<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
Commission file number: 0-5256
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 58-1351398
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two North Riverside Plaza
Chicago, Illinois 60606
(Address of Principal Executive Office)
(312) 648-5656
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
11,175,919 shares of Common Stock outstanding as of August 1, 1994
<PAGE> 2
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
FORM 10-Q
JUNE 30, 1994
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information: PAGE NO.
--------
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 10
PART II. Other Information:
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 6. Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
2
<PAGE> 3
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
(UNAUDITED) (RESTATED)
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . $ 31.4 $ 79.0
Trade receivables, net . . . . . . . . . . . . . . 28.6 112.0
Inventories, net . . . . . . . . . . . . . . . . . 126.3 117.9
Other current assets . . . . . . . . . . . . . . . 74.8 29.3
Net current assets of discontinued operations . . . 42.1 173.7
--------- ----------
Total current assets . . . . . . . . . . . . . . 303.2 511.9
Investments accounted for by the equity method . . . . 72.0 59.7
Loans receivable and real estate, net . . . . . . . . . 80.0 79.4
Property, plant and equipment, net . . . . . . . . . . 161.3 162.7
Goodwill . . . . . . . . . . . . . . . . . . . . . . . 303.8 308.2
Other long-term assets . . . . . . . . . . . . . . . . 123.2 87.3
--------- ----------
Total assets . . . . . . . . . . . . . . . . $ 1,043.5 $ 1,209.2
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Current portion long-term debt . . . . . . . . . . $ 28.0 $ 18.4
Accounts payable . . . . . . . . . . . . . . . . 63.7 50.9
Accrued liabilities . . . . . . . . . . . . . . . 89.6 71.9
Litigation reserve . . . . . . . . . . . . . . . . 34.0 34.0
--------- ----------
Total current liabilities . . . . . . . . . . . 215.3 175.2
Long-term debt . . . . . . . . . . . . . . . . . . . . 458.3 642.8
Accrued employee benefit obligations . . . . . . . . 51.6 47.9
Other long-term liabilities . . . . . . . . . . . . . 106.4 92.4
--------- ----------
Total liabilities . . . . . . . . . . . . . . 831.6 958.3
--------- ----------
Redeemable preferred stock of subsidiary . . . . . . 45.1 43.6
--------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock (5,000,000 shares authorized, none
issued) . . . . . . . . . . . . . . . . . . . . -- --
Common stock, (40,000,000 shares authorized,
12,059,000 issued) . . . . . . . . . . . . . . 0.1 0.1
Additional paid-in capital . . . . . . . . . . . . . 195.1 194.8
Retained (deficit) earnings . . . . . . . . . . . . . (7.6) 35.5
Pension liability adjustment, net . . . . . . . . . . (4.6) (4.6)
Cumulative translation adjustments . . . . . . . . . . (2.9) (5.0)
Common stock in treasury, at cost . . . . . . . . . . (13.3) (13.5)
--------- ----------
Total stockholders' equity . . . . . . . . . . 166.8 207.3
--------- ----------
Total liabilities and stockholders' equity . . $ 1,043.5 $ 1,209.2
========= ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1994 1993 1994 1993
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
Net sales and revenues . . . . . . . . . . . . . . . . . . . $ 241.9 $ 201.0 $ 454.8 $ 379.2
-------- --------- --------- ----------
Operating expenses:
Cost of goods and services sold . . . . . . . . . . . . 184.8 153.2 348.9 291.0
Selling and administrative . . . . . . . . . . . . . . . 38.1 27.3 69.6 61.9
Goodwill amortization . . . . . . . . . . . . . . . . . 2.3 2.3 4.5 4.5
Other charges . . . . . . . . . . . . . . . . . . . . . 0.6 5.3 0.8 5.4
-------- --------- --------- ----------
Total operating expenses . . . . . . . . . . . . . . . . . . 225.8 188.1 423.8 362.8
-------- --------- --------- ----------
Operating income . . . . . . . . . . . . . . . . . . . . . . 16.1 12.9 31.0 16.4
Earnings accounted for by the equity method . . . . . . . . . 12.8 13.7 14.5 15.7
Net interest expense . . . . . . . . . . . . . . . . . . . . (9.1) (17.8) (20.5) (33.9)
-------- --------- --------- ----------
Income (loss) from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . . . 19.8 8.8 25.0 (1.8)
Income tax expense (benefit) from continuing operations . . . 9.4 (0.6) 10.1 (0.2)
-------- --------- --------- ----------
Income (loss) from continuing operations . . . . . . . . . . 10.4 9.4 14.9 (1.6)
Discontinued Operations:
(Loss) from discontinued operations, net of income
tax benefits of $0.8 and $0.4 for the quarter and
six months ended June 1994, respectively, and $0.5
and $0.4 for the quarter and six months
ended June 1993 . . . . . . . . . . . . . . . . . . . . (4.4) (0.7) (4.1) (1.3)
(Loss) on disposal of businesses, net of income
tax benefits of $4.0 . . . . . . . . . . . . . . . . . . (31.1) -- (31.1) --
-------- --------- --------- ----------
(Loss) income before extraordinary item . . . . . . . . . . (25.1) 8.7 (20.3) (2.9)
Extraordinary gain (loss) from early retirement of debt,
net of income tax benefit of $4.2 and $4.7 for the
quarter and six months ended June 1994, respectively . . 4.2 -- (21.3) --
-------- --------- --------- ----------
(Loss) income before cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . . . (20.9) 8.7 (41.6) (2.9)
Cumulative effect of change in accounting principle . . . . . -- -- -- 8.1
-------- --------- --------- ----------
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . (20.9) 8.7 (41.6) 5.2
Dividends on subsidiary preferred stock . . . . . . . . . . . (0.8) (0.7) (1.5) (1.4)
-------- --------- --------- ----------
Net (loss) income to common stockholders . . . . . . . . . . $ (21.7) $ 8.0 $ (43.1) $ 3.8
======== ========= ========= ==========
Weighted average common and common equivalent
shares outstanding . . . . . . . . . . . . . . . . . . . 11.2 11.1 11.2 11.1
======== ========= ========= ==========
(Loss) income per common share:
Continuing operations . . . . . . . . . . . . . . . . . $ 0.86 $ 0.78 $ 1.19 $ (0.27)
Discontinued operations . . . . . . . . . . . . . . . . (3.17) (0.06) (3.14) (0.12)
Extraordinary item . . . . . . . . . . . . . . . . . . . 0.37 -- (1.90) --
Cumulative effect of change in accounting principle . . . -- -- -- 0.73
-------- --------- --------- ----------
Net (loss) income . . . . . . . . . . . . . . . . . . $ (1.94) $ 0.72 $ (3.85) $ 0.34
======== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------
1994 1993
-------- ---------
(RESTATED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations . . . . . . . . . . . . $ 14.9 $ (1.6)
Adjustments to reconcile income (loss) from continuing operations
to net cash flow from operations:
Depreciation . . . . . . . . . . . . . . . . . . . . . . 11.9 11.5
Amortization . . . . . . . . . . . . . . . . . . . . . . 6.5 8.3
Undistributed earnings of investments accounted for
under the equity method . . . . . . . . . . . . (12.3) (12.5)
Valuation adjustments . . . . . . . . . . . . . . . . . -- 8.3
Accretion of discount on senior subordinated notes . . . 10.5 --
Proceeds from sale of accounts receivable . . . . . . . 110.3 --
Cash effects of changes in other working capital
balances, accrued employee benefit obligations, and
other long-term liabilities (excluding the effects
of dispositions of businesses) . . . . . . . . . . . . (13.7) (8.0)
------- -------
Net cash flow provided by continuing operating
activities . . . . . . . . . . . . . . . . . . . 128.1 6.0
Net cash flow (used by) discontinued operations . . (20.9) (3.6)
------- -------
Net cash flow provided by operations . . . . . . . . 107.2 2.4
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of businesses . . . . . . . . . . . . . . . . 59.9 22.9
Loan principal repayments and proceeds from sale of real estate . 2.1 12.5
Loan disbursements . . . . . . . . . . . . . . . . . . . . . . . (0.5) --
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . (10.7) (9.5)
Expenses from sale of securities . . . . . . . . . . . . . . . . (0.7) --
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8.6) (4.1)
------- -------
Net cash flow provided by investing activities . . . 41.5 21.8
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt . . . . . . . . . . . . . . . . . . . . . . . . 325.0 31.0
Net reduction of debt . . . . . . . . . . . . . . . . . . . . . . (521.8) (21.2)
Exercise of options . . . . . . . . . . . . . . . . . . . . . . . 0.5 --
------- -------
Net cash flow (used by) provided by financing
activities . . . . . . . . . . . . . . . . (196.3) 9.8
------- -------
CHANGE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . (47.6) 34.0
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . 79.0 29.2
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . $ 31.4 $ 63.2
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION:
The accompanying unaudited Condensed Consolidated Financial Statements
of Great American Management and Investment, Inc. (the "Company" or
"GAMI") have been prepared pursuant to the Securities and Exchange
Commission ("SEC") rules and regulations and should be read in
conjunction with the Consolidated Financial Statements and Notes
thereto included in the Company's Annual Report for the year ended
December 31, 1993. The following notes to the Condensed Consolidated
Financial Statements highlight significant changes to the notes
included in the Annual Report and such interim disclosures as required
by the SEC. The accompanying Condensed Consolidated Financial
Statements reflect, in the opinion of management, all adjustments
necessary for a fair presentation of the interim financial statements.
All such adjustments are of a normal and recurring nature, except as
otherwise described herein. Operating results for the interim periods
presented are not necessarily indicative of results that may be
expected for the full year.
Certain amounts in the 1993 Condensed Consolidated Financial
Statements have been reclassified to conform with the classifications
presented in the 1994 Condensed Consolidated Financial Statements.
The historical financial statements of the Company have been restated
for companies being reported as discontinued operations.
(2) DISCONTINUED OPERATIONS
During the quarter ended June 30, 1994, the Company decided
to pursue the sales of certain of the businesses comprising the
Industrial Products Group and all of the businesses comprising the
Specialty Products Group, excluding Equality Specialties. As a result
of this decision, the Company has reflected the net assets and results
of operations of Pfaudler, Inc. (worldwide operations)("Pfaudler"),
Chemineer, Inc. ("Chemineer"), Hill Refrigeration, Inc. ("Hill"),
Caron International, Inc. ("Caron") and Gerry Sportswear, Inc.
("Gerry") as discontinued operations. The Company recorded a pretax
provision of $53.2 million and applicable tax benefits of $6.5 million
in the quarter ended June 30, 1994 for estimated losses from operations
and the ultimate disposition of Hill, Caron and Gerry. In addition,
the Company recorded an additional pretax provision of $6.8 million and
applicable tax benefits of $1.3 million, related to Lapp Insulator
Company which has been previously reported as a discontinued
operation. The Company also recorded pretax charges of $5.8 million
and applicable tax benefits of $1.2 million to establish additional
self-insurance reserves related to businesses previously sold by the
Company.
In June 1994, Eagle Industries, Inc. ("Eagle"), a wholly owned
subsidiary of the Company, sold the stock of Pfaudler and Chemineer to
Robbins & Myers, Inc. ("Robbins"). Eagle received cash proceeds of
$59.9 million and a $50.0 million, 5.5% subordinated note (which the
Company recorded at a discounted value of $40.0 million). In addition,
Eagle received stock appreciation rights with respect to 2.0 million
shares of common stock of Robbins. The Company recorded a pretax gain
of $30.7 million, and applicable taxes of $5.0 million with respect to
the sale of these businesses. In August 1994, the Company completed
the sale of certain assets and liabilities of Hill to an indirect
subsidiary of Dover Corporation for cash proceeds of approximately $8.8
million. In connection with the sale, the Company guaranteed in favor
of the buyer: (i) all of the obligations of Hill not assumed by the
buyer for a period of six years up to a limit of $6.5 million, and (ii)
on an unsecured basis, and without limitation to time, Hill's
liabilities for environmental matters and pension and retiree medical
benefits.
6
<PAGE> 7
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
(UNAUDITED)
The following table summarizes key financial data related to the
discontinued operations of Lapp (1993), Chemineer, Pfaudler, Caron,
Gerry and Hill (in millions):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1994 1993
----- ------
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . $ 162.9 $ 221.1
Operating income (loss). . . . . . . . . . . . . (3.0) 2.3
Allocated interest expense . . . . . . . . . . . 1.5 4.5
Income tax benefit applicable to discontinued
businesses. . . . . . . . . . . . . . . . . (0.4) (0.4)
Change in accounting principle . . . . . . . . . -- 0.5
Loss from operations of discontinued businesses
net of applicable income taxes. . . . . . . (4.1) (1.3)
</TABLE>
The net current assets of discontinued operations included in the
Condensed Consolidated Balance Sheet at June 30, 1994 and December 31,
1993 amounted to $42.1 million and $173.7 million, respectively, and
consisted primarily of cash, trade receivables, inventories, property,
plant and equipment and goodwill net of trade payables, accrued
liabilities and accrued employee benefit obligations. These amounts
have all been classified as current based on the intent to dispose of
them within one year.
(3) INVENTORIES
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
(Unaudited) (Restated)
------------ -------------
<S> <C> <C>
Raw materials and supplies. . . . . . . . . $ 39.5 $ 37.7
Work in process . . . . . . . . . . . . . . 29.2 25.2
Finished goods. . . . . . . . . . . . . . . 57.6 55.0
-------- -------
$ 126.3 $ 117.9
======== =======
</TABLE>
(4) LONG-TERM DEBT
Components of long-term debt were as follows (in millions):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
-------------- ------------
Senior Debt: (Unaudited)
<S> <C> <C>
GAMI . . . . . . . . . . . . . . . . . . $ 0.2 $ 0.2
Eagle. . . . . . . . . . . . . . . . . . 265.3 224.0
----------- -----------
265.5 224.2
----------- -----------
Subordinated Debt:
Eagle. . . . . . . . . . . . . . . . . . 208.3 421.6
----------- -----------
Other:
GAMI . . . . . . . . . . . . . . . . . . 4.3 4.3
Eagle. . . . . . . . . . . . . . . . . . 8.2 11.1
----------- -----------
12.5 15.4
----------- -----------
Total debt . . . . . . . . . . . . . . . . 486.3 661.2
Less current portion . . . . . . . . . . . (28.0) (18.4)
----------- -----------
Total long-term debt . . . . . . . . . . . $ 458.3 $ 642.8
=========== ===========
</TABLE>
Refer to the Company's Annual Report for the year ended December 31,
1993 for a more detailed description of all the Company's short-term
and long-term debt.
7
<PAGE> 8
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1994
(UNAUDITED)
During the first quarter of 1994, Eagle consummated a refinancing,
involving the repayment and redemption of all of its then existing
senior bank credit facilities (the "Senior Facilities"), its 13%
Senior Subordinated Notes due October 1998 (the "13% Notes") and its
13.75% Senior Subordinated Notes due March 1998 (the "13.75% Notes")
(collectively, the "Refinancing"). In January 1994, the Senior
Facilities were fully repaid and the agreements terminated. The 13%
Notes were redeemed on February 27, 1994 at 104% of their principal
amount plus accrued interest. The 13.75% Notes were redeemed on March
15, 1994 at 105.5% of their principal amount plus accrued interest.
The Company recorded an extraordinary charge of $21.3 million, which
is net of income tax benefits of $4.7 million in connection with the
Refinancing.
A portion of the proceeds to consummate the Refinancing were derived
from a new $425.0 million senior bank credit facility (the "Credit
Facility") made available to Eagle Industrial Products Corporation,
("Eagle Industrial"), a newly formed wholly owned subsidiary of Eagle,
which owns all of the operating subsidiaries of Eagle. As a result of
the sale of Pfaudler and Chemineer, Eagle made a principal payment of
$18.0 million and the Credit Facility was amended. At June 30, 1994,
the Credit Facility, as amended, consisted of: (1) a $204.5 million
term loan due in quarterly installments, commencing with the quarter
ending September 30, 1994, increasing from $5.9 million per quarter
during 1994 to $13.8 million per quarter in 1999; (2) a $60.8 million
term loan due in equal quarterly installments aggregating $0.3 million
per year in 1994, $0.5 million in 1995, $0.9 million per year from
1996 through 1999 and $56.3 million in 2000; and (3) a $135.0 million
revolving credit facility (subject to borrowing base availability)
that expires in 1999, which may be extended through 2000.
Borrowings under the Credit Facility bear interest at alternative
floating rate structures, at management's option (6.4% at June 30,
1994), and are secured by substantially all domestic property, plant,
equipment, inventory and certain receivables of Eagle Industrial and
its subsidiaries. The Credit Facility requires an annual commitment
fee of 0.5% on the average daily unused amount of the revolving
portion of the Credit Facility. At June 30, 1994, no amounts were
outstanding under the revolving credit portion and $265.3 million was
outstanding under the term loan portion of the Credit Facility.
Additionally, the Credit Facility provides for a letter of credit
facility of up to $50.0 million. Borrowing availability under the
revolving portion of the Credit Facility is reduced by the outstanding
amount of letters of credit. At June 30, 1994, an additional $51.5
million was available to borrow under the Credit Facility.
The Credit Facility contains various financial covenants, the more
restrictive requirements of which being the maintenance of minimum
levels of net worth; limitations on incurring additional indebtedness;
restrictions on the payments of dividends or the making of loans to
Eagle; maintenance of certain ratios of cash flow to interest expense
and indebtedness; maintenance of a minimum level of cash flow to fixed
charges; and a prohibition on payments to Eagle for management
services in excess of $3.0 million per year. Eagle has provided a
guarantee as to the repayment of amounts outstanding under the Credit
Facility. Additionally, the Credit Facility requires that the
Company's majority shareholder and affiliates directly or indirectly
maintain at least 30% of the voting power to elect members of the
board of directors of Eagle and that Eagle directly owns 100% of Eagle
Industrial.
Refer to Note 5 for a further discussion of other sources of proceeds
utilized to complete the Refinancing.
The Company and its subsidiaries complied with all covenants of their
respective debt agreements at June 30, 1994.
(5) SECURITIZATION AND CAPITAL CONTRIBUTION
As discussed in Note 4, during the first quarter of 1994, Eagle
consummated the Refinancing. In addition to the establishment of the
Credit Facility, proceeds for the Refinancing were derived from an
asset securitization program (the "Securitization") whereby Eagle sold
certain of its accounts receivable for
8
<PAGE> 9
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1994
(UNAUDITED)
$110.3 million plus a residual interest in a trust. Eagle also
received a $50.0 million capital contribution (the "Capital
Contribution") from GAMI. Aggregate proceeds from the Credit
Facility, the Securitization and the Capital Contribution amounted to
$485.0 million.
In connection with the Securitization, Eagle entered into a receivable
sale agreement whereby it will sell, with limited recourse, on a
continuous basis, an undivided interest in certain of its account
receivables. Under the agreement, which expires in June 1999, the
maximum amount of proceeds which may be accessed through this
agreement at any one time is $145.0 million and is subject to change
based on the level of eligible receivables and restrictions on
concentrations of receivables. At June 30, 1994, uncollected account
receivables sold under the agreement amounted to $152.6 million.
Total cash proceeds since the inception of the Securitization (January
31, 1994) through June 30, 1994 of $578.8 million (including the
initial proceeds of $110.3 million) were reported as a component of
cash flows from operating activities. The loss on the sale of account
receivables under this program was $1.4 million and $2.1 million in
the quarter and six months ended June 30, 1994, respectively, and was
included in selling and administrative expenses. The difference
between the amount of receivables sold and proceeds received at June
30, 1994 (the "Residual Interest") was $38.5 million. This Residual
Interest was reflected in other current assets.
(6) COMMITMENTS, CONTINGENCIES AND LITIGATION
Madison Management Group, Inc. ("Madison"), a non-consolidated
subsidiary of GAMI, is currently under the protection of Chapter 7 of
the United States Bankruptcy Code. On December 31, 1992, the court
appointed trustee for Madison filed a complaint (the "Complaint")
against the Company, a subsidiary and certain present and former
officers and directors of the Company and Madison. In May 1994, the
Company entered into an agreement (the "Agreement") with substantially
all of the pipe claimants in the Madison bankruptcy to acquire $457.0
million of claims against Madison for approximately $24.6 million.
The Agreement is not subject to bankruptcy court approval. The
closing of this transaction is expected to be completed during the
third quarter of 1994. These claims represent, in face amount,
approximately 94% of all noncontingent claims filed against Madison in
its bankruptcy. At June 30, 1994, the Company had reserves amounting
to $34.0 million relating to this matter and other matters associated
with the Madison bankruptcy. Refer to GAMI's Annual Report for the
year ended December 31, 1993 for additional information related to
Madison and the Complaint.
(7) STOCK OPTIONS
During the six months ended June 30, 1994, options to acquire 17,331
shares of the Company's common stock were exercised, with total
proceeds of $0.5 million realized.
(8) OTHER
In June 1994, the Company recorded pretax charges of $6.0 million to
establish additional self-insurance reserves related to continuing
operations. In addition, as discussed in Note 2, the Company recorded
pretax charges of $5.8 million and applicable tax benefits of $1.2
million to establish additional self-insurance reserves for businesses
previously sold by the Company. These revisions in estimated
self-insurance reserves for workers' compensation, product liability
and general liability were the result of a comprehensive review of
existing self-insurance reserves related to continuing operations and
retained liabilities related to previously owned businesses.
9
<PAGE> 10
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
JUNE 30, 1994
Capitalized terms not defined herein, are defined in the Notes to Condensed
Consolidated Financial Statements.
The following discusses the results of operations and financial
condition for the quarter and six months ended June 30, 1994 as compared to the
comparable periods of 1993. This section should be read in conjunction with the
Management's Discussion and Analysis of Financial Condition and Results of
Operations and audited Consolidated Financial Statements included in the
Company's Annual Report for the year ended December 31, 1993.
As discussed in Note 2 to the Condensed Consolidated Financial
Statements, the Company decided to pursue the sales of all the businesses in the
Specialty Products Group, excluding Equality Specialties ("Equality"), and sold
certain businesses in the Industrial Products Group. As a result, the Company's
continuing operations are comprised of 10 manufacturing and distribution
businesses in three reportable segments and a financial services business. In
addition, the operations of Burns Aerospace Corporation and Equality are now
combined in Corporate and Other. The following is a list of the primary
manufacturing and distribution companies or divisions owned by the Company and
its subsidiaries:
<TABLE>
<CAPTION>
COMPANY/DIVISION DESCRIPTION OF PRODUCT PRIMARY INDUSTRY(IES)
----------------- -------------------------- ----------------------
<S> <C> <C>
BUILDING PRODUCTS GROUP
Hart & Cooley, Inc. ("Hart & Heating, Ventilation and Air Residential and Commercial
Cooley") Conditioning Accessories Construction
Mansfield Plumbing Products, Inc. Bathroom Fixtures & Plumbing Residential Construction
("Mansfield") Fittings
DeVilbiss Air Power Company Light Duty Air Compressors Home Improvement
("DeVilbiss Air Power")
ELECTRICAL PRODUCTS GROUP
Elastimold Underground Medium-and Electric Utility
High-Voltage Cable
Accessories
Hendrix Wire and Cable ("Hendrix") Power Cables and Cable Electric Utility
Accessories
Industrial Electrical Products Interconnect, Control and Electrical/Electronic
("IEP") Timing Devices; Airport
Lighting Transformers; and
Electrical Connectors
AUTOMOTIVE PRODUCTS GROUP
Mighty Distributing Systems of Auto Parts Distribution Automobile Aftermarket
America, Inc.
The Parts House, Inc. Auto Parts Distribution Automobile Aftermarket
Denman Tire Corporation ("Denman") Specialty Pneumatic Tires Aftermarket Tires
Clevaflex Multi-ply, Flexible Tubing Automotive OEM
CORPORATE AND OTHER
Equality Specialties Decorative Wrappings for Retail Accessories
Packaging Gifts
Burns Aerospace Corporation ("Burns") Commercial Aircraft Seating Commercial Aviation
</TABLE>
10
<PAGE> 11
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1994 AS COMPARED TO THE QUARTER ENDED JUNE 30, 1993
The following table shows net sales and revenues and operating income
by business group (in millions):
<TABLE>
<CAPTION>
NET SALES AND REVENUES OPERATING INCOME
------------------------ -------------------------
QUARTER ENDED JUNE 30, QUARTER ENDED JUNE 30,
------------------------- --------------------------
1994 1993 1994 1993
------- ----- ------ ---------
<S> <C> <C> <C> <C>
Building Products Group . . . . . . $ 112.1 $ 88.5 $ 12.1 $ 11.8
Electrical Products Group . . . . . 51.4 43.7 5.7 4.4
Automotive Products Group . . . . . 46.6 42.6 2.0 2.2
Corporate and Other . . . . . . . . 27.7 21.1 (5.2) (2.5)
Financial Services Group . . . . . 4.1 5.1 2.1 2.3
Other Charges . . . . . . . . . . -- -- (0.6) (5.3)
-------- -------- --------- --------
Total . . . . . . . . . . . . $ 241.9 $ 201.0 $ 16.1 $ 12.9
======== ======== ========= ==========
</TABLE>
NET SALES AND REVENUES
Net sales of $241.9 million for the second quarter of 1994 were $40.9 million
or 20.3% higher than net sales for the second quarter of 1993. This increase
was primarily due to increased volume in most of the Company's businesses.
Net sales of $112.1 million for the Building Products Group were $23.6 million
or 26.7% higher than net sales for the 1993 period. This increase was due to
increased volume as a result of increased market penetration by Hart & Cooley
in its flexible duct product line, and to a lesser extent improved pricing,
increased sales to Sears Roebuck and Co. by DeVilbiss Air Power and increased
sales of ultra-low-flush toilets by Mansfield.
Net sales of $51.4 million for the Electrical Products Group were $7.7 million
or 17.6% higher than net sales for the 1993 period. This increase was
primarily due to increased volume at Elastimold due to an improvement in the
economy and a product line acquisition in 1993. Hendrix also contributed to
the increase due to increased volume.
Net sales of $46.6 million for the Automotive Products Group were $4.0 million
or 9.4% higher than net sales for the 1993 period. This increase was primarily
due to increased volume at the automotive parts distribution businesses as a
result of increased market penetration.
Other net sales of $27.7 million were $6.6 million or 31.3% higher than net
sales for the 1993 period. This increase was primarily due to shipments under
a major order at Burns.
Revenues of $4.1 million for the Financial Services Group were $1.0 million or
19.6% lower than revenues for the 1993 period. The decrease was primarily due
to the effect of the sale of one hotel and one apartment complex in 1993,
partially offset by the effect of the foreclosure of one hotel loan receivable
during 1993, and decreased interest income on the Company's loan portfolio
resulting from loan payoffs and various principal reductions.
OPERATING INCOME
Operating income of $16.1 million for the second quarter of 1994 was $3.2
million or 24.8% higher than operating income for the comparable period in
1993. The increase was due primarily to reserves recorded in 1993 related to
the Madison bankruptcy case. Increases in the Building Products and Electrical
Products Groups were offset by declines in the Automotive Products and
Financial Services Groups and increased corporate and other expenses due
primarily to $6.5 million of charges recorded to establish self-insurance
reserves.
11
<PAGE> 12
Operating income of $12.1 million for the Building Products Group was $0.3
million or 2.5% higher than in the 1993 period. This increase was due to the
increased volume at all of the Company's businesses within this group.
Improved pricing at Hart & Cooley and the increased sales of higher margin
ultra-low-flush toilets at Mansfield also contributed to the increase in
operating income. These increases were partially offset by $3.6 million of
charges to establish self-insurance reserves.
Operating income of $5.7 million for the Electrical Products Group was $1.3
million or 29.5% higher than in the 1993 period. This increase was primarily
due to the increased volume at Elastimold and Hendrix partially offset by
declines at IEP and $0.8 million of charges recorded in 1994 to establish
self-insurance reserves.
Operating income of $2.0 million for the Automotive Products Group was $0.2
million or 9.1% lower than in the 1993 period. This decrease was primarily due
to $0.5 million of charges recorded to establish self-insurance reserves.
Corporate and other expenses of $5.2 million were $2.7 million higher than in
the 1993 period. This increase was primarily due to $1.4 million of expenses
associated with the Company's asset securitization program in 1994 as well as
$1.6 million of charges for self-insurance reserves.
Operating income for the Financial Services Group was $2.1 million as compared
to $2.3 million in the 1993 period. This decrease was primarily due to a
decrease in the Company's operations during a renovation of one hotel and
decreases in interest income on the Company's decreasing loan portfolio,
partially offset by $0.5 million of partnership management fees recognized in
1994 for the years 1991, 1992, and 1993 which were previously suspended.
Other charges of $0.6 million as compared to $5.3 million in the 1993 period
primarily represent the Company's recording of an increase in 1993 in the
reserve for various costs related to the Madison bankruptcy case.
EARNINGS ACCOUNTED FOR BY THE EQUITY METHOD
Earnings accounted for by the equity method were $12.8 million and $13.7
million for the quarters ended June 30, 1994 and 1993, respectively. A decrease
in the Company's share of earnings from The Vigoro Corporation ("Vigoro") of
$1.4 million was primarily caused by the Company's decrease in ownership from
47% to 30% of Vigoro's outstanding common stock. This decrease was partially
offset by record earnings reported by Vigoro in the first six months of 1994
primarily due to the effect of Vigoro's acquisition of Mid-Ohio Chemical Company
in April 1994 as well as higher prices and volumes for nitrogen-based
fertilizers due to favorable spring weather conditions and a slight increase in
fertilizer application rates. An increase in the Company's share of earnings
from The Commodore Corporation ("Commodore") of $0.5 million was a result of
increased volume in the spring months which offset the effect of lost production
due to adverse winter weather in 1994 in the Midwest and Northeast U.S.
INTEREST EXPENSE
Net interest expense was $9.1 million for the quarter ended June 30,
1994 compared to $17.8 million for the comparable 1993 period, a decrease of
$8.7 million or 48.9%. This decrease was primarily due to the overall decrease
in the level of debt coupled with a decrease in interest rates associated with
the Refinancing which was completed on January 31, 1994.
12
<PAGE> 13
PROVISION FOR INCOME TAXES
The effective tax rate for the first quarter of 1994 and 1993 reflected
the effect of non-deductible expenses, primarily goodwill amortization, and
foreign and state income taxes. Due to limited net operating loss carryback
availability, the Company's ability to recognize federal income tax benefits for
losses from discontinued operations was limited to the amount of federal income
tax expense from continuing operations.
SIX MONTHS ENDED JUNE 30, 1994 AS COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1993
The following table shows net sales and revenues and operating income
by business group (in millions):
<TABLE>
<CAPTION>
NET SALES AND REVENUES OPERATING INCOME
SIX MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- ---------------------------
1994 1993 1994 1993
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Building Products Group . . . $ 212.6 $ 164.4 $ 24.6 $ 21.1
Electrical Products Group . . 96.5 82.1 9.1 7.1
Automotive Products Group . . 87.5 77.9 3.6 2.9
Corporate and Other . . . . . 50.2 45.0 (9.6) (4.0)
Financial Services Group . . 8.0 9.8 4.1 (5.3)
Other Charges . . . . . . . . -- -- (0.8) (5.4)
----------- --------- ---------- ---------
Total . . . . . . . . . $ 454.8 $ 379.2 $ 31.0 $ 16.4
=========== ========= ========== ==========
</TABLE>
NET SALES AND REVENUES
Net sales of $454.8 million for the six months ended June 30, 1994 were
$75.6 million or 19.9% higher than net sales for the comparable period in 1993.
This increase was primarily due to increased volume at most of the Company's
businesses with the most significant increases in the Building Products Group.
Net sales of $212.6 million for the Building Products Group were $48.2
million or 29.3% higher for the first six months of 1994 compared to the first
six months of 1993. This increase was primarily due to increased volume at Hart
& Cooley in its flexible duct product line due to increased market penetration
and the improved residential market, increased sales to Sears Roebuck and Co. by
DeVilbiss Air Power and increased sales of ultra-low-flush toilets by Mansfield.
Net sales of $96.5 million for the Electrical Products Group were $14.4
million or 17.5% higher in the first six months of 1994 compared to the first
six months of 1993. This increase was primarily due to increased volume at
Elastimold as a result of an improvement in the economy as well as the
acquisition of a product line in 1993. Hendrix and IEP also had improvements in
volume which contributed to the increase.
Net sales of $87.5 million for the Automotive Products Group were $9.6
million or 12.3% higher in the first six months of 1994 compared to the first
six months of 1993. This increase was primarily due to increased volume at the
automotive parts distribution businesses as a result of new distribution
channels and increased market penetration. Denman also contributed to the
increase due to price increases established in January 1994 and increased
volume.
Other net sales increased $5.2 million or 11.6% compared to 1993. This
increase was primarily due to shipments under a major order at Burns.
Revenues of $8.0 million for the Financial Services Group were $1.8
million or 18.4% lower than revenues for the 1993 period. The decrease was
primarily due to the effect of the sale of one hotel and one apartment complex
in 1993, and decreased interest income on the Company's loan portfolio resulting
from loan payoffs and various principal repayments. The decrease was partially
offset by the effect of the foreclosure of one hotel loan receivable during 1993
and partnership management fees for the years 1991, 1992 and 1993 collected in
1994 which were previously suspended.
13
<PAGE> 14
OPERATING INCOME
Operating income of $31.0 million for the six months ended June 30, 1994
was $14.6 million or 89.0% higher than operating income for the comparable
period in 1993. This increase was due primarily to valuation reserves and costs
related to the Madison bankruptcy recorded in 1993. In addition, most of the
Company's businesses showed increases which were partially offset by $6.9
million of charges recorded to establish self-insurance reserves.
Operating income of $24.6 million for the Building Products Group was
$3.5 million or 16.6% higher than in the 1993 period. This increase was
primarily due to increased volume at all of the Company's businesses within this
group as well as improved pricing at Hart & Cooley. The contribution of
increased sales of higher margin ultra-low-flush toilets at Mansfield was
partially offset by competitive pricing. These increases were partially offset
by $3.9 million of charges to establish self-insurance reserves.
Operating income of $9.1 million for the Electrical Products Group was
$2.0 million or 28.2% higher than in the 1993 period. This increase was
primarily due to increased volume at most of the businesses within this group
partially offset by charges of $0.9 million recorded in 1994 to establish
self-insurance reserves.
Operating income of $3.6 million for the Automotive Products Group was
$0.7 million or 24.1% higher than in the 1993 period. This increase was due to
increased volume at all the businesses within this group partially offset by
charges of $0.5 million recorded in 1994 to establish self-insurance reserves.
Corporate and other expenses of $9.6 million were $5.6 million higher
than in the 1993 period. This increase was primarily due to $1.6 million of
charges recorded to establish additional self-insurance reserves and $2.1
million of expenses associated with the Company's asset securitization program.
In addition, in 1993, the Company recorded a one-time curtailment gain
associated with a pension plan as well as a gain on the sale of equity
securities which totalled $1.7 million.
Operating income for the Financial Services Group was $4.1 million as
compared to an operating loss of $5.3 million in the 1993 period. This increase
was primarily due to $8.3 million of valuation reserves recorded in 1993 and by
the recognition of $0.5 million of partnership management fees in 1994 for the
years 1991, 1992 and 1993 which were previously suspended.
Other charges of $0.8 million as compared to $5.4 million in the 1993
period primarily represent reserves and other costs recorded in 1993 related to
the Madison bankruptcy case.
EARNINGS ACCOUNTED FOR BY THE EQUITY METHOD
Earnings accounted for by the equity method were $14.5 million and $15.7
million for the six months ended June 30, 1994 and 1993, respectively. A
decrease in the Company's share of earnings from Vigoro of $1.5 million was
primarily caused by the Company's decrease in ownership from 47% to 30% of
Vigoro's outstanding common stock. This decrease was partially offset by record
earnings reported by Vigoro in the first six months of 1994 primarily due to the
effect of Vigoro's acquisition of Mid-Ohio Chemical Company in April 1994 as
well as higher prices and volumes for nitrogen-based fertilizers due to
favorable spring weather conditions and a slight increase in fertilizer
application rates. An increase in the Company's share of earnings from
Commodore of $0.3 million was a result of increased volume in the spring months
which offset the effect of lost production due to adverse winter weather in 1994
in the Midwest and Northeast U.S.
INTEREST EXPENSE
Net interest expense was $20.5 million for the six months ended June 30,
1994 compared to $33.9 million for the comparable 1993 period. This decrease was
primarily due to the overall decrease in the level of debt coupled with the
decrease in interest rates associated with the Refinancing which was completed
on January 31, 1994.
PROVISION FOR INCOME TAXES
The effective tax rate for the six months ended June 30, 1994 reflected
the effect of non-deductible expenses, primarily goodwill amortization, and
foreign and state income taxes. Due to the limited net operating loss
14
<PAGE> 15
carryback availability, the Company's ability to recognize federal
income tax benefits from discontinued operations and extraordinary item was
limited to the amount of federal income tax expense from continuing operations.
DISCONTINUED OPERATIONS
During the quarter ended June 30, 1994, the Company decided to pursue the sales
of certain of the businesses comprising the Industrial Products Group and all
of the businesses comprising the Specialty Products Group except Equality
Specialties. As a result of this decision, the Company has reflected the net
assets and results of operation of Pfaudler, Chemineer, Hill, Caron and Gerry
as discontinued operations. The Company recorded a pretax provision of $53.2
million and applicable tax benefits of $6.5 million in the quarter ended June
30, 1994 for estimated losses from operations and the ultimate disposition of
Hill, Caron and Gerry. Net losses recorded by these businesses were $4.4
million and $4.1 million for the quarter and six months ended June 30, 1994,
respectively. In addition, the Company recorded a pretax provision of $6.8
million and applicable tax benefits of $1.3 million, related to Lapp Insulator
Company which had been previously reported as a discontinued operation. The
Company also recorded pretax charges of $5.8 million and applicable tax
benefits of $1.2 million to establish additional self-insurance reserves for
businesses previously sold by the Company. These revisions in estimated
self-insurance reserves for workers' compensation, product liability and
general liability were the result of a comprehensive review of existing
self-insurance reserves related to continuing operations and retained
liabilities related to previously owned businesses.
In June 1994, Eagle sold the stock of Pfaudler and Chemineer to Robbins. The
Company received cash proceeds of $59.9 million and a $50.0 million, 5.5%,
subordinated note (which the Company recorded at a discounted value of $40.0
million). In addition, the Company received stock appreciation rights with
respect to 2.0 million shares of common stock of Robbins. The Company recorded
a pretax gain of $30.7 million, and applicable taxes of $5.0 million with
respect to the sale of their businesses. In August 1994, the Company completed
the sale of certain assets of Hill an indirect subsidiary of Dover Corporation
for cash proceeds of approximately $8.8 million. The Company is pursuing the
sales of Caron, Gerry and Lapp.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its debt service, capital expenditure
requirements and operating needs through a combination of operating cash flow
and external financing. Cash flow from continuing operating activities was
$128.1 million for the six months ended June 30, 1994, compared to $6.0 million
in the comparable 1993 period. This increase was primarily the result of $110.3
million in proceeds from the sale of accounts receivable in connection with the
Securitization (see Note 5 to the Condensed Consolidated Financial Statements).
Excluding the effects of these proceeds, cash flow provided by continuing
operations was $17.8 million for the six months ended June 30, 1994 or $11.8
million greater than the comparable period of 1993. This increase was primarily
due to the increased level of operating income and a reduction in the amount of
interest paid as a result of the Refinancing as described in Note 4 to the
Condensed Consolidated Financial Statements.
At June 30, 1994, the Credit Facility consisted of: (1) a $204.5
million term loan due in quarterly installments, commencing with the quarter
ending September 30, 1994, increasing from $5.9 million per quarter during 1994
to $13.8 million per quarter in 1999; (2) a $60.8 million term loan due in equal
quarterly installments aggregating $0.3 million in 1994, $0.5 million in 1995,
$0.9 million per year in 1996 through 1999 and $56.3 million in 2000; and (3) a
$135.0 million revolving credit facility (subject to borrowing base
availability) that expires in 1999, which may be extended through 2000.
Borrowings under the Credit Facility bear interest at alternative floating rate
structures, at management's option (6.4% at June 30, 1994), and are secured by
substantially all domestic property, plant, equipment, inventory and certain
receivables of Eagle Industrial and its subsidiaries. At June 30, 1994, $0.0
million and $265.3 million were outstanding under the revolving credit portion
and term loan portions of the Credit Facility, respectively. Additionally, the
Credit Facility provides for a letter of credit facility of up to $50.0
million. Borrowing availability under the revolving portion of the Credit
Facility is reduced by the outstanding amount of letters of credit.
At June 30, 1994, the Company and its subsidiaries had $71.1 million of
borrowing availability under its revolving credit facilities. Management
believes that its current cash balance, cash flow from continuing operations and
availability under its revolving credit facilities will be sufficient to pay
interest on outstanding debt, meet current debt maturities, pay income taxes,
fund capital expenditures and meet other operating needs.
15
<PAGE> 16
PART II -- OTHER INFORMATION
Item 5. Other Information
Effective August 5, 1994, Great American Management and Investment,
Inc. (the "Company") sold certain assets and liabilities of Hill
Refrigeration, Inc. ("Hill") to an indirect subsidiary of Dover
Corporation pursuant to an Asset Purchase Agreement (the "Agreement")
dated August 5, 1994. Hill is a manufacturer of commercial
refrigeration equipment. Under the terms of the Agreement, total
consideration received amounted to $8.8 million in cash.
The proforma effects of reporting this business as a discontinued
operation is included in the Condensed Consolidated Financial
Statements of the Company included herein.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
2.1 Asset Purchase Agreement among Hill Phoenix, Inc.,
ReFrigeration Systems, Inc., Phoenix
ReFrigeration Systems, Inc.,
Dover Diversified, Inc., Hill
ReFrigeration, Inc. and
Eagle Industries, Inc.
b. Reports on Form 8-K:
Current Report on Form 8-K dated June 9, 1994
regarding the agreement to sell Pfaudler (United States), Inc.
and Chemineer to Robbins & Myers, Inc. and the announcement that
Great American Management and Investment, Inc. had entered into
an agreement to acquire the claims of the pipe claimants in the
Madison Management Group, Inc. bankruptcy.
Current Report on Form 8-K dated June 30, 1994 regarding
the sale of Pfaudler (United States), Inc. and Chemineer, Inc.
to Robbins & Myers, Inc.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC.
By: /s/Arthur A. Greenberg
----------------------------
Arthur A. Greenberg
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
By: /s/ Norman M. Field
--------------------------
Norman M. Field
Vice President and Treasurer
(Principal Accounting Officer)
Dated: August 15, 1994
17
<PAGE> 1
Exhibit 2.1
ASSET PURCHASE AGREEMENT
AMONG
HILL PHOENIX, INC.
REFRIGERATION SYSTEMS, INC.
PHOENIX REFRIGERATION SYSTEMS, INC.
DOVER DIVERSIFIED, INC.
HILL REFRIGERATION, INC.
and
EAGLE INDUSTRIES, INC.
August 5, 1994
<PAGE> 2
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. Assets to be Transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2. ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1. Liabilities to be Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2. Liabilities Not to be Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. PURCHASE PRICE - PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2. Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3. Determination of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4. Other Payments and Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5. Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4. REPRESENTATIONS AND WARRANTIES OF COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1. Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8. Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.9. Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.10.No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.11.Compliance With Laws and Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.12.Title to and Condition of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.13.Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.14.Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.15.Contract Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.16.Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.17.Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.18.Employment Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.19.Trade Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.20.Major Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.21.Product Warranty and Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.22.Assets Necessary to Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.23.No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1. Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.3. No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
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6. EMPLOYEES - EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1. Affected Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2. Retained Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3. Payroll Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.4. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7. COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.1. Noncompetition; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.2. Use of Company's Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3. Sales Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.4. Unemployment Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.5. Bulk Sales Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.6. Access to Information and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.7. Change of Corporate Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.8. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.9. Health Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.10.Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.11.Taxes Resulting from Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.12.Oryx Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.1. By Company and Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.2. By Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3. Indemnification of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.4. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.5. Indemnification for Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.6. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.7. Guaranty; Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10. RESOLUTION OF DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.1.Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3.Procedures; No Appeal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.4.Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.5.Entry of Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.6.Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.7.Continued Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.8.Tolling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.1.Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.2.Further Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.3.Disclosures and Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.4.Assignment; Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.5.Law Governing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.6.Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.7.Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.8.Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.9.Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
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11.10.Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.11.Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.12.Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
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<PAGE> 5
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT ("Agreement"), dated August 5, 1994, by and among
Refrigeration Systems, Inc., a Delaware corporation ("Buyer"), Hill Phoenix,
Inc., a Delaware corporation ("HPI"), Phoenix Refrigeration Systems, Inc., a
Georgia corporation ("Phoenix"), Dover Diversified, Inc., a Delaware
corporation ("DDI"), Hill Refrigeration, Inc., a Delaware corporation
("Company") and Eagle Industries, Inc., a Delaware corporation ("Shareholder").
RECITALS
A. Company is engaged in the design, manufacture, marketing, distribution,
sale and related research and development of refrigeration cases and
refrigeration systems for commercial use (the "Business"). Shareholder,
through a subsidiary, owns all of the issued and outstanding capital stock of
Company.
B. Prior to January 1994 the Business was operated as the Hill
Refrigeration Division of Falcon Manufacturing, Inc. (such division is
referred to herein as "Falcon"). In January 1994, Falcon contributed all of
its assets and assigned its liabilities to the Company. All references to the
Company in this Agreement are intended to refer both to Hill Refrigeration,
Inc. and to Falcon.
C. Company's facilities consist of (i) plant and offices located at 360
Pennington Avenue, Trenton, New Jersey, (ii) plant and offices located at 501
Prospect Street, Trenton, New Jersey, (iii) offices and warehouse space located
at 6761 Sierra Court, Suite C, Dublin, California, (iv) offices and warehouse
space located at 3601 and 3615 Walnut Avenue, San Bernadino, California and (v)
plant and offices located at 1 South Gold Drive, Hamilton Township, New Jersey
and (vi) an office located at Unit #9, 301 Byrne Drive, Barrie Ontario Canada
(collectively, the "Facilities").
D. Buyer desires to purchase from Company, and Company desires to sell to
Buyer the Business and substantially all of the property and assets of Company
other than certain real estate and improvements, subject to and in accordance
with the terms of this Agreement.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree
as follows.
<PAGE> 6
1. PURCHASE AND SALE OF ASSETS
1.1. Assets to be Transferred. Subject to the terms and
conditions of this Agreement, on the Closing Date (as hereinafter defined)
Company shall sell, transfer, convey, assign, and deliver to Buyer (or upon
Buyer's direction, to HPI), and Buyer (or HPI, as the case may be) shall
purchase and accept all of the Business, rights, claims and assets (of every
kind, nature, character and description, whether tangible or intangible,
whether accrued, contingent or otherwise, and wherever situated) of Company,
excepting only the Excluded Assets (as hereinafter defined) (collectively the
"Purchased Assets"). The Purchased Assets shall include, but not be limited
to, the following (notwithstanding itemization, the Purchased Assets shall not
include the Excluded Assets):
1.1.(a) Personal Property. All machinery, equipment,
vehicles, tools, supplies, spare parts, furniture and all other
tangible personal property (other than tangible personal property
leased pursuant to Personal Property Leases as hereinafter defined)
owned, utilized or held for use by Company in the Business on the
Closing Date or otherwise located at the Facilities. Buyer directs
that all machinery, equipment and vehicles shall be sold directly to
HPI.
1.1.(b) Inventory. All inventories of raw materials,
work-in-process and finished goods (including all such in transit to
the Company) of Company on the Closing Date, together with related
packaging materials (collectively the "Inventory").
1.1.(c) Personal Property Leases. All leases of
machinery, equipment, vehicles, furniture and other personal property
leased by Company (the "Personal Property Leases") including all such
leases described in SCHEDULE 1.1.(C). Buyer directs that all
machinery, equipment and vehicle leases shall be assigned and sold
directly to HPI.
1.1.(d) Trade Rights. All the Company's interest in
any Trade Rights. As used herein, the term "Trade Rights" shall mean
and include: (i) all trademark rights, business identifiers, trade
dress, service marks, trade names, and brand names, all registrations
thereof and applications therefor and all goodwill associated with the
foregoing; (ii) all copyrights, copyright registrations and copyright
applications, and all other rights associated with the foregoing and
the underlying works of authorship; (iii) all patents and patent
applications and all international proprietary rights associated
therewith; (iv) all contracts or agreements granting any right, title,
license or
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<PAGE> 7
privilege under the intellectual property rights of any third party
including, without limitations, the agreements described on SCHEDULE
1.1(D); (v) all inventions, mask works and mask work registrations,
know-how, discoveries, improvements, designs, trade secrets, shop and
royalty rights, employee covenants and agreements respecting
intellectual property and non-competition and all other types of
intellectual property; and (vi) all claims for infringement or breach
of any of the foregoing. Buyer directs that all Trade Rights shall be
assigned and sold directly to HPI.
1.1.(e) Contracts. All the Company's rights in, to and
under the contracts, purchase orders and sales orders (collectively
"Contracts") identified below, (collectively the "Assumed Contracts"):
(i) Any Contract entered into by
Company in the ordinary course of
its business which does not involve
consideration or other expenditure
by Company payable or performable
on or after the Closing Date
(excluding amounts included in
trade payables assumed by Buyer
hereunder) in excess of $10,000 or
performance over a period of more
than six (6) months.
(ii) Contracts identified in any of
SCHEDULES 1.1(C), 1.1(D), 1.1(E),
1.1(M) OR 4.14 (other than items 2,
3, 4 and 5 on SCHEDULE 4.14(G) and
the powers of attorney listed on
SCHEDULE 4.14(F)) and all purchase
commitments for inventory items and
supplies in excess of $10,000 shown
on the Company's Weekly Report of
Open Purchase Orders by Vendor as
of August 4, 1994 delivered to
Buyer at Closing.
(iii) Every other Contract to which
Company is a party, other than
Excluded Contracts (as hereinafter
defined), which Buyer assumes
pursuant to the provisions of
SECTION 11.2 hereof or which Buyer
elects to assume at any reasonable
time after the Closing Date by
giving written notice to Company as
set forth in SECTION 11.7 hereof.
Such contracts shall be deemed to
have been assumed as of the Closing
Date.
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<PAGE> 8
(iv) Contracts to which Affiliates of the
Company are parties the benefits of
which are made available to the Business
and which are identified on SCHEDULE
1.1(F).
To the extent that any Assumed Contract for which assignment to Buyer
is provided herein is not assignable without the consent of another
party, this Agreement shall not constitute an assignment or an
attempted assignment thereof if such assignment or attempted
assignment would constitute a breach thereof. Company and Buyer agree
to use reasonable efforts (without any requirement on the part of
Buyer or Company to pay any money or agree to any change in the terms
of any such Assumed Contract) to obtain the consent of such other
party to the assignment of any such Assumed Contract to Buyer in all
cases in which such consent is or may be required for such assignment.
If any such consent shall not be obtained, Company and Buyer shall
cooperate in any reasonable arrangement designed to provide for Buyer
the benefits intended to be assigned to Buyer under the relevant
Assumed Contract, including enforcement at the cost and for the
account of Buyer of any and all rights of Company against the other
party thereto arising out of the breach or cancellation thereof by
such other party or otherwise. Buyer shall assume the Liabilities
arising after the Closing Date pursuant to SECTION 2.1(B) hereof under
any Contract with respect to which Buyer has purchased Contract rights
under this SECTION 1.1(E).
1.1.(f) Computer Software. All computer source codes,
programs and other software of Company used, held for use or acquired
or developed for use in the Business, including all machine readable
code, printed listings of code, documentation and related property and
information of Company.
1.1.(g) Literature. All sales literature, promotional
literature, catalogs and similar materials of Company.
1.1.(h) Records and Files. All records, files,
invoices, customer lists, blueprints, specifications, designs,
drawings, accounting records, business records, operating data and
other data of Company used in connection with the Business or
otherwise located at the Facilities.
1.1.(i) Notes and Accounts Receivable. All notes and
accounts receivable of or generated by the Company, excluding the
account receivable from Oryx Retail Fixtures, Inc. Buyer acknowledges
that title to certain accounts receivable that are a part of the
Purchased Assets is held
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<PAGE> 9
by Continental Bank, National Association, as Trustee under the Eagle
Trade Receivables Master Trust (the "Receivables Trustee") and that
the Company shall sell such receivables as herein provided by causing
the Receivables Trustee to transfer the receivables to Buyer at
Closing pursuant to that certain Receivables Sale Agreement (herein so
called) of even date herewith by and between Buyer, Company and the
Receivables Trustee.
1.1.(j) Licenses; Permits. All licenses, permits and
approvals of Company issued by any Government Entities, except those
listed on SCHEDULE 1.2(H).
1.1.(k) Corporate Name. The name "Hill Refrigeration",
"Hill Canada" and similar names and all rights to use or allow others
to use such name.
1.1.(l) General Intangibles. All prepaid items, all
causes of action arising out of occurrences before or after the
Closing, and other intangible rights and assets arising out of or
relating to the Business, except for those items described in SECTION
1.2(F).
1.1.(m) Leased Real Property. All of the leases of
real property by the Company, including the leases described on
SCHEDULE 1.1(M) (the "Real Property Leases") with respect to the real
property described therein (the "Leased Real Property").
1.2. Excluded Assets. The provisions of SECTION 1.1
notwithstanding, Company shall not sell, transfer, assign, convey or deliver to
Buyer, and Buyer will not purchase or accept the following assets of Company,
whether recorded or unrecorded, accrued, contingent or otherwise (collectively
the "Excluded Assets"):
1.2.(a) Cash and Cash Equivalents. All cash and cash
equivalents and checks and drafts in the possession of the Company.
1.2.(b) Consideration. The consideration delivered by
Buyer to Company pursuant to this Agreement.
1.2.(c) Tax Credits and Records. Federal, state and
local income and franchise tax credits and tax refund claims and
associated returns and records. Buyer shall have reasonable access to
such returns and records and may make excerpts therefrom and copies
thereof to the extent necessary for the preparation of Buyer's tax
returns, or for other proper business purposes.
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<PAGE> 10
1.2.(d) Corporate Franchise. Company's franchise to be
a corporation, its certificate of incorporation, corporate seal, stock
books, minute books and other corporate records having principally to
do with the corporate organization and capitalization of Company.
1.2.(e) Obligations of Affiliates. Notes, drafts or
accounts receivable or other obligations for the payment of money made
or owed by any Affiliate of Company (excepting amounts owed to the
Company by employees of the Company and other obligations of
Affiliates specifically referred to in this Agreement as included in
the Purchased Assets). For purposes of this agreement, the term
"Affiliate" shall mean and include, as to any person or entity, all
shareholders, directors and officers of such entity; the spouse of any
such person; or any entity controlling, controlled by or under common
control with the entity as to which the affiliation is to exist.
1.2.(f) Certain General Intangibles. The rights of the
Company respecting causes of action associated with obligations and
liabilities of the Company that are not Assumed Liabilities
(including, without limitation, the rights of the Company under and
with respect to any financing affecting the Purchased Assets that is
not an Assumed Liability and the benefits under any Contract
applicable to the period prior to Closing unless and to the extent the
liabilities under such Contract are Assumed Liabilities), and the
account receivable from Oryx Retail Fixtures, Inc.
1.2.(g) Owned Real Property. The Facilities and such
other real property, including fixtures, buildings, improvements and
all appurtenant rights as are described on SCHEDULE 4.12(C).
1.2.(h) Certain Licenses and Permits. The licenses and
permits of the Company described on SCHEDULE 1.2(H).
2. ASSUMPTION OF LIABILITIES
2.1. Liabilities to be Assumed. As used in this Agreement, the
term "Liability" shall mean and include any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
liability, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, liquidated or unliquidated, secured or unsecured.
Subject to the terms and conditions of this Agreement, on the Closing Date,
Buyer (or HPI, with respect to obligations relating
6
<PAGE> 11
to machinery, equipment and vehicle leases and Trade Rights) shall assume and
agree to perform and discharge the following, and only the following
Liabilities of Company (collectively the "Assumed Liabilities"):
2.1.(a) Accounts Payable, Equipment Lease, Obligations
and Certain Accrued Items. Accounts payable (excluding accounts owed
to Oryx Retail Fixtures, Inc.), equipment lease obligations, and
Liabilities for vacation and holiday pay, but in the case of accounts
payable, only in the amounts accrued on the Closing Account Schedule
and specifically identified on a schedule to the Closing Account
Schedule. The term "accounts payable" shall include, without
limitation, sales tax payable, accrued payroll and accrued payroll
taxes.
2.1.(b) Contractual Liabilities. Company's Liabilities
arising on and from and after the Closing Date under and pursuant to
Assumed Contracts (including without limitation the customer deposits
identified on SCHEDULE 4.14(D)), provided that Buyer shall not assume
any obligation to deliver product or services with respect to which
any payment has been paid to the Company prior to the Closing Date,
unless (A) Company shall remit to Buyer the amount of such payment or
(B) a direct credit in such amount shall be provided to Buyer in the
computation of the Purchase Price (as hereinafter defined).
Liabilities with respect to Personal Property Leases assigned to HPI
pursuant to SECTION 1.1(C) shall be assumed by HPI, and not by Buyer.
2.1.(c) Liabilities Under Permits and Licenses.
Company's Liabilities arising from and after the Closing Date under
any permits, licenses or approvals assigned to Buyer at or after the
Closing.
2.1.(d) Product and Service Warranties. All
Liabilities of the Company for product and service warranties given by
the Company in accordance with its normal written product warranty
terms for any product sold by the Company prior to Closing.
2.1.(e) [Intentionally Omitted]
2.1.(f) Union Contract. All Liabilities of the Company
arising on and from and after Closing under the Agreement between the
Company and United Steelworkers of America, AFL-CIO-CLC Local Union
No. 5298 ("Union"), dated January 12, 1992, as modified by that
certain Memorandum of Understanding between Buyer and the Union
regarding the assumption of such agreement.
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<PAGE> 12
2.1.(g) Product Liability. Any Liability arising out
of or in any way related to or resulting from any product sold by
Buyer following the Closing, including products contained in the
Inventory purchased by Buyer hereunder (including any Liability for
claims made for injury to person, damage to property or other damage,
whether made in product liability, tort or otherwise).
2.2. Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in SECTION 2.1, Buyer is not assuming any Liabilities of
Company and all such Liabilities shall be and remain the responsibility of
Company. Notwithstanding the provisions of SECTION 2.1, Buyer is not assuming
and Company shall not be deemed to have transferred to Buyer the following
Liabilities of Company:
2.2.(a) Certain Contracts. The Liabilities of Company
under and pursuant to the following Contracts ("Excluded Contracts"):
(i) Any Contract which is not an Assumed Contract
(ii) Any agreement or order relating to
environmental conditions at the
Facilities (subject, however, to
Buyer's obligations under the
Facility Lease).
(iii) Employee benefit or pension plans
or agreements, except the United
Steelworkers 401(k) Savings Plan
referred to in SECTION 6.4(A).
(iv) Agreements related to borrowed
money or financing of the Company
or its Affiliates, including
without limitation loan agreements,
promissory notes, security
agreements or receivable sales
agreements (excepting equipment
lease obligations with respect to
equipment leases included in the
Purchased Assets).
2.2.(b) Taxes Arising from Transaction. Any taxes
imposed upon Company arising out of the sale or transfer of the
Purchased Assets to Buyer and the other transactions contemplated by
this Agreement, including but not limited to any income, transfer,
use, gross receipts or documentary stamp taxes, except as provided in
Section 11.8.
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2.2.(c) Income and Franchise Taxes. Any Liability of
Company for Federal income taxes and any state or local income, profit
or franchise taxes (and any penalties or interest due on account
thereof).
2.2.(d) Insured Claims. Any Liability of Company
insured against, to the extent such Liability is or will be paid by an
insurer.
2.2.(e) Product Liability. Any Liability of Company
arising out of or in any way relating to or resulting from any product
sold prior to the Closing Date (including any Liability of Company for
claims made for injury to person, damage to property or other damage,
whether made in product liability, tort or otherwise), excepting only
Liabilities for product and service warranties described in SECTION
2.1(D).
2.2.(f) Litigation Matters. Any Liability with respect
to any action, suit, proceeding, arbitration, investigation or
inquiry, whether civil, criminal or administrative brought by or
before any court, governmental agency or recognized arbitral authority
with respect to matters occurring prior to Closing ("Litigation"),
whether or not described in SCHEDULE 4.10.
2.2.(g) Infringements. Any Liability of Company or its
Affiliates to a third party for infringement of such third party's
Trade Rights.
2.2.(h) Transaction Expenses. All Liabilities incurred
by Company in connection with this Agreement and the transactions
contemplated herein, except as provided in SECTION 11.8.
2.2.(i) Liability For Breach. Liabilities of Company
for any breach or failure to perform any of Company's covenants and
agreements contained in, or made pursuant to, this Agreement, or, with
respect to matters occurring prior to the Closing, any other Contract,
whether or not assumed hereunder.
2.2.(j) Liabilities to Affiliates. Liabilities of
Company to its Affiliates, except only that Buyer is assuming
Company's Liabilities for vacation and holiday pay pursuant to SECTION
2.1(A) and severance pay owed to employees of the Company pursuant to
SECTION 2.1(E).
2.2.(k) Violation of Laws or Orders. Liabilities of
Company for any violation of or failure to comply with any statute,
law, ordinance, rule or regulation (collectively, "Laws") or any
order, writ, injunction,
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judgment, plan or decree (collectively, "Orders") of any court,
arbitrator, department, commission, board, bureau, agency, authority,
instrumentality or other governmental body, whether federal, state,
municipal, foreign or other (collectively, "Government Entities").
2.2.(l) Environmental Liabilities. Any Liabilities
arising out of, related to or incurred in connection with any
pollution, threat to the environment, or exposure to, or manufacture,
processing, distribution, use, treatment, generation, transport or
handling, disposal, emission, discharge, storage or release of Waste
(as defined in SECTION 4.11(C)) that (i) results from Company's or any
previous owner's or operator's ownership, operation or occupancy of
the Facilities or the Company's Business, properties or assets,
including without limitation any failure to comply with the
Environmental Laws (as defined in SECTION 4.11(C)), or (ii) occurred,
existed, arose out of conditions or circumstances that existed, or was
caused on or before the Closing Date.
2.2.(m) Employee Welfare and Benefit Plan Liabilities.
Any Liabilities arising under, or in connection with, any employee
welfare benefit or pension benefit plan currently or previously
maintained or contributed to by Company or any member of its
controlled group (as defined in Section 4001(a)(13) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")),
including, without limitation, retiree medical or other
post-retirement or post-termination welfare Liabilities and
Liabilities in connection with any defined benefit pension plan or
multiemployer pension plan; provided, however, that Buyer shall assume
sponsorship of the United Steelworkers 401(k) Savings Plan pursuant to
the terms of SECTION 6.4(A) hereof.
2.2.(n) Facility Closedown and Disposal Costs. Any
Liabilities (other than those for severance pay to the extent assumed
by Buyer pursuant to SECTION 2.1(E)) arising out of, related to or
incurred in connection with the closedown and disposal of the
Facilities by the Company, regardless of whether such costs are
incurred before or after the Closing Date, including without
limitation, compliance with Environmental Laws, vacant building
security costs, utility disconnection costs, sale expenses, demolition
costs and removal and transport and storage costs for Excluded Assets
(subject, however, to Buyer's obligations under the Lease, dated even
date herewith between Buyer and the Company ("Facility Lease") with
respect to environmental matters, removal of equipment, fixtures and
other property, restoration costs and other matters) and except as
provided in SECTION 7.8.
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2.2.(o) Successor Liabilities. Any Liability of the
Company which any person seeks to impose upon Buyer by virtue of any
theory of successor liability or as a result of Buyer's failure to
comply with any bulk transfer or similar statue, including without
limitation Liabilities relating to environmental matters, pension
plans, product liability, taxes and labor and employment matters,
unless otherwise expressly assumed by Buyer hereunder.
2.2.(p) Severance. Any Liability of the Company for
severance or other termination benefits.
2.2.(q) Collective Bargaining Agreements. Any
Liability with respect to Collective Bargaining Agreements, other than
pursuant to 2.1(f).
Nothing in this Agreement or in any document executed pursuant hereto or in
connection herewith shall affect in any way the right of the Company, in its
sole and absolute discretion, to pay, resolve, compromise, settle or otherwise
handle any Liability of the Company or any Affiliate of the Company that is not
an Assumed Liability.
3. PURCHASE PRICE - PAYMENT
3.1. Purchase Price. The purchase price (the "Purchase Price")
for the Purchased Assets shall be sum of (i) the face value of accounts
receivable included in the Purchased Assets reflected on the Closing Account
Schedule, plus (ii) Fifteen Million Eight Hundred Ten Thousand Dollars
($15,810,000.00) plus (iii) the amount by which the inventory reflected on the
Closing Account Schedule exceeds Seventeen Million Nine Hundred Thirty Thousand
Dollars ($17,930,000.00), less (iv) the amount by which inventory reflected on
the Closing Account Schedule is less than Seventeen Million Seven Hundred
Eighty Thousand Dollars ($17,780,000.00), less (v) Forty-Nine Thousand Five
Hundred Dollars ($49,500).
3.2. Payment of Purchase Price. The Purchase Price shall be
paid as follows:
3.2.(a) Accounts Payable. Buyer shall receive a credit
to the Purchase Price equal to the book value of accounts payable
assumed by Buyer pursuant to and as defined in SECTION 2.1(A)
("Accounts Payable Value").
3.2.(b) Cash to Company. At the Closing, HPI shall
deliver to Company the sum of Eight Million Dollars ($8,000,000) in
respect of the Purchased Assets purchased by HPI hereunder and Buyer
shall deliver to Company the sum of the Estimated Purchase Price
(excluding the payment by HPI)
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less the Estimated Accounts Payable Value reflected on the Estimated
Closing Account Schedule (as hereinafter defined). The Company hereby
directs Buyer to pay to the Receivables Trustee that portion of the
Purchase Price attributable to the accounts receivable that are
included in the Purchased Assets that are held by the Receivables
Trustee and acknowledges that receipt of such payment by the
Receivables Trustee (whether or not the amount is correctly allocable
to the accounts receivable) shall constitute payment by Buyer of such
portion of the Purchase Price hereunder.
3.2.(c) Adjustment of Estimated Closing Payments. On or
before the fifth business day following the determination of the
Closing Account Schedule (pursuant to SECTION 3.3, below), either (i)
Company shall pay to Buyer the amount, if any, by which (A) the
Estimated Purchase Price, less the Estimated Accounts Payable Value,
exceeds (B) the Purchase Price less the Accounts Payable Value; or
(ii) Buyer shall pay to Company the amount, if any, by which (A) the
Purchase Price less the Accounts Payable Value, exceeds (B) the
Estimated Purchase Price less the Estimated Accounts Payable Value.
3.2.(d) Method of Payment. All payments under this
SECTION 3.2 shall be made in the form of certified or bank cashier's
check payable to the order of the recipient or, at the recipient's
option, by wire transfer of immediately available funds to an account
designated by the recipient not less than 48 hours prior to the time
for payment specified herein.
3.3. Determination of Purchase Price.
3.3.(a) Estimated Closing Account Schedule. The
Estimated Purchase Price and the Estimated Accounts Payable Value
shall be determined in accordance with this SECTION 3.3(A) for
purposes of calculating the cash payment to Company at the Closing.
Prior to the Closing Date, Company shall, in consultation with the
Buyer, prepare and deliver to Buyer a projected schedule ("Estimated
Closing Account Schedule") setting forth in reasonable detail the
estimated accounts receivable, inventory and accounts payable of the
Company as of the Closing Date. Such schedule shall contain
sufficient detail for the estimation of the Purchase Price ("Estimated
Purchase Price") and the estimation of the Assumed Accounts Payable
Value ("Estimated Accounts Payable Value").
3.3.(b) Closing Account Schedule. Within 45 days after
the Closing Date, Buyer shall deliver to Company a proposed schedule
of the Company setting forth in reasonable detail the accounts
receivable, inventory and accounts
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payable of the Company as of the Closing Date, prepared in accordance
with generally accepted accounting principles from the books and
records of Company in accordance with the provisions of SECTION 3.3(D)
("Closing Account Schedule"). The proposed Closing Account Schedule
shall be accompanied by a report (1) containing sufficient detail for
the determination of and setting forth the amount of the Purchase
Price and the Accounts Payable Value and (2) setting forth the amount
of any payment to be paid and by whom pursuant to SECTION 3.2(C)
hereof. Buyer shall make available or cause to be made available the
personnel and records necessary and allow the Company and its
representatives to conduct any necessary physical inspection to assist
in its review of the proposed Closing Account Schedule. Upon receipt
of these documents as proposed by Buyer, the Company and its
representatives may study the proposed Closing Account Schedule
(together with the detailed backup information and other books and
records related to the assets and liabilities shown or to be shown
therein) and may conduct any necessary physical inspections to
determine whether the Company believes that the amounts shown thereon
have been correctly computed. If the Company believes any such
amounts have been incorrectly computed, then the Company shall so
notify Buyer in writing within sixty (60) days after the Company's
receipt of the Closing Account Schedule as proposed by Buyer, and the
Company and Buyer shall attempt to resolve any resulting discrepancies
and make any appropriate adjustments to the Closing Account Schedule
to reflect such resolution. If no such notice is received by Buyer
within such 60-day period, the Closing Account Schedule as proposed by
Buyer shall be deemed approved by the Company and final. If, within
forty-five (45) days after the receipt by Buyer of such a notice from
the Company, the Company and Buyer are unable to resolve any resulting
discrepancies, they shall resolve the matter in accordance with
SECTION 3.3(C) below.
3.3.(c) Resolving Disputes. In the event of a dispute
or disagreement relating to the Closing Account Schedule or schedules
thereto which Buyer and Company are unable to resolve as provided in
SECTION 3.3(B) above, either party may elect to have all such disputes
or disagreements resolved by an accounting firm of nationally
recognized standing (the "Third Accounting Firm") to be mutually
selected by Company and Buyer. The Third Accounting Firm shall make a
resolution of the Closing Account Schedule and the Purchase Price and
Accounts Payable Value, which shall be final and binding for purposes
of this ARTICLE 3. The Third Accounting Firm shall be instructed to
use every reasonable effort to perform its services within 30 days of
submission of the Closing Account Schedule to it and, in any case, as
soon as practicable after such
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submission. The fees and expenses for the services of the Third
Accounting Firm shall be shared equally by Buyer and Company.
3.3.(d) Accounting Conventions. The Closing Account
Schedule shall be prepared in a manner consistent with Company's past
practices in accordance with generally accepted accounting principles.
The only accounts on the Closing Account Schedule which shall affect
the computation of the Purchase Price and the Assumed Accounts Payable
Value shall be accounts receivable, inventory and accounts payable,
and all such accounts shall be determined as gross values without
regard to reserves or other allowances. For purposes of the Closing
Account Schedule, all account determinations shall be made as of the
close of business on the Closing Date.
3.4. Other Payments and Adjustments. The amount of wages and
other remuneration due employees of Company in respect of periods prior to the
Closing Date will be paid by Company directly to such employees, except for
unpaid holiday and vacation pay.
3.5. Allocation of Purchase Price. The aggregate Purchase Price
(including the assumption by Buyer of the Assumed Liabilities) shall be
allocated among the Purchased Assets for tax purposes as reasonably directed by
Buyer. Company and Buyer will follow and use such allocation in all tax
returns, filings or other related reports made by them to any governmental
agencies. To the extent that disclosures of this allocation are required to be
made by the parties to the Internal Revenue Service ("IRS") under the
provisions of Section 1060 of the Internal Revenue Code of 1986, as amended
(the "Code") or any regulations thereunder, Buyer and Company will disclose
such reports to the other prior to filing with the IRS.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY
Company makes the following representations and warranties to Buyer,
each of which is true and correct on the date hereof, shall be unaffected by
any investigation heretofore or hereafter made by Buyer, or any knowledge of
Buyer other than as specifically disclosed in the schedules delivered to Buyer
at the time of the execution of this Agreement, and shall survive the Closing
of the transactions provided for herein but only to the extent hereinafter
provided.
4.1. Corporate.
4.1.(a) Organization. Each of Company and Shareholder
is a corporation duly organized, validly
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existing and in good standing under the laws of the State of Delaware.
4.1.(b) Corporate Power. Company has all requisite
corporate power and authority to own, operate and lease its
properties, to carry on its business as and where such is now being
conducted, to enter into this Agreement and the other documents and
instruments to be executed and delivered by Company pursuant hereto
and to carry out the transactions contemplated hereby and thereby.
4.1.(c) Qualification. Company is duly licensed or
qualified to do business as a foreign corporation, and is in good
standing, in each jurisdiction wherein the character of the properties
owned or leased by it, or the nature of its business, makes such
licensing or qualification necessary except where the failure to so
license or qualify does not have a material adverse effect on the
Purchased Assets or the financial conditions, business operations or
prospects of the Company. The states in which Company is licensed or
qualified to do business are listed in SCHEDULE 4.1(C).
4.1.(d) No Subsidiaries. Company does not own any
interest in any corporation, partnership or other entity.
4.2. Authority. The execution and delivery of this Agreement
and the other documents and instruments to be executed and delivered by Company
and/or Shareholder pursuant hereto and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors and shareholder of Company and Shareholder, as the case may be. No
other or further corporate act or proceeding on the part of Company,
Shareholder or their respective shareholders is necessary to authorize this
Agreement or the other documents and instruments to be executed and delivered
by Company and/or Shareholder pursuant hereto or the consummation of the
transactions contemplated hereby and thereby. It is not presently intended
that Company be dissolved until all of its Liabilities have been paid or
otherwise provided for in full, to the extent required by law. This Agreement
constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by Company and/or Shareholder,
pursuant hereto will constitute, valid binding agreements of Company and/or
Shareholder, as the case may be, enforceable in accordance with their
respective terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally, and by
general equitable principles.
4.3. No Violation. Except as set forth on SCHEDULE 4.3, neither
the execution and delivery of this Agreement or the other documents and
instruments to be executed and delivered by Company
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pursuant hereto, nor the consummation by Company or Shareholder of the
transactions contemplated hereby and thereby (a) will violate any applicable
Law or Order, (b) except for applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), will require any
authorization, consent, approval, exemption or other action by or notice to any
Government Entity, or (c) subject to obtaining the consents referred to in
SCHEDULE 4.3, will violate or conflict with, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or will result in the termination of, or accelerate the performance
required by, or result in the creation of any Lien (as defined in SECTION
4.12(A)) upon any of the assets of Company or Shareholder under, any term or
provision of the Certificate of Incorporation or By-laws of Company or
Shareholder or of any contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which Company and/or
Shareholder is a party or by which Company or Shareholder or any of their
respective assets or properties may be bound or affected.
4.4. Financial Statements. Included as SCHEDULE 4.4 are true
and correct copies of the financial statements of Falcon consisting of balance
sheets of Falcon as of March 4, 1994 and December 31, 1993, 1992 and 1991, and
the related statements of income and cash flows for the years 1991 and 1992 and
statement of income for December 31, 1993 (including the notes contained
therein or annexed thereto). These balance sheets, income statements and cash
flow statements are unaudited and are based on results as they were reported
for internal purposes. They have been prepared in accordance with the
accounting policies and procedures established by Shareholder, and accordingly
do not reflect all costs, accruals and reserves which are recorded by
Shareholder. These statements fairly present the balance sheet, statement of
income and cash flows and were prepared in accordance with the principles set
forth above.
4.5. Tax Matters.
4.5.(a) Provision For Taxes. The provision made for
taxes on the July 1, 1994 balance sheet of the Company ("Recent
Balance Sheet") is, to the knowledge of Company, sufficient for the
payment of all federal, state, foreign, county, local and other
income, ad valorem, excise, profits, franchise, occupation, property,
payroll, sales, use, gross receipts and other taxes (and any interest
and penalties) and assessments, whether or not disputed at the date of
the Recent Balance Sheet, and for all years and periods prior thereto.
Since the date of the Recent Balance Sheet, Company has not incurred
any taxes other than taxes incurred in the ordinary course of business
consistent in type and amount with past practices of Company.
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4.5.(b) Tax Returns Filed. Except as set forth on
SCHEDULE 4.5(B), all federal, state, foreign, county, local and other
tax returns required to be filed by or on behalf of Company or Falcon
have been timely filed and when filed were true and correct in all
material respects, and the taxes shown as due thereon were paid or
adequately accrued. Each of Company and Falcon has duly withheld and
paid all taxes which it is required to withhold and pay relating to
salaries and other compensation heretofore paid to the employees of
Company or Falcon.
4.5.(c) Consolidated Group. SCHEDULE 4.5(C) lists
every year Company or Falcon Manufacturing, Inc. was a member of an
affiliated group of corporations that filed a consolidated tax return
on which the statute of limitations does not bar a federal tax
assessment, and each corporation that has been part of such group.
4.5.(d) Other. Except as set forth in SCHEDULE 4.5(D),
since January 1, 1989, neither Company nor Falcon Manufacturing, Inc.
has (i) filed any consent or agreement under Section 341(f) of the
Code, (ii) applied for any tax ruling, (iii) entered into a closing
agreement with any taxing authority, (iv) filed an election under
Section 338(g) or Section 338(h)(10) of the Code (nor has a deemed
election under Section 338(e) of the Code occurred), (v) made any
payments, or been a party to an agreement (including this Agreement)
that under any circumstances could obligate it to make payments that
will not be deductible because of Section 280G of the Code, or (vi)
been a party to any tax allocation or tax sharing agreement.
4.6. Accounts Receivable. All trade accounts receivable of
Company included in the Purchased Assets represent arm's length sales actually
made in the ordinary course of business.
4.7. Inventory. Except as set forth in SCHEDULE 4.7, all
inventory of Company is located on premises owned or leased by Company as
reflected in this Agreement.
4.8. Absence of Certain Changes. Except as and to the extent
set forth in SCHEDULE 4.8, since December 31, 1993, there has not been:
4.8.(a) Adverse Change. Any material adverse change in
the financial condition, assets, Liabilities, business, or operations
of Company;
4.8.(b) Damage. Any material casualty loss, damage or
destruction, whether covered by insurance or not, affecting the
Business or Purchased Assets, which has not heretofore been corrected;
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4.8.(c) Increase in Compensation. Any increase of more
than five percent (5%) in the compensation, salaries or wages payable
or to become payable to any employee of Company (including, without
limitation, any increase or change pursuant to any bonus, pension,
profit sharing, retirement or other plan or commitment), or any bonus
or other employee benefit granted, made or accrued;
4.8.(d) Commitments. Any commitment or transaction by
Company with respect to the Business (including, without limitation,
any borrowing or capital expenditure) other than in the ordinary
course of business consistent with past practice;
4.8.(e) Disposition of Property. Any sale, lease or
other transfer or disposition of any properties or assets of Company,
except for the sale of inventory items and the replacement or
retirement of obsolete property in the ordinary course of business;
4.8.(f) Amendment of Contracts. Any waiver of material
rights under an Assumed Contract, other than in the ordinary course of
business; or
4.8.(g) Distribution Terms. Any material change in the
terms extended to any customer or distributor.
4.9. Intentionally Omitted.
4.10. No Litigation. Except as set forth in SCHEDULE 4.10 there
is no Litigation pending or to the knowledge of Company threatened against
Company, its Business or any of its assets, nor does Company know of any basis
for any Litigation that would have a material adverse effect on the Business.
SCHEDULE 4.10 also identifies all Litigation to which Company or Falcon have
been parties since January 9, 1990.
4.11. Compliance With Laws and Orders.
4.11.(a) Compliance. Except as set forth in SCHEDULE
4.11(A), to the knowledge of Company, Company is in material
compliance with all applicable Laws and Orders, including, without
limitation, those applicable to discrimination in employment,
occupational safety and health, trade practices, competition and
pricing, product warranties, zoning, building and sanitation,
employment, labor relations, product advertising and the Environmental
Laws as hereinafter defined. Except as set forth in SCHEDULE 4.11(A),
Company has not received notice of any violation or alleged violation
of, and is subject to no Liability for past or continuing violation
of, any Laws or Orders which notice is still outstanding. To the
knowledge
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of Company, all reports and returns required to be filed by Company
with any Government Entities have been filed, and were accurate when
filed in all material respects.
4.11.(b) Licenses and Permits. To the knowledge of the
Company, Company has all licenses, permits, approvals, authorizations
and consents of all Government Entities and all certification
organizations required for the conduct of the Business (as presently
conducted) and operation of the Facilities. To the knowledge of the
Company, all such licenses, permits, approvals, authorizations and
consents are described in SCHEDULE 4.11(B), are in full force and
effect and, except as described in SCHEDULE 4.11(B), are assignable to
Buyer in accordance with the terms thereof. Except as set forth in
SCHEDULE 4.11(B), Company is and has been in compliance with all such
permits and licenses, approvals, authorizations and consents in all
material respects.
4.11.(c) Environmental Matters. The applicable Laws
relating to pollution or protection of the environment, including Laws
relating to emissions, discharges, generation, storage, releases or
threatened releases of pollutants, contaminants, toxic, hazardous or
petroleum or petroleum-based substances or wastes ("Waste") into the
environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Waste (including, without
limitation, the Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act and
the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), as amended, and their state and local counterparts)
are herein collectively referred to as the "Environmental Laws".
Except as set forth in SCHEDULE 4.11(C), to the knowledge of Company,
Company is in material compliance with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or
contained in any regulations, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder. Except as set forth in SCHEDULE 4.11(C), there
is no Litigation nor any demand, claim, hearing or notice of violation
pending or to Company's knowledge threatened against Company relating
in any way to the Environmental Laws or any Order issued, entered,
promulgated or approved thereunder.
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4.12. Title to and Condition of Properties.
4.12.(a) Title to Assets. Company has transferable
title to all the Purchased Assets (excepting only accounts receivable
owned by the Receivables Trustee), free and clear of all mortgages,
liens (statutory or otherwise), security interests, pledges, licenses,
equities, options, conditional sales contracts, or encumbrances of any
nature whatsoever (collectively, "Liens") except those described in
SCHEDULE 4.12(A)(I). At Closing, Buyer will receive title to all the
Purchased Assets, free and clear of all Liens of any nature
whatsoever, except as described in SCHEDULE 4.12(A)(II).
4.12.(b) Condition. The tangible assets constituting
Purchased Assets and the buildings, plants and other structures of the
Company used in the Business, are sufficient to operate the Business
as presently conducted in light of anticipated production volumes.
Subject to the foregoing, and except as otherwise expressly provided
in this Agreement, Buyer and HPI are acquiring the tangible Purchased
Assets in their "AS-IS" physical condition and Seller makes no
representation with respect to the condition of the tangible assets
included in the Purchased Assets.
4.12.(c) Real Property. SCHEDULE 4.12(C) sets forth all
real property owned, used or occupied by Company (the "Real
Property"), including an indication of whether such Real Property is
owned or leased. Company has no notice or knowledge of any planned or
proposed increase in assessed valuations of any Real Property.
4.12.(d) No Condemnation or Expropriation. Neither the
whole nor any portion of the property or any other assets of Company
is subject to any Order to be sold or is being condemned, expropriated
or otherwise taken by any Government Entities with or without payment
of compensation therefor, nor to the Company's knowledge has any such
condemnation, expropriation or taking been proposed by any Government
Entities.
4.13. Insurance. Set forth in SCHEDULES 4.13 AND 4.17 is a list
of all policies of fire, liability, product liability, workers compensation,
and other forms of insurance presently in effect with respect to the business
and properties of Company. All such policies are valid, outstanding and
enforceable policies. No notice of cancellation or termination has been
received with respect to any such policy, and Company has no knowledge of any
act or omission of Company which could result in cancellation of any such
policy prior to its scheduled expiration date. Company has not been refused
any insurance with respect to any aspect of the operations of the business of
Company nor has coverage been limited by any insurance carrier to which Company
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has applied for insurance or with which Company has carried insurance during
the last three years. Since January 9, 1990, all products liability and
general liability policies maintained by or for the benefit of Company have
been "occurrence" policies and not "claims made" policies. There is no claim
by Company or Falcon pending under any such policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies. To
the knowledge of Company, such policies are sufficient in all material respects
for compliance by Company with all requirements of law and with the
requirements of all material contracts to which Company is a party.
4.14. Contracts and Commitments.
Except as set forth in SCHEDULE 4.14 or any other Schedule
hereto:
4.14.(a) Real Property Leases. Company has no leases of
real property.
4.14.(b) Personal Property Leases. Company has no
leases of personal property involving consideration or other
expenditure in excess of $10,000 or involving performance over a
period of more than 6 months.
4.14.(c) Purchase Commitments. Company has no purchase
commitments for inventory items or supplies that, together with
amounts on hand, are in excess of normal usage consistent with past
practice, or which are at an excessive price.
4.14.(d) Sales Commitments. Company has no sales
contracts or commitments to customers or distributors which aggregate
in excess of $10,000 to any one customer or distributor (or group of
affiliated customers or distributors). Company has no sales contracts
or commitments except those made in the ordinary course of business
and at arm's length. Company has received no advance payments or
progress payments toward products which have not been invoiced and
shipped.
4.14.(e) Contracts With Affiliates and Certain Others.
Company has no Contract (written or oral) with any Affiliate or any
other officer, employee, agent, consultant, distributor, dealer or
franchisee that is not cancelable by Company on notice of not longer
than 30 days without liability, penalty or premium.
4.14.(f) Powers of Attorney. The Company has not given
a power of attorney, which is currently in effect, to any person, firm
or corporation for any purpose whatsoever.
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4.14.(g) Collective Bargaining Agreements. Company is
not a party to any collective bargaining agreements with any unions,
guilds, shop committees or other collective bargaining groups. Copies
of all such agreements have heretofore been delivered to Buyer.
4.14.(h) Guarantees. Company has not guaranteed the
payment or performance of any person, firm or corporation, agreed to
indemnify any person or act as a surety, or otherwise agreed to be
contingently or secondarily liable for the obligations of any person,
except pursuant to financing arrangements for the Company and its
Affiliates with banks and other financial institutions.
4.14.(i) Contracts Subject to Renegotiation. Company is
not a party to any Contract with any governmental body which is
subject to renegotiation.
4.14.(j) Restrictive Agreements. Company is not a party
to nor is it bound by any agreement requiring Company to assign any
interest in any trade secret or proprietary information that is
included in the Purchased Assets or with respect to the Business, or
prohibiting or restricting Company from competing in any business or
geographical area or soliciting customers or otherwise restricting it
from carrying on its business anywhere in the world.
4.14.(k) Other Material Contracts. Company has no
lease, license, contract or commitment relating to the Business
involving consideration or other expenditure in excess of $10,000, or
involving performance over a period of more than 6 months, or which is
otherwise individually material to the operations of Company, except
as explicitly described in the Schedules to this Agreement.
4.15. Contract Defaults. Except as specifically described in
SCHEDULE 4.15, Company is not in default under any Assumed Contract, nor, to
the knowledge of Company has any event or omission occurred which through the
giving of notice, would constitute a default thereunder. To the Company's
knowledge, no third party is in default under any Assumed Contract to which
Company is a party, nor has any event or omission occurred which, through the
giving of notice would constitute a default thereunder. The foregoing
representation shall not affect Buyer's obligation to perform warranty service
pursuant to SECTION 2.1(D).
4.16. Labor Matters. Except as set forth in SCHEDULE 4.16, since
January 9, 1990 Company has experienced no labor disputes, union organization
attempts or any work stoppage due to labor disagreements in connection with the
Business. Except to the extent set forth in SCHEDULE 4.16, (a) Company is in
compliance
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with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and is not engaged in any
unfair labor practice; (b) there is no unfair labor practice charge or
complaint against Company pending or threatened; (c) there is no labor strike,
dispute, request for representation, slowdown or stoppage actually pending or
threatened against or affecting Company nor any secondary boycott with respect
to products of Company; (d) no question concerning representation has been
raised or is threatened respecting the employees of Company; (e) no grievance
which might have a material adverse effect on Company, nor any arbitration
proceeding arising out of or under collective bargaining agreements, is pending
and no such claim therefor exists; and (f) there are no administrative charges
or court complaints against Company concerning alleged employment
discrimination or other employment related matters pending or threatened before
the U.S. Equal Employment Opportunity Commission or any Government Entity.
4.17. Employee Benefit Plans.
4.17.(a) Disclosure. SCHEDULE 4.17(A) sets forth all
pension, thrift, savings, profit sharing, retirement, incentive bonus
or other bonus, medical, dental, life, accident insurance, benefit,
employee welfare, disability, group insurance, executive or deferred
compensation, hospitalization and other similar fringe or employee
benefit plans, programs and arrangements, and any employment or
consulting contracts, "golden parachutes," severance agreements or
plans, vacation and sick leave plans, programs, arrangements and
policies, including, without limitation, all "employee benefit plans"
(as defined in Section 3(3) of ERISA), all employee manuals, and all
written or binding oral statements of policies, practices or
understandings relating to employment, which are provided to, for the
benefit of, or relate to, any persons ("Company Employees") employed
by Company. The items described in the foregoing sentence are
hereinafter sometimes referred to collectively as "Employee
Plans/Agreements," and each individually as an "Employee
Plan/Agreement." True and correct copies of all the Employee
Plans/Agreements, including all amendments thereto, and all summary
plan descriptions and summaries of material modifications related to
such Employee Plan/Agreements, have heretofore been provided to Buyer.
4.17.(b) Defined Benefit and Multiemployer Pension
Plans. With respect to each Employee Plan/Agreement described in
SCHEDULE 4.17(A) or any other plan, fund or program maintained or ever
maintained or contributed to by Company or any member of Company's
controlled group (as defined in Section 4001(a)(14) of ERISA) that is
subject to Title IV of ERISA), all required contributions have been
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made to such plan, no such plan has incurred an "accumulated funding
deficiency" under Section 302 of ERISA or Section 412 of the Code,
whether or not such deficiency has been waived, and no such plan has
been terminated so as to subject, directly or indirectly, any assets
of Company to any liability, contingent or otherwise, or the
imposition of any lien under Title IV of ERISA. With respect to any
multiemployer pension plan (as defined in Section 4001(a)(3) of ERISA)
to which the Company or any member of its controlled group (as defined
4001(a)(14) of ERISA) contributes or was previously obligated to
contribute, all contributions required to be made to such plan have
been made, and except as set forth in SCHEDULE 4.17.(B), neither the
Company nor any controlled group member has incurred a partial or
complete withdrawal (as defined in Sections 4203 and 4205 of ERISA)
with respect to any such multiemployer plan.
4.17.(c) Prohibited Transactions, etc. There have been
no "prohibited transactions" within the meaning of Section 406 or 407
of ERISA or Section 4975 of the Code for which a statutory or
administrative exemption does not exist with respect to any Employee
Plan/Agreement, and no event or omission has occurred in connection
with which the Company or any of its assets or any Employee
Plan/Agreement, directly or indirectly, could be subject to any
Liability under ERISA, the Code or any other Law or Order applicable
to any Employee Plan/Agreement, or under any agreement, instrument,
Law or Order pursuant to which Company is required to indemnify any
person against liability incurred under any such Law or Order.
4.17.(d) Payments and Compliance. With respect to each
Employee Plan/Agreement, (i) all payments due from Company to date
have been made and all amounts properly accrued to date as Liabilities
of Company which have not been paid have been properly recorded on the
books of Company and are reflected in the Recent Balance Sheet; (ii)
Company has complied with, and each such Employee Plan/Agreement
conforms in form and operation to, all applicable laws and
regulations, including but not limited to ERISA and the Code, in all
respects and all reports and information relating to such Employee
Plan/Agreement required to be filed with any governmental entity have
been timely filed; (iii) all reports and information relating to each
such Employee Plan/Agreement required to be disclosed or provided to
participants or their beneficiaries have been timely disclosed or
provided; (iv) except as disclosed on SCHEDULE 4.17(D), each such
Employee Plan/Agreement which is intended to qualify under Section 401
of the Code has received a favorable determination letter from the
Internal Revenue Service with respect to such qualification, its
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related trust has been determined to be exempt from taxation under
Section 501(a) of the Code, and nothing has occurred since the date of
such letter that has or is likely to adversely affect such
qualification or exemption; (v) there are no actions, suits or claims
pending (other than routine claims for benefits) or threatened with
respect to such Employee Plan/Agreement or against the assets of such
Employee Plan/Agreement; and (vi) no Employee Plan/Agreement is a plan
which is established and maintained outside the United States
primarily for the benefit of individuals substantially all of whom are
nonresident aliens.
4.17.(e) No Triggering of Obligations. The consummation
of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee of Company to severance pay,
unemployment compensation or any other payment, except as expressly
provided in this Agreement, (ii) except as described in SECTION 6.5,
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee or former employee or (iii)
result in any prohibited transaction described in Section 406 of ERISA
or Section 4975 of the Code for which an exemption is not available.
4.17.(f) Future Commitments. Company has no announced
plan or legally binding commitment to create any additional Employee
Plans/Agreements or to amend or modify any existing Employee
Plan/Agreement.
4.18. Employment Compensation. SCHEDULE 4.18 contains a list of
all employees to whom the Company paid compensation in 1993, including bonuses
and incentives, at an annual rate in excess of Thirty Thousand Dollars
($30,000) for services rendered or otherwise.
4.19. Trade Rights. SCHEDULE 4.19 includes all Trade Rights of
the type described in clauses (i), (ii), (iii) or (iv) of SECTION 1.1(D) in
which Company now has any interest, specifying whether such Trade Rights are
owned, controlled, used or held (under license or otherwise) by Company, and
also indicating which of such Trade Rights are registered. Except as shown on
SCHEDULE 4.19, all Trade Rights shown as registered in SCHEDULE 4.19 have been
properly registered, all pending registrations and applications have been
properly made and filed and all annuity, maintenance, renewal and other fees
relating to registrations or applications are current. To the knowledge of the
Company, in order to conduct the Business, as such is currently being conducted
or proposed to be conducted, Company does not require any Trade Rights that it
does not already have. To the knowledge of the Company, Company is not
infringing, has not infringed and, to the extent of current development, the
Company's Origin II design product line will not infringe, any
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Trade Rights of another in the operation of the business of Company, nor, to
the Company's knowledge, is any other person infringing the Trade Rights of
Company. Company has not granted any license or made any assignment of any
Trade Right listed on SCHEDULE 4.19, and no other person has any right to use
any Trade Right owned or held by Company, except as listed in SCHEDULE 1.1.(E).
Except as set forth in SCHEDULE 1.1.(D), Company does not pay any royalties or
other consideration for the right to use any Trade Rights of others. There is
no Litigation pending or, to the knowledge of the Company, threatened to
challenge Company's right, title and interest with respect to its continued use
and right to preclude others from using any Trade Rights of Company. All Trade
Rights of Company are valid, enforceable and in good standing, and, to the
knowledge of the Company, there are no equitable defenses to enforcement based
on any act or omission of Company, except as indicated on SCHEDULE 4.19.
4.20. Major Customers and Suppliers.
4.20.(a) Major Customers. SCHEDULE 4.20(A) contains a
list of the twenty five (25) largest customers, including
distributors, of Company for each of the two (2) most recent calendar
years (determined on the basis of the total dollar amount of net
sales) showing the total dollar amount of net sales to each such
customer during each such year. Company has no knowledge or
information of any facts indicating, nor any other reason to believe,
that any of the customers listed on SCHEDULE 4.20(A) will not continue
to be customers of the Business after the Closing at substantially the
same level of purchases as heretofore.
4.20.(b) Major Suppliers. SCHEDULE 4.20(B) contains a
list of the twenty five (25) largest suppliers to Company for calendar
year 1993 and year to date 1994 (determined on the basis of the total
dollar amount of purchases) showing the total dollar amount of
purchases from each such supplier during each such year. Company has
no knowledge or information of any facts indicating, nor any other
reason to believe, that any of the suppliers listed on SCHEDULE
4.20(B) will not continue to be suppliers to the Business after the
Closing and will not continue to supply the Business with
substantially the same quantity and quality of goods at competitive
prices.
4.20.(c) Dealers and Distributors. SCHEDULE 4.20(C)
contains a list by product line of all sales representatives, dealers,
distributors and franchisees of Company, together with representative
copies of all sales representative, dealer, distributor and franchise
contracts and policy statements, and a description of all substantial
modifications or exceptions.
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4.21. Product Warranty and Product Liability. SCHEDULE 4.21
contains a description of Company's standard warranty or warranties for sales
of Products (as defined below). SCHEDULE 4.21 sets forth each warranty claim
and product liability claim since 1990 and through June 2, 1994, and the
disposition thereof. SCHEDULE 4.21 contains a description of all product
liability claims and similar Litigation relating to Products manufactured or
sold, or services rendered, which are presently pending or which to Company's
knowledge are threatened, or which have been asserted or commenced against
Company since January 9, 1990, in which a party thereto either requests
injunctive relief or alleges damages (whether or not covered by insurance). To
Company's knowledge, there have been no consistent or common problems among
product lines in the field which have resulted in or could reasonably be
expected to result in a replacement, field fix, retrofit modification or recall
campaign with respect to any such product. As used in this SECTION 4.21, the
term "Products" means any and all products currently or at any time previously
sold by Company, or by any predecessor of Company under any brand name or mark
under which products are or have been sold by Company or such predecessor.
4.22. Assets Necessary to Business. The Purchased Assets
together with the Facility Lease include all property and assets, tangible and
intangible, and all leases, licenses and other agreements (excepting the
licenses and permits listed in SCHEDULE 1.2(H) and Assumed Contracts with
respect to which any required consent has not been obtained) which are
necessary to carry on the Business as presently conducted.
4.23. No Brokers or Finders. Neither Company nor any of its
directors, officers, employees, Affiliates or agents have retained, employed or
used any broker or finder in connection with the transaction provided for
herein or in connection with the negotiation thereof.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Company,
each of which is true and correct on the date hereof, shall be unaffected by
any investigation heretofore or hereafter made by Company or any notice to
Company, and shall survive the Closing of the transactions provided for herein.
5.1. Corporate.
5.1.(a) Organization. Each of Buyer, HPI, Phoenix and
DDI is a corporation duly organized, validly existing and in good
standing under the laws of their respective states of incorporation.
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5.1.(b) Corporate Power. Buyer, HPI, Phoenix and DDI
each has all requisite corporate power to enter into this Agreement
and the other documents and instruments to be executed and delivered
by them and to carry out the transactions contemplated hereby and
thereby.
5.2. Authority. The execution and delivery of this Agreement
and the other documents and instruments to be executed and delivered by Buyer,
HPI, Phoenix, and DDI pursuant hereto and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Buyer, HPI, Phoenix and DDI as the case may be. No other
corporate act or proceeding on the part of Buyer, HPI, Phoenix, or DDI is
necessary to authorize this Agreement or the other documents and instruments to
be executed and delivered by them pursuant hereto or the consummation of the
transactions contemplated hereby and thereby. It is not presently intended
that DDI be dissolved unless all of its Liabilities have been paid or otherwise
provided for in full, to the extent required by law. This Agreement
constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by Buyer, HPI, Phoenix or DDI pursuant
hereto will constitute, valid and binding agreements of such signatories
thereto, enforceable in accordance with their respective terms, except as such
may be limited by bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally, and by general equitable principles.
5.3. No Brokers or Finders. Neither Buyer nor any of its
Affiliates, directors, officers, employees or agents have retained, employed or
used any broker or finder in connection with the transaction provided for
herein or in connection with the negotiation thereof.
6. EMPLOYEES - EMPLOYEE BENEFITS
6.1. Affected Employees. Buyer agrees to offer employment to
each person who is employed by Company immediately prior to the Closing. Such
employment shall be subject to and conditioned upon agreement by such employees
to terms and conditions of employment established by Buyer. "Affected
Employees" shall mean employees of the Company who are employed by Buyer
immediately after the Closing.
6.2. Retained Responsibilities. Company agrees to satisfy, or
cause its insurance carriers to satisfy, all claims for benefits, whether
insured or otherwise (including, but not limited to, workers' compensation,
life insurance, medical and disability programs), under Company's employee
benefit programs brought by, or in respect of, Affected Employees and other
employees and former employees of the Company, which claims arise out of events
occurring on or prior to the Closing Date, in
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accordance with the terms and conditions of such programs or applicable
workers' compensation statutes. Buyer shall not be responsible for any such
claims.
6.3. Payroll Tax. Company agrees to make a clean cut-off of
payroll and payroll tax reporting with respect to the Affected Employees paying
over to the federal, state and city governments those amounts respectively
withheld or required to be withheld for periods ending on or prior to the
Closing Date. Company also agrees to issue, by the date prescribed by IRS
Regulations, Forms W-2 for wages paid through the Closing Date. Except as set
forth in this Agreement, Buyer shall be responsible for all payroll and payroll
tax obligations after the Closing Date for Affected Employees.
6.4. Employee Benefit Plans.
6.4.(a) Defined Contribution Plans. Company shall vest
and make non-forfeitable as of the Closing Date the interest of each
Affected Employee, who is a participant in the Hill Refrigeration Tax
Sheltered Savings Plan or the Hill Refrigeration United Steelworkers
of America (USWA) Savings Program - 401(k) Plan. As of the Closing
Date, Buyer shall assume sponsorship of the United Steelworkers 401(k)
Savings Plan. Upon the transfer of sponsorship, Buyer shall be
responsible for the operation and administration of such plan on or
after the Closing Date, but shall not assume or otherwise be
responsible for any fines, penalties or other obligations or
liabilities that accrued prior to the Closing Date or will accrue
following the Closing Date on account of actions or omissions
occurring prior to the Closing Date. Within 30 days following the
Closing Date, Buyer and Company shall adopt appropriate and mutually
acceptable resolutions to provide for the transfer of sponsorship of
the plan to Buyer.
6.4.(b) Hourly Employee Defined Benefit Plans. (i)
Buyer shall not assume the Hill Refrigeration Employee Non-
Contributory Pension Plan ("Hill Pension Plan") or any obligations in
connection with the Hill Pension Plan. Buyer shall provide a pension
plan of its own for employees covered by the Union Agreement ("Buyer's
Pension Plan") which shall contain substantially similar terms to the
Hill Pension Plan, and shall recognize all prior employment with
Seller to the extent that such employment is recognized as Continuous
Service and Credited Service under the Hill Pension Plan as in effect
on the Closing Date; provided, that an employee's accrued normal
retirement benefit under Buyer's Pension Plan shall be reduced by the
product of $24.50 multiplied by the employee's years of service that
are recognized for benefit accrual purposes under the Hill Pension
Plan as of the Closing Date. In the event the
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employee qualifies for the $300 minimum disability benefit, the
benefit provided from the Buyer's Pension Plan shall be $300
multiplied by a fraction, the numerator of which is the employee's
Continuous Service recognized under the Buyer's Pension Plan for
periods of employment on or after the Closing Date, and the
denominator of which is the employee's total period of Continuous
Service, including service with Seller prior to the Closing Date.
(ii) Seller shall vest and make non-forfeitable the
accrued benefit of each Affected Employee who is a participant in the
Hill Pension Plan. For purposes of determining whether a participant
is entitled to begin receiving payment of his pension benefits and for
purposes of determining whether a participant qualifies for a normal,
early, deferred vested or disability pension (but not for benefit
accrual purposes), Company shall recognize employment with Buyer after
the Closing Date as if such employment had been performed for Company,
so that a plan participant who becomes an employee of Buyer in
accordance with Section 6.1 shall not be deemed to have terminated
employment with Company until such time as the employee terminates
employment with Buyer. In the event the employee qualifies for the
$300 minimum disability benefit described in Section 4.04(c)(1) of the
Hill Pension Plan, the benefit provided from the Hill Pension Plan
shall be $300 multiplied by a fraction, the numerator of which is the
employee's Continuous Service recognized under the Hill Pension Plan
as of the Closing Date and the denominator of which is the employee's
total period of Continuous Service, including service with Buyer on or
after the Closing Date. Seller shall adopt appropriate amendments to
the Hill Pension Plan to effectuate the provisions of this Section
6.4(b)(ii). Buyer shall not assume or otherwise become liable for or
become a successor to any Company defined benefit plan, including,
without limitation, the Hill Pension Plan.
6.4.(c) Salaried Employee Defined Benefit Plan.
Company shall vest and make non-forfeitable the accrued benefit of
each Affected Employee who is a participant in the Hill Refrigeration
Salaried Employees Retirement Plan ("Salaried Plan"). Solely for
purposes of determining whether a participant is entitled to begin
receiving payment of his pension benefits, Company shall recognize
employment with Buyer after the Closing Date as if such employment had
been performed for Company, so that a plan participant who becomes an
employee of Buyer in accordance with Section 6.1 shall not be deemed
to have terminated employment with Company until such time as the
employee terminates employment with Buyer. Buyer shall not assume or
otherwise become liable for or become a successor to any Company
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defined benefit plan, including, without limitation, the Salaried Plan.
6.4.(d) No Third-Party Rights. Nothing in this
Agreement, express or implied, is intended to confer upon any of
Company's employees, former employees, collective bargaining
representatives, job applicants, any association or group of such
persons or any Affected Employees any rights or remedies of any nature
or kind whatsoever under or by reason of this Agreement, including,
without limitation, any rights of employment.
6.4(e) Severance Plan. Buyer shall provide a
severance plan to salaried Affected Employees whose employment is terminated by
Buyer within six (6) months following the Closing Date (other than for cause or
in connection with the future sale of the business by Buyer) that provides a
benefit at least equal to one week salary for each year of service completed
through the Closing Date with Company (or predecessor companies), to a maximum
of twenty-six (26) weeks.
7. COVENANTS OF THE PARTIES
7.1. Noncompetition; Confidentiality. Subject to the Closing,
and as an inducement to Buyer to execute this Agreement and complete the
transactions contemplated hereby, and in order to preserve the goodwill
associated with the Business being acquired pursuant to this Agreement, and in
addition to and not in limitation of any other covenants contained in any
agreement executed and delivered to Buyer hereof, Company and Shareholder
hereby covenant and agree as follows:
7.1.(a) Covenant Not to Compete. For a period of five
(5) years from the Closing Date, neither Company nor Shareholder will,
directly or indirectly:
(i) engage in, continue in or carry on
any business which competes with
the Business, including owning or
controlling any financial interest
in any corporation, partnership,
firm or other form of business
organization which is so engaged;
(ii) consult with, advise or assist in
any way, whether or not for
consideration, any corporation,
partnership, firm or other business
organization which is now or at the
time of the consultation, advise or
assistance is or intends to become
a competitor of Buyer or HPI in
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any aspect with respect to the
Business including, but not
limited to, advertising or
otherwise endorsing the products of
any such competitor; soliciting
customers or otherwise serving as
an intermediary for any such
competitor; loaning money or
rendering any other form of
financial assistance to or engaging
in any form of business transaction
on other than an arm's length basis
with any such competitor;
(iii) offer employment to an Affected
Employee, without the prior written
consent of Buyer, unless (x) such
Affected Employee has been
terminated by Buyer or HPI without
cause or (y) the employment with
Buyer or HPI of such Affected
Employee has otherwise been
terminated for more than one year;
or
(iv) engage in any practice the purpose
of which is to evade the provisions
of this covenant not to compete;
provided, however, that the foregoing shall not prohibit the ownership
of securities of corporations which are listed on a national
securities exchange or traded in the national over-the-counter market
in an amount which shall not exceed 5% of the outstanding shares of
any such corporation and further provided that the foregoing shall not
prohibit the purchasing, owning, managing or operating of or having an
interest in any business that is included in a larger acquisition by
Company, Shareholder or their Affiliates after the date hereof, if
such business generates at the time of the acquisition less than ten
percent (10%) of the gross revenues of all of the businesses acquired.
The parties agree that the geographic scope of this covenant not to
compete shall extend to each of the fifty states within the United
States of America. The parties agree that Buyer or HPI may sell,
assign or otherwise transfer this covenant not to compete, in whole or
in part, to any person, corporation, firm or entity that purchases or
operates all or part of the Business or the Purchased Assets being
acquired by Buyer and HPI hereunder. In the event a court of
competent jurisdiction determines that the provisions of this covenant
not to compete are excessively broad as to duration, geographical
scope or activity, it is expressly agreed that this covenant not to
compete shall be construed so that the remaining provisions shall not
be affected, but shall remain in full force and effect, and any such
over
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broad provisions shall be deemed, without further action on the part
of any person, to be modified, amended and/or limited, but only to the
extent necessary to render the same valid and enforceable in such
jurisdiction.
7.1.(b) Covenant of Confidentiality. Neither Company
nor Shareholder shall at any time subsequent to the Closing, except as
explicitly requested by Buyer or as is otherwise required by law
(including Company's legal reporting requirements) or as necessary to
enforce its rights hereunder, (i) use for any purpose, (ii) disclose
to any person, or (iii) keep or make copies of documents, tapes, discs
or programs containing, any confidential information concerning the
Business. For purposes hereof, "confidential information" shall mean
and include, without limitation, all Trade Rights in which Company has
an interest, all customer lists and customer information, and all
other information concerning Company's processes, apparatus,
equipment, packaging, products, marketing and distribution methods,
not previously disclosed to the public by Company.
7.1.(c) Equitable Relief for Violations. Company and
Shareholder agree that the provisions and restrictions contained in
this SECTION 7.1 are necessary to protect the legitimate continuing
interests of Buyer and HPI in acquiring the Business and goodwill of
the Business through the purchase of the Purchased Assets and the
assumption of the Assumed Liabilities, and that any violation or
breach of these provisions will result in irreparable injury to Buyer
and HPI for which a remedy at law would be inadequate and that, in
addition to any relief at law which may be available to Buyer or HPI
for such violation or breach and regardless of any other provision
contained in this Agreement, Buyer and HPI shall be entitled to
injunctive and other equitable relief as a court may grant after
considering the intent of this SECTION 7.1.
7.2. Use of Company's Name. Following the Closing, neither
Company nor any Affiliate shall, without the prior written consent of Buyer,
make any use of the name "Hill Refrigeration" or any other name confusingly
similar thereto, except as may be necessary for Company to pay its liabilities,
prepare tax returns and other reports, and to otherwise wind up and conclude
its business.
7.3. Sales Tax Matters. Promptly following the Closing, Company
shall obtain a sales tax clearance certificate from the New Jersey Department
of Revenue with respect to sales tax payable by the Company as of the Closing
Date.
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7.4. Unemployment Compensation. Company shall, upon the request
of Buyer, reasonably cooperate with Buyer in any efforts by Buyer to obtain the
transfer of Company's portion of the New Jersey unemployment compensation fund
applicable to Affected Employees, to the extent Buyer elects to transfer and
assume such amounts. In connection therewith, Company will execute such
documents as Buyer may reasonably request in order to effectuate such transfer.
7.5. Bulk Sales Compliance. Buyer and Company waive compliance
with the provisions of the bulk sales or bulk transfer statutes applicable to
this transaction, subject to Company's and Shareholder's indemnification of
Buyer with respect to Liabilities resulting from such noncompliance as provided
in ARTICLE 8.
7.6. Access to Information and Records. For six years after
the Closing Date (and permanently for personnel-related records), Buyer shall
grant to the Company, Shareholder and their representatives, at the request of
the Company or Shareholder, access to and the right to make copies, at the
Company's or Shareholder's expense, of those records and documents relating to
the Purchased Assets and the Business possession of which is transferred to
Buyer, and Buyer shall maintain such records and documents in accordance with
sound business practices. If at the expiration of such six year period any tax
audit or judicial proceeding is pending or the applicable statute of
limitations is extended, at Company's request, Buyer shall maintain such
records and documents for such longer period as such audit or proceeding is
pending or such statutory period is extended. At the termination of the term
of the Facility Lease, Buyer may deliver possession of such records as are no
longer required by Buyer by notifying Company that it is delivering such
records to Company and Buyer shall leave such records at the Facilities upon
departure.
7.7. Change of Corporate Name. Concurrently with the Closing,
Company shall change its corporate name to a new name bearing no resemblance to
its present name so as to permit the use of its present name by Buyer.
7.8. Environmental Matters. It is agreed that this transaction
constitutes the sale or transfer of more than 50% of the assets of an
industrial establishment, such that the Company is obligated to provide notice
of this transaction to the New Jersey Department of Environmental Protection
and Energy pursuant to the New Jersey Industrial Site Recovery Act ("ISRA").
Any future termination of Buyer's operations at the Facilities may also require
a notice under ISRA. Following the Closing, Company shall file all such
notices and take all such actions as are required to be filed or taken under
ISRA and other applicable Environmental Laws with respect to the Facilities,
including, but
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not limited to, obtaining required approvals and performing any required
remediation, regardless of whether such notices or actions are required as a
result of acts, occurrences or events caused by Company or Buyer or occurring
before or after Closing (including, but not limited to, any notices and actions
required upon the termination of Buyer's use of the Facilities); however, as to
Buyer's acts and occurrences, or events after the Closing, Company shall not be
required to perform any required remediation to the extent Buyer has
indemnified Company for such acts, occurrences or events under the Facility
Lease. Company, as owner of the Facilities, agrees to be responsible for all
such filings and all such actions notwithstanding Buyer's use of the
Facilities, subject only to Buyer's obligations under the Facility Lease.
7.9. Health Insurance Coverage. Buyer covenants and agrees to
provide to employees who are offered and accept employment with Buyer health
coverage under an employee welfare benefit plan (as defined in Section 3(1) of
ERISA) maintained or contributed to by Buyer which provides for coverage
without any pre-existing condition limitation or waiting period condition.
7.10. Insurance. Company and Buyer shall reasonably cooperate to
provide to Buyer the benefit of Company's insurance for any claims relating to
the Purchased Assets for occurrences arising prior to the Closing, except to
the extent that such claims would exhaust the availability of Company's
insurance coverage for other matters and except to the extent that such claims
adversely affect the Company's right of recovery for claims arising from
Liabilities which are not Assumed Liabilities.
7.11. Taxes Resulting From Transaction. Except as provided in
SECTION 11.8, Buyer shall pay all taxes imposed upon it and Company shall pay
all taxes imposed upon it, if any, arising out of the transactions contemplated
hereby.
7.12. Oryx Payment. Within thirty (30) business days following
Closing, Company shall pay to Oryx Retail Fixtures, Inc. the amount of the
account payable owed by the Company to Oryx in excess of the account receivable
owed by Oryx to the Company.
8. INDEMNIFICATION
8.1. By Company and Shareholder. Subject to the terms and
conditions of this ARTICLE 8, Hill Refrigeration, Inc. and Shareholder, jointly
and severally, hereby agree to indemnify, defend and hold harmless Buyer, and
its directors, officers, employees, and Affiliates (hereinafter "Buyer's
Affiliates"), from and against all Claims asserted against, imposed upon, or
35
<PAGE> 40
incurred by Buyer, Buyer's Affiliates or the Business or the Purchased Assets,
and arising out of or resulting from:
8.1.(a) the inaccuracy or breach of any representation
or warranty of Company contained in this Agreement or in any document
executed pursuant to this Agreement, including without limitation, the
Facility Lease (regardless of whether such breach is deemed
"material");
8.1.(b) the breach of any covenant of Company or
Shareholder contained in this Agreement or any document executed
pursuant to this Agreement, including without limitation, the Facility
Lease (regardless of whether such breach is deemed "material");
8.1.(c) Liabilities of the Company or any of its
Affiliates which are not Assumed Liabilities (whether arising before
or after the Closing) or Liabilities associated with Excluded Assets;
8.1.(d) any Claim of or against Buyer or Buyer's
Affiliates with respect to any Liabilities (excepting Liabilities
assumed by Buyer pursuant to SECTION 2.1(E)) arising out of, related
to or incurred in connection with the closedown and disposal of the
Facilities by Company, regardless of whether such costs are incurred
before or after the Closing Date, including without limitation, costs
for compliance with Environmental Laws, vacant building security
costs, utility disconnection costs, sale expenses, demolition costs
and removal, transport and storage costs for Excluded Assets
(excepting Buyer's obligations under the Facility Lease and Buyer's
Liabilities to its employees under its employee pension and welfare
benefit plans);
As used in this ARTICLE 8, the term "Claim" shall include (i) all
losses, damages (including reasonable and foreseeable consequential damages),
judgments, awards, settlements, costs and expenses (including, without
limitation, interest (including prejudgment interest in any litigated or
arbitrated matter), penalties, court costs and attorneys fees and expenses);
and (ii) all demands, claims, suits, actions, costs of investigation, causes of
action, proceedings and assessments, whether or not ultimately determined to be
valid.
The Company shall not be liable to Buyer under either SECTION 8.1(A)
OR 8.1(B) unless and only to the extent the aggregate dollar value of all
Claims thereunder exceeds $50,000.00 (at which point Buyer shall be entitled to
recover as to Claims in excess of an aggregate of $50,000.00) (the
"Deductible"), except with respect to a breach of any representation or
warranty of the Company made in SECTIONS 4.1, 4.2 AND 4.12(A) or a breach of
the covenants set forth in ARTICLE
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<PAGE> 41
6, SECTION 7.1, OR SECTION 7.8 or in the Facility Lease, as to which the
Deductible shall not apply. The Deductible shall not apply to any other Claim
or right of indemnification, including without limitation indemnification
sought pursuant to SECTION 8.1(C) OR (D), SECTION 8.5, or to any adjustments to
the Purchase Price pursuant to ARTICLE 3 hereof. A claim by Buyer made under
either SECTIONS 8.1(A) OR 8.1(B) and under another provision of this Agreement
shall not be subject to the Deductible to the extent that the claim can be
brought under a provision of this Agreement other than SECTION 8.1(A) OR
8.1(B).
8.2. By Buyer. Subject to the terms and conditions of this
ARTICLE 8, Buyer, Phoenix and DDI, jointly and severally, hereby agree to
indemnify, defend and hold harmless Company, its directors, officers, employees
and Affiliates from and against all Claims asserted against, imposed upon or
incurred by any such person and arising out of or resulting from
8.2.(a) the inaccuracy or breach of any representation
or warranty of Buyer contained in this Agreement or in any document
executed pursuant to this Agreement including, without limitation, the
Facility Lease (regardless of whether such breach is deemed
"material");
8.2.(b) the breach of any covenant of Buyer contained
in this Agreement or in any document executed pursuant to this
Agreement including, without limitation, the Facility Lease
(regardless of whether such breach is deemed "material"); or
8.2.(c) Liabilities of the Company which are Assumed
Liabilities hereunder.
8.2.(d) Court costs and attorneys fees incurred in
connection with the defense of Claims against the Company for payment
or performance obligations of Buyer or HPI created following the
Closing and for which Company is not otherwise expressly responsible
under the terms of this Agreement or the agreements executed in
connection herewith.
8.3. Indemnification of Claims. The obligations and liabilities
of any party to indemnify any other under this ARTICLE 8 with respect to Claims
shall be subject to the following terms and conditions:
8.3.(a) Notice and Defense. The party or parties to be
indemnified (whether one or more, the "Indemnified Party") will give
the party from whom indemnification is sought (the "Indemnifying
Party") prompt written notice of any such Claim, and the Indemnifying
Party may undertake the defense thereof by representatives chosen by
it. Such notice shall describe the Claim with reasonable specificity
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<PAGE> 42
to the extent facts are known at the time of the notice. Failure to
give such prompt written notice shall not affect the Indemnifying
Party's duty or obligations under this ARTICLE 8, except to the extent
the Indemnifying Party is prejudiced thereby. So long as the
Indemnifying Party is defending any such Claim actively and in good
faith, the Indemnified Party shall not settle such Claim. The
Indemnified Party shall make available to the Indemnifying Party or
its representatives all records and other materials required by them
and in the possession or under the control of the Indemnified Party,
for the use of the Indemnifying Party and its representatives in
defending any such Claim, and shall in other respects give reasonable
cooperation in such defense.
8.3.(b) Failure to Defend. If the Indemnifying Party,
within ten days after notice of any such Claim, fails to defend such
Claim actively and in good faith, the Indemnified Party will (upon
further notice) have the right to undertake the defense, compromise or
settlement of such Claim or consent to the entry of a judgment with
respect to such Claim at the risk of the Indemnifying Party, and the
Indemnifying Party shall thereafter have no right to challenge the
Indemnified Party's defense, compromise, settlement or consent to
judgment.
8.3.(c) Indemnified Party's Rights. Anything in this
ARTICLE 8 to the contrary notwithstanding, (i) if there is a
reasonable probability that a Claim may materially and adversely
affect the Indemnified Party other than as a result of money damages
or other money payments, the Indemnified Party shall have the right to
defend, compromise or settle such Claim (at the risk of the
Indemnifying Party), and (ii) the Indemnifying Party shall not,
without the written consent of the Indemnified Party (such consent not
to be unreasonably withheld), settle or compromise any Claim or
consent to the entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party of a release from all Liability in respect of
such Claim.
8.3.(d) Time Limitations On Notice. Any notice for
indemnification sought pursuant to SECTION 8.1(A) hereof (excepting
with respect to a breach of warranty or representation made in SECTION
4.1, 4.2 OR 4.12(A)) shall be delivered on or before the first
anniversary of the Closing Date. There shall be no time limitation on
any other claim for indemnification brought under this Agreement or
any other agreement between the parties, including claims for
indemnification brought under any other section of this Agreement or
any other agreement which might also be brought under SECTION 8.1(A)
hereof. The parties hereto waive any
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limitation which may operate to otherwise bar a claim for
indemnification hereunder
8.4. Payment. The Indemnifying Party shall promptly pay the
Indemnified Party any amount due under this ARTICLE 8, which payment may be
accomplished in whole or in part, at the option of the Indemnified Party, by
the Indemnified Party setting off any amount owed to the Indemnifying Party by
the Indemnified Party. To the extent set-off is made by an Indemnified Party
in satisfaction or partial satisfaction of an indemnity obligation under this
ARTICLE 8 that is disputed by the Indemnifying Party, upon a subsequent
determination by final judgment not subject to appeal or by agreement of the
parties that all or a portion of such indemnity obligation was not owed to the
Indemnified Party, the Indemnified Party shall pay the Indemnifying Party the
amount which was set off and not owed, together with interest at seven percent
(7%) per annum. Upon judgment, determination, settlement or compromise of any
Claim in accordance with the provisions of this ARTICLE 8, the Indemnifying
Party shall pay promptly on behalf of the Indemnified Party, and/or to the
Indemnified Party in reimbursement of any amount theretofore required to be
paid by it, the amount so determined by judgment, determination, settlement or
compromise and all other Claims of the Indemnified Party with respect thereto,
unless in the case of a judgment an appeal is made from the judgment. If the
Indemnifying Party desires to appeal from an adverse judgment, then the
Indemnifying Party shall post and pay the cost of any required security or bond
to stay execution of the judgment pending appeal. Upon the payment in full by
the Indemnifying Party of such amounts, the Indemnifying Party shall succeed to
the rights of such Indemnified Party, to the extent not waived in settlement in
accordance herewith, against the third party who made such third party Claim.
8.5. Indemnification for Environmental Matters. Without
limiting the generality of any other provision of this ARTICLE 8:
8.5.(a) Indemnification. Company and Shareholder,
jointly and severally agree to indemnify, reimburse, hold harmless and
defend Buyer and Buyer's Affiliates for, from, and against all Claims
asserted against, imposed on, or incurred by Buyer, directly or
indirectly, in connection with any pollution, threat to the
environment, or exposure to, or manufacture, processing, distribution,
use, treatment, generation, transport or handling, disposal, emission,
discharge, storage or release of Waste that (A) results from Company's
or any previous owner's or operator's ownership, operation or
occupancy of the Facilities or the Business, properties and assets
being transferred to Buyer, or (B) occurred, existed, arose out of
conditions or circumstances that existed, or was caused on or before
the Closing Date; or (C) results from any act(s) or omission(s)
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<PAGE> 44
of Buyer after the date of Closing that constitute(s) a substantial
continuation of any act(s) or omission(s) of Company prior to the
Closing Date to the extent such Claims relate to the remediation of
Waste, the release of which began prior to the Closing Date. Such
indemnification shall remain effective notwithstanding any act of
Buyer or occurrence following the Closing.
8.5.(b) Transfers of Permits. Company and Shareholder,
jointly and severally, agree to indemnify, reimburse, defend, and hold
harmless Buyer and Buyer's Affiliates from, for and against all
demands, claims, actions or causes of action arising from or in
connection with the operation of the Purchased Assets by Buyer in the
absence of a permit required by law, subsequent to the Closing Date
and prior to transfer to the Buyer of any permits currently applicable
to the Purchased Assets.
8.5.(c) Dealings with Government Authorities. Company
shall file all such notices and take all such actions as are required
to be filed or taken under the New Jersey Environmental Cleanup
Responsibility Act and other applicable Environmental Laws, including
obtaining required approvals and performing any required remediation,
regardless of whether such notices or actions are required as a result
of acts, occurrences or events occurring before or after Closing
except as provided in SECTION 7.8. Company and Shareholder jointly
and severally, agree to indemnify and hold harmless Buyer and Buyer's
Affiliates from any Liabilities arising out of Company's failure to
take such actions, file such notices or obtain such approvals.
8.6. No Waiver. The closing of the transactions contemplated by
this Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of condition
constituting the basis of the Claim at or before the Closing, and regardless of
whether such breach, violation or failure is deemed to be "material". All
claims of any party hereto with respect to the transactions contemplated hereby
shall be brought exclusively under the terms of this Agreement and the other
agreements executed in connection herewith.
8.7. Guaranty; Escrow Agreement. Great American Management and
Investment, Inc. ("GAMI"), the parent company of Shareholder, shall guaranty
certain obligations of Company and Shareholder hereunder pursuant to that
certain Guaranty Agreement executed in connection herewith and GAMI and Buyer
shall enter into an escrow agreement pursuant to which GAMI shall deposit $6.5
million in marketable securities with an escrow agent
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<PAGE> 45
pursuant to the terms of that certain Escrow Agreement executed in connection
herewith.
9. CLOSING
The closing of this transaction ("the Closing") shall take place at
the offices of Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin
53211, at 10:00 A.M. on August 5, 1994, or at such other time and place as the
parties hereto shall agree upon. Such date is referred to in this Agreement as
the "Closing Date".
10. RESOLUTION OF DISPUTES
10.1. Arbitration. Any dispute, controversy or claim arising out
of or relating to this Agreement or any contract or agreement entered into
pursuant hereto or the performance by the parties of its or their terms shall
be settled by binding arbitration held in Chicago, Illinois in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then
in effect, except as specifically otherwise provided in this ARTICLE 10.
Notwithstanding the foregoing, Buyer may, in its discretion, apply to a court
of competent jurisdiction for equitable relief from any violation or threatened
violation of the covenants of Company and/or any Shareholder under SECTION 7.1
of this Agreement.
10.2. Arbitrators. If the matter in controversy (exclusive of
attorney fees and expenses) shall appear, as at the time of the demand for
arbitration, to exceed $250,000.00, then the panel to be appointed shall
consist of three neutral arbitrators; otherwise, one neutral arbitrator.
10.3. Procedures; No Appeal. The arbitrator(s) shall allow such
discovery as the arbitrator(s) determine appropriate under the circumstances
and shall resolve the dispute as expeditiously as practicable, and if
reasonably practicable, within 120 days after the selection of the
arbitrator(s). The arbitrator(s) shall give the parties written notice of the
decision, with the reasons therefor set out, and shall have 30 days thereafter
to reconsider and modify such decision if any party so requests within 10 days
after the decision. Thereafter, the decision of the arbitrator(s) shall be
final, binding, and nonappealable with respect to all persons, including
(without limitation) persons who have failed or refused to participate in the
arbitration process.
10.4. Authority. The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or preliminary
relief, and to allocate responsibility for
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the costs of the arbitration and to award recovery of attorneys fees and
expenses in such manner as is determined to be appropriate by the
arbitrator(s).
10.5. Entry of Judgment. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject matter
jurisdiction. Company, Buyer and Shareholder hereby submit to the in personam
jurisdiction of the Federal and State courts in Illinois, for the purpose of
confirming any such award and entering judgment thereon.
10.6. Confidentiality. All proceedings under this ARTICLE 10,
and all evidence given or discovered pursuant hereto, shall be maintained in
confidence by all parties.
10.7. Continued Performance. The fact that the dispute
resolution procedures specified in this ARTICLE 10 shall have been or may be
invoked shall not excuse any party from performing its obligations under this
Agreement and during the pendency of any such procedure all parties shall
continue to perform their respective obligations in good faith, subject to the
right of setoff provided in SECTION 8.4 hereof.
10.8. Tolling. All applicable statutes of limitation shall be
tolled while the procedures specified in this ARTICLE 10 are pending. The
parties will take such action, if any, required to effectuate such tolling.
11. MISCELLANEOUS
11.1. Disclosure Schedule. Information set forth in the
schedules to this Agreement specifically refers to the article and section of
this Agreement to which such information is responsive and such information
shall not be deemed to have been disclosed with respect to any other article or
section of this Agreement or for any other purpose.
11.2. Further Assurance. From time to time, upon request of any
party hereto, the other parties will execute and deliver such documents and
take such other action as may be reasonably appropriate in order to consummate
more effectively the transactions contemplated hereby, to vest in Buyer good,
valid and marketable title to the business and assets being transferred
hereunder, and to enable each party to perform its obligations hereunder
(provided that neither party shall be required to expend any unreimbursed
out-of-pocket costs or other unreasonable expenses). In the event Company has
failed to disclose any Contract in the schedules to this Agreement noted in
SECTION 1.1(E), Buyer agrees to use its best efforts to assume such Contract
following Closing so long as such Contract relates to the Business, was entered
into in the ordinary course, is not in
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material default, will not result in a loss to Buyer of more than $5000 and
does not impose any material adverse contingent liability on Buyer.
11.3. Disclosures and Announcements. Both the timing and the
content of all disclosure to third parties and public announcements concerning
the transactions provided for in this Agreement by either Company or Buyer
shall be subject to the approval of the other in all essential respects, except
that approval shall not be required as to any statements and other information
which Buyer, Company or other respective officials may be required to make
pursuant to any rule or regulation of the Securities and Exchange Commission or
otherwise required by law.
11.4. Assignment; Parties in Interest.
11.4.(a) Assignment. Except as expressly provided
herein, the rights and obligations of a party hereunder may not be
assigned, transferred or encumbered without the prior written consent
of the other parties. Notwithstanding the foregoing, Buyer may,
without consent of any other party, cause HPI to carry out all or any
part of the transactions contemplated hereby and each of Company's
obligations to Buyer hereunder shall also be deemed to run to HPI, as
well; but the foregoing shall not allow for recovery by Company and
HPI of duplicative claims against the Company.
11.4.(b) Parties in Interest. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the
respective successors and permitted assigns of the parties hereto.
Nothing contained herein shall be deemed to confer upon any other
person any right or remedy under or by reason of this Agreement. The
obligations of the parties hereunder, including without limitation the
indemnification obligations pursuant to ARTICLE 8, are for the
exclusive benefits of the parties hereto, and may not be enforced by
or on behalf of any other person or entity (including without
limitation any Government Entities, union, customer or supplier).
11.5. Law Governing Agreement. This Agreement may not be
modified or terminated orally, and shall be construed and interpreted according
to the internal laws of the State of Illinois, excluding any choice of law
rules that may direct the application of the laws of another jurisdiction.
11.6. Amendment and Modification. Buyer, Company and Shareholder
may amend, modify and supplement this Agreement in such manner as may be agreed
upon by them in writing.
11.7. Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be:
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(a) personally delivered; (b) sent by telecopier, facsimile transmission or
other electronic means of transmitting written documents; or (c) sent to the
parties at their respective addresses indicated herein by registered or
certified U.S. mail, return receipt requested and postage prepaid, or by
private overnight mail courier service. The respective addresses to be used
for all such notices, demands or requests are as follows:
(a) If to Buyer or Buyer's Affiliates, to:
Phoenix Refrigeration Systems, Inc.
709 Sigman Road
Conyers, Georgia
Attention: Grant M. Brown
Facsimile: (404) 483-2063
(with a copy to)
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Attention: Martin D. Mann
Facsimile: (414) 289-3791
or to such other person or address as Buyer shall furnish to Company in
writing.
(b) If to Company or Shareholder or their
respective Affiliates, to:
Eagle Industries, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: William Hall
Facsimile: (312) 906-8402
(with copies to)
Eagle Industries, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: Gus J. Athas
General Counsel
Facsimile: (312) 906-8402
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza
Suite 1600
Chicago, Illinois 60606
Attention: Donald J. Liebentritt
Facsimile: (312) 454-0335
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or to such other person or address as Company shall furnish to Buyer in
writing.
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent
by overnight courier pursuant to this paragraph, such communication shall be
deemed delivered upon receipt; and if sent by U.S. mail pursuant to this
paragraph, such communication shall be deemed delivered as of the date of
delivery indicated on the receipt issued by the relevant postal service, or, if
the addressee fails or refuses to accept delivery, as of the date of such
failure or refusal. Any party to this Agreement may change its address for the
purposes of this Agreement by giving notice thereof in accordance with this
Section.
11.8. Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
11.8.(a) Sales Taxes. Company and Buyer shall each pay
one half of any sales or similar tax imposed with respect to the
transactions provided for in this Agreement, and any interest or
penalties related thereto, except that Buyer's obligation pursuant to
this SECTION 11.8(A) shall be limited to $7,500 and Company shall pay
any excess.
11.8.(b) Professional Fees. Except as otherwise
provided herein, each of the parties shall bear its own expenses and
the expenses of its counsel and other professional advisors and agents
in connection with the transactions contemplated hereby.
11.8.(c) Costs of Litigation or Arbitration. The
parties agree that (subject to the discretion, in an arbitration
proceeding, of the arbitrator as set forth in SECTION 10.4) the
prevailing party in any action brought with respect to or to enforce
any right or remedy under this Agreement shall be entitled to recover
from the other party or parties all reasonable costs and expenses of
any nature whatsoever incurred by the prevailing party in connection
with such action, including without limitation attorneys' fees and
prejudgment interest.
11.9. Knowledge. Knowledge of the Company shall mean the actual
knowledge possessed by any of Dean Flatt, James Healy, John Vana, Bradley
Schwichtenberg, or Edward Finnegan.
11.10. Entire Agreement. This instrument embodies the entire
agreement between the parties hereto with respect to the transactions
contemplated herein, and there have been and are no
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agreements, representations or warranties between the parties other than those
set forth or provided for herein.
11.11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.12. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
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IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date and year first above written.
REFRIGERATION SYSTEMS, INC.
("Buyer")
By /s/ROLAND PARKER
Roland Parker
Vice President
HILL PHOENIX, INC.
("HPI")
By /s/ ROLAND PARKER
Roland Parker
Vice President
PHOENIX REFRIGERATION SYSTEMS, INC.
("Phoenix")
By /s/ GRANT M. BROWN
Grant M. Brown
President
DOVER DIVERSIFIED, INC.
("DDI")
By /s/ JERRY W. YOCHUM
Jerry W. Yochum
President
HILL REFRIGERATION, INC.
("Company")
By /s/ GUS J. ATHAS
Gus J. Athas
Vice President
<PAGE> 52
EAGLE INDUSTRIES, INC.
("Shareholder")
By /s/ GUS J. ATHAS
Gus J. Athas
Vice President
