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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-23654
GARDNER DENVER MACHINERY INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 76-0419383
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1800 GARDNER EXPRESSWAY
QUINCY, ILLINOIS 62301
(Address of Principal Executive Offices and Zip Code)
(217) 222-5400
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
------------ ----------
Number of shares outstanding of the issuer's Common Stock, par
value $.01 per share, as of November 12 1996: 4,922,078
shares.
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<TABLE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
GARDNER DENVER MACHINERY INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
------- -------
<S> <C> <C>
Revenues $56,519 $44,894
Costs and expenses:
Cost of sales (exclusive of depreciation
and amortization) 38,977 31,903
Depreciation and amortization 2,099 2,016
Selling and administrative expenses 8,147 6,355
Interest expense 906 1,198
Loss on investment in and advances to affiliate 60 -
------- -------
Income before income taxes 6,330 3,422
Provision for income taxes 2,595 1,540
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Net income $3,735 $1,882
======= =======
Earnings per share $0.73 $0.38
======= =======
- ---------------------
The accompanying notes are an integral part of this statement.
</TABLE>
2
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<TABLE>
GARDNER DENVER MACHINERY INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
-------- --------
<S> <C> <C>
Revenues $154,002 $144,083
Costs and expenses:
Cost of sales (exclusive of depreciation
and amortization) 106,509 102,324
Depreciation and amortization 5,897 6,337
Selling and administrative expenses 20,522 18,457
Interest expense 2,000 3,955
Loss on investment in and advances to affiliate 158 -
-------- --------
Income before income taxes 18,916 13,010
Provision for income taxes 7,629 5,855
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Net income $11,287 $7,155
======== ========
Earnings per share $2.23 $1.47
======== ========
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The accompanying notes are an integral part of this statement.
</TABLE>
3
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<TABLE>
GARDNER DENVER MACHINERY INC.
CONSOLIDATED BALANCE SHEET
(dollars in thousands, except per share amounts)
<CAPTION>
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 16,012 $ 1,869
Receivables, net 46,769 39,933
Inventories, net 47,800 46,318
Deferred income taxes 2,371 -
Other 2,181 2,217
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Total current assets 115,133 90,337
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Plant and equipment, net 34,350 32,184
Intangibles, net 74,371 43,050
Deferred income taxes 19,881 17,808
Investment in and advances to affiliate 863 -
Other assets 1,107 872
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Total assets $245,705 $184,251
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 2,803 $ 1,441
Accounts payable and accrued liabilities 49,683 29,675
Deferred income taxes - 486
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Total current liabilities 52,486 31,602
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Long-term debt, less current maturities 67,153 36,661
Postretirement benefits other than pensions 57,050 60,108
Other long-term liabilities 1,131 646
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Total liabilities 177,820 129,017
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Stockholders' equity:
Common stock, $.01 par value; 50,000,000 shares
authorized; 4,902,589 shares issued and
outstanding at September 30, 1996 49 48
Capital in excess of par value 134,571 133,175
Retained deficit (66,702) (77,989)
Cumulative translation adjustment (33) -
---------- ----------
Total stockholders' equity 67,885 55,234
---------- ----------
Total liabilities and stockholders' equity $245,705 $184,251
========== ==========
The accompanying notes are an integral part of this statement.
</TABLE>
4
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<TABLE>
GARDNER DENVER MACHINERY INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $11,287 $7,155
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 4,015 4,807
Amortization 1,881 1,530
Loss on investment in and advances to affiliate 158 -
Stock issued for employee benefit plans 896 960
Deferred income taxes (450) 415
Changes in assets and liabilities
(excluding the impact of acquisitions):
Receivables, net 3,932 (5,157)
Inventories, net 6,665 7,454
Accounts payable and accrued liabilities 895 3,280
Other assets and liabilities, net (4,114) (3,902)
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Net cash provided by operating activities 25,165 16,542
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Cash flows from investing activities:
Acquisitions (net of cash acquired) (33,950) -
Capital expenditures (1,518) (2,135)
Disposals of plant and equipment 596 316
Investment in and advances to affiliate (1,050) -
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Net cash used for investing activities (35,922) (1,819)
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Cash flows from financing activities:
Principal payments on long-term debt (38,601) (13,997)
Proceeds from long-term debt 63,000 -
Proceeds from stock options 501 17
------- -------
Net cash provided by (used for)
financing activities 24,900 (13,980)
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Increase in cash and cash equivalents 14,143 743
------- -------
Cash and cash equivalents, beginning of period 1,869 3,330
------- -------
Cash and cash equivalents, end of period $16,012 $4,073
======= =======
The accompanying notes are an integral part of this statement.
</TABLE>
5
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NOTES TO FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Basis of Presentation. The accompanying financial statements
include the accounts of Gardner Denver Machinery Inc. ("Gardner
Denver" or the "Company") and its majority-owned subsidiaries,
including the acquisitions in August of Gardner Denver Holdings
Inc.("GDHI"), known as NORAMPTCO, Inc. until August 9, 1996, and
TCM Investments, Inc. ("TCM"). All transactions between Gardner
Denver Machinery Inc. and its majority-owned subsidiaries have
been eliminated.
The financial information presented as of any date other than
December 31 has been prepared from the books and records without
audit. The accompanying consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and
do not include all of the information and the footnotes required
by generally accepted accounting principles for complete
statements. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary for a
fair presentation of such financial statements, have been included.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto for the year ended December 31, 1995 contained in the
Company's 1995 Annual Report to Stockholders.
Interest Rate Swap Agreements. The interest differential to be
paid or received under these agreements is accrued as the interest
rates change, and is recognized over the life of the agreements.
See Note 6 in this document for additional information on these
agreements.
Investment in and Advances to Affiliate. The Company uses the
equity method of accounting for its 25% interest in GVM
Gesellschaft fur Schraubenverdichter und
Schraubenmotorentechnologie mbH ("GVM"). Due to losses incurred to
date by GVM, consolidated retained earnings of the Company do not
include any undistributed earnings from GVM accounted for by the
equity method at September 30, 1996. There were no equity
investments in GVM at December 31, 1995. For additional
information regarding the investment in and advances to affiliate,
see Note 7.
NOTE 2. INCOME TAXES.
In the first nine months of 1996 and 1995, the Company paid $7.7
million and $1.1 million, respectively to the various taxing
authorities and recognized $7.6 million and $5.9 million,
respectively in tax expense. In addition, during the first quarter
of 1996, the Company received $2.3 million in tax refunds from an
overpayment of federal income taxes in the fourth quarter of 1995.
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<TABLE>
NOTE 3. INVENTORIES.
<CAPTION>
September 30 December 31,
1996 1995
------------ ------------
<S> <C> <C>
Raw Materials $ 7,224 $ 7,398
Work-in-process 10,558 6,702
Finished goods, including parts
and subassemblies 49,608 47,334
Perishable tooling and supplies 3,096 3,096
--------- ---------
70,486 64,530
Excess of current standard costs
over LIFO costs (13,578) (10,606)
Excess and slow-moving inventory (9,108) (7,606)
--------- ---------
Total net inventories $ 47,800 $ 46,318
========= =========
</TABLE>
NOTE 4. LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS.
Long-term debt at September 30, 1996 consisted of certain
industrial revenue bonds and other notes due between 1997 and 2005
totaling $7.0 million (which included debt assumed by the Company
in its recent acquisitions), $28 million from a $65 million credit
facility entered into on November 30, 1995, and unsecured notes
payable of $35 million. The credit facility is a three-year,
unsecured, revolving loan used to repay a secured term loan and
revolving line of credit, and to provide for general corporate
purposes. At September 30, 1996, $37 million remained available
for additional borrowings at which time the Company and lenders
agreed to extend the maturity of the revolving loan until November
30, 1999. All other terms and conditions of the loan remained
unchanged. On September 26, 1996, the Company entered into an
unsecured senior note agreement for $35 million at a fixed interest
rate of 7.3%. This debt has a ten-year final, seven-year average
maturity. The loan is due September 26, 2006 with principal
payments beginning in 2000. Maturities of long-term debt for the
five years subsequent to September 30, 1996 are $2.8 million for
1997; $1.2 million for 1998; $29.1 million for 1999; $5.9 million
for 2000; and $5.7 million for 2001.
Total interest expense during the first nine months of 1996 and
1995 totaled $2.0 and $4.0 million, respectively. Interest paid
for each period was not materially different from the amount
expensed.
NOTE 5. EARNINGS PER SHARE.
Earnings per share were calculated for the three month and nine
month periods ended September 30, 1996 based on 5,122,554 and
5,072,493 weighted average shares outstanding for each period
respectively, while earnings per share for the three and nine month
periods ended September 30, 1995 were calculated based on 4,940,750
and 4,864,811 weighted average shares outstanding, respectively.
7
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NOTE 6. INTEREST RATE SWAP AGREEMENTS.
At September 30, 1996, the Company had two interest rate swap
agreements with a commercial bank (the "Counter Party")
outstanding, having a cumulative notional principal amount of $30
million. The swaps provide an average fixed LIBOR rate of 6%. One
interest rate swap terminates in November 1996 and the second in
November 1997. The Counter Party has an option to extend either,
or both agreements for one additional year each. The Company is
exposed to credit loss in the event of nonperformance by the
Counter Party to the interest rate swap agreements. However, the
Company does not anticipate such nonperformance.
NOTE 7. INVESTMENT IN AND ADVANCES TO AFFILIATE.
On February 13, 1996 the Company exercised an option to purchase
25% of the common stock in GVM, a privately held German company.
The investment is accounted for using the equity method. As part
of the agreement, the Company has committed to loan GVM a total of
$0.9 million over the remainder of 1996. As of September 30, 1996,
the Company has loaned its affiliate $0.8 million of this
commitment. The agreement specifies the payment of market interest
rates and the re-payment of the loan at the end of five years. The
loan is included in Investment in and Advances to Affiliate on the
Consolidated Balance Sheet. The Company has an option to acquire
an additional 24% of GVMs aggregate authorized capital by
converting part of its claim to any payments of principal and
accrued interest under the loan into such equity interest.
NOTE 8. ACQUISITIONS.
On August 9, 1996, the Company purchased 100% of the issued and
outstanding stock of GDHI for $26.8 million (net of cash acquired).
GDHI designs, manufactures and sells blowers and exhausters used in
various industrial and waste water applications. The purchase
price was allocated to assets and liabilities based on their
respective fair values at the date of acquisition and resulted in
cost in excess of net assets acquired of $27.3 million. As a
result of the stability of the product technology, markets and
customers, this amount is being amortized over 40 years using the
straight line method.
The following summarizes the unaudited pro forma results of
operations of the combined companies which includes the actual
results of the Company, historical results of operations of GDHI
for the first seven months of the year and adjustments to the
historical results for expected changes in operations assuming the
acquisition had been effective at the beginning of the fiscal year.
These adjustments include the effect of amortization of goodwill,
interest expense of acquisition debt, elimination of expenses
related to the former principal owner/CEO, costs incurred for the
sale of GDHI, and certain other adjustments, together with related
income tax effects. The results are not necessarily indicative of
what would have occurred had these transactions been consummated as
of the beginning of the fiscal year presented, or of future
operations of the consolidated companies. The Companys pro forma
results of operations for the nine months ending September 30, 1996
were: revenues of $177.3 million, income before income taxes of
$21.1 million, net income of $12.6 million, and earnings per share
of $2.48. The Companys pro forma results of operations for the
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nine months ending September 30, 1995 were: revenues of $175.1
million, income before income taxes of $14.3 million, net income of
$7.7 million and earnings per share of $1.58.
On August 14, 1996, the Company purchased 100% of the issued and
outstanding stock of TCM for $7.2 million (net of cash acquired).
TCM designs, manufactures and sells pumps and compressors used
primarily in oil and natural gas applications. The purchase price
was allocated to assets and liabilities based on their respective
fair values at the date of acquisition and resulted in cost in
excess of net assets acquired of $4.1 million. As a result of the
stability of TCMs products, markets and customers, this amount is
being amortized over 40 years using the straight line method.
Both acquisitions have been accounted for by the purchase method,
and accordingly, the results of operations of GDHI and TCM are
included in the Companys Consolidated Statement of Operations from
the dates of acquisition. Certain estimates of fair market value
of assets received and liabilities assumed were made with
adjustments to each separate companys historical financial
statements. These adjustments included estimates of various costs
totaling $6.2 million planned by management necessary to fully
integrate the acquisitions into Gardner Denver's operations. These
estimates and adjustments have not yet been finalized.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS.
Revenues
For both the three and nine month periods ended September 30, 1996,
revenues for compressor products, adjusted to exclude nonrecurring
revenues, increased due to the effect of acquisitions in August and
the impact of a limited scheduled shutdown when compared to the
same periods of 1995. Revenues for petroleum products have
increased significantly in the three and nine month periods of
1996, compared to the comparable periods of 1995, due to
incremental demand resulting from the impact of higher prices of
oil and natural gas on drilling activity, the effect of
acquisitions made in August and the impact of a limited scheduled
shutdown.
For the nine months ended September 30, 1996, revenues were $154.0
million compared to $144.1 million in the same period of 1995.
Revenues in the first nine months of 1996 included approximately
$9.3 million from the acquisitions of GDHI and TCM. Revenues in
the first nine months of 1995 included approximately $4.4 million
from sales of castings and drilling components which did not recur
in 1996 since the Companys foundry and drilling components product
line were sold in the fourth quarter of 1995. Excluding revenues
from recent acquisitions from the results of 1996 and sales of
castings and drilling components from 1995, revenues increased
approximately $5.0 million (4%) for the nine month period of 1996
compared to the same period of 1995. Revenues in the Compressed
Air Products segment, excluding revenues from acquisitions in 1996
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and casting sales in 1995, increased approximately 2% to $126.7
million for the nine month period of 1996 from $124.6 million for
the comparable period of 1995. Excluding drilling components in
1995 and revenues from acquisitions in 1996, Petroleum Products
segment revenues increased approximately 19% to $18.0 million for
the nine month period of 1996 from $15.1 million for the comparable
period of 1995.
Revenues in the third quarter of 1996 were $56.5 million compared
to $44.9 million in the same quarter of 1995. Excluding
nonrecurring casting and drilling components sales of $0.5 million
in 1995 and revenues of $9.3 million from GDHI and TCM in 1996,
revenues in the third quarter of 1996 increased approximately $2.8
million (6%) over the same period in 1995. Approximately $1.4
million of this increase is attributable to a shorter manufacturing
shutdown period in 1996, compared to 1995. Due to production
requirements, this regularly scheduled shutdown was limited to one
week in 1996 at one manufacturing facility, compared to two weeks
in previous years. A second manufacturing facility was shutdown
for one week during the second quarter of 1996 and one week during
the third quarter. In previous years, this facility was shutdown
for two consecutive weeks during the third quarter.
Revenues for the Compressed Air Products segment rose to $48.2
million in the third quarter of 1996 from $39.7 million in the same
period of 1995, adjusted to exclude casting sales. Approximately
$7.1 million of this increase is attributable to the acquisitions.
Petroleum Products segment revenues increased to $8.3 million in
the third quarter of 1996 from $4.7 million in the comparable
quarter of 1995, adjusted to exclude sales of drilling components.
Approximately $2.2 million of this increase is attributable to the
recent acquisitions.
Sequentially, revenues in the third quarter of 1996 declined $1.7
million, or 3% from the second quarter of 1996, excluding the
impact of the recent acquisitions. This volume reduction is a
result of a shorter production period in the third quarter compared
to that of the second as a result of the scheduled manufacturing
shutdown.
Costs and Expenses
Gross margins (defined as revenues less cost of sales exclusive of
depreciation and amortization) for the nine month period of 1996
increased $5.7 million (14%) to $47.5 million from $41.8 million in
the same period of 1995. The increase in gross margin was
primarily due to the impact from the recent acquisitions ($3.1
million), with the remaining improvement primarily resulting from
cost reduction efforts and manufacturing process improvements.
Gross margin as a percentage of sales improved to 30.8% in the nine
month period of 1996 from 29.0% in the same period of 1995. If
adjusted to exclude castings and drilling components sales, which
generated below average margins, the gross margin percentage for
the nine month period of 1995 would have been 29.2% compared to
30.7% for the same period of 1996 excluding the impact of the
acquisitions. For the third quarter of 1996 the gross margin
percentage improved to 31.0% (30.8% excluding the acquisitions)
from 28.9% in the third quarter of 1995 (29.1% adjusted to exclude
casting and drilling components sales). The improvement for both
the nine month period and the quarter is indicative of the combined
effect of previously completed cost reduction efforts and
manufacturing process improvements and the impact of the recent
acquisitions.
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Excluding the effect of acquisitions, the gross margin percentage
for the third quarter of 1996 was not materially different from
that of the second quarter of 1996. The Company expects that gross
margin will be enhanced in the fourth quarter of 1996 by the
inclusion of LIFO income.
Depreciation and amortization decreased 6% to $5.9 million in the
first nine months of 1996, compared with $6.3 million for the same
period of 1995. For the third quarter, depreciation and
amortization increased 5% to $2.1 million in 1996, compared to $2.0
million in 1995. The decrease in the nine month period was
primarily a result of the disposal of the foundry assets upon the
completion of the sale in 1995. An expense reduction also results
from existing assets becoming fully depreciated. The increase in
depreciation and amortization expense for the three month period
was due to the impact of the acquisitions ($0.3 million) offset by
depreciation savings from the sale of the foundry ($0.2 million).
For the nine month period, depreciation and amortization expense as
a percentage of revenues decreased to approximately 3.8% in 1996
from 4.4% in 1995, while for the three month period, depreciation
and amortization expense as a percentage of revenues decreased to
3.7% from 4.5%. In both cases the reduction is due to the effect
of lower depreciation expense and increased revenues discussed
above.
Selling and administrative expenses increased in the first nine
months of 1996 by 11% to $20.5 million from $18.5 million in the
same period of 1995. As a percentage of revenues, selling and
administrative expenses for the nine months increased to 13.3% in
1996 from 12.8% in 1995 in spite of increased revenues. For the
third quarter, selling and administrative expenses increased 27% to
$8.1 million in 1996 from $6.4 million for the same period of 1995.
As a percentage of revenues, selling and administrative expenses
for the third quarter increased to 14.4% in 1996 from 14.2% in
1995. Approximately $1.7 million of this increase in each the
three and nine month periods is attributable to newly acquired
operations. The increases are also due to higher manpower levels
and related travel and training expenses since the Company operated
with several employment openings in the previous year, and
increased professional fees associated with the acquisitions.
During the nine month period of 1996, the Company recognized its
proportionate share ($0.2 million) of the losses incurred by GVM as
a loss on investment in and advances to affiliate. For the third
quarter of 1996 this loss was $0.1 million. For additional
information on this investment, refer to Notes 1 and 7 of the Notes
to Financial Statements contained in this document.
Interest expense decreased $2.0 million (50%) to $2.0 million for
the nine month period of 1996 compared to the same period of 1995,
due to a significantly lower debt level for most of the period and
lower interest rates in effect during 1996 compared to 1995.
During the third quarter of 1996, interest expense decreased $0.3
million (25%) compared to the same period in 1995, for the same
reasons, offset by higher expense beginning in August related to
the acquisitions. In November 1995, the Company executed a new
credit facility which reduced its effective interest rate by
approximately 200 basis points. In September 1996, the Company
obtained $35 million in long-term financing at a fixed rate of
approximately 7.3%. The proceeds from this private placement were
utilized to partially repay existing bank debt. See Note 4 of the
Notes to Financial Statements contained in this document for
further information on the Companys borrowing arrangements.
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Compared to the same period of 1995, income before income taxes
increased $5.9 million (45%) in the first nine months of 1996 to
$18.9 million, primarily due to increased revenue volume and gross
margin, and interest expense and depreciation reductions. For the
third quarter of 1996, income before taxes increased $2.9 million
(85%) from the same period of 1995 to $6.3 million for the same
reasons. Approximately $0.8 million of the increase in each of the
nine and three month periods is attributable to the acquisitions.
Compared to 1995, provision for income taxes increased by $1.8
million to $7.6 million for the first nine months of 1996, and by
$1.1 million to $2.6 million for the third quarter of 1996, as a
result of the increase in income before taxes. The Company's
effective tax rate declined to 41% in the third quarter of 1996
from 45% in the same period of 1995, which reduced income taxes for
the quarter by $0.3 million ($0.05 per share) compared to the
previous year. For the nine month period, the lower effective tax
rate in 1996 decreased income taxes by $0.9 million ($0.17 per
share) compared to 1995. The reduction in the tax rate is due to
benefits generated through the Companys Foreign Sales Corporation
(FSC) and other tax strategies.
Net income for the nine months ended September 30, 1996 increased
$4.1 million (57%) to $11.3 million from $7.2 million for the same
period in 1995 and increased $1.8 million (95%) to $3.7 million for
the third quarter compared to 1995, for the reasons previously
discussed. Net income in each the nine and three month periods
included approximately $0.4 million ($0.08 per share) from the
acquisitions. During the third quarter of 1996, net income
remained consistent when compared to the second quarter of the
year. The incremental income from the acquisitions was offset by
the financial impact of the manufacturing shutdown.
LIQUIDITY AND CAPITAL RESOURCES
Operating Working Capital
During the nine months ended September 30, 1996, operating working
capital (defined as receivables plus inventories, less accounts
payable and accrued liabilities) decreased $11.7 million to $44.9
million. Receivables increased $6.8 million since the end of 1995,
due to the impact of the recent acquisitions which added $11.5
million. Without the acquisitions, receivables would have declined
$4.7 million due to the receipt of a federal income tax refund in
the first quarter of 1996 and higher collections including
increased use of progress payments. The refund resulted from an
overpayment of taxes related to the timing of the sale of the
drilling components product line and the associated inventory
liquidation. Taxes were paid assuming that the inventory
liquidation would not be consummated in 1995, but this sale was
completed in late December.
The $1.5 million increase in inventories was a result of the
acquisitions, which caused a $7.9 million increase. Without the
acquisitions, inventory declined $6.4 million due to continued
focus on improving inventory turnover and the shipment of several
large orders in 1996 which had been manufactured in 1995 and held
at the customers request. Inventories also declined $3.2 million
due to increased sales of petroleum products which are
substantially from stock. The $20.0 million increase in accounts
payable and accrued liabilities was essentially due to the impact
of the recent
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acquisitions, and includes accrued liabilities related to integrating various
operations of the Company.
Cash Flows
During the nine months ended September 30, 1996, the Company
generated cash flows from operations totaling $25.2 million, an
increase of $8.6 million (52%) over the comparable period in 1995.
This substantial increase was primarily the result of the increased
net income ($4.1 million) and the decreased operating working
capital ($5.9 million reduction compared to the prior period)
discussed previously, partially offset by lower depreciation and
amortization ($0.4 million) and additions to the deferred tax
assets ($0.9 million). Cash was also provided by the completion of
a $35 million debt placement and a $28 million borrowing under the
Company's existing revolving line of credit. The cash flows and
additional debt enabled the Company to invest in acquisitions
($33.9 million) and a joint venture ($1.0 million), expend $1.5
million on capital expenditures, and repay $38.6 million of long-
term debt principal, resulting in an increase in the cash balance
of $14.1 million.
Capital Expenditures and Commitments
Capital projects to reduce product costs, improve product quality,
increase manufacturing efficiency and operating flexibility or
expand production capacity resulted in expenditures of $1.5 million
in the first nine months of 1996, which was $0.6 million less than
the level of capital expenditures in the comparable period in
1995. The Company also expended $1.4 million for intangible and
other assets in the first nine months of 1996, primarily for the
implementation of a new integrated business system. Commitments
for future capital expenditures at September 30, 1996 totaled $6.9
million. Management expects additional capital authorizations to
be committed during the remainder of 1996, but substantial portions
of these commitments will not be spent in the current year.
PENDING LITIGATION
The Company is a defendant (together with Cooper) in a lawsuit
alleging misappropriation of trade secrets and interference with
contractual relations in connection with research and development
of single screw design technology and its related manufacturing
techniques. The suit requests $4.66 million in compensatory
damages and an unspecified amount in punitive damages. As part of
the spin-off of the Company from Cooper, the Company agreed to
indemnify Cooper for losses incurred in this type of lawsuit.
Although the extent of the liability, if any, remains unknown,
management does not believe the ultimate resolution of this legal
action will have a materially adverse impact on the results of
operations or the financial condition of the Company.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
2.1 Stock Purchase Agreement, dated as of July 11,
1996, among Gardner Denver Machinery Inc., Jacques
Lepage, Suzanne Lepage, Anne Lepage and Arthur
Lepage, filed as Exhibit 2.0 to Gardner Denver
Machinery Inc.s Current Report on Form 8-K, dated
August 9, 1996, as amended, and incorporated herein
by reference.
2.2 Stock Purchase Agreement, dated as of August 10,
1996, among Gardner Denver Machinery Inc., TCM
Investments, Inc. and the Holders of all the Issued
and Outstanding Common Stock and Options to Acquire
Common Stock of TCM Investments, Inc.
4.0 Note Purchase Agreement dated as of September 26,
1996.
10.0 First Amendment, dated as of September 10, 1996 to
the Credit Agreement dated as of November 30, 1995.
11.1 Computation of earnings per share for the three
months ended September 30, 1996.
11.2 Computation of earnings per share for the nine
months ended September 30, 1996.
27.0 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated
August 9, 1996 and a related amended Current Report on
Form 8-K/A, related to its acquisition of NORAMPTCO.
This Form 8-K included a description of the acquisition
(Item 2), the audited financial statements for NORAMPTCO
for the fiscal year ended January 31, 1996, in accordance
with Rule 3.05 of Regulation S-X, (Item 7), and pro forma
financial information prepared pursuant to Article 11 of
Regulation S-X (Item 7).
14
<PAGE> 15
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 thereunto duly authorized.
GARDNER DENVER MACHINERY INC.
Date: November 12, 1996 By: /s/Ross J. Centanni
-----------------------------------------
Ross J. Centanni
President and Chief Executive Officer
Date: November 12, 1996 By: /s/Philip R. Roth
------------------------------------------
Philip R. Roth
Vice President, Finance and
Chief Financial Officer
15
<PAGE> 16
GARDNER DENVER MACHINERY INC.
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<C> <S>
2.1 Stock Purchase Agreement, dated as of July 11,
1996, among Gardner Denver Machinery Inc., Jacques
Lepage, Suzanne Lepage, Anne Lepage and Arthur
Lepage, filed as Exhibit 2.0 to Gardner Denver
Machinery Inc.s Current Report on Form 8-K, dated
August 9, 1996, as amended, and incorporated herein
by reference.
2.2 Stock Purchase Agreement, dated as of August 10,
1996, among Gardner Denver Machinery Inc., TCM
Investments Inc. and the Holders of all the Issued
and Outstanding Common Stock and Options to Acquire
Common Stock of TCM Investments, Inc.
4.0 Note Purchase Agreement dated as of September 26,
1996.
10.0 First Amendment, dated as of September 10, 1996 to
the Credit Agreement dated as of November 30, 1995.
11.1 Computation of earnings per share for the three
months ended September 30, 1996.
11.2 Computation of earnings per share for the nine
months ended September 30, 1996.
27.0 Financial Data Schedule.
</TABLE>
16
<PAGE> 1
Exhibit 2.2
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BY AND AMONG
GARDNER DENVER MACHINERY INC.
AND
TCM INVESTMENTS, INC.
AND
THE HOLDERS OF ALL THE ISSUED AND OUTSTANDING
COMMON STOCK AND OPTIONS TO ACQUIRE COMMON STOCK
OF TCM INVESTMENTS, INC.
DATED AS OF AUGUST 10, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of the 10th day of August, 1996, by and among
GARDNER DENVER MACHINERY INC., a Delaware corporation ("Buyer"),
TCM INVESTMENTS, INC., an Oklahoma corporation ("TCM"), and the
holders of all the issued and outstanding shares of TCM Common
Stock and all issued and outstanding options to purchase TCM Common
Stock as set forth on Exhibit A hereto (the "Holders") (TCM,
---------
the Holders and Buyer are collectively referred to as the
"Parties"). For all purposes herein, each Holder is acting
individually only with respect to its Shares and not jointly with
the other Holders, except as expressly set forth herein.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, TCM and its Subsidiaries are engaged in the business
of manufacturing, buying, selling, distributing, assembling and
repairing pumps and compressors and other matters incidental
thereto (the "Business"); and
WHEREAS, TCM is a corporation duly organized and existing
under the laws of the State of Oklahoma which, as of the date
hereof, has authorized capital stock consisting of Five Hundred
Thousand (500,000) shares of common stock, with a par value of
$1.00 per share ("TCM's Common Stock"), of which there are Three
Hundred Forty-Five Thousand Two Hundred Ninety and 71/100
(345,290.71) shares outstanding on a fully diluted basis,
consisting of Two Hundred Forty-Seven Thousand Two Hundred Ninety
and 71/100 (247,290.71) issued and outstanding shares of TCM Common
Stock (the "Common Shares") and Ninety-Eight Thousand (98,000)
options to purchase shares of TCM Common Stock (the "Option
Shares") (the Common Shares and the Option Shares together, the
"Shares"); and
WHEREAS, Buyer desires to purchase and acquire, upon the terms
and subject to the conditions and exceptions contained herein, all
of the Shares from the Holders;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the
mutual promises, covenants and agreements contained herein and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties hereto hereby agree
as follows:
1. BASIC TRANSACTION.
-----------------
1.1 ACQUISITION OF SHARES. Upon the terms and
---------------------
subject to the conditions and exceptions contained herein, at
Closing, Buyer agrees to purchase and accept from the Holders and
each Holder agrees to sell, transfer and deliver to Buyer its
Common Shares and to cancel and terminate its Option Shares, which
collectively shall constitute all the Common Shares and Option
Shares.
1.2 PURCHASE PRICE. In consideration of and in
--------------
exchange for the Common Shares and cancellation of the Option
Shares, Buyer shall pay to the Holders at Closing, by and through the
18
<PAGE> 3
Disbursement Agent, Seven Million Dollars ($7,000,000.00) plus
or minus the adjustments set forth in Section 1.4 below (the
"Purchase Price") less the Holdback Funds, by wire transfer of
immediately available FED funds to Holders in accordance with the
written instructions of the Disbursement Agent and Buyer shall wire
transfer the Holdback Funds in immediately available FED funds into
the Escrow Account established with Escrow Holder to be held and
disbursed in accordance with the Holdback Escrow Agreement. One
Hundred Thousand Dollars ($100,000.00) of the Purchase Price shall
be allocated equally between the Consulting Agreement and the Non-
Competition Agreement described in Sections 2.2.3 and 2.2.4 hereof,
respectively. Payment of the Purchase Price as aforesaid by Buyer
to the Disbursement Agent in accordance with his written
instructions shall fully discharge Buyer's obligation to the
Holders for the purchase of the Shares and, together with the
transfer described in Section 1.3, to Jack L. Alexander
("Alexander") under the Consulting Agreement and Non-Competition
Agreement.
1.3 Additional Consideration. As additional
------------------------
consideration for the Non-Competition Agreement described in
Section 2.2.4, Buyer shall cause that certain real estate legally
described on Schedule 1.3 (the "Adex Property"), which is
------------
presently owned by Adex, Inc., a Subsidiary of TCM, to be
transferred and assigned by quit claim deed to Alexander or his
designee subsequent to the Closing. Buyer and Alexander agree that
the Adex Property shall be valued at not less than its net book
value as reflected in the Final April 30, 1996 Financial Statements
for purposes of such transfer and assignment. In connection with
such transfer, Alexander shall indemnify and save and hold harmless
Buyer, its affiliates and subsidiaries, and their respective
partners, officers, directors, shareholders, agents and
representatives, and each of them, from and against any and all
costs, fines, claims and expenses (including attorney fees)
reasonably and actually incurred in connection with or arising out
of or resulting from any environmental conditions, contamination or
pollution of any nature or kind which exits, has existed, or may
exist in the future with respect to the Adex Property.
1.4 ADJUSTMENT IN PURCHASE PRICE - CHANGE IN NET WORTH.
--------------------------------------------------
1.4.1 ADJUSTMENT. If the Net Worth of TCM and
----------
its Subsidiaries, as reflected on the Final April 30, 1996
Financial Statements, is: (i) less than Three Million Three Hundred
Fifty-One Thousand Dollars ($3,351,000.00) (the "Lesser Base
Amount"), the Purchase Price shall be reduced, dollar for dollar,
by the amount by which such Net Worth, as reflected on the Final
April 30, 1996 Financial Statements, is less than the Lesser Base
Amount; or (ii) greater than Three Million Four Hundred Fifty-One
Thousand Dollars ($3,451,000.00) (the "Greater Base Amount"), the
Purchase Price shall be increased, dollar for dollar, by the amount
by which such Net Worth, as reflected on the Final April 30, 1996
Financial Statements is greater than the Greater Base Amount.
1.4.2 DETERMINATION OF FINAL APRIL 30, 1996 FINANCIAL
-----------------------------------------------
STATEMENTS.
- ----------
(a) PREPARATION OF PRELIMINARY FINANCIAL STATEMENTS.
-----------------------------------------------
In order to determine the adjustment, if any, in the Purchase Price
as set forth above, promptly after execution hereof, TCM shall cause
its auditors ("TCM's Auditors") to complete an audit of TCM and its
Subsidiaries, on a consolidated basis, as of April 30, 1996 (the
"Financial Statement Date"). Immediately upon completion thereof,
TCM's Auditors shall deliver to Buyer and TCM, Audited Financial
Statements,
19
<PAGE> 4
together with the worksheets on which they are based (the "Preliminary
April 30, 1996 Financial Statements"), of TCM and its Subsidiaries as
of the close of business on the Financial Statement Date (without
giving effect to the transactions contemplated by this Agreement). The
Preliminary April 30, 1996 Financial Statements shall be prepared in
accordance with GAAP on a basis consistent with the application of such
principles used in the preparation of the audited financial
statements of TCM and its Subsidiaries for the year ending April
30, 1995.
(b) BUYER'S REVIEW OF PRELIMINARY APRIL 30, 1996
--------------------------------------------
FINANCIAL STATEMENTS. Following its receipt of the Preliminary
- --------------------
April 30, 1996 Financial Statements, Buyer or Buyer's auditors,
Arthur Andersen ("Buyer's Auditors"), shall have ten (10) business
days to review the same. At or before the end of such ten (10)
business day period, Buyer shall either: (1) accept the Preliminary
April 30, 1996 Financial Statements in their entirety, in which
case the Preliminary April 30, 1996 Financial Statements shall be
the Final April 30, 1996 Financial Statements and the Net Worth of
TCM and its Subsidiaries shall be determined based thereon as
delivered; or (2) deliver to TCM and TCM's Auditors written notice
of those items in the Preliminary April 30, 1996 Financial
Statements which Buyer disputes, in which case all other items not
affected by the disputed items will be deemed to be as set forth on
the Preliminary April 30, 1996 Financial Statements as delivered.
Within a further period of five (5) business days after the end of
Buyer's aforementioned ten (10) business day period, Buyer and TCM
shall attempt in good faith to resolve any such disputed items. If
Buyer and TCM can reach an agreement on such disputed items within
such time, then such financial statements reflecting such agreement
shall be herein referred to as the Final April 30, 1996 Financial
Statements and the Net Worth of TCM and its Subsidiaries shall be
based thereon.
(c) DISPUTE RESOLUTION MECHANISM. Failing such
----------------------------
resolution, at the end of said five (5) business days, Buyer and
Holders' Committee shall agree on an independent accounting firm
(the "Independent Accountants") to serve as arbitrator with respect
to the disputed items. The unresolved disputed items will be
referred to the Independent Accountants for final binding
arbitration of such disputed items. The Independent Accountants
shall establish procedures for resolution of the disputed items if
Buyer and Holders' Committee are unable to agree on such procedures
and shall determine the unresolved disputed items within fourteen
(14) business days after such reference. The Independent
Accountants shall review the opinions and adjustments suggested by
Buyer or Buyer's Auditors and shall determine what adjustments, if
any, should be made to the Preliminary April 30, 1996 Financial
Statements (such statement, together with the Independent
Accountants adjustments, being herein referred to as the Final
April 30, 1996 Financial Statements) and shall be binding on TCM
and Buyer. The Net Worth of TCM and its Subsidiaries as of the
Financial Statement Date shall then be as reflected in the Final
April 30, 1996 Financial Statements as determined in accordance
herewith. The decision of the Independent Accountants shall be
final and binding on the Parties hereto, and judgment may be
entered on the basis of such decision in any court having
jurisdiction. The fees of the Independent Accountants, if any,
shall be shared equally by Buyer and the Holders, with the Holders'
share being deducted from the Purchase Price otherwise payable to
them at Closing.
20
<PAGE> 5
2. CLOSING.
-------
2.1 CLOSING. Upon the terms and subject to the
-------
conditions and exceptions contained herein, the closing of the
transactions contemplated hereby (the "Closing") shall take place
at the offices of Sublett and Shafer, P.C., Suite 805, 320 South
Boston, Tulsa, Oklahoma at 10:00 a.m. (local time) on August 14,
1996, or as soon as practicable thereafter following the date on
which all of the conditions set forth in Section 6 hereof are
satisfied or waived (the "Closing Date"), unless the Parties hereto
shall otherwise agree.
2.2 DELIVERIES AND PAYMENTS AT CLOSING.
----------------------------------
2.2.1 PAYMENT FOR TENDERED SHARES. At the
---------------------------
Closing and subject to the adjustments provided in Section 1, Buyer
shall pay the Purchase Price due to Holders, less the Holdback
Funds, to the Disbursement Agent and shall pay the Holdback Funds
to the Escrow Holder as provided in Section 1 hereof against
receipt by Buyer from the Holders of all (a) share certificates
representing all the Common Shares, duly endorsed for transfer to
Buyer, and (b) termination agreements evidencing the cancellation
and termination of the Option Shares (the "Termination
Agreements"), in such form as Buyer may reasonably request.
2.2.2 CERTIFICATES. At the Closing, Buyer and
------------
TCM shall each deliver to the other the certificates and other
items described in Section 6 hereof.
2.2.3 CONSULTING AGREEMENT. At the Closing, in
--------------------
accordance with Section 6.1 hereof, Buyer and Alexander shall enter
into a Consulting Agreement substantially in the form attached
hereto as Exhibit B (the "Consulting Agreement").
---------
2.2.4 AGREEMENT NOT TO COMPETE. At Closing, in
------------------------
accordance with Section 6.1 hereof, Buyer and Alexander shall enter
into a Non-Competition Agreement substantially in the form attached
hereto as Exhibit C (the "Non-Competition Agreement").
---------
2.2.5 HOLDBACK ESCROW AGREEMENT. At the Closing,
-------------------------
in accordance with Section 6.3.6 hereof, Buyer, TCM, Holders'
Agents and the Escrow Holder shall enter into a Holdback Escrow
Agreement substantially in the form attached hereto as Exhibit D
---------
(the "Holdback Escrow Agreement").
2.2.6 TERMINATION OF EMPLOYMENT AGREEMENT.
-----------------------------------
Effective as of the Closing Date, all employment agreements between
TCM and it Subsidiaries and Alexander shall be terminated pursuant
to a Termination of Contract(s) of Employment, substantially in the
form attached hereto as Exhibit E (the "Termination of Employment
---------
Agreement(s)").
2.2.7 RESIGNATIONS AND MERGER OF ESOP. As of the
-------------------------------
Closing Date, all officers and directors of TCM and its
Subsidiaries and all trustees of the ESOP shall resign other than
those whom Buyer shall have specified in writing at least five (5)
business days prior to the Closing. Within sixty (60) days
following the Closing, Buyer shall merge the ESOP into Buyer's
401(k)
21
<PAGE> 6
retirement saving plan and shall complete all Internal Revenue Service
filings related thereto as soon as is reasonably possible.
2.2.8 TERMINATION OF LIFE INSURANCE CONTRACTS.
---------------------------------------
Effective as of the Closing Date, TCM shall cancel the two life
insurance policies it owns in the face amount of $1,000,000.00 on
Alexander's life. Any refundable prepaid premiums or cash
surrender value on such policies shall be TCM's property.
2.2.9 OTHER CLOSING TRANSACTIONS. At the
--------------------------
Closing, each of the Parties hereto shall take such other actions
reasonably required hereby to be performed by it prior to or at the
Closing, including, without limitation, satisfying the conditions
set forth in Section 6 hereof.
3. REPRESENTATIONS AND WARRANTIES OF TCM AND HOLDERS.
-------------------------------------------------
As an inducement to Buyer to enter into this Agreement
and to consummate the transactions contemplated hereby, Holders,
TCM and its Subsidiaries hereby represent and warrant that the
following are true and correct as of the date hereof and shall,
except as may be specifically provided for in this Agreement or
otherwise specifically agreed upon or waived, in each case in
writing by Buyer, be true and correct as of the Closing:
3.1 VALIDITY. This Agreement constitutes the
--------
legal, valid and binding obligation of TCM and is enforceable
in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization, and
other laws affecting creditors' rights generally and general
principles of equity, regardless of whether asserted in equity or
at law.
3.2 SCHEDULES. The Schedules referred to in this
---------
Section 3 are attached hereto and incorporated herein by reference,
and all information set forth in such Schedules is true, correct
and complete in all material respects as of the date of this
Agreement, and such Schedules taken as a whole do not omit to state
any material fact necessary in order to make the statements therein
not misleading, and shall be deemed for all purposes of this
Agreement to constitute part of the representations and warranties
under this Section 3. Each of the documents and other writings
furnished to Buyer and its representatives, officers, directors and
employees, or any of them, (collectively, the "Buyer's
Representatives") by TCM and its representatives, officers,
directors and employees, or any of them, pursuant to this Agreement
is true, correct and complete in all material respects as of the
date furnished and at Closing and does not omit to state any
material fact necessary in order to make the statements therein not
misleading. TCM shall promptly provide Buyer with written
notification of any material event or occurrence or other material
information of any kind whatsoever necessary to maintain this
Agreement and all other documents and writings furnished to the
Buyer's Representatives pursuant to this Agreement as true, correct
and complete in all material respects at the time of the execution
hereof and at all times thereafter to and including the Closing
Date.
22
<PAGE> 7
3.3 CORPORATE AND FINANCIAL.
-----------------------
3.3.1 ORGANIZATION. TCM is a corporation duly
------------
organized, validly existing and in good standing under the laws of
the State of Oklahoma and has the corporate power to carry on its
business as it is now being conducted or presently proposed to be
conducted. TCM is duly qualified as a foreign corporation to do
business, and is in good standing (to the extent the concept of
good standing exists), in each jurisdiction where the character of
its properties owned or held under lease or the nature of its
activities makes such qualification necessary.
3.3.2 SUBSIDIARIES. Schedule 3.3.2 sets forth
------------ --------------
for each Subsidiary of TCM (i) its name and jurisdiction of
incorporation, (ii) the number of shares of authorized capital
stock of each class of its capital stock, (iii) the number of
issued and outstanding shares of each class of its capital stock,
the names of the holders thereof, and the number of shares held by
each such holder, and (iv) the number of shares of its capital
stock held in treasury, if any. All of the issued and outstanding
shares of capital stock of each Subsidiary of TCM have been duly
authorized and are validly issued, fully paid and non-assessable.
Except as set forth in Schedule 3.3.2, either TCM or one of its
--------------
Subsidiaries holds of record and owns beneficially all of the
outstanding shares of each Subsidiary, free and clear of any
restrictions on transfer (except as required by applicable
securities laws) or security interests, options, warrants, purchase
rights, contracts, commitments, equity claims and demands. Except
for the Option Shares which are being cancelled as of the Closing,
there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights or
other contracts or commitments that could require any of TCM or its
Subsidiaries to sell, transfer or otherwise dispose of any capital
stock of any of its Subsidiaries or that could require any
Subsidiary of TCM to issue, sell or otherwise cause to become
outstanding any of its own capital stock. Except as set forth in
Schedule 3.3.2, neither TCM nor any of its Subsidiaries
- --------------
controls, directly or indirectly, or has any direct or indirect
equity participation in any Person which is not a Subsidiary of
TCM.
3.3.3 AUTHORITY; NO CONFLICT.
----------------------
(a) TCM has full power and authority to enter into
this Agreement and, with the consent of the Holders of the Option
Shares, to terminate the Option Shares as contemplated by this
Agreement, and all corporate action including, but not limited to,
approval by the Board of Directors which may be necessary on the
part of TCM to consummate such transactions has been taken or will
be taken prior to Closing. At or prior to Closing, TCM will
furnish Buyer with a certified copy of the Board of Directors
resolution or unanimous written consent approving this Agreement
and the transactions contemplated hereby.
(b) This Agreement and all other agreements to be
executed and delivered by TCM hereunder will not result in any
conflict with, breach of, or default or acceleration under, any
mortgage, agreement, lease, indenture, or other instrument, order,
judgment or decree to which TCM or any of its Subsidiaries is a
party or by which TCM or its properties or assets may be bound or
affected or violate any applicable law or regulation.
23
<PAGE> 8
(c) TCM has furnished the Buyer's Representatives
with a complete and correct copy of the Certificate of
Incorporation, as amended to date, of TCM as certified by the
Secretary of State of the State of Oklahoma and a complete and
correct copy of the Bylaws of TCM, as presently in effect,
certified by its incumbent secretary.
3.3.4 CAPITAL STRUCTURE.
-----------------
(a) The authorized capital stock of TCM consists of
Five Hundred Thousand (500,000) shares of $1.00 par value common
stock of which Two Hundred Forty-Seven Thousand Two Hundred Ninety
and 71/100 (247,290.71) shares are issued and outstanding and
options to purchase an additional Ninety-Eight Thousand (98,000)
shares of such common stock are issued and outstanding. There are
no preferred shares of TCM. All of the Common Shares are duly and
validly issued, fully paid and non-assessable and were offered,
issued and sold in compliance with all applicable federal and state
securities laws. No person or entity has any right of rescission
or claim for damages under federal or state securities laws with
respect to the issuance of any Shares of TCM's Common Stock
previously issued. None of the outstanding Shares have been issued
in violation of any preemptive or other rights of the Holders.
(b) Except for the Option Shares, TCM does not have
outstanding any securities or other rights which are either by
their terms or by contract convertible or exchangeable into capital
stock of or other equity interest in TCM or any preemptive or
similar rights to subscribe for or to purchase, or any options or
warrants or agreements for the purchase or issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character
relating to, TCM's Common Stock or other equity interest or
securities convertible into TCM's Common Stock or other equity
interest. Except as otherwise provided in the ESOP and for the
agreement herein to terminate the Option Shares, TCM is not subject
to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire or to register any shares of its
capital stock.
(c) There is no agreement to which TCM or any of
its Subsidiaries is a party restricting the transfer of any Shares
except as required by applicable state and federal securities laws.
(d) Any Shares which have been purchased or
redeemed by TCM have been purchased or redeemed in accordance with
all applicable federal and state laws, rules and regulations,
including, without limitation, all federal and state securities
laws. The sale of the Common Shares to Buyer and the termination
of the Option Shares by Seller shall not result in, and will not,
with the giving of notice or lapse of time or both, result in a
default or acceleration of the maturity of, or otherwise modify,
any agreement, note, mortgage, bond, security agreement, loan
agreement or other contract or commitment of TCM and its
Subsidiaries.
3.3.5 CORPORATE RECORDS. The stock records and
-----------------
minute books of TCM furnished to the Buyer's Representatives by TCM
prior to Closing fully and accurately reflect all issuances,
transfers and redemptions of the capital stock of TCM, correctly
show the total number of Common Shares issued and outstanding on
the date hereof and as of Closing, correctly set forth the Option
Shares and the number of Option Shares, correctly show all
corporate action taken by the directors and
24
<PAGE> 9
shareholders of TCM since the incorporation of TCM (including actions
taken by consent without a meeting) and contain true and complete
copies or originals of TCM's Certificate of Incorporation and all
amendments thereto, Bylaws as amended and currently in force, and the
minutes of all meetings or consent actions of TCM's directors and
shareholders since the incorporation of TCM. No resolutions,
regulations or bylaws have been passed, enacted, consented to or
adopted by such directors or shareholders since the incorporation
of TCM, except those contained in the minute books.
3.3.6 FINANCIAL STATEMENTS. TCM has delivered to
--------------------
the Buyer's Representatives true, correct and complete copies of
the audited consolidated financial statements of TCM and its
Subsidiaries for the fiscal years ended April 30, 1995 and April
30, 1994, including fiscal balance sheets, statements of income and
retained earnings, statements of changes in financial position, a
statement of cash flows and related notes (all of the foregoing
described financial statements together with the Final April 30,
1996 Financial Statements being herein collectively referred to as
the "Financial Statements").
3.3.7 LIABILITIES. Except as disclosed in the
-----------
Schedules hereto (including Schedule 3.3.7) or in the Final
--------------
April 30, 1996 Financial Statements, TCM and its Subsidiaries do
not have any material debt, liability, or obligation of any kind,
whether accrued, absolute, contingent or otherwise, including but
not limited to (a) liability or obligation on account of any
federal, state, local or foreign taxes or penalties, interest or
fines with respect to such taxes, (b) liability arising from or by
virtue of the production, manufacture, sale, lease, distribution,
delivery or other transfer or disposition of personal property or
services of any type, kind or variety, or (c) unfunded liabilities
with respect to the ESOP or any Pension Plan or profit sharing
plan, whether operated by TCM or any of its Subsidiaries covering
employees of TCM or its Subsidiaries, except liabilities incurred
in the ordinary course of business since the Financial Statement
Date (none of which has, individually or in the aggregate, been or
will be materially adverse to the business or financial condition
of TCM). The ESOP has no loans outstanding and has no obligation
to repay any such loans. Except as set forth on Schedule 3.3.7
--------------
or as reflected on the Final April 30, 1996 Financial Statements,
TCM and its Subsidiaries have no material obligations (absolute or
contingent) to provide funds on behalf of, or to guarantee or
assume any debt, liability or obligation of any Person, except for
endorsements in connection with the deposit of items for
collection. All material contingent liabilities of TCM and its
Subsidiaries in connection with the recourse financing of the sale
of inventory to customers on the date hereof and the Closing Date
are and will relate only to genuine, legal, valid and collectible
obligations in the ordinary course of business of customers who are
the primary obligors.
3.3.8 ABSENCE OF CHANGES. Except as set forth on
------------------
Schedule 3.3.8 and the other Schedules hereto, since the
- --------------
Financial Statement Date:
(a) There has been no change in the Business,
assets, liabilities, results of operation or financial condition of
TCM and its Subsidiaries, or in any of its relationships with
suppliers, customers, employees, lessors or others, which
individually or in the aggregate has had or is likely to have a
material adverse effect on the Businesses, assets or properties of
TCM and its Subsidiaries
25
<PAGE> 10
taken as a whole;
(b) There has been no material uninsured damage,
destruction or loss to the assets or properties of TCM or its
Subsidiaries taken as a whole;
(c) Except for the transactions provided for in
this Agreement, the businesses of TCM and its Subsidiaries have
been operated in all material respects in the ordinary course;
(d) The properties and assets of TCM and its
Subsidiaries taken as a whole have been maintained in all material
respects in good order, repair and condition, ordinary wear and
tear excepted;
(e) The books, accounts and records of TCM and its
Subsidiaries have been maintained in all material respects in the
usual, regular and ordinary manner on a basis consistent with prior
years;
(f) There has been no declaration, setting aside or
payment of any dividend or other distribution on or in respect of
the Shares nor has there been any direct or indirect redemption,
retirement, purchase or other acquisition by TCM of TCM's Common
Stock, except for the cancellation of the Option Shares at Closing
and except in accordance with the ESOP;
(g) Except for changes disclosed to Buyer on
Schedule 3.3.8, there has been (i) no increase in the
- --------------
compensation or in the rate of compensation or commissions payable
or to become payable by TCM or any of its Subsidiaries to (x) any
director whose regular compensation is listed on Schedule 3.3.8,
--------------
or (y) any officer, salaried employee, salesman, distributor or agent
earning Forty-Five Thousand Dollars ($45,000.00) or more per annum;
(ii) no increase in the compensation or in the rate of compensation
payable or to become payable to hourly employees and salaried employees
of TCM and its Subsidiaries earning less than Forty-Five Thousand
Dollars ($45,000.00) per annum; (iii) no director, officer, or employee
hired at a salary in excess of Forty-Five Thousand Dollars ($45,000.00)
per annum; (iv) no increase in any payment of or payment or commitment
to pay any bonus, profit sharing or other extraordinary compensation to
any employee; and (v) no increase in the rate of commissions paid or
payable to any employee of TCM and its Subsidiaries;
(h) There has been no material labor dispute,
organizational effort by any union, unfair labor practice charge or
employment discrimination or harassment charge, nor institution of
nor, to the knowledge of TCM and its Subsidiaries, threatened
institution of any such effort, complaint or other proceeding in
connection therewith, involving TCM or any of its Subsidiaries or
affecting the operations of TCM and its Subsidiaries;
(i) Except for contributions to the ESOP, as
disclosed to Buyer on Schedule 3.3.8, there has been no
--------------
issuance or sale by TCM and its Subsidiaries of their authorized
capital stock, options or warrants for such capital stock, bonds,
notes or other securities of TCM or any of its Subsidiaries or any
modification or amendment of the rights of the holders of any
outstanding capital stock, bonds, notes or other securities
thereof;
26
<PAGE> 11
(j) Except to the extent provided in the security
agreements between TCM and its Subsidiaries and each of the
suppliers of TCM's and its Subsidiaries' inventory providing for a
security interest solely in the inventory purchased by TCM and its
Subsidiaries from such suppliers in the ordinary course of TCM's
and its Subsidiaries' business to secure payment of the purchase
price of such inventory, there has been no mortgage, lien or other
encumbrance (other than as is created through the operation of law
in the ordinary course of business) or security interest (other
than liens for current taxes not yet due) created on or in
(including without limitation, any deposit for security consisting
of) any asset or assets of TCM and its Subsidiaries or assumed by
TCM and its Subsidiaries with respect to any asset or assets;
(k) There has been no material indebtedness or
other material liability or obligation (whether absolute, accrued,
contingent or otherwise) incurred by TCM and its Subsidiaries,
including, without limitation, any draws or advances under any
lines of credit, which would be required to be reflected on a
balance sheet of TCM and its Subsidiaries, prepared in accordance
with GAAP, except such as have been incurred in the ordinary course
of business of TCM and its Subsidiaries;
(l) No obligation or liability of TCM or its
Subsidiaries has been discharged or satisfied, other than the
current liabilities reflected on the Final April 30, 1996 Financial
Statement and current liabilities incurred in the ordinary course
of business;
(m) Except for the sale of inventory in the
ordinary course of business, there has been no sale, transfer or
other disposition of any assets of TCM and its Subsidiaries, the
fair market value of which individually exceeds Fifty Thousand
Dollars ($50,000.00);
(n) Except as set forth on Schedule 3.3.8, there
-----
have been no material charge-off's of or reserves established
with respect to the accounts receivable;
(o) There has been no amendment, termination or
waiver of any right of TCM or any of its Subsidiaries under any
contract or agreement or governmental license, permit or permission
which, individually or in the aggregate, has had or will have a
material adverse effect on the business or properties of TCM and
its Subsidiaries; and
(p) There has been no creation of, amendment to or
contributions made to any bonus, incentive compensation, deferred
compensation, profit sharing, retirement, pension, group insurance
or other benefit plan, or any union, employment or consulting
agreement or arrangement.
3.3.9 LITIGATION AND PROCEEDINGS. Except as set
--------------------------
forth on Schedule 3.3.9, there are no material actions, decrees,
--------------
suits, counterclaims, claims, proceedings or governmental or other
investigations pending or, to the knowledge of TCM and its
Subsidiaries, threatened against, by or affecting TCM or its
Subsidiaries in any court or before any arbitrator or governmental
agency, and no material judgment, award, order or decree of any
nature has been rendered against TCM or its Subsidiaries or with
respect thereto by any agency, arbitrator, court, commission or other
authority which has not been paid or discharged, nor, to the
knowledge of TCM and its Subsidiaries, does
27
<PAGE> 12
TCM or its Subsidiaries have any unasserted contingent liabilities
which, individually or collectively, might have a material adverse
effect on the assets or on the operation of TCM and its Subsidiaries
or which might prevent or impede the Closing. Neither TCM nor any of
its Subsidiaries have received notice that any of them have been
charged with and, to the knowledge of TCM, neither TCM nor any of its
Subsidiaries are under investigation with respect to any charge
concerning any provision of any federal, state or other applicable or
administrative regulation with respect to the business of TCM and
its Subsidiaries. There are no pending or, to the knowledge of
TCM, threatened claims against any of the officers or directors of
TCM and its Subsidiaries in connection with the business or affairs
of TCM and its Subsidiaries. The reserves relating to such
actions, decrees, suits, counterclaims, claims, proceedings, or
governmental investigations which are set forth on Schedule 3.3.9
--------------
are, in the good faith opinion of management of TCM and its
Subsidiaries, adequate to cover all liabilities and obligations of
TCM and its Subsidiaries; however, there can be no guarantee of
outcome.
3.4 BUSINESS OPERATIONS.
-------------------
3.4.1 PERMITS; COMPLIANCE WITH LAW.
----------------------------
(a) TCM and its Subsidiaries and each of its
officers, directors and employees have all material permits,
licenses, approvals and authorizations of and registrations with
and under all federal, state, local and foreign laws, authorities
and agencies required for TCM and its Subsidiaries and their
officers, directors and employees to carry on each part of their
respective activities as presently conducted in connection with the
business of TCM and its Subsidiaries and all of such permits,
licenses, approvals, authorizations and registrations are in full
force and effect, and no suspension or cancellation of any of them
is pending or threatened.
(b) Except to the extent otherwise disclosed herein
(including any Schedules hereto), TCM and its Subsidiaries have
complied in all material respects with all federal, state and local
laws, rules, regulations and ordinances applicable to it or its
Business or its employees (including, without limitation, the
National Labor Relations Act, as amended, Title VII of the Civil
Rights Act of 1964, as amended, and the Age Discrimination in
Employment Act, as amended). No past violation of any such law,
rule, regulation or ordinance has occurred which could or would
materially impair the right or ability of TCM and its Subsidiaries
or its respective officers, directors or employees to conduct their
respective activities in connection with the Business of TCM and
its Subsidiaries.
3.4.2 ENVIRONMENTAL.
-------------
(a) TCM and its Subsidiaries hereby warrant and
represent that:
(i) Except as set forth on Schedule 3.4.2, all
--------------
underground storage tanks, if any, that have been owned or operated
by TCM and its Subsidiaries at the facilities and properties
presently owned, operated and leased by TCM and its Subsidiaries,
and any other underground storage tanks which have been located at
such facilities and properties, have been removed, and all clean-up
associated therewith completed in accordance with applicable
Environmental Laws;
28
<PAGE> 13
(ii) Except as set forth in Schedule 3.4.2, TCM
--------------
and its Subsidiaries have obtained all permits, licenses,
governmental approvals and other authorizations which they are
required to have under Environmental Laws, and TCM and its
Subsidiaries have prepared, submitted, made or given all required
filings, reports, disclosures and notifications and maintained all
records that they are required to make or maintain under applicable
Environmental Laws relating to the generation, use, manufacture,
refining, transportation, treatment, storage, handling, cleanup,
disposal, transfer, production, processing, or release by or for
TCM and its Subsidiaries of Hazardous Substances on, in, under or
from any properties or facilities currently or previously owned,
operated or leased by TCM and its Subsidiaries;
(iii) Except as set forth in Schedule 3.4.2, TCM
--------------
and its Subsidiaries are and have been in compliance with all
applicable limitations, restrictions, conditions, prohibitions,
requirements, obligations, schedules and timetables contained in
the Environmental Laws and permits issued thereunder, with respect
to operations by TCM and its Subsidiaries at properties and
facilities currently and previously owned, operated and leased by
TCM and its Subsidiaries including, without limitation, the
generation, use, manufacture, transportation, treatment, storage,
handling, disposal, transfer, recycling, reclamation, production
and processing by or for TCM and its Subsidiaries of Hazardous
Substances at, on, under, or from any of the properties or
facilities;
(iv) Except as set forth in Schedule 3.4.2, there
--------------
is no civil, criminal or administrative action, suit, demand, claim,
hearing, notice or demand letter, environmental lien, notice of
violation, investigation, or proceeding pending or, to the knowledge
of TCM and its Subsidiaries, threatened against TCM and its
Subsidiaries involving any Environmental Laws or Hazardous
Substances;
(v) Except as set forth in Schedule 3.4.2, TCM
--------------
and its Subsidiaries and their officers, directors, managers, and
employees are not aware of any instance of or any investigation,
assessment, removal or remediation of a release of Hazardous
Substances at, on, under or from any facility owned or operated by
TCM or any of its Subsidiaries.
3.4.3 INSURANCE. Schedule 3.4.3 contains a complete
--------- --------------
list and description (including the expiration date, premium amount
and coverage thereunder) of all policies of insurance and bonds
presently maintained by, or providing coverage for, TCM and its
Subsidiaries or any of its officers and directors (as officers and
directors of TCM and its Subsidiaries), all of which are and will be
maintained through the Closing Date, in full force and effect,
together with a complete list of all pending claims under any
insurance policy or bond. All material terms, obligations and
provisions of each insurance policy and bond have been complied with,
all premiums due thereon have been paid, and no notice of
cancellation with respect thereto has been received. In the good
faith judgment of TCM, the policies and bonds presently maintained
by, or providing coverage for TCM and its Subsidiaries or any of
their officers and directors (as officers and directors of TCM and
its Subsidiaries), provide adequate coverage to insure the properties
and business of TCM and its Subsidiaries and the activities of their
officers and directors against such risks and in such amounts as are
prudent and customary. Except as set forth on Schedule 3.4.3,
--------------
neither TCM nor any of its Subsidiaries will have as of the Closing
Date any liability for premiums or for retrospective premium
adjustments for any period prior to the Closing Date. TCM has
heretofore delivered to Buyer's
29
<PAGE> 14
Representatives true, correct and complete copies of all insurance
policies and bonds or the binders for all insurance policies and
bonds presently maintained by, or providing coverage for TCM, its
Subsidiaries or any of their officers and directors (as officers
and directors of TCM and its Subsidiaries), or a summary thereof.
The insurance coverage listed in Schedule 3.4.3 hereto is on an
occurrence basis. --------------
3.5 CONTRACTS; PROPERTIES AND ASSETS.
--------------------------------
3.5.1 CONTRACTS AND COMMITMENTS. Except as
-------------------------
reflected in the other Schedules hereto and other than the purchase
and sale of inventory in the ordinary course of TCM's and its
Subsidiaries' business, Schedule 3.5.1 contains a list which
--------------
identifies and briefly describes all written and oral contracts,
agreements, guaranties or commitments, to which TCM or its
Subsidiaries is a party or by which TCM or its Subsidiaries may be
bound (including, without limitation, employment agreements and
open purchase and sale orders), involving the payment by or to TCM
or its Subsidiaries of more than Fifty Thousand Dollars
($50,000.00) or which is otherwise material to, or in connection
with, the operation of the business of TCM and its Subsidiaries.
There are no material written or oral contracts, agreements,
guaranties or commitments to which TCM and its Subsidiaries is a
party or by which TCM and its Subsidiaries or their properties are
bound, other than as reflected on Schedule 3.5.1, and other
--------------
than those relating to the purchase or sale of inventory in the
ordinary course of TCM's and its Subsidiaries' business, involving
payments or obligations in the aggregate for all such contracts,
agreements, guaranties or commitments in excess of Three Hundred
Thousand Dollars ($300,000.00). Each such contract, agreement,
guaranty or commitment is in full force and effect and is valid and
enforceable in accordance with its terms and constitutes a legal
and binding obligation of the respective parties thereto and is not
the subject of any notice of default, termination or partial
termination. TCM and its Subsidiaries have complied in all
respects with the provisions of such contracts, agreements,
guaranties and commitments. A true and complete copy of each such
document has been submitted to Buyer for examination. Neither TCM
nor any of its Subsidiaries has any arrangement (formal or
informal) nor are any of them a party to any agreement with any
current or previous customer regarding any rebates or other
payments or gifts (in kind or in cash).
3.5.2 LICENSES; INTELLECTUAL PROPERTY. Except as
-------------------------------
described in Schedule 3.5.2, neither TCM nor any of its
--------------
Subsidiaries are a party, either as licensor or licensee, to any
material agreement for any inventions, patent, process, trademark,
service mark, trade name, copyright, trade secret or confidential
information ("Intellectual Property"). All Intellectual Property
and applications therefor or registrations thereof, owned or used
by TCM and its Subsidiaries are listed in Schedule 3.5.2 and
--------------
comprise all such Intellectual Property required for TCM and its
Subsidiaries to conduct, and to continue to conduct, their business
as presently conducted. If any such Intellectual Property is owned
by any Person other than TCM or one of its Subsidiaries, TCM shall
cause such Person to assign and transfer such Intellectual Property
to TCM or one of its Subsidiaries, without cost, prior to the
Closing. Except as set forth on Schedule 3.5.2, there are no
--------------
rights of third parties with respect to any of, and TCM and its
Subsidiaries have the right to use, the Intellectual Property owned
or used by TCM and its Subsidiaries. TCM and its Subsidiaries have
complied in all material respects with applicable laws relating to
the filing or registration of "fictitious names" or trade names, if
any.
30
<PAGE> 15
3.5.3 TITLE TO PROPERTIES. TCM and its
-------------------
Subsidiaries have good and marketable title to all of their
properties, real and personal, tangible and intangible, including,
but not limited to, those reflected on the Final April 30, 1996
Financial Statements (except as since sold or otherwise disposed of
in the ordinary course of business), free and clear of all
encumbrances, liens, security interests, claims or charges of any
kind or character except (i) those referred to in Schedule 3.5.3
--------------
and (ii) liens for real estate taxes not yet due and payable. TCM
and its Subsidiaries possess all property and rights that TCM and its
Subsidiaries consider necessary to the conduct of their business as
presently conducted.
3.5.4 CONDITIONS OF PROPERTIES. Taken as a
------------------------
whole, all of the buildings and equipment owned or leased by TCM
and its Subsidiaries and used in its Business are in good condition
and repair in all material respects, normal wear and tear excepted,
suited for the uses intended, and operated in conformity with all
material applicable building, zoning and other applicable
ordinances, laws and regulations, and to the knowledge of TCM and
its Subsidiaries, there are no proposed changes therein that would
have a material adverse effect on such properties or their use.
3.5.5 REAL PROPERTY AND LEASES.
------------------------
(a) All leases pursuant to which TCM or its
Subsidiaries are lessee or lessor of any real or personal property
(the "Company Leases") are valid and enforceable with respect to
TCM or its Subsidiaries, as the case may be, and, to the knowledge
of TCM and its Subsidiaries, with respect to the other party or
parties thereto, in accordance with their respective terms; there
is not under any of such leases (i) any material default or any
claimed default by TCM or its Subsidiaries or event of default or
event which with notice or lapse of time, or both, would constitute
a default by TCM or its Subsidiaries and in respect of which
adequate steps have not been taken to prevent a default on its part
from occurring; or (ii) to the knowledge of TCM and its
Subsidiaries, any existing default by any lessee of TCM or its
Subsidiaries or any event of default or event which with notice or
lapse of time, or both, would constitute a material default by any
such lessee. A true, complete and accurate list of the Company
Leases, setting forth the lessor and lessee, property, initial and
renewal term and annual rentals is contained in Schedule 3.5.5.
--------------
(b) The copies of the Company Leases heretofore
furnished by TCM and its Subsidiaries to Buyer's Representatives
are true, correct and complete, and such Company Leases have not
been modified in any material respect and are in full force and
effect in accordance with their respective terms.
(c) The interest of TCM or its Subsidiaries in and
under each of the Company Leases is unencumbered and subject to no
present claim, contest, dispute, action or, to the knowledge of
TCM, threatened action at law or in equity.
(d) The present use and operation of, and
improvements upon, all real properties leased by TCM or its
Subsidiaries (the "Leased Properties") are in conformity with all
applicable material building, zoning and other applicable laws,
ordinances and regulations, and, to the knowledge of TCM and its
Subsidiaries, there are no proposed changes therein that would have
a material adverse
31
<PAGE> 16
effect on the Leased Properties or their use.
(e) Except as set forth in Schedule 3.5.5, no
--------------
rent has been paid in advance and no security deposit has been paid
by, nor is any brokerage commission payable by TCM and its
Subsidiaries with respect to any Company Lease pursuant to which
either TCM or one of its Subsidiaries is lessee.
(f) There are no contractual obligations or
agreements in principle for either TCM or one of its Subsidiaries
to enter into new leases of real property or to renew or amend
existing Company Leases prior to the Closing Date.
(g) Schedule 3.5.5 lists all real property that
--------------
either TCM or any of its Subsidiaries owns (the "Real Estate").
With respect to each such parcel of Real Estate, TCM or one of its
Subsidiaries has good and marketable title to the parcel of Real
Estate free and clear of any security interests, easements,
covenants or other restrictions, except as described in the Surveys
provided pursuant to Section 5.5.2 below, except for installments
of regular or special assessments not yet delinquent and recorded
easements, and such other encumbrances as may be set forth on
Schedule 3.5.5. In addition, with respect to each parcel,
- --------------
there are no outstanding leases, subleases or other agreements
(written or oral) granting to any party or parties the right to use
or occupy any portion of the parcel of Real Estate and there are no
outstanding options or rights of first refusal to purchase the
parcel of Real Estate or any portion thereof or the interest
therein.
3.5.6 INVENTORIES. The inventory of TCM and its
-----------
Subsidiaries consists of items of a quality and quantity usable and
salable in the ordinary course of their Businesses, and, taken as
a whole, the values of obsolete or slow moving materials and
materials below standard quality have been written down on its
books of account on a consistent basis to realizable market value,
or adequate reserves have been provided therefor. All goods sold
or otherwise distributed by TCM and its Subsidiaries and all
finished goods in the inventory of TCM and its Subsidiaries conform
in all respects to customary trade standards for marketable goods,
subject to returns of goods or warranty claims in accordance with
the prior history of TCM and its Subsidiaries.
3.6 EMPLOYEES AND BENEFITS.
----------------------
3.6.1 DIRECTORS OR OFFICERS. Schedule 3.6.1 correctly
--------------------- --------------
lists all of the present officers and directors of TCM and its
Subsidiaries.
3.6.2 COMPENSATION STRUCTURE. Schedule 3.6.2 contains
---------------------- --------------
a true and complete list of the names, titles, and compensation
arrangements of each employee of TCM and its Subsidiaries (including,
without limitation, all salary, wages, bonuses and fringe benefits
other than those fringe benefits made available to all employees on a
nondiscriminatory basis, in each case separately itemized) earning in
excess of Forty-Five Thousand Dollars ($45,000.00) per year. Except
as set forth in Schedule 3.6.2, no management or other key employee
--------------
or significant number of other employees of TCM or any of its
Subsidiaries has informed or advised TCM or any of its Subsidiaries
employees do not intend to continue such employee's or employees'
32
<PAGE> 17
employment with TCM or one of its Subsidiaries, as the case may be,
after the date hereof. TCM and its Subsidiaries have heretofore
provided the Buyer's Representatives with copies of all written
agreements, and memoranda currently in effect which have been
provided to such employees relating to their current compensation.
A list of such agreements is included in Schedule 3.6.2.
--------------
3.6.3 EMPLOYEE BENEFITS.
-----------------
(a) Except as set forth in Schedule 3.6.3,
--------------
neither TCM nor any of its Subsidiaries has or maintains a "pension
plan" (as such term is defined in Section 3 of ERISA), "welfare
benefit plan" (as such term is defined in Section 3 of ERISA),
bonus plan, stock option plan, deferred compensation plan or other
similar plan for any of its employees.
(b) Each "employee benefit plan" as defined in
Section 3(3) of ERISA, maintained by or on behalf of TCM or one of
its Subsidiaries or by any other party (including any plans which
are "multiemployer plans" under Section 3(37)(A) of ERISA
("Multiemployer Plans")) and any defined benefit pension plan (as
defined in Section 3(35) of ERISA) terminated by TCM or one of its
Subsidiaries within the five (5) plan years ending immediately
before the Closing Date which covers or covered any employee of TCM
or its Subsidiaries, or any predecessor of either TCM or one of its
Subsidiaries is listed on Schedule 3.6.3 (all such plans listed on
--------------
Schedule 3.6.3 are sometimes collectively referred to herein as the
- --------------
"Plans" and individually as a "Plan").
(c) True and complete copies of all the Plans and
Plan trusts, Summary Plan Descriptions, Actuarial Reports (if any)
and Annual Reports on Form 5500 for the most recent three years
with respect to the Plans, Internal Revenue Service determination
letters and any other related documents have been, or prior to the
Closing Date will be, provided to the Buyer's Representatives.
(d) Except as set forth on Schedule 3.6.3, with
--------------
respect to each Plan: (i) no litigation or administrative or other
proceeding is pending or known to be threatened; (ii) the Plan has
been administered in substantial compliance with, and has been
restated or amended (except for amendments not yet required by law
to be made) so as to comply with, all material applicable
requirements of law including all material applicable requirements
of ERISA, the Code and regulations promulgated thereunder by the
Internal Revenue Service and the United States Department of Labor.
No Plan nor any trustee, administrator or fiduciary thereof has at
any time been involved in any transaction relating to such Plan
which would constitute a breach of fiduciary duty under ERISA or a
"prohibited transaction" within the meaning of Section 406 of ERISA
or Section 4975 of the Code.
(e) Each Plan has been administered in all material
respects in compliance with applicable law and the terms of the
Plan.
(f) Each "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Pension Plan") maintained by or
on behalf of TCM is listed on Schedule 3.6.3, and copies of such
--------------
Pension Plans have been, or prior to the Closing Date will be,
provided to Buyer's Representatives. The Pension Plans are
qualified plans within the meaning of Section 401(a) of the Code,
and the
33
<PAGE> 18
trusts thereunder are exempt from federal income tax under
Section 501(a) of the Code, and TCM's and each of its Subsidiaries'
predecessors, if any, have made or accrued, and as of the Closing
Date will have made or accrued, all payments and contributions
required to be made under the provisions of the Pension Plans or by
law with respect to any period prior to the Closing Date. Except
as set forth on Schedule 3.6.3, as of the date hereof, no
--------------
contribution to either the 401(k) plan or ESOP maintained by TCM
and its Subsidiaries has been authorized which has not been fully
paid.
(g) Except as disclosed on Schedule 3.6.3 and
--------------
except for obligations under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), neither TCM nor any of its
Subsidiaries has any obligation to provide, or liability for,
health care, life insurance or other benefits after termination of
employment for former or present employees. As of the Closing
Date, TCM and its Subsidiaries will have cured any known material
violations or deficiencies under applicable statutes, orders and
regulations relating to its employee benefit plans or its
administration thereof and will have provided adequate reserves, or
insurance or qualified trust funds, for all claims incurred through
the Closing Date, based on an actuarial valuation satisfactory to
the actuaries of Buyer representing a projection of claims expected
to be incurred for such retirees during their period of coverage
under such Plan.
(h) To the knowledge of TCM and its Subsidiaries,
no fact or circumstance exists which could constitute grounds in
the future for the Pension Benefit Guaranty Corporation ("PBGC")
(or any successor to the PBGC) to take any action whatsoever under
Section 4042 of ERISA in connection with any plan which an
Affiliate of TCM or one of its Subsidiaries maintains within the
meaning of Section 4062 or 4064 of ERISA, and, in either case, the
PBGC has not previously taken any such action which has resulted
in, or reasonably might result in, any liability of an Affiliate or
TCM or any of its Subsidiaries to the PBGC, which would have a
materially adverse effect on the business of TCM and its
Subsidiaries.
(i) Only current and former employees of TCM and
its Subsidiaries or their dependents participate in the Plans.
(j) TCM is not an affiliate with any entity other
than entities required to be aggregated with it pursuant to
Sections 414(b), (c), (m) or (o) of the Code. No Plan is
cosponsored or has been adopted by any entity other than TCM or one
of its Subsidiaries.
(k) No Pension Plan had an accumulated funding
deficiency as of the last day of the most recent plan year thereof.
Within the past ten (10) years, no Pension Plan has been completely
or partially terminated, no reportable event has occurred with
respect to such plan and, to the knowledge of TCM and its
Subsidiaries, no proceeding by the PBGC to terminate any such
Pension Plan has been instituted or threatened. With respect to
the Plans, to the knowledge of TCM and its Subsidiaries, no claims
are pending or threatened with respect to the assets thereunder or
the assets of TCM, its Subsidiaries and Affiliates, except for
routine claims for benefits. None of the Plans is a multiple
employer welfare arrangement, as defined in Section 3(40)(A) of
Title I of ERISA. Each Plan can be terminated after the Closing
Date to eliminate the liability for claims under such Plan
resulting from occurrences after the date of termination.
34
<PAGE> 19
3.6.4 LABOR-RELATED MATTERS. Neither TCM nor any
---------------------
of its Subsidiaries is a party to any collective bargaining
agreement or agreement with any union or labor organization.
Except as set forth on Schedule 3.6.4, there are no pending or
--------------
asserted claims against TCM or any of its Subsidiaries, or any of
its officers or directors for unfair labor practices, employment
discrimination, wrongful or retaliatory discharge, sexual
harassment, workers' compensation, employment compensation,
negligent hiring or retention or for unpaid salaries, wages or
other fringe benefits ("Employee Claims"). Except as set forth on
Schedule 3.6.4, to the knowledge of TCM and its Subsidiaries,
- --------------
there are no threatened or unasserted Employee Claims of any
material kind or nature.
3.6.5 TRANSACTIONS WITH MANAGEMENT. Schedule 3.6.5
---------------------------- --------------
contains a description, by name, amount and type, of all outstanding
contracts with or commitments to present shareholders or former
shareholders, directors, officers, employees or agents, including any
business directly or indirectly controlled by any such person (other
than contracts or commitments relating to services to be performed by
an officer, director, or employee as a currently employed employee of
TCM or one of its Subsidiaries and other than contracts or
commitments with former shareholders, directors, officers, employees
or agents on an arm's length basis). There are neither any
outstanding loans due and owing by any Shareholder to TCM or one of
its Subsidiaries nor any outstanding loans due and owing from TCM or
one of its Subsidiaries to any Shareholder. Except as set forth in
Schedule 3.6.5, there are no inter-company obligations between TCM
-----
and its Subsidiaries that were not entered into or incurred on an
arms length basis.
3.7 OTHER.
-----
3.7.1 APPROVALS AND CONSENTS. Schedule 3.7.1 lists
---------------------- --------------
all consents or other approvals necessary in order for TCM and the
Holders, and each of them to consummate the transactions contemplated
by this Agreement, including but not limited to all governmental and
other regulatory approvals and consents of suppliers including,
without limitation, that of Dowell, lenders, lessors, landlords and
governmental entities.
3.7.2 TAXES. All federal, state, local and
-----
foreign tax returns and reports of TCM and its Subsidiaries
required by law to be filed have been filed, and all federal,
state, local, foreign and any other taxes, assessments, fees and
other governmental charges with respect to the employees,
properties, assets, income or franchises of TCM and its
Subsidiaries shown on such returns and reports to be due and
payable, or which are otherwise due and payable, have been paid by
TCM or its Subsidiaries or accrued or reserved against on TCM's or
its Subsidiaries' financial statements or will be properly accrued
or reserved against on the books and records of TCM and its
Subsidiaries as of the Closing Date. Each of TCM and its
Subsidiaries has withheld and paid all taxes required to have been
withheld, and paid in connection with amounts paid to an employee,
independent contractor, creditor, stockholder or other third party.
No authority is expected to assess any additional taxes for any
period for which tax returns have been filed. There is no dispute
or claim concerning any tax liability of either TCM or any of its
Subsidiaries, based upon either (a) claims raised by any authority
in writing or (b) based upon personal contact by any agent of such
authority. Neither TCM nor any of its Subsidiaries has waived any
statute of limitation with respect to taxes
35
<PAGE> 20
or agreed to any extension of time with respect to a federal income
tax assessment or deficiency. Neither TCM nor any of its
Subsidiaries is currently the beneficiary of any extension of time
within which to file any tax return.
3.7.3 PRODUCT WARRANTY. Except as set forth in
----------------
Schedule 3.7.3, to the knowledge of TCM and its Subsidiaries:
- --------------
(a) The reserve for product warranty claims set
forth on the face of the Final April 30, 1996 Financial Statements
as adjusted for the passage of time through the Closing Date is in
accordance with the past practice of TCM and its Subsidiaries and
is adequate to cover all known, and incurred but not recognized,
product warranty claims and, as stated thereon, in accordance with
GAAP;
(b) There are no facts which TCM or its
Subsidiaries believe will lead to a voluntary or involuntary recall
of any pumps, compressors or other goods sold, leased or delivered
by any of TCM or its Subsidiaries.
3.7.4 PRODUCT LIABILITY. Each product
-----------------
manufactured or sold either by TCM or one of its Subsidiaries has
been in conformity with all applicable contractual commitments and
all express and implied warranties given therewith. Neither TCM
nor its Subsidiaries has any known liability for replacement or
repair of its goods or products or other damages in connection
therewith, subject only to the reserve for product warranty claims
set forth on the face of the Final April 30, 1996 Financial
Statements as adjusted for the passage of time through the Closing
Date in accordance with the past practices of TCM and its
Subsidiaries.
3.7.5 BROKERS. Neither TCM nor any of its
-------
Subsidiaries has retained any broker, finder, investment banker or
financial advisor in connection with this Agreement or any
transaction contemplated hereby to which Buyer may be held liable
for any fees or other compensation.
3.7.6 REPRESENTATIONS AND WARRANTIES. No
------------------------------
representation or warranty contained in this Section 3 or in any
written statement delivered by or at the direction of TCM pursuant
hereto or in connection with the transactions contemplated hereby
contains or shall contain any untrue statement, nor shall such
representations and warranties taken as a whole omit any statement
necessary in order to make any statement not misleading. There is
no material fact known to TCM or any of its Subsidiaries (other
than facts relating to general business conditions), which
adversely affects the business, operations, or assets or the
condition, financial or otherwise, of TCM and its Subsidiaries in
any respect which has not been disclosed in this Agreement or in
the Schedules.
3.8 Representations and Warranties of Holders.
-----------------------------------------
Each Holder represents and warrants for itself severally (and not
jointly and severally with TCM or other Holders) that:
(a) Each Holder holds, of record, the number of
Common Shares and/or Option Shares as is set forth in Exhibit A
---------
free and clear of any restrictions on transfer other than those
imposed under federal and state securities laws, and free and clear
of all security interests, liens, charges, encumbrances, options,
warrants, purchase rights, contracts, commitments and claims,
except for those agreements or restrictions which will be
terminated prior to Closing. Other than as provided
36
<PAGE> 21
in the ESOP and as provided herein relating to the termination of the
Option Shares at Closing, no Holder or any other person is a party to
any other option, warrant, purchase right or other contract or
commitment that could require it to sell, transfer or otherwise
dispose of any of its Common Shares or Option Shares. Other than
as provided in the ESOP, no Holder is a party to any voting trust,
proxy, buy/sell agreement or other contract or agreement or
understanding with respect to the voting of his Common Shares or
Options.
(b) Cushair, Inc., Jalex Industries, Inc. and
Design Directions, Inc. are duly organized, validly existing and in
good standing under the laws of the jurisdiction of their
incorporation. The ESOP is a qualified employee stock ownership
plan under ERISA.
(c) Each Holder has full power and authority and,
in the case of (i) Cushair, Inc., Jalex Industries, Inc. and Design
Directions, Inc., full corporate power and authority, and (ii) in
the case of the ESOP, full approval and authorization in accordance
with the ESOP, in each case, to execute and deliver this Agreement
and to perform Holder's obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of such
Holder, enforceable in accordance with its terms and conditions,
except as such enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization and other laws effecting
creditors' rights generally and general principles of equity,
regardless of whether asserted in equity or at law. No Holder is
a debtor in a case commenced voluntarily or involuntarily under
either federal or state bankruptcy or insolvency laws.
(d) Neither the execution and the delivery of this
Agreement by a Holder, nor the performance by Holder of its
obligations hereunder, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge or other restriction of any government, governmental agency
or court to which Holders are subject or, in the case of (x)
Cushair, Inc., Jalex Industries, Inc. or Design Directions, Inc.,
any provision of their charter or bylaws, (y) the ESOP, the
agreement under which it is established and all amendments thereto,
or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any third party the
right to accelerate, terminate, modify or cancel, or require any
notice under any agreement, contract, lease, license, instrument or
other arrangement to which any Holder is a party or by which he or
it is bound or to which any of his or its assets is subject, except
for those agreements or restrictions which will be terminated prior
to Closing, or (iii) with respect to the ESOP, violate any
fiduciary duties the trustees may have to its participants.
(e) Each Holder has determined that the
consideration to be paid by Buyer for the Shares is fair.
(g) No representations, warranties, promises,
inducements, coercion or other pressures of any kind were brought
to bear upon or influenced in any way Holder's decision to sell its
Shares other than its determination that the Purchase Price and the
terms of sale herein are fair; and
(h) Each Holder hereby waives all rights, claims
and entitlements that such Holder may have under all federal and
state securities laws.
(i) As of the Closing Date, each Holder has
received from TCM or its Subsidiaries all
37
<PAGE> 22
director's fees, dividends, bonuses or other compensation to which
Holder or any entity controlled by Holder may be entitled from such
entities.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
---------------------------------------
Buyer hereby represents and warrants to the Holders as
follows:
4.1 ORGANIZATION OF BUYER. Buyer is a
---------------------
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
4.2 AUTHORIZATION. Buyer has all necessary power
-------------
and authority and has taken all action necessary to enter into this
Agreement and the other agreements, documents and instruments to be
executed and delivered by Buyer in connection with or pursuant to
this Agreement, to consummate the transactions contemplated hereby
and thereby and to perform its obligations hereunder and
thereunder. A certified copy of the Board of Directors resolution
approving the consummation of the transactions contemplated hereby
shall be delivered to TCM at Closing. This Agreement has been duly
executed and delivered by Buyer and is a legal, valid and binding
obligation of Buyer, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization and other similar laws
affecting creditors' rights generally and general principles of
equity, regardless of whether asserted in a proceeding in equity or
at law. The agreements, documents and instruments to be executed
and delivered by Buyer in connection with or pursuant to this
Agreement, when executed and delivered, will constitute the legal,
valid and binding obligations of Buyer, enforceable against it in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization and
other similar laws affecting creditors' rights generally and
general principles of equity, regardless of whether asserted in a
proceeding in equity or at law.
4.3 NO CONFLICT OR VIOLATION. Neither the
------------------------
execution and delivery of this Agreement and the other agreements,
documents and instruments to be executed and delivered by Buyer in
connection with or pursuant to this Agreement, nor the consummation
of the transactions contemplated hereby or thereby will result in:
(a) a violation of or a conflict with any provision of Buyer's
Certificate of Incorporation or Bylaws; (b) a breach of, or a
default under, any term or provision of any contract, agreement,
indebtedness, lease, commitment, license, franchise, permit,
authorization or concession to which Buyer is a party, which breach
or default would have a material adverse effect on the business or
financial condition of Buyer or its ability to consummate the
transactions contemplated hereby; or (c) a violation by Buyer of
any statute, rule, regulation, ordinance, code, order, judgment,
writ, injunction, decree or award, which violation would have a
material adverse effect on the business or financial condition of
Buyer or its ability to consummate the transactions contemplated
hereby.
4.4 CONSENTS AND APPROVALS. No consent,
----------------------
approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority, or any
other person or entity, is required to be made or obtained by Buyer
in connection with the execution, delivery and performance of this
Agreement and the other agreements, documents and instruments to be
executed
38
<PAGE> 23
and delivered by Buyer in connection herewith or pursuant hereto and
the consummation of the transactions contemplated hereby.
4.5 NO BROKER. Buyer has not retained any
---------
broker, finder, investment banker or financial advisor in
connection with this Agreement or any transaction contemplated
hereby to which TCM will be held liable for any fees or other
compensation.
5. COVENANTS OF TCM.
----------------
TCM and its Subsidiaries covenants and agrees that, from
and after the date of this Agreement and until the Closing, TCM and
its Subsidiaries will conduct its Business subject to the following
provisions and limitations:
5.1 MAINTENANCE OF BUSINESSES PRIOR TO CLOSING.
------------------------------------------
TCM and its Subsidiaries shall continue to carry on the Business in
the ordinary course and consistent with past practice and will not
take any action inconsistent therewith or with the consummation of
the transactions contemplated by this Agreement without the consent
of Buyer. Without limiting the generality of the foregoing, TCM
and its Subsidiaries shall: (a) maintain their assets in all
material respects in their current state of repair, excepting
normal wear and tear; (b) maintain insurance covering their assets
similar to that in effect on the date hereof; (c) use their good
faith efforts to preserve their current business organizations; (d)
use their good faith efforts to keep available the services of the
current material employees and other material personnel of the
Business; and (e) use their good faith efforts to preserve the
current business relationships with customers, suppliers and others
having business dealings with TCM and its Subsidiaries. Neither
TCM nor any of its Subsidiaries shall engage in any practice, take
any action, embark on any course of inaction or enter into any
transaction that would cause any of its representations and
warranties set forth in Section 3 hereof to be untrue as of the
Closing Date or result in any of such representations and
warranties being untrue as of the Closing Date. Without limiting
the generality of the foregoing, neither TCM nor any of its
Subsidiaries shall take any of the following actions: (i) issue any
shares of their common capital stock; (ii) except as contemplated
by this Agreement, purchase or propose the purchase of any such
shares including, without limitation, pursuant to any purchase
option or put rights under the terms of the ESOP, or other equity
interest or any class of securities convertible into, or rights,
warrants or options to acquire, any such shares or other
convertible securities or enter into any agreement with respect to
the foregoing; or (iii) acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets or stock of,
or by any other manner, any business or any corporation,
partnership, association or other entity or division thereof;
(iv) sell, mortgage, lease, buy or otherwise acquire, transfer or
dispose of any real or personal property or any interest therein,
except for the sale of inventory in the ordinary course; (v) except
as may be disclosed in Schedule 5.1, materially increase the
------------
compensation payable or to become payable to any director, officer
or employee of TCM or its Subsidiaries not in the ordinary course
of business; (vi) incur any long-term liabilities or indebtedness
outside the ordinary course of business or in excess of One Hundred
Thousand Dollars ($100,000.00) without the prior written consent of
Buyer; (vii) pay any claim or discharge or satisfy any lien or
encumbrance or pay any obligation or liability other than in the
ordinary course of business or as required by the terms of any
instrument evidencing or governing
39
<PAGE> 24
the same or by the terms hereof; (viii) except as may be disclosed in
Schedule 5.1, enter into or amend, or make any contributions to, any
- ------------
Plan or bonus, incentive compensation, deferred compensation, profit
sharing, retirement, Pension Plan, group insurance or other benefit
plan; or (ix) agree to do any of the foregoing.
5.2 INVESTIGATION OF BUYER. Between the date
----------------------
of this Agreement and the Closing, Buyer intends to continue to
conduct a review of the business and financial condition of TCM and
its Subsidiaries. In connection with such review by Buyer, TCM and
its Subsidiaries shall allow Buyer and its representatives, during
normal business hours to make such inspection of TCM's and its
Subsidiaries' assets and to inspect and make copies of such books,
records, contracts and other information reasonably requested by
Buyer. TCM and its Subsidiaries shall furnish to Buyer promptly
upon request all such additional documents and information with
respect to the affairs of TCM and its Subsidiaries as Buyer or
Buyer's Representatives may from time to time reasonably request
and shall instruct such employees, customers and suppliers to
cooperate with Buyer, and to provide such information as Buyer and
Buyer's Representatives may reasonably request.
5.3 CONSENTS AND GOOD FAITH EFFORTS. As soon
-------------------------------
as practicable after the date of this Agreement, TCM and its
Subsidiaries shall commence all reasonable action and shall use its
good faith efforts to obtain all material applicable permits,
consents, approvals and agreements of, and to give all notices and
make all filings with, any third parties or governmental
authorities as may be necessary or appropriate to authorize,
approve or permit the consummation of the transactions provided for
hereby on or prior to the Closing Date.
5.4 NO SOLICITATION. Neither TCM, its
---------------
Subsidiaries nor any of their directors, officers, employees,
agents, representatives and affiliates shall solicit or request
from third parties any offers to purchase all or substantially all
of the assets or substantially all of the stock of TCM or any of
its Subsidiaries, nor participate in any negotiations related to
any such offers.
5.5 TITLE INSURANCE AND SURVEYS.
---------------------------
5.5.1 TITLE INSURANCE. TCM will obtain (and will
---------------
cause its Subsidiaries to obtain) with respect to each parcel of
Real Estate that any of TCM and its Subsidiaries owns, except for
the Adex Property for which no Title Policy shall be required, an
ALTA Owner's Policy of Title Insurance Form 1402.92 (or equivalent
policy) (the "Title Policy"), in such amount as Buyer reasonably
may determine to be the fair market value of such Real Estate
(including all improvements located thereon), insuring title to
such Real Estate to be in Buyer as of the Closing (subject only to
the standard preprinted exceptions described in such Title Policy
and in Schedule 5.5.1). Each Title Policy delivered hereunder
--------------
shall (a) insure title to the Real Estate, and (b) contain an
"extended coverage endorsement" insuring over the general
exceptions contained customarily in such policies.
5.5.2 SURVEYS. With respect to each parcel of
-------
Real Estate that any of TCM and its Subsidiaries owns, other than
the Adex Property for which no Survey shall be required, and as to
which a Title Policy is to be procured pursuant to Section 5.5.1
above, TCM will procure (and will cause its Subsidiaries to
procure) in preparation for the Closing a current survey of the
Real Estate
40
<PAGE> 25
certified to Buyer, prepared by a licensed surveyor and
conforming to current ALTA Minimum Detail Requirements for Land
Title Surveys, disclosing the location of all improvements,
easements, party walls, sidewalks, roadways, utility lines, and
other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey(s)"). The
Survey(s) shall not disclose any survey defect or encroachment from
or onto the Real Estate which has not been cured or insured over
prior to the Closing.
5.6 NOTICE. TCM shall promptly give Buyer
------
written notice in the event TCM becomes aware of the existence or
occurrence of any event or condition which would make any
representation or warranty of TCM or its Subsidiaries contained
herein untrue in any material respect or which might prevent the
consummation of the transactions contemplated hereby.
6. CONDITIONS AND OBLIGATIONS TO CLOSE.
-----------------------------------
6.1 CONDITIONS TO OBLIGATIONS OF TCM, BUYER AND
-------------------------------------------
THE HOLDERS. The obligations of TCM, Buyer and the Holders to
- -----------
consummate the transactions to be performed by each of them in
connection with the Closing are subject to the satisfaction of the
following conditions:
6.1.1 Holder Approval. The Holders shall execute
---------------
this Agreement, and deliver to Buyer the certificates representing
the Common Shares and Termination Agreements evidencing the
cancellation of the Option Shares.
6.1.2 AGREEMENTS BETWEEN BUYER AND ALEXANDER.
--------------------------------------
Buyer and Alexander shall have entered into, effective as of the
Closing: (A) the Consulting Agreement; and (B) the Non-Competition
Agreement. In addition, Alexander shall assign, transfer and
deliver to Buyer or its designee at Closing Stock Certificate No.
4 representing one (1) share of TCM Mfg. Int'l., Limited, a
subsidiary of Twentieth Century.
6.1.3 DOWELL AND NECESSARY APPROVAL. The Dowell
-----------------------------
Contract shall be in full force and effect, Twentieth Century shall
not be in default thereunder, neither party thereto shall have
given notice of termination to the other thereunder, and TCM shall
have procured Dowell's approval or consent under Section 9.1
thereof, if necessary, in connection herewith. In addition, TCM
and Buyer shall have received all other authorizations, consents
and approvals of government and governmental agencies.
6.1.4 Final Determination of Net Worth. A final
--------------------------------
determination of Net Worth of TCM and it Subsidiaries as of the
Financial Statement Date and any resultant adjustment in the
Purchase Price shall have been made in accordance with Section 1.4.
6.1.5 WAIVER. Any party may waive any condition
------
to its obligation to close specified in this Section 6.1 by
executing a writing so stating at or prior to the Closing.
6.2 CONDITIONS TO OBLIGATIONS OF TCM AND HOLDERS.
--------------------------------------------
In addition to the conditions set forth in Section 6.1, the
obligations of TCM and Holders to consummate the Closing are
subject to the satisfaction and fulfillment at or prior to the
Closing of each of the following conditions, any of
41
<PAGE> 26
which may be waived by TCM or the Holders:
6.2.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------
All representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects on the
date hereof and as of the Closing Date as though made on the
Closing Date, and Buyer shall have performed or complied with all
covenants and obligations to be performed or complied with by it
under the terms of this Agreement at or prior to the Closing.
6.2.2 NO GOVERNMENTAL PROCEEDINGS OR LITIGATION.
-----------------------------------------
No action by any governmental agency shall have been instituted or
threatened for the purpose of enjoining or preventing the Closing
or that questions the validity or legality of the transactions
contemplated hereby.
6.2.3 CERTIFICATES. Buyer shall have delivered
------------
to TCM such certificates of its officers and others to evidence
compliance with the conditions set forth in this Section 6 as may
be reasonably requested by TCM, including, without limitation:
(a) A Certificate of Good Standing for Buyer issued
by the Delaware Secretary of State;
(b) A certificate executed by the President or
Secretary of Buyer certifying, as of the Closing Date to (i) a true
and complete copy of the Certificate of Incorporation of Buyer;
(ii) a true and complete copy of the Bylaws of Buyer; (iii) a true
and correct copy of the resolution of the board of directors of
Buyer authorizing the transactions contemplated hereby and the
instruments and deliveries to be executed and made by Buyer in
connection with the consummation of the transactions contemplated
hereby; and (iv) incumbency matters;
(c) TCM's and Holders' satisfaction as of the
Closing Date of all of the conditions relative to Buyer set forth
in this Section 6.
6.2.4 OTHER ACTIONS BY BUYER. All actions to be
----------------------
taken by Buyer in connection with the consummation of the
transactions contemplated herein and all certificates, opinions,
instruments and other documents which are to affect the transaction
contemplated hereby shall be reasonably satisfactory in form and
substance to TCM and the Holders.
6.3 CONDITIONS TO BUYER'S OBLIGATIONS. In
---------------------------------
addition to the conditions set forth in Section 6.1, the
obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject to the satisfaction and fulfillment at
or prior to the Closing of each of the following conditions, any of
which may be waived by Buyer:
6.3.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------
All representations and warranties of TCM and the Holders contained
in this Agreement shall be true and correct in all material
respects on the date hereof and as of the Closing Date as though
made on the Closing Date, and TCM shall have performed or complied
with all covenants and obligations to be performed or complied with
by it under the terms of this Agreement at or prior to the Closing.
6.3.2 NO GOVERNMENTAL PROCEEDINGS OR LITIGATION.
-----------------------------------------
No action by any governmental
42
<PAGE> 27
agency or other person or entity shall have been instituted or
threatened for the purpose of enjoining or preventing the
transactions contemplated by this
Agreement or that questions the validity or legality of the
transactions contemplated hereby or that has or could reasonably be
expected to have, in the opinion of Buyer, a material adverse
operation or financial condition of TCM.
6.3.3 RESIGNATIONS. Buyer shall have received
------------
the resignations effective as of the Closing of each director and
officer of TCM and its Subsidiaries, other than those whom Buyer
shall have specified in writing at least five (5) business days
prior to the Closing and the trustees of the ESOP.
6.3.4 OTHER ACTIONS. All actions to be taken by
-------------
TCM and the Holders in connection with the consummation of the
transactions contemplated hereby and all certificates, instruments
and other documents required to affect the transactions
contemplated hereby will be reasonably satisfactory in form and
substance to Buyer.
6.3.5 TERMINATION OF CONTRACTS.
------------------------
(a) The Contract(s) of Employment between TCM or
any of its Subsidiaries and Alexander shall have been terminated as
of the Closing Date.
(b) The oral contract between TCM and any of its
Subsidiaries and Joe Wyatt or Wyatt & Company, Inc., whereby the
latter provides accounting and computer assistance to TCM and is
Subsidiaries on a fee basis, shall be terminated and all fees due
Joe Wyatt or Wyatt & Company, Inc. pursuant thereto shall have been
paid and discharged.
6.3.6 HOLDBACK ESCROW AGREEMENT. Buyer, TCM,
-------------------------
Holders' Agents and the Escrow Agent shall have entered into the
Holdback Escrow Agreement.
6.3.7 CERTIFICATES. TCM shall have delivered to
------------
Buyer such certificates of its officers and others to evidence
compliance with the conditions set forth in this Section 6 as may
be reasonably requested by Buyer, including, without limitation:
(a) A Certificate of Good Standing for TCM issued
by the Oklahoma Secretary of State;
(b) A certificate executed by the President or
Secretary of TCM certifying to, as of the
Closing Date: (i) a true and complete copy of
the Certificate of Incorporation of TCM;
(ii) a true and complete copy of the bylaws of
TCM; (iii) a true and correct copy of
resolutions of the board of directors of TCM
authorizing the execution, delivery and
performance of this Agreement by TCM, the
execution, delivery and performance of the
agreements, documents and instruments to be
executed and delivered by TCM in connection
herewith or pursuant hereto, and the
consummation of the transactions contemplated
hereby and thereby; and (iv) incumbency
matters; and
(c) Buyer's satisfaction as of the Closing Date of
all conditions relative to TCM and the
43
<PAGE> 28
Holders set forth in this Section 6.
6.3.8 NO MATERIAL ADVERSE CHANGE. From April 30,
--------------------------
1996 to the Closing Date there shall have been no material adverse
change in the assets or liabilities, the business or condition
(financial or otherwise) of TCM and its Subsidiaries, its
relationships with its employees or customers regardless of reason,
including, without limitation, any material adverse change in its
relationship with Dowell, or any legislative or regulatory changes,
revocation of any license or rights to do business, failure to
obtain permits required by TCM or any of its Subsidiaries, fire,
explosion, accident, casualty, labor trouble, flood, riot, storm,
condemnation or act of God or otherwise.
7. TERMINATION.
-----------
7.1 TERMINATION. This Agreement and the
-----------
transactions contemplated hereby may be terminated at any time
prior to the Closing, as follows:
7.1.1 MUTUAL CONSENT. By mutual consent of TCM,
--------------
Holders and Buyer;
7.1.2 REQUIRED CONSENTS. By Buyer, if any party,
-----------------
including, without limitation, any governmental agency, whose
consent or approval is required to permit the consummation of the
transactions contemplated hereby on the part of TCM or its
Subsidiaries, fails to consent to or approve such transactions;
7.1.3 HOLDER APPROVAL. By Buyer, if all Holders
---------------
do not execute this Agreement;
7.1.4 MATERIAL INFORMATION. By Buyer, if TCM or
--------------------
its Subsidiaries fail to disclose any material information about
TCM or its Subsidiaries' assets or their Business or provides Buyer
with any materially inaccurate or misleading information taken as
a whole and not corrected about TCM or any of its Subsidiaries'
assets or their Business;
7.1.5 HOLDERS' FAILURE TO CLOSE. By Buyer, if
-------------------------
Buyer is prepared to close and all conditions to TCM's and Holders'
obligations to close pursuant to Section 6 hereof have been
satisfied and one or more Holders fail to close on the Closing
Date; and
7.1.6 BUYER'S FAILURE TO CLOSE. By TCM or the
------------------------
Holders, if TCM and the Holders are prepared to close and all
conditions to Buyer's obligations to close as set forth in
Section 6 hereof have been satisfied and Buyer fails to close on
the Closing Date.
7.2 CUT-OFF DATE. If the Closing shall not
------------
have occurred on or before August 15, 1996, this Agreement shall
automatically terminate without further action of any party hereto.
7.3 EFFECT OF TERMINATION. If this Agreement
---------------------
is terminated pursuant to Sections 7.1.1, 7.1.2 or 7.2 hereof, all
rights and obligations of TCM, the Holders and Buyer hereunder
shall terminate, and if this Agreement is terminated pursuant to
Sections 7.1.3, 7.1.4, 7.1.5 or 7.1.6 hereof, the non-breaching
party shall be entitled to exercise and pursue all rights and
remedies available to
44
<PAGE> 29
it hereunder, at law, in equity or otherwise, including the right to
recover reasonable attorney fees and expenses expended to the date
of breach and in pursuing such remedies.
8. INDEMNIFICATION.
---------------
8.1 INDEMNIFICATION BY HOLDERS. Each Holder
--------------------------
severally (and not jointly) hereby agrees to indemnify, save, hold
harmless and defend Buyer, its affiliates and subsidiaries, and
their respective partners, officers, directors, shareholders,
agents and representatives, and each of them, from and against any
and all costs, losses, liabilities, damages, lawsuits,
deficiencies, claims and expenses reasonably and actually incurred
(whether or not arising out of third-party claims), including,
without limitation, interest, penalties, additions, reasonable
travel expenses, reasonable attorneys' fees and all amounts paid in
connection with the defense or settlement of any of the foregoing
(herein, the "Damages"), in connection with or arising out of or
resulting from any one or more of the following: (a) any inaccuracy
in any representation or warranty made by TCM and its Subsidiaries,
herein or in any Exhibit, Schedule, tax return or other document
provided pursuant to or in connection with this Agreement; (b) the
breach of any covenant or agreement or any misrepresentation made
by TCM and its Subsidiaries contained in this Agreement, including
the Schedules and Exhibits hereto, or any other agreement,
instrument or document executed by TCM or its Subsidiaries pursuant
hereto or in connection herewith; (c) any failure of the Holders to
duly perform or observe any term, provision, covenant or agreement
herein on the part of such parties to be performed or observed; (d)
any liability, breach, default, claim, accident, injury or damage
of any kind occurring prior to the Closing Date; and (e) the
release of Hazardous Substances at, on or from any facility used
prior to Closing by either TCM or any of its Subsidiaries to
process, recycle, reclaim, refine, transport, store, dispose of or
otherwise handle Hazardous Substances generated by TCM and its
Subsidiaries; provided, however, that no Holder shall be liable for
any amount of Damages in excess of the amount received by it
hereunder.
8.2 INDEMNIFICATION BY BUYER. Buyer hereby
------------------------
indemnifies and agrees to save and hold harmless the Holders from
and against any and all Damages incurred in connection with or
arising out of or resulting from any one or more of the following:
(a) the breach of any covenant or agreement or any
misrepresentation made by Buyer contained in this Agreement,
including the Schedules and Exhibits hereto, or any other
agreement, instrument or document executed by Buyer pursuant hereto
or in connection herewith or (b) any failure of Buyer to duly
perform or observe any term, provision, covenant or agreement
herein on the part of Buyer to be performed or observed.
8.3 DEFENSE OF CLAIMS. If any action or
-----------------
proceeding (including any governmental investigation or inquiry)
shall be brought or asserted or threatened to be brought or
asserted against a party (the "Indemnified Party") in respect of
which indemnity may be sought from the other party (the
"Indemnifying Party"), such Indemnified Party shall promptly notify
the Indemnifying Party in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel
satisfactory to such Indemnified Party and the payment of all
expenses. The Indemnifying Party shall not, except with the
written consent of the Indemnified Party, consent to the entry of
a judgment or settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to the
Indemnified Party of an unconditional release from all
45
<PAGE> 30
liability in respect of such third party claim or demand. The
Indemnified Party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be the expense of such
Indemnified Party unless: (a) the Indemnifying Party has agreed to
pay such fees and expenses; or (b) the Indemnifying Party shall have
failed to assume the defense of such action or proceeding or shall
have failed to employ counsel reasonably satisfactory to such
Indemnified Party in any such action or proceeding; or (c) the
named parties to any such action or proceeding (including any
impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that there may be one or more legal defenses
available to such Indemnified Party that are different from or
additional to those available to the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on behalf
of such Indemnified Party, it being understood, however, that the
Indemnifying Party shall not, in connection with any one such
action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of
attorneys at any time for such Indemnified Party). The
Indemnifying Party shall not be liable for any settlement of any
such action or proceeding effected without its written consent, but
if settled with its written consent or if there be a final judgment
for the plaintiff in any such action or proceeding, the
Indemnifying Party agrees to indemnify and hold harmless such
Indemnified Parties from and against any loss or liability by
reason of such settlement or judgment. If either party shall claim
indemnification for Damages hereunder for any claim other than a
third party claim, the Indemnified Party shall promptly notify the
Indemnifying Party of the nature of the claim and the amount of the
Damages and payment therefor shall be made by the Indemnifying
Party forthwith upon receipt of such notice.
8.4 LIMITATION ON INDEMNIFICATION.
-----------------------------
Notwithstanding the provisions of Section 8.1, there will be an
aggregate ceiling in the amount of Two Hundred Fifty Thousand
Dollars ($250,000.00) on the obligation of the Holders to indemnify
Buyer under this Agreement and, further, the Holders shall have no
obligation to indemnify Buyer hereunder except strictly in
accordance with the terms and limitations of the Holdback Escrow
Agreement.
8.5 ESCROWING OF FUNDS. In order to have an
------------------
available source of funds for the Holders' indemnification of
claims asserted by Buyer under this Section, TCM, Holders and Buyer
agree that on or before the Closing Date, the Holdback Funds shall
be deposited by Buyer in the Escrow Account to be held and
disbursed pursuant to the terms of the Holdback Escrow Agreement.
The Holders' liability to indemnify Buyer under this Agreement,
absent fraud, shall be limited to the Holdback Funds and Buyer
shall have no right to collect any Damages from any Holder,
individually or collectively, but only out of the Holdback Funds
and in accordance with the provisions of the Holdback Escrow
Agreement.
8.6 DAMAGES. The term "Damages" as used in
-------
this Section is not limited to matters asserted by third parties
against TCM and its Subsidiaries or Buyer, as the case may be, but
includes Damages incurred or sustained by TCM, Holders or Buyer, as
the case may be, in the absence of third party claims.
46
<PAGE> 31
9. ARBITRATION. Other than as provided in Section 1.4.2
-----------
which is excepted herefrom, the Parties hereto agree that any
disputes, disagreements or claims for the breach by any party of
any representations, warranties, agreements or covenants hereunder
("Disputes") shall be submitted to binding arbitration. The
arbitration committee to whom any Disputes are submitted shall
consist of an arbitrator chosen by Buyer, an arbitrator chosen by
the Holders' Committee, and a third arbitrator chosen by the
arbitrators selected by Buyer and Holders' Committee. The decision
of the arbitration committee shall be based on majority rule and
shall be final and binding on the parties hereto; provided,
however, that any party shall be permitted to file suit in a court
of appropriate jurisdiction to enforce any decision of the
arbitration committee. The decision of the arbitration committee
regarding any dispute, including one relating to a claim for
indemnification, shall be communicated in writing to the Escrow
Agent, Buyer and the Holders when rendered. Notwithstanding any
other provision hereof, this Section shall survive the Closing and
shall remain in effect until the Holdback Escrow Agreement
terminates.
10. DEFINITIONS. The following terms when used herein
-----------
shall have the following meanings; such terms to be equally
applicable to both the singular and plural of the terms defined
(capitalized terms defined elsewhere in this Agreement to have the
meaning so ascribed to them in all provisions of this Agreement):
"Affiliate" means any trade or business (whether
incorporated or unincorporated) which is a member of a group
described in Section 414(c) of the Code of which TCM is also a
member.
"Bank" means State Bank & Trust, N.A., a national banking
association.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Disbursement Agent" means James G. Fehrle, Attorney at
Law, or if he should resign, die or become disabled, the attorney
selected by the Holders' Committee; provided a successor selected
by the Holders' Committee shall have all the same powers and rights
of the original Disbursement Agent hereunder.
"Dowell" means Dowell, a division of Schlumberger
Technology Corporation, a Texas corporation with its head office at
Sugar Land, Texas.
"Dowell Contract" means the Reciprocating Pump Service
Agreement dated May 23, 1995 between Dowell and Twentieth Century.
"Environmental Laws" means all applicable federal, state and
local laws, statutes, decrees, ordinances, codes, rules,
regulations and orders directed to TCM or any of its Subsidiaries
relating to the Release or threatened Release into the environment
(including, without limitation, ambient air, surface water, ground
water and surface and subsurface soil) of any pollutant,
contaminant, chemical or industrial, toxic, hazardous or regulated
substances, materials or wastes, or relating to the manufacture,
processing, distribution, use, generation, treatment, storage,
disposal, transport,
47
<PAGE> 32
reclamation, recycling, or handling of or exposure to pollutants,
contaminants, chemicals or industrial, toxic, hazardous or regulated
substances, materials, or wastes, including, without limiting the
foregoing, the Resource Conservation and Recovery Act ("RCRA"), as
amended, 42 U.S.C. Sections 6901 et seq., the Comprehensive
-- ---
Environmental Response, Compensation and Liability Act ("CERCLA"),
as amended, 42 U.S.C. Sections 9601 et seq., the Toxic Substance
-- ---
Control Act ("TSCA"), as amended, 15 U.S.C. Sections 2601 et seq.,
-- ---
the Clean Air Act, as amended, 42 U.S.C. Sections 7401 et seq., the
-- ---
Clean Water Act, as amended, 42 U.S.C. Sections 1251 et seq., the
-- ---
Occupational Safety and Health Act ("OSHA"), as amended, 29 U.S.C.
Sections 651 et seq., all applicable analogous or similar state and
-- ---
local statutes, all other applicable federal, state and local so
called "Superfund" or "Superlien" laws, and all applicable federal,
state and local underground or aboveground storage tank laws, and
all applicable regulations and rules promulgated pursuant to the
aforementioned laws and statutes.
"ESOP" means the Employee Stock Ownership Plan of TCM and its
Subsidiaries effective May 1, 1989 and as amended thereafter.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Hazardous Substances" means hazardous substances, toxic
substances, hazardous wastes, hazardous materials, and other
substances regulated under RCRA, CERCLA, TSCA, the Clean Air Act,
the Clean Water Act, OSHA, and other Environmental Laws, including
without limitation, asbestos, petroleum products, and waste and
used oil.
"Holdback Funds" means the sum of Two Hundred Fifty Thousand
Dollars ($250,000.00).
"Holders' Committee" means Jack L. Alexander, Joe Wyatt and
Lawrence M. Cibula, whose consent, approval or authorization shall
be deemed given by the act, consent, approval or authorization of
a majority thereof.
"Net Worth" means Total Shareholders' Equity of TCM and its
Subsidiaries on a consolidated basis as of the Financial Statement
Date, as determined by TCM's Auditors and as adjusted in accordance
with the procedure outlined in Section 1.4.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a
trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political
subdivision thereof).
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the
common stock or has the power to vote or direct the voting of
sufficient amounts to elect a majority of the directors.
"Twentieth Century" means 20th Century Mfg. & Supply Co., an
Oklahoma corporation, and wholly owned subsidiary of TCM.
48
<PAGE> 33
11. PAYOFF OF BANK. Within thirty (30) days following the
--------------
Closing, Buyer shall either pay in full or cause to be paid in full
by TCM or one or more of its Subsidiaries, all debts and
obligations owing from TCM and its Subsidiaries to the Bank, as
disclosed to Buyer in Schedule 3.5.1, so as to permit the Bank
--------------
to release Jack Alexander from any and all guarantees he may have
given the Bank in connection therewith.
12. IRREVOCABLE APPOINTMENT OF HOLDERS' COMMITTEE. Pursuant
---------------------------------------------
to the Holders' Agreement by and among the Holders, the Holders'
Committee has been irrevocably appointed as agents for the Holders
to act in the name, place and stead of the Holders to do or refrain
from doing all things the Holders might do hereunder and under the
Holdback Escrow Agreement with respect to the transfer and sale of
the Shares, the payment and resolution of Indemnification Claims
and the consummation of the transactions contemplated herein and
therein. Buyer and any other Person may conclusively and absolutely
rely, without inquiring, upon any action of the Holders' Committee,
as the action of the Holders in all matters referred to herein or
in the Holdback Escrow Agreement and the Holders confirm all that
the Holders' Committee shall do or cause to be done by virtue of
their appointment as agents of the Holders'.
13. MISCELLANEOUS.
-------------
13.1 SURVIVAL OF REPRESENTATIONS. All statements
---------------------------
contained in any Exhibit, Schedule, certificate or instrument of
conveyance delivered by or on behalf of the parties pursuant to
this Agreement or in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the
parties delivering the same hereunder. Subject to the provisions
of Sections 8 and 9 hereof, the representations, warranties,
covenants and agreements of TCM, the Holders and Buyer contained
herein and as provided in the preceding sentence shall survive the
Closing Date for a period of one (1) year without regard to any
investigation made by any of the Parties hereto.
13.2 ASSIGNMENT. This Agreement shall be binding upon
----------
and shall inure to the benefit of the Parties and their respective
successors and assigns; provided, however, that TCM may not assign
its rights or obligations hereunder without the prior written
consent of Buyer.
13.3 NOTICES. All notices, requests, demands and other
-------
communications which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly
given when received if personally delivered; on the next business
day following receipt if transmitted by telecopy, electronic or
digital transmission method; upon receipt, if sent for next day
delivery to a domestic address by a recognized overnight delivery
service; and upon receipt, if sent by certified or registered mail,
return receipt requested. In each case notice shall be sent:
If to Buyer: Gardner Denver Machinery Inc.
1800 Gardner Expressway
P.O. Box 4024
49
<PAGE> 34
Quincy, Illinois 62306-4024
ATTN: Ross J. Centanni
Telecopy: (217) 228-8260
with a copy to: William M. McCleery, Jr., Esquire
Schmiedeskamp, Robertson, Neu & Mitchell
525 Jersey
P.O. Box 1069
Quincy, Illinois 62306
Telecopy: (217) 223-1005
If to TCM: TCM Investments, Inc.
4747 S. 83rd E Avenue
Tulsa, Oklahoma 74147
ATTN: Jack L. Alexander
Telecopy: (918) 664-6225
with a copy to: Charles Sublett, Esquire
Sublett and Shafer, P.C.
320 South Boston
Tulsa, Oklahoma 74103
Telecopy: (918) 587-0077
If to Holders: To each Holder at its respective address
as set forth on the signature pages
hereof.
or to such other place and with such other copies as either party
may designate as to itself by written notice to the others.
13.4 GOVERNING LAW. This Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of Oklahoma.
To the extent jurisdiction exists, any claim arising pursuant to
this Agreement shall be filed in a court located in the State of
Oklahoma.
13.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This
----------------------------------------
Agreement, together with all Exhibits and Schedules hereto which
are incorporated herein by this reference, constitutes the entire
agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, among the
parties. This Agreement may be amended, modified or supplemented
only by a writing signed by all of the parties hereto. No waiver
of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
13.6 MULTIPLE COUNTERPARTS. This Agreement may be
---------------------
executed in one or more counterparts, including a facsimile
thereof, each of which shall be deemed to be an original, including
the signature thereon, but all of which together shall constitute
one and the same
50
<PAGE> 35
agreement.
13.7 EXPENSES. Except as set forth below or as otherwise
--------
specified herein, each party hereto shall pay its own legal,
accounting, out-of-pocket and other expenses incident to this
Agreement and to any action taken by such party in preparation for
carrying this Agreement into effect; provided, however, that TCM
shall pay all reasonable fees and expenses accrued prior to Closing
for legal services rendered to the Holders related to this
Agreement and the transactions contemplated hereby. Itemized
statements setting forth the legal services rendered, the time
expended and the hourly fee charges shall be submitted to Buyer
prior to Closing by each Holder or its attorney.
13.8 SEVERABILITY. In the event that any one or more of
------------
the provisions contained in this Agreement or in any other document
referred to herein, shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then such invalidity,
illegality or unenforceability shall not affect any other provision
of this Agreement or any other such instrument.
13.9 TITLES. The titles, captions or headings of the
------
Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
13.10 BINDING EFFECT. This Agreement shall be binding
--------------
upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
13.11 CUMULATIVE REMEDIES. All rights and remedies of
-------------------
any party hereto are cumulative of each other and of every other right
or remedy such party may otherwise have at law or in equity, and
the exercise of one or more rights or remedies shall not prejudice
or impair the concurrent or subsequent exercise of other rights or
remedies. With respect to remedies for breaches of representations
and warranties set forth herein, the foregoing provisions are
subject to the provisions of Section 9 hereof.
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have executed, or
caused their respective duly authorized representatives to execute,
this Agreement under seal as of the day and year first above
written.
"Buyer"
GARDNER DENVER MACHINERY INC.
By:
-------------------------------------------
Title:
----------------------------------------
[CORPORATE SEAL]
"TCM"
TCM INVESTMENTS, INC.
By:
-------------------------------------------
Title:
----------------------------------------
[CORPORATE SEAL]
"Holders":
Cushair, Inc.
By:
-------------------------------------------
Name: Nancy L. Wyatt
Title: President
Address: 4150 S. 100th East Avenue
Suite 308
Tulsa, Oklahoma 74146
----------------------------------------------
Nancy L. Wyatt
Address: 4150 S. 100th East Avenue
Suite 308
Tulsa, Oklahoma 74146
----------------------------------------------
Joe Wyatt
Address: c/o Wyatt & Company
4150 S. 100th East Avenue
Suite 308
Tulsa, Oklahoma 74146
[SIGNATURES CONTINUED ON NEXT PAGE]
52
<PAGE> 37
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT AMONG
GARDNER DENVER MACHINERY INC., TCM INVESTMENTS, INC.
AND THE HOLDERS NAMED HEREIN
Jalex Industries, Inc.
By:
-------------------------------------------
Name: Jack L. Alexander
Title: President
Address: 260 East 28th Street
Tulsa, Oklahoma 74114
----------------------------------------------
Jack L. Alexander
Address: 260 East 28th Street
Tulsa, Oklahoma 74114
----------------------------------------------
Janice E. Alexander
Address: 260 East 28th Street
Tulsa, Oklahoma 74114
Design Directions, Inc.
By:
-------------------------------------------
Name: Lawrence W. Cibula
Title: President
Address: 10537 South 69th East Avenue
Tulsa, Oklahoma 74133
----------------------------------------------
Lawrence M. Cibula
Address: 10537 South 69th East Avenue
Tulsa, Oklahoma 74133
TCM Employee Stock Ownership Plan
By:
-------------------------------------------
Jack L. Alexander, Trustee
By:
-------------------------------------------
Joe Wyatt, Trustee
By:
-------------------------------------------
Lawrence M. Cibula, Trustee
Address: c/o TCM Investments, Inc.
4747 South 83rd East Avenue
Tulsa, Oklahoma 74147
[SIGNATURES CONTINUED ON NEXT PAGE]
53
<PAGE> 38
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT AMONG
GARDNER DENVER MACHINERY INC., TCM INVESTMENTS, INC.
AND THE HOLDERS NAMED HEREIN
----------------------------------------------
Alan W. Carlton
Address: 10770 South 77th E. Avenue
Tulsa, Oklahoma 74136
By:
-------------------------------------------
Joe Wyatt
His Attorney-In-Fact
Eugene F. Jacobs R-Trust
By:
-------------------------------------------
Eugene F. Jacobs, Trustee
Address: 4150 S. 100th E. Avenue
Suite 308
Tulsa, Oklahoma 74146
----------------------------------------------
Sherry L. Cowett
Address: 3701 S. 61st W. Avenue
Tulsa, Oklahoma 74107
----------------------------------------------
Norman Gougler, Jr.
Address: Route 1, Box 1540
Talala, Oklahoma 74080
----------------------------------------------
Thomas E. Yeldell, Jr.
Address: 17309 E. 110th Street North
Owasso, Oklahoma 74055
----------------------------------------------
James P. Murphy
Address: 219 Sherlyn Lane
Sapulpa, Oklahoma 74066
----------------------------------------------
Chester W. Blair
Address: 4016 W. 42nd Street
Tulsa, Oklahoma 74107
[SIGNATURES CONTINUED ON NEXT PAGE]
54
<PAGE> 39
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT AMONG
GARDNER DENVER MACHINERY INC., TCM INVESTMENTS, INC.
AND THE HOLDERS NAMED HEREIN
----------------------------------------------
Marvin B. Jones
Address: 7775 S. Hawthorne
Broken Arrow, Oklahoma 74014
----------------------------------------------
Dr. Feron G. Waters
Address: 8754 S. Richmond
Tulsa, Oklahoma 74137
By:
-------------------------------------------
Joe Wyatt
His Attorney-In-Fact
----------------------------------------------
David Booker
Address: 2525 S. 104th E. Avenue
Tulsa, Oklahoma 74129
----------------------------------------------
James M. Pace
Address: 29 E. Sherlyn
Sapulpa, Oklahoma 74066
55
<PAGE> 1
Exhibit 4.0
GARDNER DENVER MACHINERY INC.
$35,000,000 7.32% Senior Notes
due September 26, 2006
-------------------
NOTE PURCHASE AGREEMENT
-------------------
September 26, 1996
56
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Section Page
<C> <S> <C>
SECTION 1. AUTHORIZATION OF NOTES . . . . . . . . . .1
SECTION 2. SALE AND PURCHASE OF NOTES . . . . . . . .1
SECTION 3. CLOSING. . . . . . . . . . . . . . . . . .1
SECTION 4 . CONDITIONS TO CLOSING. . . . . . . . . . .2
Section 4.1. Representations and Warranties . . . . . .2
Section 4.2. Performance; No Default. . . . . . . . . .2
Section 4.3. Compliance Certificates. . . . . . . . . .2
Section 4.4. Opinions of Counsel. . . . . . . . . . . .2
Section 4.5. Purchase Permitted By Applicable
Law, etc . . . . . . . . . . . . . . . .2
Section 4.6. Payment of Special Counsel Fees. . . . . .3
Section 4.7. Private Placement Number . . . . . . . . .3
Section 4.8. Changes in Corporate Structure . . . . . .3
Section 4.9. Proceedings and Documents. . . . . . . . .3
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY. . . . . . . . . . . . . . . . .3
Section 5.1. Organization; Power and Authority. . . . .3
Section 5.2. Authorization, etc.. . . . . . . . . . . .4
Section 5.3. Disclosure . . . . . . . . . . . . . . . .4
Section 5.4. Organization and Ownership of
Shares of Subsidiaries; Affiliates . . .4
Section 5.5. Financial Statements . . . . . . . . . . .5
Section 5.6. Compliance with Laws, Other
Instruments, etc.. . . . . . . . . . . .5
Section 5.7. Governmental Authorizations, etc.. . . . .5
Section 5.8. Litigation; Observance of Agreements,
Statutes and Orders. . . . . . . . . . .6
Section 5.9. Taxes. . . . . . . . . . . . . . . . . . .6
Section 5.10. Title to Property; Leases. . . . . . . . .6
Section 5.11. Licenses, Permits, etc.. . . . . . . . . .6
Section 5.12. Compliance with ERISA. . . . . . . . . . .7
Section 5.13. Private Offering by the Company. . . . . .7
Section 5.14. Use of Proceeds; Margin Regulations. . . .8
Section 5.15. Existing Indebtedness; Future Liens. . . .8
Section 5.16. Foreign Assets Control Regulations, etc. .8
Section 5.17. Status under Certain Statutes. . . . . . .9
Section 5.18. Environmental Matters. . . . . . . . . . .9
57
<PAGE> 3
SECTION 6. REPRESENTATIONS OF THE PURCHASER . . . . .9
Section 6.1. Purchase for Investment. . . . . . . . . .9
Section 6.2. Source of Funds. . . . . . . . . . . . . 10
SECTION 7. INFORMATION AS TO THE COMPANY. . . . . . 11
Section 7.1. Financial and Business Information . . . 11
Section 7.2. Officer's Certificate. . . . . . . . . . 14
Section 7.3. Inspection . . . . . . . . . . . . . . . 15
SECTION 8. PREPAYMENT OF THE NOTES. . . . . . . . . 15
Section 8.1. Required Prepayments . . . . . . . . . . 15
Section 8.2. Optional Prepayments with
Make-Whole Amount . . . . . . . . . . 15
Section 8.3. Allocation of Partial Prepayments. . . . 16
Section 8.4. Maturity; Surrender, etc . . . . . . . . 16
Section 8.5. Purchase of Notes. . . . . . . . . . . . 16
Section 8.6. Make-Whole Amount. . . . . . . . . . . . 16
SECTION 9. AFFIRMATIVE COVENANTS. . . . . . . . . . 18
Section 9.1. Compliance with Law. . . . . . . . . . . 18
Section 9.2. Insurance. . . . . . . . . . . . . . . . 18
Section 9.3. Maintenance of Properties. . . . . . . . 18
Section 9.4. Payment of Taxes and Claims. . . . . . . 18
Section 9.5. Corporate Existence, etc.. . . . . . . . 19
Section 9.6. Nature of Business . . . . . . . . . . . 19
SECTION 10. NEGATIVE COVENANTS . . . . . . . . . . . 19
Section 10.1. Transactions with Affiliates . . . . . . 19
Section 10.2. Merger, Consolidation, etc.. . . . . . . 19
Section 10.3. Consolidated Net Worth . . . . . . . . . 20
Section 10.4. Incurrence of Debt . . . . . . . . . . . 20
Section 10.5. Incurrence of Subsidiary Debt. . . . . . 20
Section 10.6. Liens. . . . . . . . . . . . . . . . . . 21
Section 10.7. Investments. . . . . . . . . . . . . . . 23
Section 10.8. Sale of Assets, etc. . . . . . . . . . . 24
SECTION 11. EVENTS OF DEFAULT. . . . . . . . . . . . 24
SECTION 12. REMEDIES ON DEFAULT, ETC.. . . . . . . . 26
58
<PAGE> 4
Section 12.1. Acceleration . . . . . . . . . . . . . . 26
Section 12.2. Other Remedies . . . . . . . . . . . . . 27
Section 12.3. Rescission . . . . . . . . . . . . . . . 27
Section 12.4. No Waivers or Election of
Remedies, Expenses, etc. . . . . . . . 27
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION
OF NOTES . . . . . . . . . . . . . . . 28
Section 13.1. Registration of Notes. . . . . . . . . . 28
Section 13.2. Transfer and Exchange of Notes . . . . . 28
Section 13.3. Replacement of Notes . . . . . . . . . . 28
SECTION 14. PAYMENTS ON NOTES. . . . . . . . . . . . 29
Section 14.1. Place of Payment . . . . . . . . . . . . 29
Section 14.2. Home Office Payment. . . . . . . . . . . 29
SECTION 15. EXPENSES, ETC. . . . . . . . . . . . . . 30
Section 15.1. Transaction Expenses . . . . . . . . . . 30
Section 15.2. Survival . . . . . . . . . . . . . . . . 30
SECTION 16. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES, ENTIRE AGREEMENT . . . . . 30
SECTION 17. AMENDMENT AND WAIVER . . . . . . . . . . 30
Section 17.1. Requirements . . . . . . . . . . . . . . 30
Section 17.2. Solicitation of Holders of Notes . . . . 31
Section 17.3. Binding Effect, etc. . . . . . . . . . . 31
Section 17.4. Notes held by Company, etc. . . . . . . 31
SECTION 18. NOTICES. . . . . . . . . . . . . . . . . 32
SECTION 19. REPRODUCTION OF DOCUMENTS. . . . . . . . 32
SECTION 20. CONFIDENTIAL INFORMATION . . . . . . . . 32
SECTION 21. SUBSTITUTION OF PURCHASER. . . . . . . . 33
SECTION 22. MISCELLANEOUS. . . . . . . . . . . . . . 34
Section 22.1. Successors and Assigns . . . . . . . . . 34
Section 22.2. Payments Due on Non-Business Days. . . . 34
Section 22.3. Severability . . . . . . . . . . . . . . 34
59
<PAGE> 5
Section 22.4. Construction . . . . . . . . . . . . . . 34
Section 22.5. Counterparts . . . . . . . . . . . . . . 34
Section 22.6. Governing Law. . . . . . . . . . . . . . 35
Signature. . . . . . . . . . . . . . . . . . . . . . . . . 36
SCHEDULE A - Information Relating to Purchaser
SCHEDULE B - Defined Terms
SCHEDULE 4.8 - Changes in Corporate Structure
SCHEDULE 5.3 - Disclosure Materials
SCHEDULE 5.4 - Subsidiaries of the Company and Ownership
of Subsidiary Stock
SCHEDULE 5.5 - Financial Statements
SCHEDULE 5.8 - Certain Litigation
SCHEDULE 5.11 - Patents, etc.
SCHEDULE 5.15 - Existing Indebtedness
EXHIBIT 1 - Form of 7.32% Senior Note due September
26, 2006
EXHIBIT 4.4(a) - Form of Opinion of Special Counsel for
the Company
EXHIBIT 4.4(b) - Form of Opinion of Special Counsel for
the Purchaser
</TABLE>
60
<PAGE> 6
GARDNER DENVER MACHINERY INC.
1800 GARDNER EXPRESSWAY
QUINCY, ILLINOIS
7.32% SENIOR NOTES DUE SEPTEMBER 26, 2006
September 26, 1996
To the Purchaser Listed in
the Attached Schedule A:
Ladies and Gentlemen:
Gardner Denver Machinery Inc., a Delaware corporation (the
"Company"), agrees with you as follows:
SECTION 1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $35,000,000
aggregate principal amount of its 7.32% Senior Notes due
September 26, 2006 (the "Notes", such term to include any such
notes issued in substitution therefor pursuant to Section 13 of
this Agreement. The Notes shall be substantially in the form set
out in Exhibit 1, with such changes therefrom, if any, as may
be approved by you and the Company. Certain capitalized terms
used in this Agreement are defined in Schedule B; references to
a "Schedule" or an "Exhibit" are, unless otherwise specified, to
a Schedule or an Exhibit attached to this Agreement.
SECTION 2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the
Company will issue and sell to you and you will purchase from
the Company, at the Closing provided for in Section 3, the
entire $35,000,000 principal amount of Notes at the purchase
price of l00% of the principal amount thereof.
SECTION 3. CLOSING.
The sale and purchase of the Notes shall occur at the offices
of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois
60603, at 10:00 a.m., Chicago time, at a closing (the "Closing")
on September 26, 1996 or on such other Business Day thereafter
as maybe agreed upon by the Company and you. At the Closing
the Company will deliver to you the Notes to be purchased by you
in the form of a single Note (or such greater number of Notes in
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<PAGE> 7
denominations of at least $100,000 as you may request)
dated the date of the Closing and registered in your name (or in
the name of your nominee), against delivery by you to the
Company or its order of immediately available funds for the
account of the Company to account number 100101236963 at
Boatmen's National Bank of St. Louis (ABA #081000032), One
Boatmen's Plaza, 800 Market Street, St. Louis, Missouri. If at
the Closing the Company shall fail to tender such Notes to you
as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all
further obligations under this Agreement, without thereby
waiving any rights you may have by reason of such failure or
such nonfulfillment.
SECTION 4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold
to you at the Closing is subject to the fulfillment to your
satisfaction, prior to or at the Closing of the following
conditions:
Section 4.1. Representations and Warranties. The
representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
Section 4.2. Performance; No Default'. The Company shall
have performed and complied with all agreements and conditions
contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and after giving effect to
the issue and sale of the Notes (and the application of the
proceeds thereof as contemplated by Section 5.14) no Default or
Event of Default shall have occurred and be continuing. Neither
the Company nor any Subsidiary shall have entered into any
transaction since the date of the Memorandum that would have
been prohibited by Sections 10.1, 10.4, 10.5 or 10.6 hereof had
such Sections applied since such date.
Section 4.3. Compliance Certificates (a) Officer's
Certificate. The Company shall have delivered to you an Officer's
Certificate, dated the date of the Closing, certifying that
the conditions specified in Sections 4.1, 4.2 and 4.8 have been
fulfilled.
(b) Secretary's Certificate. The Company shall have
delivered to you a certificate certifying as to the resolutions
attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Notes and the
Agreement.
Section 4.4. Opinions of Counsel. You shall have received
opinions in form and substance satisfactory to you, dated the
date of the Closing (a) from Squire, Sanders & Dempsey, special
counsel for the Company, covering the matters set forth in
Exhibit 4.4(a) and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may
reasonably request (and the Company hereby instructs its counsel
to deliver such opinion to you) and (b) from Chapman and Cutler,
your special counsel in connection with such transactions,
covering the matters set forth in Exhibit 4.4(b) and covering
such other matters incident to such transactions as you may
reasonably request.
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<PAGE> 8
Section 4.5. Purchase Permitted By Applicable Law, etc.
On the date of the Closing your purchase of Notes shall
(i) be permitted by the laws and regulations of each
jurisdiction to which you are subject, without recourse to
provisions (such as Section 1405(a)(8) of the New York
Insurance Law) permitting limited investments by insurance
companies without restriction as to the character of the
particular investment, (ii) not violate any applicable law or
regulation (including, without limitation, Regulation G, T or
X of the Board of Governors of the Federal Reserve System) and
(iii) not subject you to any tax, penalty or liability under or
pursuant to any applicable law or regulation, which law or
regulation was not in effect on the date hereof. If requested by
you, you shall have received an Officer's Certificate
certifying as to such matters of fact as you may reasonably
specify to enable you to determine whether such purchase is so
permitted.
Section 4.6. Payment of Special Counsel Fees. Without
limiting the provisions of Section 15. 1, the Company shall
have paid on or before the Closing the fees, charges and
disbursements of your special counsel referred to in Section 4.4
to the extent reflected in a statement of such counsel rendered
to the Company at least one Business Day prior to the Closing.
Section 4.7. Private Placement Number. A Private
Placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of
the National Association of Insurance Commissioners) shall have
been obtained for the Notes.
Section 4.8 Changes in Corporate Structure. Except as
specified in Schedule 4.8, the Company shall not have changed
its jurisdiction of incorporation or been a party to any merger
or consolidation and shall not have succeeded to all or any
substantial part of the liabilities of any other entity, at any
time following the date of the most recent financial statements
referred to in Schedule 5.5.
Section 4.9. Proceedings and Documents. All corporate and
other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and
your special counsel, and you and your special counsel shall
have received all such counterpart originals or certified or
other copies of such documents as you or they may reasonably
request.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
Section 5.1. Organization; Power and Authority. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of its Jurisdiction of incorporation,
and is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to
63
<PAGE> 9
which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company has the
corporate power and authority to own or hold under lease the
properties it purports to own or hold under lease, to transact
the business it transacts and proposes to transact, to execute
and deliver this Agreement and the Notes and to perform the
provisions hereof and thereof.
Section 5.2. Authorizations, etc. This Agreement and the
Notes have been duly authorized by all necessary corporate
action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors'
rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
Section 5.3. Disclosure. The Company, through its agent,
First Chicago Capital Markets, Inc., has delivered to you a copy
of a Confidential Offering Memorandum, dated August, 1996
including each appendix thereto (the "Memorandum"), relating
to the transactions contemplated hereby. The Memorandum
fairly describes, in all material respects, the general nature
of the business and principal properties of the Company and its
Subsidiaries. Except as disclosed in Schedule 5.3, this
Agreement, the Memorandum, the documents, certificates or other
writings delivered to you by or on behalf of the Company in
connection with the transactions contemplated hereby and the
financial statements listed in Schedule 5.5, taken as a whole,
do not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein not misleading in light of the circumstances under
which they were made for the purposes of disclosure to
Institutional Investors. Except as disclosed in the Memorandum
or as expressly described in Schedule 5.3, or in one of the
documents, certificates or other writings identified therein, or
in the financial statements listed in Schedule 5.5, since
December 31, 1995, there has been no change in the financial
condition, operations, business, properties or prospects of the
Company or any Subsidiary except changes that individually or in
the aggregate could not reasonably be expected to have a
Material Adverse Effect. There is no fact known to the Company
that could reasonably be expected to have a Material Adverse
Effect that has not been set forth herein or in the Memorandum
or in the other documents, certificates and other writings
delivered to you by or on behalf of the Company specifically for
use in connection with the transactions contemplated hereby.
Section 5.4. Organization and Ownership of Shares of
Subsidiaries; Affiliates. (a) Schedule 5.4 contains (except as
noted therein) complete and correct lists (i) of the Company's
Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, the percentage of
shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other
Subsidiary and whether such Subsidiary is a Restricted
Subsidiary or an Unrestricted Subsidiary, (ii) of the Company's
Affiliates, other than Subsidiaries, and (iii) of the Company's
directors and senior officers.
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<PAGE> 10
(b) All of the outstanding shares of capital stock or
similar equity interests of each Subsidiary shown in Schedule
5.4 as being owned by the Company and its Subsidiaries have
been validly issued, are fully paid and nonassessable and are
owned by the Company or another Subsidiary free and clear of any
Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a
corporation or other legal entity duly organized, validly
existing and in good standing under the laws of its jurisdiction
of organization, and is duly qualified as a foreign corporation
or other legal entity and is in good standing in each
jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. Each such Subsidiary has the corporate or other power
and authority to own or hold under lease the properties it
purports to own or hold under lease and to transact the business
it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to
any legal restriction or any agreement (other than this
Agreement, the agreements listed on Schedule 5.4 and customary
limitations imposed by corporate law statutes) restricting the
ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company
or any of its Subsidiaries that owns outstanding shares of
capital stock or similar equity interests of such Subsidiary.
Section 5.5. Financial Statements. The Company has
delivered to each Purchaser copies of the financial statements
of the Company and its Subsidiaries listed on Schedule 5.5.
All of said financial statements (including in each case the
related schedules and notes) fairly present in all material
respects the consolidated financial position of the Company and
its Subsidiaries as of the respective dates specified in such
Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been
prepared in accordance with GAAP consistently applied throughout
the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to
normal year-end adjustments).
Section 5.6. Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the Company of this
Agreement and the Notes will not (i) contravene, result in any
breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company
or any Subsidiary under, any indenture, mortgage, deed of trust,
loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the
Company or any Subsidiary is bound or by which the Company or
any Subsidiary or any of their respective properties may be
bound or affected, (ii) conflict with or result in a breach of
any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or
Governmental Authority applicable to the Company or any
Subsidiary or (iii) violate any provision of any statute or
other rule or regulation of any Governmental Authority
applicable to the Company or any Subsidiary.
65
<PAGE> 11
Section 5.7. Governmental Authorizations, etc. No
consent, approval or authorization of, or registration, filing
or declaration with, any Governmental Authority is required in
connection with the execution, delivery or performance by the
Company of this Agreement or the Notes.
Section 5.8. Litigation; Observance of Agreements,
Statutes and Orders. (a) Except as disclosed in Schedule 5.8,
there are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the
Company or any Subsidiary or any property of the Company or any
Subsidiary in any court or before any arbitrator of any kind or
before or by any Governmental Authority that, individually or in
the aggregate, could reasonably be expected to have a Material
Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default
under any term of any agreement or instrument to which it is a
party or by which it is bound, or any order, judgment, decree or
ruling of any court, arbitrator or Governmental Authority or is
in violation of any applicable law, ordinance, rule or
regulation (including without limitation Environmental Laws) of
any Governmental Authority, which default or violation,
individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
Section 5.9. Taxes. The Company and its Subsidiaries
have filed all tax returns that are required to have been filed
in any jurisdiction, and have paid all taxes shown to be due and
payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or
franchises, to the extent such taxes and assessments have become
due and payable and before they have become delinquent, except
for any taxes and assessments (i) the amount of which is not
individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested
in good faith by appropriate proceedings and with respect to
which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. The
Company knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect.
The charges, accruals and reserves on the books of the Company
and its Subsidiaries in respect of Federal, state or other taxes
for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries have not been
determined by the Internal Revenue Service but have been paid
for all fiscal years up to and including the fiscal year ended
December 31, 1995.
Section. 5.10. Title to Property; Leases. The Company
and its Subsidiaries have good and sufficient title to their
respective properties that individually or in the aggregate are
Material, including all such properties reflected in the most
recent audited balance sheet referred to in Section 5.5 or
purported to have been acquired by the Company or any Subsidiary
after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of
Liens prohibited by this Agreement. All leases that individually
or in the aggregate are Material are valid and subsisting and
are in full force and effect in all material respects.
66
<PAGE> 12
Section 5.11. Licenses, Permits, etc. Except as
disclosed in Schedule 5.11, (a) the Company and its Subsidiaries
own or possess all licenses, permits, franchises,
authorizations, patents, copyrights, service marks, trademarks
and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights
of others;
(b) to the best knowledge of the Company, no product of
the Company infringes in any material respect any license,
permit, franchise, authorization, patent, copyright, service
mark, trademark, trade name or other right owned by any other
Person; and
(c) to the best knowledge of the Company, there is no
Material violation by any Person of any right of the Company or
any of its Subsidiaries with respect to any patent, copyright,
service mark, trademark, trade name or other right owned or used
by the Company or any of its Subsidiaries.
Section 5.12. Compliance with ERISA. (a) The Company and
each ERISA Affiliate have operated and administered each Plan in
compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably
be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans (as
defined in Section 3 of ERISA), and no event, transaction or
condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by
the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company
or any ERISA Affiliate, in either case pursuant to Title I or IV
of ERISA or to such penalty or excise tax provisions or to
Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the
aggregate Material.
(b) The present value of the aggregate benefit liabilities
under each of the Plans (other than Multiemployer Plans),
determined as of the end of such Plan's most recently ended
plan year on the basis of the actuarial assumptions specified
for funding purposes in such Plan's most recent actuarial
valuation report, did not exceed the aggregate current value of
the assets of such Plan allocable to such benefit liabilities by
more than $4,000,000 in the case of any single Plan and by more
than $6,000,000 in the aggregate for all Plans. The term
"benefit liabilities" has the meaning specified in section 4001
of ERISA and the terms "current value" and "present value" have
the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent
withdrawal liabilities) under section 4201 or 4204 of ERISA in
respect of Multiemployer Plans that individually or in the
aggregate are Material.
(d) The execution and delivery of this Agreement and the
issuance and sale of the Notes hereunder will not involve any
transaction that is subject to the prohibitions of section 406
of ERISA or in connection with which a tax could be imposed
pursuant to section
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<PAGE> 13
4975(c)(1)(A)-(D) of the Code. The representation by the Company
in the first sentence of this Section 5.12(d) is made in reliance
upon and subject to the accuracy of your representation in Section
6.2 as to the sources of the funds used to pay the purchase price
of the Notes to be purchased by you.
Section 5.13. Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has
offered the Notes or any similar securities for sale
to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with,
any person other than you and not more than 40 other
Institutional Investors, each of which has been offered the
Notes at a private sale for investment. Neither the Company nor
anyone acting on its behalf has taken, or will take, any action
that would subject the issuance or sale of the Notes to the
registration requirements of Section 5 of the Securities Act.
Section 5.14. Use of Proceeds; Margin Regulations. The
Company will apply the proceeds of the sale of the Notes (i) to
the repayment of Indebtedness to banks (including Indebtedness
incurred to provide funds for the acquisition of TCM
Investments, Inc. and Noramptco (collectively, the
"Acquisitions"), (ii) to, directly or indirectly, provide funds
for future acquisitions or (iii) for general corporate purposes.
The Company has made all filings, if any, required to be made
under, and has no reason to believe that the Acquisitions were
in violation of, the Hart-Scott-Rodino Antitrust Improvements
Act of 1976. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose
of buying or carrying any margin stock within the meaning of
Regulation G of the Board of Governors of the Federal Reserve
System (12 CFR 207), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve
the Company in a violation of Regulation X of said Board (12 CFR
224) or to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 5% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not
have any present intention that margin stock will constitute
more than 5% of the value of such assets. As used in this
Section, the terms "margin stock" and "purpose of buying or
carrying" shall have the meanings assigned to them in said
Regulation G.
Section 5.15. Existing Indebtedness; Future Liens. (a)
Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Indebtedness of the Company
and its Subsidiaries as of June 30, 1996, since which date there
has been no Material change in the amounts, interest rates,
sinking funds, installment payments or maturities of the
Indebtedness of the Company or its Subsidiaries. Neither the
Company nor any Subsidiary is in default and no waiver of
default is currently in effect, in the payment of any principal
or interest on any Indebtedness of the Company or such
Subsidiary and no event or condition exists with respect to any
Indebtedness of the Company or any Subsidiary that would permit
(or that with notice or the lapse of time, or both, would
permit) one or more Persons to cause such Indebtedness to become
due and payable before its stated maturity or before its
regularly scheduled dates of payment.
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<PAGE> 14
(b) Except as disclosed in Schedule 5.15, neither the
Company nor any Subsidiary has agreed or consented to cause or
permit in the future (upon the happening of a contingency or
otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien not permitted by Section 10.6.
Section 5.16. Foreign Assets Control Regulations,
etc. Neither the sale of the Notes by the Company
hereunder nor its use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) or any enabling legislation or executive order relating
thereto.
Section 5.17. Status under Certain Statutes. Neither the
Company nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the Public Utility
Holding Company Act of 1935, as amended, the Interstate Commerce
Act, as amended, or the Federal Power Act, as amended.
Section 5.18. Environmental Matters. Neither the Company
nor any Subsidiary has knowledge of any claim or has received
any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries
or any of their respective real properties now or formerly
owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect.
Except as otherwise disclosed to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of
any facts which would give rise to any claim, public or
private, or violation of Environmental Laws or damage to
the environment emanating from, occurring on or in any way
related to real properties now or formerly owned, leased or
operated by any of them or to other assets or their use,
except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has
stored any Hazardous Materials on real properties now or
formerly owned, leased or operated by any of them and has
not disposed of any Hazardous Materials in a manner
contrary to any Environmental Laws in each case in any
manner that could reasonably be expected to result in a
Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased
or operated by the Company or any of its Subsidiaries are
in compliance with applicable Environmental Laws, except
where failure to comply could not reasonably be expected to
result in a Material Adverse Effect.
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<PAGE> 15
SECTION 6. REPRESENTATIONS OF THE PURCHASER.
Section 6.1. Purchase for Investment. You represent that
you are purchasing the Notes for your own account or for one or
more separate accounts maintained by you or for the account of
one or more pension or trust funds and not with a view to the
distribution thereof, provided that the disposition of your or
their property shall at all times be within your or their
control. You understand that the Notes have not been registered
under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under
circumstances where neither such registration nor such an
exemption is required by law, and that the Company is not
required to register the Notes.
Section 6.2. Source of Funds. You represent that at least
one of the following statements is an accurate representation as
to each source of funds (a "Source") to be used by you to pay
the purchase price of the Notes to be purchased by you
hereunder:
(a) if you are an insurance company, the Source does not
include assets allocated to any separate account maintained
by you in which any employee benefit plan (or its related
trust) has any interest, other than a separate account
that is maintained solely in connection with your fixed
contractual obligations under which the amounts payable, or
credited, to such plan and to any participant or
beneficiary of such plan (including any annuitant) are not
affected in any manner by the investment performance of the
separate account (within the meaning of Department of Labor
Regulation 2510.3-l0l(h)(i)); or
(b) if you are an insurance company, the source is an
"insurance company general account" within the meaning of
Department of Labor Prohibited Transactions Exemption
("PTE") 95-60 (issued July 12, 1995) and the purchase of
Notes by you is eligible for and satisfies the requirements
of PTE 95-60; or
(c) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued
January 29, 1990), or (ii) a bank collective investment
fund, within the meaning of PTE 91-38 (issued July 12,
1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (c), no employee benefit
plan or group of plans maintained by the same employer or
employee organization beneficially owns more than 10% of
all assets allocated to such pooled separate account or
collective investment fund; or
(d) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption)
managed by a "qualified professional asset manager" or
"QPAM" (within the meaning of Part V of the QPAM
Exemption), no employee benefit plan's assets that are
included in such investment fund, when combined with the
assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within
the meaning of Section V(c)(l) of the QPAM Exemption) of
such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part l(c) and
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(g) of the QPAM Exemption are satisfied, neither the QPAM
nor a person controlling or controlled by the QPAM (applying
the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and
(i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such
investment fund have been disclosed to the Company in
writing pursuant to this paragraph (d); or
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or
a separate account or trust fund comprised of one or more
employee benefit plans, each of which has been identified
to the Company in writing pursuant to this paragraph (e);
or
(g) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage
of ERISA.
If you or any subsequent transferee of the Notes indicates
that you or such transferee is relying on any representation
contained in paragraph (c), (d) or (f) above, the Company shall
deliver a certificate on the date of the Closing, with respect
to you and on or prior to the date of any transfer of the Notes,
with respect to any subsequent holder of the Notes, which
certificate shall state whether (i) with respect to any plan
identified pursuant to paragraph (c) or (f) above, it is a
"party in interest" (as defined in Title I, Section 3(14) of
ERISA) or a "disqualified person" (as defined in Section
4975(e)(2) of the Code), or (ii) with respect to any plan
identified pursuant to paragraph (c) above, it or any
"affiliate" (as defined in Section V(c) of the QPAM Exemption)
has at such time, and during the immediately preceding one
year, exercised the authority to appoint or terminate said QPAM
as manager of the assets of any plan identified in writing
pursuant to paragraph (d) above or to negotiate the terms of
said QPAM's management agreement on behalf of any such
identified plans.
As used in this Section 6.2, the terms "employee benefit
plan", "governmental plan", "party in interest" and "separate
account" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.
SECTION 7. INFORMATION AS TO COMPANY.
Section 7.1 Financial and Business Information. The
Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) Quarterly Statements - within 60 days after the end of
each quarterly fiscal period in each fiscal year of the
Company (other than the last quarterly fiscal period of
each such fiscal year), duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter,
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(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and
its Subsidiaries, for such quarter and (in the case of
the second and third quarters) for the portion of the
fiscal year ending with such quarter,
(iii) a consolidated balance sheet of the Company and
its Restricted Subsidiaries as at the end of such
quarter, and
(iv) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and
its Restricted Subsidiaries, for such quarter and (in
the case of the second and third quarters) for the
portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures
for the corresponding periods in the previous fiscal year,
all in reasonable detail, prepared in accordance with GAAP
applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting,
in all material respects, the financial position of the
companies being reported on and their results of operations
and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period
specified above of copies of the Company's Quarterly Report
on Form 10-Q prepared in compliance with the requirements
therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of
clauses (i) and (ii) of this Section 7.l(a);
(b) Annual Statements - within 105 days after the end of
each fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year,
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and
its Subsidiaries, for such year,
(iii) a consolidated balance sheet of the Company and
its Restricted Subsidiaries, as at the end of such year,
and
(iv) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and
its Restricted Subsidiaries, for such year,
setting forth in each case in comparative form the figures
for the previous fiscal year, all in reasonable detail,
prepared in accordance with GAAP, and accompanied
(A) by an opinion thereon of independent certified
public accountants of recognized national standing,
which opinion shall state that such financial statements
present fairly, in all material respects, the financial
position of the companies being
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<PAGE> 18
reported upon and their results of operations and cash
flows and have been prepared in conformity with GAAP, and
that the examination of such accountants in connection
with such financial statements has been made in accordance
with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in
the circumstances, and
(B) a certificate of such accountants stating that they
have reviewed this Agreement and stating further
whether, in making their audit, they have become aware
of any condition or event that then constitutes a
Default or an Event of Default, and, if they are aware
that any such condition or event then exists, specifying
the nature and period of the existence thereof (it being
understood that such accountants shall not be liable,
directly or indirectly, for any failure to obtain
knowledge of any Default or Event of Default unless such
accountants should have obtained knowledge thereof in
making an audit in accordance with generally accepted
auditing standards or did not make such an audit),
provided that the delivery within the time period specified
above of the Company's Annual Report on Form 10-K for such
fiscal year (together with the Company's annual report to
shareholders, if any, prepared pursuant to Rule 14a-3 under
the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Securities and
Exchange Commission, together with the accountant's
certificate described in clause (B) above, shall be deemed
to satisfy the requirements of clauses (i) and (ii) of this
Section 7.l(b);
(c) SEC and Other Reports - promptly upon their becoming
available, one copy of (i) each financial statement,
report, notice or proxy statement sent by the Company or
any Subsidiary to public securities holders generally, and
(ii) each regular or periodic report in the nature of an
8K, 10Q, 10K or report of a similar nature, each
registration statement (without exhibits except as
expressly requested by such holder and other than
registration statements relating solely to employee plans
of the Company), and each prospectus and all amendments
thereto filed by the Company or any Subsidiary with the
Securities and Exchange Commission and of all press
releases and other statements made available generally by
the Company or any Subsidiary to the public concerning
developments that are Material;
(d) Notice of Default or Event of Default - promptly, and
in any event within five days after a Responsible Officer
becoming aware of the existence of any Default or Event of
Default or that any Person has given any notice or taken
any action with respect to a claimed default hereunder or
that any Person has given any notice or taken any action
with respect to a claimed default of the type referred to
in Section ll(f), a written notice specifying the nature
and period of existence thereof and what action the Company
is taking or proposes to take with respect thereto;
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(e) ERISA Matters - promptly, and in any event within five
days after a Responsible Officer becoming aware of any of
the following, a written notice setting forth the nature
thereof and the action, if any, that the Company or an
ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date
hereof; or
(ii) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of,
proceedings under section 4042 of ERISA for the
termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or
any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with
respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the
Company or any ERISA Affiliate pursuant to Title I or
IV of ERISA or the penalty or excise provisions of the
Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties
or assets of the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or
excise tax provisions, if such liability or Lien, taken
together with any other such liabilities or Liens then
existing, could reasonably be expected to have a
Material Adverse Effect;
(f) Notices from Governmental Authority - Promptly, and
in any event within 30 days of receipt thereof, copies of
any notice to the Company or any Subsidiary from any
Federal or state Governmental Authority relating to any
order, ruling, statute or other law or regulation that
could reasonably be expected to have a Material Adverse
Effect; and
(g) Requested Information - with reasonable promptness,
such other data and information relating to the business,
operations, affairs, financial condition, assets or
properties of the Company or any of its Subsidiaries or
relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to
time may be reasonably requested by any such holder of
Notes.
Section 7.2. Officer's Certificate. Each set of
financial statements delivered to a holder of Notes pursuant to
Section 7.l(a) or Section 7.l(b) hereof shall be accompanied by
a certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance - the information (including
detailed calculations) required in order to establish
whether the Company was in compliance with the requirements
of Section 10.3 through Section 10.8 hereof, inclusive,
during the quarterly or annual period covered by the
statements then being furnished (including with respect to each
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<PAGE> 20
such Section, where applicable, the calculations of
the maximum or minimum amount, ratio or percentage, as the
case may be, permissible under the terms of such Sections,
and the calculation of the amount, ratio or percentage then
in existence; and
(b) Event of Default - a statement that such officer has
reviewed the relevant terms hereof and has made, or caused
to be made, under his or supervision a review of the
transactions and conditions of the Company and its
Subsidiaries from the beginning of the quarterly or annual
period covered by the statements then being furnished to
the date of the certificate and that such review shall not
have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event
of Default or, if any such condition or event existed or
exists (including, without limitation, any such event or
condition resulting from the failure of the Company or any
Subsidiary to comply with any Environmental Law),
specifying the nature and period of existence thereof and
what action the Company shall have taken or proposes to
take with respect thereto.
Section 7.3. Inspection. The Company shall permit the
representatives of each holder of Notes that is an Institutional
Investor:
(a) No Default - if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable
prior notice to the Company, to visit the principal
executive office of the Company, to discuss the affairs,
finances and accounts of the Company and its Subsidiaries
with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld)
its independent public accountants, and (with the consent
of the Company, which consent will not be unreasonably
withheld) to visit the other offices and properties of the
Company and each Subsidiary, all at such reasonable times
and as often as may be reasonably requested in writing; and
(b) Default - if a Default or Event of Default then
exists, at the expense of the Company to visit and inspect
any of the offices or properties of the Company or any
Subsidiary, to examine all their respective books of
account, records, reports and other papers, to make copies
and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective
officers and independent public accountants (and by this
provision the Company authorizes said accountants to
discuss the affairs, finances and accounts of the Company
and its Subsidiaries), all at such times and as often as
may be requested.
SECTION 8. PREPAYMENT OF THE NOTES.
Section 8.1. Required Prepayments. On September 26,
2000, and on each September 26 thereafter to and including
September 26, 2005, the Company will prepay $5,000,000 principal
amount (or such lesser principal amount as shall then be
outstanding) of the Notes at par and without payment of the
Make-Whole Amount or any premium, provided that upon any partial
prepayment of the Notes pursuant to Section 8.2 or purchase of
the Notes permitted by
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Section 8.5 the principal amount of each required prepayment of the
Notes becoming due under this Section 8.1 on and after the date of
such prepayment or purchase shall be reduced in the same proportion
as the aggregate unpaid principal amount of the Notes is reduced as
a result of such prepayment or purchase.
Section 8.2. Optional Prepayments with Make-Whole Amount.
The Company may, at its option, upon notice as provided below,
prepay at any time all, or from time to time any part of, the
Notes, in an amount not less than 5% of the aggregate principal
amount of the Notes then outstanding in the case of a partial
prepayment, at 100% of the principal amount so prepaid, plus the
Make-Whole Amount determined for the prepayment date with
respect to such principal amount. The Company will give each
holder of Notes written notice of each optional prepayment under
this Section 8.2 not less than 30 days and not more than 60 days
prior to the date fixed for such prepayment. Each such notice
shall specify such date, the aggregate principal amount of the
Notes to be prepaid on such date, the principal amount of each
Note held by such holder to be prepaid (determined in accordance
with Section 8.3), and the interest to be paid on the prepayment
date with respect to such principal amount being prepaid, and
shall be accompanied by a certificate of a Senior Financial
Officer as to the estimated Make-Whole Amount due in connection
with such prepayment (calculated as if the date of such notice
were the date of the prepayment), setting forth the details of
such computation. Two Business Days prior to such prepayment,
the Company shall deliver to each holder of Notes a certificate
of a Senior Financial Officer specifying the calculation of
such Make-Whole Amount as of the specified prepayment date.
Section 8.3. Allocation of Partial Prepayments. In the
case of each partial prepayment of the Notes, the principal
amount of the Notes to be prepaid shall be allocated among all
of the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof
not theretofore called for prepayment.
Section 8.4. Maturity; Surrender, etc. In the case of
each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and
become due and payable on the date fixed for such prepayment,
together with interest on such principal amount accrued to such
date and the applicable Make-Whole Amount, if any. From and
after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the
interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or
prepaid in full shall be surrendered to the Company and canceled
and shall not be reissued, and no Note shall be issued in lieu
of any prepaid principal amount of any Note.
Section 8.5. Purchase of Notes. The Company will not
and will not permit any Affiliate to purchase, redeem, prepay or
otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the
Notes in accordance with the terms of this Agreement and the
Notes. The Company will promptly cancel all Notes acquired by it
or any Affiliate pursuant to any payment, prepayment or purchase
of Notes pursuant to any provision of this Agreement and no
Notes may be issued in substitution or exchange for any such
Notes.
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Section 8.6. Make-Whole Amount. The term "Make-Whole
Amount" means, with respect to any Note, an amount equal to the
excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such
Note over the amount of such Called Principal, provided that the
Make-Whole Amount may in no event be less than zero. For the
purposes of determining the Make-Whole Amount, the following
terms have the following meanings:
"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context
requires.
"Discovered Value" means, with respect to the Called
Principal of any Note, the amount obtained by discounting
all Remaining Scheduled Payments with respect to such
Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal,
in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on
which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of any Note, the sum of (x) 0.50% plus (y) yield
to maturity- implied by (i) the yields reported, as of
10:00 A.M. (New York City time) on the second Business Day
preceding the Settlement Date with respect to such Called
Principal, on the display designated as "Page 500" on the
Telerate Access Service (or such other display as may
replace Page 500 on Telerate Access Service) for actively
traded U.S. Treasury securities having a maturity equal to
the Remaining Average Life of such Called Principal as of
such Settlement Date, or (ii) if such yields are not
reported as of such time or the yields reported as of such
time are not ascertainable, the Treasury Constant Maturity
Series Yields reported, for the latest day for which such
yields have been so reported as of the second Business Day
preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H. 15
(519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant
maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (b)
interpolating linearly between (1) the actively traded U.S.
Treasury security with the maturity closest to and greater
than the Remaining Average Life and (2) the actively traded
U.S. Treasury security with the maturity closest to and
less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any
Called Principal, the number of years (calculated to the
nearest one-twelfth year) obtained by dividing (i) such
Called Principal into (ii) the sum of the products obtained
by multiplying (a) the principal component of each
Remaining Scheduled Payment with respect to such Called
Principal by (b) the number of years (calculated to the
nearest one-twelfth year) that will elapse
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between the Settlement Date with respect to such Called
Principal and the scheduled due date of such Remaining
Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to
the Called Principal of any Note, all payments of such
Called Principal and interest thereon that would be due
after the Settlement Date with respect to such Called
Principal if no payment of such Called Principal were made
prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments
are due to be made under the terms of the Notes, then the
amount of the next succeeding scheduled interest payment
will be reduced by the amount of interest accrued to such
Settlement Date and required to be paid on such Settlement
Date pursuant to Section 8.2 or 12.1.
"Settlement Date" means, with respect to the Called
Principal of any Note, the date on which such Called
Principal is to be prepaid pursuant to Section 8.2 or has
become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
SECTION 9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
Section 9.1. Compliance with Law. The Company will and
will cause each of its Subsidiaries to comply with all laws,
ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental
Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance
with such laws, ordinances or governmental rules or regulations or
failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 9.2 Insurance. The Company will and will cause
each of its Subsidiaries to maintain, with financially sound and
reputable insurers, insurance with respect to their respective
properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts
(including deductibles, co-insurance and self-insurance, if
adequate reserves are maintained with respect thereto) as is
customary in the case of entities of established reputations
engaged in the same or a similar business and similarly
situated.
Section 9.3. Maintenance of Properties. The Company will
and will cause each of its Subsidiaries to maintain and keep, or
cause to be maintained and kept, their respective properties in
good repair, working order and condition (other than ordinary
wear and tear), so that the business carried on in connection
therewith may be properly conducted at all times, provided that
this Section shall not prevent the Company or any Subsidiary
from discontinuing the operation and the maintenance of any of
its properties if such discontinuance is desirable
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in the conduct of its business and the Company has concluded that
such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 9.4. Payment of Taxes and Claims. The Company
will and will cause each of its Subsidiaries to file all tax
returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns
and all other taxes, assessments, governmental charges, or
levies imposed on them or any of their properties, assets,
income or franchises, to the extent such taxes and assessments
have become due and Payable and before they have become
delinquent and all claims for which sums have become due and
payable that have or might become a Lien (not permitted by
Section 10.6) on properties or assets of the Company or any
Subsidiary, provided that neither the Company nor any Subsidiary
need pay any such tax or assessment or claims if (i) the amount,
applicability or validity thereof is contested by the Company or
such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with GAAP
on the books of the Company or such Subsidiary or (ii) the
nonpayment of all such taxes and assessments in the aggregate
could not reasonably be expected to have a Material Adverse
Effect.
Section 9.5. Corporate Existence, etc. The Company will
at all times preserve and keep in full force and effect its
corporate existence. Subject to Sections 10.2 and 10.8, the
Company will at all times preserve and keep in full force and
effect the corporate existence of each of its Subsidiaries
(unless merged into the Company or a Subsidiary) and all rights
and franchises of the Company and its Subsidiaries unless, in
the good faith judgment of the Company, the termination of or
failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 9.6. Nature of Business. Neither the Company nor
any Subsidiary will engage in any business if, as a result, the
general nature of the business, taken on a consolidated basis,
which would then be engaged in by the Company and its
Subsidiaries would be substantially changed from the general
nature of the business engaged in by the Company and its
Subsidiaries on the date of this Agreement.
SECTION 10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes
are outstanding:
Section 10.1. Transactions with Affiliates. The Company
will not and will not permit any Subsidiary to enter into
directly or indirectly any transaction or Material group of
related transactions (including without limitation the
purchase, lease, sale or exchange of properties of any kind or
the rendering of any service) with any Affiliate (other than the
Company or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Company's or
such Subsidiary's business and upon fair and reasonable terms no
less favorable to the Company or such Subsidiary than would be
obtainable in a comparable
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arm's-length transaction with a Person not an Affiliate.
Section 10.2. Merger, Consolidation, etc. The Company
shall not consolidate with or merge with any other corporation
or convey, transfer or lease substantially all of its assets
in a single transaction or series of transactions to any
Person unless:
(a) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by
conveyance, transfer or lease substantially all of the
assets of the Company as an entirety, as the case may be,
shall be a solvent corporation organized and existing under
the laws of the United States or any State thereof
(including the District of Columbia), and, if the Company
is not such corporation, (i) such corporation shall have
executed and delivered to each holder of any Notes its
assumption of the due and punctual performance and
observance of each covenant and condition of this Agreement
and the Notes and (ii) shall have caused to be delivered to
each holder of any Notes an opinion of nationally
recognized independent counsel, or other independent
counsel reasonably satisfactory to the Required Holders, to
the effect that all agreements or instruments effecting
such assumption are enforceable in accordance with their
terms and comply with the terms hereof; or
(b) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be
continuing.
No such conveyance, transfer or lease of substantially all of
the assets of the Company shall have the effect of releasing the
Company or any successor corporation that shall theretofore have
become such in the manner prescribed in this Section 10.2 from
its liability under this Agreement or the Notes.
Section 10.3 Consolidated Net Worth. The Company will
not, on the last day of each fiscal quarter of the Company,
permit Consolidated Net Worth to be less than the sum of (a)
$41,000,000, plus (b) an aggregate amount equal to 50% of
Consolidated Net Income (but, in each case, only if a positive
number) for each completed fiscal quarter of the Company
beginning with the fiscal quarter ended September 30, 1996.
Section 10.4. Incurrence of Debt. The Company will not,
and will not permit any Restricted Subsidiary to, directly or
indirectly, create, incur, assume, guarantee, or otherwise
become directly or indirectly liable with respect to, any Debt,
unless on the date the Company or such Restricted Subsidiary
becomes liable with respect to any such Debt and immediately
after giving effect thereto and to the concurrent retirement of
any other Debt,
(a) no Default or Event of Default exists, and
(b) Consolidated Total Debt does not exceed 350% of
Operating Cash Flow for the then most recently ended
period of four consecutive fiscal quarters of the
Company.
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For the purposes of this Section 10.4,
(x) Operating Cash Flow shall be calculated after giving
pro forma effect for any period to all acquisitions and
dispositions completed during such period as if such
transactions had occurred on the first day of such period;
and
(y) Any Person becoming a Restricted Subsidiary after the
date hereof shall be deemed, at the time it becomes a
Restricted Subsidiary, to have incurred all of its then
outstanding Debt, and any Person extending, renewing or
refunding any Debt shall be deemed to have incurred such
Debt at the time of such extension, renewal or refunding.
Section 10.5. Incurrence of Subsidiary Debt. The Company
will not permit any Restricted Subsidiary to, directly or
indirectly, create, incur, assume, guarantee or otherwise become
liable with respect to, any Debt other than:
(a) Debt of a Restricted subsidiary owed to the Company or
to a Wholly-Owned Restricted Subsidiary; and
(b) Debt of a Restricted Subsidiary in addition to that
otherwise permitted by the foregoing provision of this
Section 10.5, provided that on the date the Restricted
Subsidiary incurs or otherwise becomes liable with respect
to any such additional Debt and immediately after giving
effect thereto and to the concurrent retirement of any
other Debt,
(i) no Default or Event of Default exists, and
(ii) the total amount of all outstanding Debt of
Restricted Subsidiaries incurred pursuant to this
paragraph (b) does not exceed 15% of Consolidated
Capitalization determined at such time.
For purposes of this Section 10.5, any Person becoming a
Restricted Subsidiary after the date hereof shall be deemed, on
the first to occur of the March 31, June 30, September 30 or
December 31 next succeeding the date on which it becomes a
Restricted Subsidiary, to have incurred all of its then
outstanding Debt, and any Restricted Subsidiary extending,
renewing or refunding any Debt shall be deemed to have incurred
such Debt at the time of such extension, renewal or refunding.
Section 10.6. Liens. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or
indirectly create, incur, assume or permit to exist (upon the
happening of a contingency or otherwise) any Lien on or with
respect to any property or asset (including, without limitation,
any document or instrument in respect of goods or accounts
receivable) of the Company or any such Subsidiary, whether now
owned or held or hereafter acquired, or any income or profits
therefrom, or assign or otherwise convey any right to receive
income or profits, except:
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(a) Liens for taxes, assessments or other governmental
charges which are not yet due and Payable or the payment
of which is not at the time required by Section 9.4;
(b) Statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar
Liens, in each case, incurred in the ordinary course of
business for sums not yet due and payable or the payment of
which is not at the time required by Section 9.4;
(c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business (i) in
connection with workers' compensation, unemployment
insurance and other types of social security or retirement
benefits, or (ii) to secure (or to obtain letters of credit
that secure) the performance of tenders, statutory
obligations, surety bonds, appeal bonds, bids, leases
(other than Capital Leases), performance bonds, purchase,
construction or sales contracts and other similar
obligations, in each case not incurred or made in
connection with the borrowing of money, the obtaining of
advances or credit or the payment of the deferred purchase
price of property;
d) Any attachment or judgment Lien, unless the judgment it
secures shall not, within 30 days after the entry thereof,
have been discharged or execution thereof stayed pending
appeal, or shall not have been discharged within 30 days
after the expiration of any such stay;
(e) Leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or
encumbrances, in each case incidental to, and not
interfering with, the ordinary conduct of the business of
the Company or any of its Restricted Subsidiaries, provided
that such Liens do not, in the aggregate, materially
detract from the value of such property;
(f) Liens on Property or assets of the Company or any of
its Restricted Subsidiaries securing Debt owing to the
Company or to any of its Wholly-Owned Restricted
Subsidiaries;
(g) Liens existing on the date of this Agreement and
securing the Debt of the Company and its Restricted
Subsidiaries referred to in items (b) and (c) of Schedule
5.15 and items (a)(l), (a)(2), (a)(3), (a)(5), (b)(l),
(b)(2), (b)(3), (b)(4), (b)(5) and (b)(6) of the Supplement
to said Schedule 5.15;
(h) Any Lien created to secure all or any part of the
purchase price, or to secure Debt incurred or assumed to
pay all or any part of the purchase price or cost of
construction, of property (or any improvement hereon)
acquired or constructed by the Company or a Restricted
Subsidiary after the date of the Closing, provided that
(i) any such Lien shall extend solely to the item or
items of such property (or
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improvement thereon) so acquired or constructed and, if
required by the terms of the instrument originally
creating such Lien, other property (or improvement
thereon) which is an improvement to or is acquired for
specific use in connection with such acquired or
constructed property (or improvement thereon) or which is
real property being improved by such acquired or
constructed property (or improvement thereon),
(ii) the principal amount of the Debt secured by any
such Lien shall at no time exceed an amount equal to
100% of the lesser of (A) the cost to the Company or
such Subsidiary of the property (or improvement thereon)
so acquired or constructed and (B) the Fair Market Value
(as determined in good faith by the board of directors
of the Company) of such property (or improvement
thereon) at the time of such acquisition or
construction, and
(iii) any such Lien shall be created contemporaneously
with, or within 30 days after, the acquisition or
construction of such property.
(i) Liens created in connection with industrial revenue
bonds related to the Sedalia, Missouri facility and Liens
created in connection with the Illinois Large Business
Development Program; and
(j) Other Liens (in addition to those permitted by
paragraphs (a) through (i) of this Section 10.6) provided
that (i) the aggregate amount of all outstanding Debt
secured by Liens pursuant to this paragraph (j) shall not
at any time exceed 10% of Consolidated Capitalization, and
(ii) after giving effect to such other Liens, no Event of
Default shall have occurred and be continuing and the
Company shall have the capacity to incur at least $1 of
additional Debt pursuant to the provisions of Section 10.4.
Section 10.7. Investments. The Company will not, and
will not permit any Restricted Subsidiary to, make any
Investments, other than:
(a) Investments by the Company and its Restricted
Subsidiaries in and to Restricted Subsidiaries, including
any Investment in a corporation which, after giving
effect to such Investment, will become a Restricted
Subsidiary;
(b) Investments in commercial paper maturing in 270 days or
less from the date of issuance which, at the time of
acquisition by the Company or any Restricted Subsidiary, is
accorded the highest rating by Standard & Poor's Rating
Group, a division of McGraw-Hill, Inc. or Moody's Investors
Service, Inc.;
(c) Investments in direct or indirect obligations of the
United States of America or any agency or instrumentality
of the United States of America, the payment or guarantee
of which constitutes a full faith and credit obligation of
the United States of America, in either case, maturing in
twelve months or less from the date of acquisition thereof;
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(d) Investments in certificates of deposit maturing within
one year from the date of acquisition thereof, issued by a
bank or trust company organized under the laws of the
United States or any state thereof, having capital, surplus
and undivided profits aggregating at least $50,000,000;
(e) Receivables arising from the sale of goods and services
in the ordinary course of business of the Company and its
Restricted Subsidiaries; and
(f) Other Investments (in addition to those Permitted by
Paragraphs (a) through (e) of this Section 10.7), provided
that (i) the aggregate amount of all Investments
outstanding pursuant to the provision of this paragraph (f)
shall not at any time exceed 10% of Consolidated
Capitalization, and (ii) after giving effect to such other
Investments, no Event of Default shall have occurred and
be continuing.
In valuing any Investments for the purpose of applying the
limitations set forth in this Section 10.7, such Investments
shall be taken at the lesser of the original cost thereof or the
book value thereof, without allowance for any subsequent
appreciation therein, but less any amount repaid or recovered on
account of capital or principal.
For purposes of this Section 10.7, at any time when a
corporation becomes a Restricted Subsidiary, all Investments of
such corporation at such time shall be deemed to have been made
by such corporation, as a Restricted Subsidiary, at such time.
Section 10.8. Sale of Assets, etc. Except as permitted
under Section 10.2, the Company will not, and will not permit
any of its Restricted Subsidiaries to, make any Asset
Disposition unless:
(a) in the good faith opinion of the Company, the Asset
Disposition is in exchange for consideration having a Fair
Market Value at least equal to that of the property
exchanged and is in the best interest of the Company or
such Restricted Subsidiary; and
(b) immediately after giving effect to the Asset
Disposition, no Default or Event of Default would exist and
the Company would have the capacity to incur at least $1 of
additional Debt pursuant to the provisions of Section 10.4;
and
(c) immediately after giving effect to the Asset
Disposition, the Disposition Value of all property that was
the subject of any Asset Disposition occurring in the then
fiscal year of the Company would not exceed 15% of
Consolidated Assets as of the end of the then most recently
ended fiscal quarter of the Company.
SECTION 11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following
conditions or events shall occur and be continuing:
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(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same
becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on
any Note for more than five Business Days after the same
becomes due and payable; or
(c) the Company defaults in the performance of or
compliance with any term contained in Section 10.2 through
Section 10.8 for more than 10 Business Days after the
earlier of (i) a Responsible Officer obtaining actual
knowledge of such default and (ii) the Company receiving
written notice of such default from any holder of a Note
(any such written notice to be identified as a "notice of
default" and to refer specifically to this paragraph (c) of
Section 11); or
(d) the Company defaults in the performance of or
compliance with any term contained herein (other than those
referred to in paragraphs (a), (b) and (c) of this Section
11) and such default is not remedied within 30 days after
the earlier of (i) a Responsible Officer obtaining actual
knowledge of such default and (ii) the Company receiving
written notice of such default from any holder of a Note
(any such written notice to be identified as a "notice of
default" and to refer specifically to this paragraph (d) of
Section 11); or
(e) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in
this Agreement or in any writing furnished in connection
with the transactions contemplated hereby proves to have
been false or incorrect in any material respect on the date
as of which made; or
(f) (i) the Company or any Subsidiary is in default (as
Principal or as guarantor or other surety) in the payment
of any principal of or premium or make-whole amount or
interest on any Indebtedness that is outstanding in an
aggregate principal amount of at least $1,000,000 beyond
any period of grace provided with respect thereto, or (ii)
the Company or any Subsidiary is in default in the
performance of or compliance with any term of any evidence
of any Indebtedness in an aggregate outstanding principal
amount of at least $ 1,000,000 or of any mortgage,
indenture or other agreement relating thereto or any other
condition exists, and as a consequence of such default or
condition such Indebtedness has become, or has been
declared, due and payable before its stated maturity or
before its regularly scheduled dates of payment, or (iii)
as a consequence of the occurrence or continuation of any
event or condition (other than the passage of time or the
right of the holder of Indebtedness to convert such
Indebtedness into equity interests or the uncoerced
exercise by the Company of an option to prepay such
Indebtedness), (x) the Company or any Subsidiary has become
obligated to purchase or repay Indebtedness before its
regular maturity or before its regularly scheduled dates of
payment in an aggregate outstanding principal amount of at
least $1,000,000, or (y) one or more Persons have the right
to require the Company or any Subsidiary so to purchase or
repay such Indebtedness; or
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(g) the Company or any Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its
debts as they become due, (ii) files, or consents by answer
or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii)
makes an assignment for the benefit of its creditors, (iv)
consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its
property, (v) is adjudicated as insolvent or to be
liquidated, or (vi) takes corporate action for the purpose
of any of the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by
the Company or any of its Subsidiaries, a custodian,
receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of
its property, or constituting an order for relief or
approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any of its Subsidiaries, or
any such petition shall be filed against the Company or any
of its Subsidiaries and such petition shall not be
dismissed or stayed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $1,000,000 are rendered against
one or more of the Company and its Subsidiaries and which
judgments are not, within 60 days after entry thereof,
bonded, discharged or stayed pending appeal, or are not
discharged within 60 days after the expiration of such
stay; or
(j) if (i) any Plan shall fail to satisfy the minimum
funding standards of ERISA or the Code for any plan year or
part thereof or a waiver of such standards or extension of
any amortization period is sought or granted under section
412 of the Code, (ii) a notice of intent to terminate any
Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings
under ERISA section 4042 to terminate or appoint a trustee
to administer any Plan or the PBGC shall have notified the
Company or any ERISA Affiliate that a Plan may become a
subject of any such proceedings, (iii) the aggregate
"amount of unfunded benefit liabilities" (within the
meaning of section 4001(a)(18) of ERISA) under all Plans,
determined in accordance with Title IV of ERISA, shall
exceed $6,000,000, (iv) the Company or any ERISA Affiliate
shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty
or excise tax provisions of the Code relating to employee
benefit plans, (v) the Company or any ERISA Affiliate
withdraws from any Multiemployer Plan, or (vi) the Company
or any Subsidiary establishes or amends any employee
welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of
the Company or any Subsidiary thereunder; and any such
event or events described in clauses (i) through (vi)
above, either
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individually or together with any other such event or events,
could reasonably be expected to have a Material Adverse
Effect.
As used in Section 11(j), the terms "employee benefit plan" and
"employee welfare benefit plan" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
SECTION 12. REMEDIES ON DEFAULT, ETC.
Section 12.1. Acceleration. (a) If an Event of Default
with respect to the Company described in paragraph (g) or (h) of
Section 11 (other than an Event of Default described in clause
(i) of paragraph (g) or described in clause (vi) of paragraph
(g) by virtue of the fact that such clause encompasses clause
(i) of paragraph (g)) has occurred, all the Notes then
outstanding shall automatically become immediately due and
payable.
(b) If any other Event of Default has occurred and is
continuing, any holder or holders of more than 50% in
principal amount of the Notes at the time outstanding may
at any time at its or their option, by notice or notices to
the Company, declare all the Notes then outstanding to be
immediately due and payable.
(c) If any Event of Default described in paragraph (a) or
(b) of Section 11 has occurred and is continuing, any
holder or holders of Notes at the time outstanding affected
by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all
the Notes held by it or them to be immediately due and
payable.
Upon any Notes becoming due and payable under this Section
12.1, whether automatically or by declaration, such Notes will
forthwith mature and the entire unpaid principal amount of such
Notes, plus (x) all accrued and unpaid interest thereon and (y)
the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case
without presentment, demand, protest or further notice, all of
which are hereby waived. The Company acknowledges, and the
parties hereto agree, that each holder of a Note has the right
to maintain its investment in the Notes free from repayment by
the Company (except as herein specifically provided for) and
that the provision for payment of a Make-Whole Amount by the
Company in the event that the Notes are prepaid or are
accelerated as a result of an Event of Default, is intended to
provide compensation for the deprivation of such right under
such circumstances.
Section 12.2 Other Remedies. If any Default or Event of
Default has occurred and is continuing, and irrespective of
whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at
the time outstanding may proceed to protect and enforce the
rights of such holder by an action at law, suit in equity or
other appropriate proceeding, whether for the specific
performance of any agreement contained herein or in any Note, or
for an injunction against a violation of any of the terms
hereof or thereof, or in aid of the exercise of any power
granted hereby or thereby or by law or otherwise.
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Section 12.3. Rescission. At any time after any Notes
have been declared due and payable pursuant to clause (b) or (c)
of Section 12.1, the holders of more than 50% in Principal
amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its
consequences if (a) the Company has paid all overdue interest on
the Notes, all principal of and Make-Whole Amount, if any, on
any Notes that are due and payable and are unpaid other than by
reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent
permitted by applicable law) any overdue interest in respect of
the Notes, at the Default Rate, (b) all Events of Default and
Defaults, other than non-payment of amounts that have become due
solely by reason of such declaration, have been cured or have
been waived pursuant to Section 17, and (c) no judgment or
decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment
under this Section 12.3 will extend to or affect any subsequent
Event of Default or Default or impair any right consequent
thereon.
Section 12.4. No Waivers or Election of Remedies,
Expenses, etc. No course of dealing and no delay on the part
of any holder of any Note in exercising any right, power or
remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any
holder thereof shall be exclusive of any other right, power or
remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without
limiting the obligations of the Company under Section 15, the
Company will pay to the holder of each Note on demand such
further amount as shall be sufficient to cover all costs and
expenses of such holder incurred in any enforcement or
collection under this Section 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
Section 13.1 Registration of Notes. The Company shall
keep at its principal executive office a register for the
registration and registration of transfers of Notes. The name
and address of each holder of one or more Notes, each transfer
thereof and the name and address of each transferee of one or
more Notes shall be registered in such register. Prior to due
presentment for registration of transfer, the Person in whose
name any Note shall be registered shall be deemed and treated as
the owner and holder thereof for all purposes hereof, and the
Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is
an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all
registered holders of Notes.
Section 13.2. Transfer and Exchange of Notes. Upon
surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the
case of a surrender for registration of transfer, duly endorsed
or accompanied by a written instrument of transfer duly executed
by the registered holder of such Note or his attorney duly
authorized in writing and accompanied by the address for notices
of each transferee of such Note or part thereof), the Company
shall execute and deliver, at the Company's expense (except as
provided below), one or more new Notes (as requested by the
holder thereof) in exchange
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therefor, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note. Each such new Note shall
be payable to such Person as such holder may request and shall be
substantially in the form of Exhibit I. Each such new Note shall be
dated and bear interest from the date to which interest shall have
been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The
Company may require payment of a sum sufficient to cover any stamp
tax or governmental charge imposed in respect of any such transfer
of Notes. Notes shall not be transferred in denominations of less
than $100,000, provided that if necessary to enable the
registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $100,000.
Any transferee, by its acceptance of a Note registered in its
name (or the name of its nominee), shall be deemed to have made
the representations set forth in Sections 6.1 and 6.2.
Section 13.3. Replacement of Notes. Upon receipt by the
Company of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of
any Note (which evidence shall be, in the case of an
Institutional Investor, notice from such Institutional Investor
of such ownership and such loss, theft, destruction or
mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder
of such Note is, or is a nominee for, the original
Purchaser or another holder of a Note with a minimum net
worth of at least $10,000,000, such Person's own unsecured
agreement of indemnity shall be deemed to be satisfactory),
or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense shall execute and deliver, in
lieu thereof, a new Note, dated and bearing interest from the
date to which interest shall have been paid on such lost,
stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
SECTION 14. PAYMENTS ON NOTES.
Section 14.1. Place of Payment. Subject to Section 14.2,
payments of principal, Make-Whole Amount, if any, and interest
becoming due and payable on the Notes shall be made in Quincy,
Illinois at the principal office of the Company in such
jurisdiction. The Company may at any time, by notice to each
holder of a Note, change the place of payment of the Notes so
long as such place of payment shall be either the principal
office of the Company in such jurisdiction or the principal
office of a bank or trust company in such jurisdiction.
Section 14.2. Home Office Payment. So long as you or
your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such
Note to the contrary, the Company will pay all sums becoming due
on such Note for principal, Make-Whole Amount, if any, and
interest by the method and at the address specified for such
purpose below your name in Schedule A, or by such other method
or at such other address as
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you shall have from time to time specified to the Company in writing
for such purpose, without the presentation or surrender of such Note
or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly
after payment or prepayment in full of any Note, you shall surrender
such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at
the place of payment most recently designated by the Company
pursuant to Section 14.1. Prior to any sale or other
disposition of any Note held by you or your nominee you will, at
your election, either endorse thereon the amount of principal
paid thereon and the last date to which interest has been paid
thereon or surrender such Note to the Company in exchange for a
new Note or Notes pursuant to Section 13.2. The Company will
afford the benefits of this Section 14.2 to any Institutional
Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same
agreement relating to such Note as you have made in this Section
14.2.
SECTION 15. EXPENSES, ETC.
Section 15.1. Transaction Expenses. Whether or not the
transactions contemplated hereby are consummated, the Company
will pay all costs and expenses (including reasonable attorneys'
fees of a special counsel and, if reasonably required, local or
other counsel) incurred by you and each other holder of a Note
in connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this
Agreement or the Notes (whether or not such amendment, waiver or
consent becomes effective), including, without limitation: (a)
the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights
under this Agreement or the Notes or in responding to any
subpoena or other legal process or informal investigative demand
issued in connection with this Agreement or the Notes, or by
reason of being a holder of any Note, and (b) the costs and
expenses, including financial advisors' fees, incurred in
connection with the insolvency or bankruptcy of the Company or
any Subsidiary or in connection with any work-out or
restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save you and each other
holder of a Note harmless from, all claims in respect of any
fees, costs or expenses if any, of brokers and finders (other
than those retained by you).
Section 15.2. Survival. The obligations of the Company
under this Section 15 will survive the payment or transfer of
any Note, the enforcement, amendment or waiver of any provision
of this Agreement or the Notes, and the termination of this
Agreement.
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.
All representations and warranties contained herein shall
survive the execution and delivery of this Agreement and the
Notes, the purchase or transfer by you of any Note or portion
thereof or interest therein and the payment of any Note, and may
be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any
certificate or other
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instrument delivered by or on behalf of the Company pursuant to this
Agreement shall be deemed representations and warranties of the
Company under this Agreement. Subject to the preceding sentence,
this Agreement and the Notes embody the entire agreement and
understanding between you and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof.
SECTION 17. AMENDMENT AND WAIVER.
Section 17.1. Requirements. This Agreement and the Notes
may be amended, and the observance of any term hereof or of the
Notes may be waived (either retroactively or prospectively),
with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any
of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or
any defined term (as it is used therein), will be effective as
to you unless consented to by you in writing, and (b) no such
amendment or waiver may, without the written consent of the
holder of each Note at the time outstanding affected thereby,
(i) subject to the provisions of Section 12 relating to
acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or
change the time of payment or method of computation of interest
or of the Make-Whole Amount on, the Notes, (ii) change the
percentage of the principal amount of the Notes the holders of
which are required to consent to any such amendment or waiver,
or (iii) amend any of Sections 8, ll(a), ll(b), 12, 17 or 20.
Section 17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder
of the Notes (irrespective of the amount of Notes then
owned by it) with sufficient information, sufficiently far
in advance of the date a decision is required, to enable
such holder to make an informed and considered decision
with respect to any proposed amendment, waiver or consent
in respect of any of the provisions hereof or of the Notes.
The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected
pursuant to the provisions of this Section 17 to each
holder of outstanding Notes promptly following the date on
which it is executed and delivered by, or receives the
consent or approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or
indirectly pay or cause to be paid any remuneration,
whether by way of supplemental or additional interest, fee
or otherwise, or grant any security, to any holder of Notes
as consideration for or as an inducement to the entering
into by any holder of Notes or any waiver or amendment of
any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each
holder of Notes then outstanding even if such holder did
not consent to such waiver or amendment.
Section 17.3. Binding, Effect, etc. Any amendment or
waiver consented to as provided in this Section 17 applies
equally to all holders of Notes and is binding upon them and
upon each future holder of any Note and upon the Company without
regard to whether such Note has
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been marked to indicate such amendment or waiver. No such amendment
or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or
waived or impair any right consequent thereon. No course of dealing
between the Company and the holder of any Note nor any delay in
exercising any rights hereunder or under any Note shall operate as a
waiver of any rights of any holder of such Note. As used herein, the
term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or
supplemented.
Section 17.4. Notes held by Company, etc. Solely for the
purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then
outstanding approved or consented to any amendment, waiver or
consent to be given under this Agreement or the Notes, or have
directed the taking of any action provided herein or in the
Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the
Company or any of its Affiliates shall be deemed not to be
outstanding.
SECTION 18. Notices.
All notices and communications provided for hereunder shall
be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), or (b) by
registered or certified mail with return receipt requested
(postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the
address specified for such communications in Schedule A,
or at such other address as you or it shall have
specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder
at such address as such other holder shall have
specified to the Company in writing, or
(iii) if to the Company, to the Company at its address
set forth at the beginning hereof to the attention of
the Treasurer, or at such other address as the Company
shall have specified to the holder of each Note in
writing.
Notices under this Section 18 will be deemed given only when
actually received.
SECTION 19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto,
including, without limitation, (a) consents, waivers and
modifications that may hereafter be executed, (b) documents
received by you at the Closing (except the Notes themselves),
and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by
you by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar
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process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by
applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether
or not such reproduction was made by you in the regular course of
business) and any enlargement, facsimile or further reproduction
of such reproduction shall likewise be admissible in evidence.
This Section 19 shall not prohibit the Company or any other
holder of Notes from contesting any such reproduction to the
same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such
reproduction.
SECTION 20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential
Information" means information delivered to you by or on behalf
of the Company or any Subsidiary in connection with the
transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when
received by you as being confidential information of the Company
or such Subsidiary, provided that such term does not include
information that (a) was publicly known or otherwise known to
you prior to the time of such disclosure, (b) subsequently
becomes publicly known through no act or omission by you or any
person acting on your behalf, (c) otherwise becomes known to you
other than through disclosure by the Company or any Subsidiary
or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will
maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by you in good faith to
protect confidential information of third parties delivered to
you, provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, employees, agents,
attorneys and affiliates (to the extent such disclosure
reasonably relates to the administration of the investment
represented by your Notes), (ii) your financial advisors and
other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the
terms of this Section 20, (iii) any other holder of any Note,
(iv) any Institutional Investor to which you sell or offer to
sell such Note or any part thereof or any participation therein
(if such Person has agreed in writing prior to its receipt of
such Confidential Information to be bound by the provisions of
this Section 20), (v) any Person from which you offer to
purchase any security of the Company (if such Person has agreed
in writing prior to its receipt of such Confidential Information
to be bound by the provisions of this Section 20), (vi) any
federal or state regulatory authority having jurisdiction over
you, (vii) the National Association of Insurance Commissioners
or any similar organization, or any nationally recognized rating
agency that requires access to information about your investment
portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to
you, (x) in response to any subpoena or other legal process, (y)
in connection with any litigation to which you are a party or
(z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or
for the protection of the rights and remedies under your Notes
and this Agreement. Each holder of a Note, by its acceptance of
a Note, will
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<PAGE> 39
be deemed to have agreed to be bound by and to be entitled to the
benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with
the delivery to any holder of a Note of information required to be
delivered to such holder under this Agreement or requested by such
holder (other than a holder that is a party to this Agreement or its
nominee), such holder will enter into an agreement with the Company
embodying the provisions of this Section 20.
SECTION 21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your
Affiliates as the purchaser of the Notes that you have agreed to
purchase hereunder, by written notice to the Company, which
notice shall be signed by both you and such Affiliate, shall
contain such Affiliate's agreement to be bound by this Agreement
and shall contain a confirmation by such Affiliate of the
accuracy with respect to it of the representations set forth in
Section 6. Upon receipt of such notice, wherever the word "you"
is used in this Agreement (other than in this Section 21), such
word shall be deemed to refer to such Affiliate in lieu of you.
In the event that such Affiliate is so substituted as a
purchaser hereunder and such Affiliate thereafter transfers to
you all of the Notes then held by such Affiliate, upon receipt
by the Company of notice of such transfer, wherever the word
"you" is used in this Agreement (other than in this Section 21),
such word shall no longer be deemed to refer to such Affiliate,
but shall refer to you, and you shall have all the rights of an
original holder of the Notes under this Agreement.
SECTION 22. MISCELLANEOUS.
Section 22.1. Successors and Assigns. All covenants and
other agreements contained in this Agreement by or on behalf of
any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without
limitation, any subsequent holder of a Note) whether so
expressed or not.
Section 22.2. Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-Whole
Amount or interest on any Note that is due on a date other than
a Business Day shall be made on the next succeeding Business Day
without including the additional days elapsed in the computation
of the interest payable on such next succeeding Business Day.
Section 22.3. Severability. Any provision of this
Agreement that 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, and any such
prohibition or unenforceability in any jurisdiction shall (to
the full extent permitted by law) not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 22.4 Construction. Each covenant contained
herein shall be construed (absent express provision to the
contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not
(absent such an express contrary
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<PAGE> 40
provision) be deemed to excuse compliance with any other covenant.
Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly
or indirectly by such Person.
Section 22.5. Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be
an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by
all, of the parties hereto.
Section 22.6 Governing Law. This Agreement shall be
construed and enforced in accordance with, and the rights of the
parties shall be governed by, the law of the State of Illinois
excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction
other than such State.
* * * * *
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If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this
Agreement and return it to the Company, whereupon the foregoing
shall become a binding agreement between you and the Company.
Very truly yours,
GARDNER DENVER MACHINERY INC.
By
----------------------------------------
Its President and Chief Executive Officer
The foregoing is hereby agreed to as of the date thereof.
METROPOLITAN LIFE INSURANCE COMPANY
By
----------------------------------
Its
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INFORMATION RELATING TO PURCHASER
METROPOLITAN LIFE INSURANCE COMPANY
Fixed Income Investments - Private Placement Unit
334 Madison Avenue
Convent Station, New Jersey 07961
Attention: Vice President
Telecopier Number: (201) 254-3050
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as "Gardner Denver Machinery Inc.,
7.32% Senior Notes due September 26, 2006, PPN 365558 A*6,
principal or interest") to:
The Chase Manhattan Bank, N.A. (ABA #021000021)
Metropolitan Branch
33 East 23rd Street
New York, New York 10010
for credit to: Metropolitan Life Insurance
Company-Corporate Investments Account Number 002-2-410591
Notices
All notices and communications, including notices with respect
to payments and written confirmation of each such payment, to
be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-5581829
SCHEDULE A
(to Note Purchase Agreement)
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DEFINED TERMS
As used herein, the following terms have the respective
meanings set forth below or set forth in the Section hereof
following such term:
"Affiliate" means, at any time, and with respect to any
Person, (a) any other Person that at such time directly or
indirectly through one or more intermediaries Controls, or is
Controlled by, or is under common Control with, such first
Person, and (b) any Person beneficially owning or holding,
directly or indirectly, 10% or more of any class of voting or
equity interests of the Company or any Subsidiary or any
corporation of which the Company and its Subsidiaries
beneficially own or hold, in the aggregate, directly or
indirectly, 10% or more of any class of voting or equity
interests. As used in this definition, "Control" means the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract
or otherwise. Unless the context otherwise clearly requires, any
reference, to an "Affiliate" is a reference to an Affiliate of
the Company.
"Asset Disposition" means any Transfer except:
(a) any
(i) Transfer from a Restricted Subsidiary to the
Company or to a Wholly-Owned Restricted Subsidiary;
(ii) Transfer from the Company to a Wholly-Owned
Restricted Subsidiary;
so long as immediately before and immediately after the
consummation of any such Transfer and after giving effect
thereto, no Default or Event of Default exists; and
(b) any Transfer made in the ordinary course of business
and involving only property that is either (i) inventory held
for sale or (ii) equipment, fixtures, supplies or materials no
longer required in the operation of the business of the Company
or any of its Restricted Subsidiaries or that is obsolete.
"Business Day" means (a) for the purposes of Section 8.6
only, any day other than a Saturday, a Sunday or a day on which
commercial banks in New York, New York are required or
authorized to be closed, and (b) for the purposes of any other
provision of this Agreement, any day other than a Saturday, a
Sunday or a day on which commercial banks in Chicago, Illinois
or New York, New York are required or authorized to be closed.
SCHEDULE B
(to Note Purchase Agreement)
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"Capital Lease" means, at any time, a lease with respect to
which the lessee is required concurrently to recognize the
acquisition of an asset and the incurrence of a liability in
accordance with GAAP.
"Capitalized Rentals" means, as of the date of any
determination, the amount at which the aggregate Rentals due and
to become due under all Capital Leases under which the Company
or any Restricted Subsidiary is a lessee would be reflected as
a liability on a consolidated balance sheet of the Company and
its Restricted Subsidiaries prepared in accordance with GAAP.
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations promulgated
thereunder from time to time.
"Company" means Gardner Denver Machinery Inc., a Delaware
corporation.
"Confidential Information" is defined in Section 20.
"Consolidated Assets" means, at any time, the total assets
of the Company and its Restricted Subsidiaries which would be
shown as assets on a consolidated balance sheet of the Company
and its Restricted Subsidiaries as of such time prepared in
accordance with GAAP, after eliminating all amounts properly
attributable to minority interests, if any, in the stock and
surplus of Subsidiaries.
"Consolidated Capitalization" means, at any time, the sum of
Consolidated Total Debt and Consolidated Net Worth.
"Consolidated Net Income" means, for any period for which the
amount thereof is to be determined, the net income and net
losses of the Company and its Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with
GAAP, but excluding therefrom the sum of any nonrecurring or
extraordinary items.
"Consolidated Net Worth" means the stockholders equity of the
Company and its Restricted Subsidiaries determined in accordance
with GAAP.
"Consolidated Total Debt" means, as of any date of
determination, the total of all Debt of the Company and its
Restricted Subsidiaries outstanding on such date, after
eliminating all offsetting debits and credits between the
Company and its Restricted Subsidiaries and all other items
required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its
Restricted Subsidiaries in accordance with GAAP.
"Debt" means, with respect to any Person, without
duplication,
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(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable
arising in the ordinary course of business but including,
without limitation, all liabilities created or arising under
any conditional sale or other title retention agreement with
respect to any such property);
(c) its liabilities for Capitalized Rentals;
(d) all liabilities for borrowed money secured by any
Lien with respect to any property owned by such Person
(whether or not it has assumed or otherwise become liable for
such liabilities); and
(e) any Guaranty of such Person with respect to
liabilities of a type described in any clauses (a) through
(d) hereof.
Debt of any Person shall include all obligations of such
Person of the character described in clauses (a) through (e)
to the extent such Person remains legally liable in respect
thereof notwithstanding that any such obligation is deemed to
be extinguished under GAAP.
"Default" means an event or condition the occurrence or
existence of which would, with the lapse of time or the giving
of notice or both, become an Event of Default.
"Default Rate" means that rate of interest that is the
greater of (i) 9.32% or (ii) l% over the rate of interest
publicly announced by The Chase Manhattan Bank in New York, over
the rate of interest publicly announced by New York as its
"base" or "prime" rate.
"Disposition Value" means, at any time, with respect to any
property.
(a) In the case of property that does not
constitute Subsidiary Stock, the book value thereof,
determined at the time of such disposition in good faith by
the Company and
(b) in the case of property that does not
constitute Subsidiary Stock, an amount equal to that
percentage of book value of the assets of the Subsidiary that
issued such stock as is equal to the percentage that the book
value of such Subsidiary Stock represents of the book value
of all of the outstanding capital stock of such Subsidiary
(assuming, in making such calculations, that all Securities
convertible into such capital stock are so converted and
giving full effect to all transactions that would occur or be
required in connection with such conversion) determined at
the time of the disposition thereof, in good faith by the
Company.
"Environmental Laws" means any and all Federal, state, local,
and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions
relating to pollution and the
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protection of the environment or the release of any materials into
the environment, including but not limited to those related to
hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with
the Company under Section 414 of the Code.
"Event of Default" is defined in Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means, at any time and with respect to
any property, the sale value of such property that would be
realized in an arm's-length sale at such time between an
informed and willing buyer and an informed and willing seller
(neither being under a compulsion to buy or sell).
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America.
"Government Authority" means
(a) the government of
(i) the United States of America or any State or
other political subdivision thereof, or
(ii) any jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business,
or which asserts jurisdiction over any properties of
the Company or any Subsidiary, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or
pertaining to, any such government.
"Guaranty" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection) of such
Person guaranteeing or in effect guaranteeing (whether by being
a general partner of a Partnership, or otherwise) any
indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including
(without limitation) obligations incurred through an agreement,
contingent or otherwise, by such Person:
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(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such indebtedness or obligation, or (ii) to
maintain any working capital or other balance sheet condition
or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase
or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of
such indebtedness or obligation of the ability of any other
Person to make payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness
or obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of
the obligor under any Guaranty, the indebtedness or other
obligations that are the subject of such Guaranty shall be
assumed to be direct obligations of such obligor.
"Hazardous Material" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a
hazard to health or safety, the removal of which may be required
or the generation, manufacture, refining, production,
processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage,
or filtration of which is or shall be restricted, prohibited or
penalized by any applicable law (including, without limitation,
asbestos, urea formaldehyde foam insulation and polycholorinated
biphenyls).
"holder" means, with respect to any Note, the Person in whose
name such Note is registered in the register maintained by the
Company pursuant to Section 13.1.
"Indebtedness" with respect to any Person means, at any time,
without duplication,
(a) its liabilities for borrowed money and its
redemption obligations in respect of mandatorily redeemable
Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable
arising in the ordinary course of business but including all
liabilities created or arising under any conditional sale or
other title retention agreement with respect to any such
property);
(c) its liabilities for Capitalized Rentals;
(d) all liabilities for borrowed money secured by any
Lien with respect to any property owned by such Person
(whether or not it has assumed or otherwise become liable for
such liabilities);
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(e) all its liabilities in respect of letters of credit
or instruments serving a similar function issued or accepted
for its account by banks and other financial institutions
(whether or not representing obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to
liabilities of a type described in any of clauses (a) through
(f) hereof.
Indebtedness of any Person shall include all obligations of such
Person of the character described in clauses (a) through (g) to
the extent such Person remains legally liable in respect thereof
notwithstanding that any such obligation is deemed to be
extinguished under GAAP.
"Institutional Investor" means (a) the original purchaser of
a Note, (b) any holder of a Note holding more than 5% of the
aggregate principal amount of the Notes then outstanding, and
(c) any bank, trust company, savings and loan association or
other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any
other similar financial institution or entity, regardless of
legal form.
"Interest Expense " means, for any period, the sum of all
interest charges on Consolidated Total Debt, as determined in
accordance with GAAP.
"Investments" shall mean all investments, in cash or by
delivery of property, made, directly or indirectly, in any
Person, whether by acquisition of shares of capital stock,
Indebtedness or other obligations or Securities or by loan,
advance, capital contribution or otherwise; provided, however,
that "Investments" shall not mean or include routine investments
in property to be used or consumed in the ordinary course of
business.
"Lien" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any
interest or title of any vendor, lessor, lender or other secured
party to or of such Person under any conditional sale or other
title retention agreement or Capital Lease, upon or with respect
to any property or asset of such Person (including in the case
of stock, stockholder agreements, voting trust agreements and
all similar arrangements).
"Make-Whole Amount" is defined in Section 8.6.
"Material" means material in relation to the business,
operations, affairs, financial condition, assets, properties, or
prospects of the Company and its Restricted Subsidiaries taken
as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, affairs, financial condition,
assets or properties of the Company and its Restricted
Subsidiaries taken as a whole, or (b) the ability of the
Company to perform its obligations under this Agreement and the
Notes, or (c) the validity or enforceability of this Agreement
or the Notes.
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"Memorandum" is defined in Section 5.3.
"Multiemployer Plan" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"Net Proceeds Amount" means, with respect to any Transfer of
any property by any Person, an amount equal to the difference of
(a) the aggregate amount of the consideration (valued at
the Fair Market Value of such consideration at the time of
the consummation of such Transfer) received by such Person
in respect of such Transfer, minus
(b) all ordinary and reasonable out-of-pocket costs and
expenses actually incurred by such Person in connection with
such Transfer.
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Senior
Financial Officer or of any other officer of the Company whose
responsibilities extend to the subject matter of such
certificate.
"Operating Cash Flow" means, for any period for which the
amount thereof is to be determined, Consolidated Net Income for
such period plus: (i) provisions for federal, state, and local
income taxes; (ii) Interest Expense; (iii) nonrecurring items to
the extent deducted to calculate Consolidated Net Income and
(iv) depreciation and amortization, all in accordance with GAAP.
"PBGC " means the Pension Benefit Guaranty Corporation
referred to and defined in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation,
limited liability company, association, trust, unincorporated
organization, or a government or agency or political subdivision
thereof.
"Plan" means an "employee benefit plan" (as defined in
section 3(3) of ERISA) that is or, within the preceding five
years, has been established or maintained, or to which
contributions are or, within the preceding five years, have been
made or required to be made, by the Company or any ERISA
Affiliate or with respect to which the Company or any ERISA
Affiliate may have any liability.
"Preferred Stock" means any class of capital stock of a
corporation that is preferred over any other class of capital
stock of such corporation as to the payment of dividends or the
payment of any amount upon liquidation or dissolution of such
corporation.
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"property" or "properties" means, unless otherwise
specifically limited, real or personal property of any kind,
tangible or intangible, choate or inchoate.
"QPAM Exemption" means Prohibited Transaction Class Exemption
84-14 issued by the United States Department of Labor.
"Rentals" means and includes all fixed rents (including as
such all payments which the lessee is obligated to make to the
lessor on termination of the lease or surrender of the property)
payable by the Company or a Restricted Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall
be exclusive of any amounts required to be paid by the Company
or a Restricted Subsidiary (whether or not designated as rents
or additional rents) on account of maintenance, repairs,
insurance, taxes and similar charges. Fixed rents under any
so-called, "percentage leases" shall be computed solely on the
basis of the minimum rents, if any, required to be paid by the
lessee regardless of sales volume or gross revenues.
"Required Holders" means, at any time, the holders of at
least 50% in principal amount of the Notes at the time
outstanding (exclusive of Notes then owned by the Company or any
of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and
any other officer of the Company with responsibility for the
administration of the relevant portion of this Agreement.
"Restricted Subsidiary" shall mean any Subsidiary (i)
designated as such in Schedule 5.4, or subsequently designated
as such by resolution of the Board of Directors of the Company,
provided that such designation would not result in the violation
of any of the terms of this Agreement and provided that such
Subsidiary has not previously been designated as a Restricted
Subsidiary, and (ii) more than 50% of the Voting Stock of which
is owned by the Company and its Restricted Subsidiaries. A
Restricted Subsidiary may be designated an Unrestricted
Subsidiary by resolution of the Board of Directors of the
Company provided that, at the time of such designation, (i) such
Subsidiary does not own any Indebtedness, shares of capital
stock or other Securities of the Company or any Restricted
Subsidiary, (ii) no Default or Event of Default exists, (iii)
such designation would not result in the violation of any of the
terms of this Agreement, and (iv) the Company would then have
the capacity to incur at least $1 of additional Debt pursuant to
the provisions of Section 10.4.
"Securities Act" means the Securities Act of 1933, as
amended from time to time.
"Security" shall have the same meaning as in Section 2(1)
of the Securities Act.
"Senior Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the
Company.
105
<PAGE> 51
"Subsidiary" means, as to any Person, any corporation,
association or other business entity in which such Person or one
or more of its Subsidiaries or such Person and one or more of
its Subsidiaries owns more than 50% of the Voting Stock, and any
partnership or joint venture if more than a 50% interest in the
profits or capital thereof is owned by such Person or one or
more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily
take major business actions without the prior approval of such
Person or one or more of its Subsidiaries). Unless the context
otherwise clearly requires, any reference to a "Subsidiary" is
a reference to a Subsidiary of the Company.
"Subsidiary Stock" means, with respect to any Person, the
stock (or any options or warrants to purchase stock or other
Securities exchangeable for or convertible into stock) of any
Subsidiary of such Person.
"Swaps" means, with respect to any Person, payment
obligations with respect to interest rate swaps, currency swaps
and similar obligations obligating such Person to make payments,
whether periodically or upon the happening of a contingency. For
the purposes of this Agreement, the amount of the obligation
under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Swap had
terminated at the end of such fiscal quarter, and in making such
determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in
each such case, the amount of such obligation shall be the net
amount so determined.
"Transfer" means, with respect to any Person, any
transaction in which such Person sells, conveys, transfers or
leases (as lessor) any of its property, including, without
limitation, Subsidiary Stock. For purposes of determining the
application of the Net Proceeds Amount in respect of any
Transfer, the Company may designate any Transfer as one or more
separate Transfers each yielding a separate Net Proceeds Amount.
In any such case, the Disposition Value of any property subject
to each such separate Transfer shall be determined by ratably
allocating the aggregate Disposition Value of all property
subject to all such separate Transfers to each such separate
Transfer on a proportionate basis.
"Unrestricted Subsidiary" is any Subsidiary which, at the
time of determination, is not a Restricted Subsidiary.
"Voting Stock" means Securities of any class or classes, the
holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate
directors (or Persons performing similar functions).
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary
one hundred percent (100%) of all of the equity interests
(except directors' qualifying shares) and voting interests of
which are owned by any one or more of the Company and the
Company's other Wholly-Owned Subsidiaries at such time.
106
<PAGE> 52
CHANGES IN CORPORATE STRUCTURE
None
SCHEDULE 4.8
(to Note Purchase Agreement)
107
<PAGE> 53
DISCLOSURE MATERIALS
1. On August 9, 1996, the Company acquired all of the issued
and outstanding capital stock of Gardner Denver Holdings
Inc. (f.k.a. NORAMPTCO, Inc.), a Delaware corporation, and
its subsidiaries, and a related company, Lamcor, Ltd., a
U.K. corporation. The aggregate purchase price was
approximately $30.5 million in cash, subject to adjustment
based upon a closing balance sheet.
2. On August 14, 1996, the Company acquired all of the issued
and outstanding capital stock of TCM Investments, Inc., an
Oklahoma corporation, and its subsidiaries. The aggregate
purchase price was approximately $7.2 million.
SCHEDULE 5.3
(to Note Purchase Agreement)
108
<PAGE> 54
SUBSIDIARIES OF THE COMPANY AND
OWNERSHIP OF SUBSIDIARY STOCK,
AFFILIATES AND DIRECTORS AND SENIOR OFFICERS
1. Subsidiaries of the Company and Ownership of Subsidiary
Stock.
<TABLE>
<CAPTION>
PERCENTAGE OF
CAPITAL STOCK OR
SIMILAR EQUITY
INTERESTS OWNED BY
NATURE AND THE COMPANY AND
JURISDICTION OF EACH OTHER
NAME OF SUBSIDIARY INCORPORATION SUBSIDIARY
<S> <C> <C>
Gardner Denver International, Inc. Delaware; Restricted 100% by the Company
("GDII")
Gardner Denver Canada, Inc. Ontario, Canada; Restricted l00% by GDII
Gardner Denver Export, Inc. Barbados; Restricted 100% by the Company
TCM Investments, Inc. ("TCMI") Oklahoma; Restricted 100% by the Company
2Oth Century Mfg. & Supply Co. Oklahoma; Restricted 100% by TCMI
("CMS")
TCM Mfg. Int'l Limited Jamaica, Restricted 99% by CMS
1% by R. Centanni<F1>
Adex, Inc. Oklahoma; Restricted l00% by TCMI
TCM Compressors, Inc. Oklahoma; Restricted 100% by TCMI
Future Fuels, Inc. ( "FFI") Oklahoma; Restricted 100% by TCMI
Fuel, L.L.C. Oklahoma; Restricted 22.8% by TCMI
77.2% by FFI
Gardner Denver Holdings Inc. Delaware; Restricted l00% by the Company
("GDHI") (f.k.a. NORAMPTCO, Inc.)
Lamson Corporation ( "Lamson") New York; Restricted 85% by GDHI
15% by the Company
Lamson Canada, Inc. Quebec, Canada; Restricted 100% by Lamson
<FN>
<F1> Beneficially owned by the Company
</TABLE>
SCHEDULE 5.4
(to Note Purchase Agreement)
109
<PAGE> 55
<TABLE>
<S> <C> <C>
Lamson Europe S.A. France; Restricted 99.6% by GDHI
0.3% by the Company
0.1% by Lamson,
U.S.T.,
GDII
P. Van Rymenam,<F1> and
R. Centanni<F1>
U.S. Turbine Corporation Delaware; Restricted 100% by GDHI
("U.S.T.")
Lamcor, Ltd. U.K.; Restricted 100% by the Company
</TABLE>
2. Affiliates of the Company
GVM Gesellschaft fur Schraubenverdichter und
Schraubenmotorentechnologie mbH
("GVM")
The Company owns 25% of the common stock of GVM, a privately held
German company. The remaining 75% of the common stock is held by one
individual. As part of the investment agreement, the Company has
committed to loan GVM a total of $0.9 million over the remainder of
1996. As of June 30, 1996, the Company has loaned its affiliate $0.6
million of this commitment. The agreement specifies the payment of
market interest rates and the repayment of the loan at the end of
five years. The Company has the option to acquire an additional 24%
of GVM's aggregate authorized capital by converting part of its claim
to any payments of principal and accrued interest under the loan to
such capital interest.
<TABLE>
<CAPTION>
3. DIRECTORS AND SENIOR
OFFICERS OF THE COMPANY OFFICE
<S> <C>
Alan E, Riedel Chairman
Ross J. Centanni President and Chief Executive Officer; Director
Donald G. Barger, Jr. Director
Michael J. Sebastian Director
Thomas M. McKenna Director
Jay R. Buehler Vice President, Manufacturing
Helen W. Cornell Vice President, Corporate Secretary and Treasurer
Roger A. Finnamore Vice President, Engineering and Quality Assurance
Steven M. Krivacek Vice President, Human Resources
Philip R. Roth Vice President, Finance and Chief Financial Officer
J. Dennis Shull Vice President, Sales and Marketing
</TABLE>
110
<PAGE> 56
FINANCIAL STATEMENTS
1. For each of the fiscal years ended December 31, 1993 through 1995,
the financial statements contained in :
(i) 1995 Annual Report to Stockholders,
(ii) 1994 Annual Report to Stockholders, and
(iii) Financial Statement excerpt from the Gardner Denver
Machinery Inc. Registration Statement on Form 10, effective on March
31, 1994.
2. For the six month fiscal period ended June 30, 1996, the financial
statements contained in:
(i) Gardner Denver Machinery Inc. Periodic Report on Form
10-Q for the Quarterly Period ended June 30, 1996.
SCHEDULE 5.5
(to Note Purchase Agreement)
111
<PAGE> 57
<TABLE>
CERTAIN LITIGATION
<S> <C>
(i) Dresser-Rand Company and Bernard A suit alleging misappropriation
of Zimmern v. Cooper Industries et al. trade secrets and interference
with contractual relations,
filed in the Eighth Judicial
Circuit Court of Illinois (Case
Number 95-L-4-7)
(ii) Waste Inc. Superfund Site The Company is named as a potentially
Michigan City, IN responsible party.
(iii) Quincy Landfill Superfund Site The Company is named as a potentially
Quincy, IL responsible party.
SCHEDULE 5.8
(to Note Purchase Agreement)
112
<PAGE> 58
PATENTS, ETC.
None
SCHEDULE 5.11
(to Note Purchase Agreement)
113
<PAGE> 59
EXISTING INDEBTEDNESS
AS OF JUNE 30, 1996
</TABLE>
<TABLE>
Indebtedness of the Company and its Subsidiaries as of June 30, 1996
was as follows<F1>:
<CAPTION>
FINAL OUTSTANDING
OBLIGOR LENDER NATURE MATURITY BALANCE
<S> <C> <C> <C> <C>
(a) Gardner Denver The First Revolving Credit November 30, $23,000,000<F2>
Machinery Inc. National Bank of Agreement and 1998
Chicago as Agent Letter of Credit
for itself and Facility
the Other Lenders
(b) Cooper City of Sedalia, Variable Rate March 1, $900,000<F3>
Industries, Inc. MO Industrial Revenue 1997
(assumed by the Refunding Bonds,
Company) secured by
property, plant and
equipment
(c) Cooper Illinois Industrial December 15, $1,098,836
Industries, Inc. Department of Development 2001
(assumed by the Commerce and Loans, secured by
Company) Community property, plant and
Affairs equipment
(d) Gardner Denver City of Quincy, Unsecured July 15, 2001 $384,629
Machinery Inc. Illinois Industrial
Development Loans
<FN>
- -------------------------
<F1> The purchase price of TCMI and the balance of the purchase price of
GDHI were funded from cash equivalents of the Company.
<F2> Outstanding balance increased to $51,000,000 on 8/9/96 to facilitate the
acquisition of GDHI.
<F3> Outstanding balance reduced to $600,000 on 9/3/96 due to scheduled
principal payment.
</TABLE>
SCHEDULE 5.15
(to Note Purchase Agreement)
114
<PAGE> 60
SUPPLEMENT
While Indebtedness of the Company and its Subsidiaries
outstanding as of June 30, 1996 set forth on Schedule 5.15 is
accurately described on said Schedule 5.15, for your information,
the Company hereby advises you of two Subsidiaries of the Company
acquired after June 30, 1996 which have Indebtedness outstanding as
at the dates indicated below:
(a) Gardner Denver Holdings Inc. (f.k.a. NORAMPTCO, Inc.) (as of
September 1, 1996)
<TABLE>
<CAPTION>
FINAL OUTSTANDING
OBLIGOR LENDER NATURE MATURITY BALANCE
<S> <C> <C> <C> <C>
(1) Lamson Onondoga County Secured Industrial November, $1,688,406
Industrial Development Revenue Bonds 2000
Authority
(2) Lamson Key Bank Secured Notes April, 2000 $ 614,286<F1>
Payable
(3) Lamson Key Bank Secured Notes April, 2000 $ 366,667<F1>
Payable
(4) Lamson Key Bank Revolving Line of Annual $ 955,000<F1>
Credit
(5) U.S. Key Bank Secured Notes February, 2005 $ 420,833<F1>
Turbine Payable
(6) Lamson Credit du Nord Notes Payable $ 18,743<F1>
Europe SA under line of credit
<CAPTION>
(b) TCM Investments, Inc. ("TCMI") (as of August 25, 1996)
FINAL OUTSTANDING
OBLIGOR LENDER NATURE MATURITY BALANCE
<S> <C> <C> <C> <C>
(1) TCMI State Bank & Trust Secured Notes January, 2002 $297,565
Payable
(2) TCMI State Bank & Trust Secured Notes April, 1998 $110,995
Payable
(3) TCMI State Bank & Trust Secured Notes April, 2000 $293,335
Payable
<FN>
- -------------------------
<F1> Guarantee by Gardner Denver Holdings Inc.
<CAPTION>
SUPPLEMENT TO
SCHEDULE 5.15
(to Note Purchase Agreement)
115
<PAGE> 61
<S> <C> <C> <C> <C>
(4) TCMI State Bank & Trust Secured Notes October, 1998 $123,524
Payable
(5) TCMI State Bank & Trust Secured Notes December, $ 14,579
Payable 1997
(6) TCMI State Bank & Trust Secured Line of September, $400,000
Credit 1996
</TABLE>
116
<PAGE> 62
FORM OF NOTE
GARDNER DENVER MACHINERY INC.
7.32% Senior Notes due September 26, 2006
No. [ ] [Date]
------------- -----------------------------------
$[ ] PPN 365558 A* 6
----------------
FOR VALUE RECEIVED, the undersigned, GARDNER DENVER MACHINERY
INC. (herein called the "Company"), a Delaware corporation, hereby
promises to pay to [ ], or registered
--------------------------
assigns, the principal sum of [ ] DOLLARS
-------------------------
on September 26, 2006, with interest (computed on the basis of a
360-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 7.32% per annum from the date hereof,
payable semiannually on the 26th day of March and September in
each year, commencing on the first of such dates after the date
hereof, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by law, on any overdue
payment (including any overdue prepayment) of principal, any
overdue payment of interest and any overdue payment of any
Make-Whole Amount (as defined in the Note Purchase Agreement
referred to below), payable semiannually as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per
annum from time to time equal to the greater of (i) 9.32% or (ii)
1% over the rate of interest publicly announced by The Chase
Manhattan Bank, from time to time in New York, New York, as its
"base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money of
the United States of America at the principal office of the
Company in Quincy, Illinois, or at such other place as the Company
shall have designated by written notice to the holder of this Note
as provided in the Note Purchase Agreement referred to below.
This Note is one of a series of Senior Notes (herein called
the "Notes") issued pursuant to the Note Purchase Agreement, dated
as of September 26, 1996 (as from time to time amended, the "Note
Purchase Agreement"), between the Company and the Purchaser named
therein and is entitled to the benefits thereof. Each holder of
this Note will be deemed, by its acceptance hereof, (i) to have
agreed to the confidentiality provisions set forth in Section 20
of the Note Purchase Agreement and (ii) to have made the
representations set forth in Section 6.1 and Section 6.2 of the
Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration
of transfer, duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the registered holder hereof or
such holder's attorney duly authorized in writing, a new Note for
a like principal amount will be issued to, and registered in the
name of, the transferee. Prior to due presentment for registration
of transfer, the Company may treat the person in whose name this
Note is
EXHIBIT 1
(to Note Purchase Agreement)
117
<PAGE> 63
registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.
The Company will make required prepayments of principal on
the dates and in the amounts specified in the Note Purchase
Agreement. This Note is also subject to optional prepayment, in
whole or from time to time in part, at the times and on the terms
specified in the Note Purchase Agreement, but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreement, occurs and is continuing, the principal of this Note
may be declared or otherwise become due and payable in the manner,
at the price (including any applicable Make-Whole Amount) and with
the effect provided in the Note Purchase Agreement.
This Note shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the
law of the State of Illinois excluding choice-of-law principles
of the law of such State that would require the application of
the laws of a jurisdiction other than such State.
GARDNER DENVER MACHINERY INC.
By
------------------------------------
Title
Exhibit 1-2
118
<PAGE> 64
DESCRIPTION OF OPINION OF SPECIAL COUNSEL
FOR THE COMPANY
September , 1996
--
Metropolitan Life Insurance Company
Fixed Income Investments-Private Placement Unit
334 Madison Avenue
Convent Station, New Jersey 07961
Attention: Vice President
Gentlemen/Ladies:
We have served as special counsel for Gardner Denver
Machinery Inc., a Delaware corporation (the "Company") in
connection with its execution and delivery of a Note Purchase
Agreement dated as of September 26, 1996 between you and the
Company, providing for the issuance and sale of Notes in the
principal amount of $35,000,000 (the "Note Purchase Agreement").
All capitalized terms used in this opinion and not otherwise
defined shall have the meanings attributed to them in the Note
Purchase Agreement. This opinion is being delivered to you in
accordance with Section 4.4 of the Note Purchase Agreement.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of (i) the Note Purchase
Agreement, (ii) the Notes, (iii) the Certificate of Incorporation
and By-laws of the Company, (iv) certificates of public officials
and officers of the Company, and (v) other certificates and
documents relating to the transaction contemplated by the Note
Purchase Agreement.
We have assumed (i) the genuineness of all signatures (other
than on behalf of the Company), (ii) the authenticity of all
documents submitted to us as originals, (iii) the conformity to
original documents of all documents submitted to us as copies, and
(iv) the due authorization, execution and delivery of all
documents by you.
Based upon the foregoing and subject to the qualifications
expressed herein, we are of the opinion that:
1. The Company is a corporation validly existing and
in good standing under the laws of the State of Delaware, has
the corporate power and the corporate authority to execute
and perform the Note Purchase Agreement, and to issue the
Notes and has the corporate power and the corporate authority
to conduct the activities in which it is now engaged.
2. The Company is duly licensed or qualified and is in
good standing as a foreign corporation in each of the states
of Illinois, Indiana, Missouri, Tennessee andOklahoma.
EXHIBIT 4.4(a)
(to Note Purchase Agreement)
119
<PAGE> 65
3. Based solely upon advice of an officer of the Company
to that effect, without independent inquiry by us, the only
Subsidiaries of the Company which either own more than 5% of
the assets of the Company on a consolidated basis or, on a
most recent historical pro forma basis, account for more than
10% of the consolidated net income of the Company, are
Gardner Denver Holdings Inc., a Delaware corporation, and
Lamson Corporation, a New York corporation (collectively, the
"Relevant Subsidiaries"). Each Relevant Subsidiary is a
corporation validly existing and in good standing under the
laws of its jurisdiction of incorporation and, based solely
upon advice of an officer of the Company as to the character
of the properties owned or leased by each such Relevant
Subsidiary and the nature of the respective businesses
transacted by them, is not required to be licensed or
qualified in any other jurisdiction as a foreign corporation
and all of the issued and outstanding shares of capital stock
of each such Relevant Subsidiary have been validly issued, are
fully paid and nonassessable and are owned by the Company, by
one or more Relevant Subsidiaries, or by the Company and one
or more Relevant Subsidiaries.
4. The Note Purchase Agreement has been duly authorized
by all necessary corporate action on the part of the Company,
has been duly executed and delivered by the Company and
constitutes the legal, valid and binding contract of the
Company enforceable in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws affecting creditors'
rights generally, and general principles of equity
(regardless of whether the application of such principles is
considered in a proceeding in equity or at law).
5. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, and the Notes
being delivered on the date hereof have been duly executed and
delivered by the Company and constitute the legal, valid and
binding obligations of the Company enforceable in accordance
with their terms, subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar
laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application
of such principles is considered in a proceeding in equity or
at law).
6. No approval, consent or withholding of objection on
the part of, or filing, registration or qualification with,
any Governmental Authority, is necessary in connection with
the execution, delivery or performance by the Company of the
Note Purchase Agreement or the Notes.
7. The issuance and sale of the Notes and the
execution, delivery and performance by the Company of the Note
Purchase Agreement do not conflict with or result in any
breach of any of the provisions of or constitute a default
under or result in the creation or imposition of any Lien upon
any of the property of the Company pursuant to the provisions
of (i) the Certificate of Incorporation or the By-laws of the
Company, (ii) to the extent known to us after due inquiry of
the Company, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease or other agreement or
instrument to which the Company is a party or by which the
Company or any of its properties may be bound or affected,
(iii)
120
<PAGE> 66
to the extent known to us (there being none such known
to us), any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority applicable to the
Company, or (iv) any statute or other rule or regulation of
any Governmental Authority applicable to the Company.
8. The issuance of the Notes and the use of the
proceeds of the sale of the Notes in accordance with the
provisions of and contemplated by the Note Purchase Agreement
do not violate or conflict with Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
9. Based solely upon advice of an officer of the
Company to that effect, without independent inquiry by us,
there are no proceedings pending or threatened against or
affecting the Company or any Subsidiary in any court or before
any Governmental Authority which, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect.
10. The issuance, sale and delivery of the Notes under
the circumstances contemplated by the Note Purchase Agreement
do not, under existing law, require the registration of the
Notes under the Securities Act of 1933, as amended, or the
qualification of an indenture under the Trust Indenture Act
of 1939, as amended.
The opinion is being rendered to you in connection with
the transactions contemplated by the Note Purchase Agreement,
is solely for your benefit and for the benefit of any
subsequent permitted holders of the Notes, and may not be
relied upon by any other person, or referred to, in whole or
in part, in any document, in each case without our prior
written consent.
The foregoing opinion is limited by, and subject to,
the following:
(a) The opinions expressed herein are given as of
the date hereof. We assume no obligation to update
or supplement such opinions to reflect any fact or
circumstance that may hereafter come to our
attention or any change in law that may hereafter
become effective.
(b) This opinion is limited to the matters
expressly set forth herein and no opinion is to be
implied or may be inferred beyond the matters
expressly stated herein.
(c) We do not express any opinion as to the laws
of any jurisdiction other than the corporate laws
of the State of Delaware, the Federal law of the
United States and the laws of the State of Ohio.
To the extent that any of the opinions contained
herein require knowledge of or interpretation of
the laws of any state other than the State of Ohio
or the corporate laws of the State of Delaware, we
have assumed that the laws of such state are the
121
<PAGE> 67
same as the laws of the State of Ohio.
(d) The enforcement of the remedies set forth in the
Note Purchase Agreement is subject to the effect of any
requirement that the holders of the Notes act reasonably
and in good faith and in a commercially reasonable
manner.
(e) We express no opinion with respect to (i) the
enforcement of any provision requiring the payment of
attorney fees incurred in enforcing rights under the Note
Purchase Agreement or the Notes or (ii) any waiver of
rights by the Company beyond those permitted by
applicable law.
(f) We express no opinion as to the rights of the
holders of the Notes to exercise the remedies available
to them upon the happening of a non-material breach of
the Note Purchase Agreement.
Respectfully submitted,
122
<PAGE> 68
DESCRIPTION OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASER
The closing opinion of Chapman and Cutler, special counsel to
the Purchaser, called for by Section 4.4(b) of the Note Purchase
Agreement, shall be dated the date of Closing and addressed to the
Purchaser, shall be satisfactory in form and substance to the
Purchaser and shall be to the effect that:
1. The Company is a corporation validly existing and in
good standing under the laws of the State of Delaware, and
has the corporate power and the corporate authority to
execute and deliver the Note Purchase Agreement and to issue
the Notes.
2. The Note Purchase Agreement has been duly authorized
by all necessary corporate action on the part of the Company,
has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the
Company enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar
laws affecting creditors' rights generally, and general
Principles of equity (regardless of whether the application
of such principles is considered in a proceeding in equity or
at law).
3. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, and the Notes
being delivered on the date hereof have been duly executed
and delivered by the Company and constitute the legal, valid
and binding obligations of the Company enforceable in
accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is
considered in a proceeding in equity or at law).
4. The issuance, sale and delivery of the Notes under
the circumstances contemplated by the Note Purchase Agreement
do not, under existing law, require the registration of the
Notes under the Securities Act of 1933, as amended, or the
qualification of an indenture under the Trust Indenture Act
of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the
opinion of Squire, Sanders & Dempsey, special counsel for the
Company, is satisfactory in scope and form to Chapman and Cutler
and that, in their opinion, the Purchaser is justified in relying
thereon.
With respect to matters of fact upon which such opinion is
based, Chapman and Cutler may rely on appropriate certificates of
public officials and officers of the Company and upon
representations of the Company and the Purchaser delivered in
connection with the issuance and sale of the Notes.
The opinion of Chapman and Cutler may be limited to the laws
of the State of Illinois, the general business laws of the State
of Delaware and the Federal laws of the United States.
EXHIBIT 4.4(b)
(to Note Purchase Agreement)
123
<PAGE> 1
Exhibit 10.0
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of September 10, 1996 (this
"Amendment") to the Credit Agreement dated as of dated as of
November 30, 1995 (the "Credit Agreement") among Gardner Denver
Machinery Inc. (the "Borrower"), the Lenders party thereto and The
First National Bank of Chicago, as LC Issuer and as Agent for the
Lenders.
The parties hereto wish to amend the Credit Agreement in
certain respects and accordingly hereby agree as follows:
1. Definitions. Unless the context otherwise requires,
-----------
all terms used herein which are defined in the Credit Agreement
shall have the meanings assigned to them therein.
2. Amendment. Effective upon the satisfaction of the
---------
conditions precedent set forth in Section 4 of this Amendment, the
Credit Agreement shall be amended as follows:
(a) Clause (vi) of Section 6.12 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"(vi) Senior unsecured notes issued by the Borrower
from time to time in an aggregate principal
amount not to exceed $35,000,000 at any one
time outstanding and which have (y) an initial
weighted average life in excess of three (3)
years and (z) a final maturity date which is
subsequent to November 30, 1998."
3. Representations and Warranties. The Borrower hereby
------------------------------
confirms, reaffirms and restates as of the date hereof the
representations and warranties set forth in Article V of the
Credit Agreement provided that such representations and warranties
shall be and hereby are amended as follows: each reference
therein to "this Agreement", including, without limitation, such
a reference included in the term "Credit Documents", shall be
deemed to be a collective reference to the Credit Agreement, this
Amendment and the Credit Agreement as amended by this Amendment.
A Default under and as defined in the Credit Agreement as amended
by this Amendment shall be deemed to have occurred if any
representation or warranty made pursuant to the foregoing sentence
of this Section 3 shall be materially false as of the date on
which made.
4. Conditions Precedent. This Amendment and the
--------------------
amendment to the Credit Agreement provided for herein shall become
effective as of the date hereof when this Amendment shall have
been duly executed and delivered by the Agent and the Borrower on
one counterpart and Lenders constituting the Required Lenders
shall have signed a counterpart or counterparts hereof and
notified the Agent by facsimile or telephone that such action has
been taken and that such executed counterpart or counterparts will
be mailed or otherwise delivered to the Agent.
124
<PAGE> 2
5. Effect on the Existing Agreement. Except as
--------------------------------
expressly amended hereby, all of the representations, warranties,
terms, covenants and conditions of the Credit Agreement and the
other Credit Documents (a) shall remain unaltered, (b) shall
continue to be, and shall remain, in full force and effect in
accordance with their respective terms, and (c) are hereby
ratified and confirmed in all respects. Upon the effectiveness
of this Amendment, all references in the Credit Agreement
(including references in the Credit Agreement as amended by this
Amendment) to "this Agreement" (and all indirect references such
as "hereby", "herein", "hereof" and "hereunder") shall be deemed
to be references to the Credit Agreement as amended by this
Amendment.
6. Expenses. The Borrower shall reimburse the Agent for
--------
any and all reasonable costs, internal charges and out-of-pocket
expenses (including attorneys' fees and time charges of attorneys
for the Agent, which attorneys may be employees of the Agent) paid
or incurred by the Agent in connection with the preparation,
review, execution and delivery of this Amendment.
7. Entire Agreement. This Amendment, the Credit
----------------
Agreement as amended by this Amendment and the other Credit
Documents embody the entire agreement and understanding between
the parties hereto and supersede any and all prior agreements and
understandings between the parties hereto relating to the subject
matter hereof.
8. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO A NATIONAL BANKING ASSOCIATION LOCATED IN THE STATE
OF ILLINOIS.
9. Counterparts. This Amendment may be executed in any
------------
number of counterparts, all of which taken together shall
constitute one agreement, and any of the parties hereto may
execute this Amendment by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
GARDNER DENVER MACHINERY INC.
By:
------------------------------------
Title:
---------------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
Individually as a Lender and as Agent
By:
------------------------------------
Title:
---------------------------------
125
<PAGE> 3
THE BANK OF NEW YORK
By:
------------------------------------
Title:
---------------------------------
CAISSE NATIONAL DE CREDIT AGRICOLE
By:
------------------------------------
Title:
---------------------------------
HARRIS TRUST & SAVINGS BANK
By:
------------------------------------
Title:
---------------------------------
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
By:
------------------------------------
Title:
---------------------------------
126
<PAGE> 1
Exhibit 11.1
<TABLE>
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except per share amounts)
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
------ ------
<S> <C> <C>
Primary earnings
Net Income $3,735 $1,882
====== ======
Shares
Weighted average number of common
shares outstanding 4,889 4,771
Assuming conversion of options issued
and outstanding 234 170
------ ------
Weighted average number of common
shares outstanding as adjusted 5,123 4,941
====== ======
Primary earnings per common share $0.73 $0.38
====== ======
Fully diluted earnings<F*>
Net Income $3,735 $1,882
====== ======
Shares
Weighted average number of common
shares outstanding 4,889 4,771
Assuming conversion of options issued
and outstanding 251 173
------ ------
Weighted average number of common
shares outstanding as adjusted 5,140 944
====== ======
Fully diluted earnings per common share $0.73 $0.38
====== ======
<FN>
<F*>This calculation is submitted in accordance with Securities
Exchange Act of 1934 Release No. 9083 although not required by
footnote 2 to paragraph 14 of APB Opinion No. 15 because it
results in dilution of less than 3%.
</TABLE>
127
<PAGE> 1
Exhibit 11.2
<TABLE>
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except per share amounts)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
------- ------
<S> <C> <C>
Primary earnings
Net Income $11,287 $7,155
======= ======
Shares
Weighted average number of common
shares outstanding 4,861 4,747
Assuming conversion of options issued
and outstanding 212 118
------- ------
Weighted average number of common
shares outstanding as adjusted 5,073 4,865
======= ======
Primary earnings per common share $2.23 $1.47
======= ======
Fully diluted earnings<F*>
Net Income $11,287 $7,155
======= ======
Shares
Weighted average number of common
shares outstanding 4,861 4,747
Assuming conversion of options issued
and outstanding 231 137
------- ------
Weighted average number of common
shares outstanding as adjusted 5,092 4,884
======= ======
Fully diluted earnings per common share $2.22 $1.47
======= ======
<FN>
<F*>This calculation is submitted in accordance with Securities
Exchange Act of 1934 Release No. 9083 although not required by
footnote 2 to paragraph 14 of APB Opinion No. 15 because it
results in dilution of less than 3%.
</TABLE>
128
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF GARDNER DENVER
MACHINERY INC. FOR THE YEAR-TO-DATE PERIOD ENDED SEPTEMBER 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 16,012
<SECURITIES> 0
<RECEIVABLES> 49,575
<ALLOWANCES> (2,806)
<INVENTORY> 47,800
<CURRENT-ASSETS> 115,133
<PP&E> 131,373
<DEPRECIATION> (97,023)
<TOTAL-ASSETS> 245,705
<CURRENT-LIABILITIES> 52,486
<BONDS> 69,956
<COMMON> 49
0
0
<OTHER-SE> 67,836
<TOTAL-LIABILITY-AND-EQUITY> 245,705
<SALES> 152,980
<TOTAL-REVENUES> 154,002
<CGS> 106,480
<TOTAL-COSTS> 106,509
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 66
<INTEREST-EXPENSE> 2,000
<INCOME-PRETAX> 19,074
<INCOME-TAX> 7,629
<INCOME-CONTINUING> 11,287
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,287
<EPS-PRIMARY> 2.23
<EPS-DILUTED> 2.22
</TABLE>
