INTERNATIONAL GALVANIZERS DRILLING RIG ELECTRICAL SYSTEMS
PARTNERSHIP, LTD. CO. PARTNERSHIP, LTD
By: AZTEC GROUP COMPANY, By: AZTEC GROUP COMPANY,
General Partner General Partner
By: /s/ DANA PERRY By: /s/ DANA PERRY
---------------------------- -----------------------------
Name: Dana Perry Name: Dana Perry
-------------------- ----------------------
Title: Vice President & CFO Title: Vice President & CFO
-------------------- ----------------------
HOBSON GALVANIZING, INC.
By: /s/ DANA PERRY
----------------------------
Name: Dana Perry
--------------------
Title: Vice President & CFO
--------------------
2
<PAGE>
EXHIBIT 1
---------
Compliance Certificate
----------------------
3
<PAGE>
COMPLIANCE CERTIFICATE
for the
quarter ending __________ ___, ______
To: Bank of America, Texas, N.A.
P. O. Box 619005
Dallas, Texas 75261-9005
Attention: Vincent A. Liberio
Ladies and Gentlemen:
This Compliance Certificate ("Certificate") is being delivered pursuant to
Section 8.2(g) of that certain Business Loan Agreement (Receivables and
Inventory), as amended (the "Agreement"), dated as of June 28, 1996 between
AZTEC MANUFACTURING CO. (the "Borrower") and BANK OF AMERICA, TEXAS, N.A. (the
"Bank"). All capitalized terms, unless otherwise defined herein, shall have the
same meanings as in the Agreement. All the calculations set forth below shall be
made pursuant to the terms of the Agreement.
The undersigned, an authorized representative of the Borrower, does hereby
certify to the Bank that:
1 Default.
-------
No default or event of default has occurred and is continuing or if a
default or event of default has occurred and is continuing, I have
described on the attached Exhibit "A" the nature thereof and the steps
-----------
taken or proposed to remedy such default or event of default.
<TABLE>
<CAPTION>
Compliance
------------
2 Section 8.2 - Financial Information.
-----------------------------------
<S> <C>
a0 Annual audited financial statements of the Borrower and
its subsidiaries, and internally prepared annual financial
statements of the Borrower on a consolidated and
consolidating basis, each within 90 days of the Borrower's
fiscal year end................................................... Yes No N/A
b0 Quarterly unaudited financial statements, on a
consolidated basis, of the Borrower and its subsidiaries,
within 45 days of the period's end................................ Yes No N/A
c0 Form 10-K Annual Report, Form 10-Q Quarterly Report and
Form 8-K current Report within 10 days after the date of
filing with the Securities and Exchange Commission................ Yes No N/A
d0 A borrowing base certificate within 30 days after the
end of each month................................................. Yes No N/A
e0 Annual consolidated and consolidating operating
forecasts of the Borrower and its subsidiaries by May 31
of each year...................................................... Yes No N/A
</TABLE>
3 Section 8.3 - Quick Ratio
-------------------------
COMPLIANCE CERTIFICATE -Page 1
<PAGE>
<TABLE>
<CAPTION>
Compliance
----------
<S> <C> <C> <C>
Borrower's minimum ratio of Quick Assets to Current
Liabilities must be at least 0.6 to 1.0 (determined on a
consolidated basis).
Quick Assets:
------------
(a) Cash, plus.................................................... $________
(b) Short-term cash investments, plus............................. $________
(c) Net trade receivables, plus................................... $________
(d) Marketable securities not classified as long-term investments. $________
(e) Total Quick Assets............................................ $________
Current Liabilities:
-------------------
(f) Current liabilities under GAAP................................ $________
(g) Amount of the line of credit which would otherwise not be
included in (f) above......................................... $________
(h) Total Current Liabilities..................................... $________
Quick Assets to Current Liabilities (3(e) / 3(h))....................... ___ to 1.0
Ratio required by Section 8.3........................................... 0.6 to 1.0 Yes No
4. Section 8.4 - Tangible Net Worth.
--------------------------------
Borrower's minimum Tangible Net Worth must be at least $11,000,000 plus
50% of Borrower's positive net income for the quarter ending after June
30, 1999 (determined on a consolidated basis).
(a) Actual Tangible Net Worth..................................... $_________
(b) Tangible Net Worth required by Section 8.4.................... $_________ Yes No
5. Section 8.5 - Current and Long Term Liabilities to Tangible Net Worth
---------------------------------------------------------------------
Borrower's ratio of Long Term Debt and Current Liabilities to Tangible
Net Worth must not exceed ________ to 1.0 (determined on a
consolidated basis).
Long Term Debt and Current Liabililties:
---------------------------------------
(a) Long Term Debt................................................ $________
(b) Current Liabilities (5(a)).................................... $________
(c) Total Long Term Debt and Current Liabilities.................. $_________
Tangible Net Worth:
------------------
(d) Tangible Net Worth (4(a))..................................... $________
Ratio of Long Term Debt and Current Liabilities
</TABLE>
COMPLIANCE CERTIFICATE - Page 2
<PAGE>
<TABLE>
<CAPTION>
Compliance
----------
<S> <C> <C> <C>
to Tangible Net Worth (13(c) / 13(d))................................... ___ to 1.0 Yes No
Ratio Required by Section 8.24.......................................... ___ to 1.0
6. Section 8.6 - Cash Flow Ratio.
-----------------------------
Borrower's minimum ratio of Cash Flow to the current portion of long term
debt plus interest expense must be at least 1.60 to 1.0 (determined on
a consolidated basis).
Cash Flow:
---------
(a) Net income from operations (before extraordinary or
nonrecurring gains or losses), minus.......................... $________
(b) Taxes, plus................................................... $________
(c) Depreciation, amortization and other non-cash
charges, plus................................................. $________
(d) Interest expense, minus....................................... $________
(e) Dividends..................................................... $________
(f) Total Cash Flow (6(a) - 6(b) + 6(c) + 6(d) - 6(e))............ $________
CMLTD plus Interest Expense:
---------------------------
(g) Current portion of long term debt, plus....................... $________
(h) Interest expense.............................................. $________
(i) Total (6(g) + 6(h))........................................... $________
Ratio of Cash Flow to the current portion of long term debt plus
interest expense (6(f) + 6(i)).......................................... ___ to 1.0
Ratio required by Section 8.6........................................... 1.60 to 1.0 Yes No
7. Section 8.7 - Other Debts.
-------------------------
No other direct or contingent debts or lease obligations incurred by the
Borrower or the Guarantors, except as permitted......................... Yes No
8. Section 8.8 - Other Liens.
-------------------------
No other security interests or liens on the property of the Borrower or
the Guarantors, except as permitted..................................... Yes No
9. Section 8.9 - Capital Expenditures.
----------------------------------
Capital expenditures for the Borrower and the Guarantors must not exceed
$6,500,000 in the aggregate for the fiscal year ended 2/2000 or
$4,000,000 during any 12 month period, thereafter.
(a) Actual Capital Expenditures................................... $________
</TABLE>
COMPLIANCE CERTIFICATE - Page 3
<PAGE>
<TABLE>
<CAPTION>
Compliance
----------
<S> <C> <C> <C>
(b) Capital Expenditures limit under Section 8.9.................. $________ Yes No
10. Section 8.10 - Dividends.
------------------------
No dividends payable by Borrower, except as permitted................... Yes No
11. Section 8.11 - Treasury Stock.
-----------------------------
No purchase of Treasury Stock is permitted. Yes No
12. Section 8.12 - Loans to Officers.
--------------------------------
Loans, advances and other extensions of credit to any executive,
officer, director or shareholder (or affiliate of any of the
foregoing) by the Borrower and the Guarantors must not exceed
$250,000 in the aggregate during any 12 month period.
(a) Actual loans, advances and other extensions of credit........ $________
(b) Limit of loans advances and other extensions of credit....... $250,000 Yes No
13. Section 8.24 - Funded Debt to EBITDA
------------------------------------
Borrower's ratio of Funded Debt to EBITDA must not exceed 3.0 to 1.0
(determined on a consolidated basis).
Funded Debt............................................................ $_______
EBITDA................................................................. $_______
Ratio of Funded Debt to EBITDA......................................... ___ to 1.0
Ratio Required by Section 8.25......................................... 3.0 to 1.0 Yes No
</TABLE>
14. Attached Schedules.
------------------
Attached hereto as Schedules are the calculations supporting the
computations set forth in this Certificate, if applicable. All
information contained herein and on the attached schedules is true and
correct.
COMPLIANCE CERTIFICATE - Page 4
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate effective
this ___ day of ________________, ____.
AZTEC MANUFACTURING CO.
By: /s/ DANA PERRY
-----------------------------
Name: Dana Perry
----------------------
Title: Vice President & CFO
----------------------
COMPLIANCE CERTIFICATE - Page 5
