EXHIBIT 2.1
6-3-97
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ASSET PURCHASE AGREEMENT
among
AQUA CARE SYSTEMS, INC.,
and
ACS ACQUISITION CORP.
and
DURCO INTERNATIONAL INC.
Dated as of
June __, 1997
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TABLE OF CONTENTS
SECTION CAPTION PAGE
------- ------- ----
1 Definitions............................
2 Purchase and Sale of the Assets........
3 Purchase Price; Payment................
4 Post-Closing Adjustments...............
5 Representations and Warranties
of Seller..............................
6 Representations and Warranties
of Purchaser...........................
7 Other Obligations and Covenants........
8 Conditions to Purchaser's Obligations..
9 Conditions to Seller's Obligations.....
10 Closing................................
11 Survival and Indemnification...........
12 Non-Competition Covenant...............
13 Damage or Destruction of Assets........
14 Miscellaneous..........................
EXHIBITS
SECTION
DESIGNATION DESCRIPTION REFERENCE
----------- ----------- ---------
A Description of Assets............. 1
B Retained Assets................... 1
C Assumed Obligations............... 1
D Assumed Contracts................. 1
E Allocation of Purchase Price...... 3.2
F Aqua Care Warrants (250,000
shares)......................... 1
F-1 Aqua Care Warrants (150,000
shares.......................... 1
G Limited Warranty Deed............. 10.3(a)
H Xxxx of Sale and General
Instrument of Transfer........... 10.3(b)
I Assumption Agreement.............. 10.4(b)
J Computer Services Agreement....... 10.5(a)
K Independent Sales Representation
Agreement........................ 10.5(b)
L Trademark License Agreement....... 10.5(c)
M Financial Statements.............. 1
N Promissory Note................... 3.3(a)
O Security Agreement................ 3.6
P Mortgage.......................... 3.6
Q Guaranty Agreement................ 3.6
i
R FSD Statement of Net Assets as of
April 30, 1997................... 4.2(a)
ii
SELLER SCHEDULES
DESIGNATION AND
SECTION REFERENCE DESCRIPTION
----------------- -----------
5.6 Equipment with Net Book Value Exceeding $1,000.
5.7 Exceptions to Seller's Title to Personal Property
5.8 Real Property
5.11 Governmental Actions Affecting Property
5.14 Assumed Contracts
5.15 List of Exceptions to Permits, Licenses,
Franchises and Governmental Approvals or
Authorizations
5.16 Licenses, Patents, Trademarks, Trade Names, and
Copyrights
5.17 Employment Agreements and Benefit Plans
5.19 Employees
5.20 Bargain Contracts
5.22 Litigation
5.24 Action Other than in Ordinary Course
5.26 Environmental Matters
5.27 Required Consents and Approvals
5.28 Adverse Effects or Changes
PURCHASER SCHEDULES
DESIGNATION AND
SECTION REFERENCE DESCRIPTION
----------------- -----------
6.6 Litigation
6.8 Action Other than in Ordinary Course
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is being executed as of the ___ day of June, 1997 among
AQUA CARE SYSTEMS, INC., a Delaware corporation ("ACS"), ACS ACQUISITION CORP.,
a New York corporation ("Purchaser"), and DURCO INTERNATIONAL INC., a New York
corporation formerly known as The Duriron Company, Inc. ("Seller"), under the
following circumstances:
A. Seller owns and operates a division in Angola, New York known
as the Filtration Systems Division ("FSD"). FSD is engaged in the
manufacture and sale of filtration equipment and metering pumps.
B. Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, the business and substantially all of the assets
of FSD.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement and any exhibit
hereto, the following terms have the following meanings:
"Adjusted Purchase Price" has the meaning indicated in Subsection
4.2(d).
"Aqua Care Warrants" means warrants, in the form of EXHIBITS F AND F-1,
to purchase 250,000 shares and 150,000 shares, respectively, of Common Stock of
ACS.
"Assets" means all assets described on EXHIBIT A that are both (i)
owned by Seller as of the Closing, and (ii) directly related to the Business in
Angola, New York.
"Assumed Contracts" means the leases, contracts and agreements
described or listed on EXHIBIT D.
"Assumed Obligations" means the obligations and liabilities, existing
as of the time of the Closing and relating to the operation of FSD, listed on
EXHIBIT C.
"Best of the Knowledge" of a party means that after reasonable inquiry
with respect to the subject matter of any such opinion, no information has come
to the attention of (a) for ACS, an officer of ACS, (b) for Purchaser, an
officer of Purchaser or ACS, and (c) for Seller, an officer involved in the
operation of FSD or the general manager of FSD, which, in any case, would give
such party actual knowledge of the existence or non-existence of any relevant
facts.
"Business" means the business of FSD as conducted at the FSD facilities
in Angola, New York and consists of the manufacture and sale of filtration
equipment and metering pumps.
"Closing" means the closing for which provision is made in Section 10.
"Closing Statement of Net Assets" has the meaning indicated in
Subsection 4.2(a).
"Collective Bargaining Agreement" means the agreement described in
Section 7.8.
"Encumbrances" has the meaning indicated in Subsection 5.7.
"Environmental Claim" means any investigation, notice, violation,
demand, allegation, action, suit, injunction, judgment, order, consent, decree,
penalty, fine, lien, proceeding, or claim (whether administrative, judicial or
private in nature) arising (a) pursuant to, or in connection with, an actual or
alleged violation of any Environmental Law, (b) in connection with any Hazardous
Material or actual or alleged Hazardous Material Activity, (c) from any
abatement, removal, remedial, corrective or other response action in connection
with a Hazardous Material, an Environmental Law or other order of a Governmental
Authority, or (d) from any actual or alleged damage, injury, threat or harm to
health, safety, natural resources or the environment.
"Environmental Law" means any current or future legal requirement
pertaining to (1) the protection of health, safety and the indoor or outdoor
environment, (2) the conservation, management or use of natural resources and
wildlife, (3) the protection or use of surface water and groundwater, (4) the
management, manufacture, possession, presence, use, generation, transportation,
treatment, storage, disposal, Release, threatened Release, abatement, removal,
remediation or handling of, or exposure to, any Hazardous Material or (5)
pollution (including any Release to air, land, surface water, and groundwater),
and includes, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C. /section/ 9601, et seq.
("XXXX"), Solid Waste Disposal Act of 1976 and Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. /section/ 6901, et seq., Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. /section/
1251, et seq., Clean Air Act of 1966, as amended, 42 U.S.C. /section/ 7401, et
seq., Toxic Substance Control Act of 1976, 15 U.S.C. /section/ 2601, et seq.,
Hazardous Material Transportation Act, 49 U.S.C. /section/ 1801, et seq.,
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. /section/ 651,
et seq., Oil Pollution Act of 1990, 33 U.S.C. /section/
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2701, et seq., Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. /section/ 11001, et seq., National Environmental Policy Act of 1969, 42
U.S.C. /section/ 4321, et seq., Safe Drinking Water Act of 1974, as amended, 42
U.S.C. /section/ 300(f), et seq., any similar, implementation or successor law,
and any amendment, rule, regulation, order or directive issued thereunder.
"Equipment" means all vehicles, equipment, furniture and fixtures owned
by Seller that are, as of the time of the Closing, used in the Business at
Angola, New York.
"Exhibit" means one of the exhibits attached to this Agreement.
"Final Statement of Net Assets" has the meaning indicated in Subsection
4.2(c)
"Financial Statements" means the balance sheet of FSD as of December
31, 1996 and the related statements of revenues and operating expenses and cash
flows of FSD for the 12 months ended December 31, 1995 and December 31, 1996,
which are attached to this Agreement as Exhibit M.
"FSD Balance Sheet" means the balance sheet of FSD as of December 31,
1996 included in the Financial Statements.
"Governmental Authority" means the government of the United States or
any foreign country or any state or political subdivision thereof or any entity,
body or authority exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government action, including the
Pension Benefit Guaranty Corporation and other quasi-governmental entities
established to perform such functions.
"Hazardous Material" means any substance, chemical, compound, product,
solid, gas, liquid, waste, byproduct, pollutant, contaminant, or material which
is hazardous or toxic, and includes, without limitation, (1) any medical waste,
(2) asbestos, polychlorinated biphyenls and petroleum (including crude oil or
any faction thereof) and (3) any such material classified or regulated as
"hazardous" or "toxic" pursuant to CERCLA, as amended by XXXX, Solid Waste
Disposal Act, as amended by the Resource Conversation and Recovery Act of 1976
("RCRA") and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. /section/
6901, et seq., Federal Water Pollution Control Act, as amended by the Clean
Water Act of 1977, 33 U.S.C. /section/ 1251, et seq., Clean Air Act of 1966, as
amended, 42 U.S.C. /section/ 7401, et seq., Toxic Substances Control Act of
1976, 15 U.S.C. /section/ 2601, et seq., or Hazardous Materials Transportation
Act, 49 U.S.C. App. /section/ 1801, et seq.
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"Hazardous Material Activity" means any activity, event or occurrence
involving a Hazardous Material, including, without limitation, the manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, Release, threatened Release, abatement, removal, remediation, handling
of or corrective or response action to any Hazardous Material.
"Inventory" means all goods, stores, and supplies held in inventory by
FSD on the date of the Closing.
"Loss" means liabilities, losses, costs, claims, damages (including
consequential damages), penalties and expenses (including attorney's fees and
expenses and costs of investigation and litigation).
"Material Adverse Effect" means an effect (or circumstance involving a
prospective effect) on the business, operations, assets, liabilities, results of
operations, cash flows, conditions (financial or otherwise) or prospects of the
Business which is materially adverse to the Business.
"Purchase Price" has the meaning indicated in Subsection 3.1.
"Purchaser Schedules" means the schedules delivered by Purchaser to
Seller pursuant to this Agreement. The Purchaser Schedules are identified by the
signature of an officer of Purchaser or ACS on the cover sheet of the Purchaser
Schedules.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the indoor or outdoor environment, including, without limitation, the
abandonment or discarding of barrels, drums, containers, tanks and other
receptacles containing or previously containing any Hazardous Material.
"Reference Statement of Net Assets" has the meaning indicated in
Subsection 4.2(a).
"Retained Assets" means the assets, rights and interests described or
listed on EXHIBIT B.
"Seller Schedules" means the schedules delivered by Seller to Purchaser
pursuant to this Agreement. The Seller Schedules are identified by the signature
of an officer of Seller on the cover sheet of the Seller Schedules.
Additional terms are defined in the text of this Agreement.
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SECTION 2. PURCHASE AND SALE OF THE ASSETS.
2.1 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, at the Closing (i) Seller shall sell, transfer and deliver to
Purchaser, and Purchaser shall purchase, accept and receive from Seller, all
right, title and interest of Seller in, to or arising from the Assets, and (ii)
Purchaser shall assume and agree to satisfy and discharge (x) the Assumed
Obligations and (y) the post-closing obligations of Seller under the Assumed
Contracts.
2.2 LIMITATION ON ASSUMED LIABILITIES. Except as otherwise specifically
provided in Subsection 2.1 or elsewhere in this Agreement, Purchaser will not
assume and shall not be liable for any debt, obligation, responsibility or
liability of Seller, whether known or unknown, contingent or absolute, or
otherwise, including, without limitation, any liabilities or obligations of
Seller arising from Seller's conduct of the Business prior to the Closing.
SECTION 3. PURCHASE PRICE; PAYMENT.
3.1 CONSIDERATION. Subject to adjustment as provided in Section 4, the
purchase price of the Assets and the consideration for Seller's non-competition
agreement set forth in Section 12.1 (the "Purchase Price") shall be equal to the
sum of (i)$4,991,216 (being the remainder of $7,120,000 minus the amount of the
accounts receivable and other assets shown on the Reference Statement of Net
Assets) plus (ii) the amount (not to exceed $1,780,000) of the Assumed
Obligations plus (iii) the value of the Aqua Care Warrants. For purposes of this
Agreement, the Aqua Care Warrants shall be considered to have a value of $5,000.
3.2 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets in the manner indicated in EXHIBIT E.
3.3 PAYMENT OF THE PURCHASE PRICE. The Purchase Price shall be payable
in the following manner:
(a) At the Closing, Purchaser shall (i) pay $2,549,819 in cash
to Seller, (ii) shall assume and agree to satisfy and discharge the
Assumed Obligations, and (iii) deliver to Seller Purchaser's Promissory
Note in the principal amount of $2,441,397 in the form of EXHIBIT N
(the "Promissory Note") representing the balance of the Purchase Price.
The portion of the Purchase Price represented by the Promissory Note
shall be payable as provided therein. The Purchase Price, and the
principal amount of the Promissory Note, will be subject to adjustment
in accordance with Subsection
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4.2. To the extent that the Assumed Obligations would otherwise exceed
$1,780,000, adjustment shall be made in accordance with Subsection 4.1.
(b) At the Closing, ACS shall issue and Purchaser shall
deliver to Seller the Aqua Care Warrants.
3.4 METHOD OF PAYMENT. Payment of the cash portion of the Purchase
Price shall, unless otherwise agreed by Seller, be made by Purchaser by wire
transfer of funds to an account designated by Seller.
3.5 ADJUSTMENTS AND PRORATIONS. Real property taxes and assessments,
school taxes, personal property taxes and related expenses associated with the
sale of real property shall be pro-rated between Seller and Purchaser as of the
Closing in accordance with the custom in Erie County, New York.
3.6 SECURITY FOR PROMISSORY NOTE. As security for the Promissory Note,
Purchaser shall, at the Closing, execute and deliver to Seller (i) a Security
Agreement in the form of EXHIBIT O, and (ii) a Mortgage in the form of EXHIBIT
P. In addition, ACS shall, at the Closing, execute and deliver to Seller the
Guaranty Agreement in the form of EXHIBIT Q. Purchaser shall pay or reimburse
Seller for any filing or recording fees, taxes or charges relating to the
Promissory Note, the Security Agreement, and the Mortgage.
3.7 NO RIGHT OF OFFSET. Purchaser shall have no right to withhold any
payment due under the Promissory Note, or exercise any right of offset with
respect thereto, on the basis that Purchaser possesses an unsatisfied claim
against Seller under the Seller Indemnification Obligations (as defined in
Section 11.2) or otherwise. In the event that Purchaser in good faith believes
that it has a valid unsatisfied claim under the Seller Indemnification
Obligations, Purchaser may, rather than making payment to Seller of amounts due
under the Promissory Note, pay such amounts (to the extent of such claim) into
an interest bearing escrow account with an independent third party bank (the
"Escrow Agent") reasonably satisfactory to Seller. The payment to the Escrow
Agent shall be made pursuant to an Escrow Agreement among Purchaser, Seller and
Escrow Agent, the terms of which shall be reasonably satisfactory to all
parties. Subject to the specific terms of the Escrow Agreement, amounts paid
into (or earned on) the escrow account shall be held, pending resolution of
Purchaser's claim for indemnification. The payment of the funds into the escrow
account shall be a prerequisite to Purchaser's right to assert a claim under the
Seller Indemnification Obligations.
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SECTION 4. POST-CLOSING ADJUSTMENTS.
4.1 ADJUSTMENT OF ASSUMED OBLIGATIONS. As promptly as possible after
the Closing, Seller shall compute the amount of the Assumed Obligations (without
regard to the $1,780,000 limitation) as of the time of the Closing. Seller shall
furnish to Purchaser a summary, by category and amount, of the Assumed
Obligations (the "Assumed Obligation Listing"). To the extent that the Assumed
Obligation Listing indicates that the Assumed Obligations would otherwise exceed
$1,780,000, Seller shall, at its option, either (i) itself discharge such amount
of the Assumed Obligations as is required to reduce the amount of the Assumed
Obligations assumed by Purchaser to $1,780,000, or (ii) reimburse Purchaser in
cash for such of the Assumed Obligations (as identified and selected by Seller)
as equals the excess of the Assumed Obligations over $1,780,000.
4.2 PREPARATION OF CLOSING STATEMENT OF NET ASSETS; ADJUSTMENT OF
PURCHASE PRICE. (a) As promptly as practical after the Closing, Seller shall
cause to be prepared and delivered to Purchaser a Statement of Net Assets of FSD
as of the close of business on the last business day of the last month preceding
the Closing (the "Closing Statement of Net Assets"). Purchaser shall cooperate
(at no charge to Seller) in the preparation of the Closing Statement of Net
Assets. The Closing Statement of Net Assets shall be prepared on the same basis
as the Statement of Net Assets of FSD as of April 30, 1997 attached hereto as
Exhibit R (the "Reference Statement of Net Assets"), except that the completed
contract method of accounting shall be used with respect to all orders in
preparing the Closing Statement of Net Assets.
(b) Purchaser shall have 15 days following receipt of the Closing
Statement of Net Assets to notify Seller of any dispute concerning any item
contained in the Closing Statement of Net Assets, which notice (the "Notice of
Dispute") shall set forth in reasonable detail the basis for such dispute. If
Purchaser fails to notify Seller of any such dispute within such 15 day period,
the Closing Statement of Net Assets shall be considered to have been accepted by
Purchaser and shall be deemed to be final. In the event that Purchaser shall so
notify Seller of any dispute, Purchaser and Seller shall cooperate in good faith
to resolve such dispute as promptly as possible.
(c) If Purchaser and Seller are unable to resolve any such dispute
within 20 days after Purchaser's delivery of the Notice of Dispute, such dispute
shall be resolved by an independent accounting firm (the "Independent Accounting
Firm"), and the determination by the Independent Accounting Firm shall be final
and binding on the parties. If Purchaser and Seller cannot mutually agree on the
identity of the Independent Accounting Firm, Purchaser and Seller shall each
submit to the other the name of a big six accounting firm which does not at the
time and has not in the prior two years provided services to Purchaser or Seller
(or any affiliate of either), and the independent
7
accounting firm shall be selected by lot from these two firms in a manner agreed
by Purchaser and Seller. Any expenses relating to the engagement of the
Independent Accounting Firm shall be allocated and paid as provided in
Subsection 4.2(h). The Independent Accounting Firm shall be instructed to use
reasonable efforts to perform its services within 30 days of submission of the
Closing Statement of Net Assets and Notice of Dispute to it and, in any event,
as promptly as practicable after such submission. The Closing Statement of Net
Assets, as modified by resolution of any disputes as provided in this paragraph
or, if applicable, as accepted and agreed by the parties pursuant to the
preceding paragraphs, shall be the "Final Statement of Net Assets."
(d) Following preparation of the Final Statement of Net Assets, the
Purchase Price shall be adjusted for changes in Adjusted Parent-Company Invested
Capital in accordance with Subsection 4.2(f). The adjustment to the Purchase
Price shall be made in the manner provided in Subsection 4.2(g). The final
Purchase Price, as so adjusted, is referred to as the "Adjusted Purchase Price."
(e) As used herein, "Adjusted Parent-Company Invested Capital" means
Parent-Company Adjusted Capital of FSD adjusted, however, to disregard accounts
receivable, other assets, and notes payable (all as reflected, for example, on
the Reference Statement of Net Assets).
(f) The Purchase Price shall be increased by the amount by which
Adjusted Parent-Company Invested Capital as determined from the Final Statement
of Net Assets exceeds Adjusted Parent-Company Invested Capital as determined
from the Reference Statement of Net Assets, and the Purchase Price shall be
decreased by the amount by which Adjusted Parent-Company Invested Capital as
determined from the Reference Statement of Net Assets exceeds Adjusted
Parent-Company Net Assets as determined from the Final Statement of Net Assets,
as the case may be.
(g) In the event that the Purchase Price adjustment called for by this
Subsection 4.2 results in a reduction of the Purchase Price, such reduction
shall be accomplished by an equal reduction, retroactive to the date of the
Closing, in the principal amount of the Promissory Note. In the event the
Purchase Price adjustment called for by this Section 4.2 results in an increase
in the Purchase Price, such increase shall be accomplished by an equal increase,
retroactive to the date of the Closing, in the principal amount of the
Promissory Note. The increased portion of the principal amount shall bear
interest from the date of the Closing at the rate of 18% per annum. Any change
(increase or decrease) in principal amount shall be made by amendment of the
Promissory Note. The amount of any increase
8
in such principal amount shall be due and payable in full 90 days after the date
of the amendment but in no event later than November 30, 1997.
(h) In the event the Independent Accounting Firm is engaged to resolve
disputes concerning the Closing Statement of Net Assets, and in the event that
the Adjusted Purchase Price as determined from the Final Statement of Net Assets
approved by the Independent Accounting Firm is less 97% of the Adjusted Purchase
Price as determined on the basis of the Closing Statement of Net Assets prepared
by Seller (as the same may be modified by Seller prior to submission of the
dispute to the Independent Accounting Firm), then Seller shall pay all expenses
relating to the engagement of the Independent Accounting Firm. Otherwise, such
expenses shall be paid by Purchaser.
4.3 ADJUSTMENT FOR CERTAIN COLLECTIONS AND PAYMENTS. Periodically but
no less frequently than every week until 28 days after the Closing and monthly
thereafter, (i) Purchaser shall remit without interest to Seller or a bank
account designated by Purchaser all payments or checks made to Purchaser with
respect to accounts receivable or other assets not included in the Assets; (ii)
Purchaser shall, upon receipt of proper documentation, reimburse Seller for any
payments made by Seller of any Assumed Obligation; and (iii) Seller shall, upon
receipt of proper documentation, reimburse Purchaser for any payment by
Purchaser of a valid obligation of Seller which is not an Assumed Obligation.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Purchaser as follows (i) as of the date of this Agreement and
(ii) as of the time of the Closing with the same force and effect as if made at
and as of the time of the Closing:
5.1 ACCURACY OF SELLER SCHEDULES. Seller has heretofore delivered to
Purchaser two identical sets of the Seller Schedules. Each Seller Schedule is
true, accurate and complete.
5.2 ORGANIZATION AND STANDING. Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New York.
5.3 CORPORATE AUTHORITY. The execution and delivery of this Agreement
by Seller and each of the documents to be delivered by it at the Closing, and
the performance by Seller of the transactions contemplated by this Agreement,
have been duly authorized by all necessary corporate actions and proceedings.
Seller is not a party to any contract or subject to any other legal restriction
that would prevent or restrict complete
9
fulfillment of any of the terms and conditions of this Agreement or compliance
with any of its obligations hereunder.
5.4 VALID AND BINDING OBLIGATIONS. This Agreement is valid and legally
binding upon Seller and is enforceable in accordance with its terms. Each of the
documents to be delivered by Seller at the Closing will be valid and legally
binding upon Seller and enforceable in accordance with its terms. Neither the
execution and delivery of this Agreement and the other documents contemplated by
this Agreement nor the performance by Seller of the terms and provisions hereof
or thereof will (a) violate the Certificate of Incorporation or By-Laws of
Seller, (b) result in a breach or violation of any term or provision of, or
constitute a default under, any indenture, mortgage, lease, or other agreement
or instrument to which Seller is a party or by which any of the Assets are
bound, (c) violate any law, statute, regulation, ordinance, rule, order, decree,
judgement, consent decree, settlement agreement or governmental requirement
enacted, promulgated, entered into, agreed or imposed by any Governmental
Authority which would, if enforced, have a Material Adverse Effect on the
Business, or (d) result in the creation of any mortgage, lien (except for the
lien of taxes not yet due), charge, restriction, pledge, security interest,
option, lease or sublease, claim, right of any third party, easement,
encroachment or encumbrance upon the Assets which would, if enforced, have a
Material Adverse Effect on the Business.
5.5 SUFFICIENCY OF ASSETS. The Assets, together with the equipment
covered by the equipment leases included in the Assumed Contracts (the
"Equipment Leases"), constitute all assets directly used in or necessary for the
conduct of the Business as now being conducted by Seller, except for (i)
Seller's mainframe computer, office equipment and books and records located away
from the Business site, and (ii) the Retained Assets. Seller will, upon request,
provide copies of all such books and records for Purchaser's use in the
continued operation of the Business.
5.6 EQUIPMENT. Set forth in Schedule 5.6 is a complete list of each
item of Equipment having, as of January 13, 1997, a book value in excess of
$1,000. There have been and will be no material dispositions of such items of
Equipment from January 13, 1997 to the date of the Closing.
5.7 TITLE TO PERSONAL PROPERTY. All tangible and intangible personal
property comprising a part of the Assets is owned by Seller (other than
equipment subject to the Equipment Leases). Except as otherwise indicated in
Schedule 5.7, Seller has good and marketable title to all tangible and
intangible personal property owned by it which comprises a part of the Assets
(other than Equipment subject to the Equipment Leases), free and clear of all
liens, encumbrances, security interests, assessments, covenants, reservations,
commitments, and
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restrictions of any nature whatsoever (collectively, "Encumbrances"). Upon
transfer to Purchaser at the Closing, Purchaser will have good and marketable
title to all tangible and intangible personal property which comprises a part of
the Assets, free and clear of all Encumbrances.
5.8 REAL PROPERTY. (a) The descriptions which are set forth in Schedule
5.8 are true and complete descriptions of all real property owned by Seller and
comprising a part of the Assets (the "Real Property"). Seller has good record
and marketable title in fee simple to the Real Property, free and clear of all
Encumbrances other than (i) easements and restrictions of record, (ii) all legal
highways, (iii) real and personal property taxes and assessments becoming due
and payable after the Closing, and (iv) building and zoning laws, ordinances and
regulations.
(b) All of the buildings, structures, improvements and appurtenances
situated on the Real Property are in substantially good operating condition and
substantially a good state of repair, ordinary wear and tear excepted. Upon
transfer to Purchaser of the Real Property, the Purchaser will have good and
marketable title to the Real Property, free and clear of all encumbrances other
than as provided herein.
5.9 REAL PROPERTY LEASE. None of the real property used by FSD is
subject to any lease.
5.10 CONDITION OF THE ASSETS. The Assets are adequate and suitable for
the purposes for which they are used in the current operations of the Business,
normal wear and tear excepted. No asbestos, asbestos-containing material, PCB
compounds or other pollutants, contaminants or hazardous or toxic wastes are
located on any portion of the Real Property, except possibly in insignificant
amounts or concentrations.
5.11 GOVERNMENTAL ACTIONS AFFECTING PROPERTY. Except as set forth on
Schedule 5.11, to the Best of the Knowledge of Seller, the Real Property and the
real property subject to the Real Property Lease comply in all material respects
with applicable building and zoning laws, ordinances, codes and regulations, and
all applicable restrictions or covenants thereby. There are no claims by any
governmental body pending or, to the Best of the Knowledge of Seller, threatened
against Seller or, to the best of the Knowledge of Seller, pending or threatened
against any third parties, alleging a violation of any law or any building,
zoning, or other ordinance, code, or regulation affecting the Real Property.
There is not pending or, to the Best of the Knowledge of Seller, threatened, any
proceeding or government action to condemn or take by the power of eminent
domain or to classify as a landmark or to impose a special assessment on any
Real Property.
11
5.12 [Reserved]
5.13 PREPAID EXPENSES. All prepaid expenses, if any, included in the
Assets represent BONA FIDE prepayments made by Seller, and full credit for such
prepaids will, after the Closing, be afforded to Purchaser by the persons who
received such prepayments from Seller.
5.14 VALIDITY OF ASSUMED CONTRACTS. Except as set forth on Schedule
5.14, each Assumed Contract is lawful, valid, binding, and in full force and
effect, and Seller is not in default under any Assumed Contract and no event has
occurred which, but for the passage of time or the giving of notice or both,
would constitute a default by Seller thereunder. Except as set forth on Schedule
5.14, to the Best of the Knowledge of Seller, no other party to any Assumed
Contract is in default thereunder and no event has occurred which, but for the
passage of time or the giving of notice or both, would constitute a default by
such other party thereunder. Information concerning sales representatives and
distributors of FSD is included in Schedule 5.14 (such information being as of
the dates indicated therein).
5.15 PERMITS, LICENSES, ETC. Except as set forth on Schedule 5.15,
there are no permits, licenses, franchises, or governmental approvals or
authorizations necessary to own the Assets or to conduct the Business. Seller
has obtained, and is in substantial compliance with, all such items listed in
Schedule 5.15 and all such items are currently in full force and effect. No
revocation, cancellation or withdrawal has been threatened to the Best of the
Knowledge of Seller.
5.16 PATENTS, TRADEMARKS, ETC. Set forth in Schedule 5.16 is a complete
list of all licenses, patents, trademarks, trade names, and copyrights, and all
pending applications, if any, for any of the same, included in the Assets,
together with a summary description of and full information concerning the
filing, registration, issuance, or licensing thereof. Except as otherwise
indicated in Schedule 5.16, Seller owns all such patents, trademarks, trade
names, copyrights, and applications, and all of the same are validly assignable
to Purchaser. To the Best of the Knowledge of Seller, Seller's use of the same
does not, and Purchaser's use will not, infringe the rights of any other party.
No licenses, sublicenses, or agreements have been granted or entered into by
Seller in respect of such patents, trademarks, trade names, copyrights, or
applications. To the Best of the Knowledge of Seller, no other patents,
trademarks, trade names, copyrights or licenses (other than the Trademark
License Agreement to which reference is made in Section 10.5) are necessary for
the conduct of the Business as now conducted by Seller or to avoid infringement
of the rights of any other party.
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5.17 EMPLOYMENT AGREEMENTS AND BENEFIT PLANS. Set forth in Schedule
5.17 is a complete list of (i) all employment agreements presently in effect
covering FSD employees; (ii) all pension, profit sharing, retirement, deferred
compensation, bonus, health, medical, life insurance, severance pay, welfare,
and all other fringe benefit programs provided for FSD employees; and (iii) the
categories of employees covered by each such agreement, contract, plan, or
program. Seller will not announce, prior to the Closing, any changes in any FSD
employee benefit plan or fringe benefit program as presently in effect. With
respect to each plan, program, arrangement agreement or policy listed on
Schedule 5.17 (the "Benefit Plans") and to the extent applicable (a) since
December 31, 1991, there has been no material violation of any applicable
provision of the Employee Retirement Income Security Act of 1974 ("ERISA"), (b)
each Benefit Plan intended to qualify under Section 401(a) of the Internal
Revenue Code of 1986 (the "Code") or for any other tax exempt or tax favored
status under the Code, so qualifies, (c) Seller is not subject to any
outstanding or potential liability or obligation, direct or indirect (other than
any such liability or obligation incurred in the ordinary course of business,
and is so reflected in the books and records of the Benefit Plan), and (d) there
are no actual or potential claims or actions (other than claims for benefits in
the normal course).
5.18 EMPLOYMENT PRACTICES. Seller has paid in full to FSD employees all
wages, salaries, commissions, bonuses and other direct compensation for all
services performed by them, other than amounts which have not yet become payable
in accordance with Seller's customary practices.
5.19 EMPLOYEES. Schedule 5.19 sets forth the name, title or
responsibility, and annual rate of compensation of each FSD employee.
5.20 BARGAIN CONTRACTS. Except as set forth on Schedule 5.20, to the
Best of the Knowledge of Seller, no Assumed Contract calls for (i) the
purchasing by Seller of any goods or services at prices substantially in excess
of prevailing market prices on the date of this Agreement, or (ii) the sale by
Seller of any goods or services at prices substantially below prevailing market
prices on the date of this Agreement.
5.21 NO VIOLATIONS. To the Best of the Knowledge of Seller, the
Business is not being conducted in material violation of any federal, state, or
local law, statute, ordinance, rule, regulation, or court or administrative
order.
5.22 LITIGATION. Except as set forth on Schedule 5.22, there are no
material suits, actions, claims, investigations, or proceedings anticipated or
pending or, to the Best of the Knowledge of Seller, threatened against or
affecting
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the Business or the Assets. No suit, action, claim, investigation or proceeding
described on Schedule 5.22 has had or will have a Material Adverse Effect on the
Business or the Assets if determined adverse to the Business's interests.
5.23 FINANCIAL STATEMENTS. The Financial Statements are attached to
this Agreement as Exhibit M. The Financial Statements have been prepared in
accordance with generally accepting accounting practices ("GAAP") consistently
applied as applicable to the financial statements of a division which is to be
sold. The Financial Statements present fairly the financial position, assets and
liabilities of the Business of Seller as of the date thereof and the revenues,
expenses, results of operations and cash flows of the Business for the periods
so covered, except that assets and liabilities not included in the Assets and
Assumed Obligations have been excluded. Subject to the foregoing, the Financial
Statements are in accordance with the books and records of Seller, do not
reflect any transactions which are not bona fide transactions and do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading. The Financial Statements
make full and adequate disclosure of, or provision for, all obligations and
liabilities of the Business (of the type required to be disclosed on a balance
sheet prepared in accordance with GAAP), which are not immaterial, as of the
date thereof. Since December 31, 1996, no liabilities have been incurred by
Seller in connection with the Business other than in the ordinary course and in
amounts consistent with past practice.
5.24 ORDINARY COURSE. Except as set forth in Schedule 5.24, since
October 31, 1996, (i) Seller has not engaged in or entered into any transaction
affecting the Business other than in the ordinary course of business; (ii) there
has been no increase in the general level of compensation of any category of
employees of FSD or in the rate of compensation of any employees, except in the
ordinary course of business; (iii) no sale or disposition of any assets of the
Business has occurred other than a sale or disposition in the ordinary course of
business; and (iv) Seller has not entered into any agreement with respect to any
of the foregoing.
5.25 SECURITIES LAW MATTERS. Seller is acquiring the Aqua Care Warrants
for investment purposes only and without a view to the distribution of such
Warrants or the shares of Common Stock of Purchaser (the "Common Stock") that
may be acquired pursuant to exercise of such Warrants. Seller recognizes that
the acquisition of such Warrants and the purchase of the Common Stock pursuant
thereto involves a degree of risk. Seller has the financial capacity to
withstand loss of its entire investment in such Warrants and Common Stock.
Seller acknowledges (i) that the Aqua Care Warrants and the Common Stock subject
thereto have not
14
been registered under the Securities Act of 1933 (the "Act") and that such
Warrants and Common Stock may be sold or otherwise disposed of only either
pursuant to an effective registration statement under the Act or pursuant to an
exemption from the registration requirements of the Act. Seller represents that
the Warrants and the Common Stock issued upon exercise thereof may bear a legend
to the foregoing effect.
5.26 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.26,
Seller and the Real Property have been and presently are in substantial
compliance with all applicable Environmental Laws. Seller has not, and has no
knowledge of any other person who has, caused any Release, threatened Release,
or disposal of any Hazardous Material at the Real Property; the Real Property is
not adversely affected by any Release, threatened Release or disposal of a
Hazardous Material originating or emanating from any other property, except
where any such Release has been remediated in compliance with the Environmental
Laws in all material respects. The Real Property does not contain any: (A)
underground storage tank, (B) landfill or dump, (C) a hazardous waste management
facility as defined pursuant to RCRA or any comparable state law, or (D) site on
or nominated for the national priority list promulgated pursuant to CERCLA or
any state remedial priority list promulgated or published pursuant to any
comparable state law. Seller, to the Best of the Knowledge of Seller, has with
respect to the Business no liability for response or corrective action, natural
resource damage or other harm pursuant to CERCLA, RCRA, or any comparable state
law. Seller is not subject to, has no notice or knowledge of, and is not
required to give any notice of, any Environmental Claim involving the Business
or the Real Property; there are no conditions or occurrences at the Real
Property which could form the basis for an Environmental Claim against Seller or
any such Real Property. To the Best Knowledge of Seller, the Real Property is
not subject to any, and Seller has no knowledge of any imminent restriction on
the ownership, occupancy, use or transferability of the Real Property in
connection with any (A) Environmental Law, or (B) Release, threatened Release or
disposal of a Hazardous Material. There are no conditions or circumstances at
the Real Property which pose a substantial risk to the environmental or the
health or safety of persons. Seller has provided or otherwise made available to
Purchaser all material environmental records prepared during the three years
prior to the Closing and required by the Environmental Laws concerning the Real
Property which Seller possesses or could reasonably have attained. Seller is in
compliance with all orders, directives, notices, approvals, certificates,
licenses and permits which have been issued to it and holds all approvals,
certificates, licenses and permits or other consents which it is required to
hold pursuant to any Environmental Law; correct and complete copies of all
currently in effect orders, directives,
15
notices, approvals, certificates, licenses, permits and consents have been
delivered to Purchaser.
5.27 CONSENTS AND APPROVALS. No permit, consent, authorization or
approval of, or filing or registration with, any Governmental Authority or any
other person or entity not a party to this Agreement is necessary in connection
with the execution, delivery and performance by Seller or the consummation of
the transactions contemplated hereby or for the lawful continued conduct of the
Business by the Purchaser following the closing as presently conducted by
Seller, except as disclosed on Schedule 5.27 or as indicated or provided in
Section 7.1(b).
5.28 NO ADVERSE EFFECTS OR CHANGES. Except as listed on Schedule 5.28
hereto, since the date of the Financial Statements, the Business has not; (a)
suffered any Material Adverse Effect; or (b) suffered any substantial damage,
destruction or loss to any of its assets or properties (whether or not covered
by insurance).
5.29 COLLECTIVE BARGAINING AGREEMENT. The Collective Bargaining
Agreement referenced in Section 7.8 hereof is the only collective bargaining
agreement affecting the employees of the Business. Subject to the terms of the
letter agreement dated March 4, 1997 among Seller, ACS and the Union (the "March
4, 1997 Letter Agreement"), the Collective Bargaining Agreement is in full force
and effect as of the date hereof and shall remain in full force and effect
through the Closing. Seller is not in default and to the Best of the Knowledge
of Seller there is no pending default of the Collective Bargaining Agreement.
Except to the extent included in the Assumed Obligations, all obligations of
Seller pursuant to the Collective Bargaining Agreement have been satisfied in
full through the Closing Date. There are as of the date of this Agreement no
pending grievances filed by any employee pursuant to the Collective Bargaining
Agreement.
5.30 TAX MATTERS. Seller has, within the time and in the manner
prescribed by law, paid all taxes that are currently due and payable arising out
of the Business. There are no tax liens on the Assets arising from tax
obligations which are currently due and payable.
5.31 NO OTHER REPRESENTATIONS. Seller makes no representations or
warranties concerning the Business or Assets except as specifically set forth in
this Agreement. Seller expressly disclaims any further representations and
warranties. Nothing in any correspondence or documents which have been sent or
furnished to Purchaser by Seller shall be interpreted as creating any additional
or implied representations or warranties.
16
SECTION 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND ACS.
Purchaser and ACS represent and warrant to Seller as follows (i) as of the date
of this Agreement and (ii) as of the time of the Closing with the same force and
effect as if made at and as of the time of the Closing:
6.1 ACCURACY OF PURCHASER SCHEDULES. Purchaser has heretofore delivered
to Seller two identical sets of the Purchaser Schedules. Each Purchaser Schedule
is true, accurate and complete.
6.2 ORGANIZATION AND STANDING. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
New York, with full power and lawful authority to carry on its business as now
conducted and to own and operate its assets, properties, and business. ACS is a
corporation duly organized, validly existing, in a good standing under the laws
of the State of Delaware, with full power and lawful authority to carry on its
business as now conducted and to own and operate its assets, properties, and
business.
6.3 CORPORATE AUTHORITY. Purchaser's and ACS's execution and delivery
of this Agreement and each of the documents to be delivered by it at the
Closing, and the performance by Purchaser and ACS of the transactions
contemplated by this Agreement, have been duly authorized by all necessary
corporate actions and proceedings. Neither Purchaser nor ACS is a party to any
contract or subject to any other legal restriction that would prevent or
restrict complete fulfillment of any of the terms and conditions of this
Agreement or compliance with any of its obligations hereunder.
6.4 VALID AND BINDING OBLIGATIONS. This Agreement is, and each of the
documents to be delivered by ACS and Purchaser at the Closing will be, valid and
legally binding upon ACS and Purchaser and enforceable in accordance with their
respective terms. Neither the execution of this Agreement and such other
documents nor the performance by ACS and Purchaser of the terms and provisions
hereof or thereof will (a) violate the Certificate of Incorporation or By-Laws
of Purchaser or ACS, (b) result in a breach or violation of any term or
provision of, or constitute a default under, any indenture, mortgage, lease, or
other agreement or instrument to which Purchaser is a party or by which it is
bound, (c) violate any law, statute, regulation, ordinance, rule, order, decree,
judgement, consent decree, settlement agreement or governmental requirement
enacted, promulgated, entered into, agreed or imposed by any Governmental
Authority which would, if enforced, have a Material Adverse Effect on the
Purchaser's or ACS's business, or (d) result in the creation of any mortgage,
lien (except for the lien of taxes not yet due), charge, restriction, pledge,
security interest, option, lease or sublease, claim, right of any third party,
easement, encroachment
17
or encumbrance upon the assets which would, if enforced, have a Material Adverse
Effect on the Purchaser's or ACS's business.
6.5 CONDITION OF THE ASSETS OF ACS. ACS's assets, together with the
equipment covered by any equipment leases, are adequate and suitable for the
purposes for which they are used in the current operation of ACS's business,
normal wear and tear excepted.
6.6 LITIGATION. Except as set forth on Purchaser Schedule 6.6, there
are no suits, actions, claims, investigations, or proceedings anticipated or
pending or, to the Best of the Knowledge of Purchaser or ACS, threatened against
or affecting Purchaser or ACS. No suit, action, claim, investigation or
proceeding described on Schedule 6.6 has had or will have a Material Adverse
Effect on the Purchaser's or ACS's business or its assets if determined adverse
to either the Purchaser's or ACS's business interests.
6.7 FINANCIAL STATEMENTS. ACS has delivered to Seller true, correct and
complete copies of its balance sheets and related statements of income and cash
flows of ACS as of and for the twelve months ending December 31, 1995 and
December 31, 1996 ("ACS's Financial Statements"). ACS's Financial Statements
have been prepared in accordance with GAAP consistently applied and present
fairly the financial position, assets and liabilities of ACS as of the dates
thereof and the revenues, expenses, results of operations and cash flows of
ACS's business for the periods so covered. The ACS Financial Statements are in
accordance with the books and records of ACS, do not reflect any transactions
which are not bona fide transactions and do not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading. ACS's Financial Statements make full and adequate
disclosure of, or provision for, all obligations and liabilities of its business
(of the type required to be disclosed on a balance sheet prepared in accordance
with GAAP), which are not immaterial, as of the date thereof. Since December 31,
1996, no liabilities have been incurred by ACS in connection with its business
other than in the ordinary course and in amounts consistent with past practice.
6.8 ORDINARY COURSE. Except as set forth in Purchaser Schedule 6.8,
since December 31, 1996, (i) ACS has not engaged in or entered into any
transaction other than in the ordinary course of business; and (ii) ACS has not
declared or made any dividend payments or other distributions in respect of or
in exchange for any of its shares.
6.9 WARRANTS. The Aqua Care Warrants have been duly authorized by the
Board of Directors of ACS and, upon issuance at the Closing, will be binding
upon and enforceable against ACS in
18
accordance with their terms. The issuance of shares of Common Stock of ACS upon
exercise of such Warrants has been duly authorized. Upon such issuance, and
payment for such shares in accordance with the terms of such Warrants, such
shares shall be duly authorized, validly issued, fully-paid and nonassessable.
6.10 NO OTHER REPRESENTATIONS. ACS and Purchaser make no
representations or warranties concerning the Purchaser's or ACS's business or
assets except as specifically set forth in this Agreement. Purchaser and ACS
expressly disclaim any further representations and warranties. Nothing in any
correspondence or documents which have been sent or furnished to Seller by
Purchaser or ACS shall be interpreted as creating any additional or implied
representations or warranties.
SECTION 7. OTHER OBLIGATIONS AND COVENANTS.
7.1 COOPERATION IN CERTAIN MATTERS; CONSENTS. (a) At Purchaser's
reasonable request, Seller shall use its best efforts to secure any consents or
approvals which may be necessary to assign any of the Assumed Contracts to
Purchaser and, if any such required consent or approval of a third party is not
obtained, Seller will cooperate with Purchaser in any reasonable arrangement
designed to provide Purchaser all of the benefits under the relevant Assumed
Contract, including, without limitation, enforcement for the benefit of
Purchaser of any and all rights of Seller against such third party arising out
of such Assumed Contract.
(b) Insofar as any equipment leases are included in the Assumed
Contracts, either (i) all necessary consents to assignment of such equipment
leases have been obtained, or (ii) such consents will be obtained and delivered
to Purchaser within 60 days after the Closing.
7.2 ACCESS TO BOOKS AND RECORDS. Prior to the Closing, Seller shall
provide Purchaser reasonable access to any books and records directly related to
the Business which may be necessary to enable Purchaser to operate the Business.
To the extent that any information made available by Seller to Purchaser as
reflected in such books and records or in connection with Purchaser's review of
the same, Purchaser shall maintain the confidentiality of the same.
7.3 FURTHER ASSURANCES. Each party will execute and deliver, or cause
to be executed and delivered, all such other instruments and will take all such
other actions as the other party may reasonably request from time to time in
order to effectuate the provisions and purposes of this Agreement.
19
7.4 BULK SALES. Seller and Purchaser hereby waive compliance with all
bulk sales or other laws for the protection of creditors in connection with the
transactions contemplated by this Agreement.
7.5 PUBLIC ANNOUNCEMENTS. Prior to the Closing, Seller and Purchaser
shall not issue any press releases, nor shall any information concerning the
purchase of the Assets be disclosed by either party to third parties, other than
representatives of Seller or Purchaser, without the prior consent of the other
party hereto, which consent shall not be unreasonably withheld. Subsequent to
Closing, Seller shall cooperate with Purchaser in announcing the sale of the
Business to FSD's suppliers, customers and employees.
7.6 CONSUMMATION OF TRANSACTIONS. Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto shall use its best
efforts to take, or cause to be taken, all such actions and to do, or cause to
be done, all other things necessary to carry out its obligations hereunder and
to consummate and make effective, as soon as reasonably practicable, the
transactions contemplated by this Agreement, including satisfying the conditions
to the obligations of the other party and obtaining all waivers, permits,
consents and approvals and effecting all registrations, filings and notices with
or to third parties or governmental or public bodies or authorities which are
necessary in connection with the transactions contemplated by this Agreement;
provided that this Subsection shall not require either party to waive any
condition for its benefit or any performance hereunder by the other party or to
make any payment to any third party, whether private or governmental, or to
expend any funds or incur any economic burden in connection with obtaining the
consent of any third party, whether private or governmental; and provided
further that this Subsection shall not require any party to take any action the
result of which, in its reasonable judgment, would be to impose material
limitations on its ability to consummate and retain the full benefits of the
transactions contemplated hereby.
7.7 HIRING OF EMPLOYEES. It is contemplated that, immediately following
the Closing, all FSD employees at Angola, New York will become employees of
Purchaser. Purchaser shall extend offers of employment to all such employees.
Subject to such adjustments as Purchaser may from time to time make after the
Closing, the compensation paid by Purchaser to such employees shall in the case
of employees covered by the Collective Bargaining Agreement be in accordance
with the terms of such Agreement for a period of at least one year after the
Closing. If, within 10 days after the Closing, Purchaser discharges (other than
for cause) any employee who was formerly an employee of Seller, and if, as a
result of such discharge, such employee is entitled to severance benefits from
Seller, Purchaser shall
20
reimburse Seller for the amount of the severance benefits paid to the
terminated employee.
7.8 COLLECTIVE BARGAINING AGREEMENT. As contemplated by the March 4,
1997 Letter Agreement, Purchaser shall assume, as of the Closing, the
obligations of Seller under the collective bargaining agreement (the "Collective
Bargaining Agreement"), between Seller and the International Union of
Electronic, Electrical, Salaried, Machine and Furniture Workers, AFL-CIO, Local
348 (the "Union"). Seller shall remain responsible for all obligations and
benefits accrued prior to the Closing, subject to the obligation of Purchaser to
pay and satisfy such of the obligations and benefits as are included in the
Assumed Obligations.
7.9 PERSONNEL ISSUES. All employees of Seller who accept offers of
employment by Purchaser as of the Closing shall be referred to herein as
"Transferred Employees", with those Transferred Employees who are members of the
Union being referred to as "Transferred Union Employees"; provided, however,
that employees who are disabled at Closing shall not be considered Transferred
Employees until they return to work for Seller. Upon request, Seller shall
provide Purchaser with information as to the title, history of assignments and
current salary with respect to such employees and assist Purchaser in effecting
their change of employment as of the Closing in an orderly fashion.
7.10 BENEFITS.
(a) UNION RECOGNITION OF SERVICE. With respect to Transferred Union
Employees, Purchaser shall recognize all service and plan participation
recognized under Seller's employee benefit plans (as defined in Section 3(3)
of ERISA) solely for purposes of determining benefit eligibility,
participation and vesting, under all of Purchaser's employee benefit plans
and programs including but not limited to Purchaser's Pension Plan (as
hereinafter defined), Purchaser's Savings Plan (as hereinafter defined), and
Purchaser's welfare and non-pension fringe benefit plans. Nothing contained
in this subsection (a) shall require Purchaser to provide any benefits for
periods of service prior to the Closing.
(b) PENSION PLAN.
(i) As soon as practicable after Closing and effective as
of Closing, Purchaser shall take all action necessary and appropriate to
establish and maintain a new tax-qualified employee defined benefit pension
plan ("Purchaser's Pension Plan") on behalf of Transferred Union Employees,
with benefits substantially identical to the Durco International Inc.
Pension Plan ("Durco Pension Plan")
21
accruing after the Closing Date. For purposes of eligibility, vesting and
benefit accrual under Purchaser's Pension Plan, each Transferred Union
Employee shall be credited with service recognized under the Durco Pension
Plan as if such service had been rendered to Purchaser. Purchaser may, but
is not obligated to, offset the benefits payable to each Transferred Union
Employee under the Purchaser's Pension Plan by the vested accrued benefit
(determined as of Closing) of that Transferred Union Employee under the
Durco Pension Plan. Seller shall continue to be responsible for and shall
pay when required all benefits of Transferred Union Employees accrued prior
to the Closing. As soon as practicable but not later than 60 days after
Purchaser provides Seller with a list of Transferred Union Employees, Seller
shall deliver to Purchaser a list of Transferred Union Employees who had
service recognized under the Durco Pension Plan, together with a listing of
each such employee's recognized service and each such employee's estimated
vested accrued benefit determined as of Closing, which shall remain Seller's
obligation.
(ii) Purchaser agrees that it will not, for a period of
one year after Closing, amend the benefit formula under Purchaser's Pension
Plan or terminate Purchaser's Pension Plan in a manner that would result in
a reduction in benefit accruals for Transferred Union Employees; provided,
however, that Purchaser may make any amendment to Purchaser's Pension Plan
which is required by law.
(c) SAVINGS AND INVESTMENT PLAN.
(i) As soon as practicable after Closing and effective as
of Closing, Purchaser shall take all action necessary and appropriate to
establish and maintain a new, tax-qualified profit sharing plan with a
tax-qualified cash or deferred arrangement ("Purchaser's Savings Plan")
which provides benefits to Transferred Union Employees which are
substantially identical to the benefits provided in the Durco International
Inc. Savings and Thrift Plan ("Durco 401(k) Plan"), and Purchaser shall not
change such benefits for at least one year after Closing.
(ii) Purchaser shall grant credit for service recognized
by Seller for purposes of eligibility to participate and vesting in
Purchaser's Savings Plan.
(iii) Promptly after receipt by Seller of a copy of a
current favorable IRS determination letter or, if Purchaser establishes its
Savings Plan by using a prototype document, a current favorable IRS opinion
or notification letter regarding the tax-qualified status of Purchaser's
22
Savings Plan, the trustee(s) of the Durco 401(k) Plan shall transfer to the
trustee(s) of Purchaser's Savings Plan the account balances of all
Transferred Employees who elect to have their account balances transferred.
(d) WELFARE AND OTHER NON-PENSION FRINGE BENEFITS.
(i) As soon as practicable after Closing, and effective
as of Closing, Purchaser shall take all action necessary and appropriate to
establish and maintain for Transferred Union Employees new group medical,
dental, life and disability plans as well as other employee welfare and
fringe benefit plans and programs, each of which shall be substantially
identical to existing employee benefit plans provided to such employees by
Seller immediately prior to Closing and listed in Schedule 5.17, until at
least January 1, 1998. Purchaser shall provide coverage and benefits (with
no exclusion for pre-existing conditions, to the extent permitted by law)
under Purchaser's welfare and other non-pension fringe benefit plans to
Transferred Union Employees beginning as of the date of the Closing, and
Seller shall have no responsibility therefor and thereafter; provided,
however, that, to the extent consistent with the appropriate employee
benefit plan document, Seller shall remain liable for any claims of
Transferred Union Employees incurred on or before Closing. For purposes of
this paragraph, a claim will be deemed to have been incurred in accordance
with the existing benefit plan documents. Seller shall also retain all
liabilities for any continuation of coverage required under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, with respect to any
person other than a Transferred Union Employee, the obligation for which
commenced on or prior to Closing.
(ii) Purchaser shall adopt a program which shall not be
changed for at least one year after the Closing on behalf of Transferred
Union Employees who are entitled to post-retirement medical, dental or life
insurance benefits upon retirement from Seller which is substantially
identical to the program maintained by Seller, provided that Purchaser shall
not be required to provide any benefits for periods of service prior to the
Closing and Seller shall remain fully liable for such benefits attributable
to pre-Closing periods in accordance with terms of the applicable employee
benefit plans and applicable law. Seller shall have no responsibility or
liability to provide post-retirement medical, dental or life insurance
benefits to Transferred Union Employees after their period of employment
with Purchaser, and Seller's obligations to the Transferred Union Employee
shall be governed by the Collective Bargaining Agreement noted in Section
7.8.
23
(e) COOPERATION OF THE PARTIES. Seller and Purchaser agree to fully
cooperate with respect to the necessary filings and calculations necessary
to effect the transactions contemplated by this Section 7.10 and in
obtaining any governmental approvals required hereunder.
(f) EMPLOYEE RIGHTS. Nothing herein express or implied shall confer
upon any employee of Seller, any Transferred Employees or any other employee
or legal representatives thereof any rights or remedies, including any right
to employment, or continued employment for any specified period, of any
nature or kind whatsoever under or by reason of this Agreement.
7.11 ACCRUED VACATION. As and to the extent included in the Assumed
Obligations, Purchaser will assume the obligations of Seller to provide accrued
vacation benefits to FSD employees.
7.12 SHANGHAI TEXTILES ACCOUNT. The Retained Assets include an account
receivable with Shanghai Textiles (the "SHANGHAI TEXTILES ACCOUNT") that is past
due. In order to assist Seller in such collection of such account, Purchaser
will, if necessary, provide Seller with FSD products at cost which are needed to
satisfy Shanghai Textiles in an amount up to $25,000.
7.13 OPERATION OF BUSINESS. From the date of this Agreement until the
Closing, Seller will operate the Business in the ordinary course consistent with
good business practice during regular business hours. Except with the prior
written consent of Purchaser, Seller shall, with respect to the Business, (i)
make no significant changes in operating practices; (ii) make no disposition of
assets other than in the ordinary course of business; (iii) grant no increase in
any levels of compensation or benefits or enter into any employment agreement
with any employee except in the ordinary course of business, (iv) other than as
required by existing plans and programs, grant any bonus or other benefits to
any employee or consultant if the obligation to pay such bonus or benefit would
be assumed by Purchaser; (v) not deplete the assets of FSD other than in the
ordinary course of business; provided, however, that Purchaser shall at all
times be permitted to withdraw cash from FSD to the extent that the cash of FSD
exceeds $10,000; and (vi) not permit FSD to incur any liability for borrowed
money from a financial institution if such liability would be assumed by
Purchaser.
7.14 AUDITED FINANCIAL STATEMENTS. The Financial Statements attached to
this Agreement as Exhibit M have been subjected to audit review by Ernst & Young
LLP ("Ernst & Young"), and Ernst & Young is prepared to deliver, following the
Closing, its report on such audit. Within 20 days after the Closing, Seller
shall cause Ernst & Young to deliver its report on such audit to Purchaser.
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7.15 CONFIDENTIALITY. As a material inducement for Seller to furnish
confidential and proprietary information related to the Business to Purchaser,
Purchaser covenants and agrees that all confidential information obtained by
Purchaser and by its employees, agents and representatives or any of them
(collectively, "Recipient") from Seller and/or its employees, agents and
representatives (collectively, "Confidential Information") shall be handled as
follows:
(a) Purchaser shall keep and shall cause Recipient to keep confidential
and Purchaser and Recipient shall not disclose any of the Confidential
Information to any third party, except as required by applicable law or
legal process, without the prior consent of Seller; provided, however, that
Confidential Information may be disclosed to Purchaser's Recipients who need
to know such information and who agree prior to receiving the Confidential
Information to keep such Confidential Information confidential and to be
bound by this Agreement to the same extent as if they were parties hereto.
(b) Purchaser will receive and hold in confidence and shall instruct
its Recipients to hold in confidence and, in either case, not to disclose to
any third party for any reason or purpose whatsoever, the Confidential
Information, whether received orally or in writing, by any other medium or
by copy, whether acquired from Seller or acquired from inspection(s) of the
Business.
(c) Purchaser shall take, and shall instruct its Recipients to take,
all reasonable measures necessary to prevent disclosure of the Confidential
Information to any third party.
(d) This Section 7.15 shall not apply to information (i) which is or
becomes public knowledge through no fault of Purchaser and/or Recipients,
(ii) which is made available to Purchaser by an independent third party not
a party to a confidentiality agreement with Seller and having a lawful right
to such availability, or (iii) which is already in the Purchaser's
possession, from a source other than Seller, at the time of receipt of such
information from Seller (and such prior possession can be properly
demonstrated to Seller).
SECTION 8. CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligations of
Purchaser under this Agreement, including Purchaser's obligations to consummate
the transactions contemplated by this Agreement, are subject to the fulfillment,
prior to or at the Closing, of each of the following conditions:
8.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects as
25
of the time of the Closing with the same force and effect as if made at and as
of the time of the Closing.
8.2 PERFORMANCE. Seller shall have duly performed and complied with in
all material respects all agreements, covenants, and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing.
8.3 NO MATERIAL ADVERSE CHANGE. There shall not have occurred, from the
date of this Agreement to the time of the Closing, any material adverse change
in the Business or the Assets.
Purchaser shall have the right to waive any of the foregoing
conditions.
SECTION 9. CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of
Seller under this Agreement, including Seller's obligation to consummate the
transactions contemplated by this Agreement, are subject to the fulfillment,
prior to or at the Closing, of each of the following conditions:
9.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Purchaser contained in this Agreement shall be true and correct in
all material respects as of the time of the Closing with the same force and
effect as if made at and as of the time of the Closing.
9.2 PERFORMANCE. Purchaser shall have duly performed and complied with
in all material respects all agreements, covenants, and conditions required by
this Agreement to be performed or complied with by it prior to or at the
Closing.
Seller shall have the right to waive any of the foregoing conditions.
SECTION 10. CLOSING.
10.1 TIME AND PLACE. The Closing of the transactions contemplated by
this Agreement shall take place at the offices of Xxxxx Day Xxxxxx & Xxxxx,
Dallas, Texas at 9:00 a.m. on June __, 1997, or at such other place, time, and
date as may be agreed upon by the parties.
10.2 ACTIONS AT CLOSING. At the Closing, the actions described in this
Section shall be taken. All actions shall be deemed to have occurred
simultaneously, and the effectiveness of any action taken at the Closing shall,
unless otherwise agreed by Purchaser and Seller, be conditioned upon the taking
of all other actions called for in this Section.
10.3 ITEMS TO BE DELIVERED BY SELLER. At the Closing, Seller shall
deliver to Purchaser:
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(a) A limited warranty deed in substantially the form of EXHIBIT G and
such other documents of transfer of title as shall be necessary to
effectively vest in Purchaser good and marketable title to the Real
Property, free and clear of all liens and encumbrances except (i) easements
and restrictions of record, (ii) all legal highways, (iii) real and personal
property taxes and assessments becoming due and payable after the Closing,
and (iv) building and zoning laws, ordinances and regulations.
(b) A xxxx of sale in substantially the form of EXHIBIT H and such
other bills of sales, assignments, subleases, and other documents of
transfer as shall be necessary to effectively vest in Purchaser good and
marketable title to the Assets (other than the Real Property) free and clear
of all Encumbrances.
(c) A certificate of the President or a Vice President of Seller, dated
the date of the Closing, in form and substance satisfactory to Purchaser and
its counsel, to the effect that, to the best of the knowledge of such
officer, the conditions set forth in Subsections 8.1, 8.2 and 8.3 have been
fulfilled.
(d) A copy of the resolutions of the Board of Directors of Seller or
its Executive Committee, certified by an officer of Seller, authorizing and
approving (or ratifying) the execution and delivery of this Agreement and
consummation of the transactions contemplated hereby.
(e) Assignments in proper form for recording of all rights of Seller in
and to all patents and trademark registrations set forth on Schedule 5.16 to
effectively vest in Purchaser good title to such patents and trademark
registrations.
(f) Such other certificates, documents, and instruments as may be
reasonably requested by Purchaser in connection with the transactions
contemplated by this Agreement.
10.4 ITEMS TO BE DELIVERED BY PURCHASER. At the Closing, Purchaser
shall deliver to Seller:
(a) The payment to Seller described in Subsection
3.3(a).
(b) An assumption agreement in substantially the form of EXHIBIT I and
such other assumption agreements as may be necessary to evidence Purchaser's
assumption of, and agreement to satisfy and discharge, all Assumed
Obligations and Assumed Contracts.
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(c) A certificate of the President or a Vice President of Purchaser,
dated as of the date of Closing, in form and substance satisfactory to
Seller and its counsel, to the effect that, to the best of the knowledge of
such officer, the conditions set forth in Subsections 9.1 and 9.2 have been
fulfilled.
(d) A copy of the resolutions of the Boards of Directors of Purchaser
and ACS, certified by officers of such corporations, approving the
acquisition of Seller and authorizing the execution and delivery of this
Agreement and consummation of the transactions contemplated hereby.
(e) The Promissory Note, the Security Agreement, the Mortgage, and the
Guaranty Agreement, all as provided by Sections 3.3(a) and 3.6.
(f) Such other certificates, documents, and instruments as may be
reasonably requested by Seller in connection with the transactions
contemplated by this Agreement.
10.5 OTHER ACTIONS. At or prior to the Closing, in addition to the
actions specified above, Seller and Purchaser shall enter into the following
additional agreements concerning the transitional services to be provided
Purchaser by Seller to assist Purchaser in operating the Business and the
license of the trademarks from Seller to Purchaser.
(a) Computer Services Agreement in substantially the form of EXHIBIT J.
(b) Independent Sales Representation Agreement in substantially the
form of EXHIBIT K.
(c) Trademark License Agreement in substantially the form of EXHIBIT L.
10.6 TERMINATION. In the event that the conditions to the obligations
of Purchaser under this Agreement (as set forth in Section 8) are not satisfied
as of the time of the Closing, Purchaser may terminate this Agreement by written
notice to Seller. In the event that the conditions to the obligations of Seller
under this Agreement (as set forth in Section 9) are not satisfied as of the
time of the Closing, Seller may terminate this Agreement by written notice to
Purchaser. In the event this Agreement is terminated by either Purchaser or
Seller in accordance with the preceding provisions of this Section, this
Agreement (except for the provisions of Sections 7.5, 7.15 and 14.1) shall be
void and have no effect and Purchaser and Seller (and their respective directors
and officers) shall have no further obligation to each other; provided, however,
that nothing contained herein shall relieve any party of liability for any
intentional breach of this Agreement. In addition, Purchaser may elect to so
terminate this Agreement prior to Closing if
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Purchaser reasonably determines, based upon clear and convincing evidence, that
Seller is in violation of Seller's representations and warranties stated in
Section 5 and Seller fails to cure such violation within 10 days after receiving
notice thereof.
SECTION 11. SURVIVAL AND INDEMNIFICATION.
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. (a)
Subject to the limitations set forth in Subsection 11.1(b), all representations,
warranties, covenants and agreements set forth in this Agreement or in any
document delivered pursuant hereto shall survive the execution, delivery and
performance of this Agreement, notwithstanding any investigation conducted at
any time with respect thereto.
(b) With the exception of the representations and warranties set forth
in Subsections 5.7 and 5.8(a) (the "Excepted Representations and Warranties"),
all representations and warranties set forth in this Agreement shall expire at
the close of business on the third anniversary of the Closing (or if such
anniversary does not fall on a business day, at the close of business on the
next business day thereafter), and no claim based upon such expired
representation or warranty may thereafter be made. The expiration of a
representation or warranty shall not, however, affect or prejudice any right to
indemnification with respect to any claim involving any inaccuracy in or breach
of such representation or warranty for which a Claim Notice (as hereinafter
defined) shall have been given prior to such expiration. The Excepted
Representations and Warranties shall not expire and shall continue in effect
indefinitely.
11.2 INDEMNIFICATION BY SELLER. Subject to the limitations set forth in
this Section 11, Seller shall indemnify and hold Purchaser harmless from and
against all claims, liabilities, losses and damages arising out of, in
connection with, or as a result of (i) any obligation of Seller not expressly
assumed by Purchaser pursuant to this Agreement or liabilities with respect to
the Business arising, or based upon events or circumstances occurring or
existing, prior to the Closing (other than Assumed Obligations); (ii) any breach
by Seller of any obligation or commitment under any Assumed Contract at any time
prior to the Closing; (iii) noncompliance with any laws relating to bulk sales
or other laws for the protection of creditors; (iv) the failure of Seller to
file any federal, state, or local returns in connection with sales or use tax,
personal and/or real property tax, payroll taxes, income tax, or other similar
taxes; (v) any misrepresentation or inaccuracy in, or breach or nonfulfillment
of, any representation, warranty, covenant, or agreement on the part of Seller
contained in this Agreement or in any exhibit, certificate or document furnished
or to be furnished to Purchaser by Seller pursuant to this Agreement; and (vi)
Seller's employment or alleged employment of any finder, broker, agent, or other
intermediary in connection with the negotiation or consummation of this
Agreement or any of the transactions contemplated hereby. The defense and
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indemnification obligations arising under this Subsection are hereinafter
referred to as the "Seller Indemnification Obligations."
11.3 INDEMNIFICATION BY PURCHASER. Subject to the limitations set forth
in this Section 11, Purchaser shall indemnify and hold Seller harmless from and
against all claims, liabilities, losses, and damages arising out of, in
connection with, or as a result of (i) any misrepresentation or inaccuracy in,
or breach or non-fulfillment of, any representation, warranty, covenant, or
agreement on the part of Purchaser contained in this Agreement or in any
exhibit, certificate, or document furnished or to be furnished to Seller by
Purchaser pursuant to this Agreement; (ii) any breach by Purchaser of any
Assumed Obligation; (iii) any failure by Purchaser to perform and discharge
post-Closing obligations under any Assumed Contract; (iv) Purchaser's employment
or alleged employment of any finder, broker, agent or other intermediary in
connection with the negotiation or consummation of this Agreement or any of the
transactions contemplated hereby; and (v) any liability to any third party
arising in any way from Purchaser's operation of the Business after the Closing.
The defense and indemnification obligations arising under this Subsection are
hereinafter referred to as the "Purchaser Indemnification Obligations."
11.4 ABSORBED DAMAGES AMOUNT. (a) Except as set forth in Subsection
11.4(b), following the Closing, Seller shall be responsible for and required to
pay Seller Indemnification Obligations, and Purchaser shall be responsible for
and required to pay Purchaser Indemnification Obligations, only if and to the
extent that the cumulative amount of the Seller Indemnification Obligations or
the Purchaser Indemnification Obligations, as the case may be, exceeds $500,000
(the "Absorbed Damages Amount").
(b) The provisions of Subsection 11.4(a) shall not apply if and to the
extent that the claim for indemnification relates to (i) the failure of
Purchaser to discharge any of the Assumed Obligations or to perform and
discharge post-Closing Obligations under any of the Assumed Contracts, (ii) any
breach of Seller's or Purchaser's obligations under Section 4, or (iii) matters
covered by clause (vi) of the first sentence of Subsection 11.2 or clauses (iv)
and (v) of the first sentence of Subsection 11.3.
11.5 LIMITATION ON MAXIMUM INDEMNIFICATION OBLIGATIONS. (a) Except as
set forth in Subsection 11.5(b), the maximum obligation of Purchaser under the
Purchaser Indemnification Obligations and Seller under the Seller
Indemnification Obligations or which arise in any way or at any time under this
Agreement after the Closing shall not exceed the Adjusted Purchase Price. In the
case of the Seller Indemnification Obligations, Seller may offset such
obligations against amounts owing to Seller under the Promissory Note.
30
(b) The provisions of Subsection 11.5(a) shall not apply if and to the
extent that the claim relates to (i) the failure of Purchaser to discharge any
of the Assumed Obligations or to perform and discharge post-Closing Obligations
under any of the Assumed Contracts, or (ii) any breach of Seller's or
Purchaser's obligations under Section 4.
11.6 TERMS AND CONDITIONS OF INDEMNIFICATION. The obligations and
liabilities of any party to indemnify any other party under this Section 11
shall be subject to the following terms and conditions:
(a) CLAIM NOTICE. Any party seeking indemnity under this Agreement
shall give written notice ("Claim Notice") to the party or parties from whom
indemnity is sought. The Claim Notice shall be given reasonably promptly
after the party seeking indemnity becomes aware of the facts indicating that
a claim for indemnification may be warranted. Each Claim Notice shall
specify the nature of the claim or demand, the applicable provision(s) of
this Agreement or other instrument under which the claim for indemnity
arises, and, if possible, the amount or the estimated amount thereof. No
failure or delay in giving a Claim Notice and no failure to include any
specific information or any reference to any provision of this Agreement or
other instrument under which the claim arises shall affect the obligation of
the party from which indemnity is sought, except to the extent that such
failure or delay shall have adversely affected the ability of such party to
defend, settle, or satisfy the claim and except as provided in Section
11.6(b).
(b) TIME LIMITATION FOR SUBMISSION OF CERTAIN CLAIMS. A Claim Notice
relating to any claim by Purchaser against Seller for breach of any
representation or warranty set forth in Section 5, or by Seller against
Purchaser for breach of any representation or warranty set forth in Section
6, must be given no later than the close of business on the third
anniversary of the Closing (or if such anniversary does not fall on a
business day, the close of business on the next business day thereafter);
provided, however, that the foregoing time limitation shall not be
applicable to any claim by Purchaser for any breach of any Excepted
Representation or Warranty.
(c) NON-THIRD PARTY CLAIMS. In the event of a claim for indemnification
which does not involve a claim or demand being asserted or sought to be
collected by a third party, such claim for indemnification shall be paid
within 30 days after the date of receipt of the Claim Notice therefor,
subject however to subparagraph (d) below.
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(d) DISPUTED NON-THIRD PARTY CLAIMS. Any non-third party claims shall
be conclusive in all respects 30 days after receipt of Claim Notice by the
party to whom such Claim Notice is sent, unless within such period the party
receiving such Claim Notice shall have sent to the claiming party a notice
questioning the propriety of the claim, in which case such claim, unless
settled by mutual agreement between Seller and Purchaser, shall promptly be
referred to the American Arbitration Association to be settled by
arbitration before a panel of three arbitrators in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, which
arbitration shall be conducted in Miami, Florida. Judgment upon the award by
the arbitrators may be entered in any court giving jurisdiction thereof. As
part of such award the arbitrators may establish their fees and expenses in
connection thereof. The fees and expenses of the arbitrators shall be
apportioned between the parties by the arbitrators in accordance with the
findings and results of the arbitration. Any award shall be a conclusive
determination of the disputed matter, shall be final and binding upon the
parties hereto, and shall not be contested by them.
(e) THIRD PARTY CLAIMS. In the event of a claim for indemnification
which does involve a claim being asserted or sought to be collected by a
third party, the party(ies) from whom indemnity is being sought (the
"Indemnifying Party") shall have the right to undertake the defense of any
such claim, and the indemnified party(ies) (the "Indemnified Party") shall
cooperate reasonably in such defense and make available all records and
materials requested by the Indemnifying Party in connection therewith. The
Indemnified Party shall be entitled to participate in such defense, but
shall not be entitled to indemnification with respect to the costs and
expenses of such defense if the Indemnifying Party shall have assumed the
defense of the claim with counsel reasonably satisfactory to the Indemnified
Party. The Indemnifying Party may settle any claim without the consent of
the Indemnified Party, if, and only if, the sole relief awarded is monetary
damages that are paid in full by the Indemnifying Party. If the Indemnifying
Party fails to diligently defend any such third party claim, the Indemnified
Party may (but shall not be required to) assume the defense of such claim
and defend and settle the same at the expense of the Indemnifying Party.
11.7 ATTORNEYS' FEES. In the event a dispute shall result in litigation
or legal proceedings between Seller and Purchaser, the prevailing party's
attorneys' fees and other expenses related to such litigation or proceeding,
together with
32
fees and expenses incurred on appeal, shall be paid by the losing party.
11.8 EXCLUSIVE REMEDY. Except as otherwise specifically provided in
this Agreement, rights of recovery pursuant to this Section 11 shall be the sole
and exclusive remedy with respect to any claim to which this Section 11 applies.
SECTION 12. NONCOMPETITION COVENANT.
12.1 NONCOMPETITION. Seller covenants and agrees with Purchaser that
for a period of five years after the date of the Closing, Seller will not,
without Purchaser's prior written consent and except to the extent permitted by
Subsection 12.2, either directly or indirectly (i) engage in a Competitive
Business, as hereinafter defined; (ii) have any interest in (whether as a
proprietor, partner, stockholder, associate, or any type of principal or owner
whatsoever) any person, firm, partnership, joint venture, or other business
entity (collectively, an "Entity") which is engaged in a Competitive Business;
or (iii) provide material financial or other material assistance or act as an
agent of or advisor to any Entity which is or is about to become engaged in a
Competitive Business.
12.2 EXCEPTIONS. (a) Seller may purchase an Entity which is partially
engaged in a Competitive Business so long as the Entity derives less than thirty
(30%) percent of its revenue from such a Competitive Business (a "Qualified
Competitive Entity"). If Seller purchases a Qualified Competitive Entity, Seller
shall grant to Purchaser a one time option to purchase that portion of the
Qualified Competitive Entity engaged in a Competitive Business (the "Competitive
Division") on an "AS IS, WHERE IS" basis. The purchase price for the Competitive
Division ("Competitive Division Purchase Price") shall be the greater of (a) the
net asset value of the Competitive Division or (b) an amount equal to the same
percentage of the aggregate purchase price (including assumed debt) paid by
Seller for the Competitive Entity as the percentage of the latest net annual
earnings of the Qualified Competitive Entity which were provided by the
Competitive Division. If Purchaser shall purchase the Competitive Division,
Purchaser shall pay to Seller in full the Competitive Division Purchase Price by
wire transfer of the funds to an account designated by Seller not later than 30
days after notice to Purchaser by Seller.
(b) Seller may own not more than 2% of the shares or other ownership
interests in any publicly held Entity engaged in a Competitive Business.
12.3 COMPETITIVE BUSINESS. As used in this Agreement, "Competitive
Business" means an Entity which engages in the manufacture and sale of
filtration equipment and/or metering pumps.
33
12.4 INJUNCTIVE RELIEF. Seller acknowledges that its satisfaction of
the covenants and agreements set forth in this Section 12 is necessary to
protect the business, goodwill, and other proprietary interests of Purchaser and
that a breach of such covenants or agreements will result in irreparable and
continuing damage to Purchaser for which there will be no adequate remedy at
law. Seller agrees that in the event of any breach of the aforesaid covenants or
agreements, Purchaser shall be entitled to injunctive relief, without the
necessity of proof of actual damage, reimbursement of all attorneys' fees and
expenses of litigation (including without limitation, attorneys' fees incurred
in connection with any appeal), and such other and further relief as may be
proper.
12.5 JUDICIAL MODIFICATION. If the scope of any restriction contained
in this Section is too broad to permit enforcement of such restriction to its
full extent, then such restriction shall be enforced to the maximum extent
permitted by law, and Seller hereby consents and agrees that such scope may be
judicially modified accordingly in any proceeding, brought to enforce such
restriction.
SECTION 13. DAMAGE OR DESTRUCTION OF ASSETS. In the event that any loss
or damage to or destruction of any of the Assets shall occur prior to the
Closing, Purchaser shall be entitled to all insurance proceeds, awards, or other
compensation payable in respect of such loss, damage, or destruction; provided,
however, that if any material portion of the Assets is lost or destroyed or
materially damaged prior to the Closing, Purchaser shall have the option of
either (i) accepting such proceeds, awards, or compensation and proceeding with
the Closing, or (ii) terminating this Agreement, in which case neither Purchaser
nor Seller shall have any further obligations or rights hereunder.
SECTION 14. MISCELLANEOUS.
14.1 EXPENSES. Subject to Section 11.7, each party to this Agreement
shall bear all costs and expenses, including legal and accounting fees, incurred
by such party in connection with the transactions contemplated by this
Agreement, whether or not consummated. Such costs and expenses of Seller shall
be paid without diminution of the Assets.
14.2 ENTIRE AGREEMENT; MODIFICATION. This Agreement and the exhibits,
other instruments, and documents referred to herein contain the entire agreement
between the parties with respect to the transactions contemplated hereby, and
supersede all negotiations, representations, warranties, commitments, offers,
and contracts, whether oral or written, prior to the date hereof. No
modification or amendment of any provision of this Agreement shall be effective
unless made in a written instrument, duly executed by the party to be bound
thereby, which refers specifically to this Agreement and states that an
amendment or
34
modification is being made in the respects set forth in such instrument.
14.3 SEVERABILITY. In the event that any provision of this Agreement
violates any applicable law, such provision shall be invalid to the extent of
such violation without affecting the validity or enforceability of any other
provision hereof.
14.4 ASSIGNMENT; NO THIRD PARTY RIGHTS. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the parties hereto
and their respective permitted successors and assigns. This Agreement may not be
assigned by either party without the prior written consent of the other, except
that Purchaser may, upon written notice to Seller but without the prior consent
of Seller, assign this Agreement and the rights of Purchaser hereunder to (i)
any direct or indirect subsidiary of Purchaser or (ii) any successor of
Purchaser. Upon any such assignment by Purchaser, all references to "Purchaser"
in this Agreement shall be deemed to include Purchaser's assignee. Seller may,
upon written notice to Purchaser but without the prior consent of Purchaser,
assign all or its rights to any successor of Seller. No assignment of this
Agreement shall relieve the assigning party of responsibility for the
performance of all its obligations hereunder. Nothing herein is intended to nor
shall it create any rights in any person other than the parties hereto and their
respective successors and assigns.
14.5 CAPTIONS. The captions of the various sections of this Agreement
have been inserted for convenience of reference only and shall not affect the
interpretation of this Agreement.
14.6 NOTICES. All notices, requests, demands, and other communications
pursuant to this Agreement must be in writing, will be deemed to have been
effectively given on the date of actual receipt by the recipient party (arrival
at the address or facsimile number indicated below being deemed to constitute
receipt by the recipient party), and shall be either (i) delivered personally,
(ii) transmitted by facsimile transmission, (iii) mailed by registered or
certified mail, postage prepaid, or (iv) delivered by a recognized express
courier service, as follows:
If to Seller:
Durco International Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxx 00000
Atten: Xx. Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
35
With a copy to:
Xxxxxxxx, Xxxx & Xxxxx LLP
0000 Xxxxxxxxxx Xxxxx X.X.
Xxxxxx, Xxxx 00000
Atten: J. Xxxxxxx Xxxx, Esq.
Facsimile: (000) 000-0000
If to Purchaser:
Aqua Care Systems, Inc.
00000 X.X. 00xx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxx 00000
Atten: Xx. Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
With a copy to:
Wallace, Bauman, Fodiman & Xxxxxxx P.A.
Sixth Floor
0000 Xxxxx Xx Xxxx Xxxxxxxxx
Xxxxx Xxxxxx, Xxxxxxx 00000
Atten: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
Any party may change the address to which notices and other communications are
to be directed to it by giving notice of such change to the other parties in the
manner provided in this Subsection.
14.7 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each or which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
14.8 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the law of the State of Florida.
14.9 GUARANTEE. ACS hereby absolutely, unconditionally, irrevocably and
fully guarantees the full and prompt payment and performance of all obligations,
liabilities and other commitments made by Purchaser to Seller under or pursuant
to this Agreement. ACS shall also be jointly and severally liable to Seller for
any such obligations, liabilities and other commitments if Seller takes any
action to enforce such obligations, liabilities and commitments.
36
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first set forth above.
AQUA CARE SYSTEMS, INC.,
a Delaware corporation
By:________________________
Xxxxxxx X. Xxxxxx
President
ACS ACQUISITION CORP.,
a New York corporation
By:________________________
Xxxxxxx X. Xxxxxx
President
DURCO INTERNATIONAL INC.,
a New York corporation
By:________________________
Xxxxxx X. Xxxxx
Vice President
37
EXHIBIT A
DESCRIPTION OF ASSETS
1. Up to and including $10,000, in the aggregate, of cash.
2. All inventories and other materials, including all inventory in
transit or on order and not yet delivered, in Angola, New York.
3. All fee simple and leasehold interests in all real estate utilized
in the Business.
4. All supplies, equipment, vehicles, machinery, furniture, fixtures,
leasehold improvements and other tangible personal property directly used in the
Business in Angola, New York.
5. All proprietary knowledge, trade secrets, customer lists, contracts,
technical information, quality control data, processes (whether secret or not),
methods and other similar know how or rights used in the conduct of the Business
6. The name "Filtration Systems Division" and the trademarks "Quadra
Press," "Enzinger" and "PPI."
7. The following patents;
A. U.S. Patent No. 4,479,873 - Light Controlled
Apparatus for Moving Filter Press Plates.
B. U.S. Patent No. 4,968,423 - Filter Leaf.
C. Canadian Patent No. 1,304,007 - Filter Leaf.
8. The Business as a going concern and its franchises, permits,
licenses, telephone numbers, customer lists, vendor lists, contracts,
advertising material and data, restrictive covenants, and similar obligations in
favor of the Business, together with all books, local computer software, files,
papers, records, and other data relating to the Business at the Business
location.
9. All other tangible and intangible property used by the Business
(including personal property leasehold interests) and located at the Business
location, but excluding any intangible property which is also used in any other
business of Seller and any choses in action in favor of Seller.
"Assets" do not include "Retained Assets" listed or described on
Exhibit B.
38
EXHIBIT B
RETAINED ASSETS
1. Prepaid assets.
2. Copies of all books and records, including by way of example but not
limitation, accounting books and records and personnel records not located at
the Business Location.
3. Contracts and agreements other than Assumed Contracts.
4. Intercompany receivables due to the Business from any entity
affiliated with Seller.
5. Any assets of Seller used in funding Seller's obligations under the
Durco Pension Plan or the Durco 401(k) Plan.
6. Any insurance coverage of the assets or liabilities of the Business
maintained by Seller.
7. The mainframe computer system used by Seller to furnish computer
services to the Business from Dayton, Ohio.
8. Office equipment used by Seller to furnish administrative services
to the Business from Dayton, Ohio.
9. All cash in excess of $10,000.
10. Trademarks and trade names other than those specifically included
in paragraph 7 of the description of Assets (Exhibit A).
11. All accounts receivable.
12. The "Other assets" reflected on the FSD Balance Sheet as of
December 31, 1996 (being the Shanghai Textiles Account).
39
EXHIBIT C
ASSUMED OBLIGATIONS
AMOUNT AS OF APRIL 30,
1997 PER FSD REFERENCE
DESCRIPTION STATEMENT OF NET ASSETS(1)
----------- --------------------------
Accounts payable(2) $584,182
Accrued liabilities(3) $452,656
--------
(1)These amounts are provided for information only. Accounts payable and
accrued liabilities as of the date of the Closing may be more or less than the
amounts indicated as of April 30, 1997.
(2)Includes accounts payable to vendors, withholding taxes payable,
miscellaneous payables, and other payables of the type included in the Financial
Statements (Exhibit M) as "Accounts payable."
(3)Includes payroll and payroll related liabilities, benefits, commissions
and sales compensation, and other liabilities of the type included in the
Financial Statements (Exhibit M) as "Accrued liabilities."
40
EXHIBIT D
ASSUMED CONTRACTS
1. All purchase orders from customers of FSD.
2. All purchase orders submitted to vendors for the supply of goods or
services to FSD.
3. The Collective Bargaining Agreement identified in Section 7.8.
4. All office equipment leases pursuant to which equipment is leased for use
in the Business.
5. All motor vehicle leases pursuant to which motor vehicles are leased for
use in or in connection with the Business.
6. All sales representation and other distribution agreements relating to the
sale or distribution of products manufactured by FSD.
41
EXHIBIT E
ALLOCATION OF PURCHASE PRICE
The Purchase Price shall be allocated among the Assets and the covenant
against competition (Section 12 of the Agreement) as follows:
DESCRIPTION ALLOCATION
----------- -----------
Current assets:
Cash Face value at closing up to
$10,000
Inventories FIFO cost at closing
Property, plant and equipment:
Land $ 35,000
Buildings $700,000
Machinery and equipment $310,000
Furniture and Fixtures $250,000
Covenant against $50,000
competition
Goodwill/going concern Balance of purchase price
value
42
EXHIBIT F
COMMON STOCK PURCHASE WARRANT
FOR THE PURCHASE OF COMMON STOCK
OF AQUA CARE SYSTEMS, INC.
Date of Issuance of Warrant
_______________, 1997
Expiration Date
_______________, 2002
THIS CERTIFIES THAT, for value received, Durco International
Inc., a New York corporation, 0000 Xxxxxxxx Xxxxxxxxx, Xxxxxx, Xxxx 00000 (the
"Original Holder"), or its registered assigns (collectively, together with the
Original Holder, the "Holder"), is entitled, subject to the terms and conditions
hereinafter set forth, at any time and from time to time to and until 5:00 p.m.,
Dayton, Ohio time, on __________, 2002 (the "Expiration Time and Date") to
purchase up to a total of 250,000 fully paid and nonassessable shares of Common
Stock, par value $.001 per share ("Common Shares"), of Aqua Care Systems, Inc.,
a Delaware corporation (the "Company"), at a purchase price of $1.00 per share
(the "Purchase Price"). The number of shares that may be purchased and the
Purchase Price are subject to adjustment as set forth below. The Common Shares
purchasable pursuant to this Warrant are referred to herein as the "Shares".
This Warrant is subject to the following provisions, terms and
conditions:
1. DATE OF ISSUANCE. The Company is issuing this Warrant on
________________, 1997 and such date shall be the "Date of Issuance" hereof and
of each new Warrant issued in exchange, transfer or replacement hereof,
regardless of the number of times new certificates representing the unexpired
and unexercised rights formerly represented by this Warrant shall be issued.
2. DURATION AND EXERCISE OF WARRANT.
2.1 EXERCISE PERIOD. This Warrant may be exercised by the Holder at any
time and from time to time prior to the Expiration Time and Date. After the
Expiration Time and Date, this Warrant shall be void, and all rights to purchase
Shares hereunder shall cease.
2.2 METHOD OF EXERCISE. This Warrant may be exercised by the Holder in
whole or in part (but not for fractional shares), by (i) surrendering this
Warrant to the Company, (ii) tendering to the Company payment of the Purchase
Price for the
43
COMMON STOCK PURCHASE WARRANT
Shares as to which the Warrant is being exercised (which payment shall be made
by certified or bank check, unless the Company shall have indicated that payment
by regular check shall be acceptable to the Company), and (iii) executing and
delivering to the Company the Exercise Form attached hereto as Exhibit I.
Subject to adjustment as contemplated by Section 6, this Warrant may not be
exercised for less than the lesser of 50,000 Shares or the remaining number of
Shares which may be purchased hereunder.
2.3 ISSUANCE OF CERTIFICATES AND NEW WARRANT. The Shares purchased upon
exercise of this Warrant shall be deemed to be issued to the Holder as the
record owner of such Shares as of the close of business on the date on which
this Warrant shall have been properly exercised. Certificates for the Shares so
purchased shall be delivered to the Holder within a reasonable time, not
exceeding 10 days, after this Warrant shall have been exercised. Unless this
Warrant has expired, a new Warrant representing the number of Shares, if any,
with respect to which this Warrant shall not then have been exercised, shall
also be delivered to the Holder within such time. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and upon surrender of this
Warrant, if mutilated, the Company will make and deliver a new Warrant of like
tenor in replacement of this Warrant. The Company shall pay all expenses and
charges payable in connection with the preparation, execution and delivery of
such a new Warrant pursuant to this Section 2.3.
3. SECURITIES ACT COMPLIANCE. (a) THIS WARRANT, AND THE SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND MAY BE TRANSFERRED ONLY IF REGISTERED UNDER
THE ACT OR IF TRANSFERRED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
PROVISIONS OF THE ACT.
(b) Unless the issuance or transfer of the Shares shall have
been registered under the Act, as a condition to delivery of certificates for
the Shares, the Company may require the Holder to deliver to the Company, in
writing, representations regarding the Holder's sophistication, investment
intent, and other matters reasonable and customary for purchasers of securities
in an unregistered private offering, and the Company may place upon each
certificate representing the Shares a legend substantially in the following
form:
44
COMMON STOCK PURCHASE WARRANT
"The Shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended (the "Act").
Such Shares may not be sold or otherwise disposed of except pursuant to
an effective registration under the Act or except pursuant to an
exemption from the registration provisions of the Act."
4. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees:
(a) That all Shares to be issued upon the exercise of this
Warrant will, upon issuance, be duly authorized, validly issued, fully
paid and nonassessable and free of all taxes, liens and charges.
(b) Without limiting the generality of the foregoing, that the
Company will from time to time take all such action as may be required
to assure that the par value per share of the Shares is at all times
equal to or less than the amount payable per Share (taking into account
the adjustment called for by Section 6).
(c) That during the period within which this Warrant may be
exercised: (i) the Company will at all times have authorized and
reserved for the purpose of issuance, upon exercise of this Warrant, a
sufficient number of Common Shares to allow exercise of this Warrant in
full; (ii) the issuance of certificates for Shares shall be made
without charge to the Holder for any issuance tax in respect thereof or
other costs incurred by the Company in connection with such exercise in
the related issuance and delivery of Shares; (iii) the Company will not
close its books against the transfer of this Warrant or of any of the
Shares in any manner which interferes with the timely exercise of this
Warrant; and (iv) the Company will at all times, in good faith and in a
commercially reasonable manner, conduct its business and carry out the
provisions of this Warrant in order to protect the rights and benefits
available to any Holder of this Warrant.
45
COMMON STOCK PURCHASE WARRANT
5. LIMITED RIGHTS OF THE HOLDER. The Holder shall not, solely by virtue
of being the Holder of this Warrant, have any of the rights of a holder of
Common Shares of the Company, either at law or equity, until this Warrant shall
have been exercised and the Holder shall, as provided in this Warrant, be deemed
to be the holder of record of Shares.
6. ADJUSTMENT; ANTI-DILUTION. (a) If all or any portion of this Warrant
shall be exercised subsequent to any stock dividend, stock split, reverse stock
split, split-up, recapitalization, merger, consolidation, combination or
exchange of shares, or reorganization of the Company occurring after the Date of
Issuance (each an "Adjustment Event"), as a result of which shares of any class
shall be issued in respect of outstanding Common Shares of the Company, or such
Common Shares shall be changed into the same or a different number of shares of
the same or another class or classes, the Holder exercising this Warrant shall
receive, for the aggregate price tendered upon such exercise, the number and
class of shares which such Holder would have received if (i) this Warrant had
been exercised immediately prior to the Adjustment Event (or the first of such
Adjustment Events, if more than one), and then (ii) the Common Shares purchased
upon such exercise had participated in the Adjustment Event (and in any
subsequent Adjustment Event prior to such actual exercise, if there shall have
been more than one Adjustment Event prior thereto).
(b) If all or any portion of this Warrant shall be exercised subsequent
to any extraordinary dividend or other distribution made in respect of the
Common Shares (or other shares unto which the Common Shares shall have been
converted or which shall have been issued in respect of the Common Shares)
(collectively, a "Dividend or Distribution"), made or occurring after the Date
of Issuance (each, an "Extraordinary Adjustment Event"), which Extraordinary
Adjustment Event shall have the effect of reducing the value of any Shares, the
Purchase Price per share shall be reduced by the amount resulting from dividing
(i) the amount or value (expressed in dollars) paid or distributed as part of
the Dividend or Distribution by (ii) the total number of shares of Common Shares
outstanding immediately prior to such Extraordinary Adjustment Event; provided,
however, that the Purchase Price shall not, in any event, be reduced below $0.01
per share.
7. ADJUSTMENT NOTICES TO HOLDER. Upon any change in the number or class
of shares purchasable upon the exercise of
46
COMMON STOCK PURCHASE WARRANT
this Warrant, then, and in each such case, the Company shall promptly deliver
written notice thereof to the Holder, whichnotice shall set forth in reasonable
detail the change and the facts upon which the change is based.
8. NOTIFICATION BY THE COMPANY. In case at any time:
(i) the Company shall declare any dividend or make any
distribution upon the Common Shares; or
(ii) the Company shall offer for subscription pro rata to the
holders of its Common Shares any additional shares of stock of any
class or any other securities convertible into or exchangeable for
shares or any rights or options to subscribe thereto; or
(iii) the Board of Directors of the Company shall authorize
any capital reorganization, reclassification or similar transaction
involving the capital stock of the Company, or a sale or conveyance of
all or substantially all of the assets of the Company, or a
consolidation, merger or business combination of the Company with
another entity; or
(iv) actions or proceedings shall be authorized or commenced
for a voluntary or involuntary dissolution, liquidation or winding-up
of the Company;
then, in any one or more of such cases, the Company shall give written notice to
the Holder, at the earliest time legally practicable (and not less than 20 days
before any record date or other date set for definitive action) of the date on
which (A) the books of the Company shall close or a record shall be taken for
such dividend, distribution or subscription rights or options or (B) such
reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation or winding-up shall take place or be voted on by
shareholders of the Company, as the case may be. Such notice shall also specify
the date as of which the holders of the Common Shares of record shall
participate in such dividend, distribution, subscription rights or options or
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, sale,
conveyance, consolidation, merger, dissolution, liquidation or winding-up, as
the case may be.
47
COMMON STOCK PURCHASE WARRANT
9. TRANSFERABILITY. Subject to the provisions of Section 3, this
Warrant and all rights hereunder are transferable, in whole or in part, without
charge to the Holder, at the office of the Company by the Holder in person or by
duly authorized attorney, upon surrender of this Warrant with the attached
Assignment (Exhibit II) properly executed
10. WARRANTS EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is
exchangeable, upon surrender by the Holder at the office of the Company, for new
Warrants of like tenor representing in the aggregate the right to purchase the
number of Shares which may be purchased hereunder, each of such new Warrants to
represent the right to purchase such number of Shares as shall be designated by
the Holder at the time of such surrender. Subject to adjustment as contemplated
by Section 6, the Company shall not, however, be required to issue individual
Warrants in denominations of less than the lesser of 50,000 Common Shares or the
remaining number of Common Shares which may be purchased hereunder.
11. REGISTRATION RIGHTS. (a) In the event that at any time after one
year after the Date of Issuance, the Company shall decide to make a public
offering of Common Shares or any other class of securities (either, a "PO"), the
Company shall offer piggyback registration rights to each holder of Shares on a
pro rata basis with respect to the most favorable registration rights being
offered with respect to any other shares and to other securities convertible
into or exercisable for Shares. Registration rights shall be in accordance with
the terms and conditions of this Section 11.
(b) As used in this Section 11: (i) "Manager" means the investment
banking firm designated by the Company as the managing underwriter of an
Underwriting (as hereinafter defined) or if there is more than one, the lead
managing underwriter; and (ii) "Seller" or "Sellers" means a Holder (or a
transferee of a Holder) selling or proposing to sell Shares pursuant to any
registration statement contemplated by this Section 11; and (iii) an
"Underwriting" means a public offering of Common Shares or other securities
pursuant to a registration statement and with respect to which the Company will
utilize an underwriter and which includes the Shares of any Seller having
piggyback registration rights pursuant to the terms hereof. References in this
Section 11 to a registration statement means a registration statement under the
Act and references to a prospectus means a
48
COMMON STOCK PURCHASE WARRANT
prospectus included in a registration statement or relating to an offer and
sale of Common Shares registered under the Act.
(c) If the Company proposes to file a registration statement under the
Act for a PO of Common Shares for cash, the Company will give each Holder notice
of its intent to make a PO and will include in such registration and any related
Underwriting any Shares which have been issued (or will have been issued
effective prior to the effective date of the registration) pursuant to the
exercise of the Holder's right to purchase Shares and which are proposed to be
sold by any Holder requesting such inclusion ("Seller Shares") by notice given
to the Company within twenty (20) days after the Company has given notice of the
date on which the Company proposes to file its registration statement with
respect to the PO. If such registration is an underwritten public offering and
the Manager advises the Company that the offering would include more Common
Shares than can be sold within a price range acceptable to the Company, the
Company will include in the registration: (i) first, all shares of Common Shares
held by the Company which the Company proposes to sell; (ii) second, up to the
full number of any Seller Shares entitled and requested to be included in such
registration by Sellers pursuant to the provisions hereof and any other Common
Shares entitled and requested to be included by other persons or any business
entity holding Common Shares, subject to the provisions of Section 11(a) above.
If the Manager advises the Company that not all of the Common Shares requested
to be included by any Seller or other person or business entity holding Common
Shares can be sold within such price range, each such Seller shall be entitled
to include that number of Common Shares equal to the lesser of (i) the number of
Seller Shares requested to be included by such Seller, or (ii) that number of
Seller Shares determined by multiplying the number of Seller Shares requested to
be included by such Seller times a fraction the numerator of which shall be the
number of Common Shares (over and above the number of Common Shares held by the
Company which it proposes to sell) which the Manager advises can be sold within
the price range acceptable to the Company and the denominator of which shall be
the aggregate of the full number of all Common Shares entitled and requested to
be included in the registration by all Sellers and other persons or any business
entity holding Common Shares. Any such number so determined which is not a whole
number shall be rounded to the nearest whole number. If after such allocation
the Manager advises that additional Common Shares can still be included in such
offering, the remaining availability shall be allocated to Sellers and other
persons or any business entity holding Common
49
COMMON STOCK PURCHASE WARRANT
Shares in proportion to their respective holdings of Common Shares until all
Common Shares entitled and requested to be included in the offering are so
included.
(d) The registration statement for each piggyback registration will,
subject to Section 11(c), include the Seller Shares specified in the related
notice given pursuant to Section 11(c) and will be reasonably satisfactory to
counsel for any Holder registering Common Shares and counsel for the Manager
(which term includes, where appropriate, counsel for the underwriters in the
Underwriting).
(e) The Company will: (i) use its best efforts to cause the
registration statement to become effective under the Act at the earliest
possible date; (ii) amend the registration statement or supplement the
prospectus whenever required by the terms of any underwriting agreement with the
underwriters as contemplated by Section 11(f) hereof; (iii) furnish such number
of copies of the registration statement, prospectuses, preliminary prospectuses
and amendments or supplements thereto as the manager may reasonably request;
(iv) make generally available to its stockholders an earnings statement
satisfying the requirements of Section 10(a) of the Act as promptly as
practicable after the expiration of twelve (12) months after the effective date
of the registration statement; and (v) use its efforts to register or qualify
the Common Shares being registered under the securities or blue sky laws of such
jurisdictions as any Seller (with the consent of the Manager) may reasonably
request and maintain such registrations or qualifications in effect for the
period specified in the underwriting agreements as contemplated by Section 11(f)
hereof.
(f) In connection with each piggyback registration, the Company and the
Sellers will enter into and perform their respective obligations under an
underwriting agreement with the Manager (whether acting alone or for a syndicate
of underwriters) containing representations, warranties, conditions, covenants
and indemnities customarily included in such agreements used by underwriters for
public offerings of common capital stock on the registration form being used in
such registration; provided that the Sellers shall not be required to make any
representations or warranties or give any indemnities other than those relating
to itself, its Common Shares, the sale thereof and its entry into and
performance of the underwriting agreement.
50
COMMON STOCK PURCHASE WARRANT
(g) Except as provided in the next sentence, expenses of each
registration, including: (i) the costs of printing and shipping the registration
statement, amendments, preliminary and final prospectuses, supplements,
underwriting agreements, blue sky surveys and stock certificates; (ii) the fees
and expenses of the Company's counsel, accountants and transfer agents; and
(iii) the reasonable fees and expenses of the Manager's counsel for the blue sky
qualification and survey (collectively, "Issuer Expenses"), for each
Underwriting, will be borne solely by the Company. Each Seller shall pay all
filing fees payable with respect to the Shares to be sold by it under the Act,
to the National Association of Securities Dealers, Inc. and in connection with
any blue sky registration or qualification contemplated by Section 11(e)(v) and
the fees and expenses of such Seller's counsel and accountants.
(h) Notwithstanding the other provisions of this Section 11, the
Company shall not be obligated to register Shares of any Holder if, in the
opinion of counsel to the Company reasonably satisfactory to the applicable
Holder and such Holder's counsel, the sale or other disposition of such Holder's
Shares, in the manner and number proposed by such Holder, may be effected
without registering such Shares under the Act.
(i) The Company shall indemnify and hold harmless each Holder and each
director, officer and partner thereof who controls such Holder within the
meaning of the Act (including the Seller, each, an "Indemnified Party" and
collectively, the "Indemnified Parties"), from and against any and all losses,
claims, damages or liabilities, joint or several, and expenses (including, but
not limited to, fees of counsel and any amounts paid in any settlement effected
with the consent of the Company) to which any such Indemnified Party may become
subject under the Act, common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) or expenses arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement or any preliminary or final prospectus contained
therein or relating to an offer and sale of Shares registered under the Act, or
any amendment or supplement thereto, or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company agrees to reimburse such
Indemnified Party for any legal or any other expenses reasonably incurred by
them in connection with
51
COMMON STOCK PURCHASE WARRANT
investigating or defending any such loss, claim, liability, action or
proceeding; provided, that the Company shall not be liable to any such person to
the extent that any such loss, claim, damage, liability (or action or
proceeding, whether commenced or threatened, in respect thereof) or expenses
ariseout of or are based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, or preliminary
or final prospectus, or amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Indemnified
Party expressly for use therein.
12. AMENDMENT AND WAIVER. (a) No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of such right or power, or any abandonment
or discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Holder are cumulative and not exclusive of any rights
or remedies which it would otherwise have. The provisions of this Warrant may be
amended, modified or waived with (and only with) the written consent of the
Company and the Holder.
(b) No notice or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
13. NOTICES. All notices, demands and other communications
(collectively, "Notices") pursuant to this Warrant shall be in writing. All
Notices shall be deemed to have been effectively given, and all deliveries shall
be deemed to have been effectively made, on the date of actual receipt by the
recipient party (arrival at the address or facsimile number indicated below
being deemed to constitute receipt by the recipient party). All Notices and
deliveries shall be either (i) delivered personally, (ii) transmitted by
facsimile transmission, (iii) mailed by registered or certified mail, postage
prepaid, or (iv) delivered by a recognized express courier service, as follows:
If to the Company:
Aqua Care Systems, Inc.
00000 X.X. 00xx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxx 00000
52
COMMON STOCK PURCHASE WARRANT
Attn: Xx. Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to the Original Holder:
Durco International Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxx 00000
Attn: Xx. Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
Notices or deliveries by the Company to a Holder other than the Original Holder
may be directed to the last known address of the Holder as it appears on the
books of the Company. The Company, the Original Holder and any other Holder may
from time to time change its address by giving notice as provided herein.
14. BINDING EFFECT. The terms and provisions of this Warrant shall
inure to the benefit of and shall be binding on the Original Holder and its
permitted successors and assigns and shall be binding upon the Company and its
successors and assigns, including, without limitation, any person or entity
succeeding to the Company by merger or consolidation.
15. GOVERNING LAW. This Warrant and the rights represented hereby shall
be governed by and construed and enforced in accordance with the laws of the
State of Delaware as applicable to contracts executed and entirely performed in
such State.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of the Date of Issuance.
AQUA CARE SYSTEMS, INC.,
a Delaware corporation
By:_____________________________
Name:
Title:
53
EXHIBIT I
EXERCISE NOTICE
(To be executed upon exercise of Warrant)
To AQUA CARE SYSTEMS, INC.
The undersigned hereby irrevocably elects to exercise the attached
Warrant for, and to purchase thereunder, _________ shares of Common Stock, par
value $.001 per share, of Aqua Care Systems, Inc., a Delaware corporation, as
provided in such Warrant, and tenders herewith payment of the applicable
Purchase Price in full in the amount of $_________.
Please issue a certificate or certificates for such shares in the
following name or names and denominations:
If the number of shares shall not be all the shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such shares.
Name of Registered
Holder:________________________
Signature:_____________________
Title:_________________________
Address:_______________________
_______________________________
54
EXHIBIT II
ASSIGNMENT
To Be Executed by the Registered Holder
Desiring to Transfer the Within Warrant of
AQUA CARE SYSTEMS, INC.
FOR VALUE RECEIVED, the undersigned registered holder hereby sells, assigns and
transfers unto __________________________ ______________________ the right to
purchase _______ shares of Common Stock, par value $.001 per share, of Aqua Care
Systems, Inc., a Delaware corporation, covered by the within Warrant, and does
hereby irrevocably constitute and appoint ___________________________ Attorney
to transfer such Warrant on the books of the Company, with full power of
substitution.
Name of Registered Holder:
__________________________________
Signature:________________________
Title:____________________________
Address:__________________________
__________________________________
__________________________________
Dated: _________ __, 199_
______________________________
Signature Guaranteed
NOTICE:
The signature to the foregoing Assignment must correspond to the name
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
55
EXHIBIT F-1
COMMON STOCK PURCHASE WARRANT
FOR THE PURCHASE OF COMMON STOCK
OF AQUA CARE SYSTEMS, INC.
Date of Issuance of Warrant
____________, 1997
Expiration Date
____________, 2002
[The terms of this Warrant will be identical to the terms of the
Warrant set forth as Exhibit F, except that this Warrant shall cover 150,000
shares and the purchase price per share shall equal fair market value.]
56
EXHIBIT G
BARGAIN AND SALE DEED
THIS INDENTURE, made as of the ____ day of ______________, 1997,
between DURCO INTERNATIONAL INC., a New York corporation formerly known as The
Duriron Company, Inc., with an address of 0000 Xxxxxxxx Xxxxxxxxx, Xxxxxx, Xxxx
00000, party of the first part, and ACS ACQUISITION CORP., a New York
corporation whose mailing address is 00000 X.X. 00xx Xxxxxx, Xxxxx Xxxxxxx,
Xxxxxxx 00000, party of the second part,
W I T N E S S E T H :
that the party of the first part, in consideration of Ten Dollars ($10.00) and
other valuable consideration paid by the party of the second part, does hereby
grant and release unto the party of the second part, the successors and assigns
of the party of the second part forever:
ALL that certain plot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying and being in the County of Erie and
State of New York, as more fully described on Exhibit A attached hereto and made
a part hereof.
TOGETHER, with all right, title and interest, if any, of the party of the first
part in and to any streets and roads abutting the above described premises to
the center lines thereof; TOGETHER with the appurtenances and all the estate and
rights of the party of the first part in and to said premises; TO HAVE AND TO
HOLD the premises herein granted unto the party of the second part, the
successors and assigns of the party of the second part forever and the party of
the first part covenants that it has not done or suffered anything whereby the
said premises have been encumbered in any way whatever, free and clear of all
liens and encumbrances except (i) easements and restrictions of record, (ii) all
legal highways, (iii) real and personal property taxes and assessments becoming
due and payable after the date hereof, and (iv) building and zoning laws,
ordinances and regulations.
The party of the first part does hereby fully warrant title to said parcel of
land and will defend the same against the lawful claims of all persons claiming
by, through or under the party of the first part but against none other.
The word "party" shall be construed as if it read "parties" whenever the sense
of this indenture so requires.
57
IN WITNESS WHEREOF, the party of the first part has hereof set its hands and
seals as of date first set forth above.
Signed and Acknowledged
in the Presence of: DURCO INTERNATIONAL INC.,
a New York corporation
___________________________ By:______________________
Name: Name:
Title:
___________________________
Name: [CORPORATE SEAL]
STATE OF ____________ )
) SS:
COUNTY OF ___________ )
On the ___ day of _______________, 1997, before me personally
came _______________________, to be known, who, being by me duly sworn, did
depose and say that he resides at ________________________________
__________________________________; that he is the ___________________ of Durco
International Inc., a New York corporation, the corporation described in and
which executed the above instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that is was so
affixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order.
-------------------------
Notary Public
This Instrument Prepared By:
Xxxxxxx X. Xxxxxxx, Esq.
XXXXXXXX XXXX & XXXXX LLP
0000 Xxxxxxxxxx Xxxxx, XX
X. X. Xxx 0000
Xxxxxx, Xxxx 00000-0000
(000) 000-0000
58
EXHIBIT H
XXXX OF SALE AND GENERAL INSTRUMENT OF TRANSFER
DURCO INTERNATIONAL INC., a New York corporation ("Seller"), for good
and valuable consideration, receipt of which is hereby acknowledged, and
pursuant to the Asset Purchase Agreement dated as of _________________, 1997
(the "Purchase Agreement") among Seller, Aqua Care Systems, Inc., a Delaware
corporation ("Aqua Care") and ACS Acquisition Corp., a New York corporation and
wholly owned subsidiary of Aqua Care ("Purchaser"), and notwithstanding that
certain of the following described assets and properties may be transferred,
assigned or conveyed by separate and specific instruments of transfer,
assignment or conveyance, by these presents does hereby sell, assign, transfer
and convey to Purchaser, its successors and assigns, the assets, rights and
interests (collectively, the "Assets") described on Exhibit A hereto.
The representations, warranties, and agreements (including the
limitations thereon) of Seller contained in the Purchase Agreement, which are
applicable to the sale, transfer, assignment, and conveyance of the Assets, are
hereby incorporated by references.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
____ day of __________________, 1997.
DURCO INTERNATIONAL INC.,
a New York corporation
By:___________________________
Name:
Title:
59
EXHIBIT I
ASSUMPTION AGREEMENT
THIS INSTRUMENT is being executed and delivered by DURCO INTERNATIONAL
INC., a New York corporation ("Seller"), and by ACS ACQUISITION CORP., a New
York corporation ("Purchaser"), pursuant to the Asset Purchase Agreement dated
as of ______________, 1997 between Seller and Purchaser (the "Asset Purchase
Agreement").
FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is hereby
acknowledged, and pursuant to the Asset Purchase Agreement, Seller hereby
assigns to Purchaser, and Purchaser hereby assumes and agrees to satisfy and
discharge, the Assumed Obligations (as defined in the Asset Purchase Agreement)
existing on this date and the Assumed Contracts (as defined in the Asset
Purchase Agreement)(the Assumed Obligations and the Assumed Contracts,
collectively, the "Assumed Liabilities"), all for which provision is made in the
Asset Purchase Agreement.
The assignment and assumption of the Assumed Liabilities is subject to
the exclusions and limitations set forth in the Asset Purchase Agreement,
including without limitation, those set forth in the definition of Assumed
Obligations and in Section 2.2
IN WITNESS WHEREOF, Seller and Purchaser have caused this instrument to
be executed by their duly authorized officers as of the ____ day of ___________,
1997.
DURCO INTERNATIONAL INC., ACS ACQUISITION CORP.,
a New York corporation a New York corporation
By:________________________ By:______________________
Name: Name:
Title: Title:
60
EXHIBIT J
COMPUTER SERVICES AGREEMENT
BY AND BETWEEN
DURCO INTERNATIONAL INC. ("DURCO")
AND
ACS ACQUISITION CORP ("ACS")
1. BACKGROUND. Effective ___________, 1997 Durco will sell certain
assets and liabilities of its Filtration Systems Division ("FSD")
to ACS with the result that ACS will then be operating the FSD
business. Prior to such sale, Durco has provided certain computer
services, ("Computer Services"), to FSD through its corporate
information systems department, which will be unaffected by this
sale. As part of operating its newly acquired FSD business, ACS
desires to continue, for an interim basis, the Computer Services
provided by Durco until ACS can install its own independent
computer systems for this purpose, and Durco is agreeable to
provide the Computer Services under the following terms and
conditions.
2. NATURE OF SERVICE. Durco will continue to provide the Computer
Services which were provided prior to the FSD sale to ACS. As
part of these Computer Services, it is understood and agreed that
Durco shall not be expected nor required to further develop the
Computer Services already provided, but that the obligation shall
merely be to maintain the existing computer system, including
"debugging" any computer problems which may apply.
3. PAYMENT. In return for access to the Durco mainframe computer
system, including the "Durconet" mainframe capabilities and the
Computer Services performed by Durco, ACS shall pay Durco the
amount of $6,500 per month in advance during the term of this
agreement.
4. DURCO SECURITY AND CONFIDENTIALITY. ACS agrees to hold in
confidence and not to disclose to anyone any of the software,
hardware configuration or related technical know-how that
61
COMPUTER SERVICES AGREEMENT
is identified by Durco as being proprietary to or copyrighted by
Durco. In addition, ACS acknowledges that ACS will share an
integrated mainframe computer system with other users who are
employed by Durco. ACS agrees that ACS's personnel shall not in
any way be entitled to access any such mainframe databases which
do not involve FSD, nor shall ACS attempt to take any action to
in any way alter, delete or add to any such non-FSD computer
databases.
5. ACS SECURITY AND CONFIDENTIALITY. Durco agrees to hold ACS's data
on Durco's mainframe computer in confidence. Durco also agrees to
reasonably cooperate with ACS's auditors either during or after
the termination of this agreement during their audit of ACS's
1997 financial statements.
6. VENDOR SOFTWARE LICENSES. Since certain of the Computer Systems
provided by Durco may be through software which is commercially
licenses by Durco from external vendors, ACS agrees to use such
computer programs for the sole purpose of operating the FSD
business. ACS further agrees (i) not to make any copies of such
licensed programs, (ii) not to disclose any such program to any
outside parties, and (iii) not to take any other action which
might be detrimental to Durco's obligations under its licenses to
such software vendors.
7. WARRANTY. Durco warrants that Durco will provide the same level
of Computer Services and computer systems which was provided
prior to the sale. Durco specifically disclaims any other
warranties concerning the value, timeliness or content of any of
the Computer Services provided.
8. NEW FSD COMPUTER SYSTEM. Durco acknowledges that ACS intends to
acquire a new computer system to replace its reliance on the
existing Durco computer system and Computer Services described in
this agreement. Durco agrees to reasonably cooperate with such
transition, and Durco agrees that it will, upon request, send one
qualified computer specialist to FSD to assist in this transition
for a period not in excess of three business days, including a
reasonable allowance for travel. ACS shall
62
COMPUTER SERVICES AGREEMENT
reimburse Durco for any out-of-pocket travel costs involved in
such transitional support. In the event that ACS desires further
assistance from Durco during such transition, the terms of such
support shall be negotiated at that time, subject to the
understanding that such reimbursement will be sufficient to
reimburse Durco's reasonable special costs in providing such
additional assistance.
9. SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES. Neither party shall
be liable to the other for any special, incidental or
consequential damages arising in any way from this agreement or
services provided hereunder.
10. TERM OF THIS AGREEMENT. This agreement shall extend until
December 31, 1997, provided that ACS may earlier terminate this
agreement through 30 days advance written notice of such intent
to terminate.
ACKNOWLEDGED AND AGREED:
DURCO INTERNATIONAL INC. ACS ACQUISITION CORP.
By: _____________________________ By: ______________________________
Title: __________________________ Title: ___________________________
Date: ___________________________ Date: ____________________________
63
EXHIBIT K
INDEPENDENT SALES REPRESENTATION AGREEMENT
__________________, 1997
This Independent Sales Representation Agreement is made between Durco
International Inc. ("Durco") and ACS Acquisition Corp ("ACS").
A. BACKGROUND
1. Durco will sell certain assets and liabilities of its
Filtration Systems Division ("FSD") to ACS
effective________________, 1997 (the "Acquisition Date").
2. Prior to such transaction's effective date, Durco, through its
salaried sales force selling its centrifugal pump product
line, also has acted as sales representative for FSD in the
marketing and sale of FSD's metering pump products and
accessories ("Metering Pumps").
3. ACS desires that, subsequent to its purchase of FSD, Durco
continue to act as a sales representative of the Metering
Pumps at least until December 31, 1997, which Durco is
agreeable to doing, under the following terms and conditions:
B. APPOINTMENT, PRODUCTS AND TERRITORY
1. ACS hereby appoints Durco as its nonexclusive and independent
sales representative to market and sell the Metering Pumps
anywhere in the world. This appointment is subject to, and
there is excluded from this appointment, any exclusive
territorial rights of those sales representatives of FSD whose
agreements were assigned to and assumed by ACS as part of the
FSD transaction.
C. PRICES AND TERMS
1. The prices at which Durco shall promote and solicit orders for
the Metering Pumps from end user customers shall be
established by ACS, and all orders solicited by Durco shall be
subject to acceptance by ACS.
2. ACS shall, on its own behalf and expense, provide for the
design, manufacture and delivery of the Metering Pumps sold by
Durco to the purchasers, with ACS having resonsibility for the
collection
64
INDEPENDENT SALES REPRESENTATION AGREEMENT
of all amounts due from purchasers in connection with these
sales of the Metering Pumps.
D. COMMISSION
1. On each order accepted by ACS, Durco, as compensation for its
efforts, shall be entitled to a commission of 6.8%. One-half
of each such commission shall be payable by ACS on or before
the 15th day of the month immediately following the month in
which the order is accepted by ACS, and the other half shall
be payable by ACS on or before the 15th day of the month
immediately following the month in which payment for the order
is received by ACS.
2. Upon termination of this agreement for any reason, Durco shall
be entitled to commissions for orders solicited by Durco and
submitted to ACS which are accepted by ACS within six months
after the termination of the agreement.
E. DUTIES OF DURCO
1. Durco shall utilize its existing pump sales force to
faithfully and diligently solicit and promote sales of the
Metering Pumps to customers in the territory through regular
contact and the establishment of good relationships with such
customers.
F. COOPERATION
1. Durco and ACS shall work together to establish a marketing
plan to maximize the sales of the Metering Pumps.
2. In order to insure that Durco can market the products
smoothly, ACS shall not appoint any other representative to
call on established customers of Durco which have previously
purchased Metering Pumps from Durco's salaried sales force
without first consulting Durco.
3. ACS shall also furnish Durco at its expense with promotional
materials covering the Metering Pumps for presentation to
potential customers.
65
INDEPENDENT SALES REPRESENTATION AGREEMENT
G. MISCELLANEOUS
1. Durco shall not attempt to solicit business for the Metering
Pumps by making any fraudulent representations concerning the
technical capabilities of the Metering Pumps. Durco shall hold
harmless and indemnify ACS from any alleged liability arising
from such fraudulent misrepresentations by Durco, except where
such representations were authorized or communicated by ACS to
Durco.
2. ACS agrees to hold harmless and indemnify Durco from any
liability to customers or third parties arising in any way
from the alleged negligent or defective design, manufacture,
delivery, installation, operation or maintenance, of the
Metering Pumps produced by ACS after the Acquisition Date. ACS
shall also hold harmless and indemnify Durco from any alleged
liability arising in any way from any promotional and
technical materials prepared by FSD after the Acquisition Date
concerning the Metering Pumps.
3. The relationship between Durco and ACS shall be that of an
independent contractor and not that of principal or agent,
with neither side having the right or authority to make any
contract or nor incur obligation in the name of the other.
H. TERM OF AGREEMENT. The initial term of this Agreement will expire at
the close of business on December 31, 1997. This Agreement shall,
however, be automatically renewed for another year (expiring December
31, 1998) unless, on or before October 31, 1997, ACS gives to Durco
written notice that ACS elects to terminate the Agreement as of
December 31, 1997. If this Agreement is not terminated as of December
31, 1997, then either ACS or Durco may terminate this Agreement
effective as of any December 31 thereafter by giving to the other
written notice of such termination on or before the October 31
preceding the effective date of termination.
66
INDEPENDENT SALES REPRESENTATION AGREEMENT
ACKNOWLEDGED AND AGREED:
DURCO INTERNATIONAL INC. ACS ACQUISITION CORP.
By: _____________________________ By: ______________________________
Title: __________________________ Title: ___________________________
Date: ___________________________ Date: ____________________________
67
EXHIBIT L
TRADEMARK LICENSE AGREEMENT
THIS AGREEMENT is being executed as the ____ day of _______________,
1997 between ACS ACQUISITION CORP., a Delaware corporation ("Purchaser"), and
DURCO INTERNATIONAL INC., a New York corporation ("Seller"), under the following
circumstances:
A. Pursuant to an Asset Purchase Agreement dated
___________________, 1997, Purchaser is purchasing from Seller the
business and substantially all of the assets of the Filtration Systems
Division ("FSD") of Seller.
B. In connection with such purchase and sale, Seller has
agreed to license to Purchaser certain trademarks of Seller, subject to
the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
have the following meanings:
"Licensed Trademarks" means the trademarks listed on Schedule A to this
Agreement, all of which are owned by Seller.
"Related Products" means, with respect to each Licensed Trademark, the
related products described on Schedule A to this Agreement.
"Territory" means the United States of America.
SECTION 2. GRANT OF LICENSE. (a) Subject to the terms and conditions of
this Agreement, Seller hereby grants to Purchaser a personal, nontransferable,
non-exclusive, royalty-free license (the "License") to use the Licensed
Trademarks in the Territory on or in connection with the sale and servicing of
the corresponding Related Products in the Territory. Purchaser shall have no
right to use any of the Licensed Trademarks on or in connection with any
products other than the corresponding Related Products. Purchaser shall have no
right to grant sublicenses under the License.
(b) Seller shall not, so long as the License remains in effect, license
any other party to use the Licensed Trademarks on or in connection with the sale
or servicing of Related Products in the Territory.
68
(c) In the event Purchaser desires to use the Licensed Trademarks
outside the Territory, Purchaser shall give notice of such desire to Seller.
Purchaser and Seller shall then amend this Agreement to extend the License to
the new area, subject, however, to Seller being able to take, prior to the
effective time of such extension, all steps necessary to perfect and protect
Seller's rights to the Licensed Trademarks in the new area.
SECTION 3. COMMENCEMENT AND DURATION OF LICENSE. (a) The License shall
commence on the date of this Agreement and shall, unless earlier terminated in
accordance with the provisions of this Agreement, terminate on the close of
business on ___________, 1998 [18 months after date of closing]. Upon
termination of the License, Purchaser shall discontinue use of the Licensed
Trademarks.
SECTION 4. TRADEMARK USAGE AND USE OF LICENSED TRADEMARKS. Purchaser
shall, on any Product on which Purchaser displays a Licensed Trademark, also
display, with equal or greater prominence, one or more of Purchaser's
trademarks. Purchaser shall clearly identify all Products as having been
manufactured by Purchaser and shall not sell Products under conditions which
would allow the purchaser or user of the Products to believe that the Products
have been manufactured by Seller.
SECTION 5. OWNERSHIP, USE AND DISPLAY DISCLAIMER . (a) Purchaser
acknowledges that Seller is the owner of the Licensed Trademarks and all
registrations relating thereto, that all property rights relating to the
Licensed Trademarks are and shall remain exclusively in Seller, and that no
proprietary rights or interests therein are conferred upon Purchaser by this
Agreement. Purchaser shall have no right to prosecute or defend any action
involving the Licensed Trademarks without the prior written consent of Seller.
(b) Purchaser shall take no action, either directly or indirectly,
which would in any way impair the scope, validity or ownership of the Licensed
Trademarks.
(c) Purchaser shall follow such reasonable guidelines and standards as
Seller may establish concerning the use of the Licensed Trademarks, and
Purchaser shall discontinue any use which, in Seller's judgment, does not
conform to such guidelines and standards.
(d) Seller makes no representations or warranties concerning the
Licensed Trademarks or the benefits to be derived by Purchaser from the use
thereof.
69
SECTION 6. QUALITY OF PRODUCTS. All Products manufactured or assembled
by Purchaser which bear a Licensed Trademark shall be subject to inspection by
Seller and shall not be below the quality of like products heretofore
manufactured or sold by Seller in the Territory.
SECTION 7. INFRINGEMENT. Purchaser shall promptly notify Seller of any
infringement or colorable imitation or attempted infringement of any Licensed
Trademark which may come to the attention of Purchaser.
SECTION 8. TERMINATION OF LICENSE. (a) Seller may terminate the License
and all rights of Purchaser under this Agreement upon occurrence of any of the
following events:
(i) In the event that Purchaser shall breach or fail to comply
with any material provision of this Agreement and such breach or
failure shall continue for a period of 20 days after the giving of
notice thereof by Seller to Purchaser, Seller may terminate the License
and such rights immediately upon the giving of notice of such
termination to Purchaser.
(ii) In the event that Purchaser shall breach or fail to
comply with any material provision of the Asset Purchase Agreement and
such breach or failure shall continue for a period of 20 days after the
giving of notice thereof by Seller to Purchaser, Seller may terminate
the License and such rights immediately upon the giving of notice of
such termination to Purchaser.
(iii) In the event that Purchaser ceases to function as a
going concern, makes an assignment for the benefit of creditors,
applies for a moratorium, is the subject of any proceeding under any
applicable bankruptcy, receivership or insolvency laws instituted by or
against Purchaser, or if the liquidation, dissolution, merger or
consolidation of Purchaser occurs, Seller shall have the right to
terminate the License and such rights immediately upon the giving of
notice of such termination to Purchaser.
(b) The rights conferred upon Seller by the provisions of this Section
shall be in addition to, and not in limitation of, any other rights and remedies
available to Seller.
(c) Seller shall not, by reason of the expiration or termination of the
License, however occurring, be liable to Purchaser for any damages (whether
direct, indirect or consequential), for any loss of profits on anticipated
sales, or for any expenditures, investments or commitments in connection with
the business or goodwill of Purchaser (including the business of FSD acquired by
Purchaser pursuant to the Asset Purchase Agreement), or otherwise.
70
SECTION 9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT; MODIFICATION. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes all negotiations, representations, warranties, commitments, offers,
contracts, whether oral or written, prior to the date hereof. No modification or
amendment of any provision of this Agreement shall be effective unless made in a
written instrument, duly executed by the party to be bound thereby, which refers
specifically to this Agreement and states that an amendment or modification is
being made in the respects set forth in such instrument.
9.2 SEVERABILITY. In the event that any provision of this Agreement
violates any applicable law, such provision shall be invalid to the extent of
such violation (and only within the applicable jurisdiction of such law) without
affecting the validity or enforceability of any other provision hereof.
9.3 ASSIGNMENT; NO THIRD PARTY RIGHTS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither this Agreement nor the
License may be assigned by Purchaser without the prior written consent of
Seller. Nothing herein is intended nor shall it create any rights in any person
other than the parties hereto and their respective permitted successors and
assigns.
9.4 NOTICES. All notices, requests, demands, and other communications
pursuant to this Agreement must be in writing, will be deemed to have been
effectively given on the date of actual receipt by the recipient party (arrival
at the address or facsimile number indicated below being deemed to constitute
receipt by the recipient party), and shall be either (i) delivered personally,
(ii) transmitted by facsimile transmission, (iii) mailed by registered or
certified mail, postage prepaid, or (iv) delivered by a recognized express
courier service, as follows:
If to Seller:
Durco International Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxx 00000
Atten: Xx. Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxxx Xxxx & Xxxxx LLP
0000 Xxxxxxxxxx Xxxxx X.X.
Xxxxxx, Xxxx 00000
Atten: J. Xxxxxxx Xxxx, Esq.
Facsimile: (000) 000-0000
71
If to Purchaser:
ACS Acquisition Corp.
00000 X.X. 00xx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxx 00000
Atten: Xx. Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
With a copy to:
Wallace, Bauman, Fodiman & Xxxxxxx P.A.
Sixth Floor
0000 Xxxxx Xx Xxxx Xxxxxxxxx
Xxxxx Xxxxxx, Xxxxxxx 00000
Atten: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
Any party may change the address to which notices and other communications are
to be directed to it by giving notice of such change to the other parties in the
manner provided in this Subsection.
9.5 WAIVER. No failure on the part of either party to exercise, and no
delay in exercising, any right, privilege or power under this Agreement shall
operate as a waiver or relinquishment thereof. No single or partial exercise by
either party of any right, privilege or power under this Agreement shall
preclude any other or further exercise thereof, or the exercise of any other
right, privilege or power. Waiver by any party of any breach of any provision of
this Agreement shall not constitute or be construed as a continuing waiver or as
a waiver of any other breach of any other provision of this Agreement.
9.6 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Florida.
72
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first set forth above.
ACS ACQUISITION CORP.
By____________________________
Name:_________________________
Title:________________________
DURCO INTERNATIONAL INC.
By____________________________
Name:_________________________
Title:________________________
73
SCHEDULE A
LICENSED TRADEMARKS RELATED PRODUCTS
------------------- ----------------
Durcometer Metering pumps
Duriron Filter presses and
metering pumps
Durco Filter presses and
metering pumps
74
EXHIBIT M
FSD FINANCIAL STATEMENTS
Attached
75
EXHIBIT N
NOTE
DATE OF NOTE: June __, 1997
PRINCIPAL AMOUNT: $2,441,397.00
MATURITY DATE: June 1, 2000
INTEREST RATE: Eleven (11%) percent per annum
FOR VALUE RECEIVED, the undersigned ("PURCHASER") does hereby covenant
and promise to pay to DURCO INTERNATIONAL INC., a New York corporation or its
successors or assigns (the "HOLDER"), at X.X. Xxx 0000, Xxxxxx, Xxxx 00000 or at
such other place as the Holder may designate to Purchaser in writing from time
to time, in legal tender of the United States, the Principal Amount, together
with interest at the Interest Rate on the Principal Amount until this Note is
paid in full as hereinafter provided and a late payment premium of ten percent
(10%) of any principal or interest payment made more than fifteen (15) days
after the due date which shall be due with any such late payment.
All interest under this Note will be computed on an actual/360-day
basis (i.e., interest for each day during which any of the Principal Amount is
outstanding shall be computed at the Interest Rate or the Default Rate (as
hereinafter defined), as applicable, divided by 360).
On July 1, 1997 and on the first day of each subsequent calendar month
to and including June 1, 1998, equal monthly payments of principal in the amount
of $20,000 shall be due and payable together with interest on the full unpaid
Principal Amount of this Note. Commencing on July 1, 1998 and on the first day
of each subsequent calendar month to and including the Maturity Date, equal
monthly payment of principal in the amount of $40,000 shall be due and payable
together with interest on the full unpaid Principal Amount of this Note.
Notwithstanding anything in the foregoing to the contrary, a final payment of
principal and interest in an amount sufficient to pay the then unpaid principal
balance together with accrued and unpaid interest hereon shall be due and
payable on the Maturity Date.
Notwithstanding any provision of this Note to the contrary, Purchaser
shall prepay the outstanding Principal Amount of this Note and unpaid interest
accrued thereon in an amount equal to one-half (1/2) of the cumulative net
proceeds in excess of $3,000,000 of any public offerings of shares of the
capital stock, common or preferred, or debt of Purchaser or the Guarantor (as
hereinafter defined), made on or after the Date of Note. For purposes of this
prepayment requirement, the "net proceeds" of a public offering mean the gross
proceeds of such offering less ordinary and customary costs of such public
offering reasonably acceptable to the Holder, including discounts and
commissions payable to any underwriter, attorneys' fees and expenses, accounting
fees and expenses, printing expenses, non-accountable expense allowances of any
underwriter, filing fees with the Securities and Exchange Commission and The
National Association of Securities Dealers, Inc. and transfer agent fees. Each
such prepayment shall be due and payable to the Holder within three (3) days of
receipt by Purchaser or the Guarantor of the applicable portion of the net
proceeds of a public offering (to the extent the proceeds of all such public
offerings exceed $3,000,000) and shall be applied by the Holder to the payment
of the outstanding Principal Amount of this Note, the unpaid accrued interest
thereon and other amounts due hereunder in such order and in such amounts as the
Holder determines in its sole discretion.
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Purchaser shall have the right to prepay the principal amount of this
Note in whole or in part, without premium or penalty, from time to time. The
obligation of Purchaser to make periodic payments of principal and interest on
the Principal Amount which remains outstanding under this Note after any partial
prepayment shall not be affected by such partial prepayment, such partial
prepayment operating instead to pay the principal of the Note at dates earlier
than the originally scheduled principal amortization dates, in inverse
chronological order.
This Note is secured by, among other things, a security agreement (the
"SECURITY AGREEMENT") and a mortgage (the MORTGAGE") encumbering property of the
Purchaser described therein (the "COLLATERAL"), which Security Agreement specify
various events of default (each, a "DEFAULT") upon the happening of which all
sums owing on this Note may, at the Holder's option, be declared immediately due
and payable. Payment of this Note is guaranteed by Aqua Care Systems, Inc., a
Delaware corporation (the "GUARANTOR"), pursuant to a Guaranty Agreement dated
the date hereof, by the Guarantor to the Holder.
During the continuance of a Default, the Principal Amount shall bear
interest at eighteen percent (18%) per annum (the "DEFAULT RATE").
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceedings (whether at the trial or appellate level), or should this Note be
placed in the hands of attorneys for collection upon default, Purchaser agrees
to pay, in addition to the principal, premium and interest due and payable
hereon, all costs of collection, including reasonable attorneys' fees and
expenses.
All parties to this Note, whether Purchaser, principal, surety,
guarantor or endorser, hereby jointly and severally waive presentment for
payment, demand, protest, notice of protest and notice of dishonor.
This Note may not be changed orally, but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
Anything herein to the contrary notwithstanding, the obligations of
Purchaser under this Note, the Security Agreement and the Mortgage shall be
subject to the limitation that payments of interest shall not be required to the
extent that receipt of any such payment by the Holder would be contrary to
provisions of law applicable to the Holder limiting the maximum rate of interest
that may be charged or collected by the Holder.
The obligations incurred under this Note are incurred solely for the
purchase of assets of the Holder for use in Purchaser's business. Purchaser
represents and agrees that this obligation is for business purposes only and not
for personal use.
The obligations of Purchaser and the Guarantor with respect to
the payment of this Note are subject to Section 4.2(g) of the Asset Purchase
Agreement dated June __, 1997, among the Holder, the Purchaser and the
Guarantor.
All notices under this Note by Purchaser or the Holder to the other of
them shall be given as provided by Section 9 of the Security Agreement.
This Note shall be governed by, and shall be construed and enforced in
accordance with, the laws of the State of New York.
JURY WAIVER. PURCHASER AND HOLDER, TO THE EXTENT PERMITTED BY
LAW, EACH WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN PURCHASER AND THE
HOLDER ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THIS NOTE,
THE SECURITY AGREEMENT AND ANY OTHER AGREEMENT, INSTRUMENT OR
77
DOCUMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS
RELATED THERETO.
IN WITNESS WHEREOF, Purchaser has executed and delivered this
Note on the day and year first above written.
ACS ACQUISITION CORP.,
a New York corporation
By:____________________________
Name:
Title:
78
EXHIBIT O
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is entered into this _____ day of June, 1997
between ACS ACQUISITION CORP., a New York Corporation ("Debtor"), and DURCO
INTERNATIONAL INC., a New York corporation ("Secured Party"), under the
following circumstances:
A. Pursuant to the Asset Purchase Agreement dated June ___, 1997 (as
amended or modified from time to time, the "Purchase Agreement"), among
Secured Party, Debtor and Aqua Care Systems, Inc., a Delaware corporation
(the "Guarantor"), Debtor purchased from Secured Party the assets of the
Filtration Systems Division of Secured Party.
B. Debtor is required by the Purchase Agreement to grant to Secured
Party a security interest in all of its assets as collateral for the
obligations of Debtor to Secured Party under the Purchase Agreement and the
Promissory Note dated the date hereof in the principal amount of
$2,441,397.00 executed and delivered by Debtor under the Purchase Agreement
(the "Note").
NOW, THEREFORE, for Ten ($10.00) Dollars and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. GRANT OF SECURITY INTEREST. Debtor hereby assigns and grants to
Secured Party a security interest in all the Collateral (as hereinafter
defined), together with all products and proceeds thereof, to secure the payment
of all amounts that become due and payable by Debtor to Secured Party under the
Note and the Purchase Agreement (the "Obligations").
2. DEFINITIONS.
(a) As used herein, the term "inventory" means goods now owned or
hereafter acquired by Debtor, wherever located, which are held for sale, lease
or other disposition or are to be furnished under contracts of service, or which
are raw materials, work-in-process, or materials used or consumed in the
business of Debtor and all accessions thereto and products thereof.
(b) As used herein, the term "equipment" means goods now owned or
hereafter acquired by Debtor including, but not limited to, all machinery,
equipment, furnishings, fixtures and vehicles which are now or hereafter owned
by Debtor and any and all additions, substitutions and replacements of any of
the foregoing, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
(c) As used herein, the term "contract rights," "accounts," "notes,"
"drafts," "acceptances," "instruments" and "chattel paper" shall include not
only such thereof as arise out of the sale or otherdisposition at any time and
from time to time of inventory or equipment, but also such as arise out of or
for furnishing services or the lease of any goods, or arising from any
indebtedness of related or affiliated companies, together with all rights now or
hereafter existing in and to all security agreements, leases and other contracts
securing or otherwise relating to any such contract rights, accounts, notes,
drafts, acceptances, instruments and chattel paper.
(d) As used herein, the term "general intangibles" shall mean (a)
all personal property (including things in action), other than goods, accounts,
chattel paper, documents, instruments and money,
79
whether now owned or hereafter acquired, and (ii) all rights to receive money
(including tax refunds) or other consideration (other than for goods sold or
leased or services rendered), whether now owned or hereafter acquired.
(e) As used herein, the term "Collateral" means all goods,
inventory, equipment, contract rights, accounts, notes, drafts, acceptances,
instruments, chattel paper and general intangibles now or hereafter owned or
acquired by Debtor.
(f) Subject to the further expressed definitions set forth in
subparagraphs (a) and (b) and (c) and (d) above, all terms used herein which are
defined in the Uniform Commercial Code of New York ("Code") have the same
meaning herein as in the Code.
3. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS. Debtor
represents, warrants and covenants:
(a) Debtor is, and as to Collateral acquired after the date hereof,
Debtor shall and will be the owner of all Collateral free from any liens,
security interests, encumbrances or other right, title or interest of any other
person, firm or corporation, except for the security interest granted hereby,
any security interest granted by Debtor to Fidelity Funding, Inc., a Texas
corporation (the "Senior Creditor") pursuant to or in accordance with the Loan
and Security Agreement and Mortgage, each dated the date hereof, between Debtor
and the Senior Creditor (collectively, the "Senior Creditor Loan Documents), or
any security interest otherwise specifically permitted by or in favor of Secured
Party ("Permitted Liens"), and Debtor shall defend the Collateral against all
claims and demands of all persons at any time claiming the same or any interest
therein adverse to Secured Party.
(b) There is no financing statement now on file in any public office
covering any property of any kind which is included in the definitions set forth
in Section 1 hereof, or intended so to be, or in which the Debtor is named as or
signs as debtor other than financing statements in favor of the Senior Creditor
filed pursuant to the Senior Creditor Loan Documents, and so long as any amount
remains unpaid on any Obligations of Debtor to Secured Party or any credit from
Secured Party to Debtor is in use by or available to Debtor, Debtor will not
execute and there will not be on file in any public office any other such
financing statement or statements except as shall pertain to the Permitted
Liens.
(c) All financing statements necessary to perfect the security
interest granted hereby have been filed for record in the appropriate public
offices.
(d) All inventory and equipment presently owned by Debtor is and
will be kept at, and all inventory and equipment hereafter acquired by the
Debtor will be kept at Debtor's principal place of business in Angola, New York,
and Debtor promptly will notify Secured Party of any change in or addition to
the location above set forth. Notwithstanding the foregoing, it is understood
and agreed that if for any reason inventory or equipment is at any time kept or
located at locations other than that above listed or hereafter consented to by
Secured Party, Secured Party shall nevertheless have and retain a security
interest therein.
4. SPECIAL PROVISIONS REGARDING ACCOUNTS RECEIVABLE.
(a) As used herein, the terms "account," "accounts" or "accounts
receivable" include all contract rights, accounts, notes, drafts, acceptances,
instruments and chattel paper representing sums due or to become due to Debtor
and any other form of any right to payment for goods sold or leased or for
services rendered, now owned or hereafter acquired.
80
(b) Secured Party shall have the privilege at any time upon request
to Debtor of inspecting during reasonable business hours any of the business
properties or premises of Debtor and the books and records of Debtor relating
not only to its accounts or the processing or collecting thereof, but also those
relating to its general business affairs and financial condition. Debtor further
agrees from time to time to furnish such other reports, data and financial
statements, in respect of its business and financial condition, as Secured Party
may reasonably require.
(c) Secured Party shall have the right at any time after an Event of
Default (as hereinafter defined), to notify any and all account debtors to make
payment thereof directly to Secured Party; but to the extent Secured Party does
not so elect, Debtor shall continue to collect the accounts. To the extent that
Secured Party shall at any time or from time to time demand, Debtor shall
forthwith account for and transmit to Secured Party in the form as received all
proceeds of collection of accounts received by Debtor and shall not commingle
such proceeds with any funds of Debtor. But until and except to the extent that
Secured Party shall make demand as aforesaid, Debtor shall have the right to use
the proceeds of Collateral to carry on its business in accordance with sound
business practices.
(d) Secured Party shall have the right in its own name or in the
name of Debtor to demand, collect, receive, receipt for, xxx for, compound and
give acquittance for, any and all amounts due or to become due on the accounts
and to endorse the name of Debtor on all commercial paper given in payment or
part payment thereof, and in its discretion to file any claim or take any other
action or proceeding which Secured Party may deem necessary or appropriate to
protect and preserve and realize upon the security interest of Secured Party in
the accounts and the proceeds thereof.
(e) Debtor will from time to time execute such further instruments
and do such further acts and things as Secured Party may reasonably require by
way of further assurance to Secured Party of the matters and things in this
Security Agreement provided for or intended so to be. Without limiting the
foregoing, Debtor agrees to xxxx its books and records to reflect the security
interest of Secured Party in and to all the Collateral.
(f) Debtor may grant, in the ordinary course of business, to any
party obligated on any of the accounts receivable, any rebate, refund or
adjustment to which such party may lawfully be entitled, and may accept, in
connection therewith, the return of goods, merchandise or other personal
property, the sale, lease or other disposition of which shall have given rise to
such accounts receivable. Any such action by Debtor shall not be construed as a
breach of Debtor's warranties expressed in Paragraph 3(a).
5. SPECIAL PROVISIONS REGARDING INVENTORY AND EQUIPMENT.
(a) So long as any portion of the Obligations of Debtor to Secured
Party secured hereby shall remain unpaid, Debtor shall at its own expense keep
all inventory and equipment insured in accordance with the requirements of the
Senior Creditor Loan Documents or, if none, in accordance with the reasonable
requirements of Secured Party, and all policies of casualty insurance shall
contain loss payable clauses to Secured Party as its interest may appear, the
form of endorsements to such policies to that end to be otherwise in form and
content satisfactory to Secured Party.
(b) So long as any portion of the Obligations of Debtor to Secured
Party secured hereby shall remain unpaid, Debtor warrants that all inventory and
equipment subject to the security interest granted hereby will at all times be
owned by Debtor free and clear of security interests of any kind whatsoever,
excepting only Permitted Liens.
81
(c) Debtor may use, consume and sell inventory in carrying on its
business in the ordinary course substantially in the same manner as now
conducted; but a sale in the ordinary course of business shall not include any
transfer or sale in satisfaction, partial or complete, of a debt owing by Debtor
except to the extent such debts may be attributable to progress payments by the
purchaser or transferee related to the purchase of the property transferred.
(d) Debtor will from time to time execute and deliver to Secured
Party such lists, descriptions and designations of inventory and equipment as
Secured Party may require to identify the nature, extent and location of
inventory and equipment.
6. GENERAL COVENANTS.
(a) Debtor agrees to pay promptly when due all taxes, assessments
and governmental charges upon or against Debtor or theproperty or operations of
Debtor, in each case before the same becomes delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith by appropriate proceedings.
(b) Debtor agrees to execute and deliver such financing statement or
statements, or amendments thereof or supplements thereto, or other instruments
as Secured Party may from time to time require in order to comply with the Code
and to preserve and protect the security interest hereby granted. In the event
for any reason the law of any other jurisdiction than the State of New York
becomes or is applicable to the Collateral or any part thereof, or to any loan
by Secured Party, Debtor agrees to execute and deliver all such instruments and
to do all such other things as may be necessary or appropriate to preserve,
protect and enforce the security interest and lien of Secured Party under the
law of such other jurisdiction to at least the same extent as such security
interest would be protected under the Code.
(c) In the event Debtor shall fail to pay taxes, assessments, costs
and expenses which Debtor is, under any of the terms hereof, required to pay, or
fails to keep the Collateral free from other security interests, liens or
encumbrances other than Permitted Liens, Secured Party may make expenditures for
any or all such purposes and the amount so expended, together with interest
thereon at a rate equal to the Default Rate (as defined in the Note), shall
become immediately due and payable by Debtor to Secured Party and shall have the
benefit of and be secured by the security interest herein granted and agreed to.
All costs and expenses of Secured Party in retaking, holding, preparing for sale
and selling or otherwise realizing upon any Collateral upon an Event of Default,
including court costs and attorneys' fees and legal expenses where permitted by
law, shall likewise constitute additional Obligations of Debtor which Debtor
promises to pay on demand and which shall be entitled to the benefit of and be
secured by said security interest.
7. EVENTS OF DEFAULT; REMEDIES.
(a) For purposes hereof, "Event of Default" means the occurrence of any
one or more of the following events:
(i) a failure by Debtor to pay when due any sum under the
Note or the Purchase Agreement;
(ii) a failure by Debtor or the Guarantor to comply with
any other covenants or provisions of the Note, the
Mortgage (as defined in the Note), this Security
Agreement, the Purchase Agreement or the Guaranty
Agreement dated the date hereof, by the Guarantor to the
Secured Party (the "Guaranty") and such failure shall
continue unremedied for thirty (30) days after written
notice thereof by
82
Secured Party to Debtor or the Guarantor, as applicable,
specifying such default;
(iii) Any representation or warranty of Debtor or the Guarantor
in this Security Agreement, the Mortgage, the Note, the
Guaranty or the Purchase Agreement proves to be untrue or
misleading in any material respect;
(iv) The loss, theft, substantial damage or destruction to or
of any material portion of the Collateral unless such
loss, theft, substantial damage or destruction is fully
covered by insurance and the proceeds are used either to
replace the Collateral or to prepay the Note or the
indebtedness owed to the Senior Creditor under the Senior
Creditor Loan Documents;
(v) Any sale, transfer or assignment, or the pledge,
hypothecation or other encumbrance, by Debtor of any of
the Collateral, except as permitted by this Security
Agreement;
(vi) Business failure, appointment of a receiver of any parts
of the property of, assignment for the benefit of
creditors, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Debtor or the
Guarantor;
(vii) Any event of default under the Senior Creditor Loan
Documents; or
(viii) Any sale of all or substantially all of the assets of
Debtor or the Guarantor without the prior written consent
of the Secured Party or any sale, disposition or issuance
of capital stock, common or preferred, of Debtor without
the prior written consent of the Secured Party such that
Debtor is no longer a wholly-owned subsidiary of the
Guarantor or any sale, disposition or issuance of capital
stock, common or preferred, of the Guarantor without the
prior written consent of the Secured Party such that any
"person" or "group" (within the meaning of Section 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as
amended), other than existing shareholders or their
heirs, devisees or legatees or a corporation, trust or
partnership controlled by such shareholders, hereafter
becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of
capital shares of the Guarantor, which shares are
entitled at the time to voting power of 50% or more in
the election of directors of the Guarantor.
(b) Upon the occurrence of an Event of Default, Secured Party shall have,
in addition to all the rights and remedies of a secured party under the Code,
the right:
(i) to take possession of any or all of the Collateral
wherever situated and, for such purpose, to enter upon any
premises where the Collateral is located; and
(ii) to sell, dispose of, hold, use or lease any or all of the
Collateral as Secured Party in its sole discretion shall
decide. Secured Party shall give Debtor reasonable notice
of the time and place of any public or private sale or
other intended disposition of all or any portion of the
Collateral. The requirements of reasonable notice shall be
met if written notice is mailed by certified or registered
mail, return receipt requested, to Debtor at its address
set forth herein postage prepaid not less
83
than ten (10) business days prior to the sale or other
disposition. Expenses of retaking, holding, preparing for
sale, selling or the like shall be paid by Debtor. Secured
Party's rights and remedies, whether pursuant hereto or
pursuant to the Code or any other statute or rule of law
conferring rights similar to those conferred by the Code,
shall be cumulative and not alternative.
(c) Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of any of the Collateral in Secured Party's
possession if it takes such action for that purpose as Debtor requests in
writing, but failure of Secured Party to comply with any such request shall not
of itself be deemed a failure to exercise reasonable care.
8. EXPENSES. To the extent that Secured Party incurs any costs or
expenses in protecting or enforcing its rights in the Collateral, including but
not limited to reasonable attorneys' fees and the costs and expenses of
litigation, such costs and expenses shall be due from Debtor on demand and, if
not paid, shall be included in the Obligations secured hereby.
9. NOTICES. All notices required or permitted to be given pursuant to
this Security Agreement shall be given by certified mail, postage prepaid,
addressed as follows:
To Debtor at: ACS Acquisition Corp.
c/o Aqua Care Systems, Inc.
00000 X.X. 00xx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxx 00000
Attention: President and CEO
To Secured Party at: The Duriron Company, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxx 00000
Attention: Vice President,
Secretary and Legal Counsel
Either party may change its notice address from time to time by written notice
to the other party in the manner set forth herein.
10. TERMINATION OF THIS SECURITY AGREEMENT. This Security Agreement and
the security interest created hereunder shall terminate only when Debtor has
fully satisfied the Obligations. At such time, Secured Party shall execute and
deliver all such instruments as Debtor shall reasonably request in confirmation
of such termination.
11. WAIVER; WARRANTY. No waiver by Secured Party of any default shall
be effective unless in writing, nor operate as a waiver of any other default or
of the same default on a future occasion. Debtor hereby represents and warrants
the existence of all necessary power to enter into and execute this Security
Agreement and that this Security Agreement is not in violation of its articles,
charter, regulations or by-laws, or of any federal, state or local laws or
judicial rulings, or of any contractual obligation with any third party, and
that this Security Agreement is enforceable in accordance with its terms.
12. TIME OF THE ESSENCE. Time is of the essence in this Security
Agreement.
13. GENERAL. All representations and warranties contained herein shall
survive the execution of this Security Agreement. This Security Agreement shall
be governed by and construed in accordance with the laws of the State of New
York. It shall be binding upon and inure to the benefit of Debtor and Secured
Party and their respective heirs, legal representatives, successors and assigns.
84
14. JURY TRIAL WAIVER. DEBTOR, TO THE EXTENT PERMITTED BY LAW, WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, BETWEEN DEBTOR AND SECURED PARTY ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN DEBTOR AND SECURED PARTY IN CONNECTION WITH THIS SECURITY AGREEMENT, THE
PURCHASE AGREEMENT, THE NOTE OR ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT
EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED
THERETO.
15. SUBORDINATION AGREEMENT. The rights and remedies of the Secured
Party under this Security Agreement are subject to a Subordination Agreement
dated the date hereof, among the Secured Party, the Debtor and the Senior
Creditor.
85
IN WITNESS WHEREOF, Debtor and Secured Party have executed this Security
Agreement on the date first set forth above.
"Debtor"
ACS ACQUISITION CORP.,
a New York corporation
By:______________________________
Name:
Title:
"Secured Party"
DURCO INTERNATIONAL INC.,
a New York corporation
By:_______________________________
Name:
Title:
86
EXHIBIT P
MORTGAGE
THE PREMISES SUBJECT TO THIS MORTGAGE ARE NOT PRINCIPALLY IMPROVED OR TO BE
IMPROVED BY ONE OR MORE STRUCTURES CONTAINING IN THE AGGREGATE NOT MORE THAN SIX
RESIDENTIAL DWELLING UNITS, EACH HAVING ITS OWN SEPARATE COOKING FACILITIES.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, THE MAXIMUM PRINCIPAL
INDEBTEDNESS WHICH IS OR UNDER ANY CONTINGENCY MAY BE SECURED BY THIS MORTGAGE
IS TWO MILLION FOUR HUNDRED FORTY-ONE THOUSAND THREE HUNDRED NINETY-SEVEN AND
00/100 DOLLARS U.S. ($2,441,397.00), TOGETHER WITH (I) TAXES, CHARGES OR
ASSESSMENTS WHICH MAY BE IMPOSED BY LAW UPON THE PREMISES, (II) PREMIUMS ON
INSURANCE POLICIES COVERING THE PREMISES, AND (III) EXPENSES INCURRED IN
UPHOLDING THE LIEN OF THIS MORTGAGE INCLUDING, BUT NOT LIMITED TO (A) THE
EXPENSES OF ANY LITIGATION TO PROSECUTE OR DEFEND THE RIGHTS AND LIEN CREATED BY
THIS MORTGAGE, (B) ANY AMOUNT, COST OR CHARGE TO WHICH THE MORTGAGEE BECOMES
SUBROGATED, UPON PAYMENT, WHETHER UNDER RECOGNIZED PRINCIPLES OF LAW OR EQUITY,
OR UNDER EXPRESS STATUTORY AUTHORITY, AND (C) INTEREST AT THE DEFAULT RATE (OR
PREVAILING INTEREST RATE) UNDER THE NOTE HEREINAFTER REFERRED TO AND PENALTIES
PROVIDED FOR HEREIN.
THIS MORTGAGE, made the _____ day of June, 1997, BETWEEN ACS
ACQUISITION CORP., a New York corporation having an address at c/o Aqua Care
Systems, Inc., 00000 X.X. 00xx Xxxxxx, Xxxxx Xxxxxxx, Xxxxxxx 00000 (the
"Mortgagor"), and DURCO INTERNATIONAL INC., a New York corporation having an
office at 0000 Xxxxxxxx Xxxxxxxxx, Xxxxxx, Xxxx 00000 (the "Mortgagee").
WITNESSETH, that to secure the payment of all amounts (the
"Indebtedness") that are now or hereafter owed to the Mortgagee under or in
respect to that certain Note dated the date hereof, from Mortgagor to Mortgagee
in the principal amount of $2,441,397.00 and the Asset Purchase Agreement dated
June ___, 1997 (the "Purchase Agreement"), among the Mortgagee, the Mortgagor
and Aqua Care Systems, Inc., a Delaware corporation, and secured by, among other
instruments (including this Mortgage), a Security Agreement dated the date
hereof, by the Mortgagee to the Mortgagor (the "Security Agreement"), the
Mortgagor hereby mortgages to the Mortgagee:
ALL that certain plot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying and being in the County of Erie and
State of New York, bounded and described on Exhibit A hereto.
TOGETHER with all right, title and interest of the Mortgagor in and to
the land lying in the streets and roads in front of and adjoining said premises;
TOGETHER with all fixtures, chattels and articles of personal property
now or hereafter attached to or used in connection with said premises, including
but not limited to furnaces, boilers, oil burners, radiators and piping, coal
stokers, plumbing and bathroom fixtures, refrigeration, air conditioning and
sprinkler systems, wash-tubs, sinks, gas and electric fixtures, stoves, ranges,
awnings, screens, window shades, elevators, motors, dynamos, refrigerators,
kitchen cabinets, incinerators, plants and shrubbery and all other equipment and
machinery, appliances, fittings, and fixtures of every kind in or used in the
operation of the buildings standing on said premises, together with any and all
replacements thereof and additions thereto;
87
TOGETHER with all awards heretofore and hereafter made to the Mortgagor
for taking by eminent domain the whole or any part of said premises or any
easement therein, including any awards for changes of grade of streets, which
said awards are hereby assigned to the Mortgagee, who is hereby authorized to
collect and receive the proceeds of such awards and to give proper receipts and
acquittances therefor, and to apply the same toward the payment of the
Indebtedness, notwithstanding the fact that the amount owing thereon may not
then be due and payable; and the said Mortgagor hereby agrees, upon request, to
make, execute and deliver any and all assignments and other instruments
sufficient for the purpose of assigning said awards to the Mortgagee, free,
clear and discharged of any encumbrances of any kind or nature whatsoever.
AND the Mortgagor covenants with the Mortgagee as follows:
1. That the Mortgagor will pay the Indebtedness as hereinbefore
provided.
2. That the Mortgagor will keep the buildings on the premises insured
against loss by fire for the benefit of the Mortgagee; that such policies of
casualty insurance shall contain loss payable clauses (including the standard
mortgagee clause) to the Mortgagee as its interest may appear, the form of
endorsements to such policies to that end to be in form and content satisfactory
to the Mortgagee; and that it will reimburse the Mortgagee for any premiums paid
for insurance made by the Mortgagee on the Mortgagor's default in so insuring
the buildings.
3. That no building on the premises shall be altered, removed or
demolished without the consent of the Mortgagee so as to diminish its
market value.
4. That the whole of the Indebtedness shall become due at the option
of the Mortgagee upon: (a) any "event of default" under the Security
Agreement; or (b) any "event of default" under the Prior Mortgage (as
hereinafter defined).
5. That the Mortgagor shall perform or observe all covenants and
conditions to be performed or observed by the Mortgagor in the Mortgage dated
the date hereof, between the Mortgagor and Fidelity Funding, Inc., as mortgagee
(the "Prior Mortgage"), to which this Mortgage is subject (the "Prior
Mortgage"). The Mortgagor represents that no default or event of default has
occurred and is continuing under the Prior Mortgage and that no event has
occurred which with notice or the passage of time or both would constitute such
a default or event of default. Upon notice from the Mortgagee, simultaneously
with the making of each payment of principal and interest on the Prior Mortgage,
the Mortgagor shall deliver to the Mortgagee a copy of the check in the amount
of such payment delivered to the holder of the Prior Mortgage. The Mortgagor
hereby irrevocably designates the Mortgagee its agent and attorney-in-fact to
perform or observe on behalf of the Mortgagor any covenant or condition which
Mortgagor fails to perform or observe under the Prior Mortgage within any
applicable grace period specified in the Prior Mortgage, and any advances made
by the Mortgagee in connection with such performance or observance shall be
repaid by the Mortgagor on demand with interest at the Default Rate (as defined
in the Note) and the amount so advanced, with interest, shall be secured by this
Mortgage. The Mortgagee shall have the right, but not the obligation, to so
perform or so observe. The performance or observance of such covenant or
condition by the Mortgagee shall not prevent the Mortgagor's failure to so
perform or observe from constituting a default hereunder. In performing or
observing any such covenant or condition, the Mortgagee shall have the right to
enter upon mortgaged premises. Upon receipt by Mortgagee from the holder of the
Prior Mortgage of any notice of default under the Prior Mortgage, the Mortgagee
may rely thereon and take any action permitted by this paragraph to remedy such
default
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notwithstanding that the existence of such default or the nature thereof may be
questioned or denied by the Mortgagor.
The Mortgagor shall not enter into any modification or amendment to the Prior
Mortgage nor acquire, whether directly or indirectly, any interest in the Prior
Mortgage.
6. That the holder of this Mortgage, in any action to foreclose it,
shall be entitled to the appointment of a receiver.
7. That the Mortgagor will pay all taxes, assessments, sewer rents or
water rates, and in default thereof, the Mortgagee may pay the same.
8. That the Mortgagor within five (5) days upon request in person or
within ten (10) days upon request by mail will furnish a written statement duly
acknowledged of the amount due on this Mortgage and whether any offsets or
defenses exist against the Indebtedness.
9. Any notice and/or demand or request shall be given or made in
accordance with Section 9 of the Security Agreement.
10. That the Mortgagor warrants the title to the premises.
11. That the fire insurance policies required by paragraph No. 2 above
shall contain the usual extended coverage endorsement; that in addition thereto
the Mortgagor, within thirty (30) days after notice and demand, will keep the
premises insured against any hazard that may reasonably be required by the
Mortgagee. All of the provisions of paragraphs No. 2 above relating to fire
insurance and the provisions of Section 254 of the Real Property Law construing
the same shall apply to the additional insurance required by this paragraph.
12. That in case of a foreclosure sale, said premises, or so much
thereof as may be affected by this Mortgage, may be sold in one parcel.
13. That if any action or proceeding be commenced (except an action to
foreclose this Mortgage or to collect the debt secured thereby), to which action
or proceeding the Mortgagee is made a party, or in which it becomes necessary to
defend or uphold the lien of this Mortgage, all sums paid by the Mortgagee for
the expense of any litigation to prosecute or defend the rights and lien created
by this Mortgage (including reasonable counsel fees), shall be paid by the
Mortgagor, together with interest thereon at the Default Rate, and any such sum
and the interest thereon shall be a lien on said premises, prior to any right,
or title to, interest in or claim upon said premises attaching or accruing
subsequent to the lien of this Mortgage, and shall be deemed to be secured by
this Mortgage. In any action or proceeding to foreclose this Mortgage, or to
recover or collect the debt secured thereby, the provisions of law respecting
the recovering of costs, disbursements and allowances shall prevail unaffected
by this covenant.
14. That the Mortgagor hereby assigns to the Mortgagee the rents, issues
and profits of the premises as further security for the payment of the
Indebtedness, and the Mortgagor grants to the Mortgagee the right to enter upon
and to take possession of the premises for the purpose of collecting the same
and to let the premises or any part thereof, and to apply the rents, issues and
profits, after payment of all necessary charges and expenses, on account of said
Indebtedness. This assignment and grant shall continue in effect until this
Mortgage is paid. The Mortgagee hereby waives the right to enter upon and to
take possession of said premises for the purpose of collecting said rents,
issues and profits, and the Mortgagor shall be entitled to collect and receive
said rents, issues and profits until default under any of the covenants,
conditions or agreements contained in this Mortgage, and agrees to use such
rents, issues and profits in payment of the Indebtedness becoming due on this
Mortgage and in payment of taxes, assessments, sewer rents, water rates and
carrying charges becoming due against said premises, but such right of the
Mortgagor may be revoked by the Mortgagee upon any
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default, on five (5) days' written notice. The Mortgagor will not, without the
written consent of the Mortgagee, receive or collect rent from any tenant of
said premises or any part thereof for a period of more than one month in
advance, and in the event of any default under this Mortgage will pay monthly in
advance to the Mortgagee, or to any receiver appointed to collect said rents,
issues and profits, the fair and reasonable rental value for the use and
occupation of said premises or of such part thereof as may be in the possession
of the Mortgagor, and upon default in any such payment will vacate and surrender
the possession of said premises to the Mortgagee or to such receiver, and in
default payment will vacate and surrender the possession of said premises to the
Mortgagee or to such receiver, and in default thereof may be evicted by summary
proceedings.
15. That the whole of said Indebtedness shall become due at the option of
the Mortgagee; (a) after failure to exhibit to the Mortgagee, within ten (10)
days after demand, receipts showing payment of all taxes, water rates, sewer
rents and assessments; or (b) after the actual or threatened alteration,
demolition or removal of any building on the premises without the written
consent of the Mortgagee (except to the extent permitted by this Mortgage); or
(c) after the assignment of the rents of the premises or any part thereof
without the written consent of the Mortgagee; or (d) if the buildings on said
premises are not maintained in reasonably good repair; or (e) after failure to
comply with any requirement or order or notice of violation of law or ordinance
issued by any governmental department claiming jurisdiction over the premises
within three months from the issuance thereof; or (f) if on application of the
Mortgagee two or more fire insurance companies lawfully doing business in the
State of New York refuse to issue policies insuring the buildings on the
premises; or (g) in the event of the removal, demolition or destruction in whole
or in part of any of the fixtures, chattels or articles of personal property
covered hereby, unless the same are promptly replaced by similar fixtures,
chattels and articles of personal property at least equal in quality and
condition to those replaced, free from chattel mortgages or other encumbrances
thereon and free from any reservation of title thereto; or (h) after thirty (30)
days' notice to the Mortgagor, in the event of the passage of any law deducting
from the value of the land for the purposes of taxation any lien thereon, or
changing in any way the taxation of mortgages or debts secured thereby for state
or local purposes; or (i) if the Mortgagor fails to keep, observe and perform
any of the other material covenants, conditions or agreements contained in this
Mortgage.
16. The Indebtedness secured hereby shall, at the option of the Mortgagee,
immediately become due and payable if the Premises are sold, conveyed or
otherwise transferred or Mortgagor enters into a contract to do so without the
prior written consent of Mortgagee, which consent may not be unreasonably
withheld; provided, however, that Mortgagee may not withhold its consent to the
transfer of the premises if Mortgagor substitutes as collateral therefor other
premises with a fair market value equal to or in excess of the fair market value
of the premises initially encumbered hereby. The fair market value of the
respective premises shall be determined by appraisals thereof.
17. This Mortgage may not be changed or terminated orally. The covenants
contained in this Mortgage shall run with the land and bind the Mortgagor, the
heirs, personal representatives, successors and assigns of the Mortgagor and all
subsequent owners, encumbrances, tenants and subtenants of the premises, and
shall enure to the benefit of the Mortgagee, the personal representatives,
successors and assigns of the Mortgagee and all subsequent holders of this
Mortgage.
18. The rights and remedies of the Mortgagee under this Mortgage are subject to
the Subordination Agreement dated the date hereof, among the Mortgagor, the
Mortgagee and the Prior Mortgagee.
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IN WITNESS WHEREOF, this Mortgage has been duly executed by the
Mortgagor.
IN PRESENCE OF: MORTGAGOR:
ACS ACQUISITION CORP.,
a New York corporation
------------------------- -----------------------------
Name: Name:
Title:
-------------------------
Name:
STATE OF _____________ )
) ss:
COUNTY OF ____________ )
On June __, 1997, before me personally came _________________, to me
known to be the individual described in and who executed the foregoing
instrument, who, being by me duly sworn, did depose and say that he resides at
_________________; that he is the ___________ of ACS Acquisition Corp., a New
York corporation, the corporation described in and which executed the above
instrument; that he signed his name thereto by order of the Board of Directors
of said corporation.
-----------------------------
Notary Public
This instrument prepared by:
Xxxx X. Xxxxx, Esq.
Xxxxxxxx Xxxx & Xxxxx LLP
0000 Xxxxxxxxxx Xxxxx, X.X.
X.X. Xxx 0000
Xxxxxx, Xxxx 00000-0000
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EXHIBIT Q
GUARANTY AGREEMENT
THIS GUARANTY is made as of this ____ day of June, 1997 by AQUA CARE
SYSTEMS, INC., a Delaware corporation ("GUARANTOR"), to DURCO INTERNATIONAL
INC., a New York corporation ("SELLER"), under the following circumstances:
A. Pursuant to the Asset Purchase Agreement dated June ___, 1997 (as
amended or modified from time to time, the "PURCHASE AGREEMENT"), among Seller,
Guarantor and ACS Acquisition Corp., a New York corporation ("PURCHASER"),
Purchaser has purchased from Seller the assets of the Filtration Systems
Division of Seller.
B. Pursuant to the Purchase Agreement, Purchaser has executed and
delivered to Seller a promissory note dated the date hereof in the principal
amount of $2,441,397.00 (as amended or modified from time to time, the "NOTE").
The Note is secured by a security agreement dated the date hereof, by Purchaser
to Seller (as amended or modified from time to time, the "SECURITY AGREEMENT"),
and a Mortgage dated the date hereof, by Purchaser to Seller (as amended or
modified from time to time, the "MORTGAGE").
C. The Purchase Agreement, the Note, the Security Agreement and the
Mortgage are hereinafter referred to as the "SELLER DOCUMENTS."
D. The Purchase Agreement requires that Guarantor shall unconditionally
guarantee the full and prompt payment and performance of all indebtedness and
obligations of Purchaser set forth in or becoming due and payable or performable
under the Seller Documents.
E. The parties hereto desire to set forth the terms and conditions by
which Guarantor will guarantee such obligations and under which Seller will
accept such guaranty.
NOW, THEREFORE, in consideration of the foregoing, and in further
consideration of the anticipated benefits to Guarantor, Guarantor agrees for the
benefit of Seller as follows:
1. COVENANTS, AGREEMENTS AND REPRESENTATIONS
1.1. Guarantor hereby, jointly and severally, absolutely and
unconditionally guarantees to Seller (a) the full and prompt payment of the
principal amount of the Note and all installments thereof, when and as the same
shall become due, whether at stated maturity, by acceleration, in amortization
installments or otherwise, (b) the full and prompt payment of the interest on
the Note when and as the same shall become due, (c) the full and prompt payment
of all other sums when and as the same shall become due and payable under the
Purchase Agreement, the Note, the Mortgage, and/or any of the other Seller
Documents, and (d) the prompt performance and observance of all covenants,
agreements, terms and conditions to be performed or observed by Purchaser under
or pursuant to the Seller Documents or any of them. All of the duties and
obligations of Purchaser to make payments and to perform and observe the
covenants, agreements, terms and conditions under or pursuant to the Seller
Documents described in clauses (a) through (d) of this Section 1.1 are
hereinafter collectively referred to as the "OBLIGATIONS." Upon the failure of
Purchaser to punctually pay, perform or observe any of the Obligations,
Guarantor, on demand by Seller, shall forthwith pay all sums not so paid as
specified in the Seller Documents or, as applicable, perform or cause to be
performed or observed any of the other Obligations which Purchaser has failed to
perform or observe. Any and all payments by Guarantor hereunder shall
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be made in lawful money of the United States. Each and every default in the
payment, performance or observance of any Obligation shall give rise to a
separate cause of action hereunder and separate suits may be brought hereunder
as each cause of action arises.
1.2. The obligations of Guarantor under this Guaranty shall not be
released, discharged, affected, modified or impaired by reason of the happening
from time to time of any event including, without limitation, any one or more of
the following:
(a) the compromise, settlement, release, discharge or termination of
any or all of the Obligations, by operation of law or otherwise, except as may
result from payment in full of the Note as to principal and interest and all
other sums due and payable pursuant to the Seller Documents or performance of
the Obligations in accordance with the Seller Documents;
(b) failure to give notice to Guarantor of the occurrence of an event
of default under the terms and provisions of any of the Seller Documents;
(c) the waiver of the payment, performance or observance by Purchaser
or Guarantor of any obligation, covenant or agreement contained in the Seller
Documents;
(d) the extension of the time for payment of principal of, or interest
on the Note or any installment thereof or of the time for performance of any
other obligation, covenant or agreement under or arising out of the Seller
Documents or this Guaranty or the extension or the renewal of any thereof;
(e) the modification or amendment (whether material or otherwise) of
any obligation, covenant or agreement set forth in any of the Seller Documents;
(f) the taking of or omission to take any action under the Seller
Documents or this Guaranty;
(g) any invalidity or unenforceability of any term or provision of any
of the Seller Documents, or any loss or release or substitution of, or other
dealing with, the Note;
(h) any failure, omission or delay on the part of Purchaser or Seller
or any subsequent holder of the Note to enforce, assert or exercise any right,
power or remedy conferred in this Guaranty, or any of the Seller Documents, or
any other act or acts on the part of Seller or any subsequent holder of the
Note;
(i) any failure or loss of title with respect to the Purchaser's
interest in the property subject to the Mortgage or any part thereof, or any
damage to or destruction or condemnation of such premises or any part thereof;
(j) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all of the assets, marshalling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition with creditors or
readjustment of, or other similar proceedings affecting Guarantor or Purchaser,
or any of the assets of any of them;
(k) the release or discharge of the Guarantor from the performance or
observance of any obligation, covenant or agreement contained in this Guaranty
by operation of law or otherwise;
(l) the default or failure of the Guarantor to fully perform any of its
obligations set forth in this Guaranty;
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(m) Seller's failure to record the Mortgage or file any UCC financing
statements (or Seller's improper recording or filing of any thereof) or to
otherwise perfect, protect, secure or insure any security interest or lien given
as security for the Note; or
(n) any other event, circumstance, right, claim or defense of any
character whatsoever, whether or not similar to the foregoing
and, in any such case, whether with or without notice, or with or without
consideration, to one or more of the Guarantor.
1.3. No set-off, counterclaim, reduction, or diminution of any
obligation, or any defense of any kind or nature (excepting payment or
performance in fact) which the Guarantor has or may have against Seller or
Purchaser shall limit or in any way affect the Guarantor's obligations under
this Guaranty.
1.4. In the event of any default in the payment of principal of, or
interest on the Note when and as the same shall become due, whether at the
stated maturity thereof, by acceleration or otherwise, any default in the
payment of any other amounts payable by Purchaser pursuant to the Seller
Documents, or any default in the performance or observance of any other of the
Obligations, Seller shall have the right to proceed first and directly against
the Guarantor in any order under this Guaranty, without proceeding against
Purchaser or any other person or entity or exhausting any other remedies which
it may have and without resorting to any other security held by Seller.
1.5. Guarantor hereby expressly waives notice from Seller of the
acceptance of and reliance upon this Guaranty. Guarantor agrees to pay all the
costs, expenses and fees, including all attorneys' fees, which may be incurred
by Seller, in enforcing this Guaranty following any default on the part of the
Guarantor hereunder, whether the same shall be enforced by suit or otherwise.
1.6. Guarantor shall indemnify Seller against loss, cost or expense by
reason of the assertion by the Guarantor of any defense to its obligations
hereunder or (so long as a default is continuing under this Guaranty) the
assertion by Purchaser of any defense to its obligations under any Seller
Document. The Guarantor waives any right or claim of right to cause a
marshalling of the Purchaser's assets or to cause Seller to proceed against any
of the security for the Note or for the obligations guaranteed hereby before
proceeding against Guarantor in any particular order.
1.7. The Guarantor expressly waives and relinquishes all rights and
remedies (including any rights of subrogation, indemnification or
reimbursement), whether against Purchaser, any other Guarantor or otherwise,
accorded by applicable law to Guarantor or under any agreement now or hereafter
with Purchaser; no payment by the Guarantor under any provision of this Guaranty
shall entitle the Guarantor, by subrogation or otherwise, to any right, title or
interest in and to the Obligations, any Seller Document, the premises subject to
the Mortgage, Purchaser or any property of Purchaser.
1.8. If claim is ever made upon Seller for repayment of any amount or
amounts received by Seller in payment of the Obligations whether in any
bankruptcy proceeding or otherwise, Guarantor shall indemnify Seller against
loss, cost or expense by reason of such claim. If Seller is ever required to
repay all or any part of said amount, then, notwithstanding any revocation or
termination of this Guaranty or the cancellation of the Note or any other
instrument evidencing or securing the any obligation, Guarantor shall be and
remain liable to Seller for the amount so repaid to the same extent as if such
amount had never originally been received by Seller.
2. MISCELLANEOUS
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2.1. Guarantor's obligation under this Guaranty are independent of
those of Purchaser. Any consents, approvals or notices required to be given to
or obtained from Purchaser under any of the Seller Documents shall not be
required to be given to or obtained from the Guarantor.
2.2. No remedy herein conferred upon or reserved is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
under this Guaranty or now or hereafter existing at law or in equity. No delay
or omission to exercise any right or power accruing upon any default, omission
or failure of performance hereunder shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle Seller to exercise any remedy reserved in this Guaranty, it shall not be
necessary to give any notice, other than such notice as may be herein expressly
required. In the event any provision contained in this Guaranty should be
breached by the Guarantor and thereafter duly waived by Seller, such waiver
shall be limited to the particular breach so waived and shall not be deemed to
waive any other breach hereunder, and shall be limited to the particular
beneficiary executing the waiver.
2.3. No waiver, amendment, release or modification of this Guaranty
shall be established by conduct, custom or course of dealing, but solely by an
instrument in writing duly executed by Seller.
2.4. This Guaranty constitutes the entire agreement, and supersedes all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof.
2.5. This Guaranty constitutes a separate instrument, enforceable in
accordance with its terms, and neither this Guaranty nor the obligations of the
Guarantor hereunder shall, under any circumstances or in any legal proceedings,
be deemed to have merged into or with any other agreement or obligation of
Guarantor.
2.6. In the event any provision of this Guaranty shall be held invalid
or unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof. If any provision
of this Guaranty shall be held or deemed to be or shall, in fact, be inoperative
or unenforceable as applied in any particular case in any jurisdiction or
jurisdictions or in all jurisdictions, or in all cases because it conflicts with
any other provision or provisions hereof or any constitution or statute or rule
of public policy, or for any other reason, such circumstances shall not have the
effect of rendering the provision in question inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative, or unenforceable to any extent
whatever.
2.7. The provisions of this Guaranty will bind and benefit the heirs,
executors, administrators, legal representatives, successors and assigns of each
of the Guarantor and Seller.
2.8. This Guaranty and the rights and obligations of the parties
hereunder shall in all respects be governed by, and construed and enforced in
accordance with, the laws of the State of New York (without giving effect to New
York's principles of conflicts of law).
2.9. GUARANTOR, TO THE EXTENT PERMITTED BY LAW, WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, BETWEEN GUARANTOR AND SELLER ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN GUARANTOR AND
SELLER IN CONNECTION WITH THIS GUARANTY OR ANY OTHER AGREEMENT, INSTRUMENT OR
DOCUMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS
RELATED THERETO.
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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of
the day and year first above written.
AQUA CARE SYSTEMS, INC.,
a Delaware corporation
By: _____________________________
Name:
Title:
96
