FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 29, 1996
Commission File Number: 0-23400
DT INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 44-0537828
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1949 E. Sunshine, Suite 2-300, Springfield, Missouri 65804
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(Address of principal executive offices)
(Zip Code)
(417) 890-0102
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(registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares of Common Stock, $0.01 par value, of the registrant
outstanding as of October 31, 1996 was 9,011,875.
<PAGE>
DT INDUSTRIES, INC.
Index
Page 1
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Page
Number
Part I Financial Information
Item 1. Financial Statements (Unaudited, except as noted)
Consolidated Balance Sheet at September 29, 1996
and June 30, 1996 (audited) 2
Consolidated Statement of Operations for the
three months ended September 29, 1996 and
September 24, 1995 3
Consolidated Statement of Changes in
Stockholders' Equity for the three months
ended September 29, 1996 4
Consolidated Statement of Cash Flows for the
three months ended September 29, 1996 and
September 24, 1995 5-6
Notes to Consolidated Financial Statements 7-14
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 15-24
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 25
Signature
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Balance Sheet
(Dollars in Thousands Except Per Share Data)
Page 2
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<TABLE>
<CAPTION>
September 29, June 30,
1996 1996
(Unaudited)
------------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,653 $ 1,210
Accounts receivable, net 34,940 32,092
Costs and estimated earnings in excess
of amounts billed on uncompleted contracts 58,088 19,130
Inventories, net 38,636 31,403
Prepaid expenses and other 6,699 10,153
------------- -------------
Total current assets 141,016 93,988
Property, plant and equipment, net 44,204 36,713
Goodwill, net 157,753 101,187
Other assets, net 3,989 1,955
------------- -------------
$ 346,962 $ 233,843
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 15,922 $ 8,481
Accounts payable 34,627 19,621
Customer advances 17,534 17,201
Accrued liabilities 24,063 22,524
------------- -------------
Total current liabilities 92,146 67,827
------------- -------------
Long-term debt 153,695 70,846
Deferred income taxes 5,261 4,756
Other long-term liabilities 3,495 2,530
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Total long-term obligations 162,451 78,132
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Commitments and contingencies (See notes 10 and 11)
Stockholders' equity:
Preferred stock, $0.01 par value; 1,500,000 shares
authorized; no shares issued and outstanding
Common stock, $0.01 par value; 100,000,000 shares
authorized; 9,009,375 and 9,001,250 shared issued
issued and outstanding at September 29, 1996 and
June 30, 1996, respectively 90 90
Additional paid-in capital 61,367 61,255
Retained earnings 30,908 26,539
------------- -------------
Total stockholders' equity 92,365 87,884
------------- -------------
$ 346,962 $ 233,843
============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Statement of Operations
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 3
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<TABLE>
<CAPTION>
Three months ended
-------------------------------
September 29, September 24,
1996 1995
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<S> <C> <C>
Net sales $ 82,635 $ 44,788
Cost of sales 59,870 33,547
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Gross profit 22,765 11,241
Selling, general and
administrative expenses 11,588 6,625
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Operating income 11,177 4,616
Interest expense 2,715 761
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Income before provision for
income taxes and extraordinary loss 8,462 3,855
Provision for income taxes 3,589 1,629
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Income before extraordinary loss 4,873 2,226
Extraordinary loss on debt refinancing less
applicable income tax benefits of $216 324
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Net income $ 4,549 $ 2,226
============= =============
Primary earnings per common share:
Income before extraordinary loss $ 0.52 $ 0.25
Extraordinary loss 0.04
------------- -------------
Net income $ 0.48 $ 0.25
============= =============
Weighted average common shares 9,415,738 9,000,000
============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Statement of Changes in Stockholders' Equity
For the Three Months Ended September 29, 1996
(Dollars in Thousands Except Per Share Data)
Page 4
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<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock Capital Earnings Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, June 30, 1996 $ 90 $ 61,255 $ 26,539 $ 87,884
Exercise of stock options (unaudited) 112 112
Net income for the three months ended
September 29, 1996 (unaudited) 4,549 4,549
Cash dividend at $0.02 per common share
(unaudited) (180) (180)
------------ ------------ ------------ ------------
Balance, September 29, 1996
(unaudited) $ 90 $ 61,367 $ 30,908 $ 92,365
============ ============ ============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Statement of Cash Flows
(Dollars in Thousands)
(Unaudited)
Page 5
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<TABLE>
<CAPTION>
Three months ended Three months ended
September 29, 1996 September 24, 1995
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,549 $ 2,226
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 1,307 884
Amortization 1,087 557
Deferred income tax provision 200 (194)
Other 12
(Increase) decrease in current assets, excluding the
effect of acquisitions:
Accounts receivable (1,072) 4,602
Costs and earnings in excess of amounts billed (16,512) (3,601)
Inventories (4,801) 2,077
Prepaid expenses and other 2,787 (915)
Increase (decrease) in current liabilities,
excluding the effect of acquisitions:
Accounts payable 8,214 1,304
Accrued liabilities (3,701) 349
Customer advances (678) 1,424
Other 16 18
------------------ ------------------
Net cash provided (used) by operating activities (8,592) 8,731
------------------ ------------------
Cash flows from investing activities:
Capital expenditures (2,417) (2,070)
Acquisition of Mid-West Automation Enterprises, Inc. stock,
net of cash acquired of $21,572
(75,179)
Acquisition of H.G. Kalish Inc. net assets, net of cash
acquired of $709 (16,424)
Other (200)
------------------ ------------------
Net cash used by investing activities (77,796) (18,494)
------------------ ------------------
</TABLE>
(continued)
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Consolidated Statement of Cash Flows
(Dollars in Thousands)
(Unaudited)
(continued)
Page 6
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<TABLE>
<CAPTION>
Three months ended Three months ended
September 29, 1996 September 24, 1995
------------------ ------------------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of debt 62,450 22,239
Repayments of term loans (155) (11,750)
Net borrowings (repayments) on revolving loans 28,009 (173)
Repayments of capital leases and other long-
term obligations (42) (54)
Financing costs (2,363)
Exercise of stock options 112
Dividends (180) (180)
------------------ ------------------
Net cash provided by financing activities 87,831 10,082
------------------ ------------------
Net increase in cash 1,443 319
Cash and cash equivalents at beginning of period 1,210 646
------------------ ------------------
Cash and cash equivalents at end of period $ 2,653 $ 965
================== ==================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 7
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1. Unaudited consolidated financial statements
The accompanying unaudited consolidated financial statements of DT
Industries, Inc. (DTI or the Company) have been prepared in accordance
with the instructions for Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. However, in the opinion of
management, such information includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
results of operations for the periods presented. Operating results for
any quarter are not necessarily indicative of the results for any other
quarter or for the full year. These statements should be read in
conjunction with the consolidated financial statements and notes to the
consolidated financial statements thereto included in the Company's Form
10-K Annual Report for the fiscal year ended June 30, 1996.
2. Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.
3. Acquisitions
On July 19, 1996, DTI purchased the outstanding stock of Mid-West
Automation Enterprises, Inc. (Mid-West), a designer and manufacturer of
integrated precision assembly systems, in a transaction accounted for
under the purchase method of accounting. The purchase price of
approximately $75,179, net of cash acquired, was financed by borrowings
under the Second Amended and Restated Credit Facilities Agreement. The
purchase price has been preliminarily allocated to the acquired assets
and assumed liabilities based on their estimated fair value at the date
of acquisition. The excess of purchase price over the estimated fair
value of net assets acquired has been recorded as goodwill. The
accompanying consolidated financial statements include the results of
Mid-West from the date of acquisition.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 8
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In August 1995 and September 1995, respectively, the Company acquired
certain assets of and assumed certain liabilities of H.G. Kalish Inc.
(Kalish) and Arrow Precision Elements, Inc. (Arrow). The Company also
acquired the stock of Swiftpack Automation Limited (Swiftpack) in
November 1995 and Assembly Machines, Inc. (AMI) in January 1996. See the
consolidated financial statements and notes thereto included in the
Company's Form 10-K Annual Report for the fiscal year ended June 30, 1996
for additional information relating to these acquisitions.
The following table sets forth pro forma information for DTI as if the
acquisitions of Kalish, Arrow, Swiftpack, AMI and Mid-West had taken
place on July 1, 1996 and June 26, 1995, respectively. This information
is unaudited and does not purport to represent actual net sales, income
before extraordinary loss and earnings per share before extraordinary
loss had the acquisitions actually occurred on July 1, 1996 and June 26,
1995:
PRO FORMA INFORMATION
FOR THE PERIODS
July 1, 1996 June 26, 1995
to to
September 29, 1996 September 24, 1995
------------------ ------------------
Net sales $ 89,807 $ 78,538
Income before extraordinary loss $ 5,113 $ 4,263
Earnings per share
before extraordinary loss $ 0.54 $ 0.47
Weighted average
shares outstanding 9,415,738 9,000,000
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 9
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4. Revenue Recognition
The percentage of completion method of accounting is used by the
Company's Special Machines segment to recognize revenues and related
costs. Under the percentage of completion method, revenues for customer
contracts are measured based on the ratio of engineering and
manufacturing labor hours incurred to date compared to total estimated
engineering and manufacturing labor hours or, for certain customer
contracts, the ratio of total costs incurred to date to total estimated
costs. Any revisions in the estimated total labor hours, total costs or
values of the contracts during the course of the work are reflected when
the facts that require the revisions become known. Revenue from the sale
of products manufactured by the Company's Components segment is
recognized upon shipment to the customer.
Costs and related expenses to manufacture the products are recorded as
cost of sales when the related revenue is recognized. Provisions for
estimated losses on uncompleted contracts are made in the period in which
such losses are determined.
5. Foreign Currency Translation
The accounts of the Company's foreign subsidiaries are maintained in
their local currency. Assets and liabilities are translated into U.S.
dollars using period-end exchange rates, and statement of operations
items are translated using weighted average exchange rates for the
period. Adjustments resulting from the process of translating the
accounts into U.S. dollars are accumulated in a separate translation
account, included in stockholders' equity. Foreign currency transaction
gains and losses are included in current earnings. The cumulative
translation adjustment account and foreign currency transaction gains and
losses are not considered material.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 10
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6. Earnings per share
The computation of primary earnings per share was based on the weighted
average number of outstanding common shares during the period plus, when
the effect was dilutive, common stock equivalents consisting of certain
shares subject to stock options and contingent purchase price payable in
common stock related to an acquired business. The common equivalent
shares arising from the effect of outstanding stock options was computed
using the treasury stock method, if dilutive. The number of contingent
shares used in the primary calculation was based on the average stock
price for the prior fiscal year and the end of the period stock price
assuming maintenance of current earnings. As all potentially dilutive
securities are considered common stock equivalents, there was not a
material difference between primary and fully diluted earnings per share.
7. Supplemental balance sheet information
September 29, 1996 June 30, 1996
(Unaudited)
------------------ ------------------
Inventories, net:
Raw materials $ 15,581 $ 14,814
Work in process 18,357 12,145
Finished goods 4,698 4,444
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$ 38,636 $ 31,403
================== ==================
Accrued liabilities:
Accrued employee
compensation and benefits $ 8,245 $ 6,030
Taxes payable and related
reserves 6,107 5,120
Product liability 1,773 1,711
Other 7,938 9,663
------------------ ------------------
$ 24,063 $ 22,524
================== ==================
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 11
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8. Financing
As of September 29, 1996 and June 30, 1996, long-term debt consisted of
the following:
September 29, 1996 June 30, 1996
(Unaudited)
------------------ ------------------
Term loans to banks $ 110,240 $ 47,917
Loan Notes 13,974 13,974
Revolving loans to banks 44,758 16,749
Capital lease obligations and other
long-term debt 645 687
------------------ ------------------
169,617 79,327
Less - current portion of
long-term debt (15,922) (8,481)
------------------ ------------------
$ 153,695 $ 70,846
================== ==================
During July 1996, the Company entered into a Second Amended and Restated
Credit Facilities Agreement for $200,000 provided by two institutions.
The agreement provides for a $55,000 revolving credit facility, a
$104,000 term loan, a $20,000 acquisition facility and a $21,000 foreign
currency denominated letter of credit. The term loan requires quarterly
principal payments ranging from $4,750 to $5,500 commencing in January
1997 with final maturity on July 23, 2001. Borrowings under the agreement
bear interest at prime or LIBOR (at the option of DTI) plus a specified
percentage based on the ratio of funded debt to operating cash flow. At
September 29, 1996, interest rates on these facilities ranged from 7.2
percent to 8.5 percent. Borrowing availability for the revolver is based
on percentages of the Company's eligible accounts receivable, eligible
inventory and outstanding letters of credit. The Company had excess
borrowing availability of $8,817 relating to the revolving credit
facility at September 29, 1996. The credit facility is secured by
substantially all of the assets of DTI and its subsidiaries and contains
certain financial and other covenants and restrictions. In conjunction
with entering into the new credit facility, the Company recognized an
extraordinary loss in July 1996 of $324 attributable to the write-off of
$540 unamortized deferred financing fees, net of related $216 tax
benefit.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 12
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In connection with the acquisition of Swiftpack on November 23, 1995, DT
Industries (UK) Limited (DTUK), a wholly-owned subsidiary, entered into
the Credit Agreement, Specific Counter-Indemnity and Debenture with a
foreign bank. The foreign credit facility was used for the cash portion
of the purchase price of Swiftpack and will be used for funding the
redemption of five fixed rate guaranteed promissory notes (Loan Notes)
entered into with certain of the prior shareholders. The aggregate
principal amount of the Loan Notes is $13,974. The Loan Notes bear
interest at 5.3%, are redeemable by the noteholders between November 25,
1996 and December 23, 1996 and are guaranteed by the foreign credit
facility. The aggregate principal amount of the foreign credit facility
is approximately $21,000. The foreign credit facility bears interest at
a variable rate based on LIBOR (approximately 7.9% including letter of
credit fees at September 29, 1996). Principal payments thereunder ranging
from $155 to $400 are due quarterly with the remaining principal due
August 16, 2000.
In connection with the issuance of the Loan Notes, the Company entered
into a foreign exchange forward contract to offset exchange gains and
losses related to the Loan Notes recorded by the foreign subsidiary. The
contract matures November 26, 1996 and provides the purchase of the
equivalent of $13,974 of Pounds Sterling at a rate of $1.5457 per Pound
Sterling.
The Company has revolving credit facilities through its foreign
subsidiaries of approximately $3,000, of which $1,467 was outstanding at
September 29, 1996.
To manage its exposure to fluctuations in interest rates, on June 28,
1995, the Company entered into an interest rate swap agreement for a
notional principal amount of $30,000, maturing June 29, 1998. Swap
agreements involve the exchange of interest obligations on fixed and
floating interest-rate debt without the exchange of the underlying
principal amount. The differential paid or received on the swap agreement
is recognized as an adjustment to interest expense. The swap agreement
requires the Company to pay a fixed rate of 6.06% in exchange for a
floating rate payment equal to the three month LIBOR determined on a
quarterly basis with settlement occurring on specific dates. Amounts
accruing under the swap agreement did not result in a material amount of
additional interest expense for the three months ended September 29,
1996.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 13
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9. Stock option plans
A summary of stock option transactions pursuant to the 1994 Employee
Stock Option Plan and the 1994 Directors Non-Qualified Stock Option Plan
follows:
AVERAGE SHARES SUBJECT
PRICE TO OPTION
-------------- --------------
Summary of Stock Options
Beginning of period, June 30, 1996 $13.86 662,250
Options granted 18.44 260,950
Options exercised 13.78 (8,125)
Options cancelled 18.25 (1,000)
--------------
End of period, September 29, 1996 $15.18 914,075
==============
Exercisable at September 29, 1996 86,224
==============
On September 18, 1996, the Board of Directors of the Company adopted the
Long-Term Incentive Plan (the "Plan"), subject to stockholder approval
prior to June 29, 1997. The Plan will become effective on the date of its
approval by the stockholders. The Plan provides for the granting of four
types of awards on a stand alone, combination, or a tandem basis,
specifically, nonqualified stock options, incentive stock options,
restricted shares and performance stock awards. The Plan provides for the
granting of up to a total of 600,000 shares of common stock, provided that
the total number of shares with respect to which awards are granted in any
one year may not exceed 100,000 shares to any individual employee and
200,000 shares in the aggregate, and the total number of shares with
respect to which grants of restricted and performance stock awards are
made in any year shall not exceed 50,000 shares to any individual employee
and 100,000 shares in the aggregate.
<PAGE>
DT INDUSTRIES, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Page 14
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10. Commitments and contingencies
The Company is a party to certain lawsuits involving employee matters,
product liability and other matters. Management and legal counsel do not
expect the outcome of any litigation to have a material adverse effect on
the Company's financial position, results of operations or liquidity.
The fiscal 1990, 1991, 1992 and 1993 federal income tax returns for DTI
and its predecessor company, Detroit Tool Group, Inc., have been audited
by the Internal Revenue Service (the IRS). During the fourth quarter of
fiscal 1996, the Company reached an agreement in principle to settle
these periods with the IRS. The additional taxes due under the agreement
are not material to the Company's financial position, results of
operations or liquidity. The Company expects the matter to be settled
during the fiscal year. There are no other material audits underway or
notification of audits for DTI or any of its subsidiaries.
11. Subsequent Events
On September 30, 1996, DTI completed the acquisition of Hansford
Manufacturing Corporation (Hansford), a privately held designer and
manufacturer of automated assembly systems, in a transaction accounted
for under the purchase method of accounting. The purchase price of
approximately $17,400 was financed under the Company's credit facility
which was increased concurrent with the acquisition to $210,000 from
$200,000. DTI also agreed to make additional cash payments totaling up to
$20,000, payable over a two-year period beginning in approximately three
years. The amount, if any, will be determined by a formula based on the
earnings of the acquired business. Any additional purchase price paid is
expected to result in additional goodwill. As the transaction occurred
subsequent to the end of the first quarter, Hansford's balance sheet and
results of operations are excluded from the consolidated balance sheet
and results of operations of DTI.
On October 28, 1996, the Company filed a registration statement with the
Securities and Exchange Commission. As amended on November 1, 1996, the
registration statement relates to the proposed offering of up to
5,847,750 shares of its common stock, including up to 762,750 shares
subject to an underwriters' over-allotment option. The proposed offering
includes up to 2,562,500 shares to be sold by the Company and up to
3,285,250 shares to be sold by certain selling stockholders. Net proceeds
to the Company from the offering will be used to reduce indebtedness. The
Company will not receive any proceeds for the sales by the selling
stockholders.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 15
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GENERAL OVERVIEW
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of DT Industries,
Inc. (DTI or the Company) for the three months ended September 29, 1996
compared to the three months ended September 24, 1995. This discussion
should be read in conjunction with the consolidated financial statements
and notes to the consolidated financial statements thereto included in
the Company's Form 10-K for the fiscal year ended June 30, 1996.
In fiscal year 1996, the Company acquired the net assets of H. G. Kalish
Inc. (Kalish) and Arrow Precision Elements, Inc. (Arrow). The Company
also acquired the stock of Swiftpack Automation Limited (Swiftpack) and
Assembly Machines, Inc. (AMI). During the three months ended September
29, 1996, the Company acquired the stock of Mid-West Automation
Enterprises, Inc. (Mid-West). The acquisitions are elements of a business
strategy to acquire companies with proprietary products and manufacturing
capabilities which have strong market and technological positions in the
niche markets they serve and to accelerate the Company's goal of
providing customers a full range of integrated automated systems. The
Company believes that emphasis on complementary acquisitions of companies
serving target markets allows it to broaden its product offerings and to
provide customers a single source for complete integrated automation
systems. The acquisitions also expand the Company's base of customers,
creating greater opportunities for cross-selling among the various
divisions of the Company.
The Company operates in two business segments, Special Machines and
Components. The Special Machines segment designs and builds integrated
systems, custom equipment, and proprietary machines used by customers in
manufacturing, testing and packaging various products in a wide variety
of industries. The Components segment stamps and fabricates a wide range
of standard and custom metal components. Gross margins of the Special
Machines segment may vary from period to period as a result of the
variations in profitability of contracts for large orders of special
machines. In addition, changes in the product mix in a given period
affect gross margins for the Special Machines segment. Operating margins
for the Special Machines segment differ from the Components segment.
Higher operating expenses for the Special Machines segment result from
the following: additional staffing required for sales and engineering
support; research and development activities; higher levels of goodwill
amortization and greater investment in sales and marketing programs.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 16
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The percentage of completion method of accounting is used by the
Company's Special Machines segment to recognize revenues and related
costs. Under the percentage of completion method, revenues for customer
contracts are measured based on the ratio of engineering and
manufacturing labor hours incurred to date compared to total estimated
engineering and manufacturing labor hours or, for certain customer
contracts, the ratio of total costs incurred to date to total estimated
costs. Any revisions in the estimated total costs or values of the
contracts during the course of the work are reflected when the facts that
require the revisions become known. Revenue from the sale of products
manufactured by the Company's Components segment is recognized upon
shipment to the customer.
Costs and related expenses to manufacture the products are recorded as
cost of sales when the related revenue is recognized. Provisions for
estimated losses on uncompleted contracts are made in the period in which
such losses are determined.
Certain information contained herein, particularly the information
appearing under the headings "Results of Operations", "Liquidity and
Capital Resources" and "Backlog" includes forward-looking statements.
These statements which, at the time made, speak about the future, are
based upon the Company's interpretation of what it believes are
significant factors affecting its businesses and are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Actual results could differ materially from those anticipated in
any forward-looking statements as a result of various factors, including
economic downturns in industries served, delays or cancellations of
customer orders, delays in shipping dates of products, significant cost
overruns on certain projects, foreign currency exchange rate fluctuations
and possible future acquisitions that may not be complementary or
additive. Additional information regarding certain important factors that
could cause actual results of operations or outcomes of other events to
differ materially from any such forward-looking statement appears
elsewhere herein, including under the heading "Seasonality and
Fluctuations in Quarterly Results".
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 17
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of consolidated net sales represented by certain items reflected in the
Company's consolidated statement of operations:
Three months
Ended
September 29, September 24,
1996 1995
------------- -------------
Net sales 100.0% 100.0%
Cost of sales 72.5 74.9
------------- -------------
Gross profit 27.5 25.1
Selling, general and
administrative expenses 14.0 14.8
------------- -------------
Operating income 13.5 10.3
Interest expense 3.3 1.7
------------- -------------
Income before provision
for income taxes and extraordinary loss 10.2 8.6
Provision for income taxes 4.3 3.6
------------- -------------
Income before extraordinary loss 5.9 5.0
Extraordinary loss on debt refinancing 0.4
------------- -------------
Net income 5.5% 5.0%
============= =============
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 18
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THREE MONTHS ENDED SEPTEMBER 29, 1996
COMPARED TO THREE MONTHS ENDED SEPTEMBER 24, 1995
NET SALES
Consolidated net sales increased $37.8 million, or 84.5%, to $82.6
million for the three months ended September 29, 1996 from $44.8 million
for the three months ended September 24, 1995. Of the $37.8 million
increase in sales, $32.2 million was due to the incremental sales of
recently acquired businesses, with the remaining $5.6 million increase
relating to increased sales from existing businesses. Recently acquired
businesses include Kalish in August 1995, Arrow in September 1995,
Swiftpack in November 1995, AMI in January 1996 and Mid-West in July
1996.
Sales by the Special Machines segment increased $36.8 million and sales
by the Components segment increased $1.0 million. The increase in sales
by the Special Machines segment was due to an increase in sales from
existing businesses of $5.8 million, or 16.2%, over the first quarter of
fiscal 1996 and $31.0 million in incremental sales from recently-acquired
businesses. Sales from existing businesses were up $2.9 million primarily
due to substantially larger projects with existing assembly systems
customers. These increases reflect international expansion by certain
customers and increased penetration into new markets. The remaining
increase of $2.9 million primarily resulted from an increase in sales of
proprietary branded plastics packaging equipment and welding equipment.
The increase in sales by the Components segment of $1.0 million was
substantially due to incremental sales arising from the Arrow
acquisition. Sales from existing components businesses were steady
despite a reduction in demand for products from customers in the
transportation industry. The reduced sales to customers in the
transportation industry were offset by the substantial increase in sales
to a customer outside the transportation industry.
GROSS PROFIT
Gross profit increased $11.6 million, or 102.5%, to $22.8 million for the
three months ended September 29, 1996 from $11.2 million for the three
months ended September 24, 1995, as a result of the sales increases
discussed above and gross margin improvements. The gross margin increased
to 27.5% from 25.1%. Gross margin exclusive of acquired operations
increased to 26.3%, reflecting general gross margin improvement in the
Special Machines segment, particularly on welding equipment contracts,
and gross margin improvement in the Components segment as a result of
production efficiencies on new parts business.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 19
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SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES
SG&A expenses increased $5.0 million, or 74.9%, to $11.6 million for the
three months ended September 29, 1996 from $6.6 million for the three
months ended September 24, 1995. Approximately $3.8 million of the
increase was due to recently acquired businesses, with the remaining
increase the result of personnel additions, increased travel costs,
increased investment in marketing activities, higher compensation expense
and increased professional and banking fees, most of which related to the
overall growth of the Company. As a percentage of consolidated net sales,
SG&A expenses decreased to 14.0% from 14.8%. The percentage decrease
resulted primarily from lower SG&A expenses associated with acquired
businesses.
OPERATING INCOME
Operating income increased $6.6 million, or 142.1%, to $11.2 million for
the three months ended September 29, 1996 from $4.6 million for the three
months ended September 24, 1995, as a result of the factors noted above.
The operating margin increased to 13.5% from 10.3% in the prior year.
INTEREST EXPENSE
Interest expense increased to $2.7 million for the three months ended
September 29, 1996 from $0.8 million for the three months ended September
24, 1995. The increase in interest expense resulted primarily from the
increase in the debt level of the Company to finance recent acquisitions.
INCOME TAXES
Provision for income taxes increased to $3.6 million for the three months
ended September 29, 1996 from $1.6 million for the three months ended
September 24, 1995, reflecting an effective tax rate of approximately
42.4% and 42.2% for each period, respectively. This rate differs from
statutory rates due to permanent differences primarily related to
non-deductible goodwill amortization on certain acquisitions.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 20
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NET INCOME
Income before extraordinary loss increased to $4.9 million for the three
months ended September 29, 1996 from $2.2 million for the three months
ended September 24, 1995 as a result of the factors noted above. The
Company recognized an extraordinary loss in July 1996 of $0.3 million, or
$0.04 per share, attributable to the write-off of $0.5 million
unamortized deferred financing fees, net of related $0.2 million tax
benefit. As a result, net income was $4.5 million, or $0.48 per share.
Primary earnings per share before the extraordinary loss were $0.52 for
the three months ended September 29, 1996 versus $0.25 for the three
months ended September 24, 1995. The weighted average common shares
outstanding for the three months ended September 29, 1996 were 9,415,738
versus 9,000,000 for the three months ended September 24, 1995. The
increase pertains to certain common stock equivalents, including stock
options and the estimated contingent shares which may be issuable in
conjunction with the Kalish acquisition, which are dilutive in the
current fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Net income plus non-cash operating charges provided $7.2 million of
operating cash flow for the quarter ended September 29, 1996. Net
increases in working capital balances used operating cash of $15.8
million, resulting in net cash used by operating activities of $8.6
million for the quarter ended September 29, 1996. The net increase in
working capital reflected the increased level of manufacturing activity
occurring at the Company, particularly in the Special Machines segment.
Additionally, the Special Machines segment has been working on several
significant individual contracts which do not provide for advance
payments. These factors resulted in a $16.5 million increase in costs and
earnings in excess of amounts billed and a $4.8 million increase in
inventory, partially offset by an $8.2 million increase in accounts
payable.
During the three months ended September 24, 1995, net cash provided by
operating activities was $8.7 million. Net decreases in working capital
balances resulted in net cash provided of $5.3 million, primarily as a
result of a decrease in accounts receivable and inventories and an
increase in accounts payable and customer advances. These effects were
partially offset by an increase in costs and earnings in excess of
amounts billed. The decrease in accounts receivable was due primarily to
cash received during the quarter related to significant fourth quarter
fiscal 1995 shipments.
Working capital balances can fluctuate significantly between periods as a
result of the significant costs incurred on individual contracts and the
relatively large amount invoiced and collected by the Company for a
number of large contracts.
During the three months ended September 29, 1996, financing activities
raised $87.8 million, net of $2.4 million of financing costs and
$0.2 million in dividends, primarily to fund the acquisition of
Mid-West for $75.2 million, net of cash acquired. The net cash
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 21
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provided by financing activities was also used to finance capital
expenditures of $2.4 million and fund working capital requirements.
During the three months ended September 24, 1995, cash provided by
operating activities was used to finance capital expenditures of
approximately $2.1 million and pay dividends of $0.2 million. Net
borrowings of the Company increased by approximately $10.3 million in the
three months ended September 24, 1995, primarily due to the acquisition
of Kalish for $16.4 million, which was partially offset by the cash
generated from operating activities in excess of capital expenditures and
dividends.
On July 19, 1996, the Company acquired the issued and outstanding stock
of Mid-West in a transaction accounted for under the purchase method of
accounting. The purchase price paid by the Company of approximately $75.2
million, net of cash acquired, was obtained by the Company pursuant to
the Company's Second Amended and Restated Credit Facilities Agreement,
which replaced the Company's previous credit agreement. The facility of
$200 million provided by two institutions included a $55 million
revolving credit facility, a $104 million term loan, a $20 million
acquisition facility and a $21 million foreign currency denominated
letter of credit. The facility was amended in September 1996 as described
below. The term loan requires quarterly principal payments ranging from
$4.8 million to $5.5 million commencing in January 1997 with final
maturity on July 23, 2001. Borrowings under the agreement bear interest
at prime or LIBOR (at the option of DTI) plus a specified percentage
based on the ratio of funded debt to operating cash flow. At September
29, 1996, interest rates on these facilities ranged from 7.2% to 8.5%.
Borrowing availability for the revolver is based on percentages of the
Company's eligible accounts receivable, eligible inventory and
outstanding letters of credit. The Company had excess borrowing
availability of $8.8 million relating to the revolving credit facility at
September 29, 1996. The credit facility is secured by substantially all
of the assets of DTI and its subsidiaries and contains certain financial
and other covenants and restrictions. In conjunction with entering into
this credit facility, the Company recognized an extraordinary loss in
July 1996 of $0.3 million attributable to the write-off of $0.5 million
unamortized deferred financing fees, net of related $0.2 million tax
benefit.
On November 23, 1995, the Company, through its wholly-owned subsidiary,
DT Industries (UK) Limited (DTUK), acquired ninety-five percent (95%) of
the issued and outstanding stock of Swiftpack and an option (the Option)
to acquire the remaining five percent (5%) of Swiftpack stock. The
acquisition was financed by entering into a Credit Agreement, Specific
Counter-Indemnity and Debenture with a foreign bank (collectively, the
Foreign Credit Agreement) which provided approximately $5.3 million in
cash and will provide funding of the principal amount of $14 million in
notes (Loan Notes) upon their maturity. The Loan Notes issued
by DTUK directly to certain of the prior shareholders bear interest
at 5.3% and mature the earlier of November 25, 1996, at the
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 22
- --------------------------------------------------------------------------------
holder's option, or December 23, 1996. The Foreign Credit Agreement
provided funding of approximately $0.9 million upon the exercise of the
Option in July 1996. The Foreign Credit Agreement is denominated in a
foreign currency and bears interest at a variable rate based upon LIBOR
(approximately 7.9% including letter of credit fees at September 29,
1996). Principal payments are due quarterly with the remaining principal
balance due on August 16, 2000. Principal payments range from
approximately $0.2 million to $0.4 million. The Foreign Credit Agreement
is secured by the letter of credit facility provided through the Second
Amended and Restated Credit Facilities Agreement.
The Company also maintains revolving credit facilities of approximately
$3.0 million through its foreign subsidiaries. At September 29, 1996,
total outstanding indebtedness under such facilities was $1.5 million.
To manage its exposure to fluctuations in interest rates, the Company
entered into an interest rate swap agreement in June 1995 for a notional
principal amount of $30 million, maturing June 29, 1998. Swap agreements
involve the exchange of interest obligations on fixed and floating
interest-rate debt without the exchange of the underlying principal
amount. The differential paid or received on the swap agreement is
recognized as an adjustment to interest expense. The swap agreement
requires the Company to pay a fixed rate of 6.06% in exchange for a
floating rate payment equal to the three month LIBOR determined on a
quarterly basis with settlement occurring on specific dates.
On September 30, 1996, the Company completed the acquisition of Hansford
Manufacturing Corporation (Hansford), a designer and manufacturer of
automated assembly systems, for a cash purchase price of approximately
$17.4 million, of which $8.5 million will be paid on June 30, 1997. The
purchase price was financed under the acquisition facility of the
Company's Second Amended and Restated Credit Facilities Agreement.
Additionally, the Company amended the credit facility to increase the
total facility to $210 million from $200 million with the revolving
credit facility increasing to $65 million from $55 million.
On October 28, 1996, the Company filed a registration statement with the
Securities and Exchange Commission. As amended on November 1, 1996, the
registration statements relates to the proposed offering of up to
5,847,750 shares of its common stock, including up to 762,750 shares
subject to an underwriters over-allotment option. The proposed offering
includes up to 2,562,500 shares to be sold by the Company and up to
3,285,250 shares to be sold by certain selling stockholders. The net
proceeds to be received by the Company from the offering are estimated to
be approximately $84.4 million (approximately $96.7 million if the
over-allotment option is exercised in full) based on the market price of
the Common Stock on October 30, 1996. The Company will not receive any
proceeds from the sales by the selling stockholders. The net proceeds to
be received by the Company are expected to be used to reduce indebtedness
bearing interest at a weighted average rate of approximately
7.5% and maturing on July 23, 2001. Under terms of the credit
facility, the prepayment of indebtedness through the application
of proceeds of the offering is expected to result in a
reduction in interest rates of 0.75% per annum on borrowings
outstanding under the credit facility. In addition, the prepayment of
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 23
- --------------------------------------------------------------------------------
indebtedness will establish a loan commitment equal to the amount of the
reduction in indebtedness, which will be available for use by the Company
to finance future acquisitions for up to two years following the
consummation of the offering.
Management anticipates that capital expenditures in the current fiscal
year and future years will include recurring replacement or refurbishment
of machinery and equipment, which will approximate depreciation expense,
and purchases to improve production methods or processes or to expand
manufacturing capabilities. Subsequent to completion of current building
expansion programs, the Company believes that its principal manufacturing
facilities have sufficient capacity to accommodate future internal growth
without major additional capital improvements.
The Company paid quarterly cash dividends of $0.02 per share on September
13, 1996 to stockholders of record on August 30, 1996.
Based on its ability to generate funds from operations and the
availability of funds under its current credit facilities, the Company
believes that it will have sufficient funds available to meet its
currently anticipated operating and capital expenditure requirements.
TAX MATTERS
The Company files a consolidated federal income tax return. The fiscal
1990, 1991, 1992 and 1993 federal income tax returns for DTI and its
predecessor company, Detroit Tool Group, Inc., have been audited by the
Internal Revenue Service (the IRS). During the fourth quarter of fiscal
1996, the Company reached an agreement in principle to settle these
matters with the IRS. The additional taxes due under the agreement are
not material to the Company's financial position, results of operations
or liquidity and are expected to be paid prior to December 31, 1996.
There are no other material audits underway or notification of audits for
DTI or any of its subsidiaries.
BACKLOG
The Company's backlog is based upon customer purchase orders that the
Company believes are firm. As of September 29, 1996, the Company had
$179.1 million of orders in backlog, which compares to a backlog of
approximately $98.0 million as of September 24, 1995. Of the $81.1
million increase, $79.9 million is due to the acquisitions of Mid-West,
AMI, and Swiftpack.
The backlog for the Special Machines segment at September 29, 1996 was
$168.5 million, which increased $76.1 million from a year ago. Backlog
for the Components segment increased $5.0 million to $10.6 million from
$5.6 million. The level of backlog at any particular time is not
necessarily indicative of the future operating performance of the
Company. Additionally, certain purchase orders are subject to
cancellation by the customer upon notification. Certain orders are also
subject to delays in completion and shipment at the request of the
customer. The Company believes most of the orders in the backlog will be
recognized as sales during the current fiscal year.
<PAGE>
DT INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Page 24
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SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS
In general, the Company's business is not subject to seasonal variations
in demand for its products. However, because orders for certain of the
Company's products can be several million dollars or more, a relatively
limited number of orders can constitute a meaningful percentage of the
Company's revenue in any one quarterly period. As a result, a relatively
small reduction or delay in the number of orders can have a material
impact on the timing of recognition of the Company's revenues. Certain of
the Company's revenues are derived from fixed price contracts. To the
extent that original cost estimates prove to be inaccurate, profitability
from a particular contract may be adversely affected. Gross margins in
the Special Machines segment may vary between comparable periods as a
result of the variations in profitability of contracts for large orders
of special machines as well as product mix between the various types of
custom and proprietary equipment manufactured by the Company.
Accordingly, results of operations of the Company for any particular
quarter are not necessarily indicative of results that may be expected
for any subsequent quarter or related fiscal year.
<PAGE>
DT INDUSTRIES, INC.
PART II. Other Information
Page 25
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ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10.1 - Agreement and Plan of Merger dated September
23, 1996 by and among H022 Corporation, a New York Corporation
(the Buyer), DT Industries, Inc., Hansford Manufacturing
Corporation, a New York corporation, and the Stockholder
listed therein
Exhibit 10.2 - Indemnification and Escrow Agreement by and
among Hansford Manufacturing Corporation, DT Industries, Inc.,
the Stockholder and Manufacturers and Traders Trust Company, a
New York Bank, as escrow agent
Exhibit 10.3 - Lease Agreement by and between Van Buren N.
Hansford, Jr., the Stockholder and Landlord, and Hansford
Manufacturing Corporation, the Tenant, dated as of September
30, 1996
Exhibit 10.4 - Amendment to the Second Amended and Restated
Credit Facilities Agreement, dated September 30, 1996, among
The Boatmen's National Bank of St. Louis and the other lenders
listed therein and DT Industries, Inc. and the other borrowers
listed therein
Exhibit 11 - Statement Regarding Computation of Earnings Per
Share
(b) Reports on Form 8-K:
On August 5, 1996 a Current Report on Form 8-K was filed to
report, pursuant to Item 2 thereof, the acquisition of
Mid-West Automation Enterprises, Inc. On September 23, 1996,
an Amendment to such Current Report was filed to include
financial statements of Mid-West for the fiscal years ended
May 26, 1996, May 28, 1995 and May 29, 1994 and pro forma
financial information required to be included in such report.
On September 19, 1996 a Current Report on Form 8-K was filed
to report, pursuant Item 5 and Item 7 thereof, the release of
the Company's audited consolidated financial statements for
the fiscal year ended June 30, 1996.
<PAGE>
DT INDUSTRIES, INC.
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.
DT INDUSTRIES, INC.
Date: November 8, 1996 /s/ Bruce P. Erdel
----------------------------------------
(Signature)
Bruce P. Erdel
Vice President - Finance and
Secretary
(Principal Financing and Accounting
Officer)
<PAGE>
EXHIBIT INDEX
Page No. in
Sequential
Exhibit No. Description Numbering System
- ----------- ----------- ----------------
10.1 Agreement and Plan of Merger dated
September 23, 1996 by and among H022
Corporation, a New York Corporation
(the Buyer), DT Industries, Inc.,
Hansford Manufacturing Corporation,
a New York corporation, and the
Stockholder listed therein
10.2 Indemnification and Escrow Agreement
by and among Hansford Manufacturing
Corporation, DT Industries, Inc.,
the Stockholder and Manufacturers
and Traders Trust Company, a New
York Bank, as escrow agent
10.3 Lease Agreement by and between
Van Buren N. Hansford, Jr., the
Stockholder and Landlord, and
Hansford Manufacturing Corporation,
the Tenant, dated as of September 30,
1996
10.4 Amendment to the Second Amended and
Restated Credit Facilities Agreement,
dated September 30, 1996, among The
Boatmen's National Bank of St. Louis
and the other lenders listed therein
and DT Industries, Inc. and the other
borrowers listed therein
11 Statement Regarding Computation of
Earnings Per Share
AGREEMENT and Plan of Merger
by and among
H022 Corporation,
DT Industries, Inc.,
Hansford Manufacturing Corporation
and
the Stockholder listed herein
September 23, 1996
<PAGE>
Table of Contents
PAGE
RECITALS 1
ARTICLE I - DEFINITIONS 1
Section 1.1 Definitions 1
Section 1.2 Interpretive Rules 5
ARTICLE II - THE MERGER 5
Section 2.1 The Merger 5
Section 2.2 Effective Time of the Merger 5
Section 2.3 Certificate of Incorporation 5
Section 2.4 By-Laws 5
Section 2.5 Directors and Officers 5
Section 2.6 Conversion of Shares 6
Section 2.7 Closing of the Company Transfer Books 6
Section 2.8 Supplementary Action 6
ARTICLE III - MERGER CONSIDERATION; CLOSING 6
Section 3.1 Merger Consideration Determination 6
Section 3.2 Payment of Merger Consideration 7
Section 3.3 Payment for Stock 8
Section 3.4 Additional Merger Consideration 9
Section 3.5 Closing 9
ARTICLE IV - ADDITIONAL AGREEMENTS 9
Section 4.1 Indemnification and Escrow Agreement 9
Section 4.2 Stockholder Release 9
Section 4.3 Lease Agreement 10
Section 4.4 Employment and Noncompetition Agreement 10
Section 4.5 HSR Act 10
Section 4.6 Termination of Agreements 10
Section 4.7 Payment of Indebtedness 10
<PAGE>
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE COMPANY 10
Section 5.1 Corporate Organization 10
Section 5.2 Valid and Binding Agreement 11
Section 5.3 No Violation 11
Section 5.4 Consents and Approvals 12
Section 5.5 Capitalization 12
Section 5.6 Subsidiaries and Affiliates 12
Section 5.7 Financial Statements 13
Section 5.8 Absence of Undisclosed Liabilities 13
Section 5.9 Interim Operations and Absence of Certain Changes 13
Section 5.10 Taxes 15
Section 5.11 Employee Benefit Plans 17
Section 5.12 Compliance with Law 19
Section 5.13 Litigation; Claims 19
Section 5.14 Contracts and Commitments 19
Section 5.15 Intellectual Property Rights 20
Section 5.16 Liens 20
Section 5.17 Insurance 21
Section 5.18 Accounts Receivable and Accounts Payable 21
Section 5.19 Inventories and Backlog 21
Section 5.20 Tangible Personal Property 22
Section 5.21 Real Property 22
Section 5.22 Environmental Matters 23
Section 5.23 Governmental Authorizations 24
Section 5.24 Employees 25
Section 5.25 Employee Relations 25
Section 5.26 Customers and Vendors 25
Section 5.27 Distributors and Representatives 26
Section 5.28 Broker's or Finder's Fees 26
Section 5.29 Disclosure 26
Section 5.30 Certain Transactions 26
Section 5.31 Absence of Questionable Payments 26
Section 5.32 Directors and Officers; Bank Accounts 27
-ii-
<PAGE>
Section 5.33 Defects in Products or Designs; Product Safety 27
Section 5.34 Product Warranties 27
Section 5.35 Government Contracts 27
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER 27
Section 6.1 Ownership of Stock 27
Section 6.2 Valid and Binding Agreements 28
Section 6.3 No Violation 28
Section 6.4 Consents and Approvals 28
Section 6.5 Broker's or Finder's Fees 28
Section 6.6 Section 630 Liability 29
Section 6.7 Residency 29
ARTICLE VII - REPRESENTATIONS AND WARRANTIES OF THE BUYER AND
THE GUARANTOR 29
Section 7.1 Corporate Organization 29
Section 7.2 Valid and Binding Agreements 29
Section 7.3 No Violation 29
Section 7.4 Consents and Approvals 30
Section 7.5 Broker's or Finder's Fees 30
ARTICLE VIII - COVENANTS 30
Section 8.1 Compliance with Law 30
Section 8.2 Operation of Business Prior to Closing 30
Section 8.3 Access 32
ARTICLE IX - CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE BUYER AND THE GUARANTOR 33
Section 9.1 Representations and Warranties 33
Section 9.2 Covenants, Agreements and Conditions 33
Section 9.3 Proceedings 33
Section 9.4 Corporate Proceedings 33
Section 9.5 Governmental Approvals 33
Section 9.6 No Material Adverse Effect 33
-iii-
<PAGE>
Section 9.7 Insurance 34
Section 9.8 Deliveries 34
Section 9.9 HSR Act Requirements 34
Section 9.10 Opinion of Counsel 35
Section 9.11 Tax Status Certification 35
Section 9.12 Consents 35
Section 9.13 Evidence of Termination 35
Section 9.14 Releases of Liens 35
Section 9.15 Releases of Stock Pledges 35
Section 9.16 Payment of Indebtedness 35
Section 9.17 Repayment of Certain Debt 35
Section 9.18 Lease Extension 35
Section 9.19 Approval of Lenders 36
ARTICLE X - CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE COMPANY AND THE STOCKHOLDERS 36
Section 10.1 Representations and Warranties 36
Section 10.2 Covenants, Agreements and Conditions 36
Section 10.3 Proceedings 36
Section 10.4 Corporate Proceedings 36
Section 10.5 Governmental Approvals 37
Section 10.6 Deliveries 37
Section 10.7 HSR Act Requirements 37
Section 10.8 Opinion of Counsel 37
Section 10.9 Repayment of Certain Debt 37
Section 10.10 Letter of Credit 37
ARTICLE XI - TAX MATTERS 38
Section 11.1 Certain Tax Elections 38
Section 11.2 Change in Tax Status 38
Section 11.3 Certain Distributions 38
ARTICLE XII - OTHER MATTERS 39
Section 12.1 Confidentiality 39
Section 12.2 Further Assurances 39
-iv-
<PAGE>
ARTICLE XIII - TERMINATION 39
Section 13.1 Methods of Termination 39
Section 13.2 Procedure Upon Termination 40
ARTICLE XIV - MISCELLANEOUS 40
Section 14.1 Survival of Representations, Warranties and
Agreements 40
Section 14.2 Service of Process 41
Section 14.3 Notices 41
Section 14.4 Governing Law 42
Section 14.5 Modification; Waiver 42
Section 14.6 Entire Agreement 42
Section 14.7 Assignment; Successors and Assigns 42
Section 14.8 Public Announcements 42
Section 14.9 Severability 43
Section 14.10 No Third Party Beneficiary 43
Section 14.11 Expenses 43
Section 14.12 Execution in Counterpart 43
EXHIBIT A Form of Closing Certificate
EXHIBIT B Form of Indemnificatino and Escrow Agreement
EXHIBIT C Principles and Procedures
EXHIBIT D Form of Certificate of Incorporation
EXHIBIT E Additional Merger Consideration
EXHIBIT F Form of Stockholder Releases
EXHIBIT G Form of Lease
EXHIBIT H Form of Employment and Noncompetitition Agreement
EXHIBIT I Form of Opinion of Harter, Secrest & Emery
Schedule 2.5 Officers and Directors
Schedule 5.1 Foreign Qualifications
Schedule 5.4 Consents and Approvals
-v-
<PAGE>
Schedule 5.5 Capitalization
Schedule 5.6 Subsidiaries and Affiliates
Schedule 5.7 Company Audited Financial Statements
Schedule 5.7A Company Unaudited Financial Statements
Schedule 5.8 Liabilities and Obligations
Schedule 5.9 Changes During Interim Operations
Schedule 5.10 Tax Matters
Schedule 5.11 Employee Benefit Plans
Schedule 5.13 Litigation; Claims
Schedule 5.14 Contracts and Commitments
Schedule 5.15 Intellectual Property Rights
Schedule 5.16 Liens
Schedule 5.17 Insurance
Schedule 5.18 Accounts Receivable and Accounts Payable
Schedule 5.19 Inventories and Backlog
Schedule 5.20 Tangible Personal Property Owned
Schedule 5.20A Tangible Personal Property Leased
Schedule 5.21 Real Property Leased
Schedule 5.22 Environmental Matters
Schedule 5.23 Governmental Authorizations
Schedule 5.24 Employees
Schedule 5.26 Customers and Vendors
Schedule 5.27 Distributors and Representatives
Schedule 5.30 Certain Transactions
Schedule 5.32 Directors and Officers; Bank Accounts
Schedule 5.33 Defects in Products or Designs
Schedule 6.1 Encumbrances on Stock
Schedule 7.5 Broker's or Finder's Fees
Schedule 9.14 Releases of Liens
-vi-
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of September
23, 1996, by and among H022 Corporation, a New York corporation (the "Buyer"),
DT Industries, Inc., a Delaware corporation (the "Guarantor"), Hansford
Manufacturing Corporation, a New York corporation (the "Company"), and VanBuren
N. Hansford, Jr., the sole stockholder of the Company (the "Stockholder").
RECITALS
WHEREAS, the respective boards of directors of the Buyer and the Company
have approved the merger of the Buyer with and into the Company (the "Merger"),
pursuant to and subject to the conditions set forth herein;
WHEREAS, the Guarantor, as the owner of all of the issued and outstanding
capital stock of Advanced Assembly Automation, Inc., an Ohio corporation, which
owns all the issued and outstanding capital stock of the Buyer, has agreed to
guaranty the Buyer's obligations hereunder; and
WHEREAS, the Buyer, the Company and the Stockholder desire to make certain
representations, warranties and agreements in connection with the Merger and to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants which are to be made and performed by
the respective parties, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
The following terms when used in this Agreement have the meanings set forth
below:
(a) "Accountants" means Cortland L. Brovitz & Co., P.C., independent
certified public accountants of the Company.
(b) "Affiliate" means any Person now or hereinafter controlling, controlled
by or under common control with another Person.
(c) "Arbitrator" has the meaning set forth in Section 3.1(b)(iii).
(d) "BCL" means the New York Business Corporation Law.
(e) "CERCLA" has the meaning set forth in Section 5.22(a).
(f) "CERCLIS" has the meaning set forth in Section 5.22(f).
(g) "Certificate of Merger" has the meaning set forth in Section 2.2.
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(h) "Claims Amount Escrow Fund" has the meaning set forth in Section
3.2(b).
(i) "Closing" has the meaning set forth in Section 3.5.
(j) "Closing Certificate" means the certificate of the Company
substantially in the form attached hereto as Exhibit A.
(k) "Closing Date" has the meaning set forth in Section 3.5.
(l) "Closing Report" has the meaning set forth in Section 3.1(b).
(m) "Closing Statements" has the meaning set forth in Section 3.1(b).
(n) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(o) "Company Financial Statements" has the meaning set forth in Section
5.7.
(p) "Company Interim Financial Statements" has the meaning set forth in
Section 5.7.
(q) "Constituent Corporations" means the Buyer and the Company.
(r) "Debt" means all long-term indebtedness, including the Revolving Credit
Line and the Term Loan, and current portions thereof, including outstanding
principal and interest and any success fees, prepayment premiums, make-whole
premiums or penalties, for borrowed money of the Company owed as of the Closing
Date, all indebtedness and distributions payable to the Stockholder and his
Affiliates, the Retiree Benefits Liabilities, the Deferred Compensation
Liability and the Working Capital Adjustment. It being understood that, to the
extent any current liability is included in the determination of Working
Capital, it should not again be included as a separate item of debt.
(s) "Debt Adjustment" is equal to the excess, if any, of the Debt (as
finally determined in accordance with Section 3.1(b)) over Fifteen Million
Dollars ($15,000,000), such that (i) if the Debt exceeds $15,000,000 then the
Debt Adjustment is equal to the amount of such excess; or (ii) if the Debt is
equal to or less than $15,000,000, then the Debt Adjustment is equal to zero
(0).
(t) "Deferred Compensation Liability" is equal to Five Hundred Thousand
Dollars ($500,000).
(u) "Deferred Merger Consideration Amount" means that portion of the Merger
Consideration which is not to be made available for payment at the Closing, but
which shall be paid in the manner set forth in Section 3.2(g).
(v) "Effective Time" has the meaning set forth in Section 2.2.
(w) "Environmental Laws" has the meaning set forth in Section 5.22(c).
(x) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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(y) "Escrow Agent" means the escrow agent selected by the parties to act
pursuant to the Indemnification and Escrow Agreement.
(z) "Escrow Amount" has the meaning set forth in Section 3.2(b).
(aa) "Estimated Debt Adjustment" means the estimated Debt Adjustment of the
Company determined as of the Closing Date and set forth on the Closing
Certificate.
(ab) "Estimated Merger Consideration" means the amount payable to the
Stockholder pursuant to Section 3.2(a).
(ac) "Estimated Working Capital Adjustment" means the estimated Working
Capital Adjustment of the Company determined as of the Closing Date and set
forth on the Closing Certificate.
(ad) "GAAP" means generally accepted accounting principles of the United
States applied in a manner consistent with past practice of the Company.
(ae) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
(af) "Hazardous Material" has the meaning set forth in Section 5.22(a).
(ag) "Indemnification and Escrow Agreement" means an indemnification and
escrow agreement substantially in the form attached hereto as Exhibit B.
(ah) "Intellectual Property" means any and all inventions, Marks (including
trademarks, service marks, certification marks, collective marks, and collective
membership marks whether word, logo, or other forms of Marks, all of the
foregoing collectively referred to as "Marks"), trade names, copyrights,
applications therefor, patents thereon, registrations thereof and licenses
thereof, royalty rights, any and all goodwill associated with the business or
represented by the assets of the Company, trade secrets, secret processes and
procedures, engineering, production, assembly, installation and design
encompassed in any and all embodiments including, but not limited to technical
drawings and specifications, working notes and memos, market studies,
consultants' reports, technical and laboratory data, competitive samples,
engineering prototypes, and confidential information, know-how, and all similar
property of any nature, tangible or intangible, including all property listed or
described on Schedule 5.15.
(ai) "IRS" means the United States Internal Revenue Service.
(aj) "Leased Improvements" has the meaning set forth in Section 5.21(b).
(ak) "Leased Property" has the meaning set forth in Section 5.21(b).
(al) "Material Adverse Effect" means, with respect to any Person, any
event, fact, condition, occurrence or effect which is materially adverse to the
business, properties, assets, liabilities, capitalization, stockholders equity,
financial condition, operations, licenses or other franchises, results of
operations or prospects of such Person.
(am) "Merger Consideration" has the meaning set forth in Section 3.1(a).
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(an) "Merger Consideration Escrow Fund" has the meaning set forth in
Section 3.2(b).
(ao) "Pension Plans" has the meaning set forth in Section 5.11(c)(i).
(ap) "Permits" has the meaning set forth in Section 5.23.
(aq) "Permitted Encumbrances" has the meaning set forth in Section 9.14.
(ar) "Person" means and includes an individual, a partnership, a joint
venture, a corporation or trust, an unincorporated organization, a group or a
government or other department or agency thereof.
(as) "Plans" has the meaning set forth in Section 5.11(a).
(at) "Price Waterhouse" means Price Waterhouse LLP, certified public
accountants for the Buyer.
(au) "Principles and Procedures" means the accounting principles and
procedures set forth on Exhibit C.
(av) "Retiree Benefits Liabilities" is equal to Three Hundred Thousand
Dollars ($300,000).
(aw) "Revolving Credit Line" means that certain Line of Credit Agreement
between the Company and Manufacturers and Traders Trust Company, as more
particularly set forth in Schedule 5.14 hereof.
(ax) "Stock" means the common stock of the Company, par value $.01 per
share.
(ay) "Stockholder Release" has the meaning set forth in Section 4.2.
(az) "Surviving Corporation" has the meaning set forth in Section 2.1.
(ba) "Tax" has the meaning set forth in Section 5.10(c).
(bb) "Taxing Authority" has the meaning set forth in Section 5.10(a).
(bc) "Tax Return" has the meaning set forth in Section 5.10(d).
(bd) "Term Loan" means that certain Term Loan Agreement between the Company
and Manufacturers and Traders Trust Company, as more particularly set forth on
Schedule 5.14 hereof.
(be) "Working Capital" means the excess as of the Closing Date of (i) the
Company's current assets over (ii) the Company's non-interest bearing current
liabilities, each as determined in accordance with the Principles and
Procedures.
(bf) "Working Capital Adjustment" means the amount, if any, by which the
Working Capital (as finally determined in accordance with Section 3.1(b)) is
less than Twelve Million Five Hundred Forty Thousand Dollars ($12,540,000).
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Section 1.2 Interpretive Rules.
For purposes of this Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires: (a) defined terms include the
plural as well as the singular and the use of any gender shall be deemed to
include the other gender; (b) references to "Articles," "Sections" and other
subdivisions and to "Schedules" and "Exhibits" without reference to a document,
are to designated Articles, Sections and other subdivisions of, and to Schedules
and Exhibits to, this Agreement; (c) the use of the term "including" means
"including but not limited to"; and (d) the words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular provision.
ARTICLE II
THE MERGER
Section 2.1 The Merger.
At the Effective Time, the Buyer shall be merged with and into the Company
in accordance with the applicable provisions of the BCL and the separate
existence of the Buyer shall thereupon cease, and the Company, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall continue its
corporate existence in accordance with the BCL under the name Hansford
Manufacturing Corporation.
Section 2.2 Effective Time of the Merger.
At the Closing, the Company shall cause the Merger to be consummated by
filing with the Secretary of State of New York an appropriate certificate of
merger (the "Certificate of Merger") duly executed in accordance with this
Agreement and the BCL. The date and time at which the Certificate of Merger is
filed is referred to herein as the "Effective Time."
Section 2.3 Certificate of Incorporation.
The Certificate of Incorporation of the Company as amended and restated in
the form set forth as Exhibit D shall be the Certificate of Incorporation of the
Surviving Corporation.
Section 2.4 By-Laws.
The By-Laws of the Buyer as in effect at the Effective Time shall be the
By-Laws of the Surviving Corporation.
Section 2.5 Directors and Officers.
The directors of the Surviving Corporation at the Effective Time shall be
the directors of the Buyer in office immediately prior to the Effective Time, as
set forth on Schedule 2.5, to serve in accordance with the By-Laws of the
Surviving Corporation. The officers of the Surviving Corporation at the
Effective Time shall be the officers of the Buyer immediately prior to the
Effective Time, as set forth on Schedule 2.5, to serve in accordance with the
By-Laws of the Surviving Corporation.
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Section 2.6 Conversion of Shares.
At the Effective Time, by virtue of the Merger and without any action on
the part of the holder of any securities of the Constituent Corporations:
(a) each share of Stock then outstanding, other than Stock to be canceled
pursuant to Section 2.6(b), and all rights with respect thereto, shall be
converted into and represent the right to receive the amounts of cash set forth
in Sections 3.1 and 3.4, payable as provided in Sections 3.2 and 3.4 and subject
to adjustment as provided in Sections 3.1 and 3.2;
(b) each share of Stock, if any, held in the Company's treasury or owned
beneficially by the Buyer shall be canceled and retired without payment of any
consideration therefor; and
(c) each issued and outstanding share of common stock of the Buyer, $0.01
par value per share, outstanding immediately prior to the Effective Time shall
remain outstanding and unchanged as a share of common stock of the Surviving
Corporation.
Section 2.7 Closing of the Company Transfer Books.
At the Effective Time, the stock transfer books of the Company shall be
closed and there shall be no further registration of transfers of Stock
thereafter. If, after the Effective Time, subject to the terms and conditions of
this Agreement, certificates representing any such shares are presented to the
Surviving Corporation, they shall be canceled and exchanged for cash in
accordance with Section 2.6.
Section 2.8 Supplementary Action.
If at any time after the Effective Time, any further assignments or
assurances in law or any other things are necessary or desirable to vest or to
perfect or confirm of record in the Surviving Corporation the title to any
property or rights of either of the Constituent Corporations, or otherwise to
carry out the provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered on behalf of the
respective Constituent Corporations, in the name of and on behalf of the
appropriate Constituent Corporation, to execute and deliver any and all things
necessary or proper to vest or to perfect or confirm title to such property or
rights in the Surviving Corporation, and otherwise carry out the purposes and
provisions of this Agreement.
ARTICLE III
MERGER CONSIDERATION; CLOSING
Section 3.1 Merger Consideration Determination.
(a) Merger Consideration. The aggregate merger consideration (the "Merger
Consideration") shall be (i) Ten Million Dollars ($10,000,000) minus (ii) the
sum of the Debt Adjustment and the amount distributed pursuant to Section
8.2(i)(ii).
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(b) Determination of Debt Adjustment and Working Capital Adjustment. The
amount of the Debt Adjustment and Working Capital Adjustment shall be determined
in the following manner:
(i) Closing Statements; Review. Promptly after the Closing Date, the
Surviving Corporation will prepare statements in accordance with this Agreement
and the Principles and Procedures which shall set forth Debt, Debt Adjustment,
Working Capital and Working Capital Adjustment (the "Closing Statements"). Price
Waterhouse, at the Surviving Corporation's expense, will audit the Closing
Statements in accordance with U.S. generally accepted auditing standards and the
Principles and Procedures and issue their report as to the results of such audit
(the "Closing Report"). Within forty-five (45) days after the Closing Date, the
Surviving Corporation will deliver the Closing Statements and Closing Report to
the Stockholder. Upon request by the Stockholder, the Surviving Corporation
shall direct Price Waterhouse to deliver drafts of the Closing Statements and
Closing Report to the Accountants for review and analysis at least ten (10) days
prior to final issuance of the Closing Statements and Closing Report and
delivery to the Stockholder as noted above. The Accountants shall have the
opportunity to review and evaluate all working papers, worksheets and other
documents utilized by the Surviving Corporation in the preparation of the
Closing Statements and by Price Waterhouse in the audit of the Closing
Statements. Price Waterhouse and the Accountants will attempt to resolve any
disputed items prior to issuance of the Closing Statements and Closing Report.
(ii) Review by the Parties. Failing such resolution, the Stockholder
will provide the Surviving Corporation within fifteen (15) days of receipt of
the Closing Statements and Closing Report detailed written explanations of any
disputed items in the Closing Statements and the Closing Report. The amount of
the Debt Adjustment and Working Capital Adjustment not affected by the disputed
items will be deemed to be as set forth in the Closing Statements and Closing
Report. Within a further period of ten (10) days from the end of the
aforementioned review period, the parties will attempt to resolve in good faith
any disputed items.
(iii) Arbitration. Failing resolution pursuant to paragraph (ii)
above, the unresolved disputed items will be referred for final binding
resolution to such nationally-recognized firm of certified public accountants
as the parties may hereafter jointly select (the "Arbitrator"). Such referral
shall be in the form of written statements of position by the Stockholder, the
Surviving Corporation, Price Waterhouse and the Accountants, with each party
having an opportunity to respond to such written statements and any requests for
statements or information by the Arbitrator. If the Arbitrator determines that
the resolution of a given disputed item requires an interpretation of law, then,
with the permission of the parties, the Arbitrator may request a law firm of
national standing chosen by it to render a legal opinion as to such matter. The
amount of the Debt Adjustment and Working Capital Adjustment affected by such
unresolved disputed items (if any) will be as determined by the Arbitrator. The
cost of such Arbitrator's review (including reasonable attorneys' fees, if any)
shall be borne by the party or parties as determined by the Arbitrator.
Section 3.2 Payment of Merger Consideration.
(a) Estimated Merger Consideration. At the Closing, the Buyer shall pay the
Stockholder, as provided in Section 3.3, (i) Ten Million Dollars ($10,000,000)]
minus (ii) the sum of (A) the Estimated Debt Adjustment, (B) the Deferred Merger
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Consideration Amount, (C) the Escrow Amount to be deposited with the Escrow
Agent pursuant to Section 3.2(b), and (D) the amount distributed pursuant to
Section 8.2(i)(ii).
(b) Escrow Amount. On June 30, 1997, the Buyer shall deposit Two Million
Dollars ($2,000,000) (the "Escrow Amount") with the Escrow Agent pursuant to the
terms of the Indemnification and Escrow Agreement. The Escrow Amount shall
constitute a Claims Amount Escrow Fund in the amount of Two Million Dollars
($2,000,000). To secure its obligation to make the deposit of the Escrow Amount
pursuant to this Section 3.2(b), the Buyer shall provide the Escrow Agent at the
Closing with an irrevocable standby letter of credit reasonably satisfactory to
the Stockholder.
(c) Closing Certificate. At the Closing, the chief financial officer of the
Company shall deliver to the Buyer, after prior consultation with Price
Waterhouse, the Closing Certificate, which shall set forth his or her best
estimate of the Estimated Debt Adjustment and the Estimated Working Capital
Adjustment.
(d) Closing Adjustment. The Debt Adjustment and Working Capital Adjustment
shall be computed based upon the Closing Report, by the agreement of the parties
or by the Arbitrator, as the case may be, and the Closing Adjustment shall be
paid within ten (10) business days thereafter. For the purposes of this
Agreement, the "Closing Adjustment" shall be equal to the Debt Adjustment minus
the Estimated Debt Adjustment. If the Closing Adjustment is a positive number,
that amount shall be paid by the Stockholder to the Surviving Corporation. If
the Closing Adjustment is a negative number, such amount shall be paid by the
Surviving Corporation to the Stockholder.
(e) Interest. All sums to be paid subsequent to the Closing Date pursuant
to this Section 3.2 shall bear interest from and after June 30, 1997, until so
paid, at the rate which is equal to the rate of interest actually earned on the
Escrow Amount during such period, computed on the basis of a 365-day year and
paid for the actual number of days elapsed. Interest calculated in accordance
with this Section 3.2(e) shall be due and payable on the date on which the
corresponding payment is due.
(f) Form of Payments. All payments hereunder, other than payments
originating from the Merger Consideration Escrow Fund or the Claims Amount
Escrow Fund, shall be made by delivery to the recipient by mailing checks to the
recipient or depositing, by bank wire transfer, the required amount (in
immediately available funds) in an account of the recipient, which account shall
be designated by the recipient at least three (3) business days prior to the
date of the required payment.
(g) Deferred Merger Consideration. The portion of the Estimated Merger
Consideration which exceeds One Million Dollars ($1,000,000) shall be paid by
the Surviving Corporation on June 30, 1997. The Surviving Corporation's
obligation to pay the portion of the Estimated Merger Consideration referred to
in this Section 3.2(g) shall be secured by an irrevocable standby letter of
credit reasonably satisfactory to the Stockholder, which shall be delivered at
the Closing.
Section 3.3 Payment for Stock.
(a) At the Effective Time, the Buyer shall make available for disbursement
in accordance with this Agreement, the aggregate Estimated Merger Consideration.
Upon surrender to the Buyer of an outstanding certificate or certificates,
together with an endorsement or stock power in blank, duly executed, the Buyer
shall disburse to the Stockholder in accordance with this Agreement the pro rata
share of the Estimated Merger Consideration attributable to each such
certificate. Until so
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surrendered, each certificate which immediately prior to the Effective Time
represented outstanding Stock shall be deemed for all corporate purposes to
evidence only the right to receive upon such surrender the pro rata share of the
Estimated Merger Consideration. No interest shall accrue or be paid on any cash
payable upon the surrender of a certificate or certificates which immediately
prior to the Effective Time represented outstanding Stock. If outstanding
certificates for shares of the Company are not surrendered, or the cash payment
therefor not claimed prior to six years after the Effective Time (or, in any
particular case, prior to such earlier date on which such cash payment would
otherwise escheat to or become the property of any governmental unit or agency),
the unclaimed amounts shall, to the extent permitted by applicable law, become
the property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
(b) If the Merger Consideration (or any portion thereof) is to be delivered
to a person other than the person in whose name the certificates surrendered in
exchange therefor are registered, it shall be a condition to the payment of such
Merger Consideration that the certificates so surrendered shall be properly
endorsed or accompanied by appropriate stock powers and otherwise in proper form
for transfer, that such transfer otherwise be proper and that the person
requesting such transfer pay to the Buyer any transfer or other taxes payable by
reason of the foregoing or establish to the satisfaction of the Buyer that such
taxes have been paid or are not required to be paid. Appropriate procedures
shall be implemented to deal with lost stock certificates.
Section 3.4 Additional Merger Consideration.
Notwithstanding Sections 3.1 and 3.3 of this Article, the Buyer agrees to
make certain additional payments to the Stockholder in the form, amounts and at
the time determined in accordance with Exhibit E.
Section 3.5 Closing.
The closing of the transactions contemplated hereby (the "Closing") shall
take place at the offices of Harter, Secrest & Emery, 700 Midtown Tower,
Rochester, New York on September 30, 1996, or at such other place, time or date
as may be agreed upon by the parties hereto (the "Closing Date").
ARTICLE IV
ADDITIONAL AGREEMENTS
Section 4.1 Indemnification and Escrow Agreement.
At the Closing, the Surviving Corporation, the Guarantor, the Stockholder
and the Escrow Agent will enter into the Indemnification and Escrow Agreement,
pursuant to which the Buyer shall deliver the Escrow Amount to be held in escrow
by the Escrow Agent.
Section 4.2 Stockholder Release.
At the Closing, the Stockholder shall deliver to the Surviving Corporation
a release substantially in the form attached hereto as Exhibit F (the
"Stockholder Release").
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Section 4.3 Lease Agreement.
At the Closing, the Surviving Corporation shall enter into an agreement
with VanBuren N. Hansford, Jr. for the lease of the premises known as 3111
Winton Road South, Rochester, New York, such agreement to be substantially in
the form attached hereto as Exhibit G.
Section 4.4 Employment and Noncompetition Agreement.
In order to protect the Buyer's investment in the Business of the Company,
at the Closing, VanBuren N. Hansford, Jr. shall enter into an employment and
noncompetition agreement with the Surviving Corporation or an Affiliate, such
agreement to be substantially in the form attached hereto as Exhibit H.
Section 4.5 HSR Act.
The Buyer, the Company and the Stockholder agree to furnish to each other
such necessary information and reasonable assistance as may be requested in
connection with any necessary filings or submissions required pursuant to the
HSR Act.
Section 4.6 Termination of Agreements.
All agreements, whether written or oral, direct or indirect, between the
Company and the Stockholder or his Affiliates, including any guaranties of any
obligations of the Stockholder or such Affiliates to third parties, shall be
terminated at or prior to the Closing. At or prior to the Closing, the
Stockholder shall have purchased the Company's interest in the whole life and
split dollar life insurance arrangements insuring the life of the Stockholder in
exchange for the value of such interests as reflected in the accounts of the
Company. At or prior to the Closing, the Company shall have assigned, and the
Stockholder shall have assumed, those certain motor vehicle leases between the
Company and American Credit Services, Inc. and General Motors Acceptance
Corporation, respectively, and the Company shall have no further obligation with
respect to such motor vehicle leases.
Section 4.7 Payment of Indebtedness.
At or prior to Closing, the Stockholder and/or his Affiliates shall repay
all indebtedness to the Company, including any outstanding principal and
interest, for borrowed money, advances or other amounts paid to or on behalf of
the Stockholder, his family or Affiliates, other than advances permitted by
Section 5.9(m).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Buyer as follows, and the
Buyer in agreeing to consummate the transactions contemplated by this Agreement
has relied upon such representations and warranties, that:
Section 5.1 Corporate Organization.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite
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power and authority (corporate and other) to own, lease and operate its
properties and to carry on its business as now being conducted.
(b) The Company is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each of the jurisdictions listed on
Schedule 5.1. The Company is not qualified or licensed to do business as a
foreign corporation in any other jurisdiction and there are no other
jurisdictions in which the failure to be qualified or licensed as a foreign
corporation would have a Material Adverse Effect on the Company.
(c) The copies of the certificate of incorporation and all amendments
thereto of the Company, as certified by the secretary of state of its
jurisdiction of incorporation, and the by-laws, as amended to date, of the
Company, as certified by its secretary, which have heretofore been delivered to
the Buyer, are true, complete and correct copies of the certificate of
incorporation and by-laws of the Company, as amended and in effect on the date
hereof, and will be true, complete and correct as of the Closing Date.
(d) The minute books and records of the Company, copies of which have been
delivered to the Buyer prior to the date hereof, are the original minute books
and records of the Company, contain all proceedings of the stockholders, the
Board of Directors and any committees thereof with respect to the Company, and
are true, correct and complete in all material respects. There have been no
changes, alterations or additions to the minute books and records which have not
been furnished to counsel for the Buyer prior to the date hereof.
Section 5.2 Valid and Binding Agreement.
The Company has all requisite corporate power and authority to enter into
this Agreement and the Indemnification and Escrow Agreement. All necessary
action on the part of the Company and its stockholders has been taken to
authorize the execution and delivery of this Agreement and the Indemnification
and Escrow Agreement, the performance of its obligations hereunder and
thereunder and the consummation of the transaction contemplated hereby and
thereby. This Agreement has been, and as of the Closing Date, the
Indemnification and Escrow Agreement will be, duly and validly executed and
delivered by the Company, and will constitute valid and binding agreements of
the Company, enforceable in accordance with their respective terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights generally and to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
Section 5.3 No Violation.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby, including obtaining the consent of
Manufacturers and Traders Trust Company referenced on Schedule 5.4 hereof, nor
compliance by the Company with any of the provisions hereof will (i) violate or
conflict with any provision of the certificate of incorporation or by-laws of
the Company, (ii) materially violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to the
Company, or (iii) materially violate, or conflict with, or result in a breach of
any provision of, or constitute a default (or any event
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which, with or without due notice or lapse of time, or both, would constitute a
default) under, or result in the termination of, accelerate the performance
required by, or result in the creation of any lien, security interest, charge or
other encumbrance upon the Stock or any of the properties or assets of the
Company under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation of which the Company is a party or by which the Company
or any of its assets are bound.
Section 5.4 Consents and Approvals.
Except for any filings required by the HSR Act, the filing of the
Certificate of Merger or except as set forth on Schedule 5.4 hereof, no permit,
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or third party is required to be
made or obtained by the Company in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
Section 5.5 Capitalization.
(a) The authorized capital stock of the Company consists solely of Sixty
Thousand (60,000) shares of Stock, of which Forty Thousand (40,000) shares are
issued and outstanding. The issued and outstanding common stock is duly
authorized, validly issued, fully paid and nonassessable (except insofar as
liability may be imposed by Section 630 of the New York Business Corporation
Law), and none of the issued and outstanding shares of common stock were issued
in violation of the preemptive rights of any present or former stockholder of
the Company.
(b) Except as set forth in Section 5.5(a) or Schedule 5.5, (i) there are no
shares of capital stock or other equity securities (as the term "equity
security" is defined in the Securities Exchange Act of 1934, as amended) of the
Company outstanding, (ii) there are no outstanding subscriptions, options,
warrants or rights to purchase or acquire any equity securities of the Company,
(iii) no equity securities of the Company are reserved for issuance for any
purpose, and (iv) there are no contracts, commitments, agreements,
understandings, arrangements or restrictions to which the Company is a party or
by which the Company is bound relating to any shares of the capital stock or
other equity securities of the Company (including the Stock), whether or not
outstanding.
(c) The Stockholder is the owner, beneficially and of record, of the shares
of Stock and, except as set forth on Schedule 5.5, there is no lien, encumbrance
or other interest relating to the Stock or any other equity securities held of
record by any other Person.
Section 5.6 Subsidiaries and Affiliates.
(a) The Company does not own any capital stock or other equity securities
of any other corporation and has no other type of interest (whether ownership or
other) in any other corporation, partnership, joint venture or other business
organization or entity. The Company is not subject to any obligation or
requirement to provide funds for, or to make any investment (in the form of a
loan, capital contribution or otherwise) to or in, any Person.
(b) Except as set forth on Schedule 5.6, neither the Stockholder nor, to
the knowledge of the Company, any of his Affiliates or members of his immediate
family
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have any direct or indirect interest in any Person that competes with, conducts
any business similar to, has any agreement or arrangement with or is involved in
any way with, the business conducted by the Company. Except as set forth on
Schedule 5.6, the Stockholder, his Affiliates and members of his immediate
family have no direct or indirect interest in any property used by, or relating
to, the business of the Company, except by virtue of ownership of the Stock,
which interest will be transferred upon consummation of the Merger.
Section 5.7 Financial Statements.
The audited financial statements of the Company for each of the three (3)
years ended December 31, 1993, December 31, 1994 and December 31, 1995, attached
as Schedule 5.7 hereto (the "Company Audited Financial Statements") present
fairly the financial position, results of operations, stockholders' equity and
cash flows of the Company in accordance with GAAP, as of the statement dates and
for the periods indicated. The unaudited internal financial statements of the
Company for the period ended August 31, 1996, attached as Schedule 5.7A hereto
(the "Company Unaudited Financial Statements") (i) present fairly the financial
position, results of operations, stockholder's equity and cash flows of the
Company, as of the statement date and for the period indicated, and (ii) have
been prepared in accordance with the Company's customary procedures for the
preparation of interim financial statements consistently applied throughout and
among the periods indicated and are consistent with the Company Audited
Financial Statements subject to year-end audit and other normal or recurring
year-end adjustments (made in accordance with GAAP, in the ordinary course of
business and consistent with prior year-end accounting principles and
adjustments).
Section 5.8 Absence of Undisclosed Liabilities.
Except as set forth on Schedule 5.8, the Company has no liability or
obligation (absolute, accrued, contingent or otherwise), including any guaranty
with respect to any obligation, except (a) such liabilities or obligations as
are fully reflected, reserved against or disclosed in the Company Audited
Financial Statements (or the footnotes thereto) or the Company Unaudited
Financial Statements and (b) such liabilities or obligations as have been
incurred in the ordinary course of business, consistent with past practice,
since July 31, 1996.
Section 5.9 Interim Operations and Absence of Certain Changes.
Since December 31, 1995, except as set forth on Schedule 5.9, the Company
has conducted its business in the ordinary course and consistent with past
practice, and the Company did not:
(a) incur any indebtedness or other liabilities (whether absolute, accrued,
contingent or otherwise) or guarantee any such indebtedness, except in the usual
and ordinary course of its business, consistent with past practice;
(b) suffer any damage, destruction or loss of tangible assets, whether or
not covered by insurance, in excess of $10,000;
(c) suffer any change in its financial condition, assets, liabilities or
business or suffer any other event or condition of any character which
individually or in the aggregate had or has a Material Adverse Effect on the
Company or materially diminishes the value of the assets of the Company;
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(d) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise) or fail to pay any accounts payable
or other liabilities when due, except in each case in the ordinary course of
business;
(e) cancel any debts or waive any claims or rights of substantial value,
except in each case in the ordinary course of business;
(f) permit any material insurance policy to be cancelled or terminated;
(g) pledge or permit the imposition of any lien on or sell, assign,
transfer or otherwise dispose of any of its tangible assets, except the sale of
inventory in the ordinary course of business;
(h) factor, discount or otherwise accept less than full payment with regard
to its accounts receivable and other amounts due or sell any inventory at less
than fair market value or make any bulk sale of such inventory;
(i) solicit customer advances or payment of accounts receivable or other
sums due in advance of their respective due dates except in each case in the
usual and ordinary course of business, consistent with past practice;
(j) sell, assign, encumber, license, pledge, abandon or otherwise transfer
any patents, applications for patents, Marks, trade names, copyrights, licenses
or other intangible assets;
(k) make any change in any method of accounting or accounting principle or
practice;
(l) write up or down the value of the inventory or determine as collectible
any notes or accounts receivable that were previously considered to be
uncollectible, except for write-ups or write-downs and other determinations in
accordance with GAAP and in the ordinary course of business and consistent with
past practice;
(m) except for payments to the Stockholder sufficient to pay his income
taxes attributable to the earnings of the Company for the fiscal year ended
December 31, 1995 and for the period from January 1, 1996 through the Closing
Date, to the extent the Stockholder is taxed on such earnings as a result of the
Company's status as an S Corporation, make any payment of cash or transfer of
any assets to the Stockholder or any Affiliate of the Stockholder;
(n) grant any general increase in the compensation payable or to become
payable to its officers or employees (including any such increase pursuant to
any bonus, pension, profit-sharing or other plan or commitment) or any special
increase in the compensation payable or to become payable to any officer or
employee, except for normal merit and cost of living increases in the ordinary
course of business and in accordance with past practice;
(o) declare, pay or set aside for payment any dividend or other
distribution (other than as permitted by Section 5.9(m)) on any shares of its
capital stock; split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock; or repurchase or
otherwise acquire any shares of its capital stock;
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(p) make any loans which in the aggregate exceed $5,000 to any employee or
make any loans to any stockholder, officer, director or Affiliate;
(q) make capital expenditures or commitments for same in excess of $25,000
in the aggregate;
(r) lose or learn of the prospective loss of any customer or vendor listed
on Schedule 5.26 or any representative or agent listed on Schedule 5.27;
(s) agree or propose, whether in writing or otherwise, to take any action
described in this Section 5.9; or
(t) make or change any Tax election.
Section 5.10 Taxes.
(a) The Company has duly and timely filed with each appropriate federal,
state, local and foreign governmental entity or other authority (individually or
collectively, "Taxing Authority") all Tax Returns required to be filed. All such
Tax Returns were true, correct and complete in all material respects. The
Company has paid all Taxes which have become due and payable (whether or not
shown on any Tax Return). Adequate reserves and accruals have been established
to provide for the payment of all Taxes which are not yet due and payable with
respect to the Company for taxable periods or portions thereof ending on or
before the Closing Date. There are no liens for Taxes upon the Company or its
assets except liens for current Taxes not yet due. The Company has delivered to
the Buyer correct and complete copies of all federal, state, local and foreign
income Tax Returns for the five (5) most recently completed years, all
examination reports by any Taxing Authority, and any statements of deficiencies
proposed or assessed against or agreed to by the Company. No audit, examination,
investigation, proceeding, action or claim with respect to the Company's Taxes
is pending, proposed or threatened, and there is no basis for the assessment or
collection of additional Taxes against the Company. Except as set forth on
Schedule 5.10, there has never been an examination or notice of potential
examination of the Tax Returns of the Company by any Taxing Authority. No
extension is in effect with respect to the filing of any Tax Return, the payment
of any Taxes, or any limitation period regarding the assessment or collection of
any Taxes.
(b) All Taxes that are required to have been withheld or collected by the
Company have been duly withheld or collected and, to the extent required, have
been paid to the proper governmental authorities or properly deposited as
required by applicable laws.
(c) As used in this Agreement, "Tax" means any of the Taxes and "Taxes"
means, with respect to the Company, (i) all income taxes (including any tax on
or based upon net income, or gross income, or income as specially defined, or
earnings, or profits, or selected items of income, earnings or profits) and all
gross receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profit taxes, alternative or add-on minimum taxes, custom
duties or other taxes, fees, assessments or charges of any kind whatsoever,
together with any interest, penalties, additions to tax or additional amounts
imposed by any Taxing Authority whether disputed or not and (ii) any liability
for the payment of any amount of Tax described in the immediately preceding
clause (a) as a result of being a "transferee" (within the meaning of Section
6901 of the Code or any other applicable law) of another person or successor, by
contract, or otherwise.
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(d) As used in this Agreement, "Tax Return" is defined as any return,
report, information return or other document (including any related or
supporting information) filed or required to be filed with any Taxing Authority
or other authority in connection with the determination, assessment or
collection of any Tax paid or payable by the Company or the administration of
any laws, regulations or administrative requirements relating to any such Tax.
(e) Schedule 5.10 lists the jurisdictions in which the Company either files
Tax Returns or pays Taxes with respect to which no returns are required to be
filed. No claim has ever been made by any Taxing Authority in a jurisdiction
where the Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(f) The Stockholder is not a foreign person within the meaning of Section
1445(b)(2) of the Code.
(g) No property of the Company is property that the Company is or will be
required to treat as owned for tax purposes by another person, or is "tax-exempt
use property" as defined in Section 168(h) of the Code.
(h) The Company has never agreed to or been required to make any adjustment
pursuant to Section 481(a) of the Code by reason of any change in accounting
method initiated by it; the IRS has not proposed any such adjustment or change
in accounting method; and the Company has no application pending with any Taxing
Authority requesting permission for any change in accounting method.
(i) The Company is not now nor during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code has ever been a United States real property
holding corporation as defined in Section 897(c)(2) of the Code.
(j) The Company is not now nor has ever been a party to any agreement,
contract, arrangement or plan that would result, separately or in the aggregate,
in the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
(k) The Company has not filed a consent pursuant to Section 341(f) of the
Code nor has the Company agreed to have Section 341(f)(2) of the Code apply to
any disposition of a section (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company.
(l) The Company has never been (i) a member of an affiliated group of
corporations (as defined in Section 1504(a) of the Code), or filed or been
included in a combined, consolidated, or unitary Tax Return, or (ii) a party to
any tax allocation, sharing or reimbursement agreement or arrangement.
(m) Except as set forth on Schedule 5.10, the Company is not an obligor on
and none of its assets has been financed directly or indirectly by any
tax-exempt bonds.
(n) The Company has not executed or entered into a closing agreement
pursuant to Section 7121 of the Code or any predecessor provision thereof or any
similar provision of state, local or foreign law.
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(o) The Company does not have any liability for the Taxes of any other
person under Treas. Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
(p) The Company does not have pending any request for a private letter
ruling.
(q) The Company has not been a personal holding company within the meaning
of Section 542 of the Code during the five-year period preceding the date
hereof.
(r) The Company has disclosed on its federal income tax Returns all
positions therein that, to the knowledge of the Company, could give rise to a
substantial understatement of federal income tax within the meaning of Code
Section 6662.
(s) At all times since its incorporation, the Company has had in effect a
valid election under Code Section 1362 to be an S Corporation.
Section 5.11 Employee Benefit Plans.
(a) Schedule 5.11 is a true and complete list of all annuity, bonus,
cafeteria, stock option, stock purchase, profit sharing, savings, pension,
retirement, incentive, group insurance, disability, employee welfare, prepaid
legal, nonqualified deferred compensation including without limitation, excess
benefit plans, top-hat plans, deferred bonuses, rabbi trusts, secular trusts,
nonqualified annuity contracts, insurance arrangements, nonqualified stock
options, phantom stock plans, or golden parachute payments, or other similar
fringe benefit plans, and all other employee benefit funds or programs (within
the meaning of Section 3(3) of ERISA), covering employees, former employees or
directors of the Company (the "Plans"). Except as set forth on Schedule 5.11,
the Company is not a party to any employee agreement, understanding, plan,
policy, procedure, pattern or practice, or other arrangement, whether written or
oral, which provides compensation or fringe benefits to its employees, and the
Company is in substantial compliance with all its obligations under all such
Plans. Except for changes required by applicable law, there are no negotiations,
demands, commitments or proposals that are pending or that have been made that
concern matters now covered, or that would be covered by the type of agreements
described on Schedule 5.11 or in this Section 5.11(a).
(b) With respect to each employee benefit plan listed on Schedule 5.11,
true and complete copies of (i) all Plan documents (including all amendments and
modifications thereof), and related agreements including without limitation, the
trust agreement and amendments thereto, insurance contracts and investment
management agreements; (ii) the last three filed Form 5500 series and Schedules
A, B, C, P and/or SSA, as applicable, and Forms PBGC-1, if any; (iii) summary
plan descriptions; (iv) summary of material modifications, if any; (v) the most
recent auditor's report, and copies of any and all tax qualification
correspondence including without limitation, private letter rulings,
applications for determination and determination letters issued with respect to
the Plans; and (vi) the most recent annual and periodic accounting of related
Plan assets, have also been delivered to the Buyer.
(c) With respect to the Plans listed on Schedule 5.11 which are subject to
ERISA, to the Company's knowledge:
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(i) The Plans are in material compliance with the applicable
provisions of ERISA and each of the employee pension benefit plans, within the
meaning of Section 3(2) of ERISA (the "Pension Plans"), which are intended to be
qualified under Section 401(a) of the Code have received a favorable
determination letter from the IRS or a request for such determination has been
timely filed with the IRS (and to the knowledge of the Company, nothing has
occurred to cause the IRS to revoke such determination and the IRS has not
indicated any disapproval of any request for such a determination);
(ii) Each Plan has been operated substantially in accordance with
its terms and all required filings that are due prior to the date hereof,
including without limitation, the Forms 5500, for all Plans have been timely
made;
(iii) No prohibited transactions, as defined by Section 406 of ERISA
or Section 4975 of the Code, have occurred with respect to any of the Plans;
(iv) The Company has not engaged in any transaction in connection
with which the Company could be subjected to a criminal or civil penalty under
ERISA;
(v) None of the Plans, nor any trust which serves as a funding
medium for any of such Plans, nor any issue relating thereto is currently under
examination by or pending before the IRS, the Department of Labor, the PBGC or
any court, other than applications for determinations pending before the IRS;
(vi) None of the Pension Plans is a defined benefit plan within the
meaning of Section 414(j) of the Code;
(vii) None of the Plans is a "multiemployer plan" as that term is
defined in Section 3(37) of ERISA and Section 411(f) of the Code, nor a plan
maintained by more than one employer (hereinafter referred to as a "multiple
employer plan"), nor a single employer plan under a multiple controlled group
within the meaning of Section 4063 of ERISA, and neither the Company nor any
entity required to be aggregated with the Company under Section 414(b), (c),
(m), or (o) of the Code has incurred any withdrawal liability with respect to
any single plan, multiemployer or multiple employer plan, which liability could
constitute a liability of the Surviving Corporation;
(viii) No written benefit claims (except those submitted in the
ordinary course of administration of such Plan) are currently pending against
any Plan;
(ix) Except as set forth on Schedule 5.11, no Plan provides for
retiree medical or retiree life insurance benefits for current or former
employees of the Company, and there is no liability for taxes with respect to
disqualified benefits under Section 4976 of the Code; and
(x) Except as set forth on Schedule 5.11, no Pension Plan has been
terminated by the Company, and there is no liability for taxes with respect to a
reversion of qualified plan assets under Section 4980 of the Code.
(d) There have been no material failures to comply with the continuation
coverage provisions required by Sections 601-608 of ERISA and Section 4980B of
the Code under any Plan.
(e) There are no employee benefit plans which cover employees of the
Company which are required to comply with the provisions of any foreign law.
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(f) All excess contributions, if any (together with any income allocable
thereto), have been distributed (or, if forfeitable, forfeited) before the close
of the first two and one half (2 1/2) months of the following plan year; and
there is no liability for excise tax under Section 4979 of the Code with respect
to such excess contributions, if any, for any Plan.
(g) There is no liability for Taxes with respect to: (i) an accumulated
funding deficiency under Section 4971 of the Code and/or (ii) a nondeductible
contribution under Section 4792 of the Code.
Section 5.12 Compliance with Law.
The Company has been, is and on the Closing Date will continue to be in
compliance with all applicable laws (including duties imposed by common law),
rules, regulations, orders, ordinances, judgments and decrees of all
governmental authorities (federal, state, local and foreign) and all
requirements imposed under building, zoning, occupational safety and health,
pension, environmental control, toxic waste, fair employment, equal opportunity
or similar laws, rules, regulations and ordinances, in each case the
noncompliance with which would be likely to have a Material Adverse Effect on
the Company.
Section 5.13 Litigation; Claims.
Schedule 5.13 hereto contains a complete and accurate list of (a) all
claims, actions, suits, proceedings or investigations pending or (to the
knowledge of the Company) threatened by or against the Company, and (b) all
judgments, decrees, arbitration awards, agreements or orders binding upon the
Company. Except as set forth on Schedule 5.13, no material claims, including
without limitation, product liability claims, have been asserted against the
Company during the past ten (10) years, and, to the knowledge of the Company,
there is no basis for any material action, proceeding or investigation involving
the Company, other than as set forth on Schedule 5.13.
Section 5.14 Contracts and Commitments.
(a) Schedule 5.14 contains a complete and accurate list of all contracts,
agreements and commitments (other than the agreements or arrangements set forth
in Schedules 5.11, 5.15, 5.17, 5.20A, 5.21, 5.24, 5.26 and 5.27), whether
written or oral, of the Company that involve commitments in excess of $10,000,
have a term of six (6) months or more or that are not in the ordinary course of
business.
(b) The agreements set forth in Schedules 5.11, 5.14, 5.15, 5.17, 5.20A,
5.21, 5.24, 5.26 and 5.27 are hereinafter referred to collectively as the
"Operating Agreements." None of the Operating Agreements has been assigned or is
the subject of any security agreement, except as set forth on Schedule 5.14.
Except as otherwise set forth on Schedule 5.14, (i) each of the Operating
Agreements is a valid and binding obligation of the Company and (to the
knowledge of the Company) the other party or parties thereto, enforceable in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws or equitable principles relating to
creditors' rights generally; (ii) neither the Company nor (to the knowledge of
the Company) any other party thereto, has terminated, canceled, modified or
waived any term or condition of any Operating Agreement; and (iii) except where
such default could not have a Material Adverse Effect on the Company, neither
the Company nor (to the knowledge of the Company) any other party to any
Operating Agreement is in default or alleged to be in default under any
Operating Agreement and there exists no event,
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condition or occurrence that, after notice or lapse of time, or both, would
constitute such a default by the Company or (to the knowledge of the Company)
any other party to any such Operating Agreement. Except as described on Schedule
5.14, none of such Operating Agreements contains any covenant or other
restriction preventing or limiting the consummation of the transactions
contemplated hereby, including any provision prohibiting the assignment of the
Company's rights thereunder or granting any party a right of termination or
modification of any provision as a result thereof. The Company has no
outstanding powers of attorney. The Company delivered to the Buyer a copy of
each of the written Operating Agreements and a description of the terms and
conditions of any oral Operating Agreements.
Section 5.15 Intellectual Property Rights.
Schedule 5.15 contains a correct and complete list of the following assets
and related matters: (a) all patents and applications for patents, all Marks and
registration of Marks and applications for registration of Marks, all copyright
registrations and applications for copyright registration, and all trade names,
owned or used (pursuant to license agreements or otherwise) by the Company, and
in the case of any such Intellectual Property that is so owned, the
jurisdictions in or by which such assets or any of them have been registered,
filed or issued and (b) to the extent not listed on Schedule 5.14, all
contracts, agreements or understandings pursuant to which the Company has
authorized any Person to use any of the Intellectual Property which is so owned.
The Company owns, possesses or licenses and as of the Closing Date will own,
possess or license, all right, title and interest in and to the items of
Intellectual Property that are material to the conduct of its business as now
conducted without conflict with the rights of others. Except as set forth on
Schedule 5.15: (a) the Company has the right to use and, to the knowledge of the
Company, the sole and exclusive rights to use, the Intellectual Property
(including applications for any of the foregoing) used in connection with the
business of the Company, and none of the past or present employees, officers,
directors or stockholders of the Company, or, to the knowledge of the Company,
anyone else, has any rights with respect thereto; (b) the consummation of the
transactions contemplated hereby will not alter or impair any such rights; (c)
the Company has not received any notice or claim of infringement or any claim
challenging or questioning the validity or effectiveness of any of the items of
Intellectual Property, and to the knowledge of the Company, there is no valid
basis for any such claim; and (d) the Company is not liable, nor has it made any
contract or arrangement whereby it may become liable, to any Person for any
royalty or other compensation for use of any of the items of Intellectual
Property.
Section 5.16 Liens.
Except as set forth on Schedule 5.16, none of the properties or assets,
whether real, personal or mixed, or tangible or intangible, owned or leased by
the Company is subject to any mortgage, lien, encumbrance or other security
interest, except for (a) liens for taxes and assessments or governmental charges
or levies not at the time due or being contested in good faith and for which
adequate reserves have been established; (b) liens in respect of pledges or
deposits under workmen's compensation laws or similar legislation, carriers',
warehousemen's, mechanics', laborers' and materialmen's and similar liens, if
the obligations secured by such liens are not then delinquent or are being
contested in good faith by appropriate proceedings disclosed on Schedule 5.13
and (c) liens incidental to the conduct of the business.
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Section 5.17 Insurance.
Except as set forth on Schedule 5.11, all insurance policies and fidelity
bonds relating to the business, assets and personnel of the Company, including
summary descriptions and the termination dates thereof, are set forth on
Schedule 5.17. Except as set forth on Schedule 5.17, the Company has not had
coverage denied or limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance, during the last two (2) years.
Section 5.18 Accounts Receivable and Accounts Payable.
Except as set forth on Schedule 5.18, all accounts receivable of the
Company, whether reflected on the Company Audited Financial Statements and/or
the Company Unaudited Financial Statements, or otherwise, represent sales
actually made in the ordinary course of business or valid claims as to which
full performance has been rendered, and the reserves against the accounts
receivable for returns and bad debts are commercially reasonable and have been
determined in accordance with GAAP, consistently applied. Except to the extent
reserved against the accounts receivable, no counterclaims or offsetting claims
with respect to the accounts receivable are pending or, to the knowledge of the
Company, threatened. Except as set forth on Schedule 5.18, the accounts payable
of the Company reflected on the Company Audited Financial Statements and the
Company Unaudited Financial Statements arose from bona fide transactions in the
ordinary course of business, and all such accounts payable have been paid, are
not yet due and payable under the Company's payment policies and procedures
(copies of which have been previously provided to the Buyer), or are being
contested by the Company in good faith.
Section 5.19 Inventories and Backlog.
The inventories of the Company as of the date hereof consist of raw
materials, goods in process and finished goods salable or usable in the normal
course of the business of the Company, and such inventories are, and shall be on
the Closing Date, at levels consistent with past practices of the business. All
such inventories are carried on the books of the Company pursuant to the normal
inventory valuation policies of the Company, which are in accordance with GAAP,
as reflected in the Company Audited Financial Statements. Any expected losses on
customer contracts in progress are recognized and recorded in the period in
which such losses are determined. Schedule 5.19 sets forth the locations of all
inventories of the Company and the amount of inventory at each location as of
July 31, 1996. Except as set forth on Schedule 5.19, no items included in
inventories of the Company is or will be pledged as collateral or held by the
Company on consignment from others. The Company is not committed to purchase
inventories in amounts greater than are reasonably expected to be usable in the
ordinary course of business as presently conducted. With respect to inventories
in the hands of suppliers for which the Company will be committed on the Closing
Date, such inventories on the Closing Date will be reasonably expected to be
usable in the ordinary course of business as presently being conducted. At July
26, 1996, the backlog of firm orders for the Company was $22,951,000. Schedule
5.19 sets forth each order of such backlog in excess of $500,000 and the
scheduled or committed delivery date thereof.
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Section 5.20 Tangible Personal Property.
Schedule 5.20 includes all of the fixed assets of the Company and each item
of tangible personal property, other than inventory (whether finished goods or
raw materials) or supplies, with an original purchase price of at least $500,
owned by the Company and the location thereof including all such furniture,
furnishings, office equipment, machinery, tools and other equipment. The Company
has, and on the Closing Date will have, good and legal title to all of the items
listed on Schedule 5.20, free and clear of all liens, claims and encumbrances
except as set forth thereon or on Schedule 5.16. Schedule 5.20A lists all leases
of tangible personal property leased by the Company and the location thereof.
Except as set forth on Schedule 5.20A, none of such leases contains any covenant
or restriction preventing or limiting the consummation of the transactions
contemplated hereunder. All of the personal property listed on Schedule 5.20 and
the assets leased pursuant to the leases listed on Schedule 5.20A are suitable
for the uses for which they are employed, are in good operating condition and
repair (ordinary wear and tear excepted) and have been maintained in accordance
with manufacturers' recommendations.
Section 5.21 Real Property.
(a) The Company does not own any real property and has not agreed (and has
no option) to purchase, sell or lease to a third party, and is not obligated to
purchase, sell or lease to a third party in connection with its business, any
real property.
(b) Schedule 5.21 contains a correct and complete list of all the real
property that is leased by the Company or that the Company has agreed (or has an
option) to lease, or may be obligated to lease and a correct and complete
description of each lease pursuant to which such real property is leased. Such
real property is hereinafter referred to as the "Leased Property," and the
improvements and fixtures thereon are hereinafter referred to as the "Leased
Improvements."
(c) Except as set forth on Schedule 5.21, the Company is the sole legal and
equitable owner of the leasehold interest in the Leased Property and the Leased
Improvements and possesses good and indefeasible title thereto, free and clear
of all conditions, exceptions, reservations, liens, restrictions, rights-of-way,
easements, encumbrances and other matters affecting title to such leasehold that
could impair the ability of the Company to realize the benefits of the rights
provided to it under its lease as such rights are currently utilized in the
conduct of the business of the Company consistent with past practice.
(d) There are no adverse or other parties in possession of the Leased
Property, the Leased Improvements, or any portion or portions thereof, and on
the Closing Date the leasehold interests in the Leased Property and the Leased
Improvements will be free and clear of any and all leases, licensees, occupants
or tenants except as set forth on Schedule 5.21. There are no pending or to the
knowledge of the Company, threatened condemnation, eminent domain or similar
proceedings, or litigation or other proceedings affecting the Leased Property,
the Leased Improvements or any portion or portions thereof. To the knowledge of
the Company, there are no pending or threatened requests, applications or
proceedings to alter or restrict any zoning or other use restrictions applicable
to the Leased Property or the Leased Improvements that would interfere with the
conduct of the business of the Company or the use of its assets, which
interference would have a Material Adverse Effect on the business of the
Company. Except as set forth on Schedule 5.21, to the knowledge of the
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Company, all water, sewer, gas, electric, telephone, drainage and other utility
equipment, facilities and services required by law or necessary for the
operation of the Leased Improvements are installed and connected pursuant to
valid permits and no notice has been received by the Company regarding the
termination or material impairment of any such service. All equipment and
fixtures associated with the Leased Improvements are in good operating condition
and repair (ordinary wear and tear excepted). The roof, foundation and
structural elements of the Leased Improvements are in good condition and repair
(ordinary wear and tear excepted). All necessary easements exist and are in full
force and effect, except where the nonexistence or nonenforceability of such
easements would not have a Material Adverse Effect on the Company. The Leased
Property has access, in accordance with past practice, to and from a public
right of way or road dedicated for public use and no notice has been received by
the Company relating to the termination or impairment of such access (including
applicable parking requirements).
Section 5.22 Environmental Matters.
(a) As used in this Agreement "Hazardous Material" shall mean: (i) any
"hazardous substance" as now defined pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Section
9601(14), or any substance listed or identified by any characteristic in any
regulation adopted pursuant to any statute referred to or incorporated into such
definition, all as in effect on the date hereof; (ii) any petroleum, including
crude oil and any fraction thereof; (iii) natural gas, natural gas liquids,
liquefied natural gas, or synthetic gas usable for fuel; (iv) any "hazardous
chemical" as defined pursuant to 29 C.F.R. Part 1910; and (v) any friable
asbestos, polychlorinated biphenyl ("PCB"), or isomer of dioxin.
(b) Except as set forth on Schedule 5.22, there is no Hazardous Material
within, under, originating from or relating to any real property interest or, to
the Company's knowledge, other location geologically or hydrologically connected
to such properties owned, operated or controlled by the Company or its
predecessors in interest.
(c) Neither the Company nor any of its predecessors in interest has any
liability, matured or not matured, absolute or contingent, assessed or
unassessed, imposed or based upon any provision under any foreign, federal,
state or local law, rule, or regulation or common law, or under any code, order,
decree, judgment or injunction applicable to the Company or its predecessors in
interest, nor, except as set forth on Schedule 5.22 hereof, has the Company
received any notice, or request for information issued, promulgated, approved or
entered thereunder, or under the common law, or any tort, nuisance or absolute
liability theory, relating to public health or safety, worker health or safety,
or pollution, damage to or protection of the environment including without
limitation, laws relating to emissions, discharges, releases or threatened
releases of Hazardous Material into the environment (including without
limitation, ambient air, surface water, groundwater, land surface or
subsurface), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, generation, disposal, transport or handling of any
Hazardous Material (hereinafter collectively referred to as "Environmental
Laws").
(d) The Company possesses and is in compliance in all material respects
with all permits, licenses, certificates, franchises and other authorizations
relating to the Environmental Laws necessary to conduct its business or required
by environmental regulations.
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(e) The Company has not, during the past five (5) years, been subject to
any civil, criminal or administrative action, suit, claim, hearing, notice of
violation, investigation, inquiry or proceeding for failure to comply with, or
received notice of any violation or potential liability under the Environmental
Laws, nor is the Company aware of any information, whether or not confirmed or
reported, which could give rise to any such potential liability.
(f) No real property, site or facility (as defined in CERCLA, 42 U.S.C.
Section 9601(9)) owned or operated by the Company is (i) listed or proposed for
listing on the National Priority List or (ii) listed on the Comprehensive
Environmental Response, Compensation, Liability Information System List
("CERCLIS") promulgated pursuant to CERCLA, or any comparable list maintained by
any foreign, state or local government authority.
(g) There are no underground storage tanks owned or operated by the
Company, and any prior use and operation of underground storage tanks owned or
operated by the Company has been in compliance with all Environmental Laws.
(h) The Company has provided to the Buyer an opportunity to inspect its
facilities, and to review and copy documents, and the Company has delivered to
the Buyer true, complete and correct copies of results of any reports, together
with supporting studies, analyses and tests in the possession of or initiated by
the Company pertaining to the existence of Hazardous Material and any other
environmental concerns relating to any of its facilities, or sites or real
property owned, leased, operated, used or controlled by the Company or any of
its predecessors in interest, or concerning compliance with or liability under
the Environmental Laws.
(i) There are no PCBs in or at any premises owned, leased, operated or
controlled by the Company and its prior use, handling, storage, transport or
disposal of PCBs has been in material compliance with all Environmental Laws.
(j) There is no friable asbestos or asbestos containing materials on or in
the properties and assets owned, leased, operated or controlled by the Company
and the facilities on such properties comply in all material respects with the
Environmental Laws including but not limited to, Occupational Safety and Health
Act regulations with respect to ambient air exposure to asbestos.
(k) The Company has not, by contract, agreed to assume the liability of any
other person or entity pursuant to any of the Environmental Laws.
Section 5.23 Governmental Authorizations.
The Company possesses all licenses, franchises, permits, certificates,
orders, approvals, exemptions, registrations or other authorizations
(collectively, the "Permits") from governmental, regulatory or administrative
agencies or authorities required for the ownership of its properties and assets
and operation of its business in the manner presently conducted, except where
the failure to possess such permit would not have a Material Adverse Effect on
the Company, (including those required pursuant to laws or regulations relating
to the protection of the environment), each of which will be in full force and
effect on the Closing Date. A list of all material Permits is set forth on
Schedule 5.23. Except as specified on Schedule 5.23, no registrations, filings,
applications, notices, transfers, consents, approvals, orders, qualifications,
waivers or other actions of any kind are required by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to enable the
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Company to continue the possession and operation of its properties and assets
and the business of the Company as presently conducted in all material respects.
Section 5.24 Employees.
Schedule 5.24 sets forth a complete and accurate list of all employees of
the Company having total annual compensation in excess of $25,000, showing for
each: name, hire date, current job title or description, current salary level
(including any bonus or deferred compensation arrangements) and any bonus,
commission or other remuneration paid during fiscal 1995 and fiscal 1996, and
describing any existing contractual arrangement with such employee. None of the
employees of the Company is currently on short-term or long-term disability.
Except as set forth on Schedule 5.24, since December 31, 1995 no salaried
employee of the Company who has been compensated at an annual rate in excess of
$40,000 has terminated his or her employment or had such employment terminated
for any reason or for no reason; no such employee has given notice of his or her
intent to terminate such employment; and no notice of termination has been given
to any such employee by the Company. Except as set forth on Schedule 5.24, no
employees of the Company shall receive any compensation as a result of the
consummation of the transaction contemplated by this Agreement.
Section 5.25 Employee Relations.
The Company has not at any time during the past five years had, nor is
there now threatened, any labor disputes or any strike, picket, work stoppage,
work slowdowns or other job action due to labor disagreements. The Company is in
material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
including the terms and provisions of any collective bargaining agreement or
other contract with a labor union representing any employees of the Company and
is not engaged in any unfair labor practice; there is no unfair labor practice
charge or complaint against the Company, or (to the knowledge of the Company)
threatened before the National Labor Relations Board or any foreign authority;
no question concerning representation has been raised or is (to the knowledge of
the Company) threatened respecting the employees of the Company; no grievance
that might have a Material Adverse Effect on the Company, nor any arbitration
proceeding arising out of or under any collective bargaining agreement, is
pending and no claims therefor exist; and no collective bargaining agreement
that is binding on the Company restricts it from relocating, closing or
contracting any of its operations.
Section 5.26 Customers and Vendors.
Schedule 5.26 sets forth a correct and complete list of the ten (10)
largest (by dollar volume) customers and vendors of the Company during the most
recently completed fiscal year, indicating the existing contractual
arrangements, if any, with each such customer or vendor. Except as set forth on
Schedule 5.26, there are no outstanding disputes with any customer or vendor
listed thereon and no customer or vendor listed thereon has refused to continue
to do business with the Company or has stated to the Company its intention not
to continue to do business with the Company or to materially change the amount
or terms of the business done with the Company. Since December 31, 1995, there
has not been any material shortage or unavailability of the raw materials
necessary to manufacture the products sold by the Company and the Company
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has no knowledge of any current shortage or unavailability which leads it to
believe that any such shortages will occur.
Section 5.27 Distributors and Representatives.
Schedule 5.27 sets forth a correct and complete list of the twenty (20)
largest (by dollar volume) distributors, representatives and agents for the sale
of the products of the Company during the two (2) most recently completed fiscal
years and all distributors, representatives and agents to whom the Company has
given any exclusive rights with respect to territories or products. Since
December 31, 1995, there has been no termination of any independent distributor,
wholesaler, sales representative or agent relationship, nor, to the knowledge of
the Company, has any present independent distributor, wholesaler, sales
representative or agent indicated any intention to terminate or materially
change the terms of its relationship with the Company.
Section 5.28 Broker's or Finder's Fees.
No agent, broker, investment banker, Person or firm acting on behalf of the
Company or under the authority of the Company is or will be entitled to any
broker's or finder's fee or any other commission or similar fee directly or
indirectly from any of the parties hereto in connection with any of the
transactions contemplated hereby.
Section 5.29 Disclosure.
No representation or warranty by the Company to the Buyer contained in this
Agreement, and no statement contained in the Schedules hereto or any certificate
furnished to the Buyer pursuant to the provisions hereof, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein not
misleading.
Section 5.30 Certain Transactions.
Except as set forth on Schedule 5.30, neither the Stockholder nor the
directors or officers of the Company is currently a party to any transaction
with the Company (other than for services as employees, officers and directors),
including without limitation any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from, any
such Person, or to or from any corporation, partnership, trust or other entity
in which any such Person, owns in excess of five percent (5%) of the outstanding
equity interest. All transactions described on Schedule 5.30, or required to be
described thereon, were entered into at arms-length upon terms no less favorable
to the Company than those generally available from unrelated third parties.
Section 5.31 Absence of Questionable Payments.
Neither the Company nor any director, officer, agent, employee or other
Person acting on their behalf has (i) used any corporate or other funds for
unlawful contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others or
established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Securities Exchange Act of 1934, as amended, or any other
applicable foreign, federal or state law; or (ii) accepted or received any
unlawful contributions, payments, expenditures or gifts.
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Section 5.32 Directors and Officers; Bank Accounts.
Schedule 5.32 lists each of the directors and officers and all of the
accounts (and signatories thereto) of the Company with any bank, brokerage firm
or other financial institution or depository.
Section 5.33 Defects in Products or Designs; Product Safety.
(a) Except as set forth on Schedule 5.33, there have been no claims of any
Person alleging any defects in the design, construction, manufacturing or
installation of any material product ("Product") made, manufactured,
constructed, distributed, sold, leased or installed by the Company or its
employees, or agents, that would adversely affect the performance or quality of
such Product. Each Product has been designed, manufactured, packaged and
labelled in compliance with all regulatory, engineering, industrial and other
codes applicable thereto and the Company has not received notice of any alleged
noncompliance with any such code. Each Product advertised or represented as
being rated or approved by a rating organization, such as Underwriters'
Laboratories, the National Sanitation Foundation or the Society of Automotive
Engineers or other similar organizations, complies with all conditions of such
rating or approval.
(b) The Company has not been required to file, and has not filed, a
notification or other report with the United States Consumer Product Safety
Commission concerning actual or potential hazards with respect to any Product
manufactured or sold by the Company.
Section 5.34 Product Warranties.
True and correct copies of all written warranties and guaranties applicable
to the Company and its products and services have been provided to the Buyer.
The amounts reflected as warranty reserves in the Company Audited Financial
Statements and/or Company Unaudited Financial Statements are commercially
reasonable and have been determined in accordance with GAAP, consistently
applied.
Section 5.35 Government Contracts.
The Company is not a party to, or bound by the provisions of, any contract
(including purchase orders, blanket purchase orders and agreements and delivery
orders) with the United States Government or any department, agency, or
instrumentality thereof or any state or local governmental agency or authority.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder represents and warrants to the Buyer, and the Buyer in
agreeing to consummate the transactions contemplated by this Agreement has
relied upon such representations and warranties, that:
Section 6.1 Ownership of Stock.
Except as set forth on Schedule 6.1, the Stockholder is the owner,
beneficially and of record, of Forty Thousand (40,000) shares of Stock, which
constitutes all of the shares of Stock which are issued and outstanding, free
and clear of any pledge,
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lien, security interest, option, charge, right of first refusal, encumbrance,
claim or equity of any kind. On the Closing Date the Stockholder will have
complete and unrestricted power and the unqualified right to sell, assign,
transfer and deliver to the Buyer on the Closing Date, good and valid title to
all of the shares of Stock which are issued and outstanding free and clear of
any such pledge, lien, security interest, option, charge, right of first
refusal, encumbrance, claim or equity of any kind.
Section 6.2 Valid and Binding Agreements.
The Stockholder has the full right, capacity and power to enter into this
Agreement. All necessary action on the part of the Stockholder has been taken to
authorize the execution and delivery of this Agreement and the Indemnification
and Escrow Agreement by the Company, the performance of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby. This Agreement has been, and on the Closing Date the
Indemnification and Escrow Agreement will be, duly and validly executed and
delivered by the Stockholder, and constitutes and will constitute valid and
binding obligations, enforceable against the Stockholder, in accordance with
their respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
generally and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 6.3 No Violation
Neither the execution and delivery of this Agreement or the Indemnification
and Escrow Agreement by the Stockholder nor the consummation of the transactions
contemplated hereby or thereby nor compliance by the Stockholder with any of the
provisions hereof or thereof will (i) violate or conflict with any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Stockholder or the Company, or (ii) violate or conflict with,
or result in a breach of any provision of, or constitute a default (or any event
which, with or without due notice or lapse of time, or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument of the Stockholder or by which he, or any of his assets, is bound.
Section 6.4 Consents and Approvals.
Except for any filings under the HSR Act or for the filing of the
Certificate of Merger, no permit, consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority or third party is required to be made or obtained by the Stockholder
in connection with the execution, delivery and performance of this Agreement or
the Indemnification and Escrow Agreement or the consummation of the transactions
contemplated hereby or thereby.
Section 6.5 Broker's or Finder's Fees.
No agent, broker, investment banker, Person or firm acting on behalf of the
Stockholder or under the authority of the Stockholder is or will be entitled to
any broker's or finder's fee or any other commission or similar fee directly or
indirectly from any of the parties hereto in connection with any of the
transactions contemplated hereby.
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Section 6.6 Section 630 Liability.
The Stockholder has no liability pursuant to Section 630 of the New York
Business Corporation Law.
Section 6.7 Residency.
The Stockholder is not a resident of the State of New York for the purposes
of determining the tax treatment of the transactions contemplated by this
Agreement.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE GUARANTOR
The Buyer and the Guarantor represent and warrant to the Company and the
Stockholder, and the Company and the Stockholder in agreeing to consummate the
transactions contemplated by this Agreement have relied upon such
representations and warranties, that:
Section 7.1 Corporate Organization.
The Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has the requisite power and
authority (corporate and other) to own, lease and operate its properties and to
carry on its business as now being conducted. The Guarantor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite power and authority (corporate and
other) to enter into this Agreement and to perform its obligations hereunder.
Section 7.2 Valid and Binding Agreements.
The Buyer has all requisite corporate power and authority to enter into
this Agreement and the Indemnification and Escrow Agreement. All necessary
corporate action on the part of the Buyer and the Guarantor has been taken to
authorize the execution and delivery of this Agreement and the Indemnification
and Escrow Agreement, the performance of their respective obligations hereunder
and thereunder and the consummation of the transactions contemplated hereby and
thereby. This Agreement has been, and as of the Closing Date, the
Indemnification and Escrow Agreement will be, duly and validly executed and
delivered by the Buyer and the Guarantor, and will constitute valid and binding
agreements of the Buyer and the Guarantor, enforceable in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
generally and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 7.3 No Violation.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby or thereby (including obtaining the
consent referred to in Section 9.19) nor compliance by the Buyer and the
Guarantor
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with any of the provisions hereof or thereof will (i) violate or conflict with
any provision of the certificate of incorporation or by-laws of the Buyer or the
Guarantor or any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to the Buyer or the Guarantor, or (ii)
violate or conflict with, or result in a breach of any provision of, or
constitute a default (or any event which, with or without due notice or lapse of
time, or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument of the Buyer or the Guarantor.
Section 7.4 Consents and Approvals.
Except for the consent referred to in Section 9.19, any filings required
under the HSR Act or the filing of the Certificate of Merger, no permit,
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or third party is required to be
made or obtained by the Buyer or the Guarantor in connection with the execution,
delivery and performance of this Agreement or the Indemnification and Escrow
Agreement or the consummation of the transactions contemplated hereby or
thereby.
Section 7.5 Broker's or Finder's Fees.
Except as disclosed on Schedule 7.5, no agent, broker, investment banker,
Person or firm acting on behalf of the Buyer or the Guarantor, or under the
authority of the Buyer or the Guarantor, is or will be entitled to any broker's
or finder's fee or any other commission or similar fee directly or indirectly
from the Buyer or the Guarantor in connection with any of the transactions
contemplated hereby.
ARTICLE VIII
COVENANTS
Section 8.1 Compliance with Law.
From the date hereof through the Closing Date, the Company will promptly
comply in all material respects with all laws and regulations (including without
limitation, those relating to the protection of the environment and employee
benefits) applicable to the Company's business and all laws and regulations with
which compliance is required for the valid consummation of the transactions
contemplated hereby and will promptly notify the Buyer of any legal,
administrative or other proceedings, investigations, inquiries, complaints,
notices of violation or other asserted claims, judgments, injunctions or
restrictions, pending, outstanding or, to the knowledge of the Company,
threatened or contemplated, which could have a Material Adverse Effect on the
Company.
Section 8.2 Operation of Business Prior to Closing.
During the period from the date hereof through the Closing Date, the
Company agrees that (except as expressly contemplated or permitted by this
Agreement or to the extent that the Buyer shall otherwise consent in writing):
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(a) The Company shall carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and
shall use all reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it to the end that its goodwill and ongoing business
shall not be impaired in any material respect at the Closing Date.
(b) The Company shall not grant any general increase in the compensation
payable or to become payable to its officers or employees (including any such
increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or any special increase in the compensation payable or to become
payable to any officer or employee, except for normal merit and cost of living
increases in the ordinary course of business and in accordance with past
practice.
(c) The Company shall not settle or compromise any material claims or
litigation or, except in the ordinary and usual course of business, modify,
amend or terminate any of its material contracts or cancel any debts or waive
any claims or rights of substantial value.
(d) The Company shall not permit any material insurance policy to be
canceled or terminated without notice to the Buyer.
(e) The Company shall not fail to confer on a regular and frequent basis
with one or more representatives of the Buyer to report material operational
matters and the general status of ongoing operations.
(f) The Company shall not, except in the ordinary course of business, (i)
factor, discount or otherwise accept less than full payment with regard to its
accounts receivable or other amounts due, (ii) delay payment on, or otherwise
alter the payment terms of, its accounts payable or pay the amounts due
thereunder later than the stated date for payment thereof or (iii) sell any
inventory at less than fair market value or make any bulk sale of such
inventory, or fail to maintain its inventory at ordinary, customary levels,
consistent with the Company Audited Financial Statements, the Company Unaudited
Financial Statements and past practice.
(g) The Company shall not, except as expressly permitted by this Agreement,
take any action that would or is reasonably likely to result in any of its
representations and warranties set forth in this Agreement being untrue in any
material respect, or in any of the conditions in this Agreement set forth in
Article IX not being satisfied.
(h) The Company shall not (i) make any new or change any current tax
election or (ii) settle or compromise any material federal, state, local or
foreign income tax liability.
(i) The Company shall not (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, except for a distribution
to the Stockholder in the amount not to exceed $490,000 immediately prior to the
effectiveness of the revocations referred to in Section 11.2, (ii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (iii) repurchase or otherwise
acquire any shares of its capital stock.
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(j) No liens, encumbrances, obligations or liabilities relating to the
Company, whether absolute or contingent (including litigation claims), shall be
discharged, satisfied or paid, other than liabilities shown on the Company
Audited Financial Statements or the Company Unaudited Financial Statements and
liabilities incurred after the date thereof in the ordinary course of business
and in normal amounts, and no such discharge, satisfaction or payment shall be
effected other than in accordance with the ordinary payment terms relating to
the liability discharged, satisfied or paid.
(k) The Company shall not amend its certificate of incorporation or
by-laws.
(l) The Company shall not (i) authorize capital expenditures in excess of
$25,000 or make any acquisition of, or investment in, assets or equity
securities of any other Person; (ii) acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof; (iii) assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of any
Person, or make any loans or advances to any Person; (iv) enter into any
material contract or agreement other than in the ordinary course of business; or
(v) enter into or amend in any respect any material contract, agreement,
commitment or arrangement with respect to any of the matters set forth in this
Section 8.2(l).
(m) The Company shall not exceed its current borrowing availability under
the Revolving Credit Line or enter into or amend in any respect the Revolving
Credit Line or Term Loan.
(n) The Company shall not make any change in any method of accounting or
accounting principle or practice.
(o) The Company shall not enter into any agreement or understanding to do
any of the foregoing.
Section 8.3 Access.
At all times prior to the Closing Date, the Company shall provide the Buyer
and its representatives with full access to, and will make available for
inspection and review, all properties, personnel, books, records and accounts of
the Company in order that the Buyer may have full opportunity to make such
investigation as each shall desire to make of the affairs of the Company. It is
understood that the Buyer shall be permitted to maintain personnel on the
premises of the Company during customary business hours to observe all aspects
of the operations of the Company and to confer with its management, attorneys
and other third parties reasonably requested for verification of any information
obtained pursuant to such observations. The Company also consents to the
examination of workpapers and other records of its accountants pertaining to the
Company and will cooperate with the Buyer to obtain such access and related
information from its accountants.
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ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER AND THE GUARANTOR
All obligations of the Buyer that are to be discharged under this Agreement
at the Closing are subject to the Company's and the Stockholder's fulfillment,
at the Closing or effective as of the Closing Date, of each of the following
conditions (unless expressly waived in writing by the Buyer at any time at or
prior to the Closing) and the Company and the Stockholder shall use their
reasonable efforts to cause each of such conditions to be satisfied:
Section 9.1 Representations and Warranties.
On the Closing Date, the representations and warranties of the Company and
the Stockholder set forth in Articles V and VI of this Agreement shall be true
and correct in all material respects as though such representations and
warranties had been made by the Company and the Stockholder on and as of the
Closing Date and the Buyer shall have received at the Closing a certificate,
dated the Closing Date, signed by the President or a Vice President of the
Company and the Stockholder to such effect.
Section 9.2 Covenants, Agreements and Conditions.
The Company and the Stockholder shall have performed and complied in all
material respects with all covenants, agreements and conditions contained in
this Agreement required to be performed by the Company and the Stockholder on or
prior to the Closing Date, and the Buyer shall have received at the Closing a
certificate, dated the Closing Date, signed by the President or a Vice President
of the Company and the Stockholder to such effect.
Section 9.3 Proceedings.
No action or proceeding shall be pending or threatened to restrain or
prevent the consummation of the transactions contemplated hereby.
Section 9.4 Corporate Proceedings.
All corporate and other proceedings to be taken and all consents to be
obtained by the Company and the Stockholder in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Buyer and its counsel,
Dickstein Shapiro Morin & Oshinsky LLP, both of whom shall have received all
such originals or certified or other copies of such documents as either may
reasonably request.
Section 9.5 Governmental Approvals.
There shall have been received all necessary governmental consents or
authorizations required in connection with the transactions contemplated hereby.
Section 9.6 No Material Adverse Effect.
During the period from July 31, 1996 through the Closing Date, there shall
not have occurred any Material Adverse Effect on the Company.
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Section 9.7 Insurance.
The Company shall have maintained in full force and effect the insurance
coverage described on Schedule 5.17 hereto or policies providing substantially
equivalent coverage.
Section 9.8 Deliveries.
The Company and the Stockholder shall have delivered to the Buyer the
following items:
(a) certificates representing the shares of Stock, duly endorsed or
accompanied by stock powers duly executed in blank (with signatures guaranteed
by any national bank or trust company) and otherwise in form acceptable for
transfer on the books of the Company;
(b) the stock books, stock ledgers, minute books and corporate seal of the
Company;
(c) certificates from appropriate authorities, dated as of or about the
Closing Date, as to the good standing, qualification to do business, and payment
of taxes by the Company in each jurisdiction where it is so qualified;
(d) the resignation of each director and officer of the Company, as
requested by the Buyer;
(e) a certificate of the Secretary or Assistant Secretary of the Company,
certifying as to the Certificate of Incorporation, By-laws, resolutions of the
Board of Directors, and incumbency and signatures of officers of the Company;
(f) a legally binding estoppel certificate from each lessor of real
property or material personal property to the Company, which certificate shall
be in form and substance reasonably satisfactory to the Buyer and its counsel;
(g) An appropriate form, executed by the Stockholder, making the election
referred to in Section 11.1;
(h) satisfactory evidence of the revocations referred to in Section 11.2;
and
(i) all other previously undelivered items required to be delivered by the
Company or the Stockholder to the Buyer at or prior to the Closing pursuant to
this Agreement (including all items referred to in Article IV) or otherwise
required in connection herewith unless waived in writing by the Buyer.
Section 9.9 HSR Act Requirements.
Any "waiting period" under the HSR Act applicable to the transactions
contemplated hereby shall have expired by the Closing Date or shall have been
terminated by the appropriate agency.
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Section 9.10 Opinion of Counsel.
The Buyer shall have received a written opinion dated as of the Closing
Date from Harter, Secrest & Emery, counsel to the Company and the Stockholder,
in form and substance reasonably satisfactory to the Buyer and its counsel.
Section 9.11 Tax Status Certification.
The Buyer shall receive an affidavit, reasonably satisfactory to Buyer,
from the Stockholder that the Stockholder is not a foreign person within the
meaning of Section 1445 of the Code. If, on or before the Closing Date, Buyer
shall not have received such affidavit, Buyer may withhold from the Estimated
Merger Consideration payable at the Closing to the Stockholder such sums as are
required to be withheld therefrom under Section 1445 of the Code.
Section 9.12 Consents.
All consents, approvals and waivers from third parties required in
connection with the transactions contemplated hereby shall have been obtained.
Section 9.13 Evidence of Termination.
The Buyer shall have received satisfactory evidence of the termination of
the agreements and other transactions referred to in Section 4.6.
Section 9.14 Releases of Liens
The Company shall have delivered to the Buyer releases of all liens and
encumbrances on the Company's assets of record other than the liens and
encumbrances set forth on Schedule 9.14 (the "Permitted Encumbrances").
Section 9.15 Releases of Stock Pledges.
The Stockholder shall have delivered to the Buyer releases of all pledges
of the Stock.
Section 9.16 Payment of Indebtedness.
The Buyer shall have received evidence of the repayment of all
indebtedness, including any outstanding principal and interest, for borrowed
money, advances or other amounts paid to or on behalf of the Stockholder, his
family or his Affiliates by the Company as of the Closing Date.
Section 9.17 Repayment of Certain Debt.
At the Closing, the Surviving Corporation shall pay all amounts owed as of
the Closing Date under the Revolving Credit Line and the Term Loan, including
outstanding principal and interest and any success fees, prepayment premiums,
make-whole premiums or penalties.
Section 9.18 Lease Extension.
The Company shall have extended the Lease Agreement by and between the
Company and Wilray of Rochester Inc., dated May 1993, as amended (the "Lease"),
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for a period of one (1) year upon substantially the same economic terms and
conditions as the Lease.
Section 9.19 Approval of Lenders.
At or prior to Closing, the Buyer and the Guarantor shall have received the
consent of the senior secured lender of the Guarantor to the consummation of the
transactions contemplated by this Agreement.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
COMPANY AND THE STOCKHOLDER
All obligations of the Company and the Stockholder that are to be
discharged under this Agreement at the Closing are subject to the Buyer's
fulfillment at the Closing or effective as of the Closing Date of each of the
following conditions (unless expressly waived in writing by the Company at any
time at or prior to the Closing) and the Buyer shall use its reasonable efforts
to cause each of such conditions to be satisfied:
Section 10.1 Representations and Warranties.
On the Closing Date, the representations and warranties of the Buyer and
the Guarantor set forth in Article VII of this Agreement shall be true and
correct in all material respects as though such representations and warranties
had been made on and as of the Closing Date, and the Company and the Stockholder
shall have received at the Closing a certificate, dated the Closing Date, signed
by the President or a Vice President of the Buyer and the Guarantor to such
effect.
Section 10.2 Covenants, Agreements and Conditions.
The Buyer shall have performed and complied in all material respects with
all covenants, agreements and conditions contained in this Agreement required to
be performed by it on or prior to the Closing Date, and the Company and the
Stockholder shall have received at the Closing a certificate, dated the Closing
Date, signed by the President or a Vice President of the Buyer to such effect.
Section 10.3 Proceedings.
No action or proceeding shall be pending or threatened to restrain or
prevent the consummation of the transactions contemplated hereby.
Section 10.4 Corporate Proceedings.
All corporate and other proceedings to be taken and all consents to be
obtained by the Buyer and the Guarantor in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Company and the Stockholder
and their counsel, Harter, Secrest & Emery, each of whom shall have received all
such originals or certified or other copies of such documents as either may
reasonably request.
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<PAGE>
Section 10.5 Governmental Approvals.
There shall have been received all necessary governmental consents or
authorizations required in connection with the transactions contemplated hereby.
Section 10.6 Deliveries.
The Buyer shall have delivered to the Company and the Stockholder the
following items:
(a) the payments as required by Section 3.2;
(b) a certificate of the Secretary or Assistant Secretary of the Buyer,
certifying as to the Certificate of Incorporation, By-laws, resolutions of the
Board of Directors, and incumbency and signatures of officers of the Buyer;
(c) a certificate of the Secretary or Assistant Secretary of the Guarantor,
certifying as to the Certificate of Incorporation, By-laws, resolutions of the
Board of Directors, and incumbency and signatures of officers of the Guarantor;
(d) a legally binding release from each creditor of the Company to whom the
Stockholder has guaranteed the obligations of the Company, which release shall
be in form and substance reasonably satisfactory to the Stockholder and his
counsel; and
(e) all other previously undelivered items required to be delivered by the
Buyer and the Guarantor at or prior to the Closing pursuant to this Agreement
(including the items listed in Article IV) or otherwise required in connection
herewith unless waived in writing by the Company and the Stockholder.
Section 10.7 HSR Act Requirements.
Any "waiting period" under the HSR Act applicable to the transactions
contemplated hereby shall have expired by the Closing Date or shall have been
terminated by the appropriate agency.
Section 10.8 Opinion of Counsel.
The Company and the Stockholders shall have received a written opinion
dated as of the Closing Date from Dickstein Shapiro Morin & Oshinsky LLP,
counsel to the Buyer and the Guarantor, in form and substance reasonably
satisfactory to the Company, the Stockholder and their counsel.
Section 10.9 Repayment of Certain Debt.
At the Closing, the Surviving Corporation shall pay all amounts owed as of
the Closing Date under the Revolving Credit Line and the Term Loan, including
outstanding principal and interest and any success fees, prepayment premiums,
make-whole premiums or penalties.
Section 10.10 Letter of Credit.
The Buyer shall have provided to the Stockholder and Escrow Agent,
respectively, the irrevocable standby letters of credit described in Sections
3.2(b) and 3.2(g).
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ARTICLE XI
TAX MATTERS
Section 11.1 Certain Tax Elections.
The Stockholder agrees to join with the corporate parent of Buyer in making
a timely election under Section 338(h)(10) of the Code with respect to the
acquisition of the Stock by operation of the Merger hereunder solely for U.S.
federal income tax purposes. The Stockholder further agrees to take all actions,
including the timely execution and filing of forms, necessary to effectuate such
election.
Section 11.2 Change in Tax Status.
The Company's election to be treated as an S Corporation for New York
income tax purposes shall be revoked, effective as of the day prior to the
Closing Date. The Company and the Stockholder shall take all actions, including
the timely execution and filing of forms, necessary to effectuate such
revocation; provided, however, that no action shall be taken to revoke the
Company's election to be treated as an S Corporation for federal income tax
purposes. If so directed by the Buyer prior to the Closing Date, the Company's
election to be treated as an S Corporation shall be similarly revoked for
Michigan income tax purposes. If the S Period Tax Return is not filed by January
1, 1997, then this Section 11.3 shall be initially applied as if the S Period
Tax Return had been filed on January 1, 1997 based upon reasonable estimates
made by the Surviving Corporation. This Section 11.3 shall again be applied,
with appropriate adjustments, upon the actual filing of the S Period Tax Return.
Section 11.3 Certain Distributions.
Within ten (10) days after the filing of the federal income Tax Return (the
"S Period Tax Return") of the Company for the period beginning on January 1,
1996 and ending on the Closing Date, either (i) the Surviving Corporation shall
pay to the Stockholder the amount by which the Stockholder S Period Tax (as
defined herein) exceeds the amount of cash distributions made by the Company to
the Stockholder since January 1, 1996 (excluding the distribution permitted by
Section 8.2(i)), or (ii) the Stockholder shall pay to the Surviving Corporation
the amount by which the amount of cash distributions made by the Company to the
Stockholder since January 1, 1996 (excluding the distribution permitted by
Section 8.2(i)) exceeds the Stockholder S Period Tax. Notwithstanding the
provisions of clause (i) above, any amount payable to the Stockholder by the
Surviving Corporation shall not exceed the amount, if any, by which Debt is less
than $15,000,000. For purposes of this Section 11.3, the "Stockholder S Period
Tax" shall be equal to the sum of (A) the taxable income (excluding capital
gains and losses) of the Company as shown on the S Period Tax Return multiplied
by 43.9% plus (B) the net capital gains of the Company as shown on the S Period
Tax Return multiplied by 32.3%; provided, however, that for purposes of
computing the Stockholder S Period Tax, taxable income of the Company shall
exclude all additional income arising solely by reason of the election made
pursuant to Section 11.1. Any sums payable by either party pursuant to this
Section 11.3 shall bear interest from the Closing Date through the date of
payment at the rate which is equal to the rate of interest actually earned on
the Escrow Amount while the Escrow Amount was held in escrow prior to the
payment to be made hereunder, if any, and the rate earned on the Vision U.S.
Treasury Money Market Fund (or, if such fund is not in continuous existence
during the relevant
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period, such similar money market mutual fund selected by the parties) for any
period during which the Escrow Amount was not held in escrow, computed on the
basis of a 365-day year and paid for the actual number of days elapsed from the
Closing Date to the date of payment. If the S Period Tax Return is not filed by
January 1, 1997, then this Section 11.3 shall be initially applied as if the S
Period Tax Return had been filed on January 1, 1997 based upon reasonable
estimates made by the Surviving Corporation. This Section 11.3 shall again be
applied, with appropriate adjustments, upon the actual filing of the S Period
Tax Return.
ARTICLE XII
OTHER MATTERS
Section 12.1 Confidentiality.
(a) Notwithstanding the termination of this Agreement, each party hereto
and his, her or its respective accountants, attorneys, employees and other
agents, will keep confidential all information, oral and written, obtained from
any other party hereto or its Affiliates and refrain from using in any manner
all information set forth above not otherwise publicly available.
(b) The Stockholder agrees that, except in the ordinary course of business
of the Company, at all times from and after the Closing Date, he shall keep
secret and retain in strictest confidence, and shall not use for his benefit or
for the benefit of others, confidential information with respect to the Company,
including but not limited to, "know-how," trade secrets, customer lists, details
of client or consultant contracts, pricing policies, operational methods,
marketing plans or strategies, product development techniques or plans other
than any of the foregoing which are in the public domain (except through conduct
of the Stockholder which violates this Section 12.1 or the Employment and
Noncompetition Agreement) prior to any disclosure by the Stockholder.
Section 12.2 Further Assurances.
Each party hereto shall cooperate with the others, and execute and deliver,
or cause to be executed and delivered, all such other instruments, including
instruments of conveyance, assignment and transfer, and take all such other
actions as may be reasonably requested by the other parties hereto from time to
time, consistent with the terms of this Agreement, to effectuate the purposes
and provisions of this Agreement.
ARTICLE XIII
TERMINATION
Section 13.1 Methods of Termination.
This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual consent of the Buyer and the Company;
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(b) by the Buyer at any time after the date which is thirty (30) days from
the date of this Agreement if any of the conditions provided for in Article IX
of this Agreement shall not have been met prior to such date;
(c) by the Company at any time after the date which is thirty (30) days
from the date of this Agreement if any of the conditions provided for in Article
X of this Agreement shall not have been met prior to such date; or
(d) at any time prior to the Effective Time by either the Buyer or the
Company if the Merger shall not have been consummated by November 30, 1996.
Section 13.2 Procedure Upon Termination.
In the event of termination by the Buyer, the Company, or both, pursuant to
this Article XIII, written notice thereof shall promptly be given to the other
party or parties and the obligations of the Buyer, the Company and the
Stockholder under this Agreement shall, except as set forth below, terminate
without further action. Upon any such termination:
(a) each party will redeliver all documents, workpapers and other materials
of the other party or parties relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, to the party or parties
furnishing the same; and
(b) no party shall have any liability or further obligation to any other
party, except for such legal and equitable rights and remedies as any party may
have under this Agreement or otherwise, by reason of any breach or violation of
this Agreement by the other party.
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by or on behalf of any of the
parties hereto or the results of any such investigation and notwithstanding the
participation of such party in the Closing, all representations and warranties
of the Buyer and the Company and the Stockholder contained in Articles V, VI and
VII herein and in any certificate executed and delivered by either the Buyer or
the Company or the Stockholder in connection with this Agreement shall survive
the Closing Date and shall terminate and expire twenty-four (24) months
thereafter; provided, however, that the representations and warranties contained
in Sections 5.5(c), 5.10, 5.11, 5.22, 5.28, 6.1, 6.5, 6.6, 6.7 and 7.5 shall
survive the Closing Date and terminate and expire at the end of the relevant
statute of limitations. All agreements of the parties contemplating performance
after the Closing Date shall survive the Closing Date for a period equal to
ninety (90) days after the expiration of the applicable statute of limitations
for any claim relating thereto.
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Section 14.2 Service of Process.
Service of process on any of the Buyer, the Company or the Stockholder for
any claim, legal action or proceeding under this Agreement may be made in the
manner set forth in Section 14.3.
Section 14.3 Notices.
All notices, requests, consents and other communications hereunder shall be
deemed given when delivered if delivered personally (including by courier) or
telecopied (which is confirmed) and three (3) days after mailing, if mailed,
postage prepaid, by registered or certified mail (return receipt requested) to
the parties at the following addresses or to other such addresses as may be
furnished in writing by one party to the others:
(a) if to the Company (prior to Closing):
Hansford Manufacturing Corporation
3111 Winton Road South
Rochester, New York 14623
Telecopier: 716-273-0809
Attention: VanBuren N. Hansford, Jr.
with a copy to:
Harter, Secrest & Emery
700 Midtown Tower
Rochester, New York 14604-2070
Telecopier: 716-232-2152
Attention: Jeffrey H. Bowen, Esquire
(b) if to the Stockholder (after the Closing):
1310 North Ocean Boulevard
Gulf Stream, Florida 33483-7234
Telecopier: 561-243-8110
with a copy to:
Harter, Secrest & Emery
700 Midtown Tower
Rochester, New York 14604-2070
Telecopier: 716-232-2152
Attention: Jeffrey H. Bowen, Esquire
(c) if to the Buyer or to the Surviving Corporation:
c/o DT Industries, Inc.
Corporate Center, Suite 2-300
1949 East Sunshine
Springfield, Missouri 65804
Telecopier: 417-890-0525
Attention: Chief Executive Officer
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with a copy to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037-1526
Telecopier: 202-887-0689
Attention: Ira H. Polon, Esquire
Section 14.4 Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, without regard to such jurisdiction's conflicts
of law principles. The parties agree that venue or any suit, action, proceeding
or litigation arising out of or in relation to this Agreement shall be in any
federal or state court in the State of New York having subject matter
jurisdiction.
Section 14.5 Modification; Waiver.
This Agreement shall not be altered or otherwise amended except pursuant to
an instrument in writing signed by the Buyer, the Company and the Stockholder.
Any party may waive any misrepresentation by any other party, or any breach of
warranty by, or failure to perform any covenant, obligation or agreement of, any
other party, provided that mere inaction or failure to exercise any right,
remedy or option under this Agreement, or delaying in exercising the same, will
not operate as nor shall be construed as a waiver, and no waiver will be
effective unless set forth in writing and only to the extent specifically stated
therein.
Section 14.6 Entire Agreement.
This Agreement, the schedules and exhibits hereto, and any other agreements
or certificates delivered pursuant hereto constitute the entire agreement of the
parties hereto with respect to the matters contemplated hereby and supersede all
previous written or oral negotiations, commitments, representations and
agreements.
Section 14.7 Assignment; Successors and Assigns.
This Agreement may not be assigned by the Company or the
Stockholder without the prior written consent of the Buyer. Prior to the Closing
Date, this Agreement may not be assigned by the Buyer without the prior written
consent of the Company. After the Closing, the Surviving Corporation may assign
this Agreement. Notwithstanding the foregoing, the Buyer and the Guarantor shall
be entitled to assign their respective rights under this Agreement, before and
after the Closing, to its senior lenders, including The Boatmen's National Bank,
N.A., as Agent, and their respective successors and assigns. All covenants,
representations, warranties and agreements of the parties contained herein shall
be binding upon, inure to the benefit of and be enforceable by their respective
successors and permitted assigns.
Section 14.8 Public Announcements.
Prior to the Closing, no public announcement of the transactions
contemplated hereby or of the terms hereof shall be made by the parties to this
Agreement without the written consent, such consent not to be unreasonably
withheld or delayed, of the Buyer and the Company, except to the extent required
by law.
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Section 14.9 Severability.
The provisions of this Agreement are severable, and in the event that any
one or more provisions are deemed illegal or unenforceable, the remaining
provisions shall remain in full force and effect.
Section 14.10 No Third Party Beneficiary.
This Agreement is intended and agreed to be solely for the benefit of the
parties hereto and their stockholders, and no other party shall accrue any
benefit, claim or right of any kind whatsoever pursuant to, under, by or through
this Agreement.
Section 14.11 Expenses.
Except as otherwise expressly provided herein, each party to this Agreement
will pay his, her or its own expenses in connection with the negotiation of this
Agreement, the performance of its obligations hereunder, and the consummation of
the transactions contemplated herein. Any such expenses incurred by the Company,
including any expenses of the Stockholder billed to the Company, shall be paid
by the Stockholder prior to or at the Closing.
Section 14.12 Execution in Counterpart.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
[The balance of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this Agreement and Plan of
Merger as of the date first written above.
H022 CORPORATION
By: /s/ Bruce P. Erdel
--------------------------------------
Name: Bruce P. Erdel
Title: Vice President
HANSFORD MANUFACTURING CORPORATION
By: /s/ VanBuren N. Hansford, Jr.
--------------------------------------
VanBuren N. Hansford, Jr.
President
STOCKHOLDER:
/s/ VanBuren N. Hansford, Jr.
------------------------------------------
VanBuren N. Hansford, Jr.
<PAGE>
The undersigned hereby unconditionally guarantees the full and punctual payment
and performance of all of the obligations of the Buyer to the Stockholder
arising under this Agreement. The liability of the undersigned hereunder shall
be primary, and in any right of action which shall accrue to the Stockholder
under this Agreement, the Stockholder may at his option, proceed against the
undersigned without having commenced any action, or having obtained any
judgment, against the Buyer.
DT INDUSTRIES, INC., as Guarantor
By: /s/ Stephen J. Gore
--------------------------------------
Stephen J. Gore
President and Chief Executive Officer
<PAGE>
NOTE
The following page contains a list of Exhibits and Schedules which have
been intentionally omitted by the Registrant pursuant to Item 601(b)(2) of
Regulation S-K.
A copy of any omitted Exhibit or Schedule will be provided to the
Securities and Exchange Commission upon request.
<PAGE>
EXHIBIT A Form of Closing Certificate
EXHIBIT B Form of Indemnificatino and Escrow Agreement
EXHIBIT C Principles and Procedures
EXHIBIT D Form of Certificate of Incorporation
EXHIBIT E Additional Merger Consideration
EXHIBIT F Form of Stockholder Releases
EXHIBIT G Form of Lease
EXHIBIT H Form of Employment and Noncompetitition Agreement
EXHIBIT I Form of Opinion of Harter, Secrest & Emery
Schedule 2.5 Officers and Directors
Schedule 5.1 Foreign Qualifications
Schedule 5.4 Consents and Approvals
Schedule 5.5 Capitalization
Schedule 5.6 Subsidiaries and Affiliates
Schedule 5.7 Company Audited Financial Statements
Schedule 5.7A Company Unaudited Financial Statements
Schedule 5.8 Liabilities and Obligations
Schedule 5.9 Changes During Interim Operations
Schedule 5.10 Tax Matters
Schedule 5.11 Employee Benefit Plans
Schedule 5.13 Litigation; Claims
Schedule 5.14 Contracts and Commitments
Schedule 5.15 Intellectual Property Rights
Schedule 5.16 Liens
Schedule 5.17 Insurance
Schedule 5.18 Accounts Receivable and Accounts Payable
Schedule 5.19 Inventories and Backlog
Schedule 5.20 Tangible Personal Property Owned
Schedule 5.20A Tangible Personal Property Leased
Schedule 5.21 Real Property Leased
Schedule 5.22 Environmental Matters
Schedule 5.23 Governmental Authorizations
Schedule 5.24 Employees
Schedule 5.26 Customers and Vendors
Schedule 5.27 Distributors and Representatives
Schedule 5.30 Certain Transactions
Schedule 5.32 Directors and Officers; Bank Accounts
Schedule 5.33 Defects in Products or Designs
Schedule 6.1 Encumbrances on Stock
Schedule 7.5 Broker's or Finder's Fees
Schedule 9.14 Releases of Liens
INDEMNIFICATION AND ESCROW AGREEMENT
THIS INDEMNIFICATION AND ESCROW AGREEMENT, dated as of September 30, 1996
(the "Agreement"), by and among Hansford Manufacturing Corporation, a New York
corporation (the "Company"), DT Industries, Inc., a Delaware corporation (the
"Guarantor"), VanBuren N. Hansford, Jr., the sole stockholder of the Company
(the "Stockholder"), and Manufacturers and Traders Trust Company, a New York
bank, as Escrow Agent ("Escrow Agent").
WHEREAS, H022 Corporation, a New York corporation ("H022"), the Guarantor,
the Company and the Stockholder have entered into an Agreement and Plan of
Merger (the "Merger Agreement") providing for the merger of H022 with and into
the Company (the "Merger") (the Company, as the surviving corporation in the
Merger, sometimes referred to herein as the "Surviving Corporation");
WHEREAS, Section 3.2(b) of the Merger Agreement provides for the delivery
of a sum equal to Two Million Dollars ($2,000,000) (the "Escrow Amount") to the
Escrow Agent on June 30, 1997, and for the delivery to the Escrow Agent of an
irrevocable standby letter of credit in the amount of the Escrow Amount (the
"Letter of Credit") at the closing of the Merger, such Escrow Amount and Letter
of Credit to be delivered to and maintained by the Escrow Agent in accordance
with the terms of this Agreement;
WHEREAS, the parties hereto desire to provide for indemnification for
breaches of representations, warranties and covenants and for certain other
matters under the Merger Agreement; and
WHEREAS, the Guarantor, as the owner of all of the issued and outstanding
capital stock of the Surviving Corporation, has agreed to guaranty the Surviving
Corporation's obligations hereunder.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereto agree as follows:
1. DEFINITIONS.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Merger Agreement.
2. INDEMNIFICATION.
(a) Subject to the limitations hereinafter set forth in this Section 2,
from and after the Effective Time, the Stockholder shall protect, defend, hold
harmless and indemnify the Surviving Corporation, its officers, directors,
stockholders, employees and agents, and their respective successors and assigns
from, against and in respect of any and all losses, liabilities, deficiencies,
penalties, fines, costs, damages and expenses whatsoever (including without
limitation, reasonable professional fees and costs of investigation, litigation,
settlement and judgment and interest) (collectively, the "Losses")
<PAGE>
that may be suffered or incurred by any of them arising from or by reason of any
of the following:
(i) Any breach of any of the representations or warranties made by
the Company in Section 5.5(c) or 5.28 of the Merger Agreement or by the
Stockholder in Section 6.1 or 6.5 of the Merger Agreement;
(ii) Any breach of any representation or warranty made by the
Company or the Stockholder in the Merger Agreement (other than in Sections
5.5(c), 5.28, 6.1 or 6.5) or contained in any certificate executed by the
Company or the Stockholder and delivered to H022 in connection with the Merger;
(iii) Any breach of any covenant or agreement made by the Company in
the Merger Agreement to the extent such breach occurred on or prior to the
Closing Date;
(iv) Any breach of any covenant or agreement made by the Stockholder
in the Merger Agreement, this Agreement or any other document or agreement
executed by the Stockholder and delivered to H022 in connection with the Merger;
(v) Any Taxes imposed on or incurred by the Company for any taxable
period ending on or before the Closing Date (or the portion, determined as
described in Section 2(d), of any Taxes imposed on or incurred by the Company
for any taxable period beginning before and ending after the Closing Date which
is allocable to the portion of such period occurring on or before the Closing
Date (the "Pre-Closing Period")), excluding (A) any such Taxes caused solely by
any election pursuant to Section 338(h)(10) of the Code (or any comparable
provision of applicable state or local tax law) with regard to the acquisition
of the shares of the Company pursuant to the Merger, and (B) any liability for
such Pre-Closing Period Taxes (other than as described in clause (A) of this
sentence) to the extent such liability results in reductions of Taxes
attributable to later periods or portions thereof occurring after the Closing
Date;
(vi) Any matter set forth on Schedule 5.13 or 5.33; and
(vii) Any and all costs and expenses (including without limitation,
reasonable legal fees and accounting fees) incident to the enforcement of the
provisions of this Section 2(a).
(b) Subject to the limitations hereinafter set forth in this Section 2,
from and after the Effective Time, the Surviving Corporation shall protect,
defend, hold harmless and indemnify the Stockholder, his personal or legal
representatives, and his successors and assigns from, against and in respect of
any and all Losses that may be suffered or incurred by any of them arising from
or by reason of any of the following:
(i) Any breach of any of the representations or warranties made by
H022 or the Guarantor in the Merger Agreement or contained in any certificate
executed by H022 or the Guarantor and delivered to the Company or the
Stockholder in connection with the Merger Agreement;
2
<PAGE>
(ii) Any breach of any covenant or agreement made by H022 or the
Guarantor in the Merger Agreement, this Agreement or any other document or
agreement executed by H022 or the Guarantor and delivered to the Company or the
Stockholder in connection with the Merger Agreement;
(iii) Any claims of any broker, investment banker, Person or firm
acting on behalf of H022 or its Affiliates for a broker's or finder's fee or
any other commission or similar fee arising in connection with the transactions
contemplated by the Merger Agreement;
(iv) Any additional U.S. federal income taxes caused solely by any
election pursuant to Section 338(h)(10) of the Code with regard to the
acquisition of the shares of the Company pursuant to the Merger; and
(v) Any and all costs and expenses (including without limitation,
reasonable legal fees and accounting fees) incident to the enforcement of the
provisions of this Section 2(b).
(c) INDEMNIFICATION PROCEDURES. All claims for indemnification under this
Agreement shall be asserted and resolved as follows:
(i) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of any third-party claim
or claims ("Third Party Claim") asserted against the Indemnified Party which
could give rise to a right of indemnification under this Agreement and (ii)
transmit to the Indemnifying Party with a copy to the Escrow Agent, a written
notice ("Claim Notice") describing in reasonable detail the nature of the Third
Party Claim, a copy of all papers served with respect to such claim (if any),
an estimate of the amount of damages attributable to the Third Party Claim, if
reasonably possible, and the basis of the Indemnified Party's request for
indemnification under this Agreement.
(ii) Within ten (10) days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the Indemnified Party
(i) whether the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Agreement with respect to such Third Party Claim
and (ii) whether the Indemnifying Party desires, at the sole cost and expense
of the Indemnifying Party, to defend the Indemnified Party against such Third
Party Claim.
(iii) If the Indemnifying Party notifies the Indemnified Party within
the Election Period that the Indemnifying Party does not dispute its potential
liability to the Indemnified Party under this Agreement and that the
Indemnifying Party elects to assume the defense of the Third Party Claim, then
the Indemnifying Party shall have the right to defend, at its sole cost and
expense, such Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted diligently by the Indemnifying Party to a final
conclusion or settled at the discretion of the Indemnifying Party in accordance
with this Section 2(c). The Indemnifying Party shall have full control of such
defense and proceedings including any compromise or settlement thereof;
provided, however,
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that any such compromise or settlement involving non-monetary obligations of the
Indemnified Party, or otherwise having a direct effect upon its continuing
operations, shall be subject to the consent of the Indemnified Party. The
Indemnified Party is hereby authorized, at the sole cost and expense of the
Indemnifying Party (but only if the Indemnified Party is actually entitled to
indemnification hereunder or if the Indemnifying Party assumes the defense with
respect to the Third Party Claim), to file, during the Election Period, any
motion, answer or other pleadings which the Indemnified Party shall deem
necessary or appropriate to protect its interests or those of the Indemnifying
Party and which are not unnecessarily prejudicial to the Indemnifying Party. If
requested by the Indemnifying Party, the Indemnified Party shall, at the sole
cost and expense of the Indemnifying Party, cooperate with the Indemnifying
Party and its counsel in contesting any Third Party Claim which the Indemnifying
Party elects to contest, including, without limitation, the making of any
related counterclaim against the Person asserting the Third Party Claim or any
cross-complaint against any Person. The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this Section 2(c) and, except as permitted
above or pursuant to this Section 2(c), shall bear its own costs and expenses
with respect to such participation.
(iv) If the Indemnifying Party fails to notify the Indemnified Party
within the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to this Section 2(c), or if the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section 2(c) but fails to
diligently and promptly prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right to defend, at the sole cost and expense
of the Indemnifying Party, the Third Party Claim. The Indemnified Party shall
have full control of such defense and proceedings; provided, however, that the
Indemnified Party may not enter into, without the Indemnifying Party's consent,
which shall not be unreasonably withheld or delayed, any compromise or
settlement of such Third Party Claim. The Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the Indemnified Party
pursuant to this Section 2(c), and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation.
(v) In the event an Indemnified Party should have a claim against
an Indemnifying Party hereunder which does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party, with a copy to the
Escrow Agent, a written notice (the "Indemnity Notice") describing in reasonable
detail the nature of the claim, an estimate of the amount of damages
attributable to such claim, the basis of the Indemnified Party's request for
indemnification under this Agreement and the amount for which a claim for
indemnification is made, taking into account the limitations set forth in
Sections 2(f) and 2(g). If the Indemnifying Party does not notify the
Indemnified Party within thirty (30) days from its receipt of the Indemnity
Notice that the Indemnifying Party disputes such claim, the claim specified by
the Indemnified Party in the Indemnity Notice shall be deemed a liability of the
Indemnifying Party hereunder. If the Indemnifying Party has timely disputed such
claim, as provided above, such dispute shall be resolved by litigation in an
appropriate court of competent jurisdiction.
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(vi) Payments of all amounts owing by the Indemnifying Party
pursuant to Sections 2(c)(iii) and (iv) shall be made not later than thirty (30)
days after the latest of (A) the settlement of the Third Party Claim, (B) the
expiration of the period for appeal of a final adjudication of such Third Party
Claim or (C) the expiration of the period for appeal of a final adjudication of
the Indemnifying Party's liability to the Indemnified Party under this
Agreement. Payments of all amounts owing by the Indemnifying Party pursuant to
Section 2(c)(v) shall be made not later than thirty (30) days after the
expiration of the thirty-day Indemnity Notice period or, if the Indemnifying
Party has timely disputed such claim, the expiration of the period for appeal of
a final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Agreement.
(vii) The failure to provide notice as provided in this Section 2(c)
shall not excuse any party from its continuing obligations hereunder; however,
any claim shall be reduced by the damages resulting from such party's delay or
failure to provide notice as provided in this Section 2(c).
(viii) Notwithstanding anything to the contrary in this Section 2(c),
should any Third Party Claim hereunder involve a situation where the Indemnified
Party reasonably anticipates that part of the claim will be borne by it and part
of the claim will be borne by the Indemnifying Party due to the existence of the
limitations in Sections 2(f) and 2(g), the parties shall jointly consult and
proceed as to any such Third Party Claim.
(d) Whenever it is necessary for purposes of Section 2(a)(v) or (b)(iv) to
determine the portion of any Taxes imposed on or incurred by the Company for a
taxable period beginning before and ending after the Closing Date which is
allocable to the Pre-Closing Period, the determination shall be made, in the
case of property, ad valorem or franchise Taxes, on a per diem basis and, in the
case of other Taxes, by assuming that the Pre-Closing Period constitutes a
separate taxable period of the Company (and any tax partnerships in which the
Company has an interest) and by taking into account the actual taxable events
occurring during such period (except that exemptions, allowances and deductions
for a taxable period beginning before and ending after the Closing Date that are
calculated on an annual or periodic basis shall be apportioned to the
Pre-Closing Period ratably on a per diem basis).
(e) With respect to claims made under Section 2 and Section 3 hereto, the
Stockholder hereby waives and agrees not to assert against the Company, its
officers, directors, employees or agents, any claims for contribution or
indemnification with respect to the representations, warranties and agreements
made by the Company with respect thereto.
(f) The Stockholder shall have no liability hereunder to indemnify the
Company for Losses arising under Section 3 or Section 2(a)(ii) or under Section
2(a)(vii) to the extent incurred in connection with such breach or breaches
described in Section 2(a)(ii) until the aggregate of all Losses described in
Section 3 and in Section 2(a) exceed One Hundred Thousand Dollars ($100,000)
(the "Basket Amount"), in which event the
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<PAGE>
Company shall be entitled to indemnification for all such Losses to the extent
that they exceed the Basket Amount.
(g) The Company shall have no liability hereunder to indemnify the
Stockholder for Losses arising under Section 2(b)(i) or under Section 2(b)(v)
to the extent incurred in connection with such breach or breaches described in
Section 2(b)(i) until the aggregate of all Losses described in Section 2(b)
exceed the Basket Amount, in which event the Stockholder shall be entitled to
indemnification for all such Losses to the extent that they exceed the Basket
Amount.
(h) The indemnification obligations set forth in Section 2 and Section 3
are made notwithstanding any investigation made by or on behalf of any of the
parties hereto or the results of any such investigation and notwithstanding the
participation of any party in the Closing.
3. COMPLIANCE WITH ENVIRONMENTAL REGULATORY REQUIREMENTS AND ENVIRONMENTAL
INDEMNIFICATION.
(a) Subject to Section 2, but notwithstanding any other provision in this
Agreement or the Merger Agreement to the contrary, the Stockholder shall be
responsible for, and shall indemnify and defend the Company against and save it
harmless from, against, and in respect of, and covenant not to sue the Company,
its respective officers, directors, stockholders and agents, and their
respective successors and assigns for, any and all Losses incurred with regard
to the representations and warranties which are the subject of Section 5.22 of
the Merger Agreement or based upon the presence of or any release or disposal of
any Hazardous Material occurring prior to the Closing Date whether caused by any
act or omission of a third party or parties or by virtue of any condition or use
of the properties owned, leased, operated or controlled by the Company or its
respective predecessors in interest.
(b) The indemnification of this Section 3 shall include any and all Losses
relating to or arising out of any claim by any Person or regulatory agency
arising out of, related to or in connection with (i) any violation or alleged
violation of any Environmental Law, attributable to circumstances or events
arising or occurring prior to the Closing Date; (ii) any violation or alleged
violation, attributable to circumstances or events arising or occurring prior to
the Closing Date, of any federal, state, local or foreign license, permit or
other government approval, authorization, order, decree, judgment, injunction,
notice, or request for information pertaining to any environmental matter; (iii)
the generation, transport, treatment, recycling, storage or disposal of
Hazardous Material, or arrangement therefor, prior to the Closing Date, by the
Company or any of its predecessors in interest; and (iv) any remedial action or
corrective action (as the latter term is used in Sections 3004(u), 3004(v), and
3008(h) of the Resource Conservation and Recovery Act) arising out of, related
to, or in connection with property owned, leased, operated, or controlled by the
Company at which Hazardous Material was generated, treated, stored or disposed
of prior to the Closing Date. In the event that liabilities and costs result
from circumstances or events arising or occurring both before and after the
Closing Date, the Stockholder shall be liable under this paragraph only for
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<PAGE>
those liabilities and costs attributable to circumstances or events arising or
occurring prior to the Closing Date. If costs and liabilities are not clearly
allocable to circumstances or events arising or occurring either before or after
the Closing Date, such allocation shall be made in an equitable manner.
(c) The indemnification of this Section 3 shall also include any Losses
relating to or arising out of any claim of injury to employees of the Company
caused by the use of asbestos in any manner, provided that this indemnification
shall only be applicable to the extent such injury results from asbestos which
was present in any product or asset of the Company on or prior to the Closing
Date.
4. DEPOSIT OF ESCROW FUNDS.
Upon the execution of this Agreement, H022 will deliver to the Escrow Agent
the Letter of Credit, which, upon receipt thereof, the Escrow Agent will
promptly acknowledge receipt thereof in writing to H022. On June 30, 1997, the
Surviving Corporation will deliver to the Escrow Agent the Escrow Amount by wire
transfer, which, upon receipt thereof, the Escrow Agent will promptly
acknowledge receipt thereof in writing and return the Letter of Credit to the
Surviving Corporation. Upon receipt of the Escrow Amount, the Escrow Agent shall
invest the Escrow Amount in an account identified as being established pursuant
to this Agreement (the "Escrow Account"). In the event that the Surviving
Corporation does not deliver the Escrow Amount in accordance with this
Agreement, the Escrow Agent shall, upon written instruction given by the
Stockholder, make a draw upon the Letter of Credit to fund any shortage and
shall hold such proceeds in accordance with the terms of this Agreement. The
Escrow Agent will hold said Escrow Amount together with all investments thereof,
additions thereto and all interest accumulated thereon and proceeds therefrom
(the "Escrow Funds") in escrow upon the terms and conditions set forth in this
Agreement and shall not withdraw the Escrow Funds from the Escrow Account except
as provided herein.
5. INVESTMENTS.
(a) The Escrow Agent shall invest and reinvest from time to time the
Escrow Funds (i) in any obligation of, or guaranteed as to principal and
interest by, the United States or any agency or instrumentality thereof
(provided that the full faith and credit of the United States supports the
obligation or guarantee of such agency or instrumentality), (ii) in any money
market fund that invests solely in such obligations or types described in clause
(i), (iii) in any other investment agreed to in writing by the Stockholder and
the Company. In the absence of such direction, the Escrow Agent shall invest the
Escrow Funds in the Vision U.S. Treasury Money Market Fund. Investments may be
executed by the Escrow Agent's own Bond Department. To the extent the Escrow
Agent invests any funds in the manner provided for in this Section, no party
hereto shall be liable for any loss which may be incurred by reason of any such
investment.
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(b) The Escrow Agent shall have the power to reduce, sell or liquidate the
foregoing investments whenever the Escrow Agent shall be required to release all
or any portion of the Escrow Funds pursuant to Section 6 hereof. The Escrow
Agent shall have no liability for any investment losses resulting from the
investment, reinvestment, sale or liquidation of any portion of the Escrow
Funds, except in the case of the gross negligence or willful misconduct of the
Escrow Agent.
6. CLAIMS AMOUNT ESCROW FUND.
The Escrow Amount, when received by the Escrow Agent, shall be known as the
"Claims Amount Escrow Fund" and shall consist of Two Million Dollars
($2,000,000), together with all interest accumulated thereon and all proceeds
therefrom.
(a) At any time and from time to time, during the period from the Closing
through the Escrow Expiration Date (as defined in Section 8 hereof), the Company
may give to the Escrow Agent a copy of one or more Claims Notices or Indemnity
Notices, as described in Section 2(c). Upon receipt of a Claims Notice or an
Indemnity Notice, the Escrow Agent shall, if such Claims Notice or Indemnity
Notice sets forth the amount of such claim, hold a portion of the Claims Amount
Escrow Fund equal to the amount of such claim as set forth in such Claims Notice
or Indemnity Notice (or, if the amount set forth exceeds the entire amount of
the Claims Amount Escrow Fund, the entire amount of the Claims Amount Escrow
Fund) in escrow until receiving notice of a Determination (as defined in Section
6(b) below) of such claim. If the Claims Notice or Indemnity Notice states that
the amount of such claim is not reasonably ascertainable by the Company, the
Escrow Agent shall hold the entire amount of the Claims Amount Escrow Fund then
in its possession until subsequently notified in writing by the Company of the
amount of such claim, and thereafter shall hold a portion of the Claims Amount
Escrow Fund equal to the amount of such claim as set forth in such subsequent
notice in escrow until Determination of such claim. In the case of any claim,
the amount of which is not reasonably ascertainable by the Company at the time
the Claims Notice or Indemnity Notice of such claim is given, the Company agrees
to notify in writing the Escrow Agent and the Stockholder of the amount of such
claim promptly after such amount becomes reasonably ascertainable by the
Company.
(b) For the purpose of this Agreement, a "Determination" shall mean (i) a
written compromise or settlement signed by the Company and the Stockholder or
(ii) a binding arbitration award or a judgment of a court of competent
jurisdiction in the United States of America or elsewhere (the time for appeal
having expired and no appeal having been perfected) in favor of the Company and
against the Stockholder and based on a Claim under Section 2(a) or Section 3 of
this Agreement; provided, however, that in the case of a claim described in an
Indemnity Notice, the Indemnity Notice to the Escrow Agent setting forth the
amount thereof as reasonably ascertained by the Company shall constitute a
Determination of such claim unless, within thirty (30) days of the receipt by
the Stockholder of such Indemnity Notice, as above provided, including the
amount of such claim, the Stockholder notifies the Escrow Agent in writing that
he disputes such amount in whole or in part (an "Objection").
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(c) Within ten (10) business days following notice of a Determination, the
Escrow Agent shall disburse to the Company from the Claims Amount Escrow Fund
the amount set forth in such Determination. In the event of an Objection, the
Escrow Agent shall release the amount which is not in dispute, if any, and shall
hold the amount in dispute until such Objection is resolved in accordance with
the provisions of Section 7 hereof.
(d) Unless the Escrow Agent has received a Claims Notice or an Indemnity
Notice, the Escrow Agent shall distribute to the Stockholder quarterly an amount
equal to the interest earned on the Claims Amount Escrow Fund during such
quarter.
(e) Provided there have been no Claim Notices or Indemnity Notices, on
September 30, 1997, the Escrow Agent shall distribute to the Stockholder an
amount equal to one-third (1/3) of the Claims Amount Escrow Fund (including
accrued interest) remaining at that time and on September 30, 1998, the Escrow
Agent shall distribute to the Stockholder an amount equal to the Claims Amount
Escrow Fund remaining at that time minus the amount of the Escrow Funds set
aside by the Escrow Agent for Claims of the Company pursuant to Section 6(a).
7. SETTLEMENT OF DISPUTES.
Any dispute which may arise under this Agreement with respect to the
delivery and/or ownership or right of possession of the Escrow Funds or any part
thereof, or the duties of the Escrow Agent hereunder, shall be settled either by
mutual agreement of the Company and the Stockholder (evidenced by appropriate
instructions in writing to the Escrow Agent, signed by such parties) or by a
binding arbitration award or a final order, decree or judgment of any
appropriate court located in the State of New York or any other jurisdiction
(the time for appeal having expired and no appeal having been perfected), each
party or parties bearing its own costs and expenses with respect to the dispute;
provided, however, that neither the Company nor the Stockholder shall have the
right to dispute any claim which has been the subject of a Determination. The
Escrow Agent shall be under no duty whatsoever to institute or defend any such
proceedings. Prior to the settlement of any such dispute, the Escrow Agent is
authorized and directed to retain in its possession, without liability to
anyone, that portion of the Escrow Funds which is the subject of such dispute.
8. TERMINATION OF ESCROW AGREEMENT.
(a) Subject to the provisions of Section 6(a), the escrow created pursuant
to this Agreement shall terminate upon the earlier to occur of: (i) the second
anniversary of the Closing Date; and (ii) the distribution of all of the Escrow
Funds by the Escrow Agent pursuant to this Agreement (the earliest to occur of
(i) and (ii) above being hereinafter referred to as the "Escrow Expiration
Date"); provided, however, that if there are any unresolved or unsettled claims
pursuant to Section 2(a) or 3 of this Agreement outstanding on the last day of
the foregoing 2 year period, this Agreement will not terminate until the
resolution of all such claims.
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(b) As soon as practicable after the Escrow Expiration Date, the Escrow
Agent shall promptly deliver to the Stockholder out of the Claims Amount Escrow
Fund the excess, if any, of the total amount remaining in the Escrow Funds over
the sum of all amounts under unresolved or unsettled claims then outstanding,
and the Escrow Agent shall continue to retain in the Claims Amount Escrow Fund
all such amounts under unresolved or unsettled Claims then outstanding, subject
to the terms of this Escrow Agreement until resolution of such claims. Payments
from the Claims Amount Escrow Fund to the Stockholder pursuant to the first
sentence of this Section 8(b) shall be made in accordance with the Stockholder's
written directions to the Escrow Agent.
(c) The occurrence of the Escrow Expiration Date, the termination of the
escrow and the distribution of all of the Escrow Funds shall not terminate this
Agreement or the indemnification obligations of the Surviving Corporation and
the Stockholder hereunder, which obligations shall continue, with respect to the
representations and warranties for the survival periods set forth in Section
14.1 of the Merger Agreement, and otherwise until ninety (90) days after the
expiration of the applicable limitations period for any claim for which
indemnification may be sought under this Agreement.
9. CONCERNING THE ESCROW AGENT.
(a) The Escrow Agent shall have no duties or responsibilities except those
expressly set forth herein. The Escrow Agent may consult with counsel and shall
have no liability hereunder except for its own negligence or willful misconduct.
It may rely on any notice, instruction, certificate, statement, request,
consent, confirmation, agreement or other instrument which it reasonably
believes to be genuine and to have been signed or presented by a proper person
or persons.
(b) The Escrow Agent shall have no duties with respect to any agreement or
agreements with respect to any or all of the Escrow Funds other than as provided
in this Agreement. In the event that any of the terms and provisions of any
other agreement between any of the parties hereto conflict or are inconsistent
with any of the terms and provisions of this Agreement, the terms and provisions
of this Agreement shall govern and control in all respects. Notwithstanding any
provision to the contrary contained in any other agreement, the Escrow Agent
shall have no interest in the Escrow Funds except as provided in this Agreement.
(c) So long as the Escrow Agent shall have any obligation to pay any
amount to the Stockholder and/or the Company from the Escrow Funds hereunder,
the Escrow Agent shall keep proper books of record and account, in which full
and correct entries shall be made of all receipts, disbursements and investment
activity in the Escrow Account.
(d) The Escrow Agent shall not be bound by any modification of this
Agreement affecting the rights, duties and obligations of the Escrow Agent
unless such modification shall be in writing and signed by the other parties
hereto, and the Escrow Agent shall have given its prior written consent thereto.
The Escrow Agent shall not be
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bound by any other modification of this Agreement unless the Escrow Agent shall
have received written notice thereof.
(e) The Escrow Agent may resign as escrow agent at any time by giving
thirty (30) days written notice by registered or certified mail to the Company
and the Stockholder and such resignation shall take effect at the end of such
thirty (30) days or upon earlier appointment of a successor. A successor escrow
agent hereunder may be appointed by designation in writing signed by the Company
and the Stockholder. The Company and the Stockholder undertake to utilize their
best efforts to arrange for the appointment of a successor escrow agent. If any
instrument of acceptance by a successor escrow agent shall not have been
delivered to the Escrow Agent within sixty (60) days after the giving of such
notice of resignation, the resigning Escrow Agent may at the expense of the
Stockholder and the Company petition any court of competent jurisdiction for the
appointment of a successor escrow agent.
(f) If at any time hereafter the Escrow Agent shall resign, be removed, be
dissolved or otherwise become incapable of acting, or the bank or trust company
acting as the Escrow Agent shall be taken over by any government official,
agency, department or board, or the position of the Escrow Agent shall become
vacant for any of the foregoing reasons or for any other reason, the Stockholder
and the Company shall appoint a successor escrow agent to fill such vacancy.
(g) Every successor escrow agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor, and also to the Company and the
Stockholder, an instrument in writing accepting such appointment hereunder, and
thereupon such successor escrow agent, without any further act, shall become
fully vested with all the rights, immunities and powers and shall be subject to
all of the duties and obligations, of its predecessor; and every predecessor
escrow agent shall deliver all property and moneys held by it hereunder to its
successor.
(h) The Company and the Stockholder shall share equally the fee charged by
the Escrow Agent for performing its services hereunder. Except as provided in
subsection 9(i) hereof, the Company and the Stockholder shall share equally any
reasonable out of pocket cost incurred by the Escrow Agent in performing its
duties hereunder. This covenant shall survive termination of this Agreement.
(i) The Company and the Stockholder hereby agree to indemnify and hold the
Escrow Agent harmless from and against any and all expenses (including
reasonable attorneys' fees), liabilities, claims, damages, actions, suits or
other charges ("Agent Claims") incurred by or assessed against the Escrow Agent
for anything done or omitted by the Escrow Agent in the performance of the
Escrow Agent's duties hereunder, except such which result from the Escrow
Agent's bad faith, gross negligence or willful misconduct. Agent Claims payable
hereunder shall be paid one-half by the Company and one-half by the Stockholder.
This indemnity shall survive the resignation of the Escrow Agent or the
termination of this Agreement.
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(j) To the extent any amount due to the Escrow Agent pursuant to Sections
9(h) or 9(i) is not paid, the Escrow Agent may deduct the same from the Escrow
Account.
(k) The Escrow Agent's fees shall be Five Hundred Dollars ($500) per year,
payable in advance on the date this Agreement is executed by the Escrow Agent
and on each subsequent anniversary date thereof, as long as the Escrow Agent is
holding any of the Escrow Funds and/or the Letter of Credit hereunder.
10. MISCELLANEOUS.
(a) This Agreement shall be construed by and governed in accordance with
the laws of the State of New York, without regard to such jurisdiction's
conflicts of laws principles.
(b) This Agreement shall be binding upon and shall inure to the benefit
of the heirs, executors, administrators, legal representatives, successors and
assigns of the parties hereto.
(c) This Agreement may be executed in one or more counterparts which taken
together shall constitute but one and the same instrument.
(d) Section headings contained herein have been inserted for reference
purposes only and shall not be construed as part of this Agreement.
(e) This Agreement may be modified or amended only by a written instrument
duly executed by all parties hereto or their respective successors or assigns.
(f) All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given (unless
otherwise specifically provided for herein) if delivered personally (including
by courier), telecopied (which is confirmed) or mailed (registered or certified
mail), postage prepaid or:
If to the Company:
c/o DT Industries, Inc.
1949 East Sunshine
Springfield, Missouri 65804
Attention: Chief Executive Officer
Fax: (417) 890-0525
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with a copy to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
Attention: Ira H. Polon, Esquire
Fax: (202) 887-0689
If to the Stockholder:
VanBuren N. Hansford, Jr.
1310 North Ocean Boulevard
Gulf Stream, Florida 33483-7234
Fax: (561) 243-8110
with a copy to:
Harter, Secrest & Emery
700 Midtown Tower
Rochester, New York 14604-2070
Attention: Jeffrey H. Bowen, Esquire
Fax: (716) 232-2152
If to the Escrow Agent:
Manufacturers and Traders Trust Company
44 Exchange Street
Rochester, New York 14614
Attention: John L. Bartolotta, Vice President
Fax (716) 325-5105
with a copy to:
Woods, Oviatt, Gilman, Sturman & Clarke, LLP
44 Exchange Street
Rochester, New York 14614
Attention: Gary F. Amendola, Esquire
Fax: (716) 454-3968
or to such other addresses or persons as any party may have furnished to the
other parties in writing, in accordance herewith, provided, however, that
notices to the Escrow Agent shall be deemed effective only upon receipt.
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(g) The Escrow Agent shall not be liable to pay any tax on any interest
earned on the Escrow Amount, it being the understanding of the parties that any
tax attributable to interest earned on the Escrow Funds shall be the
responsibility of the Stockholder. The tax identification number the Stockholder
is ###-##-####.
(h) If any party hereto refuses to comply with, or at any time violates or
attempts to violate, any term, covenant or agreement contained in this
Agreement, any other party hereto may, by injunctive action, compel the
defaulting party to comply with, or refrain from violating, such term, covenant
or agreement, and may, by injunctive action, compel specific performance of the
obligations of the defaulting party.
(i) Except as provided herein, the rights and obligations of the parties
under this Agreement shall not be assigned to any person or entity, without the
written consent of the other parties. Notwithstanding the foregoing, H022, the
Surviving Corporation and the Guarantor shall be entitled to assign their
respective rights under this Agreement, before and after the Closing, to their
senior lenders, including The Boatmen's National Bank of St. Louis, as Agent for
itself and other lenders, and their respective successors and assigns. All
covenants, representations, warranties and agreements of the parties contained
herein shall be binding upon, inure to the benefit of and be enforceable by
their respective successors and permitted assigns.
[The balance of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
HANSFORD MANUFACTURING CORPORATION
By: /s/ VanBuren N. Hansford, Jr.
-------------------------------------
VanBuren N. Hansford, Jr., President
STOCKHOLDER:
/s/ VanBuren N. Hansford, Jr.
-----------------------------------------
VanBuren N. Hansford, Jr.
H022 CORPORATION
By: /s/ Bruce P. Erdel
-------------------------------------
Bruce P. Erdel, Vice President
MANUFACTURERS AND TRADERS TRUST COMPANY
By: /s/ John L. Bartolotta
-------------------------------------
John L. Bartolotta, Vice President
<PAGE>
Subject to the limitation of Section 2(g), the undersigned corporation hereby
unconditionally guarantees the full and punctual payment and performance of all
of the obligations of the Surviving Corporation to the Stockholder arising under
this Agreement. The liability of the undersigned hereunder shall be primary, and
in any right of action which shall accrue to the Stockholder under this
Agreement, the Stockholder may at his option, proceed against the undersigned
without having commenced any action, or having obtained any judgment, against
the Surviving Corporation.
DT INDUSTRIES, INC., as Guarantor
By: /s/ Stephen J. Gore
-------------------------------------
Stephen J. Gore
President and Chief Executive Officer
LEASE AGREEMENT
VANBUREN N. HANSFORD, JR.
Landlord
and
HANSFORD MANUFACTURING CORPORATION
a New York Corporation
Tenant
----------------------------
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Dated as of September 30, 1996
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. Leased Property, Fixed Term 1
2. Basic Rent, etc. 1
2.1 Basic Rent 1
2.2 Basic Rent; Manner of Payment 1
3. Additional Rent 2
4. No Counterclaim, Abatement, etc. 2
5. Condition and Permitted Use of Property 2
6. Maintenance and Repairs 2
7. Alterations and Additions, etc. 2
8 Tenant's Equipment 3
9 Utility Services 3
10. Indemnification 3
10.1 Indemnification by Tenant 3
10.2 Indemnification by Landlord 4
11. Inspection, etc. 4
12. Payment of Taxes, etc. 5
13. Compliance with Legal and Insurance Requirements, Instruments 5
13.1. Landlord's Obligation 5
13.2 Tenant's Obligation 5
14. Liens, Easements, etc. 5
15. Permitted Contests 6
16. Insurance 6
16.1 Landlord's Insurance 6
16.2 Tenant's Insurance 6
16.3 Reimbursement by Tenant 7
16.4 Waiver of Subrogation 7
17. Hazardous Materials 8
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18. Damage to or Destruction of Property 8
18.1 Tenant to Give Notice 8
18.2 Restoration 8
18.3. Total Destruction 9
19. Taking of Property 9
19.1. Tenant to Give Notice; Assignment of Awards, etc. 9
19.2. Partial Taking 9
19.3. Total Taking 10
20. Certificate as to No Event of Default, etc.; Financial
Statements, etc. 10
20.1. Certificate of Tenant as to No Event of Default, etc. 10
20.2. Certificate of Landlord 11
21. Right of Landlord to Perform Tenant's Covenants, etc. 11
22. Assignments, Subleases, Mortgages, etc. 11
22.1 Assignments, Subleases, etc. by Tenant 11
22.2. Assignments, Mortgages, etc. by Landlord 12
23. Events of Default; Termination 13
24. Repossession, etc. 14
25. Survival of Tenant's Obligations; Damages 14
25.1. Termination of Lease Not to Relieve Tenant
of Obligations 14
25.2. Damages 14
26. Tenant's Waiver of Statutory Rights 15
27. No Waiver by Landlord 15
28. Remedies Cumulative 15
29. Modification, Acceptance of Surrender 15
30. End of Lease Term 15
31. Notices, etc. 15
32. Short Form or Memorandum 16
33. Quiet Enjoyment; Inspection 16
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34. Liability of Landlord 16
35. Miscellaneous 16
36. Extension Option 17
37. Definitions 17
Exhibit A: Description of Property; Permitted Exceptions
Exhibit B: Basic Rent Schedule
Exhibit C: Basic Rent for Extension Term
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<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease"), dated as of September 30, 1996, is by
and between VanBuren N. Hansford, Jr. (hereinafter referred to as "Landlord"),
and Hansford Manufacturing Corporation, a New York corporation (hereinafter
referred to as "Tenant"). The Landlord and Tenant are sometimes hereinafter
collectively referred to herein as the "parties".
WITNESSETH THAT:
In consideration of the mutual agreements contained in this Lease, Landlord
and Tenant agree with each other as follows:
1. Leased Property, Fixed Term. Upon and subject to the conditions and
indications set forth below, Landlord leases to Tenant, and Tenant leases, and
rents from Landlord, the following real property ("Property") described in
Exhibit A attached hereto and made a part hereof, together with all buildings,
improvements and structures now or hereafter located on the Property (the
"Improvements", the Property and the Improvements being collectively referred to
herein as the "Premises") subject, however, to the Permitted Exceptions set
forth on Exhibit A hereto.
TO HAVE AND TO HOLD the Premises for an initial ten (10) year term (the
"Initial Term", the Initial Term and any renewal terms being referred to herein
as the "Lease Term") commencing on September 30, 1996 (the "Commencement Date")
and expiring at midnight on September 30, 2006, unless this Lease shall sooner
terminate or be extended for one or more additional renewal terms as provided
herein.
2. Basic Rent
2.1 Basic Rent. Net basic rental ("Basic Rent") shall be payable by
Tenant during the Initial Term in the amounts specified on Exhibit B hereto.
Tenant's obligation for payment of Basic Rent shall begin on the Commencement
Date. Any partial calendar months will be prorated on a per diem basis. If the
Commencement Date occurs on a day that is not the first day of a month, then the
monthly installment of Basic Rent for the month in which the Commencement Date
occurs shall be appropriately prorated and paid by Tenant on the Commencement
Date.
2.2 Basic Rent Net; Manner of Payment. The Basic Rent and all other
sums payable to Landlord hereunder shall be payable in monthly installments on
or before the first day of each month in such currency of the United States of
America as at time of payment shall be legal tender for the payment of public
and private debts and
<PAGE>
shall be paid to Landlord at Landlord's address set forth above or to such other
person or address as Landlord from time to time may designate in writing.
3. Additional Rent. Tenant will also pay, from time to time as provided
in this Lease or within ten (10) days of written demand by Landlord, as
additional rent (the "Additional Rent") all other amounts, liabilities and
obligations that Tenant assumes or agrees to pay pursuant to this Lease.
4. No Counterclaim, Abatement, etc. The Basic Rent, Additional Rent and
all other sums payable by Tenant hereunder shall be paid without setoff or
deduction, unless otherwise provided herein.
5. Condition and Permitted Use of Property. Landlord represents and
warrants to Tenant that as of the Commencement Date the foundations, roof,
exterior walls and all other structural elements of the Improvements, together
with the HVAC, mechanical, electrical and plumbing systems and all components
thereof and the other equipment contained within the Improvements (collectively,
the "Systems"), shall be in good working order and condition, and should this
not be the case Landlord agrees hereby to perform, at its sole expense, whatever
repairs thereto and/or replacements thereof as are reasonably necessary to place
same in good working order and condition. Tenant may use the Property for any
office, manufacturing, warehouse, distribution and industrial purposes and uses
incidental thereto (collectively, the "Permitted Use") and will not do or permit
any act or thing that is contrary to any Legal Requirement or Insurance
Requirement, or that may materially impair the value or utility of the Property
or any part thereof, or that constitutes a public or private nuisance or waste
of the Property or any part thereof.
6. Maintenance and Repairs. Subject to the provisions of Sections 5, 18
and 19 hereof, Tenant, at its expense, will: (i) keep the Premises and the
adjoining sidewalks, curbs, and all means of access to the Premises in good and
clean order and condition, subject to ordinary wear and tear; and (ii) perform
all routine maintenance of the roof, foundation, walls and other structural
components of the Improvements and the Systems. Landlord shall be solely
responsible, at its expense, for all necessary repairs and/ or replacements of
the roof, foundation, walls and other structural components of the Improvements
and the Systems, except only for such repairs and/or replacements the need for
which is caused by Tenant's negligence or willful misconduct or that of its
agents, employees, contractors, invitees or anyone acting on Tenant's behalf or
Tenant's failure to perform its routine maintenance as herein provided, which
such repairs and/or replacements shall be Tenant's responsibility. All repairs
and/or replacements performed pursuant to the provisions hereof shall be at
least equal in quality, utility and class to the original condition of the
Premises.
7. Alterations and Additions, etc. Subject to Landlord's prior approval
as to the scope and general nature of alterations of and additions to the
Improvements or any part thereof, which approval shall not be unreasonably
withheld, delayed or conditioned,
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Tenant at its expense may make reasonable alterations of and additions to the
Improvements or any part thereof; provided, however, that any such alteration or
addition (a) shall not change the general character of the Improvements, or
materially reduce the fair market value of any such Improvements immediately
before such alteration or addition, (b) shall be effected with due diligence, in
a good and workmanlike manner and in compliance with all Legal Requirements,
Insurance Requirements and the provisions of Section 16.2 hereof, and (c) shall
be fully paid for by Tenant upon its construction or installation on the
Property. Tenant shall provide to Landlord advance plans which show the nature
of any such alteration and/or addition. All alterations of and additions to the
Improvements, other than Tenant's Equipment, shall immediately become the
property of Landlord, shall constitute a part of the Premises and shall remain
with the Premises at the expiration of the Lease Term, unless Landlord otherwise
provides in a notice to Tenant given at least 120 days prior to the expiration
of the Lease Term.
8. Tenant's Equipment. All Tenant's Equipment shall be and remain the
property of Tenant. Tenant will immediately repair at its expense all damage to
the Property caused by the initial installation of Tenant's Equipment upon the
Premises or any removal of Tenant's Equipment therefrom, whether effected by
Tenant or Landlord (provided Landlord exercises the care in such removal).
9. Utility Services. Landlord shall provide, at its expense, as of the
Commencement Date, the necessary mains, conduits and hook-ups to provide utility
services to the Premises. Tenant shall purchase all utility services including,
without limitation, fuel, water, electricity and sewer service from the utility
or municipality providing same, and shall pay for such services when such
payments are due.
10. Indemnification:
10.1 Indemnification by Tenant. Tenant will (to the full extent
permitted by applicable law) protect, indemnify and save harmless Landlord, any
beneficiary of Landlord, any officer, director or shareholder of any of the
foregoing and any Mortgagee of the Premises (each an "Indemnified Party") from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses) imposed upon or incurred by or asserted against any
Indemnified Party or against the Premises or any interest of such Indemnified
Party therein by reason of the occurrence or existence of any of the following
during the term of this Lease: (a) any accident, injury to or death of any
person or persons or loss of or damage to property occurring on or about the
Premises or any part thereof or the adjoining sidewalks, curbs, streets or ways
unless caused by the negligence or willful misconduct of the Indemnified Party
or that of the Indemnified Party's employees, agents, contractors or anyone
acting on such Indemnified Party's behalf, (b) any use, or condition of the
Premises or any part thereof, or of the adjoining sidewalks, curbs, streets or
ways unless caused by the negligence or willful misconduct of the Indemnified
Party or the Indemnified Party's employees, agents, contractors or anyone acting
on such Indemnified Party's behalf, including, without limitation, any
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claim in respect of any adverse environmental impact or effect which is due
solely to the Tenant's conduct or operation after the commencement of the Lease
and is not the result of any pre-existing condition which is later discovered,
(c) any failure on the part of Tenant to perform or comply with any of the terms
of this Lease, (d) any negligent or tortious act on the part of Tenant or any of
its agents, contractors, servants, employees, licensees or invitees, or (e) any
negligent or tortious act on the part of any assignee or sublessee of Tenant, or
of any agents, contractors, servants, employees, licensees or invitees of any
assignee or sublessee of Tenant. Any Indemnified Party seeking indemnification
hereunder shall give notice to Tenant of the existence of any claim giving rise
to the need for such indemnification within thirty (30) Business Days after the
date on which such Indemnified Party shall have obtained actual knowledge of
such claim. In case any action, suit or proceeding is brought against any
Indemnified Party by reason of any occurrence referred to above, Tenant, upon
the request of such Indemnified Party, will at Tenant's expense resist and
defend such action, suit or proceeding or cause the same to be resisted and
defended by counsel designated by Tenant and reasonably acceptable to such
Indemnified Party.
10.2 Indemnification by Landlord. Landlord will (to the full
extent permitted by applicable law) protect, indemnify and save harmless Tenant,
any beneficiary of Tenant and any officer, director or shareholder of any of the
foregoing (each an "Indemnified Party") from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) imposed
upon or incurred by or asserted against any Indemnified Party or against the
Premises or any interest of such Indemnified Party therein by reason of the
occurrence or existence of any of the following during the term of this Lease:
(a) any failure on the part of Landlord to perform or comply with any of the
terms of this Lease or (b) any negligent or tortious act on the part of Landlord
or any of its agents, contractors, servants, employees, licensees or anyone
acting on Landlord's behalf. Any Indemnified Party seeking indemnification
hereunder shall give notice to Landlord of the existence of any claim giving
rise to the need for such indemnification within thirty (30) Business Days after
the date on which such Indemnified Party shall have obtained actual knowledge of
such claim; provided, however, that no Indemnified Party shall have any such
obligation with respect to any claim whose existence is actually known to
Landlord. In case any action, suit or proceeding is brought against any
Indemnified Party by reason of any occurrence referred to above, Landlord upon
the request of such Indemnified Party, will at Landlord's expense resist and
defend such action, suit or proceeding or cause the same to be resisted and
defended by counsel designated by Landlord and reasonably acceptable to such
Indemnified Party.
11. Inspection, etc. Landlord and its authorized representatives may enter
the Premises at all reasonable times (provided that no such entry shall be made
without reasonable advance notice or shall unreasonably interfere with the
conduct of Tenant's business) for the purpose of (a) inspecting the same, (b)
exhibiting the Premises for the purpose of sale or mortgage or other financing,
(c) at any time within six (6) months prior to the expiration of the term of
this Lease, exhibiting the Premises for the purpose
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of leasing same, and (d) at any time after Tenant shall have abandoned the
Premises, displaying thereon advertisements for sale or letting. Landlord shall
not have any duty to make any such inspection and shall not incur any liability
or obligation for not making any such inspection. No such entry permitted by
this Section 11 shall constitute an eviction of Tenant.
12. Payment of Taxes, etc. Subject to the provisions of Section 15 hereof,
Tenant will pay, promptly as and when the same shall become due and payable all
taxes (including, without limitation, real estate taxes, personal or other
property taxes and all sales, value added, use and similar taxes), assessments
(including, without limitation, all assessments for public improvements or
benefits, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the term hereof) installments of which
become due and payable during the term hereof, water, sewer or other rents,
rates and charges, excises, review, license fees, permit fees, or any future
inspection fees and other authorization fees which may be created or imposed and
other charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character that may be
assessed, levied, confirmed or imposed on or in respect of the Premises or any
rent therefrom (all of the foregoing being hereinafter collectively referred to
as "Taxes"). Notwithstanding the foregoing or any other provision of this Lease,
Tenant shall not be required to pay any income, profits or revenue tax upon the
net income of Landlord, nor any franchise, excise, corporate, estate,
inheritance, succession, capital levy or transfer tax of Landlord, nor any
interest, additions to tax or penalties in respect thereof, unless such tax is
imposed, levied or assessed in substitution for any Taxes that Tenant is
required to pay pursuant to this Section 12 . Tenant will furnish to Landlord,
upon request, official receipts or other proof reasonably satisfactory to
Landlord evidencing payment of any Taxes in accordance with the requirements of
this Section 12.
13. Compliance with Legal and Insurance Requirements, Instruments.
13.1 Landlord's Obligation. Prior to the Commencement Date, Landlord
at its expense will promptly (a) comply with all Legal Requirements and
Insurance Requirements, and (b) procure, maintain and comply with all permits,
licenses and other authorizations required for the Permitted Use of the
Premises.
13.2 Tenant's Obligation. Throughout the Fixed Term and any Extended
Term, Tenant at its expense will promptly (a) comply with all Legal Requirements
and Insurance Requirements, and (b) procure, maintain and comply with all
permits, licenses and other authorizations required for its use of the Property.
14. Liens, Easements, etc. Tenant will not directly or indirectly create
or permit to be created or to remain (except as permitted by Section 15), and
will discharge, any lien, or encumbrance with respect to the Premises or any
part thereof or Tenant's interest therein; provided, however, that the foregoing
shall not be applicable in
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connection with any mortgage, lien or encumbrance permitted to be created or
remain by Landlord.
15. Permitted Contests. Tenant at its expense may contest by appropriate
legal proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Taxes or lien therefor or
any Legal Requirement or Insurance Requirement or the application of any
instrument of record affecting the Property or any part thereof or any claims of
mechanics, materialmen, suppliers or vendors or lien therefor, and, if permitted
by law, may withhold payment of the same pending such contest; provided,
however, that (a) such proceedings shall suspend the collection thereof from
Landlord, the Property and any sums payable hereunder, (b) neither the Property
nor any part thereof or interest therein (or any sums payable hereunder) would
be in any danger of being sold, forfeited or lost, nor would the use or
occupancy of the Property (or any part thereof) be adversely affected, (c)
Landlord shall not be in any danger of any civil or criminal liability by reason
thereof and neither the Property nor any part thereof or interest therein (or
any sums payable hereunder) would be subject to the imposition of any lien as a
result of such failure, and (d) Tenant shall have either (i) paid the disputed
amount under protest, or (ii) provided to Landlord evidence of such security as
Landlord may deem reasonably necessary to insure the ultimate payment of the
contested amount and to prevent the forfeiture of any sums payable to Landlord
or any Mortgagee hereunder. Tenant shall give prompt written notice to Landlord
of the commencement of any contest referred to in the preceding sentence,
providing a reasonably detailed description thereof, and Landlord shall, at
Tenant's expense, cooperate with Tenant with respect to any such contest. Tenant
agrees that each such contest shall be promptly prosecuted to final conclusion,
and Tenant shall indemnify and save Landlord and any Mortgagee harmless from and
against any and all losses, judgments, decrees and costs (including, without
limitation, reasonable attorneys' fees and expenses) incurred in connection
therewith. Tenant agrees that it will, promptly after final determination of
each such contest, fully pay and discharge the amounts which shall finally be
levied, assessed, charged or imposed or determined to be payable, together with
all penalties, fines, interest, costs and expenses incurred in connection
therewith, and perform all acts the performance of which shall be finally
ordered or decreed as a result thereof.
16. Insurance.
16.1 Landlord's Insurance. Landlord, for its benefit and that of any
Mortgagee and the Tenant, shall maintain with insurers authorized to issue
insurance in the State of New York and having an A.M. Best rating of "A" or
better ("Approved Insurers") or otherwise selected by Landlord and any
Mortgagee: (a) insurance with respect to the Improvements against loss or damage
by fire, lightning and other risks from time to time included under "all-risk"
policies and against loss or damage by sprinkler leakage, water damage,
collapse, vandalism and malicious mischief, in amounts sufficient to prevent
Landlord from becoming co-insurers of any loss under the applicable policies,
and in any event in amounts not less than 100% of the actual replacement cost of
the Improvements (initially determined as of the date on which such
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insurance is originally issued, and subsequently re-determined on the basis on
an annual review of the actual replacement cost of the Improvements), as
determined by Landlord (such insurance shall also include at least nine (9)
months rental loss coverage), and (b) explosion insurance in respect of any
steam and pressure boilers and similar apparatus located on the Property.
16.2 Tenant's Insurance. Tenant, at its expense, shall maintain with
Approved Insurers or insurers otherwise approved by Landlord: (a) comprehensive
general liability insurance against claims arising out of or connected with the
possession, use, leasing, operation or condition of the Property in such amounts
as are usually carried by persons operating similar properties in the same
general locality but in any event with a combined single limit of not less than
$1,000,000.00 for any single injury to a person and $5,000,000.00 for all claims
with respect to property damage and personal injury and death with respect to
any one occurrence; (b) such other insurance against such risks and in such
amounts as is reasonable and customary based on the Permitted Use. In addition,
during any period of alteration or addition to the Improvements pursuant to
Section 7 hereof, performed by or at the direction of Tenant, Tenant shall
obtain and keep in effect Builder's Risk insurance in such amounts as Landlord
shall reasonably request. The insurance under this Section 16.2 may be effected
under a blanket policy or policies covering the Property and other property and
assets not constituting part of the Property. All insurance maintained by Tenant
pursuant to Section 16.2. hereof shall (a) name Landlord and any Mortgagee as
additional insureds, and (b) provide that if all or any part of such policy is
canceled, terminated or expires, the insurer will forthwith give notice thereof
to each named insured party and that no cancellation, reduction in amount or
material change in coverage thereof shall be effective until at least 30 days
after delivery to each named insured party of written notice thereof; and (c) be
reasonably satisfactory in all other respects to Landlord and any Mortgagee.
16.3 Reimbursement by Tenant. Tenant shall promptly pay to Landlord,
upon written demand (including reasonable documentation of the amount requested)
and at least ten (10) days prior to the due date (provided timely demand is made
by Landlord), as Additional Rent, the cost of all insurance required to be
maintained by Landlord pursuant to Section 16.1. above. Tenant's obligation to
reimburse Landlord for the cost of rental loss insurance shall not exceed
$500.00 per year.
16.4 Waiver of Subrogation. Each party hereto waives any and every
claim which arises or may arise in such party's favor against the other party
hereto during the term of this Lease for any and all loss of, or damage to, any
of such party's property located within or upon, or constituting part of, the
Premises, which loss or damage is covered by valid and collectible fire and
extended coverage insurance policies to the extent that such loss or damage is
recoverable under such insurance policies. Such mutual waivers shall be in
addition to, and not in limitation or derogation of, any other waiver or release
contained in this Lease with respect to any loss of, or damage to, property of
the parties hereto. Inasmuch as such mutual waivers will preclude the assignment
of any aforesaid claim by way of subrogation or otherwise to an insurance
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company (or any other party), each party hereby agrees immediately to give to
each insurance company which has issued to such party policies of fire and
extended coverage insurance, written notice of the terms of such mutual waivers,
and to cause such insurance policies to be properly endorsed, if necessary, to
prevent the invalidation of such insurance coverages by reason of such waivers.
17. Hazardous Materials. Landlord warrants that, to the best of its
knowledge the Property is, as of the Commencement Date of this Lease, free of
hazardous substances and materials. Landlord shall indemnify Tenant from the
release of hazardous materials present on the Property prior to Tenant's
possession, or elsewhere if caused by Landlord or persons acting under Landlord.
The within covenants shall survive the expiration or earlier termination of the
Lease Term. Tenant shall not (either with or without negligence) cause or permit
the escape, disposal or release of any biologically or chemically active or
other hazardous substances, or materials on or from the Premises. Tenant shall
not allow the storage or use of such substances or materials in any manner not
sanctioned by federal, state or local law for the storage and use of such
substances or materials, nor allow to be brought into the Premises any such
materials or substances except to use in the ordinary course of Tenant's
business. Tenant shall insure that any hazardous materials generated by it in
the ordinary course of its business are transported and disposed of off the
Premises in accordance in all material respects with all applicable federal,
state and local laws and regulations. Without limitation, hazardous substances
and materials shall include those described in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
Section 6901 et seq., the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 2601, et seq. and any applicable state or local laws and the regulations
adopted under these acts. In all events, Tenant shall indemnify Landlord in the
manner elsewhere provided in this Lease from any release of hazardous materials
on the Premises occurring while Tenant is in possession thereof, or elsewhere if
caused by Tenant or persons acting under Tenant. The covenants and agreements of
the parties set forth in this Section 17 shall survive the expiration or earlier
termination of the Lease Term.
18. Damage to or Destruction of Property.
18.1 Tenant to Give Notice. In case of any damage to or destruction
of the Improvements located on the Property (or any part of such Improvements),
Tenant will promptly give notice thereof to Landlord, generally describing the
nature and extent of such damage or destruction.
18.2 Restoration. In case of any damage to or destruction of the
Improvements located on the Property, or any part of such Improvements (other
than a Total Destruction), Landlord , at its expense, will promptly commence and
complete Restoration of such Improvements to the extent of any insurance
proceeds on account of such damage or destruction. In the event that insurance
proceeds available on account of such damage or destruction (taking into account
the rights of Landlord's mortgagee in
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and to such proceeds) shall not be sufficient for Restoration of the
Improvements, and Landlord shall decide not to undertake Restoration of the
Improvements, Landlord shall be permitted to terminate the Lease by written
notice to Tenant within sixty (60) days after the date of such destruction. The
above notwithstanding, Tenant shall be entitled to terminate this Lease: (a) by
written notice to Landlord within sixty (60) days after the date of such
destruction if Restoration cannot reasonably be expected to be completed within
two hundred and seventy (270) days after the date of destruction; or (b) if
Landlord undertakes Restoration of all or a portion of the Improvements and
fails to complete such Restoration within two hundred and seventy (270) days
after the date of destruction (subject to Unavoidable Delays), such election to
terminate to be effected by written notice to Landlord within thirty (30) days
after expiration of the two hundred and seventy (270) day period.
The Basic Rent and Additional Rent payable hereunder attributable to such
portion of the Improvements as are so rendered unusable by such damage or
destruction shall be abated until Restoration of the Improvements is complete or
termination of the Lease, as appropriate.
18.3 Total Destruction. In case of (a) the destruction during the
last two years of the Fixed Term, or the last two years of any Extended Term, of
all of the Improvements located on the Property, or (b) the destruction during
the last two years of the Fixed Term, or the last two years of any Extended
Term, of such a substantial part of the Improvements located on the Property
that Restoration of such Improvements is not economically feasible (any such
destruction being hereinafter referred to as a "Total Destruction"), Landlord or
Tenant may, by notice to the other party given within 60 days after the date of
such destruction, terminate this Lease.
19. Taking of Property.
19.1 Tenant to Give Notice; Assignment of Awards, etc. In case of a
Taking, or the commencement of any proceedings or negotiations that might result
in a Taking, in respect of which the Restoration of the Property is reasonably
estimated to cost more than $10,000, Tenant will promptly give notice thereof to
Landlord, generally describing the nature and extent of such Taking or the
nature of such proceedings or negotiations and the nature and extent of the
Taking that might result therefrom. Tenant hereby irrevocably assigns, transfers
and sets over to Landlord all rights of Tenant to any award or payment on
account of any Taking of Tenant's Leasehold and irrevocably authorizes and
empowers Landlord, with full power of substitution, in the name of Tenant or
otherwise, to file and prosecute what would otherwise be Tenant's claim for any
such award or payment and to collect, receipt for and retain the same except as
provided pursuant to Section 19.3.
19.2 Partial Taking. In the case of a Taking other than a Total
Taking, (a) this Lease shall remain in effect as to the portion of the Property
remaining immediately after such Taking, and the Basic Rent, Additional Rent or
any other sum payable
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hereunder shall be equitably prorated, and (b) Landlord, whether or not the
awards or payments, if any, on account of such Taking shall be sufficient for
the purpose, at its expense will promptly commence and complete (subject to
Unavoidable Delays) Restoration of the Property, except for any reduction in
area of the Property caused by such Taking; provided, however, that in the event
Landlord's mortgagee does not permit any such award or payment to be used to
effect a Restoration of the Property, Landlord shall be permitted to terminate
the Lease by written notice to Tenant within sixty (60) days of the date of such
Taking, and provided further in case of Taking for temporary use ("Temporary
use" being defined for all purposes herein as any taking for less than six
consecutive months), Landlord shall not be required to effect any Restoration
until such Taking is terminated.
The Basic Rent and Additional Rent payable hereunder attributable to such
portion of the Improvements which shall have been taken shall be equitably
abated after the date the property can no longer be used for the intended
purpose.
19.3 Total Taking. In case of the Taking during the Fixed Term or any
Extended Term of the Property in its entirety (or all of the Improvements
located thereon) or the Taking during the Fixed Term or Extended Term (other
than for temporary use) of such a substantial part of the Property (or the
Improvements located thereon) that either (a) the portion of the Property (or
the Improvements located thereon) remaining after such Taking is (and after
Restoration would be) unsuitable for use by Tenant in the operation of its
business, as reasonably determined by Tenant, or (b) Restoration of the Property
(or the Improvements located thereon,) is not otherwise economically feasible,
Landlord or Tenant may, by notice to the other party given within sixty (60)
days of the date of such Taking, terminate this Lease as of the date of such
Taking.
In the event of the termination of this Lease as a result of any such
Taking, the Tenant hereby releases all right, title, claim and interest in and
to any award or payments received or payable as a result of any such Taking of
the Improvements and/or the Property, except that the Tenant may pursue and
shall be entitled to any separate award for the loss of its trade fixtures or
equipment and/or moving allowances, if any such separate award is made.
20. Certificate as to No Event of Default, etc.; Financial Statements,
etc.
20.1 Certificate of Tenant as to No Event of Default, etc. Tenant
will deliver to Landlord within 10 days following Landlord's request therefor
(a) a Certificate of Tenant stating (i) that this Lease is unmodified and in
full force and effect (or, if there have been modifications, that this Lease is
in full force and effect, as modified, and stating the modifications), (ii) the
date to which the Basic Rent has been paid and that all Additional Rent payable
on or before the date of such Certificate has been paid, and (iii) that, to the
best of its knowledge, no Event of Default exists hereunder, or, if any such
Event of Default is known to exist, specifying the nature and period of
existence
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thereof and what action Tenant is taking or has taken with respect thereto; it
being agreed that (and any such Certificate shall state that) no rights or
remedies of Landlord hereunder or otherwise resulting from any condition, event
or circumstance that would entitle Landlord to declare an Event of Default (and
with respect to which condition, event or circumstance no Event of Default has
been declared on or before the date of such Certificate) shall be waived,
impaired or diminished in any respect by reason of any such Certificate or any
statement made therein and (b) such reasonable information with respect to
Tenant and the Property or any part thereof as from time to time may reasonably
be requested.
20.2 Certificate of Landlord. Within 10 days following Tenant's
request therefor, Landlord will deliver to Tenant a Certificate of Landlord
stating: (a) that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that this Lease is in full force and effect, as
modified, and stating the modifications); (b) the date to which Basic Rent has
been paid hereunder; and (c) whether or not an Event of Default has been
declared by Landlord hereunder, it being agreed that (and any such Certificate
shall state that) no rights or remedies of Landlord hereunder or otherwise
resulting from any condition, event or circumstance that would entitle Landlord
to declare an Event of Default (and with respect to which condition, event or
circumstance no Event of Default has been declared on or before the date of such
Certificate) shall be waived, impaired or diminished in any respect by reason of
any such Certificate or any statement made therein. No failure of Landlord to
deliver any such Certificate of Landlord shall release, discharge or otherwise
affect any of Tenant's or Landlord's rights or obligations hereunder.
21. Right of Landlord to Perform Tenant's Covenants, etc. If Tenant shall
fail to make any payment or perform any act required to be made or performed by
it hereunder, Landlord, upon notice to Tenant (except in cases of emergency that
threaten bodily injury or material property damage) and after Tenant shall have
had reasonable opportunity to make such payment or perform such obligation, but
without waiving or releasing any obligation or default, may make such payment or
perform such act for the account and at the expense of Tenant, and may enter
upon the Property and the Improvements or any part thereof for such purpose and
take all such action thereon as, in the opinion of Landlord, may be necessary or
appropriate therefor. No such entry shall constitute an eviction of Tenant. All
reasonable payments so made by Landlord and all reasonable costs and expenses
(including, without limitation, attorneys' fees and expenses) incurred in
connection therewith or in connection with the performance by Landlord of any
such act shall constitute Additional Rent hereunder.
22. Assignments, Subleases, Mortgages, etc.
22.1 Assignments, Subleases, etc. by Tenant. If no Event of Default
shall have occurred and be continuing, Tenant may at any time, after obtaining
the written consent of Landlord, sublet the Property or any part thereof, and
may assign its interest in this Lease (including any right to extend the Initial
Term); provided, however, that (a) Tenant shall deliver to Landlord a fully
executed counterpart of each such sublease
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or assignment promptly after execution thereof, and (b) no assignment, whether
by operation of law, consolidation, merger, a sale of stock or otherwise, shall
be effective prior to the execution by the assignee and delivery to Landlord of
an instrument, reasonably satisfactory in form and substance to Landlord,
assuming all of the obligations of Tenant under this Lease. Provided Landlord,
acting reasonably, does not object to the financial ability of the proposed
sublessee or assignee or their proposed use of the Premises, Landlord shall not
otherwise unreasonably withhold, delay or condition his proposed consent to a
sublease or assignment. Written consent of the Landlord shall not be required
for assignment to, or sublease with, affiliates or subsidiaries of the Tenant.
No assignment or sublease made as permitted by this Section 22.1 shall affect or
reduce any obligations of Tenant or any rights of Landlord hereunder, and all
obligations of the Tenant originally named hereunder shall continue in full
force and effect as the obligations of a principal and not of a guarantor or
surety, to the same extent as though no assignment or subletting had been made.
Landlord hereby consents to the assignment of Tenant's interest in this Lease to
Tenant's secured lenders as security for Tenant's obligations to such lenders,
provided the terms and conditions of any such assignment are reasonably
satisfactory to Landlord.
22.2 Assignments, Mortgages, etc. by Landlord. The interest of Landlord in
this Lease and in and to the Property or any part thereof may, at any time and
from time to time, be sold, conveyed, assigned or otherwise transferred, without
the prior written consent of Tenant, and upon any sale or conveyance of the
Property as an entirety or any assignment or other transfer (other than for the
purpose of securing indebtedness) by any party lessor of its interest in this
Lease and in and to the Property, such party lessor shall be completely relieved
of and from any and all obligations not theretofore accrued under this Lease or
otherwise with respect to the Property, and such party lessor shall have no
further obligations whatsoever to any party lessee, except to the extent that
any such obligation accrued prior to the date of such sale, conveyance,
assignment or transfer, and Tenant shall thereupon look only to the then owner
of Landlord's estate in the Property for the performance of any obligations of
Landlord hereunder. Landlord may also from time to time mortgage or assign, by
way of pledge or otherwise, any or all of the rights, in whole or in part, of
Landlord under this Lease to any Person as security for the indebtedness or
other obligations of Landlord. From and after any such mortgage or assignment
and to the extent provided in the instrument effecting such mortgage or
assignment, (a) such Mortgagee may enforce any and all of the terms of this
Lease to the extent so assigned as though such Mortgagee had been a party
hereto, (b) no action or failure to act on the part of Landlord shall adversely
affect or limit any rights of such Mortgagee, (c) no such assignment shall
constitute an assumption of any such obligations on the part of such Mortgagee
(unless such Mortgage shall become a mortgagee in possession), and (d) a copy of
all notices, demands, consents, approvals and other instruments given by Tenant
hereunder shall also be delivered to such Mortgagee, if such Mortgagee shall
have provided Tenant with written notice of its address for such purposes. No
foreclosure, sale or other proceedings under any mortgage or other security
arrangement with respect to the Property shall discharge or otherwise affect the
obligations of Tenant hereunder, unless Tenant's rights under this Lease and its
leasehold interest created hereby shall be impaired in any way whatsoever.
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In no event shall this Lease be subordinate to a presently existing or
future Mortgage unless Tenant shall have the benefit of a Non-Disturbance
Agreement reasonably acceptable to Tenant. Should the Property be subject to a
Mortgage as of the date hereof, Landlord shall, as a condition of Tenant's
obligations hereunder, obtain from any such existing Mortgagee such a
Non-Disturbance Agreement on Tenant's behalf.
23. Events of Default; Termination. The occurrence of any one or more of
the following events shall constitute an "Event of Default" :
(a) if Tenant shall fail to pay any installment of Basic Rent or Addi-
tional Rent, or other sum required to be paid by Tenant hereunder on the date
the same becomes due and payable and such failure continues for more than five
(5) Business Days after written notice thereof by Landlord to Tenant;
(b) if Tenant shall fail to perform or comply with any term of this
Lease (other than those referred to in clause (a) above) and, in any such case,
such failure shall continue for more than thirty (30) days after written notice
thereof by Landlord to Tenant; provided, however, that in the case of any such
failure that is susceptible of being cured but cannot with diligence be cured
within such 30-day period, if Tenant shall promptly commence to cure the same
and shall thereafter prosecute the curing thereof with diligence, the period
within which such failure may be cured shall be extended for such further period
as shall be necessary for the curing thereof with diligence;
(c) if the Premises or the Improvements shall be left vacant and
without maintenance and security;
(d) if Tenant shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing;
(e) if an involuntary case or other proceeding shall be commenced
against Tenant seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undischarged and unstayed for a period of 90 days, or if an
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order for relief shall be entered against Tenant under the federal bankruptcy
laws as now or hereafter in effect;
Upon the occurrence of an Event of Default, Landlord may, at any time
thereafter, during the continuance of any such Event of Default, give a written
termination notice to Tenant specifying a date not less than thirty days from
the date on which such notice is given on which this Lease shall terminate. On
such date, (subject to the provisions of Section 25 hereof relating to the
survival of Tenant's obligations hereunder), the term of this Lease shall
terminate by limitation.
24. Repossession, etc. If an Event of Default shall have occurred and be
continuing, Landlord, whether or not the term of this Lease shall have been
terminated pursuant to Section 23 hereof, may enter upon and repossess the
Property or any part thereof by legal process, summary proceedings, ejectment or
otherwise, and may, if permitted by law, remove Tenant and all other persons and
any and all property therefrom. Except for the gross negligence or willful
misconduct of it or its agents, employees or contractors, Landlord shall be
under no liability for, or by reason of, any such entry, repossession or
removal.
25. Survival of Tenant's Obligations; Damages
25.1 Termination of Lease Not to Relieve Tenant of Obligations. No
termination of the term of this Lease pursuant to Section 23 hereof, and no
repossession of the Property or any part thereof pursuant to Section 24 hereof
or otherwise, and no reletting of the Property, shall relieve Tenant of its
liabilities and obligations hereunder, all of which shall survive such
expiration, termination, repossession or reletting.
25.2 Damages. In the event of any such termination, repossession or
reletting, Tenant will pay to Landlord the Basic Rent and all Additional Rent
and other sums required to be paid by Tenant up to the time of such termination,
repossession or release, and thereafter Tenant, until the end of what would have
been the term of this Lease (including the Fixed Term) in the absence of such
termination or repossession, and, whether or not the Property or any part
thereof shall have been relet, shall be liable to Landlord for and shall pay to
Landlord, as liquidated and agreed current damages for Tenant's default: (a) the
Basic Rent and all Additional Rent and other sums that would be payable under
this Lease by Tenant in the absence of such termination or repossession, plus,
(b) all reasonable expenses directly or indirectly incurred by Landlord in
connection with such termination and repossession and any reletting effected for
the account of Tenant pursuant to Section 24 hereof (including, without
limitation, all repossession costs, brokerage commissions, legal expenses,
attorney's fees, employees' expenses, alteration costs and expenses of preparing
for such reletting, less (c) the proceeds, if any, of such reletting. Tenant
will pay such current damages monthly on the days on which the Basic Rent would
have been payable under this Lease in the absence of such termination,
repossession or reletting, and Landlord shall be entitled to recover the same
from Tenant on each such day.
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26. Tenant's Waiver Trial by Jury. In the event of any termination of the
term of this Lease pursuant to Section 23 hereof or any repossession of the
Property or any part thereof pursuant to Section 24 hereof, Tenant, so far as
permitted by law, waives any right to a trial by jury in any proceeding or any
matter in any way connected with this Lease.
27. No Waiver by Landlord. No failure by Landlord to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial rent
during the continuance of any such breach, shall constitute a waiver of any such
breach or of any such term. No waiver of any breach shall affect or alter this
Lease, which shall continue in full force and effect, or the rights of Landlord
with respect to any other then existing or subsequent breach.
28. Remedies Cumulative. Each right, power and remedy of Landlord provided
for in this Lease or now or hereafter existing at law or in equity or by statute
or otherwise shall be cumulative and concurrent and shall be in addition to
every other right, power or remedy provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise, and the
exercise or attempted exercise by Landlord of any one or more of the rights,
powers or remedies provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise shall not preclude the simultaneous
or later exercise by Landlord of any or all such other rights, powers or
remedies.
29. Modification, Acceptance of Surrender. No modification, termination or
surrender to Landlord of this Lease and no surrender of the Property or any part
thereof or of any interest therein shall be valid or effective unless agreed to
and accepted in writing by Landlord, and no act by any representative or agent
of Landlord, and no act by Landlord, other than such a written agreement and
acceptance by Landlord, shall constitute an agreement thereto or acceptance
thereof.
30. End of Lease Term. Upon the expiration or earlier termination of this
Lease, Tenant, at its expense, shall quit and surrender to Landlord the Property
in good order and condition, ordinary wear and tear and damage by casualty and
condemnation excepted, and, if requested by Landlord, shall remove, at Tenant's
expense, all of Tenant's Equipment therefrom and shall repair, at Tenant's
expense, all damage caused by such removal.
31. Notices, etc. All notices, offers, acceptances, rejections, consents
and other communications hereunder shall be in writing and shall be deemed to
have been given when delivered or mailed by first class registered or certified
mail, postage prepaid, or sent by a nationally recognized overnight courier
service, addressed:
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If to Landlord:
VanBuren N. Hansford, Jr.
1310 North Ocean Boulevard
Gulf Stream, Florida 33483-7234
or at such other address as Landlord shall have furnished to Tenant in writing;
and
If to Tenant:
Hansford Manufacturing Corporation
c/o DT Industries, Inc.
Corporate Centre, Suite 2-300
1949 East Sunshine
Springfield, Missouri 65804
or at such other address as Tenant shall have furnished to Landlord in
writing.
32. Short Form or Memorandum. Landlord and Tenant shall execute and
deliver a short form or memorandum of this Lease, satisfactory in form and
substance to Landlord and Tenant, for recording in the proper office or offices
in each of the states in which the Property is located.
33. Quiet Enjoyment; Inspection. So long as Tenant shall pay the Basic
Rent and Additional Rent and any other sums payable hereunder as the same become
due and shall fully comply with all of the terms of this Lease and fully perform
its obligations hereunder, Tenant (and any assignee or subtenant of Tenant
permitted pursuant to the terms of this Lease) shall peaceably and quietly have,
hold and enjoy the Property for the term hereof, subject, however, to all the
terms of this Lease. Nothing contained in this Section 33 shall prohibit
Landlord, or any Mortgagee, or their respective authorized representatives, from
entering the Property at reasonable times to inspect the same on reasonable
advance notice.
34. Liability of Landlord. Notwithstanding anything contained in this
Lease to the contrary, it is specifically understood and agreed that neither
Landlord nor any beneficiary of Landlord, nor any officer, director or
shareholder of any of the foregoing, or any Mortgagee, shall have any personal
liability in respect of any of the terms, covenants, conditions or provisions of
this Lease.
35. Miscellaneous. All rights, powers and remedies provided herein may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and are intended to be limited to the extent
necessary so that they will not render this Lease invalid, illegal or
unenforceable under the provisions of any applicable law. If any term of this
Lease or any application thereof shall be invalid or unenforceable, the
remainder of this Lease and any other application of such term shall
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not be affected thereby. This Lease may be changed, waived, discharged or
terminated only by an instrument in writing, signed by each of the parties
hereto. Subject to Section 22.1 hereof, this Lease shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto. This Lease shall be construed and
enforced in accordance with and governed by the laws of the State of New York.
The headings in this Lease are for the purposes of reference only and shall not
limit or otherwise affect the meaning hereof. This Lease may be executed in
several counterparts, each of which shall be an original, but all of which
together shall constitute one and the same instrument.
36. Extension Option.
(a) Landlord hereby grants to Tenant an option to extend the Initial
Term on the same terms, conditions and provisions set forth in this Lease,
except as otherwise provided herein, for two (2) periods of five (5) years each
after the expiration of the Initial Term (collectively the "Extension Period").
Said option shall be exercised by written notice from Tenant to Landlord of
Tenant's election to exercise said option period given not later than one (1)
year prior to the expiration of the Initial Term or the first renewal term, as
appropriate. Tenant may only exercise said option, and any exercise thereof
shall only be effective if, at the time of Tenant's exercise of said option,
this Lease is in full force and effect and no Event of Default shall exist
hereunder.
(b) Basic Rent for the Premises during the Extension Period shall be
as specified in Exhibit C hereto.
(c) If Tenant has validly exercised said option, then within thirty
(30) days after request by either party hereto, Landlord and Tenant shall enter
into a written amendment to this Lease confirming the terms, conditions and
provisions applicable to the Extension Period.
37. Definitions. As used in this Lease, the following terms shall have the
following respective meanings, applicable both to the singular and plural forms
of the terms so defined:
Additional Rent: the meaning specified in Section 3 hereof.
Basic Rent: the meaning specified in Section 2 hereof.
Business Day: any day other than a day on which banking institutions in the
State of New York are authorized by law to close.
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Certificate: with respect to any corporation, a certificate of such
corporation signed by the President or a Vice President and by the Treasurer,
Comptroller, Assistant Treasurer or Assistant Comptroller of such corporation.
Event of Default: the meaning specified in Section 23 hereof.
Improvements: the meaning specified in Section 1 hereof.
Initial Term: the meaning specified in Section 1 hereof.
Indemnified Party: the meaning specified in Section 10 hereof.
Insurance Requirements: all terms of any insurance policy covering Tenant
or covering Landlord or applicable to the Property or any part thereof, all
requirements of the issuer of any such policy, and all orders, rules,
regulations and other requirements of the National Board of Fire Underwriters
(or any other body exercising single functions) applicable to or affecting the
Property or any part thereof or any use or condition of the Property or any part
thereof.
Landlord: VanBuren N. Hansford, Jr., together with his heirs, executors,
administrators, legal representatives, successors and assigns.
Legal Requirements: all laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all governments, departments,
commissions, boards, courts, authorities (including, without limitations,
environmental protection, planning and zoning authorities), agencies (and other
governmental or quasi-governmental units, whether Federal, state, count,
district, municipal, city or other), and any officials and officers thereof,
foreseen or unforeseen, ordinary or extraordinary, which now or at any time
hereafter may be applicable to Tenant with respect to the Property or to the
Property or any part thereof (including any which may apply to the repair, use
or maintenance of the Property or any part thereof, or any of the adjoining
sidewalks, curbs, vaults and vault space, if any, streets or ways, or any use or
condition of the Property or any part thereof.
Mortgage: any mortgage, deed of trust or other similar instrument from time
to time providing for the assignment as security of Landlord's interest in the
Premises or this Lease by the holder thereof.
Mortgagee: the mortgagee under any Mortgage.
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Permitted Exceptions: the exceptions set forth on Exhibit A hereto.
Person: a corporation, an association, a partnership, a limited liability
company, an organization, a trust, an individual, a government or political
subdivision thereof or a governmental agency.
Property: the meaning specified in Section 1 hereof.
Restoration: in case of damage to or destruction of, or Taking of, the
Property or of the Improvements located thereon, the restoration, replacement or
rebuilding of the Property or the Improvements as nearly as possible to its
value, condition and character immediately prior to such damage, destruction or
Taking, with such alterations and additions as may be made at Tenant's election
pursuant to and subject to the conditions of Section 7 hereof, together with any
temporary repairs and property protection which may be required pending
completion of such work.
Taking: a temporary or permanent taking by a government or political
subdivision thereof or by a governmental agency during the term hereof of all or
part of the Property, or any interest therein or right accruing thereto, as the
result of or in lieu of or in anticipation of the exercise of the right of
condemnation or eminent domain, or a change of grade affecting the Property or
any part thereof. Such a taking shall be deemed to have occurred on the date on
which Tenant shall be legally required to relinquish possession of the Property.
Taxes: the meaning specified in Section 12 hereof.
Tenant: Hansford Manufacturing Corporation, together with any entity or
entities succeeding to all or substantially all of the assets of it, by merger
or otherwise.
Tenant's Equipment: Tenant's equipment, trade fixtures, furnishings and
other items of personal property.
Total Destruction: the meaning specified in Section 18 hereof.
Unavoidable Delays: reasonable delays due to acts of God, governmental
prohibitions, acts of war, strikes, labor stoppages of general applicability
(the effect of which makes it impossible to obtain necessary services) or other
causes beyond the control of any party. Lack of funds, cost or shortage of
materials or failure of performance of any subcontractor or other supplier of
materials or services retained by such party shall not be deemed a cause beyond
the control of such party.
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IN WITNESS WHEREOF, the parties hereto have caused this Lease to be duly
executed as of the date first set forth above.
WITNESS: LANDLORD:
/s/ Raymond P. Miller /s/ VanBuren N. Hansford, Jr.
- ------------------------------ -----------------------------
VanBuren N. Hansford, Jr.
WITNESS: TENANT:
Hansford Manufacturing Corporation
/s/ Mary V. Chin /s/ Bruce P. Erdel
- ------------------------------ -----------------------------
Bruce P. Erdel
Vice President
<PAGE>
NOTE
The following page contains a list of Exhibits and Schedules which have
been intentionally omitted by the Registrant pursuant to Item 601(b)(2) of
Regulation S-K.
A copy of any omitted Exhibit or Schedule will be provided to the
Securities and Exchange Commission upon request.
<PAGE>
Exhibit A Legal Description of Property and Permitted Exceptions
Exhibit B Basic Rent Schedule
Exhibit C Basic Rent for Extension Period
AMENDMENT
to
SECOND AMENDED AND RESTATED CREDIT FACILITIES AGREEMENT
among
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, as "Agent"
and
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
and
THE OTHER LENDERS LISTED ON THE SIGNATURE PAGES HEREOF, as "Lenders"
and
DT INDUSTRIES, INC.
and
THE OTHER BORROWERS LISTED ON THE SIGNATURE PAGES HEREOF, as "Borrowers"
This AMENDMENT to SECOND AMENDED AND RESTATED CREDIT FACILITIES
AGREEMENT (the "Amendment") is entered into as of September ___, 1996, by and
among DT INDUSTRIES, INC. ("DTI"), a Delaware corporation, DETROIT TOOL AND
ENGINEERING COMPANY, a Delaware corporation ("Engineering"), DETROIT TOOL METAL
PRODUCTS CO., a Missouri corporation, ("Metal Products"), SENCORP SYSTEMS, INC.,
a Delaware corporation ("Sencorp"), PHARMA GROUP, INC., a Delaware corporation,
formerly known as Stokes-Merrill Corporation ("PGI"), ADVANCED ASSEMBLY
AUTOMATION, INC., an Ohio corporation ("AAA"), DT CANADA INC., a New Brunswick,
Canada corporation ("DT Canada"), KALISH CANADA INC., a New Brunswick, Canada
corporation ("Kalish Canada"), and MID-WEST AUTOMATION ENTERPRISES, INC.
("Mid-West Enterprises") (DTI, Engineering, Metal Products, Sencorp, PGI, AAA,
DT Canada, Kalish Canada, and Mid-West Enterprises are referred to herein both
collectively and individually as "Borrower"), THE BOATMEN'S NATIONAL BANK OF ST.
LOUIS ("Boatmen's"), as administrative agent ("Agent"), and the Lenders.
RECITALS:
A. Borrower and Lenders are party to that certain Second Amended and
Restated Credit Facilities Agreement dated as of July 19, 1996, (as it
may be amended, restated, extended, renewed, replaced, or otherwise
modified from time to time, the "Loan Agreement").
B. Agent has requested that certain other financial institutions become
Lenders by taking an assignment of the Commitments, as provided in
Section 20.4.1 of the Loan Agreement.
C. Borrower has requested that Lenders increase the Aggregate Revolving
Commitment by $10 million and finance the acquisition of Hansford
Manufacturing Corporation, a New York corporation, by AAA. Lenders are
willing to do so subject to, and in reliance upon, the terms and
conditions contained herein.
D. Borrower and Lenders desire to amend the Loan Agreement upon the terms
and conditions hereinafter set forth.
Therefore, in consideration of the mutual agreements herein and other
sufficient consideration, the receipt of which is hereby acknowledged, Borrower
and Lenders hereby amend the Loan Agreement as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
have the meanings given them in the Loan Agreement.
<PAGE>
2. CONDITIONS TO EFFECTIVENESS OF AMENDMENT. This Amendment shall become
effective on September ___, 1996, (the "Amendment Effective Date") if the
following conditions precedent have been satisfied:
2.1. REQUIRED DOCUMENTS. Unless waived by Lenders, Agent shall have
received on or before the Amendment Effective Date all of the documents (or
facsimile counterpart copies thereof showing signatures) listed or described on
Part I of Exhibit A hereto, each (if applicable) duly executed and, (as
applicable), sealed, attested, acknowledged, certified, or authenticated; and
all the requirements described in Exhibit A hereto shall have been met. THE
ITEMS LISTED ON PART II OF EXHIBIT A HERETO MAY BE DELIVERED AFTER THE AMENDMENT
EFFECTIVE DATE, AND BORROWER AGREES THAT FAILURE TO DELIVER ANY SUCH ITEM TO
AGENT, IN FORM AND SUBSTANCE ACCEPTABLE TO AGENT, ON OR BEFORE NOVEMBER 1, 1996,
SHALL CONSTITUTE AN IMMEDIATE EVENT OF DEFAULT UNDER THE LOAN AGREEMENT.
2.2. REPRESENTATIONS AND WARRANTIES OF BORROWER. The representations
and warranties of each Borrower set forth in Section of this Amendment shall be
true and correct in all material respects on the Amendment Effective Date.
3. AMENDMENTS TO LOAN AGREEMENT.
3.1. DEFINITIONS.
3.1.1. NEW DEFINITIONS. The following definitions are hereby
added to the Loan Agreement in proper alphabetical order:
"'Hansford': Hansford Manufacturing Corporation, a New York
corporation."
"'Hansford Acquisition Documents': The Agreement and Plan of Merger by
and among H022 Corporation, DT Industries, Inc., Hansford, and the
stockholder listed therein dated of even date herewith, and all
documents executed or delivered in connection therewith."
"'Hansford Letter of Credit' is defined in Section 3.8.
3.1.2. AMENDED DEFINITION. The definition of "Guarantor" is
hereby deleted in its entirety and the following is substituted in lieu
thereof:
"'Guarantor': Armac, AMI, Mid-West Systems, Hansford, and any other
Person party to a Guaranty.
3.1.3. AMENDED DEFINITION. The definition of "Lenders" is
hereby deleted in its entirety and the following is substituted in lieu
thereof:
"'Lenders': shall collectively mean (a) The Boatmen's National Bank of
St. Louis, (b) each of the other banks and financial institutions
listed on the signature pages hereof, and (c) each bank or financial
institution which takes an assignment at any time of all or a portion
any of the foregoing's rights and obligations under the Agreement
pursuant to the terms of Section 20.4.1 and an Assignment and
Acceptance or which otherwise executes and delivers to Agent an
agreement, in form and substance acceptable to Agent, to join the Loan
Agreement as a "Lender"."
3.2. INCREASE IN REVOLVING COMMITMENT. Section 3.1.1 of the Loan
Agreement is hereby amended by deleting the sentence beginning with the words
"The 'Aggregate Revolving Commitment'" in its entirety and replacing it with the
following sentence:
2
<PAGE>
"The 'Aggregate Revolving Commitment' on any date shall be $65,000,000,
or such lesser or greater Dollar amount to which it may have been
changed as provided herein."
3.3. HANSFORD LETTER OF CREDIT. Section 3.8 of the Loan Agreement is
hereby amended by adding the following words after the last sentence:
"Notwithstanding anything to the contrary contained in this Section
3.8, Boatmen's will issue one or more standby letters of credit for the
account of Borrower to secure the payment of the deferred portion of
the merger consideration under the Hansford Acquisition Documents
(collectively and individually, the "Hansford Letter of Credit").
Lenders will not make any General Acquisition Advance in excess of an
amount equal to the General Acquisition Loan Commitment less the
original face amount of the Hansford Letter of Credit, except for
General Acquisition Advances which are used solely to reimburse Lenders
for any draws on the Hansford Letter of Credit. A Hansford Letter of
Credit shall be deemed to be a "Letter of Credit" for all purposes
under this Agreement, except that the issuance thereof or payment of
draws thereon will not reduce the Letter of Credit Commitment, and in
the case of any draw on a Hansford Letter of Credit, the "Revolving
Advance" in Section 7.5.2 shall be deemed to be a "General Acquisition
Advance"."
3.4. PERMITTED INDIRECT OBLIGATIONS. Section 16.4 of the Loan
Agreement is hereby amended by adding the following language before the words
"(collectively, the "Permitted Indirect Obligations")":
"and (viii) the guaranty of DTI of the obligations of Hansford pursuant
to that certain Indemnification and Escrow Agreement among Hansford,
DTI, VanBuren N. Hansford, Jr., and Escrow Agent of even date herewith,
and (ix) the guaranty of DTI of the obligations of Hansford pursuant to
its lease of real property at 3111 Winton Road South, Rochester, New
York, from VanBuren N. Hansford, Jr.".
3.5. FINANCIAL COVENANTS.
3.5.1. CAPITAL EXPENDITURES. The chart contained in Section
17.2 of the Loan Agreement is hereby deleted and the following chart
substituted in lieu thereof:
<TABLE>
<CAPTION>
PERIOD MAXIMUM CAPITAL EXPENDITURES
<S> <C>
Effective Date through 6/30/96 $13,000,000
7/1/96 through 6/30/97 $12,500,000
Each fiscal year thereafter $13,500,000
</TABLE>
3.5.2. OPERATING LEASE OBLIGATIONS. Section 17.4 of the Loan
Agreement is hereby amended by deleting the words "does not exceed
$5,500,000 in any fiscal year" in the fifth line and substituting the
words "does not exceed $6,000,000 in any fiscal year" in lieu thereof.
3.6. EXHIBIT 13. Exhibit 13 to the Loan Agreement is hereby amended
as provided in Exhibit B, attached hereto and incorporated herein by this
reference.
4. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower hereby represents
and warrants to Lenders as of the date hereof that (i) this Amendment has been
duly authorized by Borrower's Board of Directors, (ii) no consents are necessary
from any third parties for Borrower's execution, delivery or performance of
this Amendment, (iii) this Amendment constitutes the legal, valid and binding
obligation of Borrower enforceable against Borrower in accordance
3
<PAGE>
with its terms except as the enforcement thereof may be limited by bankruptcy,
insolvency or other laws related to creditors rights generally or by the
application of equity principles, and (iv) there exists no Default or Event of
Default under the Loan Agreement, as amended or waived by this Amendment.
5. EFFECT OF AMENDMENT. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of Agent
or Lenders under the Loan Agreement or any of the other Loan Documents, nor
constitute a waiver of any provision of the Loan Agreement, any of the other
Loan Documents or any existing Default or Event of Default, nor act as a release
or subordination of the Security Interests of Agent or Lenders under the
Security Documents. Each reference in the Loan Agreement to "the Agreement",
"hereunder", "hereof", "herein", or words of like import, shall be read as
referring to the Loan Agreement as amended by this Amendment.
6. REAFFIRMATION. Borrower hereby acknowledges and confirms that (i)
except as expressly amended hereby the Loan Agreement remains in full force and
effect, (ii) the Loan Agreement, as amended hereby, is in full force and effect,
(iii) Borrower has no defenses to its obligations under the Loan Agreement and
the other Loan Documents, (iv) the Security Interests of Agent and Lenders under
the Security Documents secure all the Loan Obligations under the Loan Agreement
as amended by this Amendment, continue in full force and effect and have the
same priority as before this Amendment, and (v) Borrower has no claim against
Agent or any Lender arising from or in connection with the Loan Agreement or the
other Loan Documents.
7. GOVERNING LAW. This Amendment has been executed and delivered in St.
Louis, Missouri, and shall be governed by and construed under the laws of the
State of Missouri without giving effect to choice or conflicts of law principles
thereunder.
8. SECTION TITLES. The section titles in this Amendment are for
convenience of reference only and shall not be construed so as to modify any
provisions of this Amendment.
9. COUNTERPARTS; FACSIMILE TRANSMISSIONS. This Amendment may be executed
in one or more counterparts and on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. Signatures to this Amendment may be given by facsimile or other
electronic transmission, and such signatures shall be fully binding on the party
sending the same.
10. INCORPORATION BY REFERENCE. Lenders and Borrower hereby agree that all
of the terms of the Loan Documents are incorporated in and made a part of this
Amendment by this reference.
11. STATUTORY NOTICE The following notice is given pursuant to Section
432.045 of the Missouri Revised Statutes; nothing contained in such notice
will be deemed to limit or modify the terms of the Loan Documents or this
Amendment:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND
OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S))
AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY
AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS
WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT
BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
BORROWER AND LENDERS HEREBY AFFIRM THAT THERE IS NO UNWRITTEN ORAL CREDIT
AGREEMENT BETWEEN BORROWER AND LENDERS WITH RESPECT TO THE SUBJECT MATTER OF
THIS AMENDMENT.
4
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first above written.
DT INDUSTRIES, INC. SENCORP SYSTEMS, INC.,
a Delaware corporation a Delaware corporation
By: /s/ Bruce P. Erdel By: /s/ Bruce P. Erdel
-------------------------------- --------------------------------
Bruce P. Erdel, Vice President - Bruce P. Erdel, Vice President
Finance and Secretary and Secretary
DETROIT TOOL AND ENGINEERING COMPANY, ADVANCED ASSEMBLY AUTOMATION, INC.,
a Delaware corporation an Ohio corporation
By: /s/ Bruce P. Erdel By: /s/ Bruce P. Erdel
-------------------------------- --------------------------------
Bruce P. Erdel, Vice President Bruce P. Erdel, Vice President
and Secretary and Secretary
DETROIT TOOL METAL PRODUCTS CO., PHARMA GROUP, INC., a Delaware
a Missouri corporation corporation
By: /s/ Bruce P. Erdel By: /s/ Bruce P. Erdel
-------------------------------- --------------------------------
Bruce P. Erdel, Vice President Bruce P. Erdel, Vice President
and Secretary and Secretary
DT CANADA INC., a New Brunswick, KALISH CANADA INC., a New Brunswick,
Canada corporation Canada corporation
By: /s/ Bruce P. Erdel By: /s/ Bruce P. Erdel
-------------------------------- --------------------------------
Bruce P. Erdel, Vice President Bruce P. Erdel, Vice President
and Secretary and Secretary
MID-WEST AUTOMATION ENTERPRISES, INC.,
an Illinois corporation
By: /s/ Bruce P. Erdel
--------------------------------
Bruce P. Erdel, Vice President
and Secretary
<PAGE>
"GUARANTORS" "GUARANTORS"
ASSEMBLY MACHINES, INC., ARMAC INDUSTRIES, CO., a Delaware
a Pennsylvania corporation corporation
By: /s/ Bruce P. Erdel By: /s/ Bruce P. Erdel
-------------------------------- --------------------------------
Bruce P. Erdel, Vice President Bruce P. Erdel, Vice President
and Secretary and Secretary
MID-WEST AUTOMATION SYSTEMS, HANSFORD MANUFACTURING CORPORATION,
INC., an Illinois corporation a New York corporation
By: /s/ Bruce P. Erdel By: /s/ Bruce P. Erdel
-------------------------------- --------------------------------
Bruce P. Erdel, Secretary Bruce P. Erdel, Vice President
and Secretary
THE BOATMEN'S NATIONAL BANK OF DRESDNER BANK AG CHICAGO AND GRAND
ST. LOUIS, as Agent and a Lender CAYMAN BRANCHES
By: /s/ Paul Porter By: /s/ John W. Sweeney
-------------------------------- --------------------------------
Name: Name: John W. Sweeney
----------------------------- ------------------------------
Title: Title: V.P.
----------------------------- ------------------------------
By: /s/ T. Nadramia
--------------------------------
Name: T. Nadramia
------------------------------
Title: VP
------------------------------
<PAGE>
NOTE
The following page contains a list of Exhibits and Schedules which have
been intentionally omitted by the Registrant pursuant to Item 601(b)(2) of
Regulation S-K.
A copy of any omitted Exhibit or Schedule will be provided to the
Securities and Exchange Commission upon request.
<PAGE>
Exhibit A Required Documents and Deliveries
Exhibit B Addition to Exhibit 13 of the Loan Agreement
Exhibit 11
DT INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
Three Months Ended
September 29, September 24,
1996 1995
------------- -------------
Income before extraordinary loss $ 4,873 $ 2,226
Extraordinary loss 324
------------- -------------
Net income $ 4,549 $ 2,226
============= =============
Primary:
Weighted average number of
shares outstanding 9,005 9,000
Add dilutive effect of stock options
based on treasury stock method
using average market price 297 4
Add shares contingently issuable to
the former owner of Kalish
assuming maintenance of current
earnings 114
------------- -------------
Primary weighted average shares
outstanding 9,416 9,004
============= =============
Primary earnings per share
before extraordinary loss $ 0.52 $ 0.25 a
Extraordinary loss 0.04
------------- -------------
Primary net income per share $ 0.48 $ 0.25 a
============= =============
Fully Diluted:
Weighted average number of
shares outstanding 9,005 9,000
Add dilutive effect of stock options
based on treasury stock method
using average market price or end
of period, whichever is greater 506 21
Add shares contingently issuable
to the former owner of Kalish
assuming maximum future earnings 118 214
------------- -------------
9,629 9,235
============= =============
Fully diluted earnings per share
before extraordinary loss $ 0.51 a $ 0.24 a
Extraordinary loss 0.04 a
------------- -------------
Fully diluted net income per share $ 0.47 a $ 0.24 a
============= =============
a The effect of common stock equivalents and/or other dilutive securities was
not material in this period; therefore, presentation on the income statement was
not considered necessary.
