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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 21, 1999
THE HOLMES GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
Massachusetts 333-44473 04-2768914
333-77905
(State of Other Jurisdiction (Commission File (IRS Employer
Incorporation) Numbers) Identification No.)
233 Fortune Boulevard, Milford MA 01757
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (508) 634-8050
Not applicable
(Former Name or Former Address, if changed since Last Report)
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Item 5. Other Events.
On December 21, 1999, pursuant to the Agreement of Purchase and Sale
of Assets (the "Agreement") by and among The Holmes Group, Inc.
("Holmes"), its wholly owned subsidiary, The Rival Company ("Rival"),
Rival's wholly owned subsidiaries, Patton Building Products, Inc. and
Patton Electric Company, Inc., and The Marley Company ("Marley"), as
buyer, Holmes consummated the sale of substantially all of the assets
of Rival's industrial and building supply products businesses to
Marley Electric Heating, a division of United Dominion Industries. The
businesses disposed of accounted for net sales of approximately $25.0
million during the twelve months ended October 31, 1999. The purchase
price was the result of arm's length negotiations among the parties.
The Agreement is filed herewith as Exhibit 10.1 and is incorporated
herein by reference. The press release issued by Holmes in connection
with the consummation of the transaction is filed herewith as Exhibit
99.1 and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
10.1 Agreement of Purchase and Sale of Assets dated December 21,
1999 by and among Marley, Holmes, Rival and certain
subsidiaries of Rival.
99.1 Text of Holmes' Press Release dated December 21, 1999.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
THE HOLMES GROUP, INC.
(Registrant)
Date: January 13, 2000 By: /s/ Ira B. Morgenstern
---------------- --------------------------------
Name: Ira B. Morgenstern
Title: Senior Vice President - Finance
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Exhibit 10.1
THE MARLEY COMPANY ACQUISITION OF CERTAIN ASSETS FROM
THE RIVAL COMPANY, PATTON ELECTRIC COMPANY, INC.
AND PATTON BUILDING PRODUCTS, INC.
DECEMBER 21, 1999
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TABLE OF CONTENTS
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1.0 PURCHASE AND SALE OF BUSINESS AND ASSETS.................................................................2
1.1 Assets Transferred..............................................................................2
1.2 Excluded Assets.................................................................................4
1.3 Seller's Use of Intellectual Property...........................................................4
2.0 ASSUMPTION OF LIABILITIES................................................................................4
3.0 CLOSING; PURCHASE PRICE..................................................................................5
3.1 Time and Place of Closing.......................................................................5
3.2 Calculation and Payment of Purchase Price.......................................................5
3.3 Allocation of Purchase Price....................................................................9
4.0 EQUIPMENT: DAMAGE, MALFUNCTION AND RISK OF LOSS..........................................................9
4.2 Inspection of Equipment at Purchaser's Facilities...............................................9
4.3 Risk of Loss, Damage Malfunction...............................................................10
4.4 Seller's Rights and Purchaser's Remedies.......................................................11
5.0 REPRESENTATIONS AND WARRANTIES OF SELLER AND GUARANTOR..................................................12
5.1 Corporate Organization.........................................................................12
5.2 Corporate Authorization, Certain Corporate Actions, No Conflicts...............................12
5.3 Financial Information..........................................................................13
5.4 Operations of the Business; Adequacy of Purchased Assets.......................................13
5.5 Absence of Certain Changes or Events...........................................................14
5.6 Undisclosed Liabilities........................................................................14
5.7 Properties.....................................................................................14
5.9 Intellectual Property..........................................................................15
5.10 Labor Matters..................................................................................16
5.11 Compliance with Laws...........................................................................16
5.12 Taxes..........................................................................................16
5.13 Contracts......................................................................................16
5.14 Inventories....................................................................................18
5.15 Backlog........................................................................................18
5.16 Consents, Approvals, etc.......................................................................18
5.17 Licenses and Permits...........................................................................18
5.18 Transactions with Interested Persons...........................................................18
5.19 Environmental Matters..........................................................................18
5.20 Equipment Leases...............................................................................19
5.21 Defects in Products or Designs; Products.......................................................19
5.22 Customers and Suppliers........................................................................19
5.23 Letters of Credit, Surety Bonds, Guarantees....................................................20
5.24 All Material Information; Disclosure...........................................................20
5.25 Brokers........................................................................................20
5.26 Certain Defined Items..........................................................................20
6.0 REPRESENTATIONS AND WARRANTIES OF PURCHASER.............................................................20
6.1 Corporate Organization.........................................................................20
6.2 Corporate Authorization, Certain Corporate Actions, No Conflicts..............................21
6.4 Consents, Approvals, etc.......................................................................21
</TABLE>
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6.5 All Material Information; Disclosure...........................................................21
6.6 Brokers........................................................................................21
7.0 DELIVERIES AT CLOSING...................................................................................22
7.1 Deliveries by Seller and Guarantor.............................................................22
7.2 Deliveries by Purchaser........................................................................22
8.0 POST-CLOSING OBLIGATIONS................................................................................23
8.1 Product Marking................................................................................23
8.2 Access After Closing...........................................................................23
8.3 Covenant Not to Compete........................................................................23
8.4 Exceptions to Covenant.........................................................................25
8.5 Confidentiality and Non-Solicitation...........................................................25
8.6 Press Release..................................................................................26
8.8 Warranty Returns or Credits....................................................................26
9.0 EMPLOYEES...............................................................................................26
10.0 AUTHORIZATIONS..........................................................................................26
11.0 CONSENTS AND APPROVALS..................................................................................27
12.0 BULK SALES COMPLIANCE...................................................................................27
13.0 INDEMNIFICATION.........................................................................................27
13.1 Seller's and Guarantor's Indemnification.......................................................28
13.2 Purchaser's Indemnification....................................................................28
13.3 Limitations on Indemnification.................................................................29
13.4 Procedure......................................................................................30
13.5 Indemnification as Exclusive Remedy............................................................31
14.0 SURVIVAL OF REPRESENTATIONS AND WARRANTIES..............................................................31
15.0 ARBITRATION.............................................................................................31
16.0 NOTICES.................................................................................................32
17.0 MISCELLANEOUS...........................................................................................33
17.1 Entire Agreement; Modification.................................................................33
17.2 Waiver.........................................................................................33
17.3 Binding Effect.................................................................................33
17.4 Numbers and Headings...........................................................................33
17.5 Exhibits and Schedules.........................................................................33
17.7 Counterparts...................................................................................34
17.8 Expenses.......................................................................................34
17.9 Validity of Provisions.........................................................................34
17.10 Governing Law..................................................................................34
17.11 Guaranty.......................................................................................34
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AGREEMENT OF PURCHASE AND SALE OF ASSETS
THIS AGREEMENT OF PURCHASE AND SALE OF ASSETS (the "Agreement") is dated
this 21st day of December, 1999, by and among THE RIVAL COMPANY, a Delaware
corporation ("Rival"), PATTON ELECTRIC COMPANY, INC., an Indiana corporation
("Patton Electric"), PATTON BUILDING PRODUCTS, INC., a Delaware corporation
("Patton Building") (Patton Electric and Patton Building together with Rival,
"Seller"); THE HOLMES GROUP, INC., a Massachusetts corporation (the
"Guarantor"); and THE MARLEY COMPANY, a Delaware corporation on behalf of its
Marley Electric Heating division (the "Purchaser").
BACKGROUND STATEMENT
A. Guarantor owns 100% of the capital stock of Rival and is a party to this
Agreement for the purpose of making representations, warranties and
covenants to Purchaser as provided herein and guarantying all of Seller's
obligations hereunder.
B. The transaction contemplated by this Agreement relates to the sale of
assets of Rival's industrial products division, which is part of Rival and
Patton Electric and which encompasses a line of electrical fans, drum
blowers and heaters sold through industrial distribution channels under the
Patton(R), and Titan(R), and Power Cat(R)brand names (the "Industrial
Division"), and building supply products division, which is part of Rival
and Patton Building and which encompasses a line of residential building
products sold through building supply wholesalers and electrical and
plumbing supply distributors also under the Patton brand name (the
"Building Supply Division"). While the Industrial Division and the Building
Supply Division have been operated by Rival through separate divisions, for
purposes of this Agreement they will be referred to collectively as the
"Business." Rival continues to operate a retail products division for the
manufacture, marketing and sale of products into consumer markets, certain
of which include the designs, functions and brand names of products
manufactured, marketed and sold through the Industrial Division.
C. Seller desires to sell assets necessary to operate the Business at its
projected level of capacity (including certain product lines sold under the
"Patton", "Titan," and "Power Cat" tradenames) in order to focus on
consumer and retail products and Purchaser desires to purchase such assets
of the Business, specifically excluding the Excluded Assets (as hereinafter
defined) for the Purchase Price (as hereinafter defined) and upon the terms
and subject to the conditions hereinafter set forth.
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STATEMENT OF AGREEMENT
In consideration of the mutual covenants and agreements hereinafter set
forth, the parties hereby agree as follows:
1.0 PURCHASE AND SALE OF BUSINESS AND ASSETS.
1.1 ASSETS TRANSFERRED. Seller hereby sells, assigns and delivers to Purchaser
free and clear of all liabilities, obligations, liens and encumbrances of
any kind other than the Assumed Liabilities, and Purchaser hereby purchases
and acquires from Seller, or, with respect to delivery only, at such later
time as mutually agreed upon by the parties as provided in the Interim
Service and Supply Agreement of even date herewith (the "Interim Services
Agreement"), all right, title and interest in and to the following
properties, assets and rights of Seller, excluding the Excluded Assets
(collectively, the "Purchased Assets"):
(a) all inventories of raw materials, work in process, finished products,
goods, spare parts, replacement and component parts held by Seller on
the Closing Date or such later date as such inventories are shipped by
Seller pursuant to the Interim Services Agreement and having a product
number or product code identified on SCHEDULE 1.1(a) (collectively,
the "Inventories"), including (i) Inventories in transit to Seller,
(ii) Inventories on consignment, (iii) Inventories at any location,
whether or not controlled by Seller, (iv) Inventories acquired by
Seller pursuant to "Seller Purchase Orders" (as defined below) and (v)
Inventories subject to purchase orders placed by Seller for
Inventories after the Closing which remain unfilled at the date of
transfer of Inventories pursuant to the Interim Services Agreement;
(b) the equipment, machinery, tools, dies and molds specified on SCHEDULE
1.1(b), and the related spare parts, replacement parts, component
parts and similar property directly relating thereto, whether or not
listed on SCHEDULE 1.1(b) (collectively, the "Equipment");
(c) all rights (i) to sell finished goods products having a product number
or product code identified on SCHEDULE 1.1(a) and (ii) to sell the
products under research or development by the Business as of the date
hereof (collectively, "Products");
(d) all transferable rights (including rights that become transferable
pursuant to ARTICLE 11.0 of this Agreement or otherwise pursuant to
the consent or approval of third parties) of Seller relating to the
Purchased Assets or the Business under all written or oral contracts,
arrangements, license and technology agreements (including all rights
under licensing agreements with Joseph Armbruster or otherwise
relating to the "Power Cat" tradename or products), distribution
agreements, sales representative arrangements and other agreements,
but excluding purchase orders placed by Seller with third parties for
finished goods or raw materials ("Seller Purchase Orders"); including
without limitation any right to receive payment for products sold or
services rendered following Closing, and to
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receive goods and services following Closing pursuant to such
contracts and to assert claims and take other rightful actions in
respect of breaches, defaults and other violations of such contracts
and otherwise (collectively, the "Contracts"), including without
limitation those set forth on SCHEDULE 1.1(d);
(e) [Intentionally left blank]
(f) (i) all patents and patent applications necessary to the operation of
the Business, including but not limited to those identified on
SCHEDULE 1.1(f)(i), (ii) all trademarks, service marks and trade names
necessary to the operation of the Business, including but not limited
to those identified on SCHEDULE 1.1(f)(ii)(A), other than (A) the
Patton, Titan and Bionaire names and (B) trademark and other rights in
the trade dress relating to those Products which have substantially
identical designs and trade dress to products which Seller will
continue to manufacture and sell and any other products, based on or
derived therefrom as provided on SCHEDULE 1.1(f)(ii)(B) (the
"Cross-Over Products"), (iii) an undivided joint ownership interest in
any and all trademark and other rights in the trade dress relating to
the Cross-Over Products, and (iv) all copyright registrations and
applications for copyright registrations, and any other non-registered
copyrights necessary to the operation of the Business, including but
not limited to those identified on SCHEDULE 1.1(f)(iv) (the items
described in clauses (i), (ii), (iii) and (iv) are collectively
referred to as the "Intellectual Property");
(g) (i) all designs, plans, product drawings, trade secrets, inventions,
data, processes, procedures, technology, techniques, blueprints,
drawings, surveys, research and development files, computer files,
research records, manufacturing know-how, manufacturing formulae, and
similar information, wherever located, relating to the Business or the
manufacture of Products by Rival or by third parties other than the
Cross-Over Products and (ii) an undivided joint ownership interest in
any or all of the foregoing relating to the Cross-Over Products
(collectively, the "Know-How");
(h) to the extent relating to the Business, all books, records, manuals,
information, computer files and other catalogs, mailing lists, price
lists, lists of customers, distribution lists, contacts, market
information, cost information, photographs, production data,
scheduling, supplying, marketing, advertising and promotional
materials and records, purchasing materials and records, manufacturing
and quality control records and procedures, records, media materials,
sales orders files, computer files (whether on discs, tapes or
otherwise), parts reference guides, project files, and other similar
materials, including, without limitation, any such materials
maintained by the Seller, Guarantor or any subsidiary or affiliate
thereof or any officer, director or key employee thereof
(collectively, "Seller's Group"); and
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(i) to the extent their transfer is permitted by law, all governmental
licenses, permits, approvals, license applications and product
registrations ("Permits").
1.2 EXCLUDED ASSETS. Seller retains and does not transfer (a) cash and cash
equivalents of Seller, Guarantor or the Business, (b) any accounts
receivable of Seller, Guarantor or the Business, (c) the Patton, Titan and
Bionaire trademarks in all configurations and styles, except to the extent
licensed under the License Agreement and (d) proceeds from any litigation
relating to the Business which arose and was settled prior to the Closing
(as defined below) (collectively, the "Excluded Assets").
1.3 SELLER'S USE OF INTELLECTUAL PROPERTY. Purchaser acknowledges and agrees
that Seller will continue to manufacture the Cross-Over Products following
Closing, and that the manufacture, marketing and sale of Cross-Over
Products may utilize and involve certain patents and copyrights that are
contained within Intellectual Property that is being conveyed by Seller to
Purchaser hereunder. Purchaser agrees that Seller may use, and to the
extent necessary hereby grants to Seller a perpetual, royalty-free,
non-exclusive and irrevocable license to such patents and copyrights to the
extent necessary to manufacture, market and sell the Cross-Over Products
solely within the Patton Retail Lines (as defined below).
2.0 ASSUMPTION OF LIABILITIES. Subject to the terms and conditions of this
Agreement and the Interim Services Agreement, as of the Closing Date
Purchaser hereby assumes and agrees to perform and discharge the following,
and only the following liabilities of Seller incurred in the ordinary
course of operating the Business (the "Assumed Liabilities"):
(a) all liabilities arising from and after the Closing Date under and
pursuant to all Contracts;
(b) all liabilities for commissions payable to sales representatives for
sales shipped following the Closing Date;
(c) all liabilities and responsibility for warranty and breach of warranty
obligations and claims for products manufactured by Seller in
connection with the Business prior to the Closing Date ("Seller
Products"), including, without limitation, warranty returns, service,
replacement or reimbursement obligations, PROVIDED HOWEVER that
Purchaser shall have no liability or responsibility for warranty
claims where the warranty granted by Seller exceeds the standard
warranties for such products in terms of duration, scope or remedy,
and PROVIDED FURTHER that Seller shall be solely liable and
responsible for any and all obligations arising from or related to (i)
product recalls or withdrawals (A) suggested by Seller, Purchaser or
the Consumer Products Safety Commission ("CPSC") to which the other
party (or, in the case of a CPSC suggestion, both parties), in the
exercise of prudent business judgement in a manner consistent with its
past practices, consents or (B) required by the CPSC or (ii) product
liability claims or threatened claims, losses or damages, in either
case arising from or related to products
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manufactured by Seller before or after the Closing Date (collectively,
"Excluded Product Liability Matters"); and
(d) all liabilities for any claims, losses and damages resulting from
injury or death of any person, or any damage to property, caused by
any Seller Product included within the Inventories if such Seller
Product shall have been altered or damaged in any way after shipment
from Seller to Purchaser or Purchaser's designee.
Except as expressly set forth above, Purchaser does not assume, and Seller
and Guarantor will pay, honor and discharge, all liabilities, obligations
and commitments of any kind relating to or arising out of the operation of
the Business prior to the Closing Date and the Excluded Product Liability
Matters (the "Excluded Liabilities").
3.0 CLOSING; PURCHASE PRICE.
3.1 TIME AND PLACE OF CLOSING. The closing of the sale of the Purchased Assets
(the "Closing") is taking place simultaneously with the execution of this
Agreement at the offices of Smith Helms Mulliss & Moore, L.L.P., 201 North
Tryon Street, Charlotte, North Carolina 28202 on December 21, 1999 (the
"Closing Date"). Closing shall be effective as of 12:00:01 a.m. on the
Closing Date.
3.2 CALCULATION AND PAYMENT OF PURCHASE PRICE.
(a) PREPARATION OF CLOSING DATE BALANCE SHEET. Seller hereby delivers to
Purchaser a balance sheet dated as of the Closing Date (the "Closing
Date Balance Sheet") which reflects the net book value of the
Inventories, Equipment and other assets included in the Purchased
Assets as of the dates specified therein, LESS a warranty reserve in
the aggregate amount of $927,406.65 as shown on SCHEDULE 3.2(a). The
value of Equipment as stated on the Closing Date Balance Sheet is the
net book value thereof as of October 31, 1999, determined in
accordance with United States generally accepted accounting principles
("GAAP") as shown on SCHEDULE 1.1(b) and the value of Inventories is
as follows:
(A) finished goods Inventories listed in Seller's most recent product
catalog determined by the parties to be saleable within the first
two (2) years after the Closing Date based on the 1/1/99 -
12/13/99 actual sales have been valued at 100% of the Rival
Standard Cost (as defined in the Interim Services Agreement) as
of the Closing Date, as detailed in the column entitled "Cal-99
Two Years Inventory" on SCHEDULE 1.1(a),
(B) finished goods Inventories listed in Seller's most recent product
catalog determined by the parties to be saleable from three (3)
years to five (5) years after the Closing Date based on the
1/1/99 - 12/13/99 actual sales have been valued at 25% of the
Rival Standard Cost as of the Closing Date, as detailed in the
column entitled "Cal-99 Inv 2-5 Years" on SCHEDULE 1.1(a),
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(C) finished goods Inventories listed in Seller's most recent product
catalog and determined by the parties not to be saleable until
five (5) years after the Closing Date based on the 1/1/99 -
12/13/99 actual sales and finished goods Inventories not listed
in Seller's most recent product catalog have been valued at 0% of
the Rival Standard Cost as of the Closing Date,
(D) raw material and work in process Inventories, excluding obsolete
and inactive Inventories as designated by Seller, usable within
the first two (2) years after the Closing Date based on two
times (2x) the greater of usage over the last 12 months or the
usage as shown on the forecast contained in schedule 1.1(a) have
been valued at 100% of Seller's net book value as of the Closing
Date,
(E) raw material and work in process Inventories, excluding obsolete
and inactive Inventories as designated by Seller, usable during
the third year after the Closing Date based on the 1/1/99 -
12/13/99 actual sales have been valued at 50% of Seller's net
book value as of the Closing Date, and
(F) (x) obsolete and inactive raw material and work in process
Inventories as designated by Seller and (y) raw material and work
in process Inventories usable after the third year after the
Closing Date based on the greater of (i) the usage of such
Inventories over the 12-month period immediately preceding the
date of the Closing Date Balance Sheet or (ii) projected usage
from January 1, 2000 to December 31, 2000 have been valued at 0%
of Seller's net book value as of the Closing Date.
The valuation of Equipment has been extracted from the financial
statements of Seller prepared on a basis consistent with the past
practices of Seller and previously delivered by Seller to the
Purchaser, and further calculated in accordance with the principles
and procedures set forth in this Agreement. For purposes of this
SECTION 3.2(a), the time periods in which Inventories are deemed
"saleable" and "usable" have been mutually agreed to by the parties
and do not constitute a representation or warranty of Seller.
(b) CALCULATION AND PAYMENT OF PRELIMINARY PURCHASE PRICE. In
consideration of the sale, assignment and delivery of the Purchased
Assets by Seller to Purchaser, Purchaser hereby pays to Seller in cash
or immediately available funds an amount equal to the value of the
Inventories and Equipment included in the Purchased Assets as set
forth on the Closing Date Balance Sheet; less the amount of the
warranty reserve; plus Four Million Dollars ($4,000,000) (the
"Preliminary Purchase Price") and less the Escrow Funds (defined
below) which shall be deposited with First Union National Bank (the
"Escrow Agent") on the Closing Date. The Escrow Funds shall consist of
the following: (x) $1,000,000 (the "Performance Escrow Funds") and (y)
the amount equal to the sum of 25% of the value of raw material and
work in process Inventories, 10% of the value of
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finished goods Inventories, and 25% of the value of Equipment all as
shown on the Closing Date Balance Sheet (the "Asset Escrow Funds")
(the Performance Escrow and the Asset Escrow Funds are collectively
referred to as the "Escrow Funds"). The Escrow Agent shall hold the
Escrow Funds in escrow for the benefit of the parties pursuant to an
Escrow Agreement, the form of which is attached as EXHIBIT 3.2(B) to
this Agreement (the "Escrow Agreement"). All interest on Escrow Funds,
or portion thereof, shall be paid to the party ultimately entitled to
payment of such Escrow Funds, or portion thereof.
(c) INTERIM RELEASES OF ESCROW FUNDS
(i) INTERIM RELEASES OF ASSET ESCROW FUNDS. Within five (5) business
days after the end of each full calendar month after the Closing
Date, Purchaser and Seller pursuant to a Joint Written Direction
(as defined in the Escrow Agreement) will direct the Escrow Agent
to release Asset Escrow Funds to Seller in the amount equal to
the sum of:
(A) 25% of the raw material and work in process Inventories
and 10% of the finished goods Inventories (I) received by
Purchaser, (II) shipped by Seller to a customer designated
by Purchaser and reflected on a customer invoice, (III)
received by Purchaser but identified by the Working Group to
have been damaged in transit to Purchaser's facility or (IV)
shipped by Seller to Purchaser and reflected on a bill of
lading but lost in transit; and
(B) 25% of the Equipment delivered by Purchaser to a carrier
for shipment at Seller's facility,
in each case occurring during the preceding month, with such
Inventories and Equipment to be valued in accordance with SECTION
3.2(a); provided that the final release of Asset Escrow Funds
shall correspond with the final release of Escrow Funds pursuant
to SECTION 3.2(e).
(ii) INTERIM RELEASES OF PERFORMANCE ESCROW FUNDS. Subject to SECTION
10 of the Interim Services Agreement, within five (5) business
days after the Working Group (as defined in the Interim Services
Agreement) agrees that a Transition Stage (as defined in the
Interim Services Agreement) has been completed, the Purchaser and
Seller pursuant to a Joint Written Direction will direct the
Escrow Agent to release 33% of the Performance Escrow Funds to
Seller; provided that the final release of Performance Escrow
Funds shall correspond with the final release of Escrow Funds
pursuant to SECTION 3.2(e).
(d) CALCULATION OF PURCHASE PRICE ADJUSTMENT. Within thirty (30) days
after the Working Group agrees that the final Transition Stage has
been completed, but not
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earlier than the completion of any remedy period available to Seller
under SECTION 4.4 hereof (the "Adjustment Calculation Date"), the
parties shall calculate the "Purchase Price Adjustment" based on the
amounts reflected on the Closing Date Balance Sheet. Such Purchase
Price Adjustment shall be equal to the value of the Inventory and
Equipment included in the Purchased Assets as set forth on the Closing
Date Balance Sheet; LESS the value of (A) the Inventory (I) received
by Purchaser, (II) shipped by Seller to a customer designated by
Purchaser and reflected on a customer invoice, (III) received by
Purchaser but identified by the Working Group to have been damaged in
transit to Purchaser's facility or (IV) shipped by Seller to Purchase
and reflected on a bill of lading but lost in transit, and (B)
Equipment delivered by Purchaser to a carrier for shipment at Seller's
facility, in each case included in the Purchased Assets and, with
respect to Equipment valued in accordance with SECTION 3.2(a) through
the Adjustment Calculation Date and, with respect to Inventories
valued in accordance with the spreadsheet model presented in SCHEDULE
1.1(a), PROVIDED THAT: (i) no further depreciation and amortization
shall be taken with respect to the Equipment from and after October
31, 1999; (ii) to the extent Inventories described in SECTION
1.1(a)(v), together with other Inventories on hand, exceed two years
inventory, such two year limit shall not be applicable, and (iii) the
Purchase Price Adjustment shall not take into account any remedies
which may be available to Purchaser relating to visible damage,
malfunctioning or failure to meet "Sufficiency Standards" (as defined
below) of the Equipment. The Preliminary Purchase Price, as adjusted
by any Purchase Price Adjustment, is referred to as the "Purchase
Price."
(e) PAYMENT OF PURCHASE PRICE ADJUSTMENT AND FINAL RELEASE OF ESCROW
FUNDS. In the event the Purchase Price Adjustment is positive (a
"Purchaser Adjustment"), upon completion of calculation of the
Purchase Price Adjustment the parties shall direct the Escrow Agent to
release to Purchaser from the Escrow Funds an amount equal to the
Purchaser Adjustment, and release any remaining Escrow Funds to
Seller; provided that, if the Escrow Funds shall be less than the
Purchaser Adjustment, Seller shall pay the remaining balance of the
Purchaser Adjustment to Purchaser in cash or immediately available
funds within three (3) business days after such amount has been
finally determined. In the event the Purchase Price Adjustment is
negative (a "Seller Adjustment"), upon completion of calculation of
the Purchase Price Adjustment the parties shall direct the Escrow
Agent to release to Seller from the Escrow Funds an amount equal to
the Seller Adjustment; provided that, if the Escrow Funds shall be
less than the Seller Adjustment, Purchaser shall pay the remaining
balance of the Seller Adjustment to Seller in cash or immediately
available funds within three (3) business days after such amount has
been finally determined.
(f) RESOLUTION OF DISPUTES REGARDING CLOSING DATE BALANCE SHEET. In the
event the parties cannot resolve any accounting issues relating to the
Closing Date Balance Sheet or the Purchase Price Adjustment, the
parties shall submit the accounting issues in dispute to binding
arbitration with the accounting firm of Deloitte &
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Touche serving as arbitrator, to be agreed upon between the parties.
Any issue other than accounting issues shall be arbitrated as set
forth in ARTICLE 15.0 of this Agreement.
(g) RESOLUTION OF DISPUTES WITHIN WORKING GROUP. If the Working Group is
unable to reach agreement as to any matter as to which its
determination is required under this SECTION 3, the dispute
resolution mechanisms set forth in SECTION 12 of the Interim Services
Agreement shall be followed.
3.3 ALLOCATION OF PURCHASE PRICE. Seller and Purchaser shall allocate the
Purchase Price among the Purchased Assets for tax purposes in accordance
with SCHEDULE 3.3 subject to calculation of the Purchase Price pursuant to
SECTION 3.2.
4.0 EQUIPMENT: DAMAGE, MALFUNCTION AND RISK OF LOSS.
4.1 INSPECTION OF EQUIPMENT AT SELLER'S FACILITIES. Following the Closing, the
Equipment will remain on Seller's premises, pending removal by Purchaser
pursuant to the Transition Stages and to the other terms and conditions of the
Interim Services Agreement. Immediately prior to Purchaser's disassembly,
packing and loading of each item of the Equipment ("Disassembly"),
representatives of Seller and Purchaser designated by the Working Group (the
"Inspection Team") shall visually inspect each such item to determine whether
any "visible damage" exists. Furthermore, with respect to Equipment that is an
item of equipment or machinery, rather than tooling, dies or molds
("Machinery"), the Inspection Team shall determine at Disassembly whether each
such item of Machinery is "functioning." The Inspection Team shall maintain a
log of each item of Equipment loaded by Purchaser for shipment from a Seller
facility and any visible damage or malfunction identified at Disassembly. In the
event the Inspection Team is unable to agree as to whether any item is visibly
damaged or, as to Machinery, malfunctioning, the dispute shall be resolved
through mechanisms of SECTION 12 of the Interim Services Agreement. No Equipment
shall be deemed visibly damaged or, as to Machinery, malfunctioning if not
identified at the time of Disassembly.
For purposes of this Agreement (i) the terms "visible damage," "visibly
damaged" and the like mean damage that can be observed without testing the
function of the Equipment and which is not material to the function of the
Equipment; (ii) the terms "function," "functioning" and the like mean that an
item of Equipment, when operated together with other appropriate Equipment, is
capable of producing Products that conform within acceptable tolerances
reasonable to the use intended and to the product specifications of Seller's
current product catalog, with the exceptions specified on SCHEDULE 10(f) of the
Interim Services Agreement and (iii) the terms "malfunction," "malfunctioning"
and the like mean that an item of Equipment does not "function." Any item of
Machinery that is "functioning" immediately prior to Disassembly and does not
operate in materially the same manner at the time of Assembly shall be deemed to
be "malfunctioning" as of the time following Disassembly for purposes of this
Agreement.
4.2 INSPECTION OF EQUIPMENT AT PURCHASER'S FACILITIES. Within six (6) months of
Purchaser's removal of Equipment from Seller's facilities, Purchaser shall
assemble all items of Equipment and either commence manufacturing or test
manufacturing capability of the Equipment,
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including testing all tooling ("Tooling") to determine whether or not it
functions ("Assembly"). The Inspection Team shall inspect all Equipment in
operation to determine any Tooling malfunction or any failure by the Equipment
to operate in accordance with the "Sufficiency Standards" (as defined in SECTION
5.4 below). In the event the Inspection Team is unable to agree as to whether
any Equipment, as utilized in manufacturing products, does not meet the
Sufficiency Standards or, as to Tooling, malfunctions, the dispute shall be
resolved through mechanisms of SECTION 12 of the Interim Services Agreement. No
Equipment shall be deemed to have failed to meet the Sufficiency Standard or, as
to Tooling, malfunctioning if not identified within six (6) months of
Purchaser's removal of Equipment from Seller's facilities.
4.3 RISK OF LOSS, DAMAGE, MALFUNCTION. The risk of loss, damage or malfunction
of Equipment shall be borne by the parties as follows:
(a) LOSS OF EQUIPMENT. Seller shall bear the risk of loss of any items of
Equipment from Closing until (but not including) Disassembly, and
Purchaser shall bear the risk thereafter to the extent that any such
loss is not caused by the negligence or willful misconduct of Seller,
its employees or agents.
(b) DAMAGED EQUIPMENT. Seller shall bear the risk of any damage to any
items of Equipment from Closing until (but not including) Disassembly,
and Purchaser shall bear the risk thereafter to the extent that any
such damage is not caused by the negligence or willful misconduct of
Seller, its employees or agents.
(c) MALFUNCTIONING MACHINERY. Seller shall bear the risk of any
malfunctioning Machinery from Closing until (but not including)
Disassembly, and Purchaser shall bear the risk thereafter to the
extent that any such malfunction is not caused by the negligence or
willful misconduct of Seller, its employees or agents.
(d) MALFUNCTIONING TOOLING. Seller shall bear the risk of any
malfunctioning Tooling from Closing through Assembly to the extent
that any such malfunction is not caused by the negligence or willful
misconduct of Purchaser, its employees or agents, which malfunctioning
does not result from any visible damage, and Purchaser shall bear the
risk thereafter to the extent that any such malfunction is not caused
by the negligence or willful misconduct of Seller, its employees or
agents.
(e) SUFFICIENCY OF ASSETS. Seller shall bear the risk that the Equipment,
at the time of Assembly, fails to meet the Sufficiency Standard, to
the extent that any such failure to meet the Sufficiency Standard is
not caused by the negligence or willful misconduct of Seller, its
employees or agents and which failure does not result from any visibly
damaged Equipment or any malfunctioning Equipment, and Purchaser shall
bear the risk thereafter.
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4.4 SELLER'S RIGHTS AND PURCHASER'S REMEDIES.
(a) LOSS OF EQUIPMENT. In the event of the loss of any item of Equipment
for which Seller bears the risk, Seller shall, at its sole cost and
expense, replace the lost item of Equipment with an item of Equipment
of comparable age, quality and function.
(b) DAMAGED MACHINERY. Subject to the limitations of the "Cap" as set
forth in SECTION 13.3(b), in the event of visible damage to any item
of Machinery for which Seller bears the risk, Seller shall have the
opportunity within thirty (30) days of such visible damage being
identified to repair such visible damage. If Seller does not repair
such visible damage, Purchaser's remedy shall be limited to one
hundred percent (100%) of the replacement cost of an item of Machinery
of comparable age, quality and function. Notwithstanding the
foregoing, if the Working Group agrees that any visible damage to
Machinery occurred between the Closing and Disassembly and did not
result from Seller's gross negligence or willful misconduct,
Purchaser's remedy shall be limited to fifty percent (50%) of the
replacement cost of an item of Machinery of comparable age, quality
and function (visible damage excepted).
(c) MALFUNCTIONING MACHINERY. Subject to the limitations of the Cap as set
forth in SECTION 13.3(b), in the event any item of Machinery is
malfunctioning for which Seller bears the risk, Seller shall have the
opportunity within thirty (30) days of such malfunction being
identified to replace or repair such Machinery. If Seller does not
replace or repair such malfunctioning Machinery, Purchaser's remedy
shall be limited to one hundred percent (100%) of the replacement cost
of an item of Machinery of comparable age, quality and function
(malfunction excepted). Notwithstanding the foregoing, if the Working
Group agrees that any Machinery became malfunctioning between the
Closing and Disassembly and did not result from Seller's gross
negligence or willful misconduct, Purchaser's remedy shall be limited
to fifty percent (50%) of the replacement cost of an item of Machinery
of comparable age, quality and function (malfunction excepted).
(d) VISIBLY DAMAGED OR MALFUNCTIONING TOOLING. In the event any item of
Tooling is visibly damaged or malfunctioning for which Seller bears
the risk, Seller shall have the opportunity for a period of thirty
(30) days after the visible damage or malfunction is identified to
remedy such visible damage or malfunction, by means of reengineering,
repair, or replacement. Purchaser agrees reasonably to cooperate with
Seller in Seller's attempts to effect such remedy. If Seller is unable
to remedy such visible damage or malfunction, Purchaser's remedy with
respect to any individual item of Tooling shall be limited to seventy
five percent (75%) of the replacement cost of a new item of Tooling of
comparable quality and function (damage and malfunction excepted);
PROVIDED HOWEVER, that Seller's aggregate liability to Purchaser with
respect to visibly damaged or malfunctioning Tooling shall not exceed
One Million Dollars ($1,000,000).
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(e) SUFFICIENCY OF ASSETS. In the event that after Assembly the Equipment
fails to meet the Sufficiency Standard, Seller shall have the
opportunity for a period of thirty (30) days after the insufficiency
is identified to remedy such insufficiency, by means of reengineering,
repair, replacement, providing additional items of equipment or other
means. Purchaser agrees reasonably to cooperate with Seller in
Seller's attempts to effect such remedy. If Seller is unable to remedy
such insufficiency, Purchaser's remedy shall be as set forth in, and
subject to the limitations of, ARTICLE 13 hereof.
(f) TOOLING NOT UTILIZED IN MANUFACTURE OF PRODUCTS. Notwithstanding
anything in this Agreement to the contrary, Seller shall have no
liability to Purchaser whatsoever with respect to any visible damage,
malfunction or failure to meet Sufficiency Standards of Tooling that
is not utilized in the manufacture of Products ("Extra Tooling").
(g) INSURANCE PROCEEDS. Any insurance proceeds relating to the loss,
damage or other casualty loss to Equipment shall be payable to the
party who bears the risk of loss for such Equipment.
(h) PROVISIONS CONTROLLING. To the extent that this ARTICLE 4 provides
additional rights to Seller, or restrictions on remedies of Purchaser,
to those provided elsewhere in this Agreement, including without
limitation ARTICLE 13 hereof, the provisions of this ARTICLE 4 shall
control.
5.0 REPRESENTATIONS AND WARRANTIES OF SELLER AND GUARANTOR. Seller and
Guarantor, jointly and severally, hereby represent and warrant to Purchaser
that:
5.1 CORPORATE ORGANIZATION. Seller and Guarantor are each corporations duly
organized, validly existing and in good standing under the laws of their
respective jurisdiction of incorporation and each has all requisite power
and authority to own, lease, license and operate its properties and assets
and to conduct the business now owned, leased, licensed and operated by it.
Seller is duly qualified, licensed or domesticated and in good standing in
each jurisdiction where the nature of its activities or the character of
the properties owned, leased or operated by it in connection with the
Business, require such qualification, licensing or domestication, except
where such failure to qualify would not have a Material Adverse Effect on
the Condition of the Business.
5.2 CORPORATE AUTHORIZATION, CERTAIN CORPORATE ACTIONS, NO CONFLICTS. Seller
and Guarantor each have all requisite power and authority to execute and
deliver this Agreement and all necessary corporate proceedings have been
taken to authorize the execution, delivery and performance by Seller and
Guarantor of this Agreement and the transactions described herein. This
Agreement is the legal, valid and binding obligation of Seller and
Guarantor, and is enforceable as to Seller and Guarantor in accordance with
its terms, except as such validity, binding effect or enforcement may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally or by equitable principles relating to the availability of
remedies. Except as set forth on the DISCLOSURE SCHEDULE, neither the
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execution, delivery nor performance of this Agreement by Seller or
Guarantor, nor consummation of the transactions contemplated hereby, will,
with or without the giving of notice or the passage of time, or both,
either (i) conflict with, result in a default, right to accelerate or loss
of rights under, or result in the creation of any lien, charge or
encumbrance pursuant to, any provision of Seller's or Guarantor's charter,
bylaws or any franchise, mortgage, deed of trust, lease, license,
agreement, understanding, law, rule or regulation or any order, judgment,
or decree to which Seller or Guarantor is a party or by which Seller or
Guarantor or any of their properties may be bound or affected or (ii)
except as set forth on the DISCLOSURE SCHEDULE, require any waiver,
consent, approval, authorization or action of or filing with any third
party.
5.3 FINANCIAL INFORMATION. Included as SCHEDULE 5.3 are the summary financial
schedules for the Business for the eleven months ending May 31, 1999, the
twelve months ending June 30, 1997, June 30, 1998 and June 30, 1999, and
the four months ending October 31, 1999, as previously provided to
Purchaser, and the year-to-date sales by major product line as of November
30, 1999 (the "Financial Statements"). The Financial Statements, and all
other financial information of the Seller (including without limitation the
profit/loss, sales and inventory information and analysis prepared by
Pricewaterhouse Coopers) delivered to the Purchaser, fairly present the
results of operations of the Business as of said dates, having been
extracted from the financial statements of Seller, which financial
statements of Seller have been prepared in accordance with GAAP, applied on
a basis consistent with prior applications of those principles, subject to
year end adjustments and footnotes in the case of any interim financial
statements. Seller further represents, and Purchaser acknowledges, that due
to the fact that the Business is comprised of divisions of Seller, the
Financial Information reflects pro rata allocations for the Business'
portion of certain expenses of Seller, such as corporate overhead, space,
information systems, taxes and other support functions, rather than actual
expenses relating to the Business.
5.4 OPERATIONS OF THE BUSINESS; ADEQUACY OF PURCHASED ASSETS. As of the Closing
Date, the Business is operated only through Seller and not through any
other direct or indirect subsidiary or affiliate of Seller, Guarantor,
other member of Seller's Group or otherwise. Except as set forth in the
DISCLOSURE SCHEDULE and provided that Purchaser utilizes human and capital
resources that are consistent with such resources utilized by Seller in its
manufacture of Products, the Purchased Assets comprise all the assets,
properties and rights of every type and description, used in or necessary
to the operation of the Business in the ordinary course and, except as set
forth in the DISCLOSURE SCHEDULE, are adequate to support the Rival Master
Forecasts at Closing and the MEH Master Forecasts (both as defined in the
Interim Services Agreement) (the "Sufficiency Standard"), and, except as
set forth in the DISCLOSURE SCHEDULE, no Person (as defined in SECTION 5.26
below) other than the Seller has any ownership interest in any such assets.
Except as disclosed in the DISCLOSURE SCHEDULE, as of the Closing Date all
items of Equipment (except for the Extra Tooling) are in operating
condition, are fit for the purposes intended and have been maintained in
accordance with good industry standards (the "Closing Condition"). All
Extra Tooling is sold "AS IS."
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5.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the DISCLOSURE
SCHEDULE, since October 31, 1999 there has not been any Material Adverse
Change in the Condition of the Business (as defined in SECTION 5.26 below),
or event or development likely to give rise to a Material Adverse Change in
the Condition of the Business, and Seller has not, in any amount or manner
with respect to the Business (a) sold, transferred, leased to others or
otherwise disposed of any of the assets necessary to operate the Business,
except for inventory sold in the ordinary course of business; (b) waived or
released any right of value relating to the Business except in the ordinary
course of business; (c) received any notice of termination of or otherwise
lost any contract, lease, license or other agreement relating to the
Business or failed to perform in all material respects all of its
obligations, or suffered or permitted any material default to exist, under,
any contract, lease, agreement or license material to the Business; (d) had
any actual or threatened employee strikes, work stoppages, slow-downs or
lockouts affecting the Business; (e) transferred or granted any rights
under, or entered into any settlement regarding the breach or infringement
of, or otherwise failed to preserve or permit to lapse, any license,
patent, copyright, trademark, trade name, invention or similar right
relating to the Business, or modified any existing right with respect
thereto; (f) made any change in the rate of compensation, commission, or
other direct or indirect remuneration payable, or paid or agreed or orally
promised to pay, conditionally or otherwise, any bonus, extra compensation,
pension, severance or vacation pay, to any salesman, distributor,
representative or agent of Seller relating to the operation of the Business
except in the ordinary course of business; (g) made any capital
expenditures or capital additions or betterments in excess of an aggregate
of Twenty-Five Thousand Dollars ($25,000); (h) made any purchase commitment
in excess of the normal, ordinary and usual requirements of the Business or
at any price in excess of the then current market price or upon terms and
conditions more onerous than those usual and customary in the industry, or
made any change in its selling, pricing, advertising or personnel practices
inconsistent with prudent business practices; (i) made any change in
accounting methods in any way affecting the Purchased Assets; (j) made any
change in its business or operations or in the manner of conducting its
business or incurred any obligations or liabilities, except in each case in
the ordinary course of business consistent with past practices; (k)
permitted or allowed any of the Purchased Assets to be mortgaged, pledged
or subjected to any lien, encumbrance, restriction or charge of any kind;
or (l) entered into any agreement or made any commitment to take any of the
types of action described in subparagraphs (a) through (l) above.
5.6 UNDISCLOSED LIABILITIES. As of the Closing Date, Seller in its operation of
the Business does not have any outstanding material liabilities incurred
outside the ordinary course of business, including debts, liabilities or
obligations, or relating to any warranty, infringement, taxes, employee
liabilities, product liability, litigation, or environmental matter, except
as described in the DISCLOSURE SCHEDULE.
5.7 PROPERTIES. Except as disclosed in the DISCLOSURE SCHEDULE, Seller has
good, marketable and legal title to, or holds by valid and existing lease
or license, free and clear of all mortgages, pledges, liens, or security
interests, each piece of property included as a
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Purchased Asset (including without limitation each asset listed on the
Closing Date Balance Sheet).
5.8 LITIGATION; ORDERS. Except for pending product liability claims required to
be disclosed pursuant to Section 5.21 hereof, there is no material claim,
legal action, administrative proceeding, governmental investigation,
arbitration or other proceeding (collectively, "Litigation") pending, nor
to Seller's Knowledge threatened, against Seller or Guarantor or any other
member of Seller's Group arising from or otherwise relating to the
Business, and Seller has no reason to be aware of any basis for the same
except as consistent with past Litigation arising from or otherwise
relating to the operation of the Business in the ordinary course. As of the
date hereof, there is no judgment or outstanding order, injunction, decree,
stipulation or award (whether rendered by a court or administrative agency,
or by arbitration) against Seller, Guarantor or any other member of
Seller's Group relating to the Business that would prohibit the
consummation of the transaction contemplated by this Agreement. No
citations, fines or penalties have been asserted against Seller, Guarantor
or any other member of Seller's Group with respect to operation of the
Purchased Assets in the Business since January 1, 1996, under a federal,
state or local law relating to air or water pollution or other
environmental protection matters, or relating to occupational health or
safety.
5.9 INTELLECTUAL PROPERTY. SCHEDULES 1.1(f)(i), 1.1(f)(ii) AND 1.1(f)(iv)
contain complete and correct lists of all the patents, registered
trademarks and registered copyrights and applications for the foregoing,
both domestic and foreign, presently owned and used by Seller relating
exclusively to the Business. All of the Intellectual Property and Know-How
is valid and in full force and effect and, except as set forth in the
DISCLOSURE SCHEDULE, Seller has not received any notice or claim that any
of the Intellectual Property or Know-How is invalid or unenforceable by it.
Except as set out in the DISCLOSURE SCHEDULE, the Intellectual Property and
Know-How are owned by Seller free and clear of any license, sublicense,
agreement, right, understanding, judgment, order, decree, stipulation,
lien, charge or encumbrance of any kind. The rights being transferred to
Purchaser pursuant to this Agreement (including the limited rights to the
"Patton" and "Titan" tradenames transferred pursuant to the License
Agreement of even date herewith between the Seller and Purchaser (the
"License Agreement") and the license agreement with Joseph Armbruster
assigned to Purchaser and more particularly described in the SCHEDULE
1.1(d)), including rights to the Intellectual Property and Know-How,
constitute all such rights necessary to produce, market, support and sell
the Products of the Business as produced, marketed, supported and sold by
Seller and to conduct the Business as currently conducted by the Seller.
None of the Intellectual Property or any of the technology covered thereby
or any of the Know-How has been misappropriated from any Person. Seller is
not infringing upon or otherwise acting adversely to any intellectual
property owned by any other Person, and there is no material claim or
action by any Person pending, or to Seller's Knowledge threatened, with
respect thereto. Except as described in the DISCLOSURE SCHEDULE, to
Seller's Knowledge there is no infringement or improper use by any third
party of the Intellectual Property or the Know-How relating to the
Business, and there is no action or proceeding instituted by Seller pending
in which an act constituting an infringement of any of the rights to such
Intellectual Property or
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Know-How was alleged to have been committed by a third party. Seller has
not taken or omitted to take any action that would have the effect of
waiving any rights to any Intellectual Property or Know-How related to the
Business. The DISCLOSURE SCHEDULE lists all licenses, sublicenses or
agreements relating to the use by third parties of the Intellectual
Property and Know-How, or the use by the Business of the Intellectual
Property of another Person, and there is no default under any such license,
sublicense or agreement.
5.10 LABOR MATTERS. As of the date hereof, at Seller's facilities where the
Business is operated and relating to the manufacturing of products
utilizing the Purchased Assets, (a) there is no collective bargaining
agreement or any labor dispute involving employees of the Business and (b)
there is no labor strike or work stoppage pending or, to Seller's
Knowledge, threatened.
5.11 COMPLIANCE WITH LAWS. Except as disclosed in the DISCLOSURE SCHEDULE, (a)
the conduct of the Business materially complies with all applicable
statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto, and (b) to Seller's Knowledge, there are no
proposed laws, rules, regulations, ordinances, orders, judgments, decrees,
governmental takings, condemnations or other proceedings that would be
applicable to the Business as operated by Seller and that could have a
Material Adverse Effect on the Condition of the Business as operated by
Seller.
5.12 TAXES. Except as disclosed in the DISCLOSURE SCHEDULE, other than liens for
taxes not yet due and payable, there are no unpaid taxes, deficiencies,
assessments, penalties, interest or other governmental charges relating to
the income, receipts, payrolls, transactions, capital or other operations
of the Business which are or could become a lien on any of the Purchased
Assets. There have been no examinations pending against, no claims have
been asserted against, and there are no unexpired waivers of any statute of
limitations with respect to any taxes, deficiencies, assessments,
penalties, interest or other governmental charges which could become liens
on any of the Purchased Assets.
5.13 CONTRACTS.
(a) Except for the Contracts listed or described in SCHEDULE 1.1(d), none
of the Contracts included in Purchased Assets:
(i) relates to a mortgage, indenture, security agreement or other
agreement or instrument relating to the borrowing of money by,
or any extension of credit to, or any guarantee by, Seller, or
any obligation to which Seller is directly or contingently
liable;
(ii) contains or relates to covenants or other provisions limiting
Seller's (or any other Person's) right to compete in any line of
business or with any person or in any area;
(iii) is or relates to a license agreement, either as licensor or
licensee;
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(iv) is or relates to a consulting arrangement, employment agreement
or similar type arrangement;
(v) provides for or relates to any sharing of profits with others
or any joint venture or similar enterprise;
(vi) involves any remaining or unsatisfied obligation outside of the
ordinary course of business (i) to make capital expenditures
(whether through the purchase of real or personal property or
otherwise) involving Twenty Thousand Dollars ($20,000) or more
in the case of any one item or group of items, (ii) to purchase
goods involving Twenty Thousand Dollars ($20,000) or more in
the case of any one item or group of items, or (iii) to supply
products or provide services involving Twenty Thousand Dollars
($20,000) or more in the case of any one item or group of
items;
(vii) involves any sales agency, manufacturer's representative,
distributorship, marketing, consignment or similar type
arrangement or agreement (whether foreign or domestic);
(viii) is any other agreement, contract, lease or commitment outside
the ordinary course of business that in any case involves
payment or receipts of more than Twenty Thousand Dollars
($20,000) or relates to suppliers of the Business (whether
foreign or domestic) or that is in any way material to the
Business.
(b) Except for agreements and arrangements listed in SCHEDULE 1.1(d) or
the DISCLOSURE SCHEDULE, Seller is not a party to any agreements (i)
relating to the Purchased Assets or (ii) with any employees who will
be employed by Purchaser after Closing.
(c) Except as disclosed in the DISCLOSURE SCHEDULE , the Contracts are
legal, valid, and effective in accordance with their terms, do not
require any consent or assignment to transfer to Purchaser and there
does not exist thereunder any default or event or condition which,
after notice or lapse of time or both, would constitute a default
thereunder by any party thereto.
Except as disclosed in the DISCLOSURE SCHEDULE, neither Seller nor any
other party to a Contract is in material breach thereof or default
thereunder, and to Seller's Knowledge there does not exist any event which,
with the giving of notice or the lapse of time, would constitute such a
breach or default. Except as otherwise set forth in the DISCLOSURE
SCHEDULE, all Contracts described or reflected therein are in full force
and effect. To the extent any Contract (other than purchase orders or sales
orders) requires the consent, notice or approval of another party to be
transferred, such necessary consent, notice or approval requirement is
designated on the DISCLOSURE SCHEDULE. Seller has provided Purchaser true,
complete and correct copies of all written Contracts other than open
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purchase orders or sales orders, PROVIDED THAT Seller has provided a copy
of the form agreement used with regard to representatives and distributors
only.
5.14 INVENTORIES. Except for raw material, components or work in process
utilized in Seller's manufacture of finished goods or components for
Purchaser under the Interim Services Agreement, as to which the
representations and warranties contained in the Interim Services Agreement
only are made, all Inventories are of a quality usable and salable in the
ordinary course of business and have been valued in accordance with SECTION
3.2(a), provided that Company does not warrant that Inventories consisting
of finished goods will be free of customer or consumer warranty claims.
Company makes no representation or warranty with respect to the salability
of the Inventories except as expressly provided herein. All Inventories are
located at the locations set forth on the DISCLOSURE SCHEDULE.
5.15 BACKLOG. The DISCLOSURE SCHEDULE lists all of Seller's open orders to
supply goods or services which were not complete on December 14, 1999.
5.16 CONSENTS, APPROVALS, ETC. There are no filings required to be made by
Seller, Guarantor or any other member of Seller's Group with, and there are
no consents, approvals, permits or authorizations required to be obtained
by Seller, Guarantor or any other member of Seller's Group from,
governmental and regulatory authorities or instrumentalities of the United
States, the several states or any other jurisdiction in connection with the
execution and delivery of this Agreement by Seller and Guarantor and the
consummation by Seller and Guarantor of the transactions contemplated
hereby.
5.17 LICENSES AND PERMITS. Seller has all material governmental licenses and
permits necessary to conduct the Business, each of which is set forth on
the DISCLOSURE SCHEDULE. Such licenses and permits are valid and in full
force and effect. There is not any proceeding pending or threatened to
limit, suspend or revoke any such license or permit.
5.18 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth on the DISCLOSURE
SCHEDULE, Seller has no agreement, understanding, obligation, indebtedness,
contract or commitment in connection with or affecting the Business or the
Purchased Assets with any member of Seller's Group (i) that is not
cancelable by Seller on notice of not longer than 30 days without
liability, penalty or premium and (ii) the cancellation of which will have
a Material Adverse Effect on the Condition of the Business.
5.19 ENVIRONMENTAL MATTERS. Without in any manner limiting the scope of the
representations set forth elsewhere in this Agreement, except as set forth
on the DISCLOSURE SCHEDULE, the manufacturing operations of the Business
with the Purchased Assets currently are in material compliance with, and
Seller (with respect to the Business and Purchased Assets only) has not
received written notice of violations under or notice of any fact upon
which any material violation could be based under, any federal, state or
local environmental laws as enacted, re-authorized and amended or
regulation, guidance, orders or decrees promulgated or issued pursuant to
any such law, except for any noncompliance that would not have a Material
Adverse Effect on the Condition of the Business.
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5.20 EQUIPMENT LEASES. There are no Leases for Equipment included in the
Purchased Assets.
5.21 DEFECTS IN PRODUCTS OR DESIGNS; PRODUCTS.
(a) To Seller's Knowledge, except for those product features (or lack
thereof) that have been alleged to constitute a defect in design or
manufacture of Products in those product warranty and product
liability matters set forth on the DISCLOSURE SCHEDULE, or which
relate to Seller's past warranty claim experience, there are no
defects in the design or manufacture of Products that would materially
adversely affect the performance or quality of the Products.
(b) The DISCLOSURE SCHEDULE sets forth the summary warranty cost data of
Seller since July 1, 1997. The products manufactured and sold by
Seller have been designed and manufactured in compliance with all
regulatory, engineering, industrial and other codes generally
recognized as being applicable thereto. Except as set forth on the
Disclosure Schedule, since January 1, 1996, none of the Products has
been the subject of any voluntary or involuntary recall campaign
performed by Seller or any voluntary or involuntary recall campaign
required by, or performed in cooperation with, any governmental
agency, that would adversely affect the performance or quality of such
Products. Seller has received no written statements, citations or
decisions by any governmental or regulatory body specifically stating
that any Product made, manufactured, constructed, distributed, sold,
leased, supported or installed at any time by Seller is defective or
unsafe or fails to meet any standards promulgated by any such
governmental or regulatory body. Except as set forth on the DISCLOSURE
SCHEDULE, no product liability claims are presently pending (as to
which Seller has been properly served) or, to Seller's Knowledge,
threatened. To Seller's Knowledge and except as disclosed on the
DISCLOSURE SCHEDULE, no fact exists relating to any Product that may
impose upon the Seller or Purchaser a duty to recall any Product or a
duty to warn customers of a defect in any Product.
5.22 CUSTOMERS AND SUPPLIERS. The DISCLOSURE SCHEDULE lists, by dollar volume
paid for the twelve month period ended June 30, 1999, the ten (10) largest
customers of the Business, with dollar volume listed ("Customers") and the
ten (10) largest suppliers of the Business ("Suppliers"). Seller has
received no written notice from any of the Customers or Suppliers that such
Customer or Supplier will discontinue a substantial portion of the business
it conducts with the Business, which notice states a schedule or time
period for such discontinuation and, to Seller's Knowledge (i) no Customer
or Supplier has informed any of the individuals named in SECTION 5.26 that
such Customer or Supplier will discontinue a substantial portion of the
business it conducts with the Business and has informed such individual of
a schedule or time period for such discontinuation (ii) no Customer has
informed any of such individuals that such Customer will discontinue
purchasing Products as a result of Purchaser's acquisition of the Purchased
Assets and the continuation of the Business following the Closing and (iii)
no Supplier has informed any of such individuals that such Supplier will
discontinue supplying materials for the
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Business as a result of Purchaser's acquisition of the Purchased Assets and
the continuation of the business following the Closing.
5.23 LETTERS OF CREDIT, SURETY BONDS, GUARANTEES. There are no letters of
credit, performance or payment bonds, guaranty arrangements and surety
bonds of any nature relating solely to the Business.
5.24 ALL MATERIAL INFORMATION; DISCLOSURE. To Seller's Knowledge, all matters
which are not generally known to the public or to the industry in which
Seller operates the Business and which could reasonably have a Material
Adverse Effect on the Condition of the Business, have been disclosed to
Purchaser. No representation or warranty made herein by Seller or
Guarantor, and no statement contained in any certificate or other
instrument furnished or to be furnished to Purchaser in connection with the
transaction contemplated by this Agreement (all of which statements shall
be deemed to have been made by Seller and Guarantor for all purposes of
this Agreement), contains or will contain any untrue statement of a
material fact or omits or will omit to state any material facts necessary
to make the information contained therein not misleading.
5.25 BROKERS. Neither the Seller nor the Guarantor has entered into any
arrangement for the provision of services in connection with this Agreement
or the transactions contemplated hereby that may give rise to an obligation
to pay any brokers' or finders' fees or other commissions, except with
respect to Seller's arrangement with Goldsmith-Agio-Helms (for which Seller
and Guarantor shall remain exclusively liable).
5.26 CERTAIN DEFINED ITEMS. References in SECTIONS 5.1 THROUGH 5.25 and
elsewhere in this Agreement to (i) "Seller's Knowledge" shall mean the
facts and circumstances that Seller or Guarantor knew or should have known
after appropriate inquiry, PROVIDED THAT appropriate inquiry of employees
of Seller and Guarantor shall be deemed to have been made by inquiry of the
following individuals: Ira B. Morgenstern; Michael Pignataro; Dennis
Neibrook, Roger Vesser, Bill Yager, Ann Thompson, Donald Long, Edward
Johnson and Joyce Moritz, except that with respect to SECTION 5.21 the list
of such individuals shall also include Darrell Sanders and Ayekut Ozgunay;
each of these named individuals has reviewed this Article 5.0 and has
provided to Seller the information known to such individuals regarding the
representations and warranties contained herein; (ii) "Material Adverse
Change in the Condition of the Business" or "Material Adverse Effect on the
Condition of the Business" shall mean a change or effect that likely would
have a material adverse change or effect on the Purchased Assets or the
results of operations of the Business; and (iii) "Person" shall mean any
individual, corporation, limited liability company, partnership,
proprietorship, trust or other entity of any kind.
6.0 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents
and warrants to Seller that:
6.1 CORPORATE ORGANIZATION. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has all requisite power and authority to own, lease, license and operate
its properties and assets and to conduct the
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businesses now owned, leased, licensed and operated by it. Purchaser is
duly qualified, licensed or domesticated and in good standing in each
jurisdiction where the nature of its activities or the character of its
properties require such qualification, licensing or domestication.
6.2 CORPORATE AUTHORIZATION, CERTAIN CORPORATE ACTIONS, NO CONFLICTS. Purchaser
has all requisite power and authority to execute and deliver this Agreement
and all necessary corporate proceedings have been taken to authorize the
execution, delivery and performance by Purchaser of this Agreement and the
transaction described herein. This Agreement is the legal, valid and
binding obligation of Purchaser, and is enforceable as to Purchaser in
accordance with its terms, except as such validity, binding effect or
enforcement may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally or by equitable principles relating
to the availability of remedies. Neither the execution, delivery, nor
performance of this Agreement by Purchaser will, with or without the giving
of notice or the passage of time, or both, conflict with, result in a
default, right to accelerate or loss of rights under, or result in the
creation of any lien, charge or encumbrance pursuant to, any provision of
Purchaser's certificate of incorporation or bylaws or any franchise,
mortgage, deed of trust, lease, license, agreement, understanding, law,
rule or regulation or any order, judgment, or decree to which Purchaser is
a party or by which Purchaser may be bound or affected.
6.3 LITIGATION; ORDERS. As of the date hereof, there is no judgment or
outstanding order, injunction, decree, stipulation or award, or pending or
threatened claims, suits or litigation against Purchaser that would
prohibit the consummation of the transaction contemplated by this
Agreement.
6.4 CONSENTS, APPROVALS, ETC. There are no filings required to be made by
Purchaser with, and there are no consents, approvals, permits or
authorizations required to be obtained by Purchaser from, governmental and
regulatory authorities or instrumentalities of the United States, the
several states or any other jurisdiction in connection with the execution
and delivery of this Agreement by Purchaser and the consummation by
Purchaser of the transaction contemplated hereby.
6.5 ALL MATERIAL INFORMATION; DISCLOSURE. No representation or warranty made
herein by Purchaser, and no statement contained in any certificate or other
instrument furnished or to be furnished to Seller in connection with the
transaction contemplated by this Agreement (all of which statements shall
be deemed to have been made by Purchaser for all purposes of this
Agreement), contains or will contain any untrue statement of a material
fact or omits or will omit to state any material facts necessary to make
the information contained therein not misleading.
6.6 BROKERS. Purchaser has not entered into any arrangement for the provision
of any services in connection with this Agreement or the transactions
contemplated thereby that may give rise to an obligation to pay brokers' or
finders' fees or other commissions.
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7.0 DELIVERIES AT CLOSING
7.1 DELIVERIES BY SELLER AND GUARANTOR. Seller and Guarantor hereby deliver the
following to Purchaser:
(a) certificates executed by an executive officer of Seller and Guarantor,
respectively, as to authorization, incumbency and the investigations
required by the provisions of Article 5.0, in the form attached as
EXHIBIT 7.1(a);
(b) an opinion of legal counsel to Seller and Guarantor, substantially in
the form of EXHIBIT 7.1(b);
(c) the Bill of Sale and Assignment in the form attached as EXHIBIT
7.1(c), duly executed by an executive officer of Seller and all other
documents, certificates and agreements necessary to transfer to
Purchaser good, marketable and legal title to the Purchased Assets,
free and clear of any and all liens thereon including, in addition to
such Bill of Sale and Assignment and without limitation;
(d) assignments of all Intellectual Property and Contracts in the forms
attached as EXHIBIT 7.1(d), duly executed by an executive officer of
Seller;
(e) the License Agreement, duly executed by an executive officer of
Seller;
(f) the Interim Services Agreement, duly executed by an executive officer
of Seller;
(g) evidence of release of all liens, charges and encumbrances on the
Purchased Assets; AND
(h) the Closing Date Balance Sheet is a form satisfactory to Purchaser.
7.2 DELIVERIES BY PURCHASER. Purchaser hereby delivers the following to Seller:
(a) a certificate executed by an executive officer of Purchaser as to
authorization and incumbency, in the form attached as EXHIBIT 7.2(a);
(b) an opinion of legal counsel to Purchaser, substantially in the form of
EXHIBIT 7.2(b);
(c) assignments of all Intellectual Property and Contracts in the forms
attached as EXHIBIT 7.1(d), to the extent required to be executed by
an executive officer of Purchaser;
(d) the License Agreement, duly executed by an executive officer of
Purchaser;
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(e) the Interim Services Agreement, duly executed by an executive officer
of Purchaser; and
(f) the Preliminary Purchase Price to the Seller and the Escrow Funds to
the Escrow Agent as described herein.
8.0 POST-CLOSING OBLIGATIONS.
8.1 PRODUCT MARKING. Following Closing, all products manufactured by, or
manufactured by third parties pursuant to orders of, Purchaser relating in
any way to the Business, including without limitation, Products, shall be
indelibly imprinted, stamped or otherwise tagged with a distinctive
identifying mark which distinguishes all such products from products
manufactured by Seller either prior to or after Closing.
8.2 ACCESS AFTER CLOSING. After the Closing, upon reasonable written notice,
Purchaser, Seller and Guarantor shall furnish or cause to be furnished to
each other and their respective accountants, counsel and other
representatives reasonable access, during normal business hours, to such
information (including records pertinent to the Business) and assistance
relating to the Business as is reasonably necessary for operations,
financial reporting and accounting matters, the preparation and filing of
any returns, reports or forms or the defense of any tax claim or
assessment. In the case of Seller and Guarantor, such assistance shall
include access to any and all documents, records, files and correspondence
relating to the Business, and Seller and Guarantor will use reasonable
efforts to maintain at their offices or in offsite storage for the longer
of seven (7) years from its date or two (2) years after the Closing Date
any such documents, records, files and correspondence that could be needed
by Purchaser. In the case of Purchaser, such assistance shall include
reasonably prompt written response to reasonable written inquiries of
Seller related to such financial reporting, accounting and tax matters,
cooperation in responding to audit reports made by taxing authorities to
Seller regarding the Business, assisting Seller (including making its
employees reasonably available (consistent with and subject to their normal
business activities) at reasonable expense to Seller) in defending any
lawsuits or claims against Seller with respect to Excluded Liabilities or
relating to the operation of the Business by Seller prior to the Closing
Date and, at Seller's request and expense, participation in audits
conducted with respect to Seller. Purchaser shall use reasonable efforts to
retain the books and records of Seller included in the Purchased Assets for
a period of seven (7) years after the Closing. After the end of such
respective retention period, before disposing of such books or records,
Purchaser, Guarantor, Seller, as the case may be, shall use their best
efforts to give notice to such effect to Guarantor, Seller or Purchaser, as
the case may be, and such parties, within a reasonable time after the
receipt of such notice, will notify the others whether to destroy such
documents or whether it will, at its cost and expense, remove and retain
all or any part of such books or records as it may select.
8.3 COVENANT NOT TO COMPETE. The parties acknowledge and agree that Purchaser
is acquiring, and the consideration paid by Purchaser hereunder reflects,
the goodwill of the Business associated with the manufacture, marketing
and/or sale of (A) those air
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circulators, heaters, work lights, ventilators and other products under the
Patton brand name identified in the product brochures attached hereto as
EXHIBIT 8.3(i) (together with any products designed, manufactured, marketed
and sold by Purchaser based on the designs and manufacturing processes of
such products, whether or not under the Patton name, the "Patton Industrial
Lines") into and through "Industrial and Commercial Channels" (as defined
below), and (B) products offered through the Building Supply Division.
Seller has devoted significant design, product development and promotion
efforts to the manufacture, marketing and sale of retail and consumer air
circulators, which have substantially identical designs and manufacturing
processes to air circulators in the Patton Industrial Lines listed on
Schedule 8.3 (including options) and which are sold under the Patton name
(the "Patton Retail Lines"), into and through "Retail and Consumer
Channels" (as defined below). The parties further acknowledge and agree
that Seller intends to continue the manufacture, marketing and sale of the
Patton Retail Lines, and that the consideration received by Seller
hereunder reflects the retention by Seller of the goodwill associated
therewith. Therefore, as an inducement to enter into this Agreement and in
partial consideration for the payment to Seller of the Purchase Price and
the transfer of the Purchased Assets to Purchaser, the parties agree that
for a period of two (2) years following the Closing Date:
(a) Neither Seller, Guarantor nor any other member of Seller's Group
(excluding for these purposes any individuals; the "Seller Covenant
Group") will engage in any business which competes with (a) the
manufacture, marketing and/or sale of products in the Patton
Industrial Lines through Industrial and Commercial Channels or (b) the
manufacture, marketing and sale of products currently offered through
the Building Supply Division, or products substantially similar
thereto, through any distribution channels, other than manufacturing
by Seller for Purchaser as contemplated by the Interim Services
Agreement; and
(b) Neither Purchaser, nor any parent, subsidiary or affiliate thereof
(excluding for these purposes any individuals; the "Purchaser Covenant
Group") will engage in any business which competes with the
manufacture, marketing and/or sale of products in the Patton Retail
Lines through Retail and Consumer Channels.
For purposes of this Agreement: (i) the term "compete" includes (A) owning
or controlling any financial interest in any corporation, partnership, firm
or other form of business organization (collectively, an "Entity") which is
so engaged, (B) consulting with, advising or assisting in any way any
Entity which is now or becomes a competitor of Purchaser or Seller, as the
case may be, in the business areas where these noncompetition covenants are
effective, (C) manufacturing products on a private label basis for, or
licensing Know-How or Intellectual Property or otherwise transferring to,
any such Entity, and (D) engaging in any practice, the sole intent of which
is to evade the provisions of these covenants not to compete; (ii) the term
"Industrial and Commercial Channels means those distribution channels which
do not normally sell products directly to homeowners, including without
limitation industrial wholesale distributors, electrical wholesalers,
contract and plumbing supply distributors and other non-consumer,
non-retail distribution channels; and (iii) the term "Retail and Consumer
Channels" means
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those distribution channels which normally sell products directly to
consumers, including hardware stores and consumer oriented building supply
stores, such as Home Depot, Home Base and Lowes, and mass merchandising
stores, such as Wal-Mart, Target and K-Mart. The parties acknowledge and
agree that the Industrial and Commercial Channels and the Retail and
Consumer Channels are mutually exclusive, and an individual distributor,
wholesaler, store or other final distribution channel cannot be included
within both Channels. However, to the extent that a single distribution
entity engages in both distribution Channels by maintaining two distinct
entities with no significant crossover as to personnel, buying strategies,
attendance at trade shows, etc., such distinct entities can be deemed to be
in separate distribution Channels for purposes of this Agreement. Seller
acknowledges that Purchaser currently markets and sells certain products
under the "Southern Comfort", "Farenheat", and "Kensington" brand name
through the Retail and Consumer Channels (the "Current Purchaser
Products"). Seller acknowledges that nothing herein shall prohibit
Purchaser from continuing to market and sell such the Current Purchaser
Products through the Retail and Consumer Channels.
8.4 EXCEPTIONS TO COVENANT.
(a) In the event that any member of the Seller Covenant Group or the
Purchaser Covenant Group, as the case may be, acquires an entity or
business, or an interest in an entity or business, a part or division
of which engages in a business that would be violative of the
covenants contained in SECTION 8.3, such member shall have a period of
six (6) months after closing of such acquisition to divest of all
operations that violate such covenants, and such acquisition and
divestiture shall not be prohibited by or deemed a breach of this
Agreement.
(b) Seller may market, distribute and sell, in its sole discretion and
without limitation, any products included in inventory not included
within the Inventories purchased by Purchaser as part of the Purchased
Assets.
(c) Seller's Group may continue to manufacture, market and sell lines of
ceiling fans into the Retail and Consumer Channels.
8.5 CONFIDENTIALITY AND NON-SOLICITATION. As an further inducement to Purchaser
to enter into this Agreement and in partial consideration of the payment to
Seller of the Purchase Price, the Seller and Guarantor agree that for a
period of five (5) years after the date hereof that neither Seller,
Guarantor nor any other member of Seller's Group will:
(a) Divulge to any person, firm or corporation any confidential
information relating to the Business, including without limitation
customers, customer lists, Know-How, contracts, prices, suppliers or
other business practices, unless and until (i) such information shall
have ceased to be confidential as evidenced by general public
knowledge or availability through public sources, (ii) such disclosure
is required in order for Seller or any member of Seller's Group to
continue its business operations as contemplated by and not in
violation of this Agreement and (iii) disclosure is required under
order of a court or other body having jurisdiction,
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provided that Seller shall have given prior notice to Purchaser of any
hearing or other proceeding in which the matter of such disclosure is
to be heard; or
(b) Without the prior written approval of Purchaser, offer employment to
or attempt to induce the termination of the employment relationship
with Purchaser of any of Seller's former employees who are employed by
Purchaser after Closing.
8.6 PRESS RELEASE. The parties agree to issue only those press releases and
such other forms of public notification announcing the transaction
contemplated hereby as is consented to in advance by the other party, such
consent not to be unreasonably withheld.
8.7 FURTHER ASSURANCES. After the Closing and for no further consideration,
Seller and Guarantor (on the one hand), and Purchaser (on the other) shall
(a) perform all reasonable acts (including without limitation, the use of
their commercially reasonable efforts to enable the other party to
accomplish transfer registration, permits, approvals, and the like as
contemplated by this Agreement), and (b) execute, acknowledge and deliver
such assignments, transfers, consents and other documents and instruments
as the other party or its counsel may reasonably request, in each case, to
vest in Purchaser or protect Purchaser's right, title and interest in, and
enjoyment of, the Purchased Assets or to carry out the provisions and
purposes of this Agreement.
8.8 WARRANTY RETURNS OR CREDITS. Subject to SECTION 2.0(d) with regard to
Excluded Product Liability Matters, in the event that any Seller Products
or any other products as to which Purchaser bears warranty liability are
returned or delivered to Seller or any member of Seller's Group, Seller
shall follow Purchaser's instructions with regard to such products and
Purchaser shall process such returns or deliveries in accordance with its
customary business practices. Subject to SECTION 2.0(d) with regard to
Excluded Product Liability Matters, if any customer of Seller credits the
value of any warranty claims against any of its accounts payable to Seller
with respect to Seller Products, Seller and Purchaser shall reasonably
cooperate to make appropriate adjustment to the Purchase Price or otherwise
to reimburse Seller in the amount of Purchaser's obligation for such
credit.
9.0 EMPLOYEES.
Purchaser has offered employment to those employees listed on SCHEDULE 9.0,
which Schedule sets forth the date on which Seller will terminate the
employment of such employees. Upon termination, Seller shall release such
employees from any post-employment non-competition covenants. Purchaser
does not assume any employee-related liabilities or expenses based on
events or pursuant to service by such employees prior to Closing, including
without limitation under any employee benefit plans, and Seller does not
assume any such liabilities or expenses for any period after Closing.
10.0 AUTHORIZATIONS. Seller, Guarantor and Purchaser, as promptly as practicable
after the date hereof, shall (a) cooperate to make, or cause to be made,
all such filings and submissions under laws, rules and regulations
applicable to them and their affiliates, as may be required in conjunction
with the consummation of the transfer of the Purchased
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Assets contemplated hereby in accordance with the terms of this Agreement,
(b) use commercially reasonable efforts to obtain, or cause to be obtained,
all authorizations, approvals, consents and waivers from all Persons,
employee groups and governmental authorities necessary to be obtained by
them or their affiliates in conjunction with such transaction, and (c) use
commercially reasonable efforts to take, or cause to be taken, all other
actions necessary, proper or advisable in order to fulfill their
obligations hereunder and to carry out the intentions of the parties
expressed herein. Seller, Guarantor and Purchaser will coordinate and
cooperate with one another in exchanging such information and supplying
such reasonable assistance as may be reasonably requested by each in
connection with the foregoing.
11.0 CONSENTS AND APPROVALS. This Agreement shall not constitute an agreement to
assign or transfer any interest in any instrument, contract, lease, permit
or other agreement or arrangement or any claim, right or benefit arising
thereunder or resulting therefrom, if an assignment or transfer or an
attempt to make such an assignment or transfer without the consent of a
third-party would constitute a breach or violation thereof or would affect
adversely the rights of Purchaser or Seller thereunder. Any transfer or
assignment to Purchaser by Seller of any interest under any instrument,
contract, lease, permit or other agreement or arrangement that requires the
consent of a third party shall be made subject to such consent or approval
being obtained. In the event any such consent or approval has not obtained
on or prior to the Closing Date, Seller and Guarantor shall continue to use
commercially reasonable efforts to obtain any such approval or consent
after the Closing Date until such time as such consent or approval has been
obtained. Seller and Guarantor will cooperate with Purchaser in any lawful
and economically feasible arrangement to provide that Purchaser shall
receive Seller's interest in the benefits under any such instrument,
contract, lease, permit or other agreement or arrangement, including a
subcontract, sublease or performance by Seller as agent, provided that
Purchaser shall undertake to pay or satisfy the corresponding liabilities
for the enjoyment of such benefit to the extent Purchaser would have been
responsible therefor if such consent or approval had been obtained. In the
case of an instrument, contract, lease, permit or other agreement or
arrangement with respect to which Purchaser subcontracts or subleases from
Seller, Purchaser will be liable only to the extent agreed in such
subcontract or sublease. Each party will pay its own costs of seeking to
obtain or obtaining any necessary or desirable consent or approval whether
before or after the Closing Date.
12.0 BULK SALES COMPLIANCE. Purchaser hereby waives compliance by Seller with
the provisions of the bulk sales laws of the State of Missouri, and Seller
warrants and agrees to pay and discharge when due all claims of creditors
that could be asserted against Purchaser by reason of such non-compliance
and to indemnify Purchaser in accordance with SECTION 13.1 for any damages
suffered by Purchaser as a result of such non-compliance.
13.0 INDEMNIFICATION. The indemnification provisions set forth in this ARTICLE
13.0 are independent of and in addition to any purchase price adjustment
contained in ARTICLE 3.0 of this Agreement.
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13.1 SELLER'S AND GUARANTOR'S INDEMNIFICATION. Seller and Guarantor, jointly and
severally, hereby agree to indemnify and hold Purchaser harmless from,
against and in respect of:
(a) any and all loss, liability, or damage, including reasonable
attorneys' fees and expenses (collectively "Damages") suffered or
incurred by Purchaser by reason of any breach of representation or
warranty or non-fulfillment or non-performance of any covenant or
agreement of Seller or Guarantor contained herein or in any
certificate, document, instrument or agreement delivered to Purchaser
pursuant hereto or in connection herewith;
(b) any and all Damages suffered or incurred by Purchaser in respect of or
in connection with any Excluded Liabilities;
(b) any and all Damages suffered or incurred by Purchaser by reason of or
in connection with any claim for finder's fee or brokers or other
commission arising by reason of any services alleged to have been
rendered to or at the instance of Seller or Guarantor or any agent or
representative thereof, including without limitation all amounts owed
to Goldsmith-Agio-Helms with respect to this Agreement or any of the
transactions contemplated hereby; and
(c) any and all Damages suffered or incurred by Purchaser by reason of or
in connection with any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses, including,
without limitation, reasonable legal fees and expenses, incident to
any of the foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in enforcing
this indemnity.
13.2 PURCHASER'S INDEMNIFICATION. Purchaser hereby agrees to indemnify and hold
Seller harmless from, against, and in respect of:
(a) any and all Damages suffered or incurred by Seller or Guarantor by
reason of any breach of representation or warranty or non-fulfillment
or non-performance of any covenant or agreement by Purchaser contained
herein or in any certificate, document, instrument or agreement
delivered to Seller pursuant hereto or in connection herewith;
(b) any and all Damages suffered or incurred by Seller or Guarantor by
reason of or in connection with any claim for finder's fee or brokers
or other commission arising by reason of any services alleged to have
been rendered to or at the instance of Purchaser with respect to this
Agreement or any of the transactions contemplated hereby;
(c) any and all Damages suffered or incurred by Seller or Guarantor by
reason or in connection with Purchaser's operation of the Business
following Closing; or
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(d) any and all Damages suffered or incurred by Seller or Guarantor by
reason of or in connection with any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs and
expenses, including, without limitation, reasonable legal fees and
expenses, incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
13.3 LIMITATIONS ON INDEMNIFICATION.
(a) Notwithstanding SECTION 13.1 above and subject to the earlier time
limitations set forth in SECTIONS 4.1 AND 4.2 hereof Seller and
Guarantor shall not be liable to indemnify Purchaser for Purchaser's
Damages, and notwithstanding SECTION 13.2 above Purchaser shall not be
liable to indemnify Seller for Seller's Damages, in either case
arising from or relating to a breach of a representation or warranty
set forth in this Agreement unless the indemnified party notifies the
indemnifying party in writing of its claim or potential claim for
indemnification not later than the day which is two (2) years after
the Closing Date, [and except as set forth in subsection (b) below or
ARTICLE 14.0].
(b) Notwithstanding SECTION 13.1 AND 13.2 above, Seller and Guarantor
shall not be liable to indemnify or have any other liability arising
under this Agreement or otherwise to Purchaser for Purchaser's
Damages, and Purchaser shall not be liable to indemnify or have any
other liability arising under this Agreement or otherwise to Seller
for Seller's Damages, unless the aggregate of the indemnified party's
Damages exceeds $150,000, and then only for the amount by which such
aggregate exceeds $150,000 (the "Basket"). Furthermore, subject to the
dollar limitations for Tooling set forth in SECTION 4.4(d) hereof,
Seller and Guarantor shall not be liable to indemnify or have any
other liability arising under this Agreement or otherwise to Purchaser
for Purchaser's Damages, and Purchaser shall not be liable to
indemnify or have any other liability arising under this Agreement or
otherwise to Seller for Seller's Damages, in excess of a total
aggregate amount equal to seventy percent (70%) of the Purchase Price
(the "Cap"), PROVIDED HOWEVER, that Seller and Guarantor shall
indemnify Purchaser for Purchaser's Damages related to or arising from
the failure of the Equipment to meet the Sufficiency Standard up to a
total aggregate amount of 85% of the Purchase Price including Seller's
other indemnity obligations (the "Sufficiency Cap"). The parties
acknowledge and agree that the Cap and the Sufficiency Cap do not
constitute separate indemnification amounts and that, subject to the
specific exceptions contained in this SECTION 13, Seller's and
Guarantor's aggregate indemnification obligation hereunder shall not
exceed the Sufficiency Cap.
(c) The limitations contained in SECTION 13.3(a) AND 13.3(b) shall not
apply to any claim by a party for indemnification based on Purchaser's
failure to receive good title to any property included in the
Purchased Assets or to any other breach of the representations
contained in SECTION 5.7, nor to any breach of a representation
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relating to taxes as set forth in SECTION 5.12. Furthermore, (i) the
limitations contained in SECTION 13.3(b) shall not apply to breaches
of covenants contained in SECTIONS 2.0, 8.1, 8.3 AND 8.5 and (ii) the
Basket contained in SECTION 13.3(b) shall not apply to Seller's
obligation to repair or replace items of Equipment under SECTIONS
4.4(a), (b) AND (c) or Tooling under Section 4.4(d).
(d) Notwithstanding the foregoing, neither Seller and Guarantor nor the
Purchaser will be entitled to indemnification with respect to
consequential damages or with respect to punitive damages, except in
the case of fraud or willful misconduct by the other party. Any
indemnification amounts payable by an indemnifying party under SECTION
13.1 OR 13.2 shall be calculated after giving effect to (i) any
proceeds (net of retro-premium adjustments and other expenses)
actually received by an indemnified party from insurance policies
covering the damage that is the subject of such claim for indemnity,
and (ii) the actual recognized tax benefit resulting from such damage.
(e) Notwithstanding the foregoing, any claim by Purchaser arising under a
breach of the representation and warranty contained in SECTION 5.4
shall be governed by the provisions of ARTICLE 4.
13.4 PROCEDURE.
(a) In order for a party (the "indemnified party"), to be entitled to any
indemnification provided under this Agreement in respect of, arising
out of or involving a claim made by any Person (other than another
party to this Agreement -- to which this SECTION 13.4 shall not apply)
against the indemnified party (a "Third Party Claim"), such
indemnified party must notify the other party (the "indemnifying
party") in writing of the Third Party Claim within fifteen (15)
business days after receipt by such indemnified party or written
notice of the Third Party Claim; provided, however, that failure to
give such notification shall not affect the indemnification provided
hereunder except to the extent the indemnifying party can demonstrate
actual prejudice as a direct or indirect result of such failure.
Thereafter, the indemnified party shall deliver to the indemnifying
party, within fifteen (15) business days after the indemnified party's
receipt thereof, copies of all notices and documents (including court
papers) received by the indemnified party relating to the Third Party
Claim.
(b) If a Third Party Claim is made against an indemnified party, the
indemnifying party will be entitled to participate in the defense
thereof and, if it acknowledges in writing its obligations to
indemnify the party seeking indemnification, subject to all provisions
of this ARTICLE 13, and so chooses to assume the defense thereof with
counsel selected by the indemnifying party. Should the indemnifying
party so elect to assume the defense of a Third Party Claim, the
indemnifying party will not be liable to the indemnified party for any
legal expenses subsequently incurred by the indemnified party in
connection with the defense thereof. If the indemnifying party assumes
such defense, the indemnified party shall have the
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right to participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party
shall control such defense. The indemnifying party shall be liable for
the fees and expenses of counsel employed by the indemnified party for
any period during which the indemnifying party has not assumed the
defense thereof (other than after the 15-day period described in
SECTION 13.4(a) if the indemnified party shall have failed to give
notice of the Third Party Claim). If the indemnifying party chooses to
defend or prosecute a Third Party Claim, the parties hereto shall
cooperate in the defense or prosecution thereof. Such cooperation
shall include the retention and (upon the indemnifying party's
request) the provision to the indemnifying party of records and
information that are reasonably relevant to such Third Party Claim,
and making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder. If the indemnifying party chooses to defend or
prosecute any Third Party Claim, the indemnified party will consent to
any settlement, compromise or discharge of such Third Party Claim that
the indemnifying party may reasonably recommend and which the
indemnifying party will pay for or perform at its sole expense. If the
indemnifying party shall have assumed the defense of a Third Party
Claim, the indemnified party shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim
without the indemnifying party's prior written consent, which shall
not be unreasonably withheld.
13.5 INDEMNIFICATION AS EXCLUSIVE REMEDY. The indemnification provided in this
ARTICLE 13 shall be the exclusive post-closing remedy available to the
parties for any breach of representation, warranty, covenant or agreement
contained in this Agreement or any other documents, instruments or
agreements executed in conjunction with the transactions contemplate
hereby, except as may otherwise be expressly provided for in any such
document, instrument or agreement; provided, however, that either party
shall be entitled to seek injunctive relief to enforce the provisions of
the Agreement or any related agreements.
14.0 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements, representations
and warranties made by each of the parties hereto shall survive the Closing
for a period of two (2) years, except the representations contained in (i)
SECTION 5.7 and SECTION 5.12 shall survive until the expiration of the
latest applicable statute of limitation. All indemnities, covenants and
agreements made herein shall survive for the period expressly indicated
herein, or, if not so indicated, indefinitely.
15.0 ARBITRATION.
(a) Any dispute, controversy or claim arising out of or in connection with
or relating to, this Agreement or any other agreement entered into
pursuant hereto, or the transactions contemplated hereby, (a
"Dispute"), including but not limited to any breach or alleged breach
hereof, shall be determined and settled by arbitration in Wilmington,
Delaware pursuant to the rules then in effect of the American
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Arbitration Association; provided, however, that (i) in the event the
event the Dispute involves an amount in excess of $250,000 the Dispute
shall be heard by a panel of three arbitrators, and (ii) in the event
the Dispute includes a disagreement under SECTION 3.2 of this
Agreement the arbitration panel shall include at least one certified
public accountant acceptable to both parties.
(b) The resolution of such arbitration shall be final and binding on the
parties hereto and enforceable in a court of competent jurisdiction.
The parties hereto hereby irrevocably submit to the nonexclusive
jurisdiction of any court of competent jurisdiction for the purpose of
enforcing any arbitration award.
(c) This ARTICLE 15 shall not preclude any of the parties hereto from
seeking injunctive or other temporary relief in any court of competent
jurisdiction in the event of a breach or threatened breach of this
Agreement or any related agreement.
16.0 NOTICES. Any and all notices or other communications required or permitted
to be given under any of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given when personally
delivered, one business day after being sent by express mail, or overnight
courier service, five business days after being sent by first class
registered mail, return receipt requested, or upon confirmation of receipt
of a telefax (with a copy also sent by express mail or overnight courier
services) addressed to parties at the addresses set forth below or at such
other address as any party may specify by notice to the other parties, or,
in the case of a telefax, to the telefax number indicated:
If to Purchaser:
United Dominion Industries, Inc.
2300 One First Union Center
301 South College Street
Charlotte, North Carolina 28202
Attention: Legal Department
Telefax: 704-347-6915
with a copy to:
Marley Electric Heating
470 Beauty Spot Road E
Bennettsville, South Carolina 29512-2700
Attention: Dennis K. Porzio
Telefax: 843-479-5205
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If to Seller and/or Guarantor:
The Holmes Group, Inc.
233 Fortune Blvd.
Milford, MA 01757
Attention: Ira B. Morgenstern
Telefax: 508-634-1847
with a copy to:
Posternak, Blankstein & Lund, L.L.P.
100 Charles River Plaza
Boston, MA 02114
Attention: Donald H. Siegel, P.C.
Telefax: 617- 367-2315
17.0 MISCELLANEOUS.
17.1 ENTIRE AGREEMENT; MODIFICATION. This writing, together with the Interim
Services Agreement, the Escrow Agreement and the License Agreement,
constitutes the entire agreement of the parties with respect to the subject
matter and supersedes any prior agreements, oral or written, hereof and may
not be modified, amended or terminated except by written agreement
specifically referring to this Agreement and signed by each party hereto.
17.2 WAIVER. No waiver of any breach or default hereunder shall be considered
valid unless in writing and signed by the party giving such waiver, and no
such waiver shall be deemed a waiver of any subsequent breach or default of
the same or similar nature.
17.3 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of each party hereto, its successors and assigns.
17.4 NUMBERS AND HEADINGS. The section and paragraph numbers and headings
contained herein are for the purposes of reference and convenience only and
are not intended to define or limit the contents of said paragraphs or
sections.
17.5 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred to herein are
hereby incorporated by reference as if set out in full and form an integral
part of this Agreement.
17.6 TRANSACTION TAXES. Seller will pay all sales, transfer and documentary
taxes, if any, and any and all further taxes arising by virtue of the sale,
transfers and deliveries to be made to Purchaser as contemplated hereby.
Notwithstanding the foregoing, gains, income and similar taxes shall be
paid by the entity or person on which such tax is imposed.
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17.7 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
all of which taken together shall be deemed one original. This Agreement
and any agreements referenced herein or required pursuant to the Closing
may be executed and delivered by facsimile signature. The parties agree to
deliver original signatures promptly following execution by facsimile
signature.
17.8 EXPENSES. Subject to any express provisions of this Agreement to the
contrary, Purchaser shall bear the expenses, costs and fees incurred by
it, and Seller and Guarantor shall bear the expenses, costs and fees
incurred by them, in connection with the transactions contemplated hereby,
the preparation and execution of this Agreement and compliance herewith.
Any such payments by Seller and Guarantor shall be made out of Seller's
assets other than the Purchased Assets and shall not reduce the Purchased
Assets being transferred hereunder.
17.9 VALIDITY OF PROVISIONS. If any provision of this Agreement or any
agreement referenced herein shall be held or deemed to be or shall, in
fact, be inoperative or unenforceable as applied in any particular case
because it conflicts with any other provision or provisions hereof or any
constitution, statute, rule of public policy, or for any other reason,
such circumstances shall not have the effect of rendering the provision in
question inoperative or unenforceable in any other case or circumstance,
or of rendering any other provision or provisions herein contained
invalid, inoperative or unenforceable to any extent whatsoever. The
invalidity of any one or more phrases, sentences, clauses, sections, or
subsections of this Agreement or any other agreements referenced herein
shall not affect the remaining portions thereof.
17.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts
made and to be performed therein.
17.11 GUARANTY. Without limiting the Guarantor's Obligations herein or
elsewhere, Guarantor hereby guarantees all of Seller's obligations owing
to Purchaser and agrees to be directly liable for all such obligations;
provided further, this guaranty shall be a guaranty of payment and not
merely of collection.
(Signatures follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PURCHASER:
THE MARLEY COMPANY
/s/ James Gibbs
By:____________________________
President
Its:___________________________
and
/s/ Timothy J. Verhagen
By:_________________________________
Vice President
Its:________________________________
SELLER:
THE RIVAL COMPANY
/s/ Ira B. Morgenstern
By:_________________________________
Senior Vice President - Finance
Its:________________________________
PATTON ELECTRIC COMPANY, INC.
/s/ Ira B. Morgenstern
By:_________________________________
Senior Vice President - Finance
Its:________________________________
PATTON BUILDING PRODUCTS, INC.
/s/ Ira B. Morgenstern
By:_________________________________
Senior Vice President - Finance
Its:________________________________
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GUARANTOR:
THE HOLMES GROUP, INC.
/s/ Ira B. Morgenstern
By:_________________________________
Senior Vice President - Finance
Its:________________________________
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EXHIBIT 99.1
December 21, 1999 (For Immediate Release)
Contact:
Ira B. Morgenstern
The Holmes Group, Inc.
Senior Vice President - Finance
508/634-8050
THE HOLMES GROUP ANNOUNCES SALE OF
INDUSTRIAL AND BUILDING SUPPLY DIVISIONS
Milford, Massachusetts - December 21, 1999 - The Holmes Group, Inc. ("Holmes")
announced today that, in a strategic divestiture, it has sold the assets of its
industrial and building supply products businesses to Marley Electric Heating of
Bennettsville, South Carolina, a division of United Dominion Industries, Inc.
Holmes acquired the industrial and building supply businesses, which
accounted for net sales of approximately $25.0 million during the twelve months
ended October 31, 1999, as part of its acquisition of The Rival Company
("Rival") in February, 1999. The industrial products division is a line of fans,
drum blowers and heaters sold through industrial distribution channels. The
building supply division includes household ventilation systems, ceiling fans
and door chimes sold through wholesalers and distributors. Holmes retains its
full range lines of fans, heaters and other products sold through the retail
distribution channels. The divestiture is part of Holmes' strategy for
integrating the Rival acquisition by focusing on Holmes' and Rival's core home
environment, kitchen and personal care products sold through retail distribution
channels.
Holmes is a leading developer, manufacturer and marketer of quality branded
home comfort products, including fans, heaters, humidifiers and air purifiers.
In addition, Holmes markets and distributes a variety of decorative and home
office lighting products, as well as various replacement filters and accessories
for its products. Its Rival subsidiary is a leading developer, manufacturer and
marketer of small kitchen and personal care appliances such as Crock-Pot(R) slow
cookers, can openers, toasters, massagers and showerheads.
Some of the statements in this press release may be considered
forward-looking within the meaning of the Private Securities Litigation Reform
Act of 1995. Forward-looking information is inherently subject to risks and
uncertainties, which include, but are not limited to, the degree of Holmes'
leverage, the effective integration of Rival into Holmes, and overall economic
and industry conditions, as well as the other risks described from time to time
in reports filed by Holmes with the Securities and Exchange Commission,
including its most recent filings on Form S-4. Should any such risks or
uncertainties materialize, or underlying assumptions prove incorrect, actual
results or outcomes may vary materially from those anticipated.
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