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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): November 13, 1997
TUFCO TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-21018 39-1723477
(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation or Organization) Number) Identification Number)
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4800 Simonton Road, Dallas, Texas 75244
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (972) 789-1079
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On November 13, 1997, pursuant to the terms of the Stock Purchase
Agreement dated as of November 12, 1997 (the "Stock Purchase Agreement") by and
among Tufco Technologies, Inc., a Delaware corporation ("Tufco"), and Charles
Cobaugh and James Barnes (collectively, the "Selling Stockholders"), Tufco
acquired 100% of the outstanding common stock (the "Acquisition") of Foremost
Manufacturing Company, Inc., a Missouri corporation ("Foremost"). Foremost is
a manufacturer and distributor of painting accessories and paint sundries
products located in Saint Louis, Missouri.
Tufco purchased 100% of the outstanding stock of Foremost from the
Selling Stockholders for an aggregate purchase price of $5,247,000 (the
"Purchase Price"), which was agreed upon through arm's length negotiations
between Tufco and the Selling Stockholders. In exchange for the outstanding
common stock of Foremost, the Selling Stockholders received (i) $4,747,000 in
cash (the "Cash Payment"), (ii) $250,000 in cash to be held in escrow until
January 31, 1999 (the "Escrow Payment") and (iii) 25,907 shares of Tufco common
stock, par value $0.01 per share. The Purchase Price shall be reduced,
however, (i) by the amount that the net worth of Foremost as of November 13,
1997, which is to be determined no later than January 12, 1998 in accordance
with the provisions of the Stock Purchase Agreement, is less than $1,000,000,
and (ii) by the amount that the indebtedness of Foremost as of November 13,
1997, which is to be determined no later than January 12, 1998 in accordance
with the provisions of the Stock Purchase Agreement, exceeds $300,000.
Additionally, the Selling Stockholders shall be entitled to receive additional
consideration of up to a maximum $900,000 based upon the revenues of Tufco's
Paint and Sundries Sector for the period commencing November 1, 1997 through
and including October 31, 1998.
The Cash Payment and Escrow Payment was funded from the proceeds of a
$5,250,000 secured term loan (the "Acquisition Loan") from Tufco's primary
lender, Bank One, Wisconsin. The Acquisition Loan has a variable interest rate
based on the LIBOR rate plus 1.375% and matures on March 31, 1998. Interest is
payable monthly commencing on November 30, 1997. The Acquisition Loan is
secured by the assets of Foremost. The Acquisition Loan may not be prepaid
without the consent of Bank One, Wisconsin.
Foremost's assets consist primarily of manufacturing equipment,
inventories and related assets used in the manufacturing and distribution of
painting accessories and paint sundries products. Tufco will continue the
business operations of Foremost as a wholly-owned subsidiary. Prior to the
Acquisition, there was no material relationship between Tufco or any of its
affiliates, directors and officers and the Selling Stockholders, Foremost or
any of its directors or officers. Mr. Cobaugh, who was formerly the President
of Foremost, will assume the position of Vice President for Tufco's Paint
Sundries Sector.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS.
*2.1 Stock Purchase Agreement dated as of November 12, 1997 by and among
Tufco Technologies, Inc., Charles Cobaugh and James Barnes
*99.1 Second Amended and Restated Loan Agreement dated as of November 13,
1997 by and between Bank One, Wisconsin and Tufco, L.P.
*99.2 Term Note dated November 13, 1997 in the original principal amount of
$5,250,000 with Tufco, L.P. as Maker and Bank One, Wisconsin as payee
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* Filed herewith
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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.
TUFCO TECHNOLOGIES, INC.
/s/ Gregory L. Wilemon
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Gregory L. Wilemon
Chief Financial Officer,
Chief Operating Officer,
Secretary and Treasurer
Dated: November 26, 1997
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EXHIBIT LIST
*2.1 Stock Purchase Agreement dated as of November 12, 1997 by and among
Tufco Technologies, Inc., Charles Cobaugh and James Barnes
*99.1 Second Amended and Restated Loan Agreement dated as of November 13,
1997 by and between Bank One, Wisconsin and Tufco, L.P.
*99.2 Term Note dated November 13, 1997 in the original principal amount of
$5,250,000 with Tufco, L.P. as Maker and Bank One, Wisconsin as payee
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* Filed herewith
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of November 12, 1997 (this
"Agreement"), by and among TUFCO TECHNOLOGIES, INC., a Delaware corporation
("Buyer"), CHARLES COBAUGH ("Cobaugh") and JAMES BARNES ("Barnes," and together
with Cobaugh, the "Stockholders").
WHEREAS, the Stockholders are the beneficial and record owners of all
of the issued and outstanding shares of common stock, no par value per share
(the "Shares"), of Foremost Manufacturing Company, Inc., a Missouri corporation
(the "Company"); and
WHEREAS, Buyer desires to purchase and the Stockholders desire to
sell, all of the Shares, upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties contained herein, and intending to be legally
bound hereby the covenants and agreements contained herein, the parties hereto
agree as follows:
ARTICLE I
SALE OF STOCK
1.1. The Sale. Upon the terms and subject to the conditions of
this Agreement, at the closing (the "Closing"), the Stockholders hereby jointly
and severally agree to sell, convey, assign, transfer and deliver to Buyer, and
Buyer hereby agrees to purchase and acquire from each Stockholder, the Shares
owned by such Stockholder, free and clear of all Liens (as defined in Section
2.1 hereof). The number and class of Shares to be sold by each of the
Stockholders is set forth in Schedule 1.1 of the disclosure schedules delivered
in connection herewith and attached hereto (the "Disclosure Schedules") to this
Agreement.
1.2. Purchase Price.
(a) On the Closing Date (as hereinafter defined), Buyer shall (x)
subject to subsequent adjustment pursuant to Section 1.3 and Section 5.1
hereof, pay to the Stockholders Five Million dollars ($5,000,000), less the
dollar amount of all Indebtedness (as hereinafter defined) of the Company
existing on October 31, 1997, and amounts, if any, calculated in accordance
with Section 1.2(b) below (as so adjusted, the "Cash Purchase Price"); (y)
deliver to Bank One Trust Company, NA, with an office at 111 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202, as escrow agent (the "Escrow Agent"),
$250,000 (such amount, the "Escrow Payment") to be held in an escrow fund (the
"Escrow Fund") in accordance with an Escrow Agreement substantially in the form
attached hereto as Exhibit A, to be executed and delivered by and among Buyer,
the Stockholders and the Escrow Agent as of the Closing Date (the "Escrow
Agreement"); and (z) issue to the Stockholders 25,907 shares of the common
stock, par value $.01 per share, of Buyer (the "Buyer Shares," and together
with the Cash Purchase Price and the Escrow Payment, the "Purchase Price").
For purposes of this Agreement, "Indebtedness" shall mean (i) any and all
indebtedness (including accrued interest thereon and other amounts payable with
respect thereto) for borrowed money or evidenced by notes, bonds, debentures or
similar evidences of indebtedness, or similar obligations (including, without
limitation, guarantees of indebtedness of others), but shall not include trade
accounts payable to the extent incurred in the
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ordinary course of business consistent with past practice but not yet due and
payable in accordance with their ordinary and customary terms and (ii) the
aggregate cash amount of all checks or other similar obligations for payment of
the Company's cash which have been issued by the Company as of October 31, 1997
and not collected on or prior to October 31, 1997, in excess of the Company's
available cash in its bank accounts on October 31, 1997 ("Bank Overdraft").
(b) In addition, all outstanding loans and advances (including
interest) owed by the Company to the Stockholders and owed by the Stockholders
to the Company on the Closing Date shall be canceled as follows: (i) in the
event such amount owed by the Company is greater than the amount owed by the
Stockholders, all such amounts owed by the Company to the Stockholders shall be
paid in full, and the Cash Purchase Price shall be reduced by the amount of
such excess; and (ii) in the event such amount owed by the Stockholders is
greater than the amount owed by the Company, such amount shall be canceled and
the Cash Purchase Price shall be reduced by the amount owed by the Stockholders
to the Company.
(c) The Company has advised Buyer, and Buyer expects that the
Indebtedness of the Company as of October 31, 1997 shall consist solely of
Indebtedness for borrowed money from Allegiant Bank.
1.3. Net Worth Adjustment.
(a) To the extent that on the Closing Date the Net Worth (as
hereinafter defined) of the Company, as determined in accordance with the
procedures set forth in Section 1.3(b) hereof, is determined to be less than
One Million dollars ($1,000,000), the Purchase Price payable by Buyer pursuant
to Section 1.2(a) hereof shall be reduced by an amount equal to the amount by
which the Net Worth of the Company is determined to be below One Million
dollars ($1,000,000). Within five business days after the final determination
of the Net Worth pursuant to the procedures in Section 1.3(b) hereof, in the
event that the Net Worth is determined pursuant to Section 1.3(b) to be less
than One Million dollars ($1,000,000), the Stockholders shall pay to Buyer, by
wire transfer, in immediately available funds, the amount by which such final
determination of the Net Worth shall be less than One Million dollars
($1,000,000). For purposes of this Agreement, the term "Net Worth" shall mean
the total assets of the Company minus the total liabilities of the Company, and
shall be determined in accordance with generally accepted accounting
principles, except that for purposes of computing Net Worth (i) depreciation of
assets (period and lives) shall be consistent with the Latest Balance Sheet;
(ii) there will be no reserve for "bad debt" with respect to accounts
receivable on the Closing Date Balance Sheet; (iii) inventory reflected on the
Closing Date Balance Sheet shall be based on a physical inventory done on
November 1 and 2, 1997 and there will be no reserve for obsolete or slow moving
inventory; and (iv) the Closing Date Balance Sheet will not reflect as an asset
any receivable from an employee. The Buyer and Stockholders agree that the
Closing Date Balance Sheet will reflect all liabilities in accordance with
generally accepted accounting principals, including without limitation, (i) the
dollar amount of all Indebtedness (other than the dollar amount of Indebtedness
which is subtracted from the Cash Purchase Price pursuant to Section 1.2); (ii)
all accrued property taxes (real estate and other assets) to the Closing Date;
(iii) accrued vacation pay to the Closing Date; (iv) accrued benefit costs to
the Closing Date; (v) federal and state income taxes to the Closing Date; (vi)
accrued payables to Guard Manufacturing Company Inc. to the Closing Date solely
with respect to health insurance premiums with respect to employees of the
Company, and compensation for Larry Oberman; and (vii) $3,000 deferred
compensation to employees of the Company.
(b) After the Closing Date, Buyer shall cause its independent
certified public accountants to prepare and deliver to the Stockholders, not
later than sixty (60) days after the Closing Date, a balance sheet of the
Company at the Closing Date (the "Closing Date Balance Sheet"), prepared in
accordance with generally
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accepted accounting principles, consistently applied with the application
thereof to the Latest Balance Sheet, to be used for purposes of calculating the
Net Worth of the Company at the Closing Date for purposes of Section 1.3(a)
hereof. Following the Closing Date, the Stockholders shall cause Anders,
Minkler and Diehl, the Company's independent certified public accountants, to
provide Buyer and its independent certified public accountants of Buyer with
access at all reasonable times, to the work papers and other information used
by the Stockholders' independent certified public accountants in preparing the
Latest Balance Sheet. The Stockholders shall have thirty (30) days after
delivery to it by Buyer of the Closing Date Balance Sheet during which to
notify Buyer of any good faith dispute of any item contained in the Closing
Date Balance Sheet. In the event that the Stockholders shall so notify Buyer
of any such dispute on or before the last day of such thirty (30) day period,
Buyer and the Stockholders and their respective independent accountants shall
cooperate in good faith to resolve such dispute as promptly as possible. If
the Stockholders fail to notify Buyer of any such good faith dispute on or
before the last day of such thirty (30) day period, the Closing Date Balance
Sheet shall be final and binding upon Buyer and the Stockholders, and such
Closing Date Balance Sheet shall be used to adjust the Purchase Price pursuant
to Section 1.3(a) hereof. If Buyer and the Stockholders and their respective
independent accountants are unable to resolve any such dispute within thirty
(30) days of Buyer's delivery of such notice, such dispute shall be resolved by
a jointly selected nationally recognized accounting firm (the "Independent
Accounting Firm") retained to resolve any disputes between Buyer and the
Stockholders over any item contained in the Closing Date Balance Sheet, which
shall make its determination as promptly as practicable, and such determination
shall be final and binding on the Buyer and the Stockholders. The Independent
Accounting Firm shall, acting as experts and not as arbitrators, determine on a
basis of the standards set forth in this Section 1.3, whether and to what
extent, if any, the Closing Date Balance Sheet requires adjustment. If the
Stockholders and Buyer cannot jointly agree on the identity of the Independent
Accounting Firm, the Stockholders and Buyer shall each submit to their
respective independent accountants the name of an accounting firm which does
not at the time provide services to the Company, the Stockholders or Buyer, and
the Independent Accounting Firm shall be selected by lot from these two firms
by the respective independent accountants of the Company and Buyer. Any
expenses relating to the engagement of the Independent Accounting Firm shall be
shared equally by the Stockholders and Buyer. The Closing Date Balance Sheet,
as modified by resolution of any disputes by Buyer and the Stockholders or by
the Independent Accounting Firm, shall be final and binding upon Buyer and the
Stockholders, and such Closing Date Balance Sheet shall be used to adjust the
Purchase Price pursuant to Section 1.3(a) hereof.
(c) To the extent that Indebtedness on the Closing Date Balance
Sheet (not including the amount of Indebtedness for which the Cash Purchase
Price is reduced pursuant to Section 1.2(a) hereof) shall be in excess of
$300,000, the Stockholders shall pay to Buyer by wire transfer in immediately
available funds within five business days after the final determination of the
Net Worth pursuant to Section 1.2(b) hereof, an additional amount equal to the
amount such Indebtedness on the Closing Date Balance Sheet is in excess of
$300,000.
1.4. Closing. Upon the terms and subject to the conditions
contained in this Agreement, the Closing will take place at 10:00 a.m. on the
Closing Date at the offices of Ottsen, Mauze, Leggat & Belz, L.C., 112 South
Hanley, St. Louis, Missouri 63105, on November 13, 1997, or such later date
immediately following the date on which all of the conditions to each party's
obligations hereunder have been satisfied or waived, or at such other place or
time or both as the parties may mutually agree (the "Closing Date").
1.5. Deliveries by Stockholders and the Company.
(a) At the Closing, the Stockholders will deliver the following to
Buyer:
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(i) Certificates representing the Shares, accompanied by stock
powers duly endorsed in blank or accompanied by duly executed
instruments of transfer, and any other documents that are
necessary to transfer to Buyer good title to all the Shares
free and clear of all Liens (as hereinafter defined);
(ii) The resignations of all members of the Boards of
Directors (all such persons collectively, the "Resigning
Directors") of the Company;
(iii) The stock books, stock ledgers, minute books and other
corporate records and corporate seals of Company;
(iv) The duly executed officer's certificate provided for in
Section 6.2(c);
(v) The Escrow Agreement;
(vi) The Cobaugh Employment and Non-competition Agreement
(as defined in Section 5.6 hereof);
(vii) The opinion of Ottsen, Mauze, Leggat & Belz L.C.,
substantially in the form attached hereto as Exhibit B;
(viii) The St. Louis Lease duly executed by the Eleven/Eleven
Company and the Company (as hereinafter defined);
(ix) All third party and governmental consents required in
connection with the transactions contemplated by this
Agreement;
(x) A release of liabilities and obligations, substantially
in the form of Exhibit C hereto by each Stockholder, and by
Guard Manufacturing Company, Inc., in favor of the Company
(the "Release");
(xi) A certification duly executed by the Stockholders with
respect to the accuracy and completeness of the Bank Overdraft
and aggregate amount of Indebtedness on October 31, 1997,
which shall include a detailed description thereof prepared by
the Company's independent certified public accountants;
(xii) A certification duly executed by the Stockholders with
respect to the good faith reasonably based estimate of the Net
Worth of the Company on the Closing Date.
(xi) All other documents, instruments and writings required
to be delivered by the Stockholders at or prior to the Closing
Date pursuant to this Agreement.
(b) At the Closing, the Stockholders will deliver to the Escrow
Agent, the Escrow Agreement, duly executed by the Stockholders.
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1.6. Deliveries by Buyer.
(a) At the Closing, Buyer will deliver to the Stockholders the
following:
(i) The Cash Purchase Price, by wire transfer to a bank
account designated by the Stockholders in writing delivered to
Buyer at least two (2) business days prior to the Closing
Date;
(ii) The Buyer Shares;
(iii) The duly executed officer's certificate provided for in
Section 6.1(c);
(iv) The Escrow Agreement;
(v) The Cobaugh Employment and Non-competition Agreement (as
hereinafter defined);
(vi) The opinion of Battle Fowler LLP, substantially in the
form attached hereto as Exhibit D;
(vii) Certified copies of the resolutions, duly adopted by
the Board of Directors of Buyer, that will be in full force
and effect at the time of delivery, authorizing the execution,
delivery and performance of this Agreement; and
(viii) All other documents, instruments and writings required
to be delivered by Buyer at or prior to the Closing Date
pursuant to this Agreement.
(b) At the Closing, Buyer will deliver to the Escrow Agent, the
Escrow Agreement, duly executed by Buyer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS AS TO THEMSELVES
Each Stockholder jointly and severally hereby represents and warrants
to Buyer that the following are true, correct and complete:
2.1. Ownership of Shares; Title. Each Stockholder is the owner of
record and beneficially of the Shares set forth next to its name on Schedule
1.1. of the Disclosure Schedules. All of the Shares are owned by the
Stockholders free and clear of any claim, levy, charge, pledge, hypothecation,
trust, security interest, proxy, voting arrangement, conditional sale or title
retention contract, or other encumbrance or restriction of any kind, including
restrictions affecting voting rights, transferability or incidents of record or
beneficial ownership (any of which being referred to as a "Lien"). The
consummation of the sale of the Shares will convey to Buyer good and marketable
title to Buyer free and clear of all Liens. There are no voting trusts,
stockholder agreements, proxies or
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other agreements or understandings in effect with respect to the voting or
transfer of the Shares to which any Stockholder is a party or is bound thereto.
Except for this Agreement, there are no outstanding warrants, options, rights
or agreements of any kind to acquire from such Stockholder any Shares owned by
such Stockholder. All of such Shares are fully paid and non-assessable.
2.2. Authority. Each Stockholder has full power, legal right and
authority to execute and deliver this Agreement, to sell the Shares in
accordance with the terms and subject to the conditions of this Agreement, and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all requisite action and no other
proceedings on the part of any Stockholder are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by each Stockholder and
constitutes a valid and binding agreement of each Stockholder, enforceable
against each Stockholder in accordance with its terms. The execution, delivery
and performance by each Stockholder of this Agreement and the transactions (and
the consummation of the transactions) contemplated hereby will not: (i) result
in the breach of, or constitute a default (with or without notice or lapse of
time, or both) under, any provision of (a) any debt instrument, indenture,
mortgage agreement or other instrument or arrangement to which such Stockholder
is a part, or by which any of the Shares owned by such Stockholder is bound or
(b) any judgment, order or decree by which such Stockholder is bound or by
which any of the Shares owned by such Stockholder is bound or affected; or (ii)
result in the imposition of any Lien on any of the Shares owned by such
Stockholder; or (iii) impair such Stockholder's ability to perform its or his
obligations under this Agreement.
2.3. Investor Representations. Each Stockholder represents and
warrants to Buyer that he is (A) an "accredited investor" as such term is
defined in the rules promulgated under the Securities Act of 1933, as amended
(the "Securities Act"); and (B) has such knowledge and experience in business
and financial matters as to be capable of evaluating the merits and risks of an
investment in the Shares and has the capacity to protect his own respective
interest in connection with the acquisition of the Shares. The Stockholders
acknowledge that the Shares are being issued by Buyer pursuant to Section 4(2)
of the Securities Act, and consequently will be subject to transfer
restrictions as more fully set forth in Section 5.5 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS AS TO THE COMPANY
The Stockholders jointly and severally represent and warrant to Buyer
that the following are true, correct and complete:
3.1. Due Incorporation and Authority. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Missouri, and has all requisite corporate power and authority to own,
lease and operate its assets and to carry on its business as now being and as
heretofore conducted. The Company has not at any time within the past five
years changed its name, been the surviving corporation in a merger, acquired
any business or changed its principal executive office.
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3.2. Consents and Approvals; No Violations. No filing with, and no
permit, order, authorization, consent or approval of, any public body or
governmental authority, domestic or foreign, or of any third party, is
necessary for the consummation by the Stockholders of the transactions
contemplated by this Agreement. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
will not: (i) violate, contravene, conflict with or result in the breach of
any provision of the Certificate of Incorporation of the Company or Bylaws of
the Company, or any resolution adopted by the Board of Directors of the Company
(or any committee thereof) or by the Company's stockholders; (ii) violate or
result in the breach of any of the terms of, result in a modification of, or
otherwise give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time or both constitute) a default
under, any indenture, license, contract or other agreement to which the Company
is a party or by or to which the Company or any of its assets or properties may
be bound or subject; (iii) violate any order, writ, judgment, injunction, award
or decree of any court, arbitrator or governmental or regulatory body against,
or binding upon, the Company or upon any of its assets or properties; (iv)
violate any statute, law, ordinance, decree, order, rule or regulation of any
jurisdiction; (v) violate or result in the revocation or suspension of, or
impose any penalty under, any Permit (as defined in Section 3.10 hereof) issued
to the Company; (vi) result in the creation of any Lien upon the assets of the
Company; or (vii) result in the acceleration of any obligation under any note,
bond, mortgage, agreement, instrument, arbitration award, judgment or decree to
which the Company is a party or bound or from which it derives a benefit.
3.3. Subsidiaries and Other Affiliates. The Company does not own,
directly or indirectly, any interest in any other Person. For purposes of this
Agreement, "Person" shall mean any individual, entity, corporation,
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, governmental or regulatory body.
3.4. Qualification. The Company is duly qualified to do business
in the State of Missouri. The Company is in good standing in the State of
Missouri. The Company is not qualified to do business in any other state or
jurisdiction.
3.5. Outstanding Capital Stock. As of the date hereof, the
authorized capital stock of the Company consists solely of 30,000 shares of
common stock, no par value, of which 10,000 Shares are issued and outstanding.
There are no shares of capital stock of the Company held by the Company as
treasury shares. The issued and outstanding Shares are duly authorized, fully
paid, nonassessable and free of all preemptive rights. No legend or other
reference to any purported Lien appears upon any certificate representing the
Shares. None of the securities of the Company were issued in violation of
United States securities laws or the securities laws of any state.
3.6. Outstanding Options or Other Rights.
(a) There are no outstanding rights, subscriptions, warrants,
calls, unsatisfied preemptive rights, options, or other agreements of any kind
to purchase or otherwise to receive from the Company any of the Shares or any
of the authorized but unissued shares of the capital stock or any other
security of the Company, and there is no outstanding security of any kind
issued by the Company convertible into capital stock of the Company.
(b) Neither the Company nor any officer, director or Stockholder
has committed, either orally or in writing, to pay any bonus, fee, or
additional compensation to any employee of the
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Company in connection with the transactions contemplated by this Agreement.
(c) The Company has not granted to any Person any right of first
look, first offer, first refusal or other similar option to acquire the capital
stock or any of the assets of the Company or any division of the Company.
3.7. Certificate of Incorporation and Bylaws. The Company has
heretofore delivered to Buyer true and complete copies of its Certificate of
Incorporation (certified by the Secretary of State of Missouri) and Bylaws
(certified by its secretary or assistant secretary) in effect as of the date
hereof. There have been no amendments or modifications to the Certificate of
Incorporation or the Bylaws of the Company since their respective certification
dates.
3.8. Financial Statements; Books and Records.
(a) The statement of assets, liabilities and equity-income tax
basis of the Company as of May 31, 1997, 1996 and 1995 (collectively the
"Year-end Balance Sheets"), and the related statement of revenues, expenses and
retained earnings-income tax basis for the years then ended, compiled by
Anders, Minkler and Diehl, the Company's independent certified public
accountants (collectively, with the Year-end Balance Sheets, the "Financial
Statements"), which have been delivered to Buyer, fairly present the financial
position of the Company as at such dates and the results of operations of the
Company and cash flows for such respective periods, in each case prepared based
upon the amounts reflected in the financial and other books and records of the
Company, and except as otherwise expressly set forth on Schedule 3.8, in
accordance with generally accepted accounting principles, consistently applied
for the periods covered thereby.
(b) The statement of assets, liabilities and equity-income tax
basis of the Company as at September 30, 1997 ("Latest Balance Sheet"), and
related statement of revenues, expenses and retained earnings-income tax basis
for the period ended September 30, 1997, which is attached hereto as Exhibit E,
fairly presents the financial position of the Company as at September 30, 1997,
and was prepared based on amounts reflected in the financial and other books
and records of the Company and in accordance with generally accepted accounting
principals (except as otherwise expressly set forth on Schedule 3.8.
(c) Except as set forth on Schedule 3.8, the books of account,
minute books, stock record books, stock ledger and other records of the Company
("Books and Records") all of which have been delivered to Buyer, are complete
and correct and have been maintained in accordance with sound business
practices, including the maintenance of a system of internal controls. The
Stockholders and the Board of Directors of the Company have ratified all prior
actions taken by the Stockholders and the Board of Directors of the Company,
respectively, since the date of incorporation of the Company. The Books and
Records that have been delivered to Buyer represent all of the Books and
Records of the Company that are in possession of the Stockholders, the Company,
or to the knowledge of the Stockholders, any third parties. Neither the Board
of Directors nor the Stockholders have since the date of the incorporation of
the Company, approved, adopted, authorized or consented to any action by the
Company which is not set forth in the Books and Records delivered to Buyer,
that could have a material effect on the business, operations, results of
operations, condition (financial or otherwise), or prospects of the Company.
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3.9. Tax Matters.
(a) Except as set forth on Schedule 3.9 of the Disclosure
Schedules, (i) all Tax (as hereinafter defined) returns, statements, reports
and forms (including estimated tax or information returns and reports) required
to be filed with any Taxing Authority (as hereinafter defined) with respect to
any Pre-Closing Tax Period (as hereinafter defined) by or on behalf of the
Company (collectively, the "Returns") have, to the extent required to be filed
on or before the date hereof, been filed when due in accordance with all
applicable laws; (ii) as of the time of filing, the Returns were true, correct
and complete and correctly reflected the facts regarding the income, business,
assets, operations, activities and status of the Company and any other
information required to be shown therein; (iii) all Taxes shown as due and
payable on the Returns that have been filed or that were otherwise due and
payable have been timely paid, or withheld and remitted to the appropriate
Taxing Authority; (iv) the charges, accruals and reserves for Taxes with
respect to the Company for any Pre-Closing Tax Period (including any
Pre-Closing Tax Period for which no Return has yet been filed) reflected on the
books of the Company (excluding any provision for deferred income taxes) are
adequate to cover such Taxes; (v) all Taxes that the Company is, or was,
required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the appropriate Taxing
Authority; (vi) the Company is not delinquent in the payment of any Tax and has
not requested any extension of time within which to file any Return and has not
yet filed such Return nor is late in the filing of any Return after giving
effect to any allowable extension for filing such Return; (vii) the Company has
not granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such extension
or waiver) has not yet expired; (viii) there is no claim, audit, action, suit,
proceeding, or investigation now pending against or with respect to the Company
in respect of any Tax or Tax Asset, or any issue which a Taxing Authority has
indicated an intention to examine of which an officer of the Company is aware
by reason of his participation in industry groups or other trade associations,
which is present in any Returns filed by the Company; (ix) there are no
requests for rulings or determinations in respect of any Tax or Tax Asset
pending between the Company and any Taxing Authority; (x) the Company does not
own any interest in real property in any jurisdiction in which a Tax is imposed
on the transfer or a controlling interest in a Person that owns any interest in
real property; (xi) none of the property owned or used by the Company is
subject to a Tax benefit transfer lease executed in accordance with Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the Tax Equity and Fiscal Responsibility Act of 1982;
(xii) none of the property owned or used by the Company is subject to a lease,
other than a "true" lease for federal income tax purposes; (xiii) none of the
property owned by the Company is "tax exempt use property" within the meaning
of Section 168(h) of the Internal Revenue Code of 1986, as amended (the
"Code"); (xiv) none of the Stockholders, the Company, or any other person on
behalf of the Company has entered into or will enter into any agreement or
consent pursuant to Section 341(f) of the Code; (xv) there are no Liens for
Taxes upon the assets of the Company except Liens for current Taxes not yet
due; (xvi) the Company will not be required to include any adjustment in
taxable income for any Post-Closing Tax Period under Section 481 of the Code
(or any similar provision of the Tax laws of any jurisdiction) as a result of a
change in method of accounting for a Pre-Closing Tax Period or pursuant to the
provisions of any agreement entered into with any Taxing Authority with regard
to the Tax liability of the Company for any Pre-Closing Tax Period; (xvii) the
Company is not currently a party to a Tax sharing agreement or under any
contractual or other obligation to pay any amounts of the type described in
clause (2) or (3) of the definition of "Tax" set forth below; (xviii) all
information set forth in the Latest Balance Sheet relating to Tax matters is
true and complete in all material respects; (xix) except as set forth in
Schedule 3.9 of the Disclosure Schedules (which sets forth all federal and
state
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tax elections that are in effect with respect to the Company), none of the
Stockholders or the Company has in effect any tax elections for federal income
tax purposes under Sections 108, 168, 338, 1017, 1033 or 4977 of the Code; (xx)
there is no contract, agreement, plan or arrangement covering any person that,
individually or collectively, as a consequence of the transactions contemplated
by this Agreement could give rise to the payment of any amount that would not
be deductible by Buyer or the Company by reason of Section 280G of the Code;
(xxi) the Company is not a party to any industrial development bonds; (xxii)
during the previous two years the Company has not engaged in any exchange under
which the gain realized on such exchange was not recognized due to Section 1031
of the Code; (xxiii) Schedule 3.9 of the Disclosure Schedules contains a
listing of each asset of the Company, if any, with respect to which the
adjusted Tax basis for federal income tax purposes differs from the book basis
for financial reporting purposes by more than $10,000, and the amount of such
adjusted tax basis and book basis, (xxiv) for Income Tax purposes, the Company
has not, in a manner inconsistent with prior practice, accelerated the
recognition of items of loss, deduction or credit into any Pre- Closing Tax
Period, or deferred or delayed the recognition of items of income or gain into
any Post-Closing Tax Period, and (xxv) the Company has not made a disclosure on
a Return pursuant to Section 6662(d)(2)(B)(ii) of the Code.
(b) For purposes of this Agreement, "Tax" shall mean (i) any
federal, state, local, foreign or other tax, including, without limitation, any
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, license,
withholding on amounts paid to or by the Company payroll, employment, excise
(including the golden parachute excise tax imposed by Section 4999 of the Code
and the greenmail excise tax imposed by Section 5881 of the Code), severance,
stamp, capital stock, occupation, property, environmental or windfall profit
tax, premium, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any Taxing Authority,
(ii) liability of the Company for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group, and (iii) liability of the Company for the payment
of any amounts as a result of being party to any Tax sharing agreement or with
respect to the payment of any amounts of the type described in (i) or (ii) as a
result of any express or implied obligation to indemnify any other Person, as a
successor or otherwise.
(c) For purposes of this Agreement, "Tax Asset" shall mean any
net operating loss, net capital loss, investment tax credit, foreign tax
credit, charitable deduction or any other credit or tax attribute which could
reduce Taxes (including, without limitation, deductions and credits related to
alternative minimum Taxes).
(d) For purposes of this Agreement, "Taxing Authority" shall mean
any governmental authority, domestic or foreign, having jurisdiction over the
assessment, determination, collection, or other imposition of any Tax.
(e) For purposes of this Agreement, "Post-Closing Tax Period"
shall mean any Tax period beginning on or after the Closing Date and those days
which include or follow the Closing Date and are included in the Tax period
which begins before the Closing Date and ends on or after the Closing Date.
(f) For purposes of this Agreement, "Pre-Closing Tax Period"
shall mean any Tax period ending prior to the Closing Date and those days which
precede the Closing Date and are
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included in the Tax period which begins before the Closing Date and ends on or
after the Closing Date.
3.10. Compliance with Laws. Except as set forth on Schedule 3.10 of
the Disclosure Schedules:
(a) The Company is in compliance with all applicable federal,
state, local and foreign laws, ordinances, regulations, orders, judgments,
injunctions, awards, decrees and other requirements of any governmental or
regulatory body, court or arbitrator;
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (i) will likely constitute or result in a
violation by the Company of, or a failure on the part of the Company to comply
with, any applicable federal, state, local and foreign laws, ordinances,
regulations, orders, judgments, injunctions, awards, decrees and other
requirements of any governmental or regulatory body, court or arbitrator, or
(ii) will likely give rise to any obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature;
(c) The Company has not received, at any time in the past five
years, any notice or other communication (whether oral or written) from any
governmental or regulatory body or any other Person regarding (i) any actual or
alleged violation of, or failure to comply with, any applicable federal, state,
local and foreign laws, ordinances, regulations, orders, judgments,
injunctions, awards, decrees and other requirements of any governmental or
regulatory body, court or arbitrator that has not been resolved, or (ii) any
actual or alleged obligation on the part of the Company to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature not
reflected in the Latest Balance Sheet; and
(d) The Company has all licenses, permits, orders, consents or
approvals of, and has made all required registrations with, any governmental or
regulatory body that are necessary to the conduct of the business of the
Company, excluding those relating to compliance with laws relating to pollution
and protection of the environment (which are discussed in Section 3.11 hereto)
(collectively, "Permits"). Schedule 3.10 of the Disclosure Schedules contains
a complete and accurate list of each Permit that is held by the Company or that
otherwise relates to the business of, or to any of the assets owned or used by,
the Company. All Permits are in full force and effect, no violations or
notices of such violations are or have been received by the Company or any
Stockholder in respect thereto, and no proceeding is pending or, to the
knowledge of the Stockholders, threatened, which may result in the revocation
or limitation of any such Permit.
3.11. Environmental Matters. Except as disclosed in Schedule 3.11
of the Disclosure Schedules:
(a) None of the real property owned or leased (as lessor or
lessee) by the Company is now or, to the best of the Company's knowledge, has
ever been during or prior to the time it was owned or leased by the Company,
used as a gasoline service station, a petroleum products storage facility, a
mine, a landfill, a dump or a site for the disposal of solid waste (as defined
under the Resource Conservation and Recovery Act, 42 U.S.C. ' 6901 et seq., as
amended ("RCRA")); the site of any storage, treatment or disposal of waste; or
the site of the burial, discharge, emission, leakage, release or threatened
release of hazardous substances, hazardous wastes, toxic substances,
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<PAGE> 12
hazardous materials, pollutants or contaminants (collectively, "Hazardous
Substances") as those terms are defined under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ' 9601 et seq., as amended
("CERCLA"); the Toxic Substance Control Act, 15 U.S.C. ' 2601 et seq., the
Clean Air Act, 42 U.S.C. ' 7401 et seq., as amended; the Hazardous Materials
Transportation Act, 49 U.S.C. ' 1801 et seq., as amended; the Superfund
Amendments and Reauthorization Act ("SARA") and RCRA or any other federal,
state or local law, code, ordinance, rule, regulation, decree or order relating
to the protection of the environment or human health (collectively,
"Environmental Laws"). Except as set forth on Schedule 3.11 of the Disclosure
Schedules, no hazardous waste as defined under RCRA or under any applicable
state law authorized under RCRA or hazardous substance or constituent as
defined under CERCLA, SARA and RCRA or any petroleum or fraction thereof is
present or stored on such property. All activities and operations of the
Company are in compliance with the requirements of all applicable environmental
laws and regulations of all federal, state and local governments or regulatory
bodies having jurisdiction over the Company or its properties, including,
without limitation, RCRA and CERCLA and analogous state laws.
(b) No notices, orders, directions, actions, suits or proceedings
are pending or, to the Stockholder's knowledge, threatened with respect to any
environmental condition affecting or originating from the real property owned
or leased (as lessor or lessee) by the Company. There are no underground
storage tanks on such property.
(c) The Company is in compliance with all reporting, permitting
and record-keeping requirements of Environmental Laws.
3.12. Actions and Proceedings. Except as disclosed in Schedule 3.12
of the Disclosure Schedules, there are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company (or any of its properties or assets) or any
actions, suits or claims (including product liability claims) or legal,
administrative or arbitral proceedings or investigations (whether or not the
defense thereof or liabilities in respect thereof are covered by insurance)
(collectively, "Actions") pending, or, to the knowledge of the Stockholders,
threatened against or involving the Company or any of its properties or assets,
or that challenges, or that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the transactions contemplated
hereby. To the knowledge of the Stockholders and the Company, no event has
occurred or circumstance exists that could reasonably be expected to give rise
to or serve as a basis for the commencement of any such Action. The Company
has delivered or made available to Buyer copies of all pleadings,
correspondence, and other documents relating to each Action listed in Schedule
3.12 of the Disclosure Schedules.
3.13. Contracts and Other Agreements.
(a) Schedule 3.13 of the Disclosure Schedules sets forth all of
the following contracts, understandings, agreements, or arrangements (written
and oral) to which the Company is a party or by or to which its respective
assets or properties are bound or subject and which are in effect on the date
hereof (the "Contracts"): (i) Contracts with any current or former officer,
director, stockholder or other affiliate of the Company or with any other
current or former employee or consultant of the Company or with an entity in
which any of the foregoing is a controlling Person, including, without
limitation, compensation plans or other arrangements; (ii) Contracts with any
labor union or association representing any employee of the Company; (iii)
Contracts (including sales or distribution agreements) with any Person to
provide goods or services that cannot be canceled by the
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Company on notice of 30 days or less without penalty; (iv) Contracts for the
sale or purchase of any assets of the Company in excess of $10,000; (v) joint
venture, partnership or similar agreements; (vi) Contracts under which the
Company agrees to indemnify any party or to pay or share the Tax liability of
any party; (vii) Contracts containing covenants of the Company not to compete
in any line of business or with any Person in any geographical area or
covenants of any other Person not to compete with the Company in any line of
business or in any geographical area; (viii) Contracts relating to the lending
or borrowing of money by the Company, including, without limitation,
capitalized leases and installment purchase obligations; (ix) any other
Contracts pursuant to the terms of which there is a direct current or future
obligation of the Company to make payments in excess of $10,000; and (x) any
guarantees of indebtedness given by the Company in respect of the indebtedness
or other obligation of any other Person; (xi) any lease, rental or occupancy
agreement, license, installment and conditional sale agreement, and other
Contracts affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property, identifying
those leases classified as capital leases for generally accepted accounting
principles purposes; (xii) any licensing agreement or other Contract with
respect to Intellectual Property (as hereinafter defined), including agreements
with current or former employees, consultants, or contractors regarding the
appropriation or the non- disclosure of any of the Intellectual Property;
(xiii) any Contract providing for payments to or by any Person based on sales,
purchases, or profits, other than direct payments for goods; (xiv) any power of
attorney that is currently effective and outstanding; (xv) any Contract that
contains or provides for any express undertaking by the Company to be
responsible for consequential damages; (xvi) any Contract for capital
expenditures in excess of $10,000; and (xvii) each amendment, supplement, and
modification (whether oral or written) in respect of any of the foregoing. All
of such Contracts are valid and binding upon the Company. The Company is not
in default under any of such Contracts, has not received any notice of a
default, and, to the knowledge of the Stockholders, no other party to any such
Contract is in default thereunder and no event has occurred or condition exists
that with notice or lapse of time or both would constitute a default
thereunder.
(b) Schedule 3.13 of the Disclosure Schedules also lists all
Contracts currently in negotiation or proposed by the Company of a type which
if entered into by the Company would be required to be listed on Schedule 3.13
or on any other Schedule to this Agreement. The Company has made available to
Buyer true and correct copies of all the written Contracts listed on Schedule
3.13 of the Disclosure Schedules for its review (other than Contracts which
contain information that Buyer is to review after the date hereof and before
the Closing Date as contemplated in Section 5.14 hereof).
3.14. Tangible Property. Except as otherwise set forth on Schedule
3.13 of the Disclosure Schedules, Schedule 3.14 of the Disclosure Schedules
contains a complete and accurate list of the Tangible Property (as hereinafter
defined) of the Company all leaseholds and other interests in real property
held by the Company. The Tangible Property is in good operating condition and
repair and is suitable for its intended purposes and current operations,
subject to normal wear and tear, and none of the Tangible Property is in need
of maintenance or repairs except for ordinary, routine maintenance and repairs.
During the past three years there has not been any significant interruption of
the operations of the Company due to inadequate maintenance of the Tangible
Property. All leases, conditional sale contracts, franchises or licenses
pursuant to which the Company may hold or use any interest owned or claimed by
the Company (including, without limitation, options) in or to Tangible Property
are in full force and effect, and free and clear of all Liens. For purposes
of this Agreement, "Tangible Property" means the facilities, machinery,
equipment, furniture, leasehold improvements, fixtures, vehicles, structures,
any related capitalized items and other fixed assets and tangible property,
other than the Real Property, material to the business of the Company.
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3.15. Real Property; Leased Property. The Company has no fee title
to and does not own and has never owned any real property. All real property
leased by the Company (the "Leased Properties") is correctly identified on
Schedule 3.15 of the Disclosure Schedules. The Company has a valid leasehold
interest in the Leased Properties, free and clear of all Liens.
3.16. Intellectual Property. Schedule 3.16 of the Disclosure
Schedules sets forth all patents, patent applications, trademarks, trademark
applications, trade names, service marks, service mark applications, customer
lists, copyrights and copyright applications as to which the Company is the
owner or the exclusive licensee. The Company owns, or is licensed to use, all
patents, trademarks, trade names, service marks, processes, know how, customer
lists and trade secrets (collectively, the "Intellectual Property") used in, or
necessary for, the conduct of its business as currently conducted. Except as
disclosed in Schedule 3.16 of the Disclosure Schedules, (i) no person has a
right to receive a royalty with respect to any of the Intellectual Property;
(ii) no claim has been asserted in writing or threatened by a third party with
respect to the use of such Intellectual Property by the Company; (iii) the use
of such Intellectual Property by the Company does not infringe on the rights of
any Person; (iv) consummation of the transactions contemplated by this
Agreement will not impair or alter any of the Company's Intellectual Property
rights; and (v) there are no infringements of the Intellectual Property by any
third party.
3.17. Title to Assets. The Company owns and has good and valid
title to all of its assets, including, without limitation, the Tangible
Property, Leased Property, Intellectual Property, and the other assets
reflected on the Latest Balance Sheet (except for assets consumed or disposed
of in the ordinary course of business since September 30, 1997) or acquired
after September 30, 1997 or described in Schedules 3.14, 3.15 and 3.16 of the
Disclosure Schedules hereof, in each case free and clear of any Lien except for
Liens specifically described in Schedule 3.17 of the Disclosure Schedules. The
Company owns, leases, licenses or rents all of the assets used by it in its
business and is in possession of all owned or leased by it, and such assets,
collectively, are sufficient for the conduct of the Company's business in the
same manner as conducted as of the date hereof.
3.18. No Undisclosed Liabilities. The Company has no Funded Debt
except for Indebtedness. The Company has no liabilities or obligations
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise), except for liabilities and obligations that were fully and
adequately reflected or reserved against on the Latest Balance Sheet and
liabilities and obligations incurred in the ordinary course of business since
September 30, 1997. Since September 30, 1997, all liabilities and obligations
(other than trade accounts payable incurred in the ordinary course of business
consistent with past practice but not yet due and payable in accordance with
their terms) have been paid in the ordinary course of business consistent with
past practice. For purposes of this Agreement, "Funded Debt" shall include:
(i) all Indebtedness; (ii) all obligations of the Company for the deferred and
unpaid purchase price of any property (other than trade accounts payable in the
ordinary course of business constituting current liabilities to the extent not
evidenced by a promissory note or other instrument); (iii) amounts in respect
of the rent or hire of property under leases or lease arrangements by which,
under generally accepted accounting principles, have been or are required to be
capitalized; (iv) amounts in respect of obligations under conditional sales or
other title retention agreements; (v) all liabilities secured by any Lien or
any property owned by the Company even though such liabilities are non-
recourse to the Company; (vi) the undrawn face amount of all letters of credit
(other than undrawn face amounts of all letters of credit, including standby
letters of credit, which have been issued for supplies acquired in the ordinary
course of business which have
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not yet been delivered to the Company in accordance with the terms of such
letters of credit to the extent not evidenced by a promissory note or other
instrument); (vii) amounts in respect of all swap, cap, collar and other
interest rate or currency hedging arrangements; and (viii) all accrued and
unpaid liabilities of the Company with respect to any pension plan, 401(k)
plan, vacation plan or other bonus or incentive plan of the Company.
3.19. Employee Benefit Plans.
(a) Schedule 3.19 of the Disclosure Schedules contains a true and
complete list of each bonus, deferred compensation, incentive compensation,
stock purchase, stock option, severance or termination pay, hospitalization or
other medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension, or retirement plan, program, agreement or arrangement,
and each other employee benefit plan, program, agreement or arrangement,
sponsored, maintained or contributed to or required to be contributed to by the
Company or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with the Company would be deemed a "single employer"
within the meaning of Section 4001(b)(1) of the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations promulgated
thereunder ("ERISA") or Section 414 of the Code, for the benefit of any
employee or former employee of the Company, whether formal or informal and
whether legally binding or not (the "Employee Benefit Plans"). Schedule 3.19
of the Disclosure Schedules identifies each of the Employee Benefit Plans that
is an "employee welfare benefit plan," or "employee pension benefit plan" as
such terms are defined in Sections 3(1) and 3(2) of ERISA (such plans being
hereinafter referred to collectively as the "ERISA Plans").
(b) Except as disclosed in Schedule 3.19 of the Disclosure
Schedule, the Company does not sponsor or maintain any Employee Benefit Plans.
The Company does not contribute to or have any obligation with respect to any
Employee Benefit Plan other than the Employee Benefit Plans set forth on
Schedule 3.19 of the Disclosure Schedules. No Employee Benefit Plan is
intended to qualify under Section 401(a) of the Code and each Employee Benefit
Plan has complied at all times in form, operation and administration with its
terms and the requirements provided by any and all statutes, orders or
governmental rules and regulations currently in effect and applicable to the
Employee Benefit Plans, including but not limited to ERISA and the Code, as
amended from time to time.
(c) Neither the Company nor any ERISA Affiliate now nor in the
past five years maintained or contributed to a Plan which is subject to Title
IV of ERISA or which is or was intended to qualify under Section 401(a) of the
Code.
(d) Neither the Company nor any ERISA Affiliate now or in the past
five years has contributed to a "multi employer plan" within the meaning of
Section 3(37) of ERISA.
(e) Neither the Company nor any ERISA Affiliate has any obligation
to provide health or other non-pension benefits to retired or other former
employees of the Company or such ERISA Affiliate following their retirement or
other termination of employment, except as required by Section 4980B of the
Code or Part 6 of Title I of ERISA.
(f) Except as set forth on Schedule 3.19 of the Disclosure
Schedules, neither the execution and delivery of this Agreement nor the
transactions hereunder will (i) entitle any current or
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former employee to severance pay, unemployment compensation or any similar
payment; (ii) accelerate the time of payment or vesting or increase the amount
of any compensation due to any current or former employee; (iii) directly or
indirectly result in any payment made or to be made to or on behalf of any
person to constitute a "parachute payment" within the meaning of Section 280G
of the Code.
(g) No employee or former employee of the Company is currently
receiving benefits under the Company's disability income and life insurance
plan.
3.20. Insurance. Schedule 3.20 of the Disclosure Schedules sets
forth a list and brief description of all policies or binders of fire,
liability, workmen's compensation, vehicular, title and other insurance held by
or on behalf of the Company or by or on behalf of its officers, directors
and/or employees (in such capacities) at the Company's expense. Such policies
and binders are valid, outstanding, enforceable and in full force and effect,
and are adequate and sufficient to cover any and all loss or damage in
connection with the operation or conduct of the Company's business. The
Company has not received any notice of cancellation or nonrenewal of any such
policy or binder. There is no inaccuracy in any application for such policies
or binders or any failure to pay premiums when due. The Company has not
received any written notice from any of its insurance carriers that any
insurance premiums will be materially increased in the future or that any
insurance coverage listed on Schedule 3.20 of the Disclosure Schedules will not
be available in the future on substantially the same terms as now in effect.
The Company has not had any application or other request for insurance rejected
within the last three years.
3.21. Officers, Directors and Employees. Schedule 3.21 of the
Disclosure Schedules sets forth the name, total 1997 compensation (including
salary, bonus and other forms of cash compensation) and annual base salary at
the date hereof of each person who is now an officer or director of the
Company, and each person who is an employee who receives an annual salary of
$30,000 or more, consultant, agent or other representative of the Company.
Except as set forth on Schedule 3.21 of the Disclosure Schedules, there is no
other compensation payable by the Company.
3.22. Operations of the Company. Except as disclosed in Schedule
3.22 of the Disclosure Schedules, since May 31, 1997, the Company has operated
its business in the ordinary course, and during such time period, the Company
has not:
(i) declared or paid any dividends or declared or made any other
distributions or payments of any kind (as compensation, fees or
otherwise, except for their current compensation which is expressly
disclosed on Schedule 3.21 of the Disclosure Schedules, pro rated for
partial years) to the Stockholders, or made any direct or indirect
redemption, retirement, purchase or other acquisition of any shares of
its capital stock;
(ii) incurred any Funded Debt, except for Indebtedness which will
be deducted from the Cash Purchase Price pursuant to Section 1.2
hereof, and except for working capital borrowings from Allegiant Bank
incurred during the period of November 1, 1997 to the day prior to the
Closing Date, in an aggregate amount not to exceed $300,000;
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(iii) waived any material right under any contract or other
agreement listed on, or required to be listed on, Schedule 3.13;
(iv) purchased, acquired or redeemed any outstanding capital stock
or equity interests of the Company;
(v) take any action or omit to take any action that would cause
any of the representations or warranties set forth herein to be untrue
in any material respect;
(vi) made any change in its accounting methods or practices except
as required by generally accepted accounting principles or made any
material write downs of assets or writeoffs of notes or accounts
receivable;
(vii) made any material changes in any of its business policies;
(viii) made any wage or salary increase, or increase in any other
direct or indirect compensation, or any payment or commitment to pay
any bonus or any severance or termination pay to any of its officers,
directors, employees, consultants, agents or other representatives, or
any accrual for or commitment or agreement to make or pay the same,
other than in the ordinary course of business, except that any such
amounts payable to the Stockholders shall be limited to the monthly
compensation set forth on Schedule 3.21 of the Disclosure Schedules;
(ix) made any loan or advance to any of its stockholders, officers,
directors, employees, consultants, agents or other representatives, or
made any other loan or advance other than in the ordinary course of
business;
(x) made any acquisition of all or any material part of the
assets, properties, capital stock or business of any other Person;
(xi) terminated or failed to renew, or received any notice of
termination or written threat (that was not subsequently withdrawn) to
terminate or fail to renew, any contract or other agreement listed on,
or required to be listed on, Schedule 3.13;
(xii) sold or entered into an agreement to sell any assets or
properties having a fair market value in excess of $10,000 in the
aggregate, other than in the ordinary course of business;
(xiii) sold or permitted the use by Persons other than pursuant to
licenses or other agreements set forth on Schedule 3.16 of any
Intellectual Property;
(xiv) entered into any collective bargaining agreement;
(xv) encountered any strike, work stoppage or comparable event;
(xvi) incurred any damage or destruction as to any of its assets or
properties, whether covered by insurance or not, which could have a
material adverse effect on the business, operations, results of
operations, condition (financial or otherwise), or
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prospects of the Company, whether or not covered by insurance;
(xvii) undertaken any capital expenditures or commitments for
additions to property, plant or equipment in excess of $10,000,
individually;
(xviii) there has been no material adverse change in the business,
operations, results of operations, condition (financial or otherwise),
or prospects of the Company, and to the best of the Company's and each
Stockholder's knowledge, no event has occurred or circumstance exists
that may result in such a material adverse change;
(xix) implemented any addition to or modification of the Employee
Benefit Plans; or
(xx) entered into any agreement to do any of the foregoing.
3.23. Banks, Brokers and Proxies. Schedule 3.23 of the Disclosure
Schedules sets forth: (i) the name of each bank, trust company, securities or
other broker or other financial institution with which the Company has an
account, credit line or safe deposit box or vaults; (ii) the name of each
Person authorized by the Company to draw thereon or to have access to any safe
deposit box or vault; and (iii) names of all Persons authorized by proxies or
powers of attorney to act on behalf of the Company in matters concerning its
business or affairs.
3.24. Labor Relations. In the past five years, the Company has not
been a party to any collective bargaining contract. There are no labor
disputes, material employee grievances, arbitration proceedings or any union
organization activities, strikes, work stoppages or slowdowns pending, or to
the Stockholders' knowledge, threatened between the Company and any of its
employees and their representatives, and no such strikes, stoppages or
slowdowns have occurred in the past five years. There are no charges of unfair
labor practices pending or, to the Stockholders' knowledge, threatened against
the Company before any governmental, regulatory or administrative agency or
authority. To the knowledge of the Stockholders, no event has occurred or
circumstance exists that could reasonably be expected to provide the basis for
any work stoppage or other labor dispute. There is no lock-out of any
employees by the Company, and no such action is contemplated by the Company.
The Company has complied with all applicable laws relating to employment, civil
rights, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxed, occupational safety and health, and plant closing. The Company
has not failed to pay any compensation, damages, taxes, fines, penalties, or
other amounts, however designated.
3.25. No Broker's, Finder's or Similar Fees. Except as set forth on
Schedule 3.25 of the Disclosure Schedules, there are no brokerage commissions,
finder's or agent's fees or similar fees or commissions payable in connection
with the transactions contemplated by this Agreement based on any agreement,
arrangement or understanding with the Company, or any action taken by or on
behalf of the Company.
3.26. Certain Payments. Neither the Company nor any director,
officer, agent, or employee of the Company, or, to the Stockholder's knowledge,
any other Person acting for or on behalf of the Company, has, directly or
indirectly, in violation of any applicable laws, (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other payment to
any Person,
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private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business; (ii) to pay for
favorable treatment for business secured; or (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
the Company or any affiliate of the Company, or (b) established or maintained
any fund or asset that has not been recorded in the Books and Records which
payment, fund or asset is reasonably probable to result in any liability or
other negative consequence to the Company.
3.27. Inventory; Accounts Receivable; Account Payable.
(a) The inventory of the Company consists of merchandise of a
quality and quantity usable and saleable in the ordinary course of business at
prices consistent with the Company's past practices, and such inventory is
carried on the Latest Balance Sheet and the books and records of the Company at
the lower of cost or market (on a FIFO basis), in accordance with generally
accepted accounting principles (except that there is no reserve for obsolete or
slow moving inventory).
(b) The accounts receivables of the Company, as reflected on the
Financial Statements and the Latest Balance Sheet, represent actual sales made
in the ordinary course of business. Such accounts receivable are free of
rights of set-off and are current and collectible in full in the ordinary
course of business, without resort to litigation (except for those which the
Stockholders pay to Buyer pursuant to Section 5.10 hereof). Except as
expressly and fully set forth on Schedule 3.27, since May 31, 1997, the Company
has collected all accounts receivable in the ordinary cause of business in
accordance with the terms thereof, and has not accelerated the collection
thereof in contemplation of the transactions contemplated herein or otherwise.
(c) Except as expressly and fully set forth on Schedule 3.27,
since May 31, 1997 the Company has paid all accounts payable in the ordinary
course of business in accordance with the terms thereof, and has not delayed
the payment thereof in contemplation of the transactions contemplated herein or
otherwise.
3.28. Potential Conflicts of Interest. Except as set forth on
Schedule 3.28 of the Disclosure Schedules, no officer, director or affiliate of
the Company, no Stockholder, no immediate family member of any Stockholder or
any officer, director or affiliate or of the Company or a Stockholder, and no
entity controlled by one or more of the foregoing:
(i) owns, directly or indirectly, any interest in or is an
officer, director, employee or consultant of, any Person, that is a
competitor, lessor, lessee, supplier, distributor, sales agent or
customer of the Company;
(ii) owns, directly or indirectly, in whole or in part, any
Intellectual or Tangible Property (other than of an immaterial nature)
that the Company uses in the conduct of its business;
(iii) has any cause of action or other claim whatsoever against, or
owes any amount to, the Company, except for claims in the ordinary
course of business for items such as accrued vacation pay, accrued
benefits under employee benefit plans, stock options, employment
agreements and similar matters;
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<PAGE> 20
(iv) is presently subject to or a party to any other business
arrangements or Contracts with the Company (other than as an employee,
officer, director or stockholder of the Company); or
(v) has received from the Company any advances of any kind
whatsoever to, or been issued any notes or other form of debt
(Sections 3.28(i), (ii), (iii), (iv) and (v) collectively referred to
herein as "Affiliate Transactions").
3.29. Disclosure. No representation or warranty of any of the
Stockholders contained in this Agreement or any exhibit, certificate or
schedule (excluding any financial projections of the Company) furnished or to
be furnished by the Stockholders to Buyer pursuant hereto (including, without
limitation, the Disclosure Schedules) materially misstates a material fact, or
omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading.
No Person has been authorized by the Company to make any representation or
warranty relating to the Company, the business of the Company 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
the Company, unless set forth herein or in the Disclosure Schedules.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to each Stockholder that the
following are true and correct:
4.1. Corporate Organization; Etc. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted.
4.2. Authority Relative to this Agreement. Buyer has all requisite
corporate authority and power to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby by
Buyer have been duly and validly authorized by all required corporate action on
the part of Buyer and no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Buyer and, assuming this Agreement has been duly authorized,
executed and delivered by each Stockholder, constitutes a valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms.
4.3. Consents and Approvals; No Violations. No filing with, and no
permit, authorization, consent or approval of any public body or governmental
authority, domestic or foreign, is necessary for the consummation by Buyer of
the transactions contemplated by this Agreement. Neither the execution and
delivery of this Agreement by Buyer nor the consummation by Buyer of the
transactions contemplated hereby nor compliance by Buyer with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-Laws of Buyer; (ii) result
in a violation or breach of, or constitute (with or without due notice or lapse
of
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<PAGE> 21
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any
indenture, license, contract, agreement or other instrument or obligation to
which Buyer or any of its subsidiaries is a party or by which any of them or
any of their properties or assets may be bound; or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Buyer, any
of its subsidiaries.
4.4. The Buyer Shares. The Buyer Shares will, when issued and
delivered to the Stockholders in accordance with this Agreement, be duly
authorized, validly issued, fully paid and nonassessable.
4.5. Investment. Buyer is purchasing the Shares for its own
account for investment and not with a view to, or for sale in connection with,
any distribution of the Shares. Buyer acknowledges that the Shares have not
been registered under the Securities Act, or applicable state securities laws
and agrees to comply fully with such laws in connection with any resale or
transfer thereof.
4.6. Brokers and Finders. Buyer has not employed any investment
banker, broker or finder or incurred any liability for any investment banking
fees, brokerage fees, commissions or finders, fees in connection with the
transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF THE PARTIES
5.1. Earn-Out.
(a) Subject to Sections 5.1(b) hereof, for a period of one year,
commencing on November 1, 1997 (the "Earn-Out Period"), the Stockholders may be
entitled to additional Purchase Price as provided in Section 5.1(b) hereof (the
"Additional Consideration"), payable in accordance with Sections 5.1(b) and
5.1(c) hereof.
(b) In the event that the Net Sales (as hereinafter defined) of
the Company and Buyer's Paint and Sundries Sector (of which the Company shall
be a part of after the Closing) during the Earn-Out Period shall be equal to or
within the range of dollar figures listed below under the heading "Net Sales,"
then the Stockholders shall be entitled to receive from Buyer, in the
aggregate, the Additional Consideration equal to that amount under the heading
"Additional Consideration" set forth below which shall be directly across from
such number under the heading "Net Sales" set forth below. For purposes of
calculating the Additional Consideration, "Net Sales" of the Company shall
include, without limitation, the revenues of the Company (at selling prices
that are within the pricing guidelines established by the mutual agreement of
Charles Cobaugh and the Chief Executive Officer of Buyer) for the period
commencing November 1, 1997 through and including October 31, 1998, net of
returns, allowances and customer discounts, as reflected in the Buyer's audited
financial statements for the year ended September 30, 1998 and the Buyer's
financial books and records for the one-month period ending October 31, 1998
(the "Earn-Out Financial Statement").
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<TABLE>
<CAPTION>
Net Sales* Additional Consideration
- --------- ------------------------
<S> <C>
$ 9.0 million - $9.49 million $150,000
$ 9.5 million - $9.99 million $400,000
$ 10.0 million - $10.49 million $500,000
$ 10.5 million - $10.99 million $600,000
$ 11.0 million - $11.49 million $700,000
$ 11.5 million - $11.99 million $800,000
$ 12.0 million and above $900,000
</TABLE>
- --------------------
*Plus, in each case, the actual net sales of the Paint and Sundries Sector of
the Buyer for the Buyer's fiscal-year ended September 30, 1997.
(c) Buyer shall prepare and deliver to the Stockholders, on or
before sixty (60) days after the end of the Earn-Out Period, the Earn-Out
Financial Statements, including, consolidating financial information with
respect to the Company and the Paint and Sundries Sector of Buyer, for the
Earn-Out Period, and the calculation of the Additional Consideration. Unless
the Stockholders object in writing to the calculation of the Additional
Consideration within thirty (30) days after delivery to the Stockholders by
Buyer pursuant to the previous sentence, the calculation of the Additional
Consideration shall be final and binding upon Buyer and the Stockholders. If
the Stockholders object in writing within said thirty (30) days, each of Buyer
and the Stockholders agree to use their good faith efforts to negotiate a
mutually acceptable settlement within the next thirty (30) days (the
"Settlement Period"). If Buyer and the Stockholders do not reach a settlement
within the Settlement Period, then Buyer and the Stockholders, within thirty
(30) days following the Settlement Period, shall (i) select and agree upon a
firm of independent certified public accountants (the "Independent Earn-Out
Accountants") to resolve all disputes in connection with the Additional
Consideration for purposes of this Section 5.1, and (ii) present in writing to
such Independent Earn-Out Accountants and to the other parties, unless
previously furnished, all non-privileged and non-confidential work papers and
other information of the independent accountants of Buyer used to prepare the
Earn-Out Financial Statements, and such additional information on their behalf
as they shall reasonably desire supporting their positions. The resolution of
the dispute rendered by such Independent Earn-Out Accountants shall be final
and binding upon Buyer and the Stockholders. The fees and expenses of the
Independent Earn-Out Accountants for services rendered under this Section
5.1(c) shall be borne and paid by equally by Buyer and the Stockholders.
Upon a final determination in accordance with this Section 5.1(c), Buyer shall
pay to the Stockholders, as soon as practicable following such determination,
the Additional Consideration that the Stockholders shall be entitled to receive
in accordance with this Section 5.1.
5.2. Conduct of Business.
(a) From the date hereof through the Closing Date, the Company
shall conduct its business in the ordinary course, and in such manner so that
the representations and warranties contained in Article III hereof shall
continue to be true and correct on and as of the Closing Date as if made on and
as of the Closing Date. Consistent with the foregoing, the Stockholders,
directors and officers of the Company shall use their respective best efforts
to preserve intact the current business organization of the Company, keep
available the services of the current officers, employees, and agents of the
Company, and maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company. In addition, the Stockholders and the Company
shall give Buyer prompt notice of (i) any event, condition or
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<PAGE> 23
circumstance occurring after the date hereof through the Closing Date that
would constitute a violation or breach of any representation, warranty or
covenant contained in this Agreement, and (ii) any event, occurrence,
transaction or other item occurring from the date hereof through the Closing
Date which would have been required to have been disclosed on any Disclosure
Schedule delivered hereunder, had such event, occurrence or action existed on
the date hereof.
(b) Between the date of this Agreement and the Closing Date, the
Company will not, and the Stockholders will not cause the Company to, without
the prior written consent of Buyer, take any affirmative action, or fail to
take any action within its control, as a result of which any of the changes or
events listed in Section 3.22 is or will (whether or not with notice or lapse
of time or both) occur, or which otherwise would cause any of the
representations and warranties made by the Stockholders herein, including
without limitation those contained in Section 3.27, to become untrue or
inaccurate.
5.3. Corporate Examinations and Investigation; Confidentiality.
(a) Prior to the Closing Date, Buyer shall be entitled, through
its employees, directors, officers, representatives, agents and contractors to
make such investigations of the assets, properties, business and operations of
the Company (including, without limitation, investigations of and access to the
Company's customers and customer list, selected canvas and other core business
suppliers and the Company's accounts receivable debtors) and such examinations
of the books, records, Tax Returns and financial condition of the Company as
they consider necessary in connection with the transactions contemplated in
this Agreement; provided, however, that the names of the Company's customers
shall not be provided to Buyer until the last business day prior to the Closing
Date. Any such investigation and examination shall be conducted at reasonable
times and under reasonable circumstances and the Company shall cooperate
therein. The Stockholders acknowledge that prior to the Closing Date, Buyer's
and the Company's independent accountant shall jointly conduct a physical
inventory and a review of the Company's accounts receivable. No investigation
by Buyer shall diminish or obviate any of the representations, warranties,
covenants or agreements of the Company under this Agreement. In order that
Buyer may have full opportunity to make such physical, business, accounting and
legal review, examination or investigation as it may wish of the business and
affairs of the Company, the Company shall make available to employees,
directors, officers, representatives, agents and contractors of Buyer during
such period all such information and copies of such documents concerning the
affairs of the Company as such representatives may request, shall permit
representatives of Buyer access to the properties of the Company and all parts
thereof, and shall cause its officers, employees, consultants, agents,
accountants and attorneys to cooperate with such representatives in connection
with such review and examination.
(b) The Purchaser acknowledges that certain information furnished
to Buyer by the Company is confidential, proprietary and otherwise not
generally available to the public and such information, whether furnished by
the Company or any of the directors, officers, employees, agents or
representatives of the Company (the "Company's Representatives") and whether in
written, oral, visual, magnetic or electronic form, shall include, but not be
limited to, information regarding or relating to financial data, market
information, marketing plans, customer requirements, business plans, trade
secrets, researched development information, technical information, and any
other information relating to the operation, business or finances of the
Company (the "Confidential Information").
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<PAGE> 24
(c) Buyer agrees that prior to the Closing Date it will not
disclose any Confidential Information, other than to directors, officers,
employees and representatives (including attorneys and accountants) of Buyer in
connection with Buyer's investigation and evaluation of the transactions
contemplated hereby, without the consent of the Stockholders, which consent
shall not be unreasonably withheld, except where the disclosure of such
information is required by court or governmental agency subpoena, order or
directive (provided that Buyer will previously provide to the Stockholders the
content of such disclosure, the reasons such disclosure is required and the
time and place such disclosure will be made). Anything to the contrary herein
notwithstanding, in the event that the Stockholders shall not consent to the
disclosure by Buyer of Confidential Information, and Buyer, in Buyer's sole
discretion, determines it is necessary or advisable to disclose Confidential
Information in order to make any filing or obtaining any consent or approval
necessary or appropriate for the consummation of the transactions contemplated
hereby, Buyer shall have the right to terminate this Agreement in accordance
with Section 8.1 hereof.
(d) The Confidential Information shall not include portions of the
Confidential Information that (i) is or becomes generally available to the
public through no action by Buyer or any of the directors, officers, employees,
agents or representatives of the Buyer (the "Buyer's Representatives" in
violation of this Agreement; or (ii) is or becomes available to Buyer or the
Buyer's Representatives from a source, other than the Company or the Company's
representatives, which Buyer believes, is not prohibited from disclosing such
portions to Buyer.
5.4. Issuance of Buyer Shares. On or prior to the Closing Date,
Buyer shall issue to the Stockholders, the Buyer Shares, which shares when
issued shall be validly issued, fully paid and nonassessable; and will use all
reasonable efforts on and after the Closing, to cause the Buyer Shares to be
quoted on NASDAQ.
5.5. Restricted Stock. The Stockholders acknowledge and agree that
their respective ability to sell, transfer or otherwise dispose of any or all
of the Buyer's Shares shall be restricted unless such transaction is registered
under the Securities Act, or an exemption from such registration is available
and the Stockholders provide an opinion of counsel to such effect (which
counsel and opinion shall be reasonable acceptable to Buyer). The Stockholders
further acknowledge that Buyer is under no obligation to register the sale,
transfer or other disposition of the Buyer Shares by or on behalf of the
Stockholders under the Securities Act, or to take any other action necessary in
order to make compliance with an exemption from such registration available.
The Stockholders further acknowledge that there will be placed on the
certificates of the Buyer Shares issued to the Stockholders, a legend stating
in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION THEREFROM UNDER THE
ACT OR SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER."
5.6. Employment and Non-Competition Agreement. On the Closing
Date, the Company and Cobaugh shall enter into an employment and
non-competition agreement substantially in the form attached as Exhibit F (the
"Cobaugh Employment and Non-competition Agreement").
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<PAGE> 25
5.7. Stockholders Non-Compete.
(a) The Stockholders jointly and severally acknowledge and agree
with respect to the Company that the business of the Company is conducted in
the United States (the "Territory"), and that the Company's reputation and
goodwill are an integral part of its business success throughout the Territory.
If the Stockholders deprive Buyer of any of the Buyer's or the Company's
goodwill or in any manner utilizes their reputation and goodwill in competition
with Buyer or the Company, Buyer will be deprived of the benefits it has
bargained for pursuant to this Agreement. Accordingly, as an inducement for
Buyer to enter into this Agreement, the Stockholders agree that for a period of
seven (7) years after the Closing Date (the "Non-competition Period") the
Stockholders shall not, without Buyer's prior written consent, directly or
indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be connected as a director,
officer, employee, partner, consultant or otherwise with, any profit or
non-profit business or organization in the Territory that, directly or
indirectly, competes with, or is about to compete with any other Person that
competes directly or indirectly with Buyer or the Company. In addition, during
the Non-competition Period, the Stockholders shall not have an equity interest
in any such firm or business. In the event the agreement in this Section 5.7
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its extending for too great a period of time or over too great a
geographical area or by reason of its being too extensive in any other respect,
it shall be interpreted to extend only over the maximum period of time for
which it may be enforceable and/or over the maximum geographical area as to
which it may be enforceable and/or to the maximum extent in all other respects
as to which it may be enforceable, all as determined by such court in such
action.
(b) During the Non-competition Period, the Stockholders shall not
(i) solicit, raid, entice, induce or contact, or attempt to solicit, raid,
entice, induce or contact, any Person that is a customer of Buyer or the
Company to become a customer of any other Person for services or the same as,
or competitive with, those services or sold, rendered or otherwise made
available to customers by Buyer or the Company as of the Closing Date, or
approach any such Person for such purpose or authorize the taking of such
actions by any other Person or assist or participate with any such Person in
taking such action, or (ii) solicit, raid, entice, induce or contact, or
attempt to solicit, raid, entice, induce or contact, any Person that currently
is or at any time during the Non-competition Period shall be (or, in the case
of termination is at the time of termination), an employee, agent or consultant
of or to the Company to do anything from which the Stockholders are restricted
by reason of this Section 5.7, and the Stockholders shall not approach any such
employee, agent or consultant for such purpose or authorize or participate with
the taking of such actions by any other Person or assist or participate with
any such Person in taking such action. The term "customer" shall include: (i)
customers of Buyer and the Company existing immediately after the Closing; and
(ii) customers that have used the products and services of the Company within
the five (5) year period prior to the Closing Date.
(c) During the Non-competition Period, the Stockholders shall not
make any statement or other communication that impugns or attacks the
reputation or character of Buyer, the Company or their affiliates or their
representatives, or damages the goodwill of Buyer, the Company or their
affiliates or their representatives, take any action that would interfere with
any contractual or customer or supplier relationships of Buyer, the Company or
their affiliates or its or their representatives, including but not limited to
any action that would result in a diminution of business, or otherwise take any
action that is detrimental to the best interests of Buyer, the Company or their
affiliates.
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<PAGE> 26
(d) The Stockholders acknowledge that a breach of the covenants
contained in this Section 5.7 will cause irreparable damage to Buyer and the
Company, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, the
Stockholders agree that if either Stockholder breaches the covenant contained
in this Section 5.7 in addition to any other remedy that may be available at
law or in equity, Buyer shall be entitled to specific performance and
injunctive relief, without posting bond or other security.
(e) If any provision of this Section 5.7 is deemed to be invalid
or unenforceable or is prohibited by the law of the jurisdiction or state where
it is to be performed, this Section 5.7 shall be deemed divisible as to such
provision and such provision shall be inoperative to the extent, and only to
the extent, it is so unenforceable or prohibited, and otherwise this Section
5.7 shall be given full force and effect.
5.8. Escrow Agreement. On the Closing Date, Buyer and each
Stockholder shall have entered into the Escrow Agreement.
5.9. St. Louis Lease. On the Closing Date, the Stockholders shall
have caused the Company to have executed a three-year triple-net lease (the
"St. Louis Lease") at $2.25 per square foot for the office and manufacturing
space currently occupied by the Company at 3745, 3759, 3763 and 3801 Forest
Park Blvd., St. Louis, Missouri (comprising of an aggregate 51,840 square
feet), and such St. Louis Lease shall provide, among other things, for two
successive three-year renewal options at market rates, substantially in the
form attached hereto as Exhibit G. The Stockholders and Buyer acknowledge and
agree that the landlord under the St. Louis Lease shall cause and be solely
responsible for complying with applicable fire and building laws, and any costs
and expenses incurred in connection with such compliance.
5.10. Accounts Receivable. Upon the delivery by Buyer to the
Stockholders of a written notice stating the amount of accounts receivable of
the Company ("Closing Accounts Receivable") reflected on the Closing Date
Balance Sheet which were not collected by Buyer or the Company during the
period of 150 days after the Closing Date, the Stockholders shall promptly pay
to Buyer the dollar amount of the Closing Accounts Receivable as Buyer did not
recover during the 150 day period after the Closing Date. Buyer will provide
the Stockholders with such information as the Stockholders reasonably request
supporting the calculation of uncollected accounts receivable. Buyer will use
all reasonable efforts in the ordinary course of business to collect the
Closing Accounts Receivable on and after the Closing; provided, that such
obligation shall not require Buyer to make any extraordinary expenditures,
including, without limitation, collection agencies and attorneys' fees. Upon
payment by the Stockholders of amounts due to Buyer under this Section 5.10,
Buyer will assign all of its right, title and interest in and to the Closing
Accounts Receivable which have been paid for by the Stockholders and upon
subsequent collection of amounts due with respect to any such purchased Closing
Accounts Receivable, will promptly forward such amounts to the Stockholders.
5.11. Reasonable Best Efforts. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable to fulfill the conditions to
the parties' obligations hereunder and to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
making all required filings and applications and obtaining all consents,
approvals, orders, waivers, licenses, permits and
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authorizations required in connection with the transactions contemplated
hereby. If at any time after the Closing Date any further action is necessary
or desirable to carry out the purposes of this Agreement, the parties hereto
shall take or cause to be taken all such necessary action, including, without
limitation, the execution and delivery of such further instruments and
documents as may be reasonably requested by the other party for such purposes
or otherwise to consummate and make effective the transactions contemplated
hereby. All Books and Records of the Company and all of the Stockholders shall
be transferred at the Closing to Buyer.
5.12. No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Article VIII hereof, neither the Company, any
Stockholder nor any of the directors, officers, employees, agents or
representatives of the Company will directly or indirectly solicit, initiate,
or encourage any inquiries or proposals from, discuss or negotiate with,
provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale, lease or exchange of the business or
assets (other than in the ordinary course of business consistent with past
practice) of the Company, or any of the capital stock of the Company, or any
merger, consolidation, business combination, or similar transaction involving
the Company. The Company and the Stockholders will promptly advise and notify
Buyer in writing of any such inquiries, proposals or other contacts.
5.13. No Incurrence of Indebtedness. From and after October 31,
1997, the Company shall not incur any Indebtedness in excess of $300,000,
without the prior written consent of Buyer.
5.14. Suppliers; Distributors; Customers. On or prior to three (3)
days prior to the Closing Date, the Stockholders will (i) provide to Buyer
Schedule 5.14 of the Disclosure Schedules which will list by percentage and
identify the total purchases by the Company for the twelve months ended
September 30, 1997 of the ten largest suppliers and distributors to the Company
and of the total sales to the ten largest customers of the Company for such
periods; provided, however, that the names of the Company's customers shall not
be provided to Buyer until the last business day prior to the Closing Date, and
(ii) will represent and warrant to Buyer (which shall be considered a
representation and warranty under Article III hereunder and incorporated in
reference therein) that no Person listed on Schedule 5.14 of the Disclosure
Schedules, has advised the Company, in writing or orally, that it intends or
within the last twelve months has threatened in writing to the Company to
cancel or otherwise terminate the business relationship of such Person with the
Company or that it intends to modify its business relationship to the Company
or to decrease or limit its purchase or supply of products or services from or
to the Company.
5.15. October 31, 1997 Certificate. The Stockholders shall provide
to Buyer, no later than three (3) business days prior to the Closing Date, a
certificate (the "October 31, 1997' Certificate") duly executed by the
Stockholders, that shall have been reviewed by Anders, Minkler and Diehl, that
sets forth an accurate and complete listing (including amount) of all
Indebtedness of the Company on October 31, 1997, calculated based on amounts
reflected in the financial and other books and records of the Company and in
accordance with generally accepted accounting principles applied on a basis
consistent with the Latest Balance Sheet. Upon delivery of the Stockholders'
Certificate, this Section 5.15 shall constitute a representation and warranty
under Article III hereof and be deemed to be incorporated by reference therein.
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5.16. Benefit Plans. Prior to the Closing Date, the Company shall
cause the Company's life insurance and long term disability plan (the "Company
Plans") to be transferred to Guard Manufacturing Company and Guard
Manufacturing Company shall assume the Company Plans as of such date prior to
the Closing. As of the Closing Date, the Company shall cease to be a
participating employer under the health and welfare plans maintained by Guard
Manufacturing Company (the "Guard Plans). Prior to the Closing Date the
Company has terminated the employment of Dolores J. Margolus, who the Company
represents is an employee at will, and as of such date prior to the Closing
Guard Manufacturing Company has employed Dolores J. Margolus and Dolores J.
Margolus has accepted such employment. The Stockholders shall take, or cause
to be taken, all such action as may be necessary to effect such cessation of
participation, plan transfer and assumption, and termination of employment and
employment. Neither the Company nor Buyer shall have any liability with
respect to the Guard Plans or the Company Plans, including, but not limited to
premium payments, reserves or administrative expenses with respect thereto or
to or with respect to the employment or termination of employment of Dolores J.
Margolus. As of the Closing Date, individuals who are employed by the Company
on the Closing Date and who provide services to the Company after the Closing
Date ("Company Employees") shall be eligible to participate in the health, life
insurance and disability plans of Buyer, subject to all of the terms and
conditions of those plans in effect from time to time, including, but not
limited to pre-existing condition exclusions and actively at work requirements.
5.17. Net Worth Certificate. The Stockholders shall provide to
Buyer, no later than one (1) business day prior to the Closing Date a
certificate ("Net Worth Certificate"), duly executed by the Stockholder, that
shall have been reviewed by Anders, Minkler and Diehl, that sets forth the
Stockholder good faith, reasonably based, estimate of the Net Worth of the
Company on the Closing Date.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE AGREEMENT
6.1. Conditions to the Stockholders' Obligations. The obligations
of the Stockholders to consummate the transactions contemplated hereby at the
Closing is subject to satisfaction or waiver by the Stockholders of the
following conditions:
(a) the representations and warranties of Buyer contained herein
shall be true and correct at and as of the date hereof and as of the Closing
Date as though such representations and warranties were made at and as of the
date of this Agreement;
(b) Buyer shall have performed and complied with all agreements,
obligations, covenants and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing;
(c) the Stockholders shall have received a duly executed
certificate of an authorized, officer of Buyer to the effect that the
conditions in paragraphs (a) and (b) of this Section 6.1 have been satisfied;
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<PAGE> 29
(d) the Stockholders shall have received from Buyer, by wire
transfer in immediately available funds, the Cash Purchase Price;
(e) the Escrow Agent shall have received from Buyer, by wire
transfer in immediately available funds, the Escrow Payment;
(f) the Stockholders shall have received from Buyer, duly executed
by Buyer, the Escrow Agreement;
(g) the Stockholders shall have received from Buyer, certificates
representing the Buyer Shares;
(h) Cobaugh shall have received from Buyer, duly executed by
Buyer, the Cobaugh Employment and Non- competition Agreement; and
(i) all deliveries of Buyer to the Stockholders required under
Section 1.6 hereof shall have been delivered to the Stockholders.
6.2. Conditions to Buyer's Obligations. The obligations of Buyer
to consummate the transactions contemplated hereby at the Closing is subject to
the satisfaction or waiver of the following conditions:
(a) the representations and warranties of the Stockholders
contained herein shall be true and correct at and as of the date hereof and as
of the Closing Date as though such representations; and warranties were made at
and as of the date of this Agreement;
(b) the Stockholders shall have performed and complied with all
agreements, obligations, covenants and conditions required by this Agreement to
be performed or complied with by them on or prior to the Closing;
(c) Buyer shall have received a duly executed certificate from the
Stockholders to the effect that the conditions in paragraphs (a) and (b) of
this Section 6.2 have been satisfied;
(d) the Stockholders shall have delivered to Buyer certificates
representing all of the Shares, accompanied by stock powers duly endorsed in
blank or accompanied by duly executed instruments of transfer, in each case,
endorsed or executed by the appropriate Stockholder;
(e) all approvals, authorizations, and consents required in order
for the Stockholders and the Company to consummate the transactions
contemplated hereby, including, without limitation, all consents required for
the Company to retain its rights and benefits under contracts and agreements to
which it is a party or governmental licenses or approvals which the Company
uses in the ordinary course of business, shall have been obtained and be in
full force and effect, and all notices required to be given to government
authorities by the Stockholders shall have been given, and all applicable
waiting periods shall have expired, and Buyer shall have been furnished with
appropriate evidence of the granting of such approvals, authorizations and
consents;
(f) the Stockholder shall have delivered to Buyer an opinion of
Ottsen, Mauze, Leggat & Belz L.C., substantially in the form of Exhibit B;
29
<PAGE> 30
(g) Buyer shall have received from Cobaugh, duly executed by
Cobaugh, the Cobaugh Employment and Non- competition Agreement;
(h) Buyer shall have received, from the Stockholders, duly
executed by the Company and the Eleven/Eleven Company, the St. Louis Lease;
(i) Buyer shall have received from the Stockholders, the
resignations of the Resigning Directors;
(j) there shall not have occurred any event or condition that has
had, or may have, a material adverse effect on the business, operations,
results of operations, condition (financial or otherwise), or prospects of
either the Company or Buyer, as determined in the sole discretion of the Buyer
or the Buyer's lender, Bank One Trust Company, NA;
(k) the Stockholders shall have provided Buyer with the
information referred to in Section 5.14 hereof, and with customary
confirmations of accounts receivable or accounts payable, as the case may be,
obtained by Anders, Minkler and Diehl, the Company's independent certified
public accountants (i) with respect to accounts receivable of the Company, at
least 80% of the Company's aggregate accounts receivable balance at September
30, 1997 and (ii) with respect to trade payables of the Company, for the ten
largest trade payable creditors of the Company but not less than 60% of the
Company's aggregate trade payables balance at September 30, 1997, together in
each case with the names of each such trade creditor or debtor, and the Buyer
shall be fully satisfied, as to the results of its due diligence investigation
with respect to the above;
(l) All deliveries to the Stockholders by Buyer required under
Section 1.5 hereof, including, without limitation, the Release, shall have been
delivered to Buyer;
(m) There shall not have been instituted any legal proceeding
seeking to prohibit or otherwise to challenge the consummation of the
transactions contemplated by this Agreement, or to obtain substantial damages
with respect thereto. In addition, there shall not have been any action taken
or any law, rule, regulation, order, judgment, or decree proposed, enacted or
deemed applicable to the transactions contemplated by this Agreement by any
governmental or regulatory body or by any court or other tribunal that makes
illegal any of the transactions contemplated by this Agreement or that
otherwise prohibits, restricts or delays consummation of any of the
transactions contemplated by this Agreement;
(n) All outstanding loans and advances by the Company to any
Stockholder, if any, shall have been paid in full or withheld from the payment
to be made to such Stockholder hereunder;
(o) Buyer shall have received from the Stockholders the October
31, 1997 Certificate, duly executed by the Stockholders, and Buyer shall be
fully satisfied as to the results of its due diligence with respect thereto;
(p) Buyer shall be fully satisfied with its due diligence of all
environmental matters which relate to the Company or the Company's business,
including, without limitation, the risk, if any, of liability to the Company or
the Buyer with respect thereto.
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<PAGE> 31
(q) Buyer shall have reviewed the Net Worth Certificate, duly
executed by the Stockholders, and shall be fully satisfied as to the results of
its due diligence with respect thereto.
(r) Buyer shall have received a certificate of existence and good
standing as of a recent date for the Company from the Missouri Secretary of
State; and
(s) Buyer shall have received from the Stockholders and the Escrow
Agent, duly executed by the Stockholders and the Escrow Agent, the Escrow
Agreement.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
7.1. Survival. All of the representations and warranties made by
or on behalf of the Stockholders in this Agreement, and in any certificates,
exhibits or other instruments delivered pursuant hereto (including, without
limitation, the Disclosure Schedules) shall survive the Closing Date for a
period of three years from the Closing Date; provided, however, that the
representations and warranties of the Stockholders set forth in Article II
hereof shall survive the Closing Date, indefinitely; and provided, further,
that the representations and warranties of the Stockholders set forth in
Section 3.9, Section 3.11 and Section 3.19 hereof shall survive until sixty
(60) days after the date the applicable statutes of limitations against the
Company shall expire, or if there is no applicable statute of limitations,
indefinitely. The right to indemnification, payment of Damages or other remedy
based on such representations, warranties, covenants, and obligations will not
be affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after
the execution and delivery of this Agreement or the Closing Date, with respect
to the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation.
7.2. Indemnification. From and after the Closing, the Stockholders
shall jointly and severally indemnify and hold harmless Buyer and the Company
(following the Closing) and their respective officers, directors, affiliates,
stockholders and agents (collectively, the "Buyer Indemnified Parties") from
and against any costs or expenses (including without limitation attorneys'
fees, and the out-of-pocket expenses of testifying and preparing for testimony
and responding to document and other information requests, and in connection
with the enforcement of any rights hereunder, whether or not a party to such
litigation), judgments, liabilities, fines, amounts paid in settlement, losses,
claims and damages (collectively, "Damages"), as incurred, to the extent they
relate to, arise out of or are the result of: (i) the breach of or any
inaccuracy in or state of facts inconsistent with any of the representations
and warranties of the Stockholders contained in or made pursuant to this
Agreement; or (ii) the breach or nonperformance of any covenant or agreement of
the Stockholders contained in this Agreement.
7.3. Tax Indemnification.
(a) The Stockholders shall pay, indemnify and hold harmless Buyer
and the Company (after the Closing) from and against all liabilities relating
to Taxes of the Company attributable to taxable periods ending on or before the
Closing Date, to the extent that such liabilities
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<PAGE> 32
are not reflected on the Closing Date Balance Sheet. For purposes of the
preceding sentence, the Closing Date shall be treated as the last day of a
taxable period, and the Buyer's independent certified public accountants shall
determine the amount, if any, of Taxes properly accruable for any period that
does not in fact end on the Closing Date based upon a closing of the books of
the Company as of the Closing Date. Buyer and Stockholders shall be afforded a
reasonable opportunity to receive and comment on such accrual. This Section
7.3 shall survive the Closing until six-months after the applicable statute of
limitations.
(b) (i) Buyer shall provide notice of any claim for
indemnification pursuant to this Section 7.3 to the Stockholders. Such notice
shall include a calculation of the amount of the requested indemnity payment.
If the Stockholders disagree with the calculation of the indemnity payment, the
Stockholders and Buyer shall attempt to resolve such disagreement for a period
of fifteen (15) days. If the parties fail to reach an agreement at the end of
such period, such disagreement shall be submitted to a nationally recognized
firm of independent certified public accountants mutually selected by the
Stockholders and Buyer, whose determination shall be final and binding on all
parties. The cost of such nationally recognized firm of independent certified
public accountants shall be borne equally by the Stockholders and Buyer.
(ii) Within 10 days after the indemnity calculation has been
resolved or determined, as provided in Section 7.3(d)(i), the Stockholders
shall pay to Buyer such amounts as have been determined to be due Buyer as a
result of the indemnifications provided in Section 7.3(a).
7.4. Limitations on Amount.
(a) The Stockholders will have no liability pursuant to Section
7.2 until the total of all Damages with respect to such matters exceeds $25,000
(except with respect to Damages for a breach of Article II or of Section 3.9
hereof for which the Stockholders shall be fully liable to Buyer), in which
case all Damages shall be collectible hereunder; and the Stockholders shall
have no liability to Buyer or the Company for Damages pursuant to Section 7.2
in excess of the Purchase Price.
(b) In the event that following the receipt of a payment of
Damages from the Stockholders pursuant to Section 7.2, Buyer or the Company
shall absolutely and unconditionally receive insurance proceeds or collect
monies from third parties (in each case net of all costs and expenses of
collection) for exactly the same matter for which the Stockholders paid Damages
to Buyer and/or the Company and Buyer and the Company have been made fully
whole with respect to all Damages with respect to such matter, then Buyer shall
pay to the Stockholders the amount of such excess recoveries beyond that
necessary to make Buyer whole, up to but not in excess of the amount of Damages
actually paid by the Stockholders to the Buyer and the Company.
7.5. Claims.
(a) Promptly after receipt by an indemnified person under this
Article VII of notice of the commencement of any action or proceeding against
it, such indemnified person will, if a claim is to be made against an
indemnifying party under this Article VII, give notice to the indemnifying
party of the commencement of such action or proceeding, specifying the factual
basis of the claim and the amount thereof in reasonable detail to the extent
then known by such indemnified person, but the failure to notify the
indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified person.
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(b) If any action or proceeding referred to in Section 7.5(a) (in
connection with matters covered by Section 7.2) is brought against an
indemnified person, the indemnifying party will be entitled to participate in
such action or proceeding and, to the extent that it wishes (unless an
indemnifying party is also a party to such action or proceeding and the
indemnified person determines that joint representation would be inappropriate)
to assume the defense of such action or proceeding with counsel satisfactory to
the indemnified person and, after notice from the indemnifying person to the
indemnified person of its election to assume the defense of such action or
proceeding, the indemnifying person will not, as long as the indemnifying
person diligently conducts such defense, be liable to the indemnified person
under this Article VII for any fees of other counsel or any other expenses with
respect to the defense of such action or proceeding, in each case subsequently
incurred by the indemnified person in connection with the defense of such
action or proceeding, other than reasonable costs of investigation, and other
than where the indemnified person has separate defenses in which case the
indemnifying person shall be responsible for the fees and expenses of one firm
of counsel for the indemnified person. If the indemnifying party assumes the
defense of an action or proceeding, (i) it will be conclusively established for
purposes of this Agreement that the claims made in that action or proceeding
are within the scope of and subject to indemnification; (ii) no compromise or
settlement of such claims may be effected by the Representative without the
Indemnified Person's prior written consent; (iii) the indemnifying person will
have no liability with respect to any compromise or settlement of such claims
effected without the indemnifying person's prior written consent; and (iv) the
indemnified person will cooperate as the indemnifying person may reasonably
request in investigating, defending and (subject to clause (ii)) settling such
action or proceeding (with the Indemnified Person's out-of-pocket costs in
providing such cooperation to be reimbursed by the indemnifying parties). The
indemnified party shall cooperate with the indemnified party with respect to
matters for which the indemnifying party is indemnifying the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified person
determines that there is a probability that an action or proceeding may
adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the indemnified person may, by notice to the indemnifying person, assume the
exclusive right to defend, compromise, or settle such action or proceeding.
7.6. Right of Set-Off. To secure the performance of the
indemnification obligations of the Stockholders hereunder, Buyer may, but shall
in no event be obligated to, set-off the amount of any Damages Buyer may have
pursuant to Section 7.2 and Section 7.3 hereof against any and all unpaid
Additional Consideration until the aggregate amount set-off hereunder equals
the amount of such Damages.
ARTICLE VIII
TERMINATION
8.1. Termination of Agreement. This Agreement may, by notice given
prior to the Closing, be terminated as follows:
(a) by Buyer, on the one hand, or the Stockholders, on the other
hand, if a material breach of any provision of this Agreement has been
committed by the other party and such breach is not waived and cannot be cured
prior to the Closing Date;
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<PAGE> 34
(b) (i) by Buyer if any of the conditions in Section 6.2 hereof
have not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Closing Date; or (ii) by Stockholders, if any of the
conditions in Section 6.1 hereof has not been satisfied as of the Closing Date
or if satisfaction of such a condition is or becomes impossible (other than
through the failure of the Stockholders to comply with their obligations under
this Agreement) and such parties have not waived such condition on or before
the Closing Date;
(c) by mutual consent of the Buyer and the Stockholders;
(d) by Buyer pursuant to Section 5.3(c) hereof; or
(e) by Buyer or the Stockholders, if the Closing has not occurred
(other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before November 30, 1997.
If this Agreement is terminated pursuant to the provisions of Section
8(c) hereof, this Agreement shall become void and of no further force and
effect, and no party hereto shall have any liability to any other party. If
this Agreement is terminated pursuant to Section 8(a), 8(b) or 8(d) hereof,
each party hereto shall be entitled to all other remedies it may have at law or
in equity.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1. Amendment and Modification. This Agreement may be amended or
modified at any time by the parties hereto, pursuant to an instrument in
writing signed by Buyer and each of the Stockholders.
9.2. Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and oral, between the parties hereto with respect to the subject
matter hereof and (b) shall not be assigned, by operation of law or otherwise
by a party hereto, without the prior written consent of the other parties.
9.3. Validity. The invalidity or unenforceability of any term or
provision of this Agreement in any situation or jurisdiction shall not affect
the validity or enforceability of the other terms or provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.4. Notices. Unless otherwise provided herein, all notices and
other communications hereunder shall be in writing and shall be deemed given
upon receipt by the other parties at the following addresses or facsimile
numbers:
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(a) if to Buyer, to:
Tufco Technologies, Inc.
4800 Simonton Road
Dallas, Texas 75244
Facsimile No.: 920-336-0344
Attention: Louis LeCalsey III
with a copy to:
Battle Fowler LLP
Park Avenue Tower
75 East 55th Street
New York, New York 10022
Facsimile No.: (212) 856-7817
Attention: Carl A. de Brito, Esq.
(b) if to the Stockholders, to:
James Barnes
11 Ellsworth Lane
St. Louis, Missouri 63124
and
Charles Cobaugh
50 Clermont Avenue
St. Louis, Missouri 63124
with a copy to:
Ottsen, Mauze, Leggat & Belz L.C.
112 South Hanley Road
St. Louis, Missouri 63105
Facsimile No.: 314-863-3821
Attention: Robert Leggat, Esq.
9.5. Governing Law. This Agreement shall be governed by the laws
of the State of Delaware (regardless of the laws that might otherwise govern
under applicable principles of conflicts of law) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies.
9.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and shall in no way be construed to
define, limit, describe, explain, modify, amplify, or add to the
interpretation, construction or meaning of any provision of, or scope or intent
of, this Agreement nor in any way affect this Agreement.
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9.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.8. Expenses. Except as otherwise contemplated by this Agreement,
whether or not this Agreement and the transactions contemplated hereby are
consummated, and except as otherwise expressly set forth herein, all costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses (it being agreed that the fees and expenses of the
Company's counsel and certified public accountants in connection with the
transactions contemplated by this Agreement shall be borne by the
Stockholders).
9.9. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its affiliates and nothing
in this Agreement, express or implied, is intended by or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
9.10. No Waivers. Except as otherwise expressly provided herein, no
failure to exercise, delay in exercising or single or martial exercise of any
right, power or remedy by any party, and no course of dealing between the
parties, shall constitute a waiver of any such right, power or remedy.
9.11. Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not Performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof and immediate injunctive relief, in addition to any other remedy at law
or equity.
9.12. Transfer Taxes. The Stockholders shall be responsible for,
and pay, all sales, use, transfer, filing, conveyance, recording, and other
similar Taxes and fees, including without limitation all applicable real estate
transfer and real property gains Taxes and recording fees and stock transfer
Taxes (collectively, "Transfer Taxes"), arising out of or in connection with
the transactions effected pursuant to this Agreement. If Buyer has primary
responsibility under applicable law for the payment of any particular Transfer
Tax, Buyer shall prepare and file the relevant Tax Return, pay the Transfer Tax
shown on such Tax Return, and notify the Stockholders of such Transfer Tax. In
such event, the Stockholders shall reimburse Buyer for the Transfer Tax in
immediately available funds within five days of the delivery of such notice.
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<PAGE> 37
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be duly signed as of the date first above written.
TUFCO TECHNOLOGIES, INC.
By: /s/ Louis LeCalsey III
-----------------------------------
Name: Louis LeCalsey III
Title: President and CEO
STOCKHOLDERS
By: /s/ Charles Cobaugh
-----------------------------------
Charles Cobaugh, Individually
By: /s/ James Barnes
-----------------------------------
James Barnes, Individually
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INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I SALE OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. The Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. Net Worth Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5. Deliveries by Stockholders and the Company . . . . . . . . . . . . . . . . . . . 3
1.6. Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS AS TO THEMSELVES . . . . . . . . . . . . . . . . . . . 5
2.1. Ownership of Shares; Title . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3. Investor Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS AS TO . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1. Due Incorporation and Authority . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2. Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . 7
3.3. Subsidiaries and Other Affiliates . . . . . . . . . . . . . . . . . . . . . . . 7
3.4. Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5. Outstanding Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6. Outstanding Options or Other Rights . . . . . . . . . . . . . . . . . . . . . . 7
3.7. Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . 8
3.8. Financial Statements; Books and Records . . . . . . . . . . . . . . . . . . . . 8
3.9. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.10. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.11. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.12. Actions and Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.13. Contracts and Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.14. Tangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.15. Real Property; Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.16. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.17. Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.18. No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.19. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.20. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.21. Officers, Directors and Employees . . . . . . . . . . . . . . . . . . . . . . . 16
3.22. Operations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.23. Banks, Brokers and Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.24. Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE> 39
<TABLE>
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3.25. No Broker's, Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . 18
3.26. Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.27. Inventory; Accounts Receivable; Account Payable . . . . . . . . . . . . . . . . 19
3.28. Potential Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . 19
3.29. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . 20
4.1. Corporate Organization; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2. Authority Relative to this Agreement . . . . . . . . . . . . . . . . . . . . . . 20
4.3. Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . 20
4.4. The Buyer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5. Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.6. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . 21
5.1. Earn-Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3. Corporate Examinations and Investigation; Confidentiality . . . . . . . . . . . 23
5.4. Issuance of Buyer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5. Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.6. Employment and Non-Competition Agreement . . . . . . . . . . . . . . . . . . . . 24
5.7. Stockholders Non-Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.8. Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.9. St. Louis Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.10. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.11. Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.12. No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.13. No Incurrence of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.14. Suppliers; Distributors; Customers . . . . . . . . . . . . . . . . . . . . . . . 27
5.15. October 31, 1997 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.16. Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.17. Net Worth Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE AGREEMENT . . . . . . . . . . . . . . 28
6.1. Conditions to the Stockholders' Obligations . . . . . . . . . . . . . . . . . . 28
6.2. Conditions to Buyer's Obligations . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VII SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.3. Tax Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.4. Limitations on Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.5. Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6. Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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<TABLE>
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ARTICLE VIII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE IX MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1. Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2. Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.6. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.8. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.9. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.10. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.11. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.12. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
<PAGE> 41
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Escrow Agreement
Exhibit B Form of Opinion of Ottsen, Mauze, Leggat & Belz
L.C.
Exhibit C Release of Liabilities and Obligations by the
Selling Stockholders and Guard Manufacturing, Inc.
Exhibit D Form of Opinion of Battle Fowler LLP
Exhibit E Financial Statements of Foremost Manufacturing
Company, Inc.
Exhibit F Form of Employment and Non-Competition Agreement
for Charles Cobaugh
Exhibit G Form of Lease
Disclosure Schedules
(ALL EXHIBITS AND SCHEDULES HAVE BEEN OMITTED, BUT SHALL BE PROVIDED TO THE
SECURITIES AND EXCHANGE COMMISSION UPON REQUEST.)
<PAGE> 1
EXHIBIT 99.1
SECOND
AMENDED AND RESTATED LOAN AGREEMENT
This Second Amended and Restated Loan Agreement is made and entered
into as of the 13th day of November, 1997, by and between Bank One, Wisconsin
(the "Bank"), and Tufco, L.P., d/b/a Tufco Division Limited Partnership, in its
own right and as successor in interest of Tufco Industries, Inc., Executive
Converting Corporation and Hamco Industries, Inc. (the "Borrower"). The Bank and
the Borrower agree as follows.
The Bank and the Borrower entered into an Amended and Restated Loan
Agreement dated as of February 7, 1997. The Bank and the Borrower desire to
further amend the Amended and Restated Loan Agreement by the execution and
delivery of this Second Amended and Restated Loan Agreement.
The Bank and Tufco Industries, Inc., Executive Converting Corporation
and Hamco Industries, Inc. entered into an initial loan agreement dated as of
August 22, 1995, amended by amendments dated as of February 1, 1996; June 30,
1996; and December 1, 1996 (the "Initial Loan Agreement"). At the time of
execution and delivery of the Initial Loan Agreement, Tufco Industries, Inc.,
Executive Converting Corporation and Hamco Industries, Inc. were wholly owned
subsidiaries of Tufco Technologies, Inc. Tufco Technologies, Inc. has undertaken
a restructuring (the "Restruc ture") pursuant to which all of the assets and
liabilities of Tufco Industries, Inc., Executive Converting Corporation and
Hamco Industries, Inc. have been respectively transferred to and assumed by
Tufco, L.P., a Delaware limited partnership, d/b/a Tufco Division Limited
Partnership.
The Bank and the Borrower enter into this Second Amended and Restated
Loan Agreement so as to evidence their understanding with respect to the matters
herein contained between themselves and to further evidence the assumption by
the Borrower of all liabilities, duties and obligations of Tufco Industries,
Inc., Executive Converting Corporation and Hamco Industries, Inc. pursuant to
the Initial Loan Agreement and related documents, including but not limited to
the Security Documents.
1. DEFINITIONS. Unless the context otherwise specifies, the
following terms shall have the meaning herein specified, which meaning shall
apply to all documents within this contemplated transaction, and such
definitions to be applicable equally to the singular and plural form of such
terms:
1.1 BANK. Bank One, Wisconsin, a Wisconsin state banking
organization, with an office located at 200 South Adams Street, Green Bay,
Wisconsin 54301.
1.2 BORROWER. Tufco, L.P., a Delaware limited partnership,
d/b/a Tufco Division Limited Partnership, with its principal office located at
4750 Simonton, Dallas, Texas 75244.
1.3 CASH FLOW. The amounts described in Section 4.14 of this
Agreement.
<PAGE> 2
1.4 COMMITMENT FEE. A fee equal to 0.25%, per annum, of the
unused amount of the revolving loan identified in Section 2.2 of this Agreement,
determined on a daily basis and payable quarterly in arrears.
1.5 CONTINGENCY FEE. A fee equal to the sum of $10,000.00
payable upon maturity of the term loan represented by the Promissory Note,
Exhibit A-4, in the event the Borrower declines to accept the Bank's proposal to
provide the Borrower with long term financing under reasonable terms of the
principal balance of the term loan represented by the Promissory Note, Exhibit
A-4. It is agreed by the Borrower and the Bank that the term loan represented by
the Promissory Note, Exhibit A-4, is a short term bridge loan to provide
financing necessary for Tufco Technologies, Inc. to purchase all of the
outstanding capital stock of Foremost Manufacturing Company, Inc.
1.6 ERISA. The term ERISA means the Employee Retirement
Income Security Act of 1974, as amended.
1.7 EVENT OF DEFAULT. The events defined in Section 7.1 of
this Agreement.
1.8 FACILITY FEE. A fee equal to 0.50% of the amount of
Facility Two paid upon advance of the Facility Two loan proceeds under the
Initial Loan Agreement.
1.9 GUARANTOR. Individually, Tufco Technologies, Inc., Tufco
Tech, Inc., Tufco, Inc., Technologies I, Inc., TFCO, Inc. and Foremost
Manufacturing Company, Inc.
1.10 GUARANTORS. Collectively, Tufco Technologies, Inc.,
Tufco Tech, Inc., Tufco, Inc., Technologies I, Inc., TFCO, Inc. and Foremost
Manufacturing Company, Inc.
1.11 LETTER(S) OF CREDIT FEE. An issuance fee equal to 0.375%
of the amount of any letter of credit payable upon issuance of any letter of
credit except for any letter of credit related to industrial revenue bond
transactions. A negotiation fee equal to 0.25% of any letter of credit amount
negotiated payable upon negotiation of any letter of credit except for any
letter of credit related to industrial revenue bond transactions. Other related
letter of credit expenses incurred by Bank includ ing, but not limited to,
amendment and cable fees, payable upon receipt of billing from Bank.
1.12 LOAN AGREEMENT. This Second Amended and Restated Loan
Agreement and any other documents or materials delivered and/or executed
pursuant thereto or pursuant to the Initial Loan Agreement, which Loan Agreement
is sometimes referred to as this Agreement.
1.13 PERMITTED LIENS. The mortgages, liens, conditional sales
agreements, encumbrances or charges set forth on Exhibit "B" attached hereto and
incorporated herein by this reference.
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<PAGE> 3
1.14 PLAN. Any pension benefit plan subject to Title IV of
ERISA maintained by the Borrower or any such Plan to which the Borrower is
required to contribute on behalf of its employees.
1.15 PREPAYMENT PREMIUM. A prepayment premium payable in
connection with any unscheduled payment of principal made by the Borrower with
respect to a Promissory Note, Exhibits "A-2" and "A-3", prior to the respective
scheduled maturity date during any period while a Promissory Note, Exhibits
"A-2" and "A-3", shall bear interest at a fixed rate. Such prepayment premium
shall be equivalent to the amount, if any, by which (a) the present value of a
flow of interest on the unscheduled principal amount prepaid from the prepayment
date to the scheduled maturity date of said note at the fixed rate then in
effect exceeds (b) the present value of a flow of interest on the unscheduled
principal amount prepaid from the prepayment date to the scheduled maturity date
of the respective Promissory Note, Exhibits "A-2" and "A-3", at the effective
monthly equivalent of the average yield of United States Government Treasury
Securities, on the date of such unscheduled prepayment, having maturities within
forty-five (45) days of the scheduled maturity date of the respective Promissory
Note, Exhibits "A-2" and "A-3", as determined by the Bank. The Prepayment
Premium shall be payable upon receipt of billing from Bank.
1.16 PROMISSORY NOTES. Promissory Notes refer to the
Promissory Notes payable to the Bank in the form as that attached hereto as
Exhibits "A-1" through "A-4," inclusive, and incorporated hereby by this
reference.
The definition of the term "Promissory Notes" shall also
include any Promissory Notes or agreements executed and delivered by the
Borrower to the Bank with respect to additional credit extended by the Bank to
the Borrower pursuant to Section 8.12 of the Loan Agreement.
1.17 REFERENCE RATE. The rate announced and/or published by
Bank One, Wisconsin, as its reference rate adjusted daily and computed on the
basis of a three hundred sixty (360) day year.
1.18 REFERENCE RATE LOANS. Reference Rate Loans are loans made
where the applicable rate of interest is the Reference Rate.
1.19 SECURITY DOCUMENTS.
(a) The Security Documents executed and delivered to
the Bank by Tufco Industries, Inc., Executive Converting Corporation
and Hamco Industries, Inc., pursuant to the Initial Loan Agreement. It
is agreed the Promissory Notes are secured by all Security Documents
executed by Tufco Industries, Inc., Executive Converting Corporation
and Hamco Industries, Inc. and further that the Borrower assumes all
liabilities, duties and obligations of Tufco Industries, Inc.,
Executive Converting Corporation and Hamco Industries, Inc. arising
thereby.
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<PAGE> 4
(b) The Amended and Restated Mortgage and Amended and
Restated Deed of Trust substantially in the form as that attached
hereto as Exhibit "C" and incorporated herein by this reference.
(c) General Business Security Agreements,
substantially in the form as that attached hereto as Exhibit "D" and
incorporated herein by this reference granting Bank a first priority
security interest and related financing statements perfecting the
security interests granted in the General Business Security Agreements
and fixtures disclaimers as the Bank may require.
(d) The Unlimited Continuing Guaranty of the
Guarantors substantially in the form as that attached hereto as Exhibit
"E" and incorporated herein by this reference.
(e) Lease assignments and other documents securing or
providing security for the Promissory Notes which the Bank may require.
1.20 DEFINITIONS APPLICABLE TO LIBOR RATE LOANS.
(a) BORROWING DATE means each date on which a loan is
made by the Bank to the Borrower.
(b) BUSINESS DAY means (i) with respect to the making,
payment or rate determination of a Libor Rate Loan, a day (other than a Saturday
or Sunday) on which banks are open for business in Milwaukee, Wisconsin and on
which dealings in Dollars are carried on in the London Interbank market and (ii)
for all other purposes, a day (other than Saturday or Sunday) on which banks are
open for business in Milwaukee, Wisconsin.
(c) LIBOR RATE shall mean the published national
consensus Libor Rate reported by the Bank with respect to a Libor Rate Loan for
the applicable Loan Period in an amount approximately equal to the requested
Libor Rate Loan established two Business Days prior to the first day of such
Loan Period. The Libor Rate determined by the Bank shall, in the absence of
error, be conclusive.
(d) LIBOR RATE LOAN means a loan hereunder bearing
interest at or by reference to the Libor Rate.
(e) LOAN PERIOD means:
( i) with respect to (a) each Libor Rate Loan with
respect to Facility One, the period commencing on the applicable Borrowing Date
and ending 15 to 90 days thereafter as specified in the related notice of
borrowing pursuant to section 2.2; (b) each Reference Rate Loan
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<PAGE> 5
converted to a Libor Rate Loan or in the case of a continuation of a Libor Rate
Loan for an additional Loan Period, the period commencing on the date of such
conversion or continuation and ending 15 to 90 days thereafter as specified in
the related Conversion/Continuation Notice pursuant to section 2.2; and (c) with
respect to the Libor Rate Loan Facility Four, the period commencing on the
applicable Borrowing Date and ending 30 days but not longer than March 31, 1998
thereafter, provided that:
(a) any Loan Period which would otherwise
end on a day which is not a Business Day shall be extended to the next
succeeding Business Day unless such Business Day falls in another calendar
month, in which case such Loan Period shall end on the next preceding Business
Day;
(b) any Loan Period which begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in a calendar month at the end of such Loan Period) shall,
subject to clause (c) below, end on the last Business Day of a calendar month;
and
(c) any Loan Period which would otherwise
end after the maturity date shall end on the maturity date.
(ii) with respect to each Reference Rate Loan, the
period commencing on the Borrowing Date of such Reference Rate Loan, or in the
case of a Libor Rate Loan converted to a Reference Rate Loan, the period
commencing on the date of such conversion, and ending on the maturity date.
2. LOANS, COLLATERAL-LOAN RATIO AND SECURITY DOCUMENTS.
2.1 MAKING THE LOANS. The Bank agrees to make the
following-described loans to the Borrower upon the terms and conditions and
disbursement procedures set forth in this Agreement, and the Borrower agrees to
execute the Promissory Notes which shall evidence the Borrower's obligation to
repay all of the disbursements made thereunder and under this Agreement.
2.2 FACILITY ONE. The Bank shall extend to the Borrower a
revolving loan, up to an aggregate maximum amount of $6,750,000.00 at any time
outstanding during the period from date hereof to March 31, 1999. The sum of
$750,000.00 shall be allocated to issuance of commercial import letters of
credit. Within such maximum amounts and subject to the allocated limitations,
loans (advances) may be made, repaid and made again. The revolving loan shall be
evidenced by the Borrower's Promissory Note in the form of Exhibit "A-1," the
terms of which are incorporated herein by reference. The revolving note shall
mature on March 31, 1999. The loan proceeds with respect to Facility One shall
be utilized for working capital needs and the issuance of commercial import
letters of credit.
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<PAGE> 6
Facility One loans shall be a Reference Rate Loan or a Libor
Rate Loan. Unless the Borrower requests a Libor Rate Loan pursuant to the
procedures herein stated, all Facility One loans shall be Reference Rate Loans.
The Borrower shall request Libor Rate Loans by written notice, or by telephonic
notice confirmed in writing, to the Bank, not later than 11:00 a.m., Milwaukee
time, on the date which is two Business Days prior to the requested Borrowing
Date (which must be a Business Day). Each such request by the Borrower must
specify the amount of the requested Libor Rate Loan and the applicable Loan
Period. Each Libor Rate Loan shall be in a minimum amount of $500,000.00. In the
event of any inconsistency between the telephonic notice and the written
confirmation thereof, the written confirmation shall control. Each such request
for a Libor Rate Loan shall be irrevocable.
The Borrower may elect from time to time, subject to the terms
and conditions hereof, to convert all or a portion of the outstanding Reference
Rate Loans to Libor Rate Loans (in each case, in a minimum amount of
$500,000.00) or to convert all or a portion of a Libor Rate Loan to a Reference
Rate Loan; provided that any conversion of a Libor Rate Loan shall occur on the
last day of the applicable Loan Period.
A Reference Rate Loan shall continue as a Reference Rate Loan
unless and until converted to a Libor Rate Loan. At the end of the applicable
Loan Period for a Libor Rate Loan, such Libor Rate Loan shall automatically be
converted to a Reference Rate Loan unless the Borrower shall have given the Bank
notice in accordance with this section 2.2 requesting that, at the end of such
Loan Period all or a portion of such Libor Rate Loan be continued as a Libor
Rate Loan.
The Borrower shall give the Bank irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of a Reference Rate Loan or
a continuation of a Libor Rate Loan not later than 11:00 a.m., Milwaukee time,
on the date of the requested conversion, in the case of a conversion to a
Reference Rate Loan, or, in the case of a conversion to or a continuation of a
Libor Rate Loan, two Business Days prior to the date of the requested conversion
or continuation, specifying (i) the requested date (which shall be a Business
Day) of such conversion or continuation, (ii) the amount and type of loan to be
converted or continued and (iii) the amount and type of loan into which such
loan is to be converted or continued, and in the case of a conversion to or
continuation of a Libor Rate Loan, the duration of the Loan Period applicable
thereto. Each such request by the Borrower for a conversion or continuation of a
Libor Rate Loan or Reference Rate Loan shall be irrevocable.
Notwithstanding anything to the contrary contained in this
section, no loan may be converted into or continued as a Libor Rate Loan when
any Event of Default has occurred and is continuing.
Libor Rate Loans may not be pre-paid without the Bank's
consent prior to the end of the applicable Loan Period.
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<PAGE> 7
If the Bank determines that the making or maintaining of a
Libor Rate Loan would violate any applicable law, rule, regulation or directive,
whether or not having the force of law, then the obligation of the Bank to make,
continue, maintain or convert any Libor Rate Loan shall be suspended until the
Bank notifies the Borrower that the circumstances causing such suspension no
longer exist. During any such period, all Libor Rate Loans shall automatically
convert into Reference Rate Loans at the end of the applicable Loan Period or
sooner if required by law.
If the Bank determines that the Bank is unable to determine
the Libor Rate in respect of a requested Loan Period or that the Bank is unable
to obtain deposits of Dollars in the London Interbank market in the applicable
amounts and for the requested Loan Period, then, upon notice from the Bank to
the Borrowers, the obligation of the Bank to make any Libor Rate Loan, or to
convert any Reference Rate Loan into a Libor Rate Loan, shall be suspended until
the Bank notifies the Borrower that the circumstances causing such suspension no
longer exist.
If the Bank shall incur any loss or expense (including any
loss or expense incurred by reason of a liquidation or redeployment of deposits
or other funds acquired by the Bank to make, continue or maintain any portion of
a Libor Rate Loan, or to convert any portion of a Reference Rate Loan into a
Libor Rate Loan) as a result of: (i) any conversion or repayment or prepayment
of the principal amount of a Libor Rate Loan on a date other than the last day
of the Loan Period applicable thereto (whether as a result of acceleration,
prepayment or otherwise); (ii) any loan not being made as a Libor Rate Loan in
accordance with the request therefor; or (iii) any loan not being continued as,
or converted to, a Libor Rate Loan in accordance with the
Continuation/Conversion Notice therefor; then, upon written notice from the Bank
to the Borrower, the Borrower shall, within 10 days of its receipt thereof, pay
to the Bank such amount as will (in a reasonable determination of the Bank)
reimburse the Bank for such loss or expense. Such written notice (which shall
include calcu lations in reasonable detail) shall, in the absence of error, be
conclusive and binding on the Borrower.
During such times as the Borrower achieves and maintains a
National Association of Insurance Commissioners ("NAIC") II, senior, unsecured,
long term debt rating or an equivalent investment grade senior, unsecured, long
term debt rating from other rating agencies; and is in full compliance with all
of the terms and conditions of this Loan Agreement, the Reference Rate pricing
option shall be reduced to Reference Rate less 0.50% and the Libor pricing
option shall be reduced to Libor plus 1.25%.
2.3 FACILITY TWO. Pursuant to the Initial Loan Agreement, the
Bank had extended to Tufco Industries, Inc., Executive Converting Corporation
and Hamco Industries, Inc., certain credit in the form of a term note having a
current outstanding principal balance in the amount of $5,550,000.04. The
Borrower shall execute and deliver to the Bank a replacement note represented by
the Promissory Note annexed hereto in the form of Exhibit "A-2", the terms of
which are incorporated herein by reference.
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<PAGE> 8
2.4 FACILITY THREE. Pursuant to the Initial Loan Agreement,
the Bank had extended to Tufco Industries, Inc., Executive Converting
Corporation and Hamco Industries, Inc., certain credit in the form of a term
note having a current outstanding principal balance in the amount of
$1,383,356.00. The Borrower shall execute and deliver to the Bank a replacement
note represented by the Promissory Note annexed hereto in the form of Exhibit
"A-3", the terms of which are incorporated herein by reference.
2.5 FACILITY FOUR. The Bank shall extend to the Borrower a
term loan in the principal sum of $5,250,000.00 for the purpose of allowing
Tufco Technologies, Inc. to purchase all of the outstanding capital stock of
Foremost Manufacturing Company, Inc. The Borrower shall execute and deliver to
the Bank a Promissory Note in the form annexed hereto as Exhibit "A-4", the
terms of which are incorporated herein by reference.
2.6 SECURITY DOCUMENTS. The Borrower agrees to deliver to the
Bank the Security Documents duly executed to secure the payment of the
Promissory Notes and any other indebtedness owing under this Agreement.
3. REPRESENTATIONS AND WARRANTIES. The Borrower and the
Guarantors, where appropriate, represent and warrant as follows, which
representations and warranties shall survive the closing and the consummation of
the transactions contemplated hereby and continue in full force and effect for
so long as there shall be any indebtedness owing under this Agreement.
3.1 DUE ORGANIZATION. The Borrower and the Guarantors are
organizations existing under all applicable laws and resolutions and have full
power and authority to carry on their respec tive businesses as now conducted
and as proposed to be conducted.
3.2 AUTHORITY. The execution and delivery of this Agreement,
the Security Documents, Promissory Notes and any other documents or materials to
be delivered pursuant to this Agreement are within the respective power of the
Borrower and the Guarantors and do not violate any provision of law or result in
a breach of, or constitute a default under or result in the creation of any
lien, charge or encumbrance upon any property or assets of the Borrower or the
Guarantors pursuant to any indenture or loan or credit agreement or other
agreement or instruments to which the Borrower or the Guarantors are a party or
by which the Borrower or the Guarantors or their property may be bound or
affected and do not require the approval or consent of any governmental body,
agency or authority or any other person or entity.
3.3 ENFORCEABILITY. This Agreement, the Security Documents and
other documents or materials to be delivered pursuant to this Agreement are the
legal, valid and binding obligations of the Borrower and the Guarantors,
respectively, enforceable against the said persons in accordance with their
respective terms. The Promissory Notes, when duly executed and delivered, will
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<PAGE> 9
constitute the legal, valid and binding obligation of the Borrower enforceable
in accordance with their terms.
3.4 LITIGATION. Except as disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the best knowledge of
the Borrower or the Guarantors, threatened against or affecting the Borrower or
the Guarantors or the properties of the Borrower or the Guarantors before any
court or governmental department, commission, board, bureau, agency or
instrumentality, which, if determined adversely to the Borrower or the
Guarantors, would have a material adverse effect on the financial condition,
properties or operations of the Borrower or the Guarantors or on the ability of
the Borrower or the Guarantors to perform this Agreement.
3.5 CERTIFICATES AND STATEMENTS. No certificate or statement
at the time delivered, herewith or heretofore, by the Borrower or the Guarantors
to the Bank in connection herewith, or in connection with any transaction
contemplated hereby, contains or contained any untrue statement of a material
fact or fails or failed to state any material fact necessary to keep the
statements contained therein from being misleading.
3.6 FINANCIAL DATA. The financial data relating to the
Borrower and the Guarantors, together with all financial statements, comments,
footnotes, notes, and schedules furnished by the Borrower and/or the Guarantors
to Bank fairly reflect the financial condition of the indicated entity and the
results of its operations as of the dates and for the periods stated therein.
All financial statements were prepared in conformity with generally accepted
accounting practices applied on a basis consistent with that of previous
statements. No material adverse change has since occurred with respect to the
financial data provided to the Bank.
3.7 INVESTMENTS IN AND GUARANTIES OF OTHERS. The Borrower and
the Guarantors have made no investments in, or advances to or guaranties of the
obligations of any individual, corporation or other entity, except those
disclosed in the financial data referred to above, the acquisition by Tufco
Technologies, Inc. of all of the outstanding capital stock of Foremost
Manufacturing Company, Inc. or as set forth herein.
3.8 INDEBTEDNESS AND LIABILITIES. The Borrower and the
Guarantors have no indebtedness or liabilities of any kind whether accrued,
absolute, contingent or otherwise, except those disclosed in the financial data
described in Section 3.6 above, or those permitted elsewhere in this Agreement
including, but not limited to, those described in Section 3.4. There exists no
default nor has any act or omission occurred which, with the giving of notice or
the passage of time, would constitute a default under the provisions of any
instrument evidencing such indebtedness or liability or any agreement relating
thereto or any other agreement or instrument to which the Borrower or a
Guarantor is a party.
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<PAGE> 10
3.9 TAX RETURNS. To the best of their knowledge, the Borrower
and the Guarantors have filed all required federal, state, and local tax returns
and have paid all taxes as shown on such returns as they have become due. There
are no claims for unpaid taxes, penalties or interest, state, federal, or local,
which have been asserted by any taxing authority upon audit, except as has been
heretofore disclosed, in writing, to Bank.
3.10 TITLE TO PROPERTIES. The Borrower and the Guarantors have
good and marketable title to all of their respective property, real, personal
and mixed, subject to no lien, security interest, mortgage, encumbrance or
charge of any kind or any agreement not to grant a security interest, mortgage
or lien, except those permitted elsewhere in this Agreement. All owned and
leased buildings and equipment of the Borrower and the Guarantors are in good
condition, repair and working order and to the best of Borrower's and
Guarantors' knowledge and belief, conform to all applicable laws, ordinances and
regulations.
3.11 REGULATION U. Neither the Borrower nor the Guarantors
will use, directly or indirectly, any part of the proceeds of the Promissory
Notes for the purpose of purchasing or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
or any amendments thereto.
3.12 ERISA LIABILITY. The Borrower and the Guarantors have no
knowledge of the occurrence of any event with respect to any Plan, which could
result in a liability of the Borrower to the Pension Benefit Guaranty
Corporation, other than the payment of premiums (but not a late payment charge)
pursuant to Section 4007 of ERISA.
3.13 ENVIRONMENTAL REGULATIONS. The Borrower and the
Guarantors have not violated, are not violating, and have not been threatened
with or received a notice or charge asserting any violation of the Federal Solid
Waste Disposal Act, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservancy Recovery Act of 1976 (RCRA), the Federal
Comprehensive Environmental Responsibility, Cleanup and Liability Act of 1980
(CERCLA), the Toxic Substance Control Act of 1976 or any other federal, state,
local or foreign laws, environmental rules and regulations thereunder,
regulating or otherwise affecting the environment as the same may have been
amended prior to the date hereof.
3.14 HAZARDOUS SUBSTANCES AND MATERIALS. There are no
substances or materials which have been, are or will be stored, deposited,
treated, recycled or disposed of on, under or at the Borrower's or a Guarantor's
business locations, which substances or materials, if known to be present on, at
or under such property, would require cleanup, removal or some other remedial
action under any federal, state or local laws, regulations, ordinances, codes or
rules relating to the discharge of air pollutants, water pollutants or processed
waste water or otherwise relating to hazardous or toxic substances or materials,
other than chemicals used in the operation of the Borrower's or a Guarantor's
business in the ordinary course. There are no conditions existing currently or
likely to exist during
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<PAGE> 11
the term of this Agreement which would subject the Borrower or a Guarantor to
damages, penalties, injunctive relief or cleanup costs under such environmental
laws, and the Borrower and the Guarantors are not subject to any judgment,
decree, order or citation relating to or arising out of such environmental laws.
The Borrower and the Guarantors shall not cause or permit any
hazardous or toxic substances or materials to be used, stored, generated or
disposed of on or in the Borrower's or a Guarantor's business locations at any
time owned, occupied or operated by the Borrower, a Guarantor or any tenants,
tenants' agents, employees, contractors or invitees, other than chemicals used
in the operation of the Borrower's or a Guarantor's business in the ordinary
course.
4. AFFIRMATIVE COVENANTS. From and after the date of this
Agreement and so long as the Loan shall remain available for advance to the
Borrower hereunder and until payment in full of all indebtedness evidenced by
the Promissory Notes and/or owing under the terms and conditions of this
Agreement, the Borrower and the Guarantors, where appropriate, agree that they
will:
4.1 INCORPORATION OF DOCUMENTS. The Borrower and the
Guarantors will fully comply in every respect with the respective covenants
contained in the documents executed and/or delivered pursuant to this Agreement
and/or any other document or materials incorporated herein by reference.
4.2 NOTICE OF EVENT OF DEFAULT. The Borrower and the
Guarantors shall furnish to the Bank as soon as possible and, in any event,
within seven (7) days after the Borrower or a Guarantor have obtained knowledge
of the occurrence of each Event of Default or each event which, with the giving
of notice or lapse of time or both, would constitute an Event of Default, which
is continuing on the date of such statement, a statement of an authorized
representative of the Borrower and/or a Guarantor setting forth details of such
Event of Default or event and the action which the Borrower and/or the Guarantor
propose to take with respect to same.
4.3 INSURANCE. The Borrower and the Guarantors, respectively,
shall maintain, at all times and from time to time, at the request of the Bank,
furnish the Bank with proof of the payment of the premiums thereon and
certificates of insurance therefor:
(a) Maintain all-risk coverage insurance for the full
insurable replacement value of all real estate improvements and
tangible personal property upon which the Bank has a lien interest in
form and content acceptable to the Bank.
(b) Business interruption coverage in such form and
amounts as reasonably required by the Bank.
(c) Public liability insurance and fire and extended
coverage insurance on
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<PAGE> 12
all property on which the Bank is given a lien interest, all in such
form and amounts as are reasonably required by the Bank.
(d) The policies of insurance required pursuant to
this section shall be placed with financially sound and reputable
insurers approved by the Bank. The policies of insurance delivered
pursuant to this section shall be satisfactory in form and content to
the Bank and shall contain an agreement of the insurer to give not less
than thirty (30) days' advance written notice to the Bank in the event
of cancellation of such policy or changes affecting the coverage
thereunder. All policies shall contain a loss payable clause naming the
Bank as loss payee or mortgage payee, as the case may be. The Borrower
and the Guarantors will furnish to the Bank such evidence of insurance
as the Bank may require. The Borrower and the Guarantors hereby agree
that, in the event they fail to pay or cause to be paid the premium on
any insurance, the Bank may do so and be reimbursed by the Borrower
therefor.
4.4 TAXES AND ASSESSMENTS. The Borrower and the Guarantors
shall pay all taxes and assessments levied or assessed against the Borrower's or
a Guarantor's assets prior to the date on which a penalty is attached thereto
unless the same is being contested in good faith by appropriate proceedings and
reserves deemed adequate by Bank have been established therefor; provided,
however, that the Borrower or a Guarantor may pay assessments in installments so
long as no fine or penalty is added to any installment for the nonpayment
thereof.
4.5 BOOKS AND RECORDS. The Borrower and the Guarantors shall
keep proper books, records and accounting data in which full, true and correct
entries will be made of all of their respec tive dealings, business and affairs
in accordance with generally accepted accounting principles and all applicable
laws and regulations and permit the Bank, acting by or through its officers or
agents, to examine and obtain copies of books, records and accounting data of
the Borrower and the Guarantors and to make extracts therefrom and copies
thereof.
4.6 COMPLIANCE WITH LAWS. The Borrower and the Guarantors
shall comply with the requirements of all applicable laws, rules, regulations
and orders of any governmental authority, noncompliance with which would have an
adverse effect on the Borrower's or the Guarantors' business, assets or
property, operations or their ability to perform their obligations under this
Agreement.
4.7 MAINTENANCE OF ASSETS AND PROPERTY. The Borrower and the
Guarantors shall keep all of their respective assets and property, whether owned
or leased, in good working order and condition, ordinary wear and tear excepted.
4.8 MERGER AND DISPOSAL OF ASSETS. The Borrower and the
Guarantors shall not directly or indirectly merge, consolidate or reorganize
with or into any other corporation or entity;
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<PAGE> 13
the Borrower and the Guarantors shall not sell, lease, transfer or otherwise
dispose of all or a substantial part of their respective assets, other than
sales made in the ordinary course of business.
4.9 PERMITS AND LICENSES. The Borrower and the Guarantors
shall maintain their existence, all permits, licenses, privileges, certificates
and the like necessary for the operation of their respective businesses.
4.10 FINANCIAL STATEMENTS. Tufco Technologies, Inc. shall
deliver to the Bank promptly, and in any event within thirty (30) days, after
the close of each quarterly period of each fiscal year (except the last such
period in each such fiscal year), financial report(s) consisting of Tufco
Technologies, Inc.'s balance sheet as of the end of such period, profit and loss
statement, and reconciliations of surplus from the beginning of such fiscal year
to the end of such period, which financial reports shall be prepared in such
form and detail as the Bank may request and shall be in conformity with
generally accepted accounting principles and other applicable laws and
regulations applied on a basis consistent with that of the preceding fiscal year
and shall be certified to be true and correct by Tufco Technologies, Inc.'s
Chief Financial Officer.
Tufco Technologies, Inc. shall deliver to the Bank promptly,
and in any event within 30 days, after the close of each quarter of each fiscal
year, a certificate signed by Tufco Technologies, Inc.'s Chief Financial Officer
and containing a statement as to whether or not, to the knowledge of such
officer, a Default (as hereinafter defined) has occurred and is continuing (or
any event which might become a Default after the lapse of time or the giving of
notice, or both), and if the certificate shows that a Default has occurred and
is continuing, it shall also specify what steps are being taken by Borrower
and/or the Guarantors to cure the same. The statement shall also provide
evidence that the Borrower and the Guarantors are in compliance with all
financial covenants contained in this Agreement.
Tufco Technologies, Inc. shall deliver to the Bank promptly,
and in any event within 45 days, after the close of each quarter of each fiscal
year of the Guarantor a Securities Exchange Commission 10Q report prepared in
accordance with generally accepted accounting principles consistently applied.
Within Ninety (90) days after the close of each fiscal year of
Tufco Technologies, Inc., deliver to the Bank copies of detailed audit reports,
Securities Exchange Commission 10K report, and management letters prepared on a
consolidated basis by independent accountants in connection with the annual
audit of the books of the Borrower and the Guarantors and a con solidating
financial statement all prepared in conformity with generally accepted
accounting principles consistently applied and other applicable laws and
regulations. Each such annual state ment shall be accompanied by a written
statement from the accountant who prepared the same, certifying that he has
obtained no knowledge of any Default by the Borrower and/or the Guarantors in
the fulfillment of any of the terms, covenants or provisions of this Agreement,
or if such accountant shall have obtained knowledge of any such Default, he
shall disclose in such statement
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<PAGE> 14
the Default or Defaults and the nature thereof, but such accountant shall not be
liable, directly or indirectly, for any failure to obtain knowledge of any
Default.
4.11 LITIGATION OR CLAIMS AFFECTING OPERATIONS. The Borrower
and the Guarantors shall promptly inform the Bank of any litigation, or of any
claim or controversy which might become the subject of litigation against the
Borrower or the Guarantors or affecting any of the Borrower's or the Guarantors'
property, if such litigation, claim or potential litigation might, in the event
of an unfavorable outcome, have material adverse effect upon the Borrower's
and/or the Guarantors' financial condition or might cause a default.
4.12 VISITATION AND INSPECTION. The Borrower and the
Guarantors shall permit its representatives of the Bank to visit and inspect any
of its respective locations and examine any of its books and records at any
reasonable time and as often as may be reasonably desired.
4.13 PAYMENT OF CLAIMS. The Borrower and the Guarantors shall
promptly pay all lawful claims, whether for labor, materials or otherwise, which
might or could, if unpaid, become a lien or charge on any property or assets of
the Borrower or a Guarantor unless and to the extent only that the same are
being contested in good faith by appropriate proceedings and reserves deemed
adequate by the Bank have been established therefor.
4.14 MINIMUM CASH FLOW REQUIREMENT. Tufco Technologies, Inc.
shall maintain a minimum Cash Flow on a consolidated aggregate fiscal quarterly
end basis as follows:
<TABLE>
<CAPTION>
Minimum Aggregate
Fiscal Quarter Cash Flow
-------------- -----------------
<S> <C>
December 31, 1997 1,385,000.00
</TABLE>
Prior to March 31, 1998, the Bank and the Borrower agree to in
good faith negotiate minimum cash flow requirements to be maintained by Tufco
Technologies, Inc. subsequent to December 31, 1997.
Cash Flow is defined as the sum of net profit stating
inventory at the lower of cost (FIFO) or market, depreciation, amortization,
deferred income tax expense less a deferred income tax credit.
5. NEGATIVE COVENANTS. So long as the Loans shall remain
available to the Borrower and until payment in full of all indebtedness
evidenced by the Promissory Notes and/or owing under the terms and conditions of
this Agreement, the Borrower and the Guarantors, where appropriate, agree that,
without the prior written consent of the Bank, they will not:
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<PAGE> 15
5.1 ENCUMBRANCES OR LIENS. Create or permit to be created or
allow to exist any encumbrance or other lien upon the assets of the Borrower or
the Guarantors described in the Secu rity Documents except the Permitted Liens
and other liens for taxes, assessments or governmental charges not delinquent or
being contested in good faith with adequate reserves made therefor.
5.2 STATUS OF BORROWER OR GUARANTORS. Make any substantial
change in the present management of or the conduct of the business of the
Borrower or the Guarantors except that required with respect to the acquisition
of Foremost Manufacturing Company, Inc.
5.3 OTHER ACTIONS. The Borrower and the Guarantors shall not
take any action or permit any event to occur which materially impairs the
Borrower's ability to make payments when due under this Agreement.
5.4 ORGANIZATIONAL DOCUMENTS. The organizational documents of
the Borrower and the Guarantors shall not be amended or modified without the
prior written consent of the Bank except that required with respect to the
acquisition of Foremost Manufacturing Company, Inc.
5.5 OBLIGATIONS OF OTHERS. The Borrower and the Guarantors
will not become liable, directly or indirectly, as guarantor or otherwise for
any obligation of any other person.
5.6 PURCHASE OF SECURITIES. The Borrower and the Guarantors
shall not own, purchase or acquire, directly or indirectly, any stock or
securities of any person, firm or corporation, including its own securities,
other than: (a) securities guaranteed as to principal and interest by the United
States government; (b) bank repurchase agreements; (c) savings accounts or
certificates of deposit in a financial institution of recognized standing; (d)
obligations issued by the United States; (e) prime commercial paper maturing
within 90 days of the date of acquisition; (f) the acquisition of treasury stock
by Tufco Technologies, Inc. to the extent allowed in Section 5.10 of this
Agreement; (g) securities presently owned by a Guarantor in the Borrower or in
another Guarantor; and (h) the acquisition by Tufco Technologies, Inc. of all of
the outstanding capital stock of Foremost Manufacturing Company, Inc.
5.7 LOANS OR ADVANCES. The Borrower and the Guarantors shall
not make any loans or advances or sell any of their accounts receivable with or
without recourse, except extensions of credit to customers in the ordinary care
of business, loans to Borrower's employees for the purpose of purchasing stock
in Tufco Technologies, Inc. in an aggregate maximum amount of $500,000.00 at any
one time outstanding and a loan by the Borrower to Tufco Technologies, Inc. in
the sum of $5,250,000.00 for the purpose of financing the purchase of all of the
capital stock of Foremost Manufacturing Company, Inc.
5.8 CAPITAL EXPENDITURES. The Borrower and the Guarantors
shall not make or commit to make, directly or indirectly, any expenditure for
the purchase or other acquisition,
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<PAGE> 16
including but not limited to capitalized leases, of fixed or capital assets,
excluding normal replacements and maintenance which are properly charged to
current operations; and leases with Banc One Corporation or its subsidiaries or
affiliates; if after giving effect thereto, the aggregate amount of all such
capital expenditures by the Borrower and the Guarantors would exceed the sum of
$3,500,000.00 during Borrower's fiscal year 1998.
5.9 INDEBTEDNESS. The Borrower and the Guarantors will not
incur, create, assume or permit to exist any indebtedness except: (a) the
obligations arising hereunder; (b) trade indebtedness incurred in the ordinary
course of business; (c) indebtedness secured by the Permitted Liens; (d) other
indebtedness with the permission of the Bank; (e) obligations incurred with Banc
One Corporation or its subsidiaries or affiliates; and (f) the $5,250,000.00
loan by the Borrower to Tufco Technologies, Inc. described in Section 5.7 above.
5.10 PURCHASE OR REDEMPTION OF STOCK AND/OR PAYMENT OF
DIVIDENDS. The Borrower and the Guarantors shall not: (a) purchase or redeem
capital stock except for the acquisition of treasury stock by Tufco
Technologies, Inc. in an aggregate maximum amount of $250,000.00 during any
fiscal year of Tufco Technologies, Inc.; or (b) declare and/or pay any dividends
except dividends to Tufco Technologies, Inc. to the extent required to allow
Tufco Technologies, Inc. to acquire its treasury stock pursuant to Section
5.10(a).
5.11 PARTNERSHIP DISTRIBUTIONS. The Borrower shall not make
any distributions of any kind or nature to anyone except distributions to its
partners necessary for the payment of income taxes and distributions necessary
to allow Tufco Technologies, Inc. to acquire its treasury stock to the extent
permitted in Section 5.10 of this Agreement.
5.12 MERGER AND CONSOLIDATION. The Borrower and/or the
Guarantors shall not merge or consolidate with or into any other entity.
5.13 TRANSFER OF ASSETS OR BUSINESS. The Borrowers and/or the
Guarantors shall not sell, lease, transfer or otherwise dispose of all or a
substantial part of their assets or business.
6. CONDITIONS PRECEDENT. The obligation of the Bank to fund the
Loans is subject to the following conditions precedent, each of which shall have
been fulfilled to the satisfaction of the Bank:
6.1 PROMISSORY NOTES. The Promissory Notes are duly executed
by the Borrower.
6.2 SECURITY DOCUMENTS. The Security Documents shall be duly
executed and delivered to the Bank by the Borrower and the Guarantors. The liens
granted to the Bank by the
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<PAGE> 17
Security Documents shall constitute perfected first and paramount liens on the
property of the Borrower, subject only to Permitted Liens.
6.3 ORGANIZATIONAL DOCUMENTS. Provision of a true, correct and
complete copy of the limited partnership agreement, articles of incorporation,
bylaws, and amendments thereto, of the Borrower and the Guarantors.
6.4 LIEN RECORD SEARCH. UCC lien searches from the appropriate
offices of the Secretary of the States of Wisconsin, North Carolina, South
Carolina, Virginia, Missouri and Texas and from the offices of the land
recorders, covering the name of the Borrower and the Guarantors evidencing the
personal property assets, including fixtures, of the Borrower and the Guarantors
to be free of all liens except Permitted Liens.
6.5 RESOLUTIONS AND CERTIFICATIONS. Resolutions of the
Guarantors and the Borrower authorizing the transactions described herein
currently certified by an authorized officer or partner.
6.6 TITLE INSURANCE COMMITMENTS. With respect to the real
property subject to the Amended and Restated Mortgage and Amended and Restated
Deed of Trust, Exhibit C, commit ments from title company(s) acceptable to Bank
and policies of title insurance to the Bank which will:
(i) Be free from the "survey" exception and
exceptions for mechanics', materialmen's or construction liens and free
from other exceptions not previously approved by the Bank.
(ii) Name the Bank and/or its assigns as an insured
in such amounts required by Bank.
(iii) Insure the mortgage and Deed of Trust to be
valid first and paramount liens on the Borrower's real property subject
only to Permitted Liens.
(iv) Satisfaction of the "Requirements" included in
the title commitments and execution and delivery of any and all
documents required under the "Requirements" section of the title
commitments.
6.7 OTHER DOCUMENTS AND EXHIBITS. The Bank shall have received
such other agreements, documents and exhibits, without limitation, which may be
required, in Bank's judgment, to assure compliance with the requirements of this
Agreement, together with such other documents as Bank may reasonably require to
evidence and secure the Loan.
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<PAGE> 18
7. DEFAULTS, RIGHTS AND REMEDIES.
7.1 EVENTS OF DEFAULT. The following shall constitute a
Default or an Event(s) of Default:
(a) The Borrower shall fail to pay, when due,
interest or principal on the Promissory Notes and such default shall
continue uncured for ten (10) days.
(b) The Borrower or a Guarantor shall fail duly to
observe or perform any of the other terms, conditions, covenants or
agreements required to be observed or performed by said persons under
this Agreement and/or any other documents executed and/or delivered
pursuant to this Agreement and/or incorporated by reference herein,
including, without limitation, the Promissory Notes and such default
shall continue uncured for twenty (20) days.
(c) Any representation or warranty made by or on
behalf of the Borrower or a Guarantor to the Bank (whether made in this
Agreement, in any financial statement, certificate, report or schedule
furnished pursuant to this Agreement, or in any written statement
otherwise pertaining to this Agreement) shall prove to be false or
misleading as of the time such representation or warranty was made
unless such matter shall be correctable and corrected to the
satisfaction of the Bank.
(d) The Borrower or a Guarantor shall be in default
under or in breach of any of the terms of any Security Document and
such default or breach shall not be cured or waived by the Bank within
the period or periods of grace, if any, applicable thereto.
(e) The Borrower or a Guarantor shall become
insolvent, however defined; or shall be dissolved; or shall commit an
act of bankruptcy under the United States Bankruptcy Act (as now or
hereafter amended); or shall file or have filed against it, voluntarily
or involuntarily, a petition in bankruptcy or for reorganization or the
adoption of an arrangement under the United States Bankruptcy Act (as
now or hereafter amended); or shall initiate or have initiated against
it, voluntarily or involuntarily, any act, process or proceeding under
any insolvency law or other statute of law providing for the
modification or adjustment of the rights of creditor and any such
proceeding, if brought by a party other than the Borrower, shall not
have been discharged within sixty (60) days of the commencement
thereof.
(f) Execution shall have been levied against any
property subject to the Security Documents or any lien creditor's suit
to enforce a judgment in excess of $100,000.00 against such property
shall have been brought and (in either case) shall continue unstayed
and in effect for a period of more than sixty (60) consecutive days.
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<PAGE> 19
(g) Any guaranty of the Borrower's obligations under
this Agreement is revoked or becomes unenforceable for any reasons.
(h) Any default or Event of Default under the
Promissory Notes, the Security Documents or any other document executed
and/or delivered in connection with this Agreement.
(i) The Borrower or a Guarantor defaults in the
performance of the terms of any other evidence of indebtedness or lease
issued or assumed by the Borrower or a Guarantor or on the terms of any
agreement under which such indebtedness is secured or issued, and such
default shall continue beyond any applicable grace period.
7.2 RIGHTS AND REMEDIES. Upon the occurrence of an Event of
Default and at any time thereafter until such Event of Default is cured to the
reasonable satisfaction of the Bank, Bank may, at its option, exercise any and
all of the following rights and remedies (and any other rights and remedies
available to it):
(a) Bank may, without notice to the Borrower unless
otherwise specified or required herein by notice to the Borrower,
terminate its obligation to advance funds hereunder.
(b) Bank may declare immediately due and payable all
unpaid principal of and accrued interest on the Promissory Notes, and
the same thereon be immediately due and payable without presentment or
other demand, protest, notice of dishonor or any other notice of any
kind, all of which are hereby expressly waived.
(c) Bank shall have the right, in addition to any
other rights provided by law, to enforce its rights and remedies under
the Security Documents.
8. MISCELLANEOUS.
8.1 FEES AND COSTS. The Borrower agrees to pay the Commitment
Fee, the Contingency Fee, the Letter(s) of Credit Fee, all fees of the Bank,
title insurance premiums, and recording fees and agrees to reimburse the Bank
upon demand for all reasonable out-of-pocket expenses actually incurred by the
Bank in connection with this Agreement or in connection with the transactions
contemplated by this Agreement, including, but not limited to, any and all
reasonable legal expenses and attorneys' fees sustained by the Bank in the
exercise of any right or remedy available to it under this Agreement or
otherwise by law or equity, and further, the services performed by such counsel
in connection with the preparation of this Agreement and the documents and
instruments incidental thereto.
-19-
<PAGE> 20
8.2 ASSIGNABILITY AND SUCCESSORS. This Agreement shall be
binding upon and inure to the benefit of the Borrower the Guarantors and the
Bank and their respective successors and assigns, except that the Borrower and
the Guarantors may not transfer or assign their rights hereunder without the
prior written consent of the Bank.
8.3 WAIVERS. No waiver by the Bank of any default hereunder
shall operate as a waiver of any other default or of the same type of default on
a future occasion. No delay on the part of the Bank in exercising any right or
remedy hereunder shall operate as a waiver thereof, no shall any single or
partial exercise of any right or remedy preclude other or further exercise
thereof or the exercise or any other right or remedy.
8.4 BANK'S REMEDIES AND CUMULATIVE. The rights and remedies
herein specified are cumulative and not exclusive of any rights or remedies
which the Bank would otherwise have. In the event of a conflict in remedies
between this Agreement and the Security Documents, including any notice period
or periods, the specific terms of the Security Documents shall control.
8.5 GOVERNING LAW AND ENTIRE AGREEMENT. This Agreement, the
Security Documents, the Promissory Notes and any other documents executed and/or
delivered pursuant to this Agreement and/or incorporated by reference herein and
all security therefor shall be governed, construed and enforced under the laws
of the State of Wisconsin in courts of the State of Wisconsin or the United
States of America. This Agreement contains the entire agreement of the parties
on the matters covered. No other agreement, statement or promise made by any
party or by any employee, officer or agent of any party that is not in writing
and signed by all parties to this Agreement shall be binding, and in entering
into this Agreement, the Borrower and the Guarantors are not relying on any
statement, representation or warranty not expressly set forth herein.
8.6 SURVIVAL. All agreements, representations and warranties
made herein shall survive the execution of this Agreement, the making of the
disbursements hereunder and the execution and delivery of the Promissory Notes.
8.7 COUNTERPARTS AND HEADINGS. This Agreement may be executed
in any number of counterparts, each of which, when so executed and delivered,
shall be an original, but such counterparts shall together constitute one and
the same instrument. The section headings in this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.
8.8 NOTICES. All communications or notices required or
permitted by this Agreement shall be in writing and shall be deemed to have been
given at the earlier of the date when actually delivered to an officer of the
other party or when deposited in the United States mail, certified or registered
mail, postage prepaid and addressed as follows, unless and until either of such
parties notifies the other in accordance with this section as a change of
address:
-20-
<PAGE> 21
If to Tufco Technologies, Inc.: If to Tufco Tech, Inc.:
ATTENTION: Louis LeCalsey, III ATTENTION: Louis LeCalsey, III
President President
4750 Simonton 4750 Simonton
Dallas, TX 75244 Dallas, TX 75244
If to Tufco, Inc.: If to TFCO, Inc.:
ATTENTION: Kathy Manos ATTENTION: Kathy Manos
President President
4750 Simonton 4750 Simonton
Dallas, TX 75244 Dallas, TX 75244
If to the Bank: If to Technologies I, Inc.:
Bank One, Wisconsin ATTENTION: Kathy Manos
ATTENTION: Mr. Mark J. Fischer President
Assistant Vice President 4750 Simonton
200 South Adams Street Dallas, TX 75244
P. O. Box 19029
Green Bay, WI 54307-9029
If to Tufco, L.P.: If to Foremost Manufacturing
ATTENTION: Louis LeCalsey, III ATTENTION: Louis LeCalsey, III
President, Tufco Tech, Inc. Company, Inc.:
4750 Simonton President, Foremost Manufacturing
Dallas, TX 75244 Company, Inc.
4750 Simonton
Dallas, TX 75244
8.9 AMENDMENT. No amendment of this Agreement shall be
effective unless in writing and signed by the parties.
8.10 PARTICIPATION. The Bank may, at any time and from time to
time, grant to any person or entity a participation in any part of the
indebtedness described herein. All of the representations, warranties and
covenants of the Borrower or the Guarantors in this Agreement are also made to
any participant with the same force and effect as if expressly so made.
8.11 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity of
enforceability of such provision in any other jurisdiction.
8.12 OTHER CREDIT. The parties acknowledge the Bank may extend
additional credit to the Borrower in such amounts and upon such terms and
conditions as the Bank in its sole discretion
-21-
<PAGE> 22
may agree. In the event the Bank extends additional credit, it is agreed that
the same is agreed to be issued pursuant to the terms of this Agreement. The
note(s) or agreement(s) represent ing such obligations shall be deemed issued
pursuant to the terms of this Agreement for all intents and purposes, including
but not limited to, the collateral securing such credit and rights of accelera
tion upon default as herein provided.
8.13 ARBITRATION. The undersigned agree that upon the written
demand of either party, whether made before or after the institution of any
legal proceedings, but prior to the rendering of any judgment in that
proceeding, all disputes, claims and controversies between them, whether
individual, joint, or class in nature, arising from this Agreement, any related
document or otherwise, including without limitation contract disputes and tort
claims, shall be resolved by binding arbitration pursuant to the Commercial
Rules of the American Arbitration Association. Any arbitration proceeding held
pursuant to this arbitration provision shall be conducted in the city nearest
the Borrower's address having an AAA regional office, or at any other place
selected by mutual agreement of the parties. No act to take or dispose of any
collateral shall constitute a waiver of this arbitration agreement or be
prohibited by this arbitration agreement. This arbitration provision shall not
limit the right of either party during any dispute, claim or controversy to
seek, use, and employ ancillary, or preliminary rights and/or remedies, judicial
or otherwise, for the purposes of realizing upon, preserving, protecting,
foreclosing upon or proceeding under forcible entry and detainer for possession
of, any real or personal property, and any such action shall not be deemed an
election of remedies. Such remedies include, without limitation, obtaining
injunctive relief or a temporary restraining order, invoking a power of sale
under any deed of trust or mortgage, obtaining a writ of attachment or
imposition of a receivership, or exercising any rights relating to personal
property, including taking or disposing of such property with or without
judicial process pursuant to Article 9 of the Uniform Commercial Code or when
applicable, a judgment by confession of judgment. Any disputes, claims or
controversies concerning the lawfulness or reasonableness of an act, or exercise
of any right or remedy concerning any collateral, including any claim to
rescind, reform, or otherwise modify any agreement relating to the collateral,
shall also be arbitrated; provided, however that no arbitrator shall have the
right or the power to enjoin or restrain any act of either party. Judgment upon
any award rendered by any arbitrator may be entered in any court having
jurisdiction. Nothing in this arbitration provision shall preclude either party
from seeking equitable relief from a court of competent jurisdiction. The
statute of limitations, estoppel, waiver, laches and similar doctrines which
would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an arbitration
proceeding shall be deemed the commencement of any action for these purposes.
The Federal Arbitration Act (Title 9 of the United States Code) shall apply to
the construction, interpretation, and enforcement of this arbitration provision.
8.14 JURY WAIVER. THE UNDERSIGNED HEREBY VOLUNTARILY,
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNED
ARISING OUT OF OR IN ANY WAY RELATED TO THIS DOCUMENT OR ANY OTHER
RELATED DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO
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<PAGE> 23
PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER RELATED
DOCUMENTS.
8.15 CONSENT AND ACKNOWLEDGMENT. The Guarantors, by their
execution of this Loan Agreement, acknowledge the same, consent to the terms and
conditions herein contained and agree to be bound by the same as this Agreement
may relate to a Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
BANK ONE, WISCONSIN
By: /s/ Mark J. Fischer
-----------------------------------------
Mark J. Fischer
Title: Assistant Vice President
TUFCO, L.P.
By: TUFCO TECH, INC., General Partner
By: /s/ Gregory Wilemon
-----------------------------------------
Gregory L. Wilemon
Title: Secretary
TUFCO TECH, INC.
By: /s/ Gregory L. Wilemon
-----------------------------------------
Gregory L. Wilemon
Title: CFO, COO, Secretary and Treasurer
TUFCO, INC.
By: /s/ Kathy Manos
-----------------------------------------
Kathy Manos
Title: President
TFCO, INC.
By: /s/ Kathy Manos
-----------------------------------------
Kathy Manos
Title: President
-23-
<PAGE> 24
TECHNOLOGIES I, INC.
By: /s/ Kathy Manos
-----------------------------------------
Kathy Manos
Title: President
TUFCO TECHNOLOGIES, INC.
By: /s/ Gregory L. Wilemon
-----------------------------------------
Gregory L. Wilemon
Title: CFO, Secretary and Treasurer
FOREMOST MANUFACTURING
COMPANY, INC.
By: /s/ Gregory L. Wilemon
-----------------------------------------
Gregory L. Wilemon
Title: CFO, COO, Secretary and Treasurer
-24-
<PAGE> 25
===============================================================================
SECOND
AMENDED AND RESTATED
LOAN AGREEMENT
Dated as of November 13, 1997
BY AND BETWEEN
Tufco, L.P.
Address: 4750 Simonton
Dallas, TX 75244
AND
Bank One, Wisconsin
Address: 200 South Adams Street
P. O. Box 19029
Green Bay, WI 54307-9029
===============================================================================
<PAGE> 26
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions 1
-----------
1.1 Bank 1
1.2 Borrower 1
1.3 Cash Flow 1
1.4 Commitment Fee 2
1.5 Contingency Fee 2
1.6 ERISA 2
1.7 Event of Default 2
1.8 Facility Fee 2
1.9 Guarantor 2
1.10 Guarantors 2
1.11 Letter(s) of Credit Fee 2
1.12 Loan Agreement 2
1.13 Permitted Liens 2
1.14 Plan 3
1.15 Prepayment Premium 3
1.16 Promissory Notes 3
1.17 Reference Rate 3
1.18 Reference Rate Loans 3
</TABLE>
<PAGE> 27
<TABLE>
<S> <C> <C>
1.19 Security Documents 3
1.20 Definitions Applicable to
Libor Rate Loans 4
2. Loans, Collateral-Loan Ratio and Security
Documents 5
2.1 Making the Loans 5
2.2 Facility One 5
2.3 Facility Two 7
2.4 Facility Three 8
2.5 Facility Four 8
2.6 Security Documents 8
3. Representations and Warranties 8
3.1 Due Organization 8
3.2 Authority 8
3.3 Enforceability 8
3.4 Litigation 9
3.5 Certificates and Statements 9
3.6 Financial Data 9
3.7 Investments in and Guaranties
of Others 9
3.8 Indebtedness and Liabilities 9
3.9 Tax Returns 10
3.10 Title to Properties 10
</TABLE>
<PAGE> 28
<TABLE>
<S> <C> <C>
3.11 Regulation U 10
3.12 ERISA Liability 10
3.13 Environmental Regulations 10
3.14 Hazardous Substances and
Materials 10
4. Affirmative Covenants 11
4.1 Incorporation of Documents 11
4.2 Notice of Event of Default 11
4.3 Insurance 11
4.4 Taxes and Assessments 12
4.5 Books and Records 12
4.6 Compliance with Laws 12
4.7 Maintenance of Assets and
Property 12
4.8 Merger and Disposal of Assets 12
4.9 Permits and Licenses 13
4.10 Financial Statements 13
4.11 Litigation or Claims Affecting
Operations 14
4.12 Visitation and Inspection 14
4.13 Payment of Claims 14
4.14 Minimum Cash Flow Requirement 14
</TABLE>
<PAGE> 29
<TABLE>
<S> <C> <C>
5. Negative Covenants 14
5.1 Encumbrances or Liens 15
5.2 Status of Borrower or Guarantors 15
5.3 Other Actions 15
5.4 Organizational Documents 15
5.5 Obligations of Others 15
5.6 Purchase of Securities 15
5.7 Loans or Advances 15
5.8 Capital Expenditures 15
5.9 Indebtedness 16
5.10 Purchase or Redemption of Stock
and/or Payment of Dividends 16
5.11 Partnership Distributions 16
5.12 Merger and Consolidation 16
5.13 Transfer of Assets or Business 16
</TABLE>
<PAGE> 30
<TABLE>
<S> <C> <C>
6. Conditions Precedent 16
6.1 Promissory Notes 16
6.2 Security Documents 16
6.3 Organizational Documents 17
6.4 Lien Record Search 17
6.5 Resolutions and Certifications 17
6.6 Title Insurance Commitments 17
6.7 Other Documents and Exhibits 17
7. Defaults, Rights and Remedies 18
7.1 Events of Default 18
7.2 Rights and Remedies 19
8. Miscellaneous 19
8.1 Fees and Costs 19
8.2 Assignability and Successors 20
8.3 Waivers 20
8.4 Bank's Remedies and Cumulative 20
8.5 Governing Law and Entire Agreement 20
8.6 Survival 20
8.7 Counterparts and Headings 20
8.8 Notices 20
8.9 Amendment 21
8.10 Participation 21
</TABLE>
<PAGE> 31
<TABLE>
<S> <C> <C>
8.11 Severability 21
8.12 Other Credit 21
8.13 Arbitration 22
8.14 Jury Waiver 22
8.15 Consent and Acknowledgment 23
</TABLE>
<PAGE> 32
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Pages
------- -----
<S> <C> <C>
A-1 Master Draw Note 3, 5
A-2 Term Note 3, 7
A-3 Business Note 3, 8
A-4 Term Note 2, 8
B Permitted Liens 2
C Amended and Restated Mortgage/ 4
Amended and Restated Deed of Trust
D General Business Security Agreements 4
E Unlimited Continuing Guaranties 4
</TABLE>
<PAGE> 1
EXHIBIT 99.2
Tufco, L.P. (Maker) $5,250,000.00
November 13, 1997
TERM NOTE
Tufco, L.P. ("Maker") promises to pay to the order of Bank One,
Wisconsin ("Bank") at its office the principal amount of $5,250,000.00 in one
payment on or before March 31, 1998, plus interest payable as set forth below.
This Note bears interest computed for the actual number of days
principal is unpaid, on a 360-day year basis, until maturity at the rate which
is 1.375% percentage points in excess of the London Interbank Offered Rate
("LIBOR Rate") for the selected LIBOR Rate Loan Period which shall be between 30
days and the maturity date of this Note determined two business days prior to
the making of the LIBOR Rate loan. The LIBOR Rate shall be the published
national consensus LIBOR Rate reported by the Bank. Interest shall be payable
monthly commencing November 30, 1997 and on the last day of each consecutive
month thereafter and at maturity.
If any payment is 10 days or more late, the Maker shall pay a late
payment penalty of 5% of the regularly scheduled payment or $25.00, whichever
is greater, up to the maximum amount of $250.00 per late charge. Upon default,
including failure to pay upon final maturity, the holder may, at its option, if
permitted under applicable law, do one or both of the following: (a) increase
the applicable interest rate on this Note 3.00 percentage points; and (b) add
any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any increased
rate). The interest rate will not exceed the maximum rate permitted by
applicable law.
Unless otherwise agreed to, in writing, or otherwise required by
applicable law, payments
<PAGE> 2
will be applied first to accrued, unpaid interest, then to principal, and any
remaining amount to any unpaid collections costs, late charges and other
charges, provided, however, upon delinquency or other default, the holder
reserves the right to apply payments among principal, interest, late charges,
collection costs and other charges at its discretion. All prepayments shall be
applied to the indebtedness owning hereunder in such order and manner as the
holder may, from time to time, determine in its sole discretion.
There shall be no prepayment of this Note without the holder's
permission. In the event of prepayment, a yield maintenance penalty shall
apply.
If any payment is not paid when due, or upon the occurrence of an
event of default under the Second Amended and Restated Loan Agreement herein
described, the unpaid balance shall, at the option of the holder and without
notice, mature and immediately become due and payable. The unpaid balance
shall mature automatically and immediately become due and payable in the event
the Maker or a guarantor becomes the subject of bankruptcy or other insolvency
proceedings.
This Note is issued and secured pursuant to a Second Amended and
Restated Loan Agreement dated of even date herewith (the "Second Amended and
Restated Loan Agreement"), between the Maker and the Bank. This Note is
further secured by all existing Security Documents referenced in the Second
Amended and Restated Loan Agreement and future security agreements,
assignments, collateral pledge agreements and mortgages between the Bank and
the Maker, and/or the Bank and any guarantor of this Note, and payment may be
accelerated upon default under any of them. The Maker grants the holder a
security interest and lien in any credit balance or other money now or
hereafter owed any Maker by holder, except for money held in qualified
retirement
-2-
<PAGE> 3
accounts, and, in addition, agrees that holder may at any time after an
occurrence of an event of default, without notice or demand, set off against
such credit balance or other money any amount unpaid under the Note.
Without affecting the liability of the Maker or any guarantor, the
holder may, without notice, renew or extend the time for payment, accept
partial payments, release or impair any collateral security for the payment of
this Note or agree not to sue any party liable on it.
The Maker and guarantors agree to pay all costs of collection,
including reasonable attorney fees, and waive presentment, protest, demand and
notice of dishonor.
The Bank has not made any representations or warranties with respect
to, and does not assume any responsibility for, the collectibility or
enforceability of this Note or any collateral securing this Note or the
financial condition of any Maker. The Maker and guarantor has independently
determined the collectibility and enforceability of this Note and any
collateral securing this Note and has made an independent appraisal of the
Maker's credit worthiness. This Note shall be construed and enforced in
accordance with the laws of the State of Wisconsin.
TUFCO, L.P. (SEAL)
By: TUFCO TECH, INC., General Partner
By: /s/ Gregory L. Wilemon
------------------------------
Gregory L. Wilemon
Title: Secretary
-3-
