EXECUTION COPY
EXHIBIT 99.1
PURCHASE AGREEMENT
AMONG
WATERLINK, INC. AND
XXXXXXXX XXXXXXXXX CORPORATION,
COLLECTIVELY, AS SELLER,
AND
XXXXXXXX ACQUISITION CORP.
AS BUYER
DECEMBER 11, 2003
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is effective December 11, 2003
(the "Effective Date"), among Xxxxxxxx Xxxxxxxxx Corporation, an Ohio
corporation ("Xxxxxxxx"), Waterlink, Inc., a Delaware corporation and the sole
shareholder of each of Waterlink UK (as hereinafter defined) and Xxxxxxxx
("Waterlink" and, together with Xxxxxxxx, "Seller") and Xxxxxxxx Acquisition
Corp., a Delaware corporation, and/or its permitted assignee ("Buyer").
BACKGROUND INFORMATION
1. Seller is an international provider of integrated water and air
purification solutions for both industrial and municipal customers (the
"Business").
2. Each of Waterlink and Xxxxxxxx are debtors-in-possession in a case (the
"Chapter 11 Case") commenced on June 27, 2003 (the "Petition Date") under
Chapter 11 of Title 11 of the United States Code, 11 U.S.C. Sections 101 et.
seq. (as amended, the "Bankruptcy Code"), pending in The United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), and
assigned Case Nos. 03-11989 (PJW) et seq. Seller desires to sell and assign to
Buyer, and Buyer desires to purchase and assume from Seller, subject to the
approval of the Bankruptcy Court, (1) all of the assets of Seller, (2) all of
the outstanding capital stock of Waterlink (UK) Holdings Limited, formerly known
as Waterlink (UK) Limited ("Waterlink UK"), a company registered in England and
Wales with number 3181974 and the holder, directly or indirectly, of the entire
issued share capital of (a) Sutcliffe Xxxxxxxx Limited ("Xxxxxxxx"), (b)
Sutcliffe Croftshaw Limited and (c) Lakeland Processing Limited (collectively,
the "Subsidiaries" and, individually, a "Subsidiary"), and (3) all of the
Assumed Liabilities (as defined below), in each case upon the terms and
conditions set forth in this Agreement.
STATEMENT OF AGREEMENT
Seller and Buyer (the "Parties") acknowledge the accuracy of the foregoing
Background Information and hereby agree as follows:
ARTICLE I
ASSET PURCHASE AND SALE
Section 1.1. Asset Purchase. On the Closing Date (defined in Article IV),
subject to the terms and conditions of this Agreement, Seller shall sell,
assign, transfer, convey and deliver to Buyer, and Buyer shall purchase, acquire
and accept from Seller, free and clear of all liens, debts and claims (each as
defined in Section 101 of the Bankruptcy Code, "Liens," "Debts" and "Claims,"
respectively) and other encumbrances to the fullest extent permitted by the
Bankruptcy Code (the "Asset Purchase"), all of Seller's right, title and
interest in and to all of the assets, properties, rights and claims, whether
tangible or intangible, owned, held or used by Seller in the operation of the
Business, other than those excluded by Buyer pursuant to Section 1.2 hereof (the
"Assets"). The Assets shall include, without limitation, the following:
(a) All accounts receivable (including, without limitation, customer
retainages) and all causes of action relating or pertaining thereto, other than
accounts receivable owed by Affiliates (as defined in Section 101 of the
Bankruptcy Code) or Insiders (as defined in Section 101 of the Bankruptcy Code)
of Seller;
(b) That certain intercompany note receivable of Waterlink from
Waterlink UK in the amount of $9,759,537 at September 30, 2003 (the "Waterlink
UK Note Receivable");
(c) All supplies, goods, materials, work in process, inventory and
stock in trade (collectively, the "Inventory");
(d) Deferred income taxes;
(e) All other current assets as reflected in the unaudited
consolidating balance sheet of Seller as of September 30, 2003;
(f) All furniture, fixtures, equipment, other leasehold improvements
and supplies;
(g) All other tangible personal property (the "Tangibles");
(h) All licenses, permits, consents, authorizations, approvals and
certificates required for the operation of the Business to the extent
transferable under applicable law or consented to by any third parties whose
consent is required for such transfer, (collectively, the "Permits");
(i) All patents, trademarks, tradenames and service marks (in each
case, including applications therefor), registered and unregistered copyrights,
and other intellectual property, proprietary rights and intangible assets,
including without limitation the names "Xxxxxxxx Xxxxxxxxx," "Xxxxxxxxx
Xxxxxxxx," "Suttcliffe Croftshaw" and "Waterlink" (collectively, the
"Proprietary Rights"), in each case to the extent transferable under applicable
law or consented to by any third parties whose consent is required for such
transfer; and
(j) To the extent assignable under the Bankruptcy Code or to the
extent assignment is consented to by the third party or parties to such
agreements, all rights under the executory contracts and unexpired leases to be
identified on Schedule 1.1(j) (collectively, the "Assumed Contracts"), which
schedule shall be provided by Buyer to Seller and attached hereto prior to the
Sale Hearing to be held by the Bankruptcy Court in accordance with Article VIII;
and
(k) All of Xxxxxxxx'x fee simple ownership interest in all of its
owned real property (except to the extent included in Excluded Assets),
including without limitation the real property located at 000 Xxxxx Xxxxxxx
Xxxxxx, Xxxxxxxx, Xxxxxxxx Xxxxxx, Xxxx 00000, and all improvements thereon.
Section 1.2. Excluded Assets. Notwithstanding any other provision of this
Agreement to the contrary, (a) the assets of Seller as of the Closing Date
identified on Schedule 1.2 and (b) any
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assets which Seller is prohibited from selling to Buyer under applicable law
(collectively, the "Excluded Assets") shall be excluded from the Assets and
shall be retained by Seller.
Section 1.3. Assumed Liabilities.
(a) At the Closing, Buyer shall assume from Seller and thereafter
pay, perform or discharge in accordance with their terms no liabilities
whatsoever, other than liabilities and obligations (i) arising under the Assumed
Contracts and all cure amounts owing under, and reinstatement costs and expenses
relating to, the Assumed Contracts as of the Closing Date (the "Cure Costs"),
(ii) arising after the Closing Date out of the ownership of the Assets and (iii)
as set forth on Schedule 1.3. The liabilities to be assumed pursuant to this
Agreement shall be referred to herein as the "Assumed Liabilities."
(b) Seller acknowledges and agrees that pursuant to the terms and
provisions of this Agreement and under any contract or other agreement, Buyer
will not assume any obligation of Seller other than the Assumed Liabilities from
and after the Closing Date. In furtherance and not in limitation of the
foregoing, neither the Buyer nor any of its affiliates shall assume, and shall
not be deemed to have assumed, any debt, claim, obligation or other liability of
Seller including, but not limited to:
(i) any liability or obligation for any fees and
expenses incurred or owed in connection with the administration of
the Chapter 11 Case, the fees and expenses of attorneys,
accountants, financial advisors, consultants and other professionals
retained by Seller or the Official Committee of Unsecured Creditors,
incurred or owed in connection with the administration of the
Chapter 11 Case, and all out of pocket expenses of Seller in
connection with the transactions contemplated under this Agreement;
(ii) Any of Seller's liabilities in respect of taxes
arising from the operation of the Business and Assets prior to the
Closing Date (other than accrued income taxes in an amount not to
exceed $86,035, which amount is the accrued income taxes of Xxxxxxxx
as reflected in the consolidating balance sheet included in the
Consolidating Financial Statements (defined in Section 6.6)
("Accrued Income Taxes");
(iii) any indebtedness for borrowed money of Seller;
(iv) any liability or obligation related to any Excluded
Asset;
(v) all accounts payable arising prior to the Closing
Date (other than Cure Costs and Assumed Liabilities);
(vi) any liability or obligation of Seller to any former
or current shareholder of Seller and its Subsidiaries;
(vii) other than Assumed Liabilities, any liability or
obligation relating to, or arising out of (i) the conduct of the
Business or the ownership of the Assets prior to the Closing Date,
or (ii) any act, omission, transaction, sale of
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goods or services, or other condition, which occurred or existed
prior to the Closing Date, other than those liabilities and
obligations included in the Assumed Liabilities; and
(viii) any and all environmental costs and liabilities
arising from Xxxxxxxx'x operation of the Business prior to the
Closing Date including, without limitation, all environmental costs
and liabilities of Xxxxxxxx relating in any manner to Xxxxxxxx'x
direct or indirect handling, transportation or disposal of any
substance regulated under any environmental law, or any substance
defined as or included in the statutory or regulatory definitions of
pollutant, hazardous or toxic waste, hazardous material or "toxic
substance" under any environmental law.
Section 1.4. Conveyance Documents. At the Closing, Seller shall convey,
assign and transfer the Assets to Buyer through the execution and delivery
of the following documents, each in form and substance reasonably
acceptable to Buyer:
(a) Bills of sale, deeds or assignments transferring the Assets, in
form and content mutually satisfactory to Buyer and Seller;
(b) An instrument whereby Buyer assumes the Assumed Contracts from
Seller, in form and content mutually satisfactory to Buyer and Seller;
(c) Such other assignment or conveyance documents as may be
reasonably requested by Buyer.
If consents or approvals of any third parties are required for any
conveyances, assignments or transfers in connection with the Asset Purchase,
Seller shall use commercially reasonable efforts to cause such consents or
approvals to be obtained prior to the Closing. All costs and expenses related to
any consents or approvals related to the Asset Purchase shall be paid by Seller.
Section 1.5. Possession. Buyer shall be entitled to exclusive possession
of the Assets as of the Closing.
ARTICLE II
STOCK PURCHASE AND SALE
Section 2.1. Stock Purchase. On the Closing Date, subject to the terms and
conditions of this Agreement, Waterlink shall sell, transfer, convey, assign and
deliver to Buyer, and Buyer shall purchase and acquire from Waterlink (the
"Stock Purchase"), all of the issued and outstanding shares in the share capital
of Waterlink UK (being 8,126,000 Ordinary Shares of L1 each) (the "Stock") free
and clear of all Liens, Debts and Claims.
Section 2.2. Stock Conveyance Documents. At the Closing, Seller shall
sell, transfer and assign the Stock to Buyer by execution and delivery of the
following:
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(a) a duly executed share transfer form in favor of, and in form and
substance reasonably satisfactory to, Buyer in relation to the Stock together
with all share certificates representing the Stock (or, in the case that any
such certificates are missing or lost, an indemnity in relation to such
certificates in a form reasonably acceptable to the Buyer); and
(b) the statutory books, minute books and other corporate books and
records of Waterlink UK and its Subsidiaries.
If consents or approvals of any third parties are required for any
conveyances, assignments or transfers in connection with the Stock Purchase,
Seller shall use commercially reasonable efforts to cause such consents or
approvals to be obtained prior to the Closing. All costs and expenses related to
such consents and approvals shall be paid by Seller.
ARTICLE III
PURCHASE PRICE; DEPOSIT
Section 3.1. Purchase Price.
(a) In full consideration for the sale and transfer of the Assets
and the Stock to Buyer, Buyer shall assume the Assumed Liabilities and pay to
Seller an amount equal to (i) $25,750,000 (such cash amount, the "Preadjustment
Cash Purchase Price") and (ii) either (A) plus the amount by which Xxxxxxxx'x
and Waterlink UK and Subsidiaries' Closing Date Working Capital (as defined
below) is greater than $18,473,000 or (B) minus the amount by which Closing Date
Working Capital is less than $17,973,000 (the amount of such adjustment (A) or
(B) being referred to herein as the "Adjustment Amount" and the Preadjustment
Cash Purchase Price as increased or decreased by the Adjustment Amount being
referred to herein as the "Purchase Price").
(b) At the Closing, unless otherwise agreed by the Parties, Buyer
shall:
(i) Pay to Seller, in immediately available U.S. funds by
confirmed wire transfer to a bank account to be designated by Seller or by
such other means as are agreed upon by Seller and Buyer, the Preadjustment
Cash Purchase Price plus or minus, as the case may be, an estimate of the
Adjustment Amount (the "Estimated Adjustment Amount"), which Estimated
Adjustment Amount shall be determined in the same manner as the Adjustment
Amount except that, for purposes of determining the Estimated Adjustment
Amount, Closing Date Working Capital shall be determined from the
Preliminary Closing Date Balance Sheet (as defined below) which shall be
prepared by Seller in good faith in accordance with GAAP and consistent
with past practice and delivered to Buyer on the 5th business day
immediately preceding the Closing Date and reasonably approved by Buyer as
to its preparation in accordance with the foregoing criteria, minus the
Deposit (as defined in Section 3.2 below), minus the Purchase Price
Adjustment Escrow Amount (as defined in Section 3.3 below), in immediately
available U.S. funds by confirmed wire transfer to a bank account to be
designated by Seller or by such other means as are agreed upon by Buyer
and Seller; and
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(ii) Pay to the Price Adjustment Escrow Agent (as defined in
Section 3.3) the Purchase Price Adjustment Escrow Amount in immediately
available U.S. funds by confirmed wire transfer to a bank account to be
designated by the Price Adjustment Escrow Agent; and
(iii) Instruct the Deposit Escrow Agent (defined in Section
3.2) to deliver the Deposit (and interest accrued thereon) to Seller by
such means as Seller and the Deposit Escrow Agent shall agree.
(c) For purposes hereof, the following terms shall have the
following definitions.
(i) "Closing Date Working Capital" of Xxxxxxxx and Waterlink
UK and the Subsidiaries shall mean, from the Final Closing Date Balance
Sheet (as defined below), (a) the sum of (i) Waterlink UK and the
Subsidiaries' cash, (ii) Xxxxxxxx'x and Waterlink UK and the Subsidiaries'
accounts receivable (other than intercompany trade receivables and
intercompany notes receivable) net of reserves, (iii) Xxxxxxxx'x and
Waterlink UK and the Subsidiaries' Inventory net of reserves, (iv)
Xxxxxxxx'x and Waterlink UK and the Subsidiaries' costs in excess of
xxxxxxxx relating to completed jobs and work-in-process, (v) Xxxxxxxx'x
deferred income taxes and (vi) Xxxxxxxx'x and Waterlink UK and the
Subsidiaries' other current assets, less (b) the sum of (i) post-petition
accounts payable of Xxxxxxxx (other than intercompany trade payables and
intercompany notes payable) and accounts payable of Waterlink UK and the
Subsidiaries (other than intercompany trade payables and intercompany
notes payable), (ii) accrued expenses of Xxxxxxxx and Waterlink UK and the
Subsidiaries, (iii) xxxxxxxx in excess of costs relating to completed jobs
and work-in-process of Xxxxxxxx and Waterlink UK and the Subsidiaries,
(iv) Accrued Income Taxes (as defined in Section 1.3(b)(ii)) and accrued
income taxes of Waterlink UK and the Subsidiaries and (v) Waterlink UK and
the Subsidiaries' current maturities of long-term debt. Notwithstanding
the foregoing, neither any Excluded Assets (nor any excluded liabilities)
shall be taken into account for purposes of computing Closing Date Working
Capital.
(ii) "Preliminary Closing Date Balance Sheet" shall mean an
estimated consolidated balance sheet of Xxxxxxxx, Waterlink UK and the
Subsidiaries as of the Closing Date.
(iii) "Final Closing Date Balance Sheet' shall mean the
consolidated balance sheet delivered by Seller to Buyer in accordance with
Section 3.4.1.
Section 3.2. Deposit. Concurrently with the execution and delivery of this
Agreement by Buyer and Seller, Buyer shall deposit into escrow (the "Deposit
Escrow") with Xxxxx & Xxxxxxxxx LLP, as escrow agent (the "Deposit Escrow
Agent") a deposit in the amount of $5,000,000 (the "Deposit") in immediately
available funds to be held by the Deposit Escrow Holder in an interest bearing
account pursuant to this Section 3.2. Interest earned on the Deposit shall be
credited to and become a part of the Deposit. If the Closing occurs, then at the
Closing, the Deposit (and all interest accrued thereon) shall be credited toward
the Purchase Price. In the event that this Agreement is terminated by reason of
Buyer's material default hereunder or the failure of Buyer to fulfill the
conditions specified in Sections 9.2(b), (c) or (e), the Deposit Escrow Holder
shall deliver the Deposit (together with all interest thereon) to Seller without
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prejudice to any rights that Seller may otherwise have hereunder. If this
Agreement is terminated pursuant to Section 10.1 of this Agreement (other than a
termination pursuant to Section 10.1(c) or (e)), then the Deposit shall be
returned to Buyer.
Section 3.3. Purchase Price Adjustment Escrow. Notwithstanding anything to
the contrary in this Agreement, Buyer and Seller agree that, at the Closing,
Seller shall deposit (via diversion of a portion of the Purchase Price otherwise
due at Closing) into escrow (the "Purchase Price Adjustment Escrow") with an
escrow agent or company as may be agreed upon by the Parties (the "Price
Adjustment Escrow Agent"), $1,250,000 (the "Purchase Price Adjustment Escrow
Amount") in immediately available U.S. funds pursuant to an escrow agreement
reasonably agreeable to, and by and among, Buyer, Seller and the Price
Adjustment Escrow Agent (the "Price Adjustment Escrow Agreement"). Upon receipt
of the Purchase Price Adjustment Escrow Amount, the Price Adjustment Escrow
Agent shall immediately deposit the Purchase Price Adjustment Escrow Amount into
an interest-bearing account. The Purchase Price Adjustment Escrow Amount shall
be held until such time as the Adjustment Amount is final and binding (the
"Purchase Price Adjustment Escrow Period"), and shall be used solely as a source
of payment to satisfy Seller's obligation, if any, to pay any difference between
the Estimated Adjustment Amount and the final Adjustment Amount under Section
3.4 hereof. Such Purchase Price Adjustment Escrow Amount shall otherwise be
administered and released during the Purchase Price Adjustment Escrow Period as
specifically provided for herein and in the Price Adjustment Escrow Agreement.
Section 3.4. Post-Closing Purchase Price Adjustment.
3.4.1 Unless the Parties shall have agreed on the Adjustment Amount
on or before the Closing Date, Seller shall, within forty-five (45) days of the
Closing Date, prepare and deliver to Buyer a consolidated balance sheet of
Xxxxxxxx, Waterlink UK and the Subsidiaries as of the Closing Date (the "Final
Closing Date Balance Sheet") based on which Seller will have determined the
Closing Date Working Capital and the Adjustment Amount. Buyer may object to
Seller's determination of the Adjustment Amount by delivery of a written
statement of objections (stating the basis of the objections with reasonable
specificity) to Seller within fifteen (15) days following delivery to it by
Seller of such consolidated balance sheet. If Buyer makes such objection, then
Buyer and Seller shall seek in good faith to resolve all disagreements set forth
in Buyer's written statement of objections within twenty (20) days following the
delivery thereof. In the event Buyer and Seller are unable to resolve all such
disagreements within such twenty (20) day period, then either of them may elect,
by written notice to the other, to have all such unresolved disagreements
resolved by an accounting firm of recognized national standing acceptable to
Buyer and Seller and not then employed by either Seller or Buyer (the "Selected
Accounting Firm"), provided that, if Buyer and Seller cannot agree upon the
accounting firm to serve as the Selected Accounting Firm, then the Bankruptcy
Court shall make the determination, which shall be final and binding on the
Parties. Each of Buyer and Seller shall promptly deliver its proposed Adjustment
Amount and support thereof to the Selected Accounting Firm, and shall jointly
instruct the Selected Accounting Firm to select either Buyer's or Seller's
proposed Adjustment Amount, which selected Adjustment Amount shall be deemed
accepted by Buyer and Seller for all purposes of this Agreement. No appeal from
such determination shall be permitted. The Selected Accounting Firm shall be
further instructed to use every reasonable effort to perform its services within
thirty (30) days after submission to it of the proposed
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Adjustment Amounts and, in any case, as soon as practicable after such
submission. The costs and expenses for the services of the Selected Accounting
Firm shall be borne by the Party whose proposed Adjustment Amount is not
selected. Notwithstanding anything to the contrary herein, any obligation of
Seller to Buyer for the post-closing adjustment under this Section 3.4 shall be
limited to, and shall not exceed, the Purchase Price Escrow Amount, and Buyer
shall have no claim against Seller for, or any recourse for recovery of, any
amount beyond the Purchase Price Escrow Amount.
3.4.2 If the Purchase Price as either agreed by the Parties or
selected by the Selected Accounting Firm or determined by the Bankruptcy Court
is less than the Preadjustment Cash Purchase Price plus or minus, as the case
may be, the Estimated Adjustment Amount, then the amount of such short-fall
shall be promptly paid to Buyer by the Price Adjustment Escrow Agent from the
Purchase Price Adjustment Escrow Amount in immediately available U.S. funds by
confirmed wire transfer to a bank account to be designated by Buyer. If such
Purchase Price is greater than the Preadjustment Cash Purchase Price plus or
minus, as the case may be, the Estimated Adjustment Amount, then the amount of
such excess shall be promptly paid to Seller by Buyer in immediately available
U.S. funds by confirmed wire transfer to a bank account to be designated by
Seller.
3.5 Taxes; Prorations. All stamp and other taxes imposed as a result of
the transfer by Seller of the Assets and the Stock shall be paid by Buyer,
except to the extent exempted by Section 1146(c) of the Bankruptcy Code. All
real, personal and other similar property taxes assessed on the Assets and the
Stock relating to all periods on or prior to the Closing shall be the
responsibility of Seller. All real, personal and other similar property taxes
assessed on the Assets relating to all periods after the Closing shall be the
responsibility of Buyer. All real, personal and similar property taxes which
have accrued but are not due as of the Closing Date shall be prorated on a per
diem basis.
ARTICLE IV
THE CLOSING
The closing of the Asset Purchase and the Stock Purchase (the
"Closing") shall be held at the offices of Xxxxx & Xxxxxxxxx LLP in Columbus,
Ohio at such time and on such date as shall be fixed by agreement of the Parties
after the conditions set forth in Article IX have been satisfied or waived and
as soon as practicable after the Sale Order becomes final, and the Parties shall
use their respective best efforts to cause the Closing to occur no later than
three business days after the Sale Order becomes final. The date of the Closing
shall be referred to herein as the "Closing Date."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
Section 5.1. Organization and Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
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Section 5.2. Power and Authority. Buyer has all requisite power and
authority to enter into this Agreement and perform its obligations under this
Agreement. This Agreement, the Asset Purchase and the Stock Purchase have been
duly and validly authorized by all necessary action on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer and constitutes the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms.
Section 5.3. Brokers. Buyer is not under any obligation to any broker or
other person (a "Broker") in connection with the transactions contemplated
in this Agreement that would cause Seller to become liable for payment of
any fee or expense with respect thereto (a "Commission").
Section 5.4. No Violations. Neither the execution, delivery, or
performance of this Agreement by Buyer, nor the consummation by Buyer of the
transactions contemplated hereby, nor compliance by Buyer with any of the
provisions hereof, will (a) conflict with or result in any breach of any
provisions of the certificate of incorporation or bylaws of Buyer, (b) result in
a violation or beach of, or constitute (with or without due notice or lapse of
time) a default (or give rise to any right of termination, cancellation,
acceleration, vesting, payment, exercise, suspension, or revocation) under any
of the terms, conditions, or provisions of any note, bond, mortgage, deed of
trust, security interest, indenture, license, contract, agreement, plan, or
other instrument or obligation to which Buyer is a party or by which Buyer or
Buyer's properties or assets may be bound or affected, or (c) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Buyer or
Buyer's properties or assets.
Section 5.5. Financing. On the date of Buyer's execution and delivery of
this Agreement, at all times thereafter up until the Closing, and on the Closing
Date, Buyer will have cash on hand or committed financing proceeds sufficient to
deliver the Purchase Price to Seller in accordance with the terms of this
Agreement.
Section 5.6. Consents and Approvals. No consent, approval, or
authorization of, or declaration, filing or registration with, any United States
federal or state governmental or regulatory authority is required to be made or
obtained by Buyer in connection with the execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated hereby.
Section 5.7 Legal Proceedings and Judgments. There are no material claims,
actions, proceedings or investigations pending or, to Buyer's knowledge,
threatened against or relating to Buyer before any court or other governmental
authority acting in an adjudicative capacity that could have a material adverse
effect on Buyer's ability to consummate the transactions contemplated hereby.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELLER
With respect to the Asset Purchase, each Seller hereby jointly and
severally represents and warrants to Buyer as follows:
Section 6.1. Organization and Standing. Xxxxxxxx is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Ohio.
Section 6.2. Power and Authority. Subject to the Bankruptcy Court's entry
of the Sale Order, Xxxxxxxx has all requisite corporate power and authority to
enter into this Agreement and to perform its obligations under this Agreement.
This Agreement and the Asset Purchase have been duly and validly authorized by
all necessary corporate action on the part of Xxxxxxxx. This Agreement has been
duly executed and delivered by Xxxxxxxx and, upon entry by the Bankruptcy Court
of the Sale Order, shall constitute the legal, valid and binding obligation of
Xxxxxxxx, enforceable against Xxxxxxxx in accordance with its terms. Upon
execution of the documents to be executed and delivered at the Closing or
otherwise pursuant to this Agreement by Xxxxxxxx (the "Ancillary Asset Purchase
Documents"), such documents shall constitute the legal, valid and binding
obligations of Xxxxxxxx, enforceable in accordance with their terms, and,
subject to the Bankruptcy Court's entry of the Sale Order, no other action or
proceeding by or in respect of Xxxxxxxx is or was necessary to authorize this
Agreement, the Ancillary Asset Purchase Documents or the consummation of the
Asset Purchase.
Section 6.3. Consents and Approvals. Xxxxxxxx'x execution and delivery of
this Agreement and the Ancillary Asset Purchase Documents and consummation of
the Asset Purchase will not require any action or consent or approval of, or
review by, or registration with, any third party, court or governmental body or
other agency, instrumentality or authority, except (a) for consents, approvals,
or authorizations of, or declarations or filings with, the Bankruptcy Court, and
(b) for consents, approvals or authorizations which may be required under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act").
Section 6.4. Brokers. Xxxxxxxx is not under any obligation to any broker
or other third party in connection with the sale of the Assets or the other
transactions contemplated by this Agreement that would cause Buyer to become
liable for payment of any fee or expense with respect thereto.
Section 6.5 Compliance with Laws. The Business and Assets, and the assets,
properties and business of Waterlink UK and the Subsidiaries, have been operated
in material compliance with all applicable laws and all applicable governmental
judgments, decrees, injunctions or similar orders, writs, ruling directives or
other requirements (collectively, the "Governmental Orders") and each a
"Governmental Order") including, without limitation, those relating to the safe
conduct of the Business and the business of Waterlink UK and the Subsidiaries,
environmental protection, consumer protection, equal opportunity discrimination,
health and occupation safety. There are no claims, lawsuits, demands, suits,
inquiries, hearings, investigations, notice of violations, litigations,
proceedings, arbitrations, or other disputes, whether civil, criminal,
administrative or otherwise pending against any Seller or any subsidiary, or, to
the knowledge of Seller, threatened, nor has Seller received or aware of any
written notice, regarding any material
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violations of any applicable regulations and Governmental Orders enforced by any
authority claiming jurisdiction over a Seller or any Subsidiary.
Section 6.6 Financial Statements. Seller has provided Buyer true, complete
and correct copies of (i) the audited consolidated balance sheets of Seller as
of September 30, 2002 and 2001, respectively, and the related audited
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the fiscal years then ended (the "Audited Financial Statements"), and
(ii) the unaudited consolidating balance sheet of Seller as of September 30,
2003 and the related unaudited consolidating statement of operations for the
twelve months ended September 30, 2003 (the "Consolidating Financial
Statements," and together with the Audited Financial Statements shall be
collectively referred to as the "Financial Statements"). A copy of the
Consolidating Financial Statements is attached hereto as Schedule 6.6. The
Audited Financial Statements have been audited by Ernst & Young LLP in
accordance with U.S. generally accepted accounting principles, consistently
applied ("GAAP"). The balance sheets included in the Financial Statements and
the notes thereto fairly present the consolidated financial position of Seller
at the respective date thereof in accordance with GAAP and such statements of
operations, changes in stockholders' equity and cash flows and the notes thereto
included in the Financial Statements fairly present the result of operations for
the periods referred to therein, in accordance with GAAP, except that the
Consolidating Balance Sheet has no notes attached thereto and does not have
year-end audit adjustments (none of which would be material or recurring). The
Financial Statements were prepared from the books and records of Seller. To
Seller's knowledge, there has been, since September 30, 2003, no material
adverse change to the financial performance, past or as currently budgeted,
except for sales declines and other consequences directly attributable to the
filing of the Chapter 11 Case. Each of the consolidated and consolidating
financial statements of Seller and its Subsidiaries, including, in each case,
the notes thereto, made available to Buyer comply, in all material respects,
with applicable accounting requirements and with the published rules and
regulations of the Securities and Exchange Commission with respect thereto. The
books and records of Seller and its Subsidiaries have been, and are being,
maintained in accordance with GAAP and applicable law.
Section 6.7 Properties.
(a) Schedule 6.7 sets forth the street address of all real property
used or held for use in the Business and in the business of Waterlink UK and the
Subsidiaries (the "Real Property") or, which Seller owns, leases, operates,
occupies, or subleases in connection with the Business and which are included in
the Assets or upon which any tangible Assets are located and which are included
in the business of Waterlink UK and the Subsidiaries and all instruments,
easements, leases, subleases, options and other material agreements (including
all amendment thereto) creating any interest or right in Seller or any other
partying any of the Real Property specifying whether such Real Property is owned
or leased and in the case of leases or subleases, the name of the lessor or
sublessor.
(b) Xxxxxxxx owns fee simple title to all the Real Property included
in the Assets other than the Real Property in which it has a leasehold interest.
Each of Xxxxxxxx, Waterlink UK and the Subsidiaries is the undisputed lessee
with respect to the Real Property leased by it and has the right to quiet
enjoyment and undisturbed possession of such property, as well as the right to
continue to conduct its Business or business, as the case may be, without any
claims by any lessors, mortgagees or other persons, subject to the terms and
conditions of the
16
Real Property leases thereto and any mortgage, Liens or other encumbrances
affecting any of the Real Property and incurred by the landlord or prior owners
of any of the Real Property, except for Liens and security interests of Seller's
lenders. There has been no disturbance of, or challenge to, the quiet possession
of Xxxxxxxx, Waterlink UK or any Subsidiary under such leases.
(c) At the Closing, Seller will convey good and valid title to, or a
valid leasehold interest in, all tangible personal property included in the
Assets that are material to the operation of the Business.
(d) As of the Closing Date, Seller will have and will transfer to
the Buyer title to all of the Assets necessary to operate the Business as
currently operated, free and clear of all Liens, Debts, Claims and other
encumbrances.
(e) Except as set forth in Schedule 6.7, neither the Assets nor the
assets and properties of Waterlink UK or any Subsidiary include real property.
Section 6.8 Customer Warranties. There have been no pending, nor to the
best knowledge of Seller, threatened, claims under or pursuant to any warranty,
whether expressed or implied, on products or services sold prior to the Closing
Date by Seller or any Subsidiary that are not disclosed or referred to in the
Financial Statements and, to the best of Seller's knowledge, that are not fully
reserved against in accordance with GAAP. To the best of Seller's knowledge, all
such reserved amounts are sufficient to cover such disclosed or referenced
claims. All of the services rendered by Seller and each Subsidiary (whether
directly or indirectly through independent contractors) have been performed in
conformity with all expressed warranties and, in all material respects, with all
applicable contractual commitments, and Seller does not have nor shall it have
any liability for replacement or repair or for other damages relating to or
arising from any such services, except for amounts incurred in the ordinary
course of business which are immaterial in the aggregate and not required by
GAAP to be disclosed in the Financial Statements. To the best of Seller's
knowledge, there is no reason to expect an increase in warranty claims in the
future.
Section 6.9. Sufficiency of Assets. The Assets constitute all the assets
necessary for the continued operation of the Business after the Closing in
substantially the same manner as conducted prior to the Closing. The assets and
properties of Waterlink UK and the Subsidiaries constitute all the assets and
properties necessary for the continued operation by them of their respective
businesses after the Closing in substantially the same manner as conducted prior
to the Closing.
ARTICLE VII
WARRANTIES OF WATERLINK
With respect to the Stock Purchase, Waterlink warrants to Buyer as
follows:
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Section 7.1. Organization and Standing. Waterlink UK and each subsidiary
is duly incorporated and validly existing in accordance with the laws of England
and Wales. Waterlink UK and each Subsidiary is duly qualified to do business and
is in good standing under the laws of (i) each jurisdiction in which it owns or
leases property and (ii) each other jurisdiction in which the conduct of its
business or the ownership of its assets requires such qualification. Waterlink
UK and each Subsidiary has all requisite corporate power and authority to own
its properties and carry on its business as presently conducted.
Section 7.2. Power and Authority. Subject to the Bankruptcy Court's entry
of the Sale Order, Waterlink has all requisite corporate power and authority to
enter into this Agreement and to perform its obligations under this Agreement.
This Agreement and the Stock Purchase have been duly and validly authorized by
all necessary corporate action on the part of Waterlink. This Agreement has been
duly executed and delivered by Waterlink and constitutes the legal, valid and
binding obligation of Waterlink, enforceable against Waterlink in accordance
with its terms. Upon execution of the documents to be executed and delivered at
the Closing or otherwise pursuant to this Agreement by Waterlink, Waterlink UK
and/or the Subsidiaries (the "Ancillary Stock Sale Documents"), such documents
shall constitute the legal, valid and binding obligations of each of them, as
applicable, enforceable in accordance with their terms, and no other action or
proceeding by or in respect of any of them is or was necessary to authorize the
Stock Purchase (save in respect of any applicable requirements under the laws of
England and Wales in relation to stamp duty payable on such Stock Purchase
payable by Seller at Closing).
Section 7.3. Consents and Approvals. Waterlink's execution and delivery of
this Agreement and consummation of the Stock Purchase, and execution and
delivery of the Ancillary Stock Purchase Documents by Waterlink, Waterlink UK
and the Subsidiaries, will not require any action or consent or approval of, or
review by, or registration with, any third party, court or governmental body or
other agency, instrumentality or authority other than the Bankruptcy Court's
entry of the Sale Order, and any applicable requirements under the laws of
England and Wales in relation to stamp duty payable on such Stock Purchase,
except for any consents required under Seller's credit agreement with its senior
secured lenders.
Section 7.4. Share Capital and Ownership. Waterlink owns all of the issued
and outstanding issued share capital of Waterlink UK, and Waterlink UK owns all
of the issued and outstanding issued share capital of each Subsidiary. All such
issued and outstanding share capital of Waterlink UK and all of the issued and
outstanding share capital of each Subsidiary is validly issued, fully paid and
non-assessable, and all such shares of share capital are owned by Waterlink and
Waterlink UK, respectively, free and clear of all Liens, pledges, encumbrances,
charges, agreements or claims of any kind whatsoever, except as set forth in
Schedule 7.4 hereof. At the Closing, all of the shares of share capital of
Waterlink UK and of each Subsidiary shall be sold, assigned, and transferred to
the Buyer free and clear of all such Liens, pledges, encumbrances, charges,
agreements and claims. There are no outstanding subscriptions, options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
preemptive rights, rights of purchase, issuance, allotment, redemption,
repayment or transfer or sale of any shares of the share capital of Waterlink UK
or any Subsidiary, other than as contemplated by this Agreement.
Section 7.5. Brokers. Neither Waterlink nor Waterlink UK nor any
Subsidiary is under any obligation to any Broker or other third party in
connection with the sale of the Stock or the other
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transactions contemplated in this Agreement that would cause Buyer, Waterlink UK
or any Subsidiary to become liable for payment of any fee or expense with
respect thereto.
Section 7.6. Absence of Long-Term Obligations. Neither Waterlink nor
Waterlink UK nor any Subsidiary has any outstanding long-term liabilities, other
than with respect to UK pension obligations.
ARTICLE VIII
COVENANTS OF THE PARTIES
Section 8.1. General. Each Party shall use all reasonable efforts to take
all actions and do all things reasonably necessary, proper or advisable to
consummate the Stock Purchase and the Asset Purchase and to obtain approval and
entry of the Sale Order (defined in Section 8.2(a)(ii)) and the BId Procedures
Order (defined in Section 8.2(a)(i)), including satisfying the cloSIng
conditions set forth in Article IX, but subject to Seller's right, pursuant to
Section 10.1(g) of this Agreement, to terminate this Agreement in The event
Seller closes an Alternative Transaction that constitutes a Qualified Bid.
Section 8.2. Applications to Bankruptcy Court.
(a) As soon as practicable after execution of this Agreement (and in
no event later than 3 business days thereafter), Seller shall apply to the
Bankruptcy Court for:
(i) the entry of an order, in form and substance satisfactory
to Buyer and its counsel, approving an auction and overbid procedures (the
"Bid Procedures Order"), which Bid Procedure Order shall (i) fix the time,
date and location of a hearing (the "Approval Hearing") to approve
Seller's consummation of the transactions contemplated by this Agreement,
(ii) fix the time and date of an auction (the "Auction") to be held at the
Cleveland, Ohio offices of either National City Corporation, Seller's
investment banker ("NatCity") or Xxxxx & Xxxxxxxxx LLP, Seller's counsel,
at which higher and better offers to purchase the Assets and the Stock may
be presented to Seller (which offers must include cash of not less than
$27,200,000 (each such offer, a "Qualified Bid")), (iii) fix deadlines
prior to the Auction for (A) Seller to serve a notice upon all
counterparties to Assumed Contracts advising said parties as to the
potential assumption by Seller and assignment to Buyer of each of the
Assumed Contracts and as to the Cure Amount necessary to be paid in order
for the Assumed Contracts to be assigned to Buyer under Section 365 of the
Bankruptcy Code; and (B) all counterparties to Assumed Contracts to file
with the Bankruptcy Court and serve upon both Buyer and Seller any and all
objections to Cure Amounts and/or the assumption by Buyer and assignment
to Seller of each of the Assumed Contracts, (iv) provide that if Seller
receives from a third party a Qualified Bid to purchase the Assets and the
Stock at the Auction, such third party is subsequently approved by the
Bankruptcy Court, such Qualified Bid closes in accordance with its terms,
Buyer has not previously terminated this Agreement and has remained
willing, ready and able to close under this Agreement, and Seller has not
terminated this Agreement pursuant to Sections 10.1(c) or (e)(ii), then
Buyer will be entitled to receive from Seller, in addition to the Expense
Reimbursement provided in Section 10.3, a flat fee payment (not dependent
on amounts actually expended or incurred by Buyer) in cash or other
immediately available funds in the amount of three percent
19
(3%) of the Preadjustment Cash Purchase Price (the "Break-Up Fee") which
payment shall be made to Buyer concurrently with the consummation of such
third party sale, (v) provide that no prospective purchaser will be
permitted to bid at the Auction unless such party has been deemed
"financially qualified" by NatCity, (vi) provide that no Qualified Bid
shall be accepted unless it is on terms at least as favorable in Seller's
judgment as those set forth in this Agreement, and (vii) after any initial
overbid, all further overbids must be in increments of at least $200,000.
Should overbidding take place, Buyer shall have the right, but not the
obligation, to participate in the overbidding and to be approved as the
overbidder at the Approval Hearing based upon any such overbid; and
(ii) the entry of an order, in form and substance satisfactory
to Buyer and its counsel, approving this Agreement and all the
transactions contemplated hereby (the "Sale Order"), which Sale Order
shall (i) approve the sale of the Assets and the Stock to Buyer on the
terms and conditions set forth in this Agreement and authorize Seller to
proceed with such sale, (ii) state that the sale of the Property to Buyer
shall be free and clear of all Liens, Debts and Claims, and any other
encumbrances whatsoever (except as expressly provided in this Agreement)
to the fullest extent permitted by the Bankruptcy Code, (iii) fix Cure
Amounts for each Assumed Contract and, to the extent permissible under
Section 365 of the Bankruptcy Code, approve Seller's assumption, and
assignment to Buyer, of the Assumed Contracts pursuant to Section 365 of
the Bankruptcy Code and order Buyer to pay the Cure Amounts as a condition
to such assumption and assignment; and (iv) provided that Buyer is the
successful bidder at the Auction, include a specific finding and
conclusion of law that Buyer has acted in good faith in connection with
its purchase of the Property and is entitled to all protections of Section
363(m) of the Bankruptcy Code.
All Parties shall use commercially reasonable efforts to have the Bankruptcy
Court enter the Bid Procedures Order as soon as practicable following the filing
of the motion therefor.
Section 8.3. Maintenance of Acquired Assets. Seller shall, during the
period from the Effective Date until the Closing Date (or until the termination
of this Agreement pursuant to Article X), maintain the Assets, all properties
and assets of Waterlink UK and the Subsidiaries, and all of Waterlink UK's and
the Subsidiaries' net operating losses, in each case consistent with past
practice, subject to any restrictions imposed by the Bankruptcy Court.
Section 8.4. Inspections. From and after the Effective Date, Buyer and its
employees, agents and representatives, upon prior written notice to Seller,
shall be allowed reasonable access to the businesses of Xxxxxxxx and Xxxxxxxx at
reasonable times for purposes of inspection; provided, however, that such access
shall not unreasonably interfere with either Seller's operation of its business
and shall be at Buyer's expense and provided further that Seller shall not be
required to take any action which would constitute a waiver of the
attorney-client privilege.
Section 8.5. Public Statements. Buyers shall consult with Seller prior to
issuing any public announcement, statement or other disclosure with respect to
this Agreement or the transactions contemplated hereby, except that each Party
may make disclosures with respect to this Agreement and the transactions
contemplated hereby to the extent required by law or by the rules or regulations
of any securities exchange or commission.
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Section 8.6. Ability to Pay Purchase Price. As of the Effective Date,
and as necessary or desirable in Seller's discretion until the Closing, Buyer
shall demonstrate to Seller's to Seller's satisfaction, that Buyer has
sufficient cash on hand or available financing proceeds or commitments to pay
the Purchase Price at the Closing.
Section 8.7. Union Contract. Without the prior written consent of
Buyer, Xxxxxxxx shall not enter into a new, or amend or otherwise modify the
existing, union contract with United Steel Workers of America.
ARTICLE IX
CONDITIONS TO CLOSING
Section 9.1. Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the Asset Purchase and the Stock Purchase shall be subject
to Seller's fulfillment on or prior to the Closing Date of each of the following
conditions unless waived by Buyer in writing:
(a) the Bankruptcy Court shall have entered and approved the Bid
Procedures Order;
(b) the Bankruptcy Court shall have entered and approved the
Sale Order;
(c) Seller shall have performed and complied in all material
respects with all of its agreements and covenants hereunder on and as of the
Closing Date;
(d) there shall not be any order of any governmental entity (a
"Governmental Order") in effect preventing consummation of the transactions
contemplated by this Agreement;.
(e) the representations and warranties of Seller contained in
this Agreement shall be true and correct in all material respects on and as of
the Closing Date;
(f) Buyer shall have received the Preliminary Closing Date
Balance Sheet in accordance with Section 3.1 hereof, which shall have been
prepared by Seller in good faith in accordance with GAAP and consistent with
past practice and reasonably approved by Buyer as to its preparation in
accordance with the foregoing criteria;
(g) Buyer shall have received an opinion of Seller's counsel
reasonably acceptable to Buyer attesting to, among other things, the validity of
the transfer of the Stock; and
(h) Seller shall have delivered, or caused to be delivered, to
Buyer a certificate (or its equivalent) dated not greater than ten (10) business
days prior to the Closing of the Secretary of State (or its equivalent) of its
jurisdiction of organization as to the existence and good standing (or its
equivalent) therein.
(i) Prior to the Closing, Seller shall have taken such action as
is reasonably required to apply for an extension to the exemption notice
received June 21, 1999 from Inland Revenue, U.K., pertaining to the deduction of
tax related to the payment of interest on the Waterlink UK intercompany note
referenced on Schedule 1.2.
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Section 9.2. Conditions to Obligations of Seller. The obligation of
Seller to consummate the Asset Purchase and the Stock Purchase shall be subject
to Buyer's fulfillment on or prior to the Closing Date of the following
conditions, unless waived by the Seller in writing:
(a) the Bankruptcy Court shall have approved and entered the
Sale Order;
(b) the representations and warranties of Buyer contained in
this Agreement shall be true and correct in all material respects on and as of
the Closing Date;
(c) Buyer shall have performed and complied in all material
respects with all of its agreements and covenants hereunder on and as of the
Closing;
(d) there shall not be any Governmental Order in effect
preventing consummation of the transactions contemplated by this Agreement; and
(e) Buyer shall have delivered, or caused to be delivered, to
Seller a certificate dated not greater than ten (10) business days prior to the
Closing of the Secretary of State of its jurisdiction of organization as to the
existence and good standing of Buyer in the that State.
Seller may waive any condition specified in this Section 9.2, except for the
condition that the Bankruptcy Court shall have approved and entered the Sale
Order.
ARTICLE X
TERMINATION
Section 10.1. Termination of Agreement. The Parties may terminate this
Agreement prior to the Closing as provided below:
(a) The Parties may terminate this Agreement by mutual written
consent at any time prior to the entry of the Sale Order;
(b) Buyer may terminate this Agreement by giving written notice
to Seller in the event Seller is in material breach of any material
representation, warranty or covenant in this Agreement that is not qualified by
materiality or Seller is in breach of any representation, warranty or covenant
in this Agreement that is so qualified, and such breach has not been cured
within ten (10) business days following the delivery of written notice thereof
to Seller (provided that Buyer is not then in breach of this Agreement);
(c) Seller may terminate this Agreement by giving written notice
to Buyer in the event (i) Buyer is in material breach of any material
representation, warranty or covenant contained in this Agreement and (ii) such
breach has not been cured within ten (10) business days following the delivery
of written notice thereof to Buyer (provided that Seller is not then in breach
of this Agreement);
(d) Buyer or Seller may terminate this Agreement if the
Bankruptcy Court denies the motion for entry of the Bidding Procedures Order or
fails to approve the
22
Break-Up Fee or fails to enter the Bidding Procedures Order (in form reasonably
satisfactory to both Parties);
(e) Seller may terminate this Agreement if (i) any of the
conditions set forth in Section 9.2(a) or (d) shall have become incapable of
fulfillment, or (ii) any of the conditions set forth In Section 9.2(b), (c) or
(e) shall have become incapable of fulfillment or cure by Buyer and shall not
have been waived by Seller, provided that Seller is not then in breach of this
Agreement;
(f) Buyer may terminate this Agreement if any of the conditions
set forth in Section 9.1 shall have become incapable of fulfillment or cure by
Seller and shall not have been waived by Buyer, provided that Buyer is not then
in breach of this Agreement; or
(g) Buyer or Seller may terminate this Agreement if Seller
consummates an Alternative Transaction or files a plan of reorganization which
shall be funded by an Alternative Transaction, in either case that constitutes a
Qualified Bid. For purposes hereof, an "Alternative Transaction" shall mean any
asset sale, stock sale, merger, debt for equity swap, joint venture, financing,
reorganization, recapitalization, funding of a plan of reorganization in the
Bankruptcy Case, or transfer of any convertible debt, convertible equity or
warrants the effect of which, individually or in the aggregate, is the direct or
indirect transfer of any or all of the Assets and Stock, or any similar
transaction that does not involve a sale of all of the Assets and Stock to
Buyer.
(h) Buyer or Seller may terminate this Agreement if a motion to
dismiss the Chapter 11 Case or a motion to convert the Chapter 11 Case or the
appointment of a trustee, receiver, liquidator or other similar person for the
purpose of liquidating any of the Assets other than pursuant to this Agreement
has been granted in the Bankruptcy Case; or
(i) Buyer or Seller may terminate this Agreement if a Closing
shall not have occurred by February 15, 2004.
Section 10.2. Default. If this Agreement is terminated under
Section 10.1, written notice thereof will forthwith be given to the other Party
and this Agreement will thereafter become void and have no further force and
effect and, except for those provisions that expressly survive the termination
of this Agreement, all further obligations of Seller and the Buyer to each other
under this Agreement will terminate without further obligation or liability of
Seller or Buyer to the other (other than with respect to breaches, if any, of
this Agreement prior to such termination), except that:
(a) Each Party will return all documents, workpapers and other
material of any other party relating to the transactions contemplated by this
Agreement, whether so obtained before or after the execution of this Agreement,
to the Party furnishing the same.
(b) If this Agreement is terminated pursuant to Article 10.1
of this Agreement (other than a termination pursuant to Section 10.1(c) or
(e)(ii)), then within two (2) business days after such termination, the Deposit
shall be returned to Buyer.
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(c) If this Agreement is terminated by Seller pursuant to
Section 10.1(c) or (e)(ii), then the Deposit shall be paid to Seller.
(d) If the Closing does not occur by reason of Seller
consummating an Alternative Transaction that constitutes a Qualified Bid, Seller
shall, on the date such Alternative Transaction is closed, pay the Break-Up Fee
to Buyer and return the Deposit to Buyer, provided that this obligation of
Seller shall not apply if Seller has terminated this Agreement pursuant to
Section 10.1(c) or (e)(ii) or if Buyer has previously terminated this Agreement
and has remained willing, ready and able to close under this Agreement.
(e) In the event of a default by Seller under this Agreement
after entry of the Sale Order by the Bankruptcy Court, the Buyer shall be
entitled to all of its remedies at law and in equity.
(f) Provided that an Alternative Transaction constituting a
Qualified Bid is consummated and the Break-Up Fee is otherwise earned in
accordance with the terms of this Agreement, the Break-Up Fee shall be entitled
to a superpriority administrative claim status pursuant to Sections 105, 503 and
507(b) of the Bankruptcy Code, senior to all other superpriority administrative
expense claims and shall be, and Seller's secured lenders will be provided
notice that the Break-Up Fee will be, payable by Seller to Buyer.
Section 10.3. Expense Reimbursement. In the event that this Agreement
is terminated by Buyer under Section 10.1(b), (f), (g) or (i), and provided that
Buyer is not in material breach of any provision of this Agreement at the time
of such termination, Seller shall be obligated to pay to Buyer an amount in cash
equal to the total amount of fees, costs and expenses incurred by Buyer in
connection with the preparation, execution and performance of this Agreement and
the transactions contemplated hereby, including without limitation all filing
and notification fees, and all fees and expenses of Buyer's Representatives (the
"Expense Reimbursement). The Expense Reimbursement shall not exceed $500,000
(the "Expense Reimbursement Limit"). Provided that the Expense Reimbursement
does not exceed the Expense Reimbursement Limit, Seller acknowledges and agrees
that the Expense Reimbursement is a reasonable amount given the size and
complexity of the transactions contemplated by this Agreement. The Expense
Reimbursement shall be paid by wire transfer or other means acceptable to the
Purchaser not later than five (5) business days following Seller's receipt of
written notice from Buyer describing in reasonable detail the fees and expenses
which constitute the Expense Reimbursement
Section 10.4. Extension; Waiver. At any time prior to the Closing,
Seller, on the one hand, or Buyer, on the other hand, may (i) extend the time
for the performance of any of the obligations or acts of the other Party, (ii)
waive any inaccuracies in the representations and warranties of the other Party
contained herein or in any document delivered pursuant hereto, (iii) waive
compliance with any of the agreements of the other Party contained herein or
(iv) waive any condition to its obligations hereunder. Any agreement on the part
of Seller, on the one hand, or Buyer, on the other hand, to any such extension
or waiver shall be valid only if set forth in writing.
ARTICLE XI
COVENANTS AFTER CLOSING
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Section 11.1. Access. During the six-year period following the Closing
Date and during normal business hours, Buyer will, and will cause its
affiliates, successors and assigns to, permit upon reasonable advance, at least
five (5) days, prior written notice (a) Seller and its representatives to have
access to the books, documents and records (including tax returns, files, papers
and related items) of, and relating to, Xxxxxxxx, its business or its employees,
in each case to the extent relating to any period prior to the Closing or the
legitimate business needs of Seller or any of its Affiliates, and permit Seller
and its representatives to make copies of such books, documents and records at
Seller's expense and (b) Seller and its representatives to have reasonable
access to the employees of Buyer and its Affiliates, and direct such employees
to cooperate with each of them, for Seller's or any of its Affiliates'
resolution of Tax, audit, litigation, accounting, securities or similar matters
that relate to any period prior to the Closing (whether such matters arose
before or after the Closing). Without limiting the generality of the foregoing,
Buyer agrees that such legitimate business needs include (i) defending or
pursuing claims, litigation or similar proceedings, (ii) preparing or making
filings contemplated by securities laws or stock exchange rules, (iii) preparing
or filing tax returns or responding to audits, and (iv) administering Seller's
bankruptcy estate.
ARTICLE XII
SURVIVAL
Section 12.1. Survival. None of the representations or warranties
contained herein or in any instrument or document delivered pursuant thereto
will survive the Closing, and none of the Parties nor any of their respective
officers, directors, representatives, employees, advisors or agents shall have
any liability to the other after the Closing for any breach thereof.
Section 12.2. "AS IS" TRANSACTION. BUYER HEREBY ACKNOWLEDGES AND AGREES
THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER MAKES NO (AND SELLER
EXPRESSLY DISCLAIMS AND NEGATES ANY) REPRESENTATIONS OR WARRANTIES OF ANY KIND
WHATSOEVER, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, WITH RESPECT TO THE
ASSETS OR ANY OTHER MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, INCOME TO
BE DERIVED OR EXPENSES TO BE INCURRED IN CONNECTION WITH THE ASSETS, THE
PHYSICAL CONDITION OF ANY PART OF THE ASSETS, THE ENVIRONMENTAL CONDITION OR
OTHER MATTER RELATING TO THE PHYSICAL CONDITION OF ANY REAL PROPERTY OWNED BY
SELLER OR WHICH ARE THE SUBJECT OF ANY ASSUMED CONTRACT AT THE CLOSING, THE
ZONING OF ANY SUCH REAL PROPERTY, THE VALUE OF THE ASSETS (OR ANY PORTION
THEREOF), THE TRANSFERABILITY OF THE ASSETS, THE TERMS, AMOUNT, VALIDITY OR
ENFORCEABILITY OF ANY ASSUMED LIABILITIES, THE TITLE OF THE ASSETS (OR ANY
PORTION THEREOF), THE MERCHANTABILITY OR FITNESS OF THE ASSETS FOR ANY
PARTICULAR PURPOSE, OR ANY OTHER MATTER OR THING RELATING TO THE ASSETS OR ANY
PORTION THEREOF. WITHOUT IN ANY WAY LIMITING THE FOREGOING, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, SELLER HEREBY DISCLAIMS ANY WARRANTY, EXPRESS OR
IMPLIED, OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE AS TO ANY
PORTION OF THE ASSETS. BUYER FURTHER ACKNOWLEDGES THAT BUYER HAS CONDUCTED AN
INDEPENDENT INSPECTION AND INVESTIGATION OF THE
25
PHYSICAL CONDITION OF THE ASSETS AND ALL SUCH OTHER MATTERS RELATING TO OR
AFFECTING THE ASSETS AS BUYER DEEMED NECESSARY OR APPROPRIATE AND THAT IN
PROCEEDING WITH ITS ACQUISITION OF THE ASSETS, EXCEPT FOR ANY REPRESENTATIONS
AND WARRANTIES EXPRESSLY SET FORTH HEREIN, BUYER IS DOING SO BASED SOLELY UPON
SUCH INDEPENDENT INSPECTIONS AND INVESTIGATIONS. ACCORDINGLY, SUBJECT TO BUYER'S
RIGHTS UNDER THIS AGREEMENT, BUYER WILL ACCEPT THE ASSETS AT THE CLOSING "AS
IS," "WHERE IS," AND "WITH ALL FAULTS" AND WITHOUT RECOURSE TO SELLER.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Notices. All notices and other communications under this
Agreement to a Party shall be in writing and shall be deemed given when
delivered personally, sent by facsimile (which is confirmed electronically) to
that Party at the facsimile number for that Party set forth below, mailed by
certified mail (return receipt requested) to that Party at the address for that
Party (or at such other address for such Party as such Party shall have
specified in notice to the other Party), or delivered to Federal Express, UPS,
or any similar express delivery service for delivery to that Party at that
address:
(a) If to Buyer:
Xxxxxxxx Acquisition Corp.
Sixty Xxx Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: I. Xxxxxx Xxxxxxx
Fax: 000-000-0000
and:
The Compass Group International, LLC
Sixty Xxx Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxx, Principal
Fax: 000-000-0000
with a copy to:
Squire, Xxxxxxx & Xxxxxxx LLP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Fax: 000-000-0000
26
(b) If to Seller:
Xxxxxxxx Xxxxxxxxx Corporation
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx, CEO
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxxxxx LLP
Capitol Square Suite 2100
00 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Section 13.2. Amendments. Any amendments to this Agreement shall be in
a writing, which may be executed in one or more counterparts and shall be
effective if executed by all Parties, and, to the extent necessary, approved by
the Bankruptcy Court.
Section 13.3. Non-Waiver. No failure by any Party to insist upon strict
compliance with any term OR provision of this Agreement, to exercise any option,
to enforce any right, or to seek any remedy upon any default of any other Party
shall affect, or constitute a waiver of, any other Party's right to insist upon
such strict compliance, exercise that option, enforce that right, or seek that
remedy with respect to that default or any prior, contemporaneous or subsequent
default. No custom or practice of the Parties at variance with any provision of
this Agreement shall affect or constitute a waiver of, any Party's right to
demand strict compliance with the provisions of this Agreement.
Section 13.4. Headings. The headings of the various articles and
sections of this Agreement are not part of the context of this Agreement, are
merely labels to assist in locating such articles and sections, and shall be
ignored in construing this Agreement.
Section 13.5. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.
Section 13.6. Entire Agreement. This Agreement (including all schedules
and other documents referred to in this Agreement all of which are hereby
incorporated by reference) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the Parties
with respect to its subject matter.
Section 13.7. No Third Party Beneficiaries. Nothing contained in this
Agreement, expressed or implied, is intended or shall be construed to confer
upon or give to any person, firm, corporation
27
or legal entity, other than the Parties, any rights, remedies or other benefits
under or by reason of this Agreement.
Section 13.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio without regard to
principles of conflicts of law. Any actions brought to enforce this Agreement,
or any breach hereof, or any obligation hereunder, shall be brought in the
Bankruptcy Court. Each of the parties hereto irrevocably and unconditionally
consents to submit to the jurisdiction of the Bankruptcy Court for any
litigation arising out of or relating to this Agreement and the transactions
contemplated thereby (and agrees not to commence any litigation relating thereto
except the Bankruptcy Court), waives any objection to the laying of venue of any
such litigation therein, and agrees not to plead or claim that such litigation
has been brought in an inconvenient form.
Section 13.9. Successors; Assignment. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by and against the Parties and
their respective heirs, personal representatives, successors and assigns.
Neither this Agreement nor any of the rights, interests or obligations under
this Agreement shall be transferred or assigned by any Party without the prior
written consent of the other Parties, provided that Buyer may, subject to the
provisions of Section 8.6, assign any of its rights (but not its obligations)
hereunder to any affiliate.
Section 13.10. Remedies. All rights and remedies of each Party under
this Agreement shall be cumulative and in addition to all other rights and
remedies which may be available to that Party from time to time, whether under
any other agreement, at law, or in equity.
Section 13.11. Descriptive Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 13.12. Publicity. No Party to this Agreement shall issue any
press release or other publicity concerning the proposed transaction without the
prior approval of the other Party, except as otherwise required by law. Each
Party shall provide to the other Party a reasonable opportunity to review any
press release prior to its issuance.
Section 13.13. Severability; Validity; Parties in Interest. If any of
the provision of this Agreement or the application thereof to any person or
circumstance is held invalid or unenforceable, the remainder of this Agreement,
and the application or such provision to other persons or circumstances, shall
not be affected thereby, and to such end, the provisions of this Agreement are
agreed to be severable. Nothing in this Agreement, express or implied, is
intended to confer upon any person not a party to this Agreement any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 13.14. Bulk Sales. Buyer hereby waives compliance with any bulk
sales or other similar laws in any applicable jurisdiction in respect of the
transaction contemplated by this Agreement.
Section 13.15. Costs and Expenses. Whether or not a Closing of the
Asset Sale and the Stock Sale as contemplated herein occurs, each party to this
Agreement will pay all costs and expenses incurred by it in connection with this
Agreement and the transactions contemplated hereby
28
except as otherwise provided herein. The foregoing shall not affect the legal
right, if any, that any Party may have to recover expenses from any other Party
that breaches its obligations hereunder.
Section 13.16. Announcements. This Agreement shall disclose any
information relating hereto without the prior written consent of the other
Parties prior to the public announcement, if any, of this Agreement, except for
such disclosures to such professional advisors of either Party as may be
necessary or appropriate in order to enter into this Agreement and consummate
the transactions contemplated by this Agreement. The provisions of this section
will be subject to the Parties' obligations to comply with applicable
requirements of federal or state laws or any governmental order or regulation,
including any order of the Bankruptcy Court, provided, however, that in such
case the disclosing Party shall give the other Party reasonable advance notice
of any such disclosure.
Section 13.17 Risk of Loss.
(a) Casualty. Seller will bear all risk of loss occurring to or
upon any portion of the Assets and the assets and properties of Waterlink UK and
the Subsidiary prior to the Closing Date. In the event that any material portion
of the Assets or of the assets and properties of Waterlink UK and the
Subsidiaries is damaged or destroyed prior to Closing Date (i) with respect to
such Assets, the Buyer may, at its option, exclude such Asset from this
Agreement or (ii) terminate this Agreement. If Buyer closes notwithstanding any
unrepaired or unrestored loss to such Assets or assets, Seller will deliver
and/or assign to the Buyer any insurance proceeds with respect to such damage or
destruction and there will be no adjustment to the Purchase Price.
(b) Condemnation. In the event that any portion of the Assets or
the assets and properties of Waterlink UK and the Subsidiaries is taken by
eminent domain or condemnation prior to the Closing Date and such taking
materially and adversely affects the use or utility of the Business or of the
business of Waterlink UK or the Subsidiaries, the Buyer may within ten (10) days
after it receives written notice of such taking either (i) proceed to close
notwithstanding the eminent domain or condemnation proceeding, in which event
Seller will assign to the Buyer its entire right, title and interest in and to
any award with respect to an Asset, (ii) exclude such Asset or (iii) terminate
this Agreement. If the Buyer closes notwithstanding any such condemnation,
Seller will deliver and/or assign to the Buyer any proceeds with respect to such
condemnation and there will be no adjustment to the Purchase Price.
Section 13.18. Severability. If any provision of this Agreement is
finally determined by a court of competent jurisdiction to be unenforceable,
such court shall have jurisdiction to reform such provision so that it is
enforceable to the maximum extent permitted by applicable law, and the Parties
shall abide by such court's determination. If any provision of this Agreement
cannot be reformed, such provision shall be deemed severed from this Agreement,
but every other provision of this Agreement shall remain in full force and
effect.
Section 13.19. Cooperation. Each Party will take all reasonable actions
necessary to comply promptly with all requirements contemplated by this
Agreement and will otherwise cooperate with, and furnish information to, the
other Party.
29
Section 13.20. Construction. The language used in this Agreement will
be deemed to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against any Party.
Any reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.
Section 13.21. Submission to Jurisdiction. Unless and to the extent
otherwise specifically provided herein, the Parties irrevocably submit to the
exclusive jurisdiction of the Bankruptcy Court (or any court exercising
appellate jurisdiction over the Bankruptcy Court) over any dispute arising out
of or relating to this Agreement or any other agreement or instrument
contemplated hereby or entered into in connection herewith or any of the
transactions contemplated hereby or thereby. Each Party hereby irrevocably
agrees that all claims in respect of such dispute or proceedings may be heard
and determined in such courts. The Parties irrevocably waive, to the fullest
extent permitted by applicable law, any objection which they may now or
hereafter have to the laying of venue of any such dispute or proceeding brought
in such courts or any defense of inconvenient forum in connection therewith.
* * * * * * * *
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
SIGNATURES APPEAR ON THE FOLLOWING PAGE.
30
Buyer: Seller:
XXXXXXXX ACQUISITION CORP. WATERLINK, INC.
By /s/ I. Xxxxxx Xxxxxxx By /s/ Xxxxxxx X. Xxxxxxxxxx
------------------------------------------ --------------------------------
Print Name I. Xxxxxx Xxxxxxx Print Name Xxxxxxx X. Xxxxxxxxxx
---------------------------------- ----------------------
Title President Title President and CEO
--------------------------------------- -----------------------------
XXXXXXXX SUTCLIFFE CORPORATION
By /s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------
Print Name Xxxxxxx X. Xxxxxxxxxx
----------------------
Title Chairman
-----------------------------
31
SCHEDULE 1.1(J)
ASSUMED CONTRACTS
NOTE: THE FINAL VERSION OF THIS SCHEDULE WILL BE PROVIDED BY BUYER TO SELLER
(AND ATTACHED HERETO AND INCORPORATED HEREIN) PRIOR TO THE SALE HEARING. SUCH
SCHEDULE SHALL INCLUDE WITHOUT LIMITATION THE FOLLOWING:
- ALL CUSTOMER CONTRACTS, INCLUDING, WITHOUT LIMITATION:
- THE ENGLEHARD CUSTOMER CONTRACT
- THE BRITA CUSTOMER CONTRACT
- THE ENGLEHARD SUPPLY CONTRACT (THE AGGREGATE OUTSTANDING PRE- AND
POST-PETITION OBLIGATIONS WITH RESPECT TO WHICH WERE APPROXIMATELY
$504,028 AS OF SEPTEMBER 30, 2003)
- THE HAYCARB SUPPLY CONTRACT (WITH RESPECT TO WHICH THERE WAS NO CURE
AMOUNT AS OF SEPTEMBER 30, 2003)
32
SCHEDULE 1.2
EXCLUDED ASSETS
- Any of Seller's cash and equivalents whatsoever, whether on hand, in
banks or elsewhere (other than cash or cash equivalents of Seller, if
any, held by or at Waterlink UK or its Subsidiaries).
- All retainers paid by Seller to its professional advisors in connection
with the Chapter 11 Case.
- Except as otherwise provided herein, all of Seller's contract rights to
payment, notes or notes receivable owing.
- All avoidance actions of Seller or its bankruptcy estates, including
those arising under 11 U.S.C. Sections 510, 544-550, and
applicable State law.
- All deposits of Seller other than customer deposits existing as of the
Closing Date in respect of (i) any existing order or work-in-process or
(ii) product orders contemplated to be commenced by any Seller or
Seller affiliate, which shall constitute acquired Assets.
- All supplier credits, insurance refunds, policies or proceeds of
insurance, tax refunds or other tax benefits arising from Seller's
operation of its business other than customer credits existing as of
the Closing Date in respect of (i) any existing order or
work-in-process or (ii) product orders contemplated to be commenced by
any Seller or Seller affiliate which shall constitute acquired Assets.
- Any rights to amounts held in escrow except as otherwise provided
herein.
- Any and all incorporation documents, corporate minutes, financial
records, income tax returns and any other documentation necessary for
Seller to conclude the administration of the chapter 11 bankruptcy
case; provided, however, the foregoing shall not include any
incorporation documents, corporate minute books financial records and
other documentation relating to Waterlink UK or any Subsidiary which
shall constitute acquired Assets.
- Notes receivable existing as of the Closing date other than that
certain intercompany note payable by Waterlink UK to Waterlink in the
amount of $9,759,537 at September 30, 2003, which shall constitute an
acquired Asset.
- All proceeds from causes of action and litigation rights existing in
favor of Seller as of the Closing Date.
- All assets of Waterlink, Inc. (other than the Stock (defined in Section
2.1) transferred by Waterlink to Buyer under Article II and the
Waterlink UK Note Receivable
33
SCHEDULE 1.3
ASSUMED LIABILITIES
- Post-petition accounts payable of Xxxxxxxx (other than intercompany
trade payables and intercompany notes payable) as of the Closing Date
(The Parties acknowledge that, as of September 30, 2003, the amount of
such accounts payable was approximately $1,300,000.)
- Accrued expenses of Xxxxxxxx (The Parties acknowledge that, as of
September 30, 2003, the amount of such accrued expenses was
approximately $1,472,974.)
- Xxxxxxxx in excess of costs of Xxxxxxxx (The Parties acknowledge that,
as of September 30, 2003, the amount of such xxxxxxxx was approximately
$744,312.)
- Accrued Income Taxes (as defined in Section 1.3(b)(ii))
34
SCHEDULE 6.6
CONSOLIDATING FINANCIAL STATEMENTS
See attached.
35
WATERLINK, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED SEPTEMBER 30, 2003
Specialty Other
Products Corporate Adjustments Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
Net sales $ 66,857,957 $ -- $ -- $ 66,857,957
Cost of goods sold 51,404,799 -- -- 51,404,799
------------ ------------ ------------ ------------ ------------
Gross profit 15,453,158 -- -- -- 15,453,158
Selling, general and admin. expense 8,882,014 1,153,970 10,035,984
US pension adjustment -- -- --
Amortization 553,607 -- 553,607
------------ ------------ ------------ ------------ ------------
9,435,621 1,153,970 -- -- 10,589,591
------------ ------------ ------------ ------------ ------------
Operating income 6,017,537 (1,153,970) -- -- 4,863,567
Other income (expense):
Interest expense (44,241) (2,457,108) (6,398) (2,507,747)
Intercompany interest expense (3,184,438) 3,178,040 6,398 0
Interest income -- 178 178
Intercompany management fee (900,000) 900,000 --
Other items, net 3,239 (1,316,635) (1,313,396)
------------ ------------ ------------ ------------ ------------
(4,125,440) 304,475 -- -- (3,820,965)
------------ ------------ ------------ ------------ ------------
Income before taxes 1,892,097 (849,495) -- -- 1,042,602
Income taxes 411,881 13,002 424,883
------------ ------------ ------------ ------------ ------------
Income from continuing operations 1,480,216 (862,497) -- -- 617,719
Cumulative effect-goodwill impairment (20,500,000) -- (20,500,000)
------------ ------------ ------------ ------------ ------------
Net income (loss) $(19,019,784) $ (862,497) $ -- $ -- $(19,882,281)
============ ============ ============ ============ ============
EBITDA $ 7,515,275 $ (1,148,618) $ 6,366,657
Key Ratios:
Gross margin 23.1% -- -- -- 23.1%
SG&A expense to sales 13.3% -- -- -- 15.0%
Operating margin 9.0% -- -- -- 7.3%
EBITDA margin 11.2% -- -- -- 9.5%
WATERLINK, INC.-SPECIALTY PRODUCTS DIVISION
CONSOLIDATING STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED SEPTEMBER 30, 2003
1.6034492 1.6034492
Xxxxxxxx Sutcliffe Holding
Sutcliffe Xxxxxxxx Company Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
Net sales $ 47,910,669 $ 19,368,509 $ -- $ (421,221) $ 66,857,957
Cost of goods sold 37,272,637 14,553,383 -- (421,221) 51,404,799
------------ ------------ ------------ ------------ ------------
Gross profit 10,638,032 4,815,126 -- -- 15,453,158
Selling, general and admin. expense 5,921,513 2,940,634 19,867 8,882,014
US pension adjustment -- -- -- --
Amortization -- -- 553,607 553,607
------------ ------------ ------------ ------------ ------------
5,921,513 2,940,634 573,474 -- 9,435,621
------------ ------------ ------------ ------------ ------------
Operating income 4,716,519 1,874,491 (573,474) -- 6,017,537
Other income (expense):
Interest expense (573) (43,668) -- (44,241)
Intercompany interest expense (2,395,571) -- (788,867) (3,184,438)
Interest income -- -- -- --
Intercompany management fee (900,000) -- -- (900,000)
Other items, net 3,239 -- -- 3,239
------------ ------------ ------------ ------------ ------------
(3,292,905) (43,668) (788,867) -- (4,125,440)
------------ ------------ ------------ ------------ ------------
Income before taxes 1,423,614 1,830,823 (1,362,340) -- 1,892,097
Income taxes 105,253 306,628 -- 411,881
------------ ------------ ------------ ------------ ------------
Income from continuing operations 1,318,361 1,524,196 (1,362,340) -- 1,480,216
Cumulative effect-goodwill impairment (14,000,000) (6,500,000) (20,500,000)
------------ ------------ ------------ ------------ ------------
Net income (loss) $(12,681,639) $ (4,975,804) $ (1,362,340) $ -- $(19,019,784)
============ ============ ============ ============ ============
EBITDA $ 5,317,055 $ 2,218,087 $ (19,867) $ -- $ 7,515,275
Key Ratios:
Gross margin 22.2% 24.9% 0.0% -- 23.1%
SG&A expense to sales 12.4% 15.2% -4.7% -- 13.3%
Operating margin 9.8% 9.7% 136.1% -- 9.0%
EBITDA margin 11.1% 11.5% 4.7% -- 11.2%
WATERLINK, INC.-CORPORATE OFFICE
CONSOLIDATING STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED SEPTEMBER 30, 2003
Other
Management Holdings Adjustments Eliminations Consolidated
----------- -------- ----------- ------------ ------------
Net sales $ -- $ -- $ -
Cost of goods sold -- -- --
----------- ------ ------ ------ -----------
Gross profit -- -- -- -- --
Selling, general and admin. expense 1,153,970 -- 1,153,970
US pension adjustment -- -- --
Amortization -- -- --
----------- ------ ------ ------ -----------
1,153,970 -- -- -- 1,153,970
----------- ------ ------ ------ -----------
Operating income (1,153,970) -- -- -- (1,153,970)
Other income (expense):
Interest expense (2,457,108) -- (2,457,108)
Intercompany interest expense 3,178,040 -- 3,178,040
Interest income 178 -- 178
Intercompany management fee 900,000 -- 900,000
Other items, net (1,316,635) -- (1,316,635)
----------- ------ ------ ------ -----------
304,475 -- -- -- 304,475
----------- ------ ------ ------ -----------
Income before taxes (849,495) -- -- -- (849,495)
Income taxes 13,002 -- 13,002
----------- ------ ------ ------ -----------
Income from continuing operations (862,497) -- -- -- (862,497)
Cumulative effect-goodwill impairment -- -- -- -- --
----------- ------ ------ ------ -----------
Net income (loss) $ (862,497) $ -- $ -- $ -- $ (862,497)
=========== ====== ====== ====== ===========
EBITDA $(1,148,618) $ -- $(1,148,618)
Key Ratios:
Gross margin -- -- -- -- --
SG&A expense to sales -- -- -- -- --
Operating margin -- -- -- -- --
EBITDA margin -- -- -- -- --
SCHEDULE 6.7
REAL PROPERTY
The real property described on the attached Exhibit A to Schedule 6.7.
36
EXHIBIT A
Page 1 of 11
Legal Description of the Premises
17
Page 2 of 11
EXHIBIT "A"
PARCEL ONE - TRACT ONE
Situated in the State of Ohio, County of Franklin, City of Columbus, being
located in Quarter Xxxxxxxx 0, Xxxxxxxx 0, Xxxxx 00, Xxxxxx Xxxxxx Military
Lands and being those tracts of land conveyed to Barnaby & Sutcliffe Corp.
(formerly Xxxxxxx Xxxxxx Co.) by deeds of record in Deed Book 2247, Page 380,
Deed Book 1852, Page 582, Deed Book 1852, Page 586, Deed Book 1853, Page 282,
Deed Book 1852, Page 579, Deed Book 1852, Page 580, Deed Book 1852, Page 597,
Deed Book 2387, Page 201 and Deed Book 2479, Page 116, all references being to
records in the Recorder's Office, Franklin County, Ohio and bounded and
described as follows:
Beginning at a point in the centerline of Xxxxxxx Avenue at the
intersection of said centerline with the northerly right-of-way line of Conrail
Railroad, said point also being the southeasterly corner of the Barnaby &
Sutcliffe Corp. 3.09 acre tract;
thence North 86 (degrees) 10' 00" West, along said right-of-way line of
Conrail Railroad, a distance of 20.11 feet to an iron pin at an angle point in
said line;
thence South 9 (degrees) 30' 45" West, continuing along said right-of-way
line of Conrail Railroad, a distance of 6.12 feet to an angle point in said
line;
thence North 86 (degrees) 10' 00" West, along said right-of-way line, a
distance of 103.02 feet to a point of curvature of a curve to the left;
thence continuing along said right-of-way line, being the arc of said curve
(Delta = 11 (degrees) 00' 40", Radius = 3198.23 feet), a chord bearing and
distance of South 88 (degrees) 19' 40" West, 613.71 feet to a point of tangency;
thence South 82 (degrees) 40' 40" West, continuing along said right-of-way
line, a distance of 245.72 feet to an angle point in said line;
thence South 84 (degrees) 51' 30" West, continuing along said right-of-way
line, a distance of 100.00 feet to an angle point in said line;
thence North 84 (degrees) 49' 55" West, continuing along said right-of-way
line, a distance of 683.84 feet to a point in Alum Creek;
thence North 5 (degrees) 10' 35" East, along a line in Alum Creek, a
distance of 97.64 feet to a point;
Continued....
Page 3 of 11
-Page Two-
thence South 86(degrees) 23' 10" East, along the southerly line of those
tracts of land conveyed to The Lutheran Senior City, Inc., by deed of record in
Deed Book 2433, Page 28, a distance of 681.38 feet to an iron pin at the
southeasterly corner of said tracts;
thence along the easterly line of said Lutheran Senior City, Inc. tracts,
the following courses and distances:
North 3(degrees) 50' 00" East, 184.45 feet to a point;
North 4(degrees) 04' 00" West, 87.50 feet to a point;
North 3(degrees) 50' 00" East, 204.00 feet to a point;
North 10(degrees) 10' 10" East, 109.00 feet to a point; and
North 3(degrees) 50' 00" East, 295.00 feet to the southwesterly corner of
The Lutheran Senior City, Inc. 0.092 acre tract;
thence North 55(degrees) 10' 00" East, along the southeasterly line of
said 0.092 acre tract, a distance of 128.08 feet to a point in a southerly line
of The Lutheran Senior City, Inc. tracts;
thence along said southerly line of The Lutheran Senior City, Inc. tracts,
the following courses and distances:
South 86(degrees) 10' 55" East, 218.44 feet to a point;
North 3(degrees) 46' 49" East, 79.58 feet to a point;
South 76(degrees) 10' 55" East, 691.32 feet to a point of curvature of a
curve to the right;
South 61(degrees) 10' 55" East, 7.76 feet, a chord bearing and distance
(Delta = 30(degrees) 00' 00", Radius = 15.00 feet), to a point;
South 46(degrees) 10' 55" East, 11.50 feet to a point of curvature of a
curve to the left;
South 61(degrees) 10' 55" East, 7.76 feet, a chord bearing and distance
(Delta = 30(degrees) 00' 00", Radius = 15.00 feet), to a point;
Continued...
Page 4 of 11
- Page Three -
South 76(degrees) 10' 55" East, 100.00 feet to a point of curvature of a
curve to the right;
South 43(degrees) 19' 58" East, 32.55 feet, a chord bearing and distance
(Delta = 65(degrees) 41' 55", Radius = 30.00 feet), to a point; and
South 10(degrees) 29' 00" East, 43.03 feet to a point in the centerline of
Xxxxxxx Avenue;
thence South 9(degrees) 30' 45" West, along said centerline of Xxxxxxx
Avenue, a distance of 158.06 feet to the northeasterly corner of the 1.197 acre
tract conveyed to Xxxxxx X. Xxxxxxxx, by deed of record in Deed Book 3394, Page
542;
thence North 86(degrees) 09' 15" West, along the northerly line of said
Xxxxxx X. Xxxxxxxx 1.197 acre tract, a distance of 289.96 feet to an angle point
in said line;
thence North 86(degrees) 24' 15" West, continuing along said northerly line
of the 1.197 acre tract, a distance of 100.00 feet to the northwesterly corner
of said tract;
thence South 3(degrees) 35' 45" West, along the westerly line of said 1.197
acre tract, a distance of 136.65 feet to an iron pin at the southwesterly corner
of said tract;
thence South 86(degrees) 24' 15" East, along the southerly line of said
1.197 acre tract, passing an iron pin at 355.82 feet, a distance of 375.93 feet
to a point in the centerline of Xxxxxxx Avenue;
thence South 9(degrees) 30' 45" West, along the centerline of Xxxxxxx
Avenue, a distance of 521.02 feet to the point of beginning, containing 26.035
acres, more or less.
Bearings contained herein are based on the same meridian as bearings in
deed of record in Deed Book 1852, Page 579.
Page 5 of 11
PARCEL ONE -- TRACT TWO
Situated in the State of Ohio, County of Franklin, City of Columbus, being
located in Quarter Xxxxxxxx 0, Xxxxxxxx 0, Xxxxx 00, Xxxxxx Xxxxxx Military
Lands and being Lots 33 and 34 of "BEXLEY VIEW NO. 3", of record in Plat Book
17, Page 58 and part of a vacated Alley as conveyed to Barneby & Sutcliffe Corp.
(formerly Barneby Xxxxxx), by deed of record in Deed Book 1852, Page 584, all
references being to records in the Recorder's Office, Franklin County, Ohio and
bounded and described as follows:
Beginning at the point of intersection of the westerly right-of-way line
of Xxxxxxx Avenue (60 feet in width) with the southerly right-of-way line of
Conrail Railroad, said point also being the northeasterly corner of Lot 33;
thence South 9 (degrees) 13' 50" West, along the westerly right-of-way
line of Xxxxxxx Avenue, a distance of 84.51 feet to an iron pin at the
northeasterly corner of Lot 35;
thence North 86 (degrees) 16' 40" West, along the northerly line of Lot 35
and said line produced westerly, a distance of 143.96 feet to an iron pin in
the centerline of an Alley (vacated);
thence North 9 (degrees) 15' 00" East, along said centerline of the Alley,
a distance of 82.31 feet to an iron pin in the southerly right-of-way line of
Conrail Railroad;
thence South 87 (degrees) 09' 00" East, along said right-of-way line of
Conrail Railroad, a distance of 144.16 feet to the point of beginning,
containing 0.274 acre, more or less.
Bearings contained herein are based on the same meridian as bearings in
deed of record in Deed Book 1852, Page 584.
Page 6 of 11
PARCEL ONE - TRACT THREE
Situated in the State of Ohio, County of Franklin, City of Columbus, being
located in Quarter Xxxxxxxx 0, Xxxxxxxx 0, Xxxxx 00, Xxxxxx Xxxxxx Military
Lands and being Lots 25 and 26 of "BEXLEY VIEW NO. 3", of record in Plat Book
17, Page 58 and part of Seventh Avenue (vacated) and Xxxxxx Avenue (vacated), as
conveyed to Barneby & Sutcliffe Corp. (formerly Barneby Xxxxxx), by deed of
record in Deed Book 1852, Page 584, all references being to records in the
Recorder's Office, Franklin County, Ohio and bounded and described as follows:
Beginning at an iron pin in the easterly right-of-way line of an Alley at
the southwesterly corner of Lot 25, the northwesterly corner of Lot 24;
thence North 4 (degrees) 52' 10" East, along said easterly right-of-way
line of the Alley, a distance of 117.51 feet to a point in the southerly
right-of-way line of the Conrail Railroad;
thence North 84 (degrees) 02' 30" East, along said right-of-way line of
Conrail Railroad, a distance of 121.06 feet to an angle point in said line;
thence South 87 (degrees) 09' 00" East, continuing along said right-of-way
line of Conrail Railroad, a distance of 25.00 feet to a point in the centerline
of Xxxxxx Avenue (50 feet in width);
thence South 4 (degrees) 52' 10" West, along said centerline of Xxxxxx
Avenue (vacated), a distance of 141.00 feet to an iron pin;
thence North 85 (degrees) 11' 00" West, crossing Xxxxxx Avenue (vacated)
and along the northerly line of Lot 24, a distance of 143.89 feet to the point
of beginning, containing 0.432 acre, more or less.
Bearings contained herein are based on the same meridian as bearings in
deed of record in Deed Book 1852, Page 584.
Page 7 of 11
PARCEL ONE - TRACT FOUR
Situated in the State of Ohio, County of Franklin and City of Columbus:
Being Lot Number Twenty (20) of NORTH BEXLEY VIEW ADDITION as the same is
numbered and delineated on the recorded plat thereof, of record in Plat Book 17,
pages 4 and 5, Recorder's Office, Franklin County, Ohio's said Lot having been
now re-subdivided and forms a part of Lot 4, in High Bank Addition, as shown on
Plat Book No. 17, page 280, Recorder's Office, Franklin County, Ohio.
Page 8 of 11
PARCEL TWO - TRACT ONE
DESCRIPTION OF A 1.485 ACRE TRACT
NORTH OF FIFTH AVENUE
WEST OF XXXXXXX AVENUE
TRACT 1
Situated in the State of Ohio, County of Franklin, City of Columbus, being
a part of Quarter Township Xx. 0, Xxxxxxxx Xx. 0, Xxxxx 00, Xxxxxx Xxxxxx
Military Lands and being 1.485 acres out of Wye Transportation Company in
Official Record Volume 4108 E12 (all references to deeds and plats being to
records in the Recorder's Office, Franklin County, Ohio) and being more fully
described as follows:
Beginning at an iron pin set at the northwest corner of North Xxxxxx View
Addition (P.B. 17, Pg. 4) a southerly line of said Wye Transportation Company;
Thence North 1(degree)05'06" West a distance of 25.36 feet along the
easterly line of Renite Company (D.B. 3702, Pg. 665), the southerly line of said
Wye Transportation Company to an iron pin set;
Thence along a curve to the right (delta=9(degrees)36'36", radius=1457.68
feet) a chord bearing South 88(degrees)29'19" West a distance of 244.21 feet,
along the northerly line of said Renite, to an iron pin set;
Thence North 88(degrees)42'23" West a distance of 205.00 feet along the
northerly line of said Renite to an iron pin set;
Thence South 1(degree)17'37" West a distance of 25.00 feet along the
westerly line of said Renite to an iron pin set;
Thence North 88(degrees)42'23" West a distance of 200.53 feet along the
northerly line of Renite Company (D.B. 2920, Pg. 587), the southerly line of
said Wye Transportation Company to a point in the centerline of Alum Creek;
Thence North 1(degree)17'37" East a distance of 93.63 feet along the
centerline of said Alum Creek to a point;
Thence South 88(degrees)43'45" East a distance of 670.79 feet, along the
northerly line of said Wye Transportation Company the southerly line of Xxxxxxxx
Xxxxxx Co. (D.B. 2247, Pg. 380), to an iron pin set;
Thence North 81(degrees)01'30" East a distance of 100.00 feet, along the
northerly line of said Wye Transportation Co., the southerly line of Xxxxxxxx
Xxxxxx Co. (D.B. 2479, Pg. 116) to an iron pin set;
Thence North 78(degrees)50'40" East a distance of 186.91 feet, along the
northerly line of said Wye Transportation Co., the southerly line of said
Xxxxxxxx Xxxxxx Co., to an iron pin set;
Page 9 of 11
Thence South 1(degree) 05'06" East a distance of 45.55 feet along the
easterly line of said Wye Transportation Co., to an iron pin set on the
southerly line of said Wye Transportation Co.;
Thence South 76(degrees) 57'59" West a distance of 117.37 feet along the
southerly line of said Wye Transportation Co., the northerly line of said North
Bexley View Addition to an iron pin set;
Thence South 74(degrees) 29'35" West a distance of 198.41 feet to the Point
of Beginning containing 1.485 acres more or less according to an actual field
survey made by Hockaden and Associates, Inc. in June of 1997.
HOCKADEN AND ASSOCIATES, INC.
Consulting Engineers
[STATE OF OHIO]
[SURVEYOR SEAL] /s/ Xxxxx X. Xxxx 10 Sept 97
-----------------------------------
Xxxxx X. Xxxx
Professional Surveyor No. 6615
40803091097F1
PARCEL TWO - TRACT TWO
DESCRIPTION OF A 0.923 ACRE TRACT
NORTH OF FIFTH AVENUE
WEST OF XXXXXXX AVENUE
TRACT 2
Situated in the State of Ohio, County of Franklin, City of Columbus, being
a part of Quarter Township Xx. 0, Xxxxxxxx Xx. 0, Xxxxx 00, Xxxxxx Xxxxxx
Military Lands, and being 0.923 acres out of that 9.697 acre tract as described
in a deed to Xxxxxxx Transportation Co. in Official Record Volume 3465 H09, (all
references to deeds and plats being to records in the Recorder's Office,
Franklin County, Ohio) and being more fully described as follows:
Beginning at a point on the easterly right of way line of said Xxxxxxx
Avenue with the centerline of a railroad;
Thence South 04(degrees)50'02" West a distance of 38.48 feet along the
easterly right of way line of said Xxxxxxx Avenue to a point;
Thence North 90(degrees)00'00" West a distance of 204.01 feet along the
northerly line of North Bexley View Addition No. 3 (P.B. 17, Pg. 58), the
southerly line of said Xxxxxxx Transportation Co. to an existing iron pin;
Thence South 89(degrees)01'00" West a distance of 307.55 feet along the
northerly line of said North Bexley View Addition No. 3, the southerly line of
said Xxxxxxx Transportation to an existing iron pin;
Thence South 80(degrees)12'30" West a distance of 259.04 feet along the
northerly line of North Bexley View Addition (P.B. 17, Page 4), the southerly
line of said Xxxxxxx Transportation to an iron pin set;
Thence South 76(degrees)57'59" West a distance of 51.11 feet along the
southerly line of said Xxxxxxx Transportation Co., the northerly line of said
North Bexley View Addition to an iron pin set;
Thence North 01(degrees)05'06" West a distance of 45.55 feet along the
westerly line of said Xxxxxxx Transportation Co., the easterly line of Caprail
Railroad (O.R.V. 19163 E09) to an iron pin set;
Thence North 78(degrees)50'40" East a distance of 50.85 feet along the
northerly line of said Xxxxxxx Transportation Co. the southerly line of said
Xxxxxxxx Xxxxxx Co. to an iron pin set;
Thence along a curve to the right (radius=3197.77 feet, delta=
11(degrees)09'20") a chord bearing North 84(degrees)25'20" East a distance of
621.63 feet along the northerly line of said Xxxxxxx Transportation Co. the
southerly line of said Xxxxxxxx Xxxxxx to an iron pin set;
Page 11 of 11
Thence North 90 (degrees) 00'00" East a distance of 103.02 feet along the
northerly line of said Xxxxxxx Transportation Co., the southerly line of said
Xxxxxxxx Xxxxxx Co. (D.B. 1852, Pg. 582, and D.B. 1852, Pg. 586) to an existing
iron pin;
Thence North 09 (degrees) 23'28" East a distance of 5.50 feet to an
existing iron pin;
Thence South 90 (degrees) 00'00" East a distance of 50.05 feet to a point
on the easterly right of way line of said Xxxxxxx Avenue;
Thence South 04 (degrees) 50'02" West a distance of 22.08 feet along the
easterly right of way line of said Xxxxxxx Avenue to the Point of Beginning
containing 0.923 acres more or less according to an actual field survey of the
premises made by Hockaden and Associates, Inc. in June of 1997.
HOCKADEN AND ASSOCIATES, INC.
Consulting Engineers
/s/ Xxxxx X. Xxxx
-----------------------------
Xxxxx X. Xxxx
Professional Surveyor No. 6615
40803de.ng1
SCHEDULE 7.4
SHARE CAPITAL AND OWNERSHIP (OF WATERLINK UK AND SUBSIDIARY)
That certain Pledge Agreement between Waterlink, Inc. and Bank of America
Illinois (now know as Bank of America, N.A.) as Collateral Agent, dated as of
June 27, 1997, as amended
37
