SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
March 15, 2000
(February 29, 2000)
HON INDUSTRIES Inc.
(Exact name of registrant as specified in its charter)
IOWA 0-2648 42-0617510
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
414 East Third Street, P.O. Box 1109, 52761-7109
Muscatine, Iowa (Zip Code)
(Address of principal executive offices)
(319) 264-7400
Registrant's telephone number, including area code
ITEM 5. Other Events.
Item 2. Acquisition or Disposition of Assets.
On February 29, 2000, HON INDUSTRIES Inc. ("HON"), through its
subsidiary Hearth Technologies Inc. ("Hearth"), purchased two
hearth products distribution businesses under two, separate
agreements. Under one agreement Hearth purchased the assets and
assumed certain liabilities of American Fireplace Company and
Hearth & Home, Inc. (the "AFC Sellers") for $38,750,000 in cash, a
6.5% Promissory Note in the principal amount of $2,250,000 and
5.5% convertible debentures in the principal amount of
$26,500,000. In the other transaction Hearth purchased all of the
issued and outstanding shares of Allied Fireside, Inc. from Ron F.
Skoronski and Kirk R. Sorenson, (the "Allied Shareholders") and
purchased the assets and assumed certain liabilities of Madison
Fire Place, Inc., Fireplace & Spa, Inc. and the Monaqua Fireplace
Company (the "Allied Sellers" and, together with the AFC Sellers
and the Allied Shareholders, the "Sellers") for $36,250,000 in
cash, a 6.5% Promissory Note in the principal amount of $2,250,000
and 5.5% convertible debentures in the principal amount of
$26,500,000. The purchase prices were determined through arms-
length negotiations.
The assets purchased relate to the distribution operations of the
Sellers, primarily in Georgia, Maryland, Minnesota, Michigan, New
Jersey, Northern Carolina, Ohio, Pennsylvania, South Carolina,
Tennessee, Virginia and Wisconsin. These operations include the
sale, installation and servicing of gas and wood-burning
fireplaces and related accessories, spas, outdoor kitchens,
barbecues and grills, outdoor and patio furniture, shelving and
garage doors. Hearth intends to continue to use the assets
purchased to conduct the businesses as conducted by the Sellers.
These businesses will be operated as divisions of Hearth Services
Inc., a wholly owned subsidiary of Hearth. In connection with the
purchase, the Allied Shareholders and four of the principal
executive officers of the AFC Sellers, Richard A. Grove, Philip T.
Mercer, James Setree and David E. Scott, each entered into three-
year employment and non-competition agreements with Hearth.
The cash portion of the purchase prices was obtained from
available cash and borrowing under the $200,000,000 Credit
Agreement dated June 11, 1997 among HON, Bankers Trust Company, as
syndication agent and administrative agent, and various lending
institutions. As additional consideration, Hearth issued its
6.5%, three-year, promissory notes in the aggregate principal
amount of $4,500,000 and its 5.5%, five-year, convertible
debentures in the aggregate principal amount of $53,000,000. The
promissory note and debentures are guaranteed by HON. The
debentures may be converted after the third anniversary of the
closing of the transaction into shares of common stock of Hearth
representing approximately 9.75% of the issued and outstanding
shares of Hearth, on a fully diluted basis. The shares into
which the debentures may be converted are subject to certain
rights of the holders to sell those shares to Hearth after the
third anniversary, and before the fifth anniversary, of the
closing of the transaction. In addition, the shares are subject
to certain rights of Hearth to purchase the shares in the event
certain of the holders terminate their employment with Hearth, and
after the fourth anniversary of the transaction. These rights to
sell and purchase the shares into which the debentures may be
converted are set forth in the Securityholders' Agreement dated
February 29, 2000 by and among HON, Hearth, the Sellers and others
(the "Securityholders' Agreement").
ITEM 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements of Business Acquired: The acquired
businesses, on a combined basis, do not meet the 20%
significant subsidiary tests required for financial
statement reporting; therefore, no financial statement
information is required to be filed with this Current
Report on Form 8-K.
(b) Pro Forma Financial Information: The acquired businesses,
on a combined basis, do not meet the 20% significant
subsidiary tests required for financial statement
reporting; therefore, no pro forma financial information
is required to be filed with this Current Report on Form
8-K.
(c) Exhibits.
Exhibit
Number Exhibit
2.1(i) Purchase Agreement dated as of January 28, 2000 (the
"AFC Purchase Agreement") by and among American Fireplace
Company and Hearth & Home, Inc., as Sellers, Hearth
Technologies Inc., as Buyer, and HON INDUSTRIES Inc.
2.1(ii) Purchase Agreement dated as of January 28, 2000 (the
"Allied Purchase Agreement") by and among Ron F.
Skoronski, Kirk R. Sorensen, Madison Fire Place, Inc.,
Fireplace & Spa, Inc. and The Minocqua Fireplace Company,
as Sellers, Hearth Technologies Inc., as Buyer, and HON
INDUSTRIES Inc.
2.1(iii) Form of Convertible Debenture.
2.1(iv) Securityholders' Agreement.
99.1 Text of press release dated March 1, 2000.
Certain related transaction documents and the schedules to the AFC
Purchase Agreement (the "AFC Schedules") and the Allied Purchase Agreement
(the "Allied Schedules") are not being filed herewith. HON undertakes
to furnish a copy of any omitted Schedule to the Commission upon request.
Pursuant to Item 601(b)(2) of Regulation S-K, the following is a list of
the omitted Schedules.
Schedules
AFC Schedules
Form of Buyer Note
Form of Sellers' Counsel Opinion
Form of HON General Counsel Opinion
Form of Instrument of Assumption of Assumed Liabilities
Form of HON Guaranty
Form of Employment and Non-Competition Agreement
Form of Shareholder Guaranty
Disclosure Schedule
Accounts Receivable
Affiliate Companies
Agreed Allocation of Purchase Price
Assignment and Consents
Bank Accounts
Builder Contracts
Changes in Circumstances
Contracts
Customers and Suppliers
Employee Benefits
Employees
Environmental Matters
Existing Indebtedness to be Discharged by Closing
Financial Statements
Fixed Assets
Insider Interests
Insurance
Intellectual Property
Liabilities
Liens
Litigation
Non-Assigned Contracts
Permits
Real Estate and Leases
Warranty Costs
Schedule 1.2 - Designated Assets
Schedule 2.1(b) - Assigned Accrued Liabilities
Schedule 4.6(g) - Acquisition Settlement Agreements
Schedule 5.1(a) - Organization and Standing; Power and
Authority
Schedule 5.1(s)(2) - Company Plans
Schedule 5.1(v) - Taxes
Schedule 5.1(ii) - Year 2000
Schedule 5.3(d) - Buyer and HON Consents
Schedule 5.4(b)(i) - Buyer Authorized Capital Stock
Schedule 5.4(b)(ii) - Shimek Debentures
Schedule 7.1 - Employee Matters
Schedule 9.7(g) - Vacation Accruals
Allied Schedules
Form of Buyer Note
Form of Sellers' Counsel Opinion
Form of HON General Counsel Opinion
Form of Instrument of Assumption of Assumed Liabilities
Form of HON Guaranty
Form of Employment and Non-Competition Agreement
Form of Shareholder Guaranty
Form of Transition Services Agreement
Disclosure Schedule
Accounts Receivable
Affiliate Companies
Agreed Allocation of Purchase Price
Assignment and Consents
Bank Accounts
Builder Contracts
Changes in Circumstances
Contracts
Customers and Suppliers
Employee Benefits
Employees
Environmental Matters
Existing Indebtedness to be Discharged by Closing
Financial Statements
Fixed Assets
Insider Interests
Insurance
Intellectual Property
Liabilities
Liens
Litigation
Non-Assigned Contracts
Permits
Real Estate and Leases
Warranty Costs
Schedule 1.2 - Designated Assets
Schedule 1.3 - Allied Shares
Schedule 2.1(b) - Assigned Accrued Liabilities
Schedule 4.5 - Certain Leased Properties
Schedule 4.6(g) - Acquisition Settlement Agreements
Schedule 5.1(a) - Organization and Standing; Power and
Authority
Schedule 5.1(s)(2) - Company Plans
Schedule 5.1(s)(ll) - Company Plans
Schedule 5.1(v) - Taxes
Schedule 5.1(ii) - Year 2000
Schedule 5.3(d) - Buyer and HON Consents
Schedule 5.4(b)(i) - Buyer Authorized Capital Stock
Schedule 5.4(b)(ii) - Shimek Debentures
Schedule 7.1 - Employee Matters
Schedule 9.7(g) - Vacation Accruals
Schedule 11.2(I)(a)(ii) - Allied Indemnification
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this Current Report on Form
8-K to be signed on its behalf by the undersigned hereunto duly
authorized.
HON INDUSTRIES Inc.
Date: March 15, 2000. By /s/ James I. Johnson
James I. Johnson
Vice President, General
Counsel and Secretary
INDEX TO EXHIBITS
Sequential
Exhibit Exhibit Page
Number Number
2.1(i) Purchase Agreement dated as of January 28, 8
2000 (the "AFC Purchase Agreement") by and
among American Fireplace Company and Hearth
& Home, Inc., as Sellers, Hearth
Technologies Inc., as Buyer, and HON
INDUSTRIES Inc.
2.1(ii) Purchase Agreement dated as of January 28, 80
2000 (the "Allied Purchase Agreement") by
and among Ron F. Skoronski, Kirk R.
Sorensen, Madison Fire Place, Inc.,
Fireplace & Spa, Inc. and The Minocqua
Fireplace Company, as Sellers, Hearth
Technologies Inc., as Buyer, and HON
INDUSTRIES Inc.
2.1(iii) Form of Convertible Debenture. 161
2.1(iv) Securityholders' Agreement. 167
99.1 Press release, dated March 1, 2000. 191
EXHIBIT 2.1(i)
PURCHASE AGREEMENT
By and Among
AMERICAN FIREPLACE COMPANY AND
HEARTH & HOME, INC., as SELLERS,
HEARTH TECHNOLOGIES INC., as BUYER, and
HON INDUSTRIES INC.
Dated as of January 28, 2000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. PURCHASE AND SALE 1
1.1 Purchase and Sale of Assets 1
(a) [Intentionally omitted] 1
(b) Prepaids 2
(c) Inventory 2
(d) Accounts Receivable 2
(e) Fixed Assets 2
(f) [Intentionally omitted] 2
(g) Leased Property 2
(h) Intellectual Property Rights 2
(i) Business Records 3
(j) Rights Under Confidentiality
Agreements and Warranties 3
(k) Customer List 3
(l) Catalogs and Advertising Materials 3
(m) Purchase Orders 3
(n) Contracts 3
(o) Permits 3
(p) [Intentionally omitted] 3
(q) Goodwill 3
(r) Miscellaneous 4
1.2 Retained Assets 4
(a) Designated Assets 4
(b) Non-Assigned Contracts 4
(c) Employee Plan Assets 4
(d) Corporate Records 4
(e) Shares in H&H 4
(f) Insurance 5
1.3 [Intentionally omitted] 5
1.4 Assignability and Consents 5
(a) Required Consents 5
(b) Nonassignable Items 5
ARTICLE II. LIABILITIES 6
2.1 Assumption of Liabilities 6
(a) [Intentionally omitted] 6
(b) Accrued Liabilities 6
(c) Contracts 6
(d) Warranty Commitments 6
2.2 Retained Liabilities 6
(a) Pre-Closing 7
(b) Liabilities Relating to the Sale of
(c) Employee-Related Liabilities 7
(d) Litigation 7
(e) Product, Environmental and Safety
Liability 7
(f) Taxes 8
(g) [Intentionally omitted] 8
(h) Liabilities Relating to Retained 8
Assets
(i) Post-Closing Date 8
(j) Shutdown Costs 8
(k) Acquisition Payments 9
ARTICLE III. PURCHASE PRICE 9
3.1 Payment 9
3.2 [Intentionally omitted] 9
3.3 [Intentionally omitted] 9
3.4 [Intentionally omitted] 9
3.5 Satisfaction of Indebtedness 9
3.6 Purchase Price Allocation 10
ARTICLE IV. CLOSING 10
4.1 General 10
4.2 Documents to be Delivered by Asset Seller 10
4.3 [Intentionally omitted] 12
4.4 Documents to be Delivered by Buyer 12
4.5 Documents to be Delivered by Buyer and
Sellers 13
4.6 Other Documents to be Delivered 13
ARTICLE V. REPRESENTATIONS AND WARRANTIES 14
5.1 Joint and Several Representations and
Warranties of Sellers 14
(a) Organization and Standing; Power and
Authority 14
(b) Articles and By-Laws 15
(c) Conflicts; Defaults 15
(d) Acquired Assets; Title to the
Acquired Assets 16
(e) Real Property 17
(f) Leases 17
(g) Contracts 17
(h) Financial Statements 18
(i) Liabilities 20
(j) Accounts Receivable; Collection;
Trade Payables 21
(k) Inventories 21
(l) Litigation 21
(m) Customers and Suppliers 22
(n) Regulatory Compliance 22
(o) Brokers, Finders and Agents 22
(p) Intellectual Property 22
(q) Permits 23
(r) Employee Relations; Collective
Bargaining Agreements 24
(s) Employees and Employee Plans 24
(t) Environmental and Safety Compliance 27
(i) General 27
(ii) Specific Environmental
Representations and Warranties 27
(iii) Definitions 28
(u) Changes in Circumstances 30
(v) Taxes 30
(w) Product Warranties 33
(x) Insurance 33
(y) Approvals 34
(z) Absence of Certain Commercial
Practices 34
(aa) Bank Accounts 34
(ab) Books and Records 34
(ac) Warranty Costs 35
(ad) Penalties and Renegotiation of
Contracts 35
(ae) Pricing Practices 35
(af) Copies of Documents 35
(ag) [Intentionally omitted] 35
(ah) Insider Interests; Advances 36
(ai) Year 2000 Compliance 36
(aj) Disclosure 37
5.2 [Intentionally omitted] 37
5.3 Representations and Warranties of HON 37
(a) Organization and Standing; Power and
Authority 37
(b) Conflicts; Defaults 37
(c) Brokers, Finders and Agents 37
(d) Consents 38
5.4 Representations and Warranties Relating
to Buyer 38
(a) Organization and Standing; Power and
Authority 38
(b) Capitalization 38
(c) Articles and By-Laws 39
(d) Conflicts; Defaults 39
(e) Compliance with Other Instruments,
etc. 39
(f) Financial Statements 39
(g) Litigation 39
(h) Absence of Certain Changes or Events 40
(i) Brokers, Finders and Agents 40
(j) Consents 40
(k) Ability to Pay Cash Amount 40
5.5 General 40
ARTICLE VI. CONDITIONS TO CLOSING 40
6.1 Conditions to Buyer's Obligations 40
(a) Representations and Warranties 40
(b) Covenants 41
(c) Material Adverse Change 41
(d) Consents 41
(e) No Proceeding or Litigation 41
(f) Legal Matters 42
(g) Certificate of Seller 42
(h) Certificate; Documents 42
(i) Tax Certificates 42
(j) Lender Consents 42
(k) Other Closing 42
6.2 Conditions to Sellers' Obligations 42
(a) Representations and Warranties 42
(b) Covenants 43
(c) Material Adverse Change 43
(d) Consents 43
(e) No Proceeding or Litigation 43
(f) Legal Matters 43
(g) Certificates of Buyer and HON 43
(h) Certificates; Documents 43
(i) LaSalle Loan 43
(j) Other Closing 43
ARTICLE VII. COVENANTS OF SELLER 44
7.1 Conduct of Businesss 44
(a) Obligations for Borrowed Money 44
(b) Employee Matters 44
(c) Sale of Assets 44
(d) Commitments 44
(e) Leased Facilities 45
(f) Encumbrances 45
(g) Insurance 45
(h) Litigation 45
(i) Representations and Warranties 45
(j) Commitments 45
7.2 Disclosure Supplements 45
7.3 Closing 46
7.4 Confidentiality 46
7.5 Maintenance of Insurance 46
7.6 Inventories 46
7.7 Maintenance of, and Access to, Records 46
7.8 Non-Competition 46
(a) Period and Conduct 46
(b) Territory 47
(c) Definition 47
(d) Remedies 47
(e) Subsidiaries, Divisions and 47
Affiliates
(f) Severability 48
7.9 Accounts Receivable 48
7.10 Name Change Filings 48
7.11 No Shopping 48
7.12 Plant Closing Obligations 48
7.13 Further Assurances; Customer and Supplier
Relationships; Assertion of Claims 49
7.14 Appointment of Representative 49
7.15 Payment of Indebtedness; Releases 49
ARTICLE VIII. COVENANTS OF BUYER AND HON 50
8.1 Covenants of Buyer 50
(a) Maintenance of, and Access to,
Records 50
(b) Closing 50
(c) Disclosure Supplements 50
(d) Copies 50
(e) Insurance 50
(f) Supply of Products 50
(g) Further Assurances 50
8.2 Covenants of HON 51
(a) Closing 51
(b) IRB Consents 51
(c) Buyer Note 51
ARTICLE IX. CERTAIN ADDITIONAL COVENANTS 51
9.1 Access to Records and Properties 51
9.2 Expenses; Transfer Taxes 51
9.3 Bulk Transfer Laws 52
9.4 Press Releases and Disclosure 52
9.5 Cooperation in the Defense of Claims 52
9.6 Regulatory Approvals 52
9.7 Employee Matters 53
9.8 [Intentionally omitted] 54
9.9 Product Warranty Work 54
ARTICLE X. TERMINATION 55
10.1 Termination 55
(a) Mutual Consent 55
(b) Termination Date 55
(c) Sellers Misrepresentation or Breach 55
(d) Buyer Misrepresentation or Breach 55
(e) Court Order 55
(f) Material Adverse Change 55
(g) Buyer's Conditions 55
(h) Sellers' Conditions 55
10.2 Effect of Termination 56
ARTICLE XI. INDEMNIFICATION 56
11.1 Indemnification by Buyer 56
11.2 Indemnification by Sellers 56
(I) General 56
(II) Environmental Indemnification 57
11.3 Notice of Claim; Right to Participate in
and Defend Third Party Claim 57
11.4 Setoff 58
11.5 Time Limitations on Claims for
Indemnification 59
11.6 Maximum and DeMinimis Amounts 59
11.7 Exclusions 60
11.8 Dispute Resolution 60
ARTICLE XII. MISCELLANEOUS 62
12.1 Amendments 62
12.2 Entire Agreement 62
12.3 Governing Law 62
12.4 Notices 62
12.5 Counterparts 63
12.6 Assignment 63
12.7 Waivers 63
12.8 Third Parties 63
12.9 Schedules 63
12.10 Headings 64
12.11 Certain Definitions 64
12.12 Remedies Not Exclusive 64
12.13 Gender and Number 64
12.14 Attorney's Fees 64
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") dated as of
January 28, 2000, is among AMERICAN FIREPLACE COMPANY, a Maryland
corporation ("AFC") formerly known as Thulman Eastern Corporation
(as so known, "TEC"), HEARTH & HOME, INC., a Maryland corporation
("H&H") (collectively, "Sellers" or the "Companies"), HEARTH
TECHNOLOGIES INC., an Iowa corporation ("Buyer"), and HON
INDUSTRIES INC., an Iowa corporation ("HON").
W I T N E S S E T H:
WHEREAS, the Companies carry on the business (the
"Business") of (1) designing, manufacturing, distributing,
marketing, selling and installing hearth and fireplace products,
including gas and wood burning fireplaces, inserts, stoves, logs,
mantels, surrounds, fascia, cabinetry, venting parts and
accessories ("Hearth Products") and (2) distributing, marketing,
selling and installing spas, outdoor kitchens, barbecues and
grills, and related products, such as outdoor and patio
furniture, shelving and garage doors ("Other Products," and
together with Hearth Products, the "Products");
WHEREAS, the Companies (each, an "Asset Seller" and
collectively, the "Asset Sellers") desire to sell substantially
all of their respective assets, properties, rights and interests
to Buyer; and
WHEREAS, Buyer desires to purchase and acquire from
each Asset Seller substantially all of such assets, properties,
rights and interests of such Asset Seller in consideration of
certain payments by Buyer and the assumption by Buyer of certain
liabilities and obligations of such Asset Seller specifically
disclosed in this Agreement.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants hereinafter contained and other good and
valuable consideration had and received, HON, Buyer and the Asset
Sellers, on the basis of, and in reliance upon, the
representations, warranties, covenants, obligations and
agreements set forth in this Agreement, and upon the terms and
subject to the conditions contained herein, hereby agree as
follows:
ARTICLE I. PURCHASE AND SALE
1.1 Purchase and Sale of Assets. At the Closing (as
hereinafter defined) and effective as of the Closing Date (as
hereinafter defined), Buyer shall purchase and acquire from each
Asset Seller, and each Asset Seller shall sell, transfer, convey,
assign and deliver to Buyer, on a going concern basis, all of the
assets, properties, rights and interests owned, used, occupied or
held by or for the benefit of such Asset Seller wherever
situated, as the same shall exist as of the Closing Date, and
wherever situated, including, without limitation, the following:
(a) [Intentionally omitted];
(b) Prepaids. All prepaid expenses, advance payments,
deposits, surety accounts and other similar assets,
including, without limitation, prepaid deposits with
landlords, suppliers and utilities;
(c) Inventory. All inventories of products,
work-in-process, finished goods, raw materials, supplies and
parts (collectively, "Inventory" or "Inventories"),
including, without limitation, all Inventories located at
the facilities listed on the Schedule entitled "Real Estate
and Leases";
(d) Accounts Receivable. All accounts receivable, any
payments received with respect thereto after the Closing
Date, unpaid interest accrued on any such accounts
receivable and any security or collateral relating thereto
(collectively, "Accounts Receivable");
(e) Fixed Assets. All tangible personal property,
plant and equipment, including, without limitation,
buildings, structures, fixtures, machinery and equipment,
dies, jigs, molds, patterns, tools, tooling, production
fixtures, maintenance machinery and equipment, office
furniture and office equipment, other furnishings, trucks,
automobiles and other vehicles and transportation equipment,
leasehold improvements and construction-in-process, and all
tangible personal property set forth on the Schedule
entitled "Fixed Assets" attached hereto (collectively, the
"Fixed Assets");
(f) [Intentionally omitted];
(g) Leased Property. All rights and interests under
the lease agreements (the "Lease Agreements") more
particularly described under the heading "Leased Property"
on the Schedule entitled "Real Estate and Leases" attached
hereto, which descriptions are incorporated herein by
reference (the premises subject to the Lease Agreements
being hereinafter collectively referred to as the "Leased
Property");
(h) Intellectual Property Rights. All inventions,
discoveries, trademarks, patents, trade names, copyrights,
know-how, intellectual property, software, shop rights,
licenses, developments, research data, designs, technology,
discoveries, trade secrets, test procedures, processes,
research data, formulas and other confidential information,
intellectual and similar intangible property rights, whether
or not patentable (or otherwise subject to legally
enforceable restrictions or protections against unauthorized
third party usage), and any and all applications for, and
extensions, divisions and reissuances of, any of the
foregoing, and rights therein, including, without
limitation, (i) the names "American Fireplace Company" and
"Hearth & Home, Inc." and all related trade and business
names and trademarks, (ii) the intellectual and intangible
property rights described on the Schedule entitled
"Intellectual Property" attached hereto, (iii) the
production methods, formulas, know-how and technical
expertise relating to the Products and (iv) any and all
domain names, World Wide Web sites and related content and
software, including electronic commerce and ordering
software, rights of use and access to related computer
servers and programs, and rights under related contracts,
agreements and licenses (collectively, the "Intangibles");
(i) Business Records. All books and records,
including, without limitation, all files, invoices, forms,
accounts, correspondence, production records, technical,
accounting, manufacturing and procedural manuals, employment
records, studies, reports or summaries relating to any
Environmental Requirements (as hereinafter defined), and
other books and records relating to the operation of the
Business or other assets or properties, and any confidential
information which has been reduced to writing or other
tangible medium;
(j) Rights Under Confidentiality Agreements and
Warranties. All rights, claims and benefits of such Asset
Seller in, to or under any (i) (A) employee confidentiality
agreements entered into by such Asset Seller and (B)
confidentiality or secrecy agreements entered into by such
Asset Seller with third parties that relate to the use or
disclosure of information; (ii) express or implied
warranties from the suppliers of goods or services
(including any coverage rights under product liability or
other insurance maintained by any of such suppliers for the
benefit of such Asset Seller); and (iii) non-competition or
non-solicitation agreements, restrictive covenants and
similar agreements;
(k) Customer List. Lists of all of the Persons to
whom or to which such Asset Seller has sold or otherwise
furnished Products, directly or indirectly (individually, a
"Customer" and collectively, the "Customers," such terms to
include any assignee or successor of any such Person,
whether by consolidation, merger, sale of assets or
otherwise), including related information as to the unit and
dollar volume of such sales, the type of Products so sold or
furnished, the method of distribution and other relevant
marketing and product information for each Customer (the
"Customer Lists"), which Customer Lists will be delivered at
Closing via electronic means;
(l) Catalogs and Advertising Materials. All
promotional and advertising materials, including, without
limitation, all catalogs, brochures, plans, supplier lists,
manuals, handbooks, equipment and parts lists, dealer and
distributor lists, and labels and packaging materials;
(m) Purchase Orders. All unfilled purchase and sale
orders (including releases of quantities pursuant thereto);
(n) Contracts. Subject to Sections 1.2(b) and 1.4,
all rights, benefits and interests of such Asset Seller in
and to all licenses, leases, contracts, agreements,
commitments and undertakings;
(o) Permits. All licenses, permits, approvals,
variances, waivers or consents (collectively, the
"Permits"), to the extent transferable, issued by any
foreign, United States, state or local governmental entity
or municipality or subdivision thereof or any authority,
department, commission, board, bureau, agency, court or
instrumentality (collectively, "Governmental Authorities");
(p) [Intentionally omitted];
(q) Goodwill. The goodwill of such Asset Seller as a
going concern; and
(r) Miscellaneous. Except for the Retained Assets (as
hereinafter defined), all other assets, properties, rights
and interests of such Asset Seller, of every kind, nature
and description, whether tangible or intangible, real,
personal or mixed, and wherever situated, including, without
limitation, those assets, properties, rights and interests
set forth on the Unaudited Balance Sheet (as hereinafter
defined), all of which are to be sold, transferred,
conveyed, assigned and delivered to Buyer at the Closing
pursuant to this Agreement.
All of the assets, properties, rights and interests owned, used,
occupied or held by or for the benefit of such Asset Seller,
which are to be sold, transferred, conveyed, assigned and
delivered by such Asset Seller to Buyer at the Closing as
contemplated herein, including without limitation, those
described in clauses (a) through (r) above, but excluding the
Retained Assets, are referred to herein collectively as the
"Acquired Assets".
1.2 Retained Assets. Anything in Section 1.1 to the
contrary notwithstanding, the following assets (collectively, the
"Retained Assets") shall be retained by each Asset Seller, and
Buyer shall in no way be construed to have purchased or acquired
(or to be obligated to purchase or to acquire) any interest
whatsoever in any of the following:
(a) Designated Assets. The assets, properties, rights
and/or interests, owned, used, occupied or held by or for
the benefit of such Asset Seller that are listed on Schedule
1.2 as not being included within, or constituting a part of,
the Acquired Assets (collectively, the "Designated Assets");
(b) Non-Assigned Contracts. All of the rights and
interests, and all of the liabilities and obligations, of
each Asset Seller in, under or pursuant to any license,
lease, contract, agreement, commitment or undertaking set
forth on the Schedule entitled "Non-Assigned Contracts"
(collectively, the "Non-Assigned Contracts");
(c) Employee Plan Assets. Except as otherwise
provided in Section 9.7, the rights of such Asset Seller
under, and any funds and property held in trust or any other
funding vehicle pursuant to, any "employee benefit plan"
(within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA")) or any other bonus, stock option, stock
appreciation, stock purchase, severance, termination, lay-
off, leave of absence, disability, workers compensation,
pension, profit sharing, retirement, vacation or holiday
pay, insurance, deferred compensation or other employee or
welfare benefit plan, agreement or arrangement of such Asset
Seller applicable to such Asset Seller's past, present or
future employees (collectively, "Employee Plans"); and
(d) Corporate Records. Such Asset Seller's minute
books, stock books, stock ledger and corporate seal;
(e) Shares in H&H. All issued and outstanding shares
of capital stock, or other equity interests, including
limited liability company interests, of H&H, TEC-USA, Inc.
and HSA, L.L.C. held by AFC; and
(f) Insurance. All rights, claims and benefits of
such Asset Seller in, to or under all insurance policies
maintained by such Asset Seller, or by any Affiliate of such
Asset Seller for the Business or the Acquired Assets.
1.3 [Intentionally omitted]
1.4 Assignability and Consents.
(a) Required Consents. The Schedule entitled
"Assignments and Consents" sets forth a list of all material
Acquired Assets, including material Contracts, Permits and
Lease Agreements, which are non-assignable or
non-transferable or cannot be subleased to Buyer without, or
with respect to which the transactions contemplated by this
Agreement would require, a consent, novation, approval,
authorization, waiver, agreement, or satisfaction of any
other requirement (including filing and registration
requirements) of or from some other individual, partnership,
corporation, association, joint stock company, trust, joint
venture, limited liability company or Governmental Authority
(each, a "Person") ("Consents"). Each Seller has commenced
and shall continue to take, or cause to be taken by others,
all necessary actions required to obtain or satisfy, at the
earliest practicable date, all Consents, from any Persons
necessary to authorize, approve or permit, and to consummate
and make effective, the transactions contemplated by this
Agreement, including full and complete sale, conveyance,
assignment, sublease or transfer of the Acquired Assets, and
to continue such efforts as may be required after the
Closing Date; provided, however, that (i) the Sellers shall
not be required to take any such action with respect to
contracts with home builders specified on the Schedule
entitled "Builder Contracts" ("Builder Contracts"), and
(ii) Sellers shall only be required under this Section 1.4,
as a condition precedent to Buyer's obligations to
consummate the transactions provided for by this Agreement,
to obtain consents to the assignment of material Lease
Agreements (the "Required Consents").
(b) Nonassignable Items. Anything in this Agreement
to the contrary notwithstanding, this Agreement shall not
constitute, or be deemed to constitute, an Agreement to
sell, convey, assign, sublease or transfer any Acquired
Assets, including Contracts, Permits and Lease Agreements,
if an attempted or deemed sale, conveyance, assignment,
sublease or transfer thereof, without the Consent of another
party thereto or a Governmental Authority would constitute a
breach of, or in any way affect the rights of, any Seller or
Buyer with respect thereto ("Nonassignable Items"). Each
Seller shall use its best efforts, and Buyer shall cooperate
in all reasonable respects with Sellers, to obtain and
satisfy all Consents and to resolve all impracticalities of
sale, conveyance, assignment, sublease or transfer necessary
to convey to Buyer all Nonassignable Items. If any such
Consents are not obtained and satisfied or if an attempted
sale, conveyance, assignment, sublease or transfer would be
ineffective, each Seller and its appropriate Affiliate, and
Buyer, shall, at and after the Closing (i) enter into such
arrangements (including related written agreements) as Buyer
may reasonably request to provide Buyer the benefit of any
such Nonassignable Items (it being acknowledged that such
arrangement may include obligations imposed on Sellers and
such Affiliates promptly to pay to Buyer when received all
monies and other items of value received by Sellers and such
Affiliates under any such Nonassignable Item) in exchange
for the performance by Buyer of Sellers' obligations in
respect of such Nonassignable Items under Section 2.1(c) and
(ii) use their reasonable best efforts to assure that the
Companies' current customers and suppliers shall continue to
do business with Buyer in accordance with the terms and for
the periods of time set forth in any Nonassignable Item.
ARTICLE II. LIABILITIES
2.1 Assumption of Liabilities. On the terms and
subject to the conditions set forth in this Agreement, Buyer
shall assume, at the Closing and effective as of the Closing
Date, and shall thereafter pay, perform and discharge as and when
due, except as otherwise provided in Section 9.7, the following,
and only the following, liabilities and obligations of each Asset
Seller with respect to its operation of its Business
(collectively, the "Assumed Liabilities"):
(a) [Intentionally omitted];
(b) Accrued Liabilities. All accounts payable,
accrued expenses and other liabilities referred to under the
caption "Assumed" on Schedule 2.1(b) in the amounts set
forth thereon or such greater amounts as may arise or accrue
after the date of such Schedule in the ordinary and normal
course and consistent with the representations, warranties,
covenants, obligations and agreements set forth in this
Agreement;
(c) Contracts. All ordinary and normal liabilities
and obligations of Sellers arising under the terms of the
Contracts disclosed on the Schedule entitled "Contracts"
other than contracts that constitute Non-Assigned Contracts
or are included in the Designated Assets (the "Assumed
Contracts") but only to the extent such liabilities and
obligations arise or accrue after the Closing Date in the
ordinary and normal course and consistent with the
representations, warranties, covenants, obligations and
agreements set forth in this Agreement; provided, however,
that Buyer shall not assume or be responsible for any such
liabilities or obligations that (i) arise from breaches
thereof or defaults thereunder by Sellers (other than any
breach of any Builder Contract deemed to arise solely as a
result of the assignment of any such Builder Contract to
Buyer pursuant to this Agreement), (ii) require any payment
or other consideration including any earn-out or contingent
purchase price, in connection with any merger, acquisition
or similar transaction, or (iii) arise under instruments or
agreements evidencing indebtedness of Sellers (other than
those installment contracts, capital leases or vehicle sales
contracts that are disclosed on the Schedule entitled
"Contracts" and pursuant to which Acquired Assets are being
purchased or leased by any Company), all of which
liabilities and obligations shall constitute Retained
Liabilities (as hereinafter defined); and
(d) Warranty Commitments. The Ordinary Warranty
Commitments (as defined in Section 5.1(w)).
2.2 Retained Liabilities. Except to the extent
assumed as provided in Section 2.1 or Section 9.7, each Asset
Seller shall retain, and Buyer shall not assume, or be
responsible or liable with respect to, any liabilities or
obligations of such Asset Seller, whether or not of, associated
with, or arising from, any of the Acquired Assets, and whether
fixed, contingent or otherwise, known or unknown (collectively
referred to hereinafter as the "Retained Liabilities"),
including, without limitation, the following:
(a) Pre-Closing. All liabilities and obligations
relating to, based in whole or in part on events or
conditions occurring or existing in connection with, or
arising out of, the Business as operated prior to the
Closing Date, or the ownership, possession, use, operation
or sale or other disposition prior to the Closing Date of
any Products or any of the Acquired Assets (or any other
assets, properties, rights or interests associated, at any
time prior to the Closing Date, with the Business);
(b) Liabilities Relating to the Sale of Acquired
Assets. All liabilities and obligations of such Asset
Seller or any of its Affiliates, or their respective
directors, officers, shareholders or agents, arising out of,
or relating to, this Agreement or the transactions
contemplated hereby, whether incurred prior to, at, or
subsequent to the Closing Date, including, without
limitation, all liabilities to shareholders or former
shareholders of any Seller, finder's or broker's fees and
expenses, and any and all fees and expenses of any
attorneys, accountants or other professionals retained by or
on behalf of such Asset Seller or any of its Affiliates;
(c) Employee-Related Liabilities. All liabilities and
obligations to any persons at any time employed by such
Asset Seller or its Affiliates or their respective
predecessors-in-interest in the Business or otherwise, at
any time or to any such person's spouse, children, other
dependents or beneficiaries, with respect to incidents,
events, exposures or circumstances occurring at any time
during the period or periods of any such persons' employment
by such Asset Seller or its Affiliates or their respective
predecessors-in-interest, whenever such claims mature or
are asserted, including, without limitation, all liabilities
and obligations arising (i) under any Employee Plans,
(ii) under any employment, wage and hour restriction, equal
opportunity, discrimination, plant closing or immigration
and naturalization laws, (iii) under any collective
bargaining Laws, agreements or arrangements, or (iv) in
connection with any workers' compensation or any other
employee health, accident, disability or safety claims;
(d) Litigation. All liabilities and obligations
relating to any litigation, action, suit, claim,
investigation or proceeding pending on the date hereof, or
constituted hereafter, based in whole or in part on events
or conditions occurring or existing in connection with, or
arising out of, or otherwise relating to, the Business as
operated by such Asset Seller or any of its Affiliates (or
any of their respective predecessors-in-interest), or the
ownership, possession, use, operation, sale or other
disposition prior to the Closing Date of any Products or any
of the Acquired Assets (or any other assets, properties,
rights or interests associated, at any time prior to the
Closing Date, with such Asset Seller);
(e) Product, Environmental and Safety Liability.
Without limiting the rights of Sellers against any third
party, all liabilities and obligations relating to the
Business, any Products or the Acquired Assets (or any other
assets, properties, rights or interests associated, at any
time prior to the Closing Date, with the Business, Products
or the Acquired Assets), based in whole or in part on events
or conditions occurring or existing prior to the Closing
Date and connected with, arising out of or relating to (i)
any dispute for services rendered or goods manufactured,
including, without limitation, product warranty claims
(other than Ordinary Warranty Commitments) and product
liability claims, and claims for refunds (other than
customer deposits), returns, personal injury and property
damage, (ii) Hazardous Materials, Environmental Requirements
or Environmental Damages (all as hereinafter defined)
including costs to obtain permits required to be, but not
obtained, prior to Closing and to document hazardous waste
disposals, (iii) claims relating to employee health and
safety, including claims for injury, sickness, disease or
death of any Person, or (iv) compliance with any statutes,
laws, rules, regulations, orders, ordinances, codes and
decrees of Governmental Authorities (collectively, "Laws")
relating to any of the foregoing;
(f) Taxes. All liabilities and obligations of such
Asset Seller or any of its Affiliates (or any of their
respective predecessors-in-interest) for any Taxes (as
hereinafter defined) due or becoming due by reason of
(i) the conduct of the Business, or (ii) the ownership,
possession, use, operation, purchase, acquisition, sale or
disposition, of any Products or any of the Acquired Assets,
including, without limitation, (1) Taxes attributable to the
sale of inventory and employee withholding tax obligations;
(2) Taxes imposed on, or accruing as a result of the
purchase and sale of the Acquired Assets (except state sales
or other similar transfer taxes arising in connection with
the transfer of assets to Buyer as provided in Section 9.2);
and (3) Taxes attributable to, or resulting from, recapture
of depreciation, other tax benefit items, or otherwise
arising from the transactions contemplated by, this
Agreement;
(g) [Intentionally omitted];
(h) Liabilities Relating to Retained Assets. All
liabilities and obligations relating to, based in whole or
in part on events or conditions occurring or existing in
connection with, or arising out of, any and all assets,
properties, rights and interests that are not being acquired
by Buyer hereunder, including, without limitation, the
Retained Assets;
(i) Post-Closing Date. All liabilities and
obligations incurred by such Asset Seller or its Affiliates
or their respective directors, officers, shareholders,
agents or employees, other than on behalf of Buyer or its
Affiliates, after the Closing Date;
(j) Shutdown Costs. Any liabilities or obligations
relating to, based in whole or in part on events or
conditions occurring or existing in connection with, or
arising out of, the shutdown prior to the Closing of any of
the operations and facilities utilized by such Asset Seller,
including, without limitation, any action which could be
construed as a "plant closing" or "mass layoff," as those
terms are defined in the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Sections 2101-2109 ("WARN"), or any
"employment loss," as defined in WARN, which any employee of
such Asset Seller or any of its Affiliates may suffer;
provided, however, that, for purposes of this
Section 2.2(j), employees of the Asset Sellers immediately
prior to the Closing shall be deemed to be employees of
Buyer as of the Closing Date; and
(k) Acquisition Payments. All liabilities and
obligations of any Company to make any payment or provide
consideration in connection with any merger, acquisition or
similar transaction.
ARTICLE III. PURCHASE PRICE
3.1 Payment. In full consideration for the transfer
of the Acquired Assets, at the Closing Buyer shall:
(i) deliver and pay to Sellers Thirty-eight Million
Seven Hundred Fifty Thousand Dollars ($38,750,000)
(the "Cash Amount") in immediately available funds
by bank wire transfer to an account designated in
writing for this purpose by McGuire, Woods,
Battle & Boothe LLP, special counsel to Sellers
("Sellers' Counsel"), on behalf of Sellers to
Buyer prior to the Closing;
(ii) execute and deliver to Sellers a Promissory Note
(the "Buyer Note"), dated as of the Closing Date,
payable in the original principal amount of Two
Million Two Hundred Fifty Thousand Dollars
($2,250,000) to Sellers, and in substantially the
form of Schedule 3.1(ii) hereto; and
(iii)execute and deliver to Sellers Convertible
Debentures with a combined face amount of
$26,500,000, dated as of the Closing Date,
payable in such denominations and in such amounts to
such payees as set forth in, and in substantially
the form of, Schedule 3.1(iii) hereto
("Convertible Debentures", and collectively with the Cash
Amount and the Buyer Note, the "Purchase Price").
3.2 [Intentionally omitted]
3.3 [Intentionally omitted]
3.4 [Intentionally omitted]
3.5 Satisfaction of Indebtedness. At or prior to the
Closing, each Company shall take such actions (including without
limitation paying, or directing Buyer to apply a portion of the
Cash Amount to pay to, the creditors of such Company) as may be
required to fully pay, satisfy and discharge all of the
indebtedness of such Company, including the promissory notes and
other evidence of indebtedness listed or described on the
Schedule entitled "Existing Indebtedness to be Discharged by
Closing," and to obtain and deliver to Buyer copies of all
executed releases, in form and substance reasonably satisfactory
to Buyer, necessary to secure the release of all Liens other than
Permitted Liens (as hereinafter defined) on the Acquired Assets
relating thereto (all of which releases Sellers shall cause to be
filed promptly, but no later than two (2) business days, after
payment of the related indebtedness and in any event promptly
after the Closing Date).
3.6 Purchase Price Allocation. The Purchase Price
represents the amount agreed upon by the parties to be the
aggregate value of the Acquired Assets and shall be allocated
among the Acquired Assets, in accordance with their respective
fair market values, which the parties have agreed are or shall be
as set forth on the Schedule entitled "Agreed Allocation of
Purchase Price" attached hereto. Any excess of the Purchase
Price over the fair market value of the Acquired Assets shall be
allocated to goodwill. Each of the parties shall report the
purchase and sale of the Acquired Assets, including, without
limitation, in all federal, foreign, state, local and other Tax
returns and reports prepared and filed by or for any Seller or
Buyer, in accordance with the basis of allocation described in
this Section 3.6.
ARTICLE IV. CLOSING
4.1 General. As used in this Agreement, the "Closing"
shall mean the time at which Sellers consummate the sale,
assignment, transfer and delivery of the Acquired Assets to Buyer
as provided herein by the execution and delivery by Sellers of
the documents and instruments referred to in Section 4.2 against
delivery by Buyer of the documents and payments provided in
Sections 3.1 and 4.4, and Sellers, Buyer and the other Persons
referred to herein deliver the additional documents referred to
in Sections 4.5 and 4.6. In the absence of a prior termination
of this Agreement by one of the parties in accordance with
Article X, the Closing shall take place at the offices of Jones,
Day, Reavis & Pogue, 77 West Wacker, 35th Floor, Chicago,
Illinois 60601-1692 at 10:00 A.M. on the second business day
following the day on which the waiting periods under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 (the "H-S-R Act")
shall have expired or been terminated (the "HSR Approvals"), or
at such other time and place and on such other day as shall be
mutually agreed upon in writing by the parties hereto (the
"Closing Date"). Legal title, equitable title and risk of loss
with respect to the Acquired Assets shall not pass to Buyer until
the Acquired Assets are transferred at the Closing, which
transfer, once it has occurred, shall be deemed effective for
tax, accounting and other computational purposes as of 12:01 A.M.
(Central Time) on the Closing Date.
4.2 Documents to be Delivered by Asset Seller. At the
Closing, each Asset Seller shall deliver to Buyer:
(a) Copies of (i) the resolutions of the Boards of
Directors and shareholders of such Asset Seller, including,
in the case of H&H, AFC as the sole shareholder of H&H,
authorizing and approving this Agreement and all other
transactions and agreements contemplated hereby, (ii) such
Asset Seller's respective Articles of Incorporation, and
(iii) such Asset Seller's respective Bylaws, all certified
by the respective corporate Secretary or Assistant Secretary
of such Asset Seller to be true, correct, complete and in
full force and effect and unmodified as of the Closing Date;
(b) A bill of sale transferring such Asset Seller's
Acquired Assets to Buyer, free and clear of any and all
liens, equities, claims, prior assignments, mortgages,
charges, security interests, pledges, conditional sales
contracts, collateral security arrangements and other title
retention arrangements, restrictions (including, in the case
of real property, rights of way, use restrictions, and other
variances, reservations or limitations of any nature) or
encumbrances whatsoever (collectively, "Liens") except for
Permitted Liens and subject to filing of those releases and
documents referred to in Sections 3.5 and 4.2(k);
(c) An opinion, dated as of the Closing Date, of
Sellers' Counsel, addressed to Buyer, substantially in the
form attached hereto as Schedule 4.2(c);
(d) Copies of all Required Consents, together with the
related estoppel certificate from such landlord with respect
to each such Lease Agreement for which a Required Consent is
provided;
(e) Instruments of assignment to Buyer of all of such
Asset Seller's trademarks, trade names, service marks and
patents (and all applications for, and extensions and
reissuances of, any of the foregoing and rights therein)
identified on the Schedule entitled "Intellectual Property";
(f) The certificate required by Section 6.1(g);
(g) Good standing or status certificates for such
Asset Seller from the appropriate state authorities in each
jurisdiction in which such Asset Seller is either
incorporated or qualified to do business as a foreign
corporation, each dated not more than thirty (30) days prior
to the Closing, together with facsimiles or telegrams, if
available, or, if not, oral advice as to good standing as of
the Closing from each of such jurisdictions;
(h) Evidence of the due filing by each Asset Seller's
ultimate parent with the Federal Trade Commission ("FTC")
and the Antitrust Division of the United States Department
of Justice ("DOJ") pursuant to the H-S-R Act and the
expiration or early termination of the waiting periods
thereunder;
(i) An incumbency certificate of the officers of each
Asset Seller;
(j) Instruments of assignment of each Lease Agreement
to which such Asset Seller is a party;
(k) Copies of executed releases, in form and substance
reasonably satisfactory to Buyer, including, without
limitation, termination statements under the Uniform
Commercial Code of any financing statements filed against
any Acquired Assets, evidencing discharge, removal and
termination of all Liens (other than Permitted Liens) to
which the Acquired Assets are subject including, without
limitation, Liens securing the indebtedness described in the
Schedule entitled "Existing Indebtedness to be Discharged by
Closing", together with evidence satisfactory to Buyer that
the indebtedness described on such Schedule shall have been
satisfied and extinguished, which releases Sellers shall
cause to be filed upon payment of the related indebtedness
and in any event promptly after the Closing Date;
(l) A receipt from each of the Asset Sellers
acknowledging receipt of the Purchase Price allocable to the
Acquired Assets and the Assumed Liabilities of such Asset
Seller;
(m) Such other deeds, bills of sale, endorsements,
assignments, affidavits, and other good and sufficient
instruments of sale, assignment, conveyance and transfer in
form and substance satisfactory to Buyer and its counsel, as
are required to effectively vest in Buyer good and
marketable title in and to all of the Acquired Assets
(including such certificates of title or other documents as
are so required with respect to any vehicles included in the
Acquired Assets), free and clear of any and all Liens except
Permitted Liens, and subject to filing of those releases and
documents referred to in Sections 3.5 and 4.2(k);
(n) Copies of resolutions transferring sponsorship of
the Assumed Plan (as hereinafter defined) to Buyer, the
Assignment Agreement dated as of the Closing transferring
sponsorship of the Assumed Plan, and amendments to the
Assumed Plan pursuant to Section 9.7 reflecting the transfer
of sponsorship of the Assumed Plan to Buyer; and
(o) Joinder agreements executed by each Additional
Securityholder (as defined below) party to the
Securityholders' Agreement, dated as of the Closing Date
(the "Securityholders' Agreement"), among HON, Buyer,
Sellers, Ron F. Skoronski, Kirk R. Sorensen, Madison Fire
Place, Inc., a Wisconsin corporation ("Madison"), Fireplace
& Spa, Inc., a Wisconsin corporation ("FPSI"), The Minocqua
Fireplace Company, a Wisconsin corporation ("Minocqua"), and
each of the Persons listed on Schedule 1.1(b) thereto as an
Additional Securityholder (the "Additional
Securityholders").
4.3 [Intentionally omitted]
4.4 Documents to be Delivered by Buyer. At the
Closing, Buyer shall deliver or cause to be delivered to Sellers:
(a) A copy of (i) the resolutions of the Board of
Directors of Buyer and HON authorizing and approving this
Agreement and all other transactions and agreements
contemplated hereby, (ii) HON's Articles of Incorporation,
(iii) Buyer's Articles of Incorporation, as amended to
increase the number of authorized shares of common stock of
Buyer to 10,000,000, and (iv) HON's and Buyer's respective
Bylaws, all certified by the Secretary or an Assistant
Secretary of Buyer or HON to be true, correct, complete and
in full force and effect as of the Closing Date;
(b) The certificate required by Section 6.2(g);
(c) Evidence of the payment of the Cash Amount in the
manner and the amount set forth in Section 3.1;
(d) the Buyer Note, duly executed on behalf of Buyer,
and in substantially the form attached hereto as Schedule
3.1(ii);
(e) evidence of the due filing by Buyer's ultimate
parent, HON, with the FTC and the DOJ pursuant to the H-S-R
Act and the expiration or early termination of the waiting
period thereunder;
(f) An opinion, dated the Closing Date, of James I.
Johnson, Vice President and General Counsel of HON,
addressed to Sellers, substantially in the form attached
hereto as Schedule 4.4(f);
(g) Good standing and tax certificates for Buyer and
HON from the Secretary of State of Iowa, each dated not more
than thirty (30) days prior to the Closing, together with
facsimiles or telegrams, if available, or, if not, oral
advice, as to good standing as of the Closing from each of
such jurisdictions;
(h) An Incumbency Certificate of the officers of each
of Buyer and HON;
(i) An Instrument of Assumption of the Assumed
Liabilities, substantially in the form attached hereto as
Schedule 4.4(i);
(j) The Convertible Debentures, in substantially the
form attached hereto as Schedule 3.1(iii), duly executed on
behalf of Buyer and issued to the persons set forth on
Schedule 3.1(iii);
(k) A Guaranty, in substantially the form attached
hereto as Schedule 4.4(k), duly executed on behalf of HON
(the "HON Guaranty"); and
(l) Resolutions accepting the transfer of sponsorship
of the Assumed Plan from AFC, and the Assumption Agreement
dated as of the Closing transferring sponsorship of the
Assumed Plan.
4.5 Documents to be Delivered by Buyer and Sellers.
At the Closing, Buyer and Sellers shall execute and deliver (i) a
letter of credit in support or a guaranty of Sellers' obligations
under the loan to be made to Sellers referred to in Section
6.2(i), (ii) a reimbursement agreement, in form and substance
satisfactory to Buyer, obligating Sellers to reimburse Buyer for
any liabilities, obligations and costs it incurs, including
amounts paid to LaSalle Bank N.A., related to the transactions
contemplated by this Section 4.5, and (iii) a pledge agreement,
in form and substance satisfactory to Buyer, pledging such amount
of Convertible Debentures to Buyer as may be necessary to fully
secure Sellers' obligations under the documents described in this
Section 4.5.
4.6 Other Documents to be Delivered. At the Closing:
(a) Buyer shall execute and deliver an Employment and
Non-Competition Agreement with each of Richard A. Grove,
Jr., Philip T. Mercer ("Mercer"), James Setree and David E.
Scott (the "Key Employees") in substantially the form
attached hereto as Schedule 4.6(a) (each, an "Employment and
Non-Competition Agreement").
(b) Each of Rodney A. Hempel, L. Denny Mercer,
Philip F. Dwyer, Brenda Gay Mercer, Amy Lynn Doody and
Michael D. Mercer shall execute and deliver a Non-
Competition Agreement to the effect set forth in Section 7.8
(each, a "Non-Competition Agreement".
(c) Each shareholder of the Asset Sellers shall
execute and deliver a Guaranty Agreement substantially in
the form attached hereto as Schedule 4.6(c) (each, a
"Shareholder Guaranty").
(d) [Intentionally omitted]
(e) [Intentionally omitted]
(f) Wayne Newsome, president of H&H, shall execute and
deliver to Buyer a consent to the assignment of the license
agreement dated April 21, 1999 between Wayne Newsome and
AFC.
(g) Sellers shall deliver such instruments of
satisfaction, release, waiver and settlement relating to the
acquisition and related agreements and instruments,
including promissory notes and rights of first refusal, to
which the Companies are a party as described on
Schedule 4.6(g), including (i) payment of all promissory
notes, (ii) payment and satisfaction of contingent purchase
price agreements, (iii) releases of Liens on any Assets, and
(iv) waiver of right of first refusal provisions.
(h) Deutsche Bank Securities Inc. shall deliver an
executed commitment letter obligating it or one of its
Affiliates to purchase the Buyer Note from Sellers on the
Closing Date.
(i) HON, Buyer, Sellers, Ron F. Skoronski, Kirk R.
Sorensen, Madison, FPSI, Minocqua, and the other parties
listed on the signature page thereto shall execute and
deliver a Securityholders' Agreement, in substantially the
form attached hereto as Schedule 4.6(i).
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.1 Joint and Several Representations and Warranties
of Sellers. Subject only to those exceptions and qualifications
listed and described (including an identification by section
reference to the representations and warranties to which such
exceptions and qualifications relate) on the Schedules referred
to in this Section 5.1 and attached to this Agreement, Sellers
hereby jointly and severally represent and warrant to Buyer that:
(a) Organization and Standing; Power and Authority.
Each Company is a corporation duly organized, validly
existing and in good standing under the laws of the states
described on Schedule 5.1(a), and has full corporate power
and authority to operate its business, to own or lease its
assets, to carry on its business as now being conducted, and
to enter into and perform this Agreement and the
transactions and other agreements and instruments
contemplated by this Agreement. Except as disclosed on the
Schedule entitled "Affiliate Companies", the Companies have
no subsidiary corporations, own no interest, direct or
indirect, in any other business enterprise, firm or
corporation, and are the only business enterprises, firms or
corporations through which the Business (or any business
competing with or similar to the Business) is conducted, or
which owns, leases or uses assets related to the Business.
Each Company is duly qualified or licensed to do business as
a foreign corporation and is in good standing in each
jurisdiction in which the failure to so qualify would have,
or might reasonably be expected to have, individually or in
the aggregate, a material adverse effect upon the condition
(financial or otherwise), business, assets, properties or
operations (a "Material Adverse Effect") of the Companies,
taken as whole. This Agreement and all other agreements and
instruments executed and delivered or to be executed and
delivered by any Person in connection herewith
(collectively, the "Transaction Documents") to which any
Seller is party have been, or upon execution thereof will
be, duly executed and delivered by such Seller. This
Agreement and the transactions and other agreements and
instruments contemplated hereby have been duly approved by
the Directors and shareholders of each such Company, and
constitute the valid and binding obligations of each Seller,
enforceable in accordance with their respective terms. Each
Asset Seller represents and warrants that it has been duly
authorized by its shareholders to make the agreements set
forth in Section 7.8 and to bind all of its shareholders
thereto.
(b) Articles and By-Laws. The copies of the Articles
of Incorporation and Bylaws of each Company heretofore
delivered to Buyer are true, correct and complete.
(c) Conflicts; Defaults. Neither the execution and
delivery of this Agreement and the other agreements and
instruments executed or to be executed in connection
herewith by any Seller, nor the performance by Sellers of
the transactions contemplated hereby or thereby, will
(i) violate, conflict with, or constitute a default under,
any of the terms of any Company's Articles of Incorporation
or By-Laws, (ii) except for any default arising solely from
the failure to obtain any Consent other than any Required
Consent, violate, conflict with, or constitute a default
under any provisions of, or result in the acceleration of
any obligation under, (x) the Contracts, (y) any order,
judgment or decree, relating to the Business or the Acquired
Assets, or by which any Company or the Acquired Assets are
bound, or (z) any contract, sales commitment, license,
purchase order, security agreement, mortgage, note, deed,
lien, lease, agreement or instrument, relating to the
Business or the Acquired Assets, or by which any Company or
the Acquired Assets are bound, which violation, conflict,
default or acceleration described in this clause (z) would
result in a Material Adverse Effect upon the Companies,
taken as a whole, (iii) result in the creation or imposition
of any Liens or restrictions, liens, encumbrances, claims
(including any "adverse claim" as such term is defined in
the Uniform Commercial Code), options, calls, pledges,
trusts and other commitments, agreements or arrangements
(collectively, "Claims") in favor of any third Person or
entity upon any of the Acquired Assets, (iv) violate any
law, statute, judgment, decree, order, rule or regulation of
any Governmental Authority, (v) constitute an event which,
after notice or lapse or time or both, would result in such
violation, conflict, default, acceleration, or creation or
imposition of Liens or Claims, (vi) constitute an event
which, after notice of lapse of time or otherwise would
create, or cause to be exercisable or enforceable, any
option, agreement or right of any kind to purchase any of
the Acquired Assets. Except as set forth in the Schedule
entitled "Assignment and Consents", no consent, novation,
approval, filing or authorization will be required to be
obtained or satisfied for the continued performance by Buyer
following the Closing of any contract, agreement, commitment
or undertaking included in the Acquired Assets. No Company
is in violation of or in default under its Articles of
Incorporation or Bylaws. No Company is in violation of or
in default under or any provision of (x) the Contracts, (y)
any order, judgment or decree, relating to the Business, or
the Acquired Assets, or by which any Company, or the
Acquired Assets are bound, or (z) any contract, sales
commitment, license, purchase order, security agreement,
mortgage, note, deed, lien, lease, agreement or instrument,
including without limitation, the Contracts, or any order,
judgment or decree, relating to the Business or the Acquired
Assets, or by which Sellers or the Acquired Assets is bound
described in this clause (z), which violation or default
would result in a Material Adverse Effect upon the
Companies, taken as a whole, or in the payment of any
monetary obligations or debts relating to the Business, and
there exists no condition or event which, after notice or
lapse of time or both, would result in any such violation or
default.
(d) Acquired Assets; Title to the Acquired Assets.
Except for the Retained Assets, the Acquired Assets are the
only assets, properties, rights and interests used by the
Companies in connection with the Business. The Acquired
Assets to be conveyed to Buyer under this Agreement,
together with cash, constitute all of the assets,
properties, rights and interests necessary to conduct the
Business in substantially the same manner as conducted by
the Companies prior to the date of this Agreement. None of
the Acquired Assets have any material defects or are in need
of maintenance or repair, except for ordinary maintenance
and repairs. Each Company has good, marketable and
exclusive title to, and the valid and enforceable power and
unqualified right to use and transfer to Buyer, each of
their respective Assets, including, without limitation, all
dies, molds or other tooling or equipment use in the
Business, whether located at the Companies' facilities or at
the facilities of their Customers or suppliers, and the
Acquired Assets (henceforth also referred to as the
"Assets") are free and clear of all Liens and Claims of any
kind or nature whatsoever, except for Permitted Liens and
the Liens required to be released under Sections 3.2 and
4.2(k). The consummation of the transactions contemplated
by this Agreement (including, without limitation, the
transfer or assignment of the Acquired Assets, and all
rights and interests therein, to Buyer as contemplated
herein) will not adversely affect such title or rights, or
any terms of the applicable agreements (whether written or
oral) evidencing, creating or granting such title or rights.
Except as otherwise disclosed in the Schedule entitled
"Contracts", none of the Assets are subject to, or held
under, any lease, mortgage, security agreement, conditional
sales contract or other title retention agreement, or are
other than in the sole possession and under the sole control
of the Companies. Each Company has the right under valid
and existing leases to occupy, use or control all properties
and assets leased by it. The delivery to Buyer of the
instruments of transfer of ownership contemplated by this
Agreement will vest good, marketable and exclusive title (as
to all Acquired Assets owned by an Asset Seller) or full
right to possess and use (as to all Acquired Assets not
owned by an Asset Seller) to the Acquired Assets in Buyer,
free and clear of all Liens and Claims of any kind or nature
whatsoever, except for current real estate Taxes or
governmental charges or levies which are a Lien but not yet
due and payable and Liens securing obligations under those
installment contracts, capital leases or vehicle sales
contracts that are disclosed on the Schedule entitled
"Contracts" and that will be assumed by Buyer (collectively,
"Permitted Liens"). The Schedule entitled "Fixed Assets"
attached hereto contains true, correct and complete lists of
all fixed assets with an individual net book value in excess
of $10,000 used in connection with the Business as of the
dates specified therein. No Company owns or holds any
marketable Securities.
(e) Real Property. The Schedule entitled "Real Estate
and Leases" attached hereto contains a true, correct and
complete list of all instruments and agreements creating any
interest or right in real property relating to the Business,
or leased or occupied by any Company. No Seller owns or has
any rights to any fee interest in real property. True,
correct and complete copies of the instruments and
agreements identified in such Schedule have been delivered
to Buyer. Each such instrument and agreement is in full
force and effect and is a legal, binding, and enforceable
obligation of the applicable Seller. Each Company has the
right to quiet enjoyment of all real property subject to
leaseholds under any such instruments, for the full term of
each such lease and, subject to proper exercise thereof, any
renewal option related thereto. There has been no
disturbance of or challenge to any Company's quiet
possession under each such lease, and no leasehold or other
interest of any Company in such real property is subject to
or subordinate to any Liens except Permitted Liens.
Neither the whole nor any portion of any real property
leased or occupied by any Company has been condemned,
requisitioned or otherwise taken by any Governmental
Authority, and, to Sellers' knowledge, no such condemnation,
requisition or taking is threatened or contemplated. To
Sellers' knowledge, no building, structure, fixture or
appurtenance comprising part of the real properties of any
Company has any material defects or is in need of
maintenance or repair, except for ordinary maintenance and
repairs.
(f) Leases. Each Lease Agreement described on the
Schedule entitled "Real Estate and Leases" has not been
modified, altered, terminated or revoked, and is in full
force and effect. No Company, as the present tenant under
its respective Lease Agreements, is in default under any of
the terms of such Lease Agreements, and there are no
existing facts or conditions which could give rise to any
such default. To Sellers' knowledge, the present lessors
under the Lease Agreements, are not in default thereunder,
or in breach thereof, and there are no existing facts or
conditions which could give rise to any such breach or
default.
(g) Contracts. The Schedule entitled "Contracts"
attached hereto contains a complete list or summary
description of (i) each license, contract, agreement,
commitment and undertaking (whether written or oral)
(A) relating to the Business or to which any Company is a
party (1) which involves the purchase of inventories or the
sale of products, and involves aggregate future payments in
excess of $50,000, or which extends for a period of more
than one year, or (2) which does not involve the purchase of
inventories or the sale of products, and involves aggregate
future payments in excess of $50,000 or extends for a period
of more than one year, (B) between any Company and any
distributor, manufacturers' agent or selling agent used or
retained in connection with the Business, or pursuant to
which any Company sells or distributes Products, in each
case described in this subsection (B) regardless of the size
or term or such licenses, contracts, agreements, commitments
and undertakings, (ii) each loan or credit agreement,
promissory note, security agreement, guaranty, indenture,
mortgage, pledge or other agreement or instrument evidencing
indebtedness of any Company, or to which any Company is a
party, (iii) any conditional sale or other title retention
agreement, equipment obligation, or lease purchase agreement
involving (in the aggregate) amounts annually in excess of
$25,000 relating to any Company or the Business, or to which
any Company is a party, (iv) any power of attorney given by
any Company to any Person, firm or corporation or otherwise
relating to the Business or the Assets, (v) any non-
competition, restrictive covenant or other agreement that
restricts any Company or any employee, consultant, agent or
director of any Company from conducting the Business
anywhere in the world, (vi) each contract, agreement,
commitment or undertaking presently in effect, whether or
not fully performed, between any Company and any current or
former officer, director, consultant or other employee (or
group thereof) retained or employed in connection with the
Business, or any current or former shareholder (or group of
shareholders) of any Company, (vii) any contract, agreement,
commitment or undertaking evidencing the acquisition or
disposition by any Company of any business, all or
substantially all assets (other than Inventories in the
normal and ordinary course of business), or shares of
capital stock of any Person during the past five years or as
to which any material obligation or liability (contingent or
not) still exists, and (viii) any other contract, agreement,
commitment or undertaking that is material to the condition
(financial or otherwise), results of operations, properties,
assets, liabilities or business of any Company or the
Business (the items described in clauses (i) through (viii)
being herein collectively referred to as the "Contracts").
Each Company has performed all obligations required to be
performed by it to date under the Contracts, and neither any
Company nor, to Sellers' knowledge, any other party to any
Contract has breached or improperly terminated any Contract
by which it is bound, and there exists no condition or event
which after notice or lapse of time or both, would
constitute any such breach, termination or default by
Sellers or, to Sellers' knowledge, by any other party. No
Company is a party to, and the Business does not involve,
any contracts, agreements, commitments or undertakings which
are subject to the Federal Acquisition Regulations,
Chapter 48 of the Code of Federal Regulations and all agency
supplements thereto, the Cost Accounting Standards set forth
in Chapter 4 of the Code of Federal Regulations, or the Cost
Principles set forth in Chapter 31 of the Code of Federal
Regulations. Each of the Contracts is in full force and
effect, and is a legal, binding and enforceable obligation
of or against Sellers, except as such enforceability may be
limited by (i) bankruptcy, insolvency or similar laws
affecting creditors' rights generally or (ii) general
principles of equity, whether considered in a proceeding in
equity or at law.
(h) Financial Statements. Each Company has heretofore
delivered to Buyer the following financial statements
(collectively, together with the notes thereto and the
financial statements to be delivered pursuant to
Section 7.2(b), the "Financial Statements"):
(i) the unaudited Balance Sheet of such Company
(the "Unaudited Balance Sheet") as of
November 30, 1999 (the "Balance Sheet Date"),
and the unaudited Statement of Income of such
Company for the eleven (11) months ended
November 30, 1999 (collectively, the
"Unaudited Financial Statements");
(ii) (A) the unaudited Balance Sheet of AFC as of
November 30, 1999, and the unaudited
Statement of Income for the eleven months
ended November 30, 1999; and the unaudited
Balance Sheet of H&H, and the unaudited
Statement of Income for the eleven months
ended November 30, 1999 (which includes
interim periods for predecessor companies,
Hearth & Home, Distributors, Inc. and
Hearth & Home Doors LLC); the audited Balance
Sheet of AFC as of December 31, 1998, the
audited Statement of Income for the year
ended December 31, 1998, and the audited
Statement of Cash Flows for the year ended
December 31, 1998, together with the
footnotes thereto and the report thereon by
C.W. Amos and Company LLC, certified public
accountants; the audited Balance Sheet of AFC
as of December 31, 1997, the audited
Statement of Income for the year ended
December 31, 1997, and the audited Statement
of Cash Flows for the year ended December 31,
1997, together with the footnotes thereto and
the report thereon by C.W. Amos and Company
LLC, certified public accountants; and the
audited Balance Sheet of AFC as of
December 31, 1996, the audited Statement of
Income for the year ended December 31, 1996,
and the audited Statement of Cash Flows for
the year ended December 31, 1996, together
with the footnotes thereto and the report
thereon by C.W. Amos and Company LLC,
certified public accountants, and (B) the
audited Balance Sheet of Hearth & Home
Distributors, Inc. as of March 31, 1998, the
audited Statement of Income for the year
ended March 31, 1998, and the audited
Statement of Cash Flows for the year ended
March 31, 1998, together with the footnotes
thereto and the report thereon by Weil,
Akman, Baylin & Coleman, P.A.; the audited
Balance Sheet of Hearth & Home Distributors,
Inc. as of March 31, 1997, the audited
Statement of Income for the year ended
March 31, 1997, and the audited Statement of
Cash Flows for the year ended March 31, 1997,
together with the footnotes thereto and the
report thereon by Weil, Akman, Baylin &
Coleman, P.A.; and the audited Balance Sheet
of Hearth & Home Doors, LLC as of
December 31, 1996, the audited Statement of
Income for the year ended December 31, 1996,
and the audited Statement of Cash Flows for
the year ended December 31, 1996, together
with the footnotes thereto and the report
thereon by Weil, Akman, Baylin & Coleman,
P.A.; and
(iii)Each of the Financial Statements was prepared
from the books and records kept by each
Company for the Business, and fairly
presents the financial position of each Company
as of such dates, and the results of each
Company's operations and each Company's cash flows
for the periods then ended in accordance
with generally accepted accounting principals
("GAAP") consistently applied (except,
in the case of the Unaudited Financial Statements,
for normally recurring year-end adjustments, which
adjustments will not be material, either individually
or in the aggregate) and without footnote disclosures,
and the related internal accounting practices and
policies of such Company disclosed on the Schedule
entitled "Financial Statements" or in the notes to
the Audited Financial Statements (the "Accounting
Practices"). Except as set forth in the Schedule
entitled "Changes in Circumstances" or the Financial
Statements, since the Balance Sheet Date, (x) the
Companies' business, working capital and cash
flow have been managed and operated in
the ordinary and normal course of business
consistent with past practice, (y) neither
the Companies nor any of their affiliates
have accelerated or materially altered the
collection or management of any Accounts
Receivable, or extended the payment term of
or materially altered any Assumed Liabilities,
including, without limitation, account payables
and expenses of the Companies, and (z) there has
been no material adverse change in the condition
(financial or otherwise), results of operations,
properties, assets, liabilities or business
of any Company or the Business, nor has there
been any event or condition of any character
which has materially and adversely affected,
or which would reasonably be expected to
materially and adversely affect, the
condition (financial or otherwise), results
of operations, properties, assets, liabilities or
business of any Company (other than as a result
of any matter set forth in the proviso to
Section 6.1(c)). The Unaudited Balance Sheet
reflects all properties and assets, real, personal or
mixed, that are currently used in connection
with each Company's Business and which would
be required under GAAP to be shown in the
Financial Statements, except for (A) inventory
purchased or sold consistent with past practice
and in the ordinary and normal course of business
since the Balance Sheet Date, (B) other immaterial
properties and assets (other than capital assets)
purchased or sold since the Balance Sheet
Date consistent with past practice and in the
ordinary and normal course of business,
(C) capital assets purchased since the
Balance Sheet Date in the ordinary course of
business consistent with past practice, and
(D) purchase commitments that are for
immaterial properties and assets or are
disclosed on the Schedule entitled "Liabilities".
(i) Liabilities. Except as disclosed in paragraphs 1
or 4 of the Schedule entitled "Changes in Circumstances",
no Company has any liabilities or obligations of any nature
whatsoever, whether absolute, accrued, contingent or
otherwise, and whether known or unknown, including, without
limitation, liabilities for Taxes, forward or long-term
commitments, or unrealized or anticipated losses from any
unfavorable conditions or occurrences, or from write-downs
or write-offs of assets (including Inventories and Accounts
Receivable), except for those (i) reflected or reserved on
the Unaudited Balance Sheet, (ii) incurred or accrued since
the Balance Sheet Date in the ordinary and normal course of
the Companies' business in transactions in the ordinary and
normal course, consistent with past practice, which
transactions are consistent with the representations,
warranties, covenants, obligations and agreements contained
in this Agreement, (iii) arising, in the ordinary course of
business, under Contracts (exclusive of any liabilities or
obligations arising from breaches or defaults by any
Company), or (iv) set forth on Schedule 2.1(b) attached
hereto.
(j) Accounts Receivable; Collection; Trade Payables.
Except for Accounts Receivable with respect to which
applicable reserves are set forth on the Unaudited Balance
Sheet, all Accounts Receivable included in the Assets and
outstanding as of the Closing Date will represent sales
actually made in the ordinary and normal course of business.
To Sellers' knowledge, other than as provided for in
reserves as contemplated above, there are no counterclaims
or setoffs against (or any basis therefor), or any other
matter or condition likely to interfere with full and timely
collection of, any of such Accounts Receivable. The
Schedule entitled "Accounts Receivable" sets forth an aged
listing by Customer of the Accounts Receivable included in
the Assets that are outstanding as of January 6, 2000. No
Company has experienced or suffered undue delay in its
payment of its liabilities and obligations to its trade
creditors (including suppliers) or trade debt.
(k) Inventories. Except as set forth in the Schedule
entitled "Financial Statements", the value at which the
Inventory included in the Assets is carried on the Unaudited
Balance Sheet reflects the lower of cost or market value or
as otherwise described in the notes to the Financial
Statements and reflects writeoffs or writedowns for damaged
or obsolete items, or items of below standard quality, in
accordance with the historical inventory policy and
practices of the Companies, a complete and accurate
description of which is included in the description of the
Accounting Practices set forth in the Schedule entitled
"Financial Statements". The Inventory, taken as a whole,
included in the Assets is not (as of the date hereof) and
will not be (as of the Closing Date) excessive in kind or
amount in light of the ordinary and normal course of conduct
and reasonably anticipated needs of the Business.
(l) Litigation. Except as set forth on the Schedule
entitled "Litigation", no Company is subject to any order
of, or written agreement or memorandum or understanding
with, any Governmental Authority, and there exists no
litigation, action, suit, claim or proceeding pending, or,
to Sellers' knowledge, any litigation, action, suit,
investigation, claim or proceeding threatened against or
affecting any Company, the Business or the Assets, or which
would affect the transactions contemplated by this
Agreement, at law or in equity or before any Governmental
Authority, including, without limitation, claims for product
warranty, product liability, antitrust, unfair competition,
price discrimination or other liability or obligation
relating to Products, whether manufactured, installed or
sold by any Company, any of its Affiliates or any of their
respective predecessors-in-interest in respect of the
Business, or which would adversely affect the transactions
contemplated by this Agreement, and, to Sellers' knowledge,
no one has grounds to assert any such litigation, action,
suit, claim or proceeding. Set forth on the Schedule
entitled "Litigation" is a description of (i) all
litigation, actions, suits, investigations, claims and
proceedings asserted, brought or threatened against any
Company or its Affiliates or predecessors-in-interest in
respect of the Business during the three-year period
preceding the date hereof, together with a description of
the outcome or present status thereof, and (ii) all
judgments, orders, decrees, writs or injunctions entered
into by, in favor of, or against any Company.
(m) Customers and Suppliers. No Company is involved
in any material controversy with any of the customers or
suppliers to the Business. The Schedule entitled "Customers
and Suppliers" sets forth a true, correct and complete list
of each of the Companies' (i) 20 largest customers in terms
of sales during the twelve (12)-month period ended December,
1999 and (ii) suppliers that, during the twelve (12) months
ended December, 1999, individually accounted for $200,000 or
more of orders for the purchase of raw materials, supplies,
equipment or parts. Except for the customers and suppliers
named in the Schedule entitled "Customers and Suppliers",
the Companies have not had any customer who accounted for
more than 5% of the Companies' sales during the period from
January to December 1999, or any supplier from whom the
Companies purchased more than 5% of the goods or services
purchased during the period from January to December 1999.
Except as otherwise disclosed in the Schedule entitled
"Contracts", no Company has been advised by any such
customer or supplier, that such customer or supplier was or
is intending to terminate its relationship with such Company
or would not continue to purchase supplies or services for
future periods on account of any dissatisfaction with such
Company's performance. All business placed by all employees
of each Company has been placed in the name of such Company,
and all fees on such business have been paid to and are the
property of such Company.
(n) Regulatory Compliance. Except as set forth on the
Schedule entitled "Litigation", the Business has been
conducted, all Assets have been maintained and each Company
is currently in compliance with all applicable Laws
(including, without limitation, all laws relating to zoning,
building codes, civil rights, occupational health and
safety, antitrust, consumer protection, currency exchange,
equal opportunity, pensions, securities and trading-with-the-
enemy), except to the extent that failure to comply would
not, individually or in the aggregate, result in a Material
Adverse Effect upon the Companies, taken as a whole, and no
material expenditures are or will be required to comply with
any such laws, regulations and orders of Governmental
Authorities. No Company is in default under, and no event
has occurred which, with the lapse of time or action by a
third party, could result in default under, the terms of any
judgment, decree, order, writ or injunction of any
Governmental Authority, whether at law or in equity, to
which such Company is a party.
(o) Brokers, Finders and Agents. No Company is
directly or indirectly obligated to anyone acting as a
broker, finder or in any other similar capacity in
connection with this Agreement or the transactions
contemplated hereby, except as provided in Section 9.2.
(p) Intellectual Property. The Schedule entitled
"Intellectual Property" attached hereto sets forth a
complete and correct list (with an indication of the record
owner and identifying number) of all patents, trademarks,
service marks, trade names, domain names and copyrights for
which registrations have been obtained (and all applications
for, or extensions or reissuances of, any of the foregoing)
which are or have been used in the conduct of, or which
relate to, the Business or which are owned by any Company.
True, correct and complete copies of such patents,
trademarks, service marks, trade names, domain names and
copyrights (and all applications for, or extensions or
reissuances of, any of the foregoing) identified on such
Schedule have been delivered to Buyer. Except as otherwise
disclosed in the Schedule entitled "Intellectual Property",
each Company is the sole owner and has the exclusive right
to use, free and clear of any payment, restriction or
encumbrance, all such patents, trademarks, service marks,
trade names, domain names and copyrights listed on such
Schedule under such Company's name. Except patents and
trademarks owned by R. Wayne Newsome and licensed to Sellers
pursuant to the license agreement to be assigned to Buyer
pursuant to Section 4.6(f), no patents, trademarks, service
marks, trade names, domain names and copyrights (or
applications for, or extensions or reissuances of any of the
foregoing) which are or have been used in the conduct of, or
which relate to, the Business are owned otherwise than by
such Company. There is no claim or demand of any Person
pertaining to, or any proceedings which are pending or, to
Sellers' knowledge, threatened, which challenge (i) the
exclusive rights of the Companies in respect of any patents,
trademarks, service marks, trade names, domain names or
copyrights (or applications for, or extensions or
reissuances of, any of the foregoing) which are or have been
used in the conduct of, or which relate to, the Business or
which are owned by such Company, or (ii) the rights of any
Company in respect of any processes, formulas, confidential
information, trade secrets, know-how, engineering data,
technology or other intellectual property (including the
Intangibles) which are or have been used in the conduct of,
or which relate to, the Business or which are owned by such
Company. No patent, trademark, service mark, trade name,
domain name, copyright, process, formulas, confidential
information, trade secret, know-how, engineering data,
technology or other intellectual property (including the
Intangibles) which is owned by any Company or which is or
has been used in the conduct of, or which relates to, the
Business is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any Governmental
Authority or any contract, agreement, commitment or
undertaking with any Person, or infringes or, to Sellers'
knowledge, is being infringed by others or is used by others
(whether or not such use constitutes infringement). To
Sellers' knowledge, the Business does not involve employment
of any Person in a manner which violates any non-competition
or non-disclosure agreement which such Person entered into
in connection with any former employment. Except patents
and trademarks owned by R. Wayne Newsome and licensed to
Sellers pursuant to the license agreement to be assigned to
Buyer pursuant to Section 4.6(f), all patents, trademarks,
service marks, trade names, domain names or copyrights (or
applications for, or extensions or reissuances of, any of
the foregoing) or processes, formulas, confidential
information, trade secrets, know-how, engineering data,
technology or other intellectual property, or rights
thereto, owned or held, directly or indirectly by any
officer, director, shareholder, employee or any Affiliate of
any Company or any Seller have been, or prior to the Closing
Date will have been, duly and effectively transferred to the
Companies. Set forth on the Schedule entitled "Intellectual
Property" is a description all litigation, actions, suits,
investigations, claims and proceedings, asserted, brought or
threatened against the Company within the three (3) years
preceding the date hereof, together with a description of
the outcome or present status thereof, relating to any
patent, trademark, service mark, trade name, domain name,
copyright, process, formula, confidential information, trade
secret, know-how, engineering data, technology or other
intellectual property.
(q) Permits. The Schedule entitled "Permits" attached
hereto contains a true, correct and complete list of all
Permits issued to any Company. Each Company has, and is in
full compliance with, all Permits which are necessary or
required for the operation of the Business as it is
currently being operated and its present activities on its
properties and facilities, all of which Permits are in full
force and effect, except to the extent (i) detailed on the
Schedule entitled "Permits" (all of which such Permits not
in full force and effect at Closing will be obtained, at
Sellers' sole cost and expense, within ninety (90) days of
Closing) or (ii) that failure to obtain such Permits or so
comply would not, individually or in the aggregate, result
in a Material Adverse Effect upon the Companies, taken as a
whole. No Company's operation of the Business during the
pendency of its applications, if any, for Permits violates
any law, regulation or order of any Governmental Authority.
(r) Employee Relations; Collective Bargaining
Agreements. There are no material controversies, including
strikes, disputes, slowdowns or work stoppages, pending, or
to Sellers' knowledge, threatened which involve any
employees of any Company. Each Company has complied and is
complying with all Laws relating to the employment of labor,
including, without limitation, any provision thereof
relating to wages, hours, collective bargaining, employee
health, safety and welfare, and the payment of social
security and similar taxes, except to the extent that
failure to comply would not, individually or in the
aggregate, result in a Material Adverse Effect upon the
Companies, taken as a whole. No Company has experienced any
material labor difficulties, including, without limitation,
strikes, slowdowns, or work stoppages, within the five-year
period preceding the date hereof. No Company is a party to
any collective bargaining or union contract, and to Sellers'
knowledge, there exists no current union organizational
effort with respect to any Company's employees.
(s) Employees and Employee Plans. (1) Except as set
forth on Schedule 5.1(s)(2), no Company is or was a party
to, maintains or has maintained, or contributes or has
contributed to, any (A) severance or employment agreement
with any current or former director, officer or employee,
(B) severance plan, program, policy or arrangement, (C) plan
or arrangement relating to its current or former directors,
officers or employees which contains change in control
provisions, (D) any Employee Plan, or (E) any collective
bargaining agreement or consulting agreement (clauses (A)
through (E) are, collectively, the "Company Plans"), nor has
any such Company or any officers or directors of any such
Company, taken any action directly or indirectly which
obligates such Company to institute or modify or change any
such Company Plan, any change in any actuarial or other
assumption used to calculate funding obligations with
respect to any Company Plan, or any change in the manner in
which contributions to any Company Plan are made or the
basis on which such contributions are determined.
(2) Schedule 5.1(s)(2) lists each Company Plan.
True, complete and correct copies of each Company Plan
and summary plan description, the most recent Internal
Revenue Service determination letters, the most recent
annual reports on Internal Revenue Service Form 5500
and actuarial reports, if applicable, and if not
applicable, statement of trust assets, have been made
available and delivered to Buyer.
(3) With respect to each Company Plan, and to any
other employee benefit plan, program, agreement or
arrangement to which a Company or any other trade or
business, whether or not incorporated (an "ERISA
Affiliate"), that together with such Company would be
deemed a "single employer" within the meaning of
Section 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended (the "Code"), has made, or was
required to make, contributions at any time prior to
the date hereof, no event has occurred, and to Seller's
knowledge there exists no condition or set of
circumstances, in connection with which any such
Company could be subject to any liability under ERISA,
the Code or any other applicable law.
(4) Each Company Plan has been administered in
accordance with its terms, and each Company Plan has
been operated and is in compliance with the applicable
provisions of ERISA, the Code and all other applicable
laws. Each Company Plan that is intended to be
qualified under Section 401(a) or 401(k) of the Code is
so qualified and has received a favorable determination
letter from the Internal Revenue Service (the "IRS")
with respect to its qualified status covering the Tax
Reform Act of 1986 and any other legislation for which
the applicable remedial amendment period has expired,
and each trust established in connection with any
Company Plan that is intended to be exempt from federal
income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that such
trust is so exempt, and no fact or event has occurred
since the date of any determination letter from the IRS
which is reasonably likely to adversely affect the
qualified status of any such Company Plan or the exempt
status of any such trust. There are no pending or
threatened or anticipated claims, investigations or
audits under or with respect to any Company Plan by or
on behalf of any current or former director, officer or
employee, or dependent or beneficiary thereof, or
otherwise (other than routine claims for benefits).
All contributions required to be made by each Company
under applicable Law or the terms of any Company Plan
or collective bargaining agreement as of the Closing
Date have been made as of such date.
(5) No Company Plan is, and no Company or ERISA
Affiliate has ever maintained or contributed to, (i) a
"defined benefit plan"(as defined in Section 3(35) of
ERISA), (ii) a "multiemployer plan" within the meaning
of Section 3(37) of ERISA, (iii) a "multiple employer
plan" within the meaning of Code Section 413 or a
"multiple employer welfare arrangement" within the
meaning of Section 3(40) of ERISA, or (iv) a "welfare
benefit fund" as defined in Section 419(e) of the Code.
(6) Except as disclosed on Schedule 5.1(s)(2), no
Company Plan provides medical, life or other welfare
benefits (whether or not insured), with respect to any
current or former employee of any Company after
retirement or other termination of service (other than
coverage mandated by applicable law). With respect to
any contract or arrangement with an insurance company
providing funding under any Company Plan, there is no
material liability for any retroactive rate adjustment.
Each Company has the right to amend or terminate its
participation with respect to each Company Plan which
it maintains or in which participates. Each Company
Plan that is a "group health plan," as defined in
Section 5000 of the Code has been operated in
compliance with Section 4980B of the Code and the
secondary payor requirements of Section 1862(b) of the
Social Security Act.
(7) Except as disclosed on Schedule 5.1(s)(2), no
current or former employee of any Company will be
entitled to any payment, additional benefits or any
acceleration of the time of payment or vesting of any
benefits under any Company Plan as a result of the
transactions contemplated by this Agreement (either
alone or in conjunction with any other event such as a
termination of employment) and no trustee under any
"rabbi trust" or similar arrangement in connection with
any Company Plan will be entitled to any payment as a
result of the transactions contemplated by this
Agreement.
(8) None of the Companies or any of their current
or former directors, officers, employees or any other
"fiduciary", as such term is defined in Section 3(21)
of ERISA, has committed any breach of fiduciary
responsibility imposed by ERISA or any other applicable
law with respect to the Company Plans which would
subject Buyer, any Company or any of their respective
directors, officers or employees to any material
liability under ERISA or any applicable law.
(9) None of the Companies has incurred any
liability under Title IV of ERISA, any lien under Code
Section 401(a)(29) or any material liability for any
tax or civil penalty imposed by Sections 4971, 4975 or
4976 of the Code or Section 502 of ERISA and no
condition or set of circumstances exists that presents
a risk to any of the Companies of incurring any such
lien or liability.
(10) Each Company (A) is in compliance in all
material respects with all applicable laws respecting
employment, employment practices, terms and conditions
of employment and wages and hours (including, but not
limited to, WARN, the Age Discrimination in Employment
Act, as amended, the Civil Rights Act of 1964, as
amended, the Equal Pay Act, the Occupational Safety and
Health Act, the Fair Labor Standards Act, the Americans
with Disability Act of 1990, the Family and Medical
Leave Act of 1993, the Immigration and Nationality Act
of 1952, as amended by the Immigration Reform and
Control Act of 1986 and the regulations promulgated
thereunder, and any other federal, state or local law
regulating employment or protecting employee rights),
in each case, with respect to current and former
employees and independent contractors of the Company,
(B) has withheld all material amounts required by
applicable laws or by agreement to be withheld from the
wages, salaries and other payments to such current and
former employees and independent contractors, (C) is
not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the
foregoing, and (D) is not liable for any payment to any
trust or other fund or to any governmental entity with
respect to unemployment compensation benefits, workers
compensation, social security or other benefits for
current or former employees and independent contractors
of any Company.
(11) Except as provided on Schedule 5.1(s)(2),
each Company Plan covers only those employees who are
employed by a Company (and their eligible spouses and
beneficiaries), except for persons covered for medical
benefits under an employee welfare benefit plan
pursuant to COBRA (as hereinafter defined).
(t) Environmental and Safety Compliance.
(i) General. Except as disclosed on the Schedule
entitled "Environmental Matters", no Company, nor, to
Sellers' knowledge, any other previous owner, tenant,
occupant or user of the real property, including Leased
Property, listed on the Schedule entitled "Real Estate
and Leases," (hereinafter collectively referred to as
the "Property") nor, to Sellers' knowledge, any other
Person, has engaged in or permitted any operations or
activities upon, or any use or occupancy of the
Property, or any portion thereof, resulting in the
emission, release, discharge, transport, dumping or
disposal of any Hazardous Materials (as hereinafter
defined) on, from, under, in or about the Property,
nor, to Sellers' knowledge, have any Hazardous
Materials migrated or been transported from the
Property to, upon, about or beneath other properties,
nor, to Sellers' knowledge, have any Hazardous
Materials migrated or been transported or threatened to
migrate or be transported from other properties to,
upon, about or beneath the Property.
(ii) Specific Environmental Representations and
Warranties. Except as specified in the Schedule
entitled "Environmental Matters":
(A) To Sellers' knowledge, there is not, nor has there
been, constructed, placed, deposited, stored,
disposed of or located on the Property any
asbestos in any form which has become friable.
(B) To Sellers' knowledge, no underground
improvements, including but not limited to
treatment or storage tanks, sumps, or water, gas
or oil wells, are or have been located on the
Property.
(C) To Sellers' knowledge, there are no
polychlorinated biphenyls (PCBs) or transformers,
capacitors, ballasts, or other equipment which
contains dielectric fluid containing PCBs at
levels in excess of fifty parts per million
(50ppm) constructed, placed, deposited, stored,
disposed of or located on the Property.
(D) The Property and its existing uses and activities
and, to Sellers' knowledge, its prior uses and
activities, comply and have at all times complied
in all material respects with all Environmental
Requirements (as hereinafter defined), and each
Company has obtained all Permits necessary under
applicable Environmental Requirements, except to
the extent that failure to comply or obtain such
Permits would not, individually or in the
aggregate, result in a Material Adverse Effect
upon the Companies, taken as a whole.
(E) No Company, nor to Sellers' knowledge, any prior
owner or occupant of the Property, has received
any notice or other communication concerning any
alleged violation of Environmental Requirements,
whether or not corrected to the satisfaction of
the appropriate authority, nor any notice or other
communication concerning alleged liability for
Environmental Damages in connection with the
Property, and there exists no judgment, decree,
order, writ or injunction outstanding, nor any
litigation, action, suit, claim (including
citation or directive) or proceeding pending or,
to the Sellers' knowledge, any litigation, action,
suit, investigation, claim or proceeding
threatened, relating to the ownership, use,
maintenance or operation of the Property by any
Person, or from the alleged violation of
Environmental Requirements, or from the suspected
presence of quantities of Hazardous Material
thereon or potential migration thereto, nor, to
Sellers' knowledge, are there any existing facts
or conditions which could give rise to any such
violation or liabilities.
(iii)Definitions.
(A) For purposes of this Section 5.1(t), the term
"Hazardous Material" means any substance:
(1) the presence of which requires investigation
or remediation under any federal, state or
local statute, regulation, ordinance, order,
action, policy or common law; or
(2) which is or has been identified as a
potential "hazardous waste," "hazardous
substance," pollutant or contaminant under
any federal, applicable state or local
statute, regulation, rule or ordinance or
amendments thereto including, without
limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42
U.S.C. Sections 9601 et seq.) and/or the Resource
Conservation and Recovery Act (42 U.S.C.
Sections 6901 et seq.); or
(3) which is toxic, explosive, corrosive,
flammable, infectious, radioactive,
carcinogenic, mutagenic, reactive, or
otherwise hazardous and has been identified
as regulated by any Governmental Authority.
(B) For purposes of this Section 5.1(t) the term
"Environmental Requirements" means all applicable
Laws, Permits and similar items of all
Governmental Authorities and all applicable
judicial, administrative, and regulatory
judgments, decrees, orders, writs or injunctions
relating to the protection of human health or the
environment, including, without limitation:
(1) All requirements pertaining to reporting,
licensing, permitting, investigation, and
remediation of emissions, discharges,
releases, or threatened releases of Hazardous
Materials;
(2) All requirements pertaining to the protection
of the health and safety of employees or the
public; and
(3) All other limitations, restrictions,
conditions, standards, prohibitions,
obligations, schedules and timetables
contained therein or in any notice or demand
letter issued, entered, promulgated or
approved thereunder.
(C) For purposes of this Section 5.1(t), the term
"Environmental Damages" means any and all
Liabilities (as defined in Section 11.1) which are
incurred at any time as a result of the existence
or disposal prior to Closing of Hazardous Material
upon, about, from, beneath the Property or
migrating or threatening to migrate to or from the
Property, or the existence of a violation of
Environmental Requirements pertaining to the
Property, regardless of whether the existence of
such Hazardous Material or the violation of
Environmental Requirements arose prior to the
present ownership or operation of the Property,
and including without limitation:
(1) Damages for personal injury, or injury to
property or natural resources occurring upon
or off of the Property, foreseeable or
unforeseeable, including, without limitation,
lost profits, consequential damages, the cost
of demolition and rebuilding of any
improvements on real property, interest and
penalties;
(2) Fees incurred for the services of attorneys,
consultants, contractors, experts,
laboratories and all other costs incurred in
connection with the investigation or
remediation of such Hazardous Materials or
violation of Environmental Requirements
including, but not limited to, the
preparation of any feasibility studies or
reports or the performance of any cleanup,
remediation, removal, response, abatement,
containment, closure, restoration or
monitoring work required by any Governmental
Authority, or reasonably necessary to make
full economic use of the Property or any
other property in a manner consistent with
its intended use or otherwise expended in
connection with such conditions, and
including without limitation any attorneys'
fees, costs and expenses incurred in
enforcing this Agreement or collecting any
sums due hereunder;
(3) Liability to any third Person or Governmental
Authority to indemnify such Person or agency
for costs expended in connection with the
items referenced in subparagraph (C)(2) of
this Section 5.1(t); and
(4) Diminution of the value of the Property, and
damages for the loss of business and
restriction on the use of or adverse impact
on the marketing of rentable or usable space
or of any amenity of the Property.
(u) Changes in Circumstances. Except as disclosed in
the Schedule entitled "Changes in Circumstances", since the
Balance Sheet Date no Company has (i) sold, transferred or
otherwise disposed of any properties or assets (including
the Assets) outside the ordinary and normal course of
business or to any Affiliate of any Company; (ii) mortgaged,
pledged or subjected to any Lien, any of the Assets;
(iii) acquired any property or assets (including the Assets)
outside the ordinary and normal course of business or from
any Affiliate of any Company; (iv) sustained any material
damage, loss or destruction of or to the Assets (whether or
not covered by insurance); (v) entered into any transaction
or otherwise conducted the Business other than in the
ordinary and normal course; (vi) except as disclosed on the
Schedule entitled "Employee Benefits", granted any salary
increase or bonus or permitted any advance to any officer,
director or employee, instituted or granted any general
salary increase to the employees of any Company or entered
into any new, or altered or amended any existing, Employee
Plan or any employment or consulting agreement; (vii) made
any borrowing, whether or not in the ordinary and normal
course of business, issued any commercial paper or
refinanced any existing borrowings (other than Retained
Liabilities representing amounts drawn on existing lines of
credit or similar extensions of credit disclosed on the
Schedule entitled "Changes in Circumstances"); (viii) paid
any obligation or liability (fixed or contingent), other
than in the ordinary and normal course of business,
discharged or satisfied any Lien, or settled any claim,
liability or suit pending or threatened; (ix) entered into
any licenses or leases other than in the ordinary and normal
course of business; (x) made any loans or gifts other than
in the ordinary and normal course of business;
(xi) modified, amended, canceled or terminated any contracts
or commitments under circumstances that have had or could
reasonably be expected to have, a Material Adverse Effect
upon the Companies, taken as a whole; (xii) declared or
paid, or become obligated to declare or pay, any dividend or
disbursed or become obligated to disburse cash except in the
ordinary and normal course; (xiii) made capital expenditures
or commitments other than in the ordinary course of business
consistent with past practice for additions to property,
plant or equipment; (xiv) written down the value of any
Inventory or written off as uncollectible any notes or
Accounts Receivable or any portion thereof; (xv) canceled
any other debts or claims or waived any rights of
substantial value; (xvi) made any material change in any
method of accounting or accounting practice; (xvii) paid,
accrued or incurred any management or similar fees to any
Related Party (as hereinafter defined) or made any other
payment or incurred any other liability to a Related Party
or paid any amounts to or in respect of, or sold or
transferred any assets to, any company or other entity, a
substantial portion of the equity ownership interest of
which is owned by any Company, any Seller or a Related Party
individually or as a group; (xviii) taken or omitted to take
any action which would cause to be breached, or might result
in a breach of, any of the representations, warranties,
covenants, obligations and agreements of any Seller
contained in Sections 5.1(e), (f), (g), (s) or (z) if the
same were made anew immediately after such act or omission;
or (xix) agreed to, or obligated itself to, do anything
identified in (i) through (xviii) above. For purposes of
this Agreement, a "Related Party" is any trust, corporation,
partnership, limited liability company or other entity in
which any Seller or any of their Affiliates has a material
interest.
(v) Taxes. Except as set forth on Schedule 5.1(v)
attached hereto:
(i) Each Company has prepared in good faith and
duly filed or caused to be duly filed all Tax
Returns (including without limitation in
respect of estimated Taxes) required to be
filed by it with the appropriate Governmental
Authorities, or requests for extensions to
file such Tax Returns have been timely filed
and granted and have not expired. All such
Tax Returns were at the time of filing and
are as of the date hereof true, correct and
complete in all material respects. All Taxes
owed by each Company have been paid within
the time and in the manner prescribed by law.
(ii) No claim has ever been made by a Taxing
authority in a jurisdiction where any Company
has never filed a Tax Return that any Company
is or may be subject to taxation by that
jurisdiction. The attached Schedule 5.1(v)
sets forth each state, local and foreign
jurisdiction in which each Company (i) filed
an income or franchise Tax Return, whether on
a consolidated, combined or separate return
basis, during the five year-period ended
December 31, 1998, or (ii) collected or
remitted any sales and/or use Taxes during
the five-year period ended December 31, 1998.
(iii)The Financial Statements reflect an adequate
reserve in accordance with GAAP consistently
applied for all Taxes payable by each Company
for all Taxable periods and portions thereof
accrued through the respective dates of such
Financial Statements. Any Taxes incurred or
accrued by each Company since the Balance
Sheet Date have arisen in the ordinary and
usual course of business determined in the
same manner as for the most recent taxable
period ending on or before such date. All
deficiencies for any Taxes that have been
assessed against each Company have been fully
paid, or are fully reflected as a liability
in such Financial Statements in accordance
with GAAP, or are being contested and an
adequate reserve therefor has been established
and is fully reflected in such Financial Statements.
(iv) No Company is a party to any pending audit,
examination, action or proceeding for the
assessment or collection of any Taxes, nor,
to Sellers' knowledge, is any such audit,
examination, action or proceeding threatened.
(v) There are no Liens for Taxes (other than for
current Taxes not yet due and payable) on the
assets of any Company.
(vi) No issue has been raised by the IRS or any
other applicable taxing authority in any
examination of the federal, state, local or
foreign income Tax Returns of any Company
which, by application of the same or similar
principles, reasonably could be expected to
result in a proposed deficiency for any other
period not so examined. No Company is
subject to any agreements, waivers or other
arrangements extending the statute of
limitations for the assessment, collection or
levy of any Taxes for any Taxable year or
other period. Copies of all income or
informational income Tax Returns of each
Company filed for each of the past three (3)
Taxable years have heretofore been delivered
to Buyer and all such Tax Returns are listed
on the attached Schedule 5.1(v).
(vii)Copies of all Tax agreements (including,
without limitation, agreements providing for
the allocation or sharing of or
indemnification with respect to Taxes) to
which any Company is a party, including any
novations, transfers or assignments thereof,
have heretofore been delivered to Buyer, and
all such agreements are listed on the
attached Schedule 5.1(v).
(viii)[Intentionally omitted]
(ix) No Company has made any payments, is
obligated to make any payments, or is a party
to any agreement that could obligate it to
make any payments, the deductibility of which
would be disallowed (in whole or in part)
under Section 280G of the Code.
(x) [Intentionally omitted]
(xi) To Sellers' knowledge, there are no matters
which give rise to a claim of any substantial
understatement of federal income Taxes within
the meaning of Section 6662 of the Code.
(xii)All Taxes that are required by law to be
withheld or collected by each Company have
been duly withheld or collected and, to the
extent required, have been paid to the proper
Governmental Authority or properly segregated
or deposited as required by applicable law.
(xiii)No Company (A) has been a member of an
affiliated group filing a consolidated
federal income Tax Return, and (B) has
any liability for the Taxes of any other
person under Treas. Reg. Section 1.1502-6
(or any similar provision of state, local, or
foreign law), as a transferee or successor, by
Contract or otherwise.
(xiv)No Company has executed or entered into any
closing agreement pursuant to Section 7121 of
the Code, or any predecessor provision
thereof, or any similar provision of state or
local law.
(xv) No Company has taken any action in
anticipation of the Closing not expressly
required by this Agreement, or not in
accordance with past practice, that would
have the effect of deferring any liability
for Taxes of any of the Companies to any
Taxable period (or portion thereof) ending
after the Closing Date.
(xvi)No Company is or will be required to include
any amount in its gross income or exclude any
amount of its deductions in any Taxable
period ending after the Closing Date by
reason of a change in accounting method in
any Taxable period ending on or before
the Closing Date.
(xvii)Except as may have been granted to the
Companies' attorneys or accountants (which
will be terminated at closing), no power
of attorney has been granted by any Company
with respect to any matter relating to Taxes
which is currently in force.
For purposes of this Agreement, (i) the term "Tax"
(including, with correlative meaning, the terms "Taxes" and
"Taxable") means all federal, state, local, and foreign net
income, gross income, profits, franchise, gross receipts,
payroll, sales, employment, use, occupation, license, value
added, property, ad valorem, withholding, excise, user,
fuel, excess or windfall profits, alternative or add-on
minimum, custom duties, gains, transfer, documentary, stamp,
and other taxes, duties, fees, assessments or charges of any
nature whatsoever, together with all interest, penalties,
fines and additions to tax or additional amounts imposed
with respect thereto, and (ii) the term "Tax Returns" means
any return, report, statement, election, information return
or other document (including schedules or any related or
supporting information) filed or required to be filed with
any Governmental Authority in connection with the
determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative
requirements relating to any Tax.
(w) Product Warranties. Except for (i) written
product or service warranties made by the Companies on their
sales order forms, packages and product catalogues, true,
accurate and complete copies of which have been provided to
Buyer, (ii) product warranties of manufacturers of the
Products, and (iii) minor Product service or Product
replacement work made by a Company at its sole discretion in
the ordinary course of business in furtherance of
maintaining customer satisfaction and the goodwill of such
Company which are not material, individually or in the
aggregate, no Company makes express product or service
warranties or commitments in connection with the sale of
Products or the performance of services related thereto,
including installation of Products. Except as otherwise
disclosed in the Schedule entitled "Warranty Costs", no
Company has received any notice of any claim that it is
under any warranty liability or obligation with respect to
the sale of Products or the performance of services related
thereto, including installation of Products other than
ordinary and normal warranty and service commitments
consistent with past practice which are neither
(a) material, individually or in the aggregate, or (b) of
the type described on the Schedule entitled "Litigation"
(such ordinary and normal commitments being referred to
herein as "Ordinary Warranty Commitments").
(x) Insurance. The Schedule entitled "Insurance"
contains a list of all insurance policies (specifying the
location, insured, insurer, amount of coverage, type of
insurance and policy number) maintained and in effect by
each Company. All premiums with respect to such policies
covering all periods up to and including the date of Closing
which have come due have been paid, and no notice of
cancellation or termination has been received with respect
to any such policy. Such policies (i) are, to Sellers'
knowledge, sufficient for compliance with all requirements
of law and of all agreements (including Lease Agreements) to
which any Company is a party; (ii) are, to Sellers'
knowledge, valid, outstanding and enforceable policies;
(iii) to Sellers' knowledge, provide adequate insurance
coverage for the assets and operations of the Companies; and
(iv) will not, to Sellers' knowledge, in any way be affected
by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. The Schedule entitled
"Insurance" identifies all risks which the Companies or its
officers have designated as being self insured. Except for
refusals or proposed coverage limitations occurring in the
normal course of renewing insurance coverages from time to
time, no Company has been refused any insurance with respect
to its assets or operations, nor has its coverage been
limited, by any insurance carrier to which it has applied
for any such insurance or with which it has carried
insurance during the last five years.
(y) Approvals. The Schedule entitled "Assignments and
Consents" attached hereto sets forth a list of all Consents,
which must be obtained or satisfied pursuant to the terms of
the related Contract, Lease Agreement or Permit. All
Required Consents have been, or shall by the Closing have
been, obtained.
(z) Absence of Certain Commercial Practices. No
Company nor, to Sellers' knowledge, any officer, director,
employee or agent of any Company (or any Person acting on
behalf of any of the foregoing) has given or agreed to give
(i) any gift or similar benefit of more than nominal value
to any Customer, supplier, Governmental Authority (including
any governmental employee or official) or any other Person
who is or may be in a position to help, hinder or assist any
Company, the Business or the Person giving such gift or
benefit in connection with any actual or proposed
transaction relating to the Business, which gifts or similar
benefits would individually or in the aggregate subject any
Company or any officer, director, employee or agent of any
Company to any fine, penalty, cost or expense or to any
criminal sanctions, (ii) receipts from or payments to any
governmental officials or employees, (iii) commercial bribes
or kick-backs, (iv) political contributions, or (v) any
receipts or disbursements in connection with any unlawful
boycott. No such gift or benefit is required in connection
with the operation of the Business to avoid any fine,
penalty, cost, expense or Material Adverse Effect upon the
Companies, taken as a whole.
(aa) Bank Accounts. The Schedule entitled "Bank
Accounts" attached hereto sets forth the names and locations
of all banks, trust companies, savings and loan associations
and other financial institutions at which any Company
maintains any safe deposit boxes or accounts (specifying the
identifying numbers), and the names of all persons
authorized to draw thereon, make withdrawals therefrom or
have access thereto.
(ab) Books and Records. The books and records of the
Companies maintained in connection with the Business
(including, without limitation, (i) books and records
relating to the purchase of materials and supplies,
manufacture or processing of products, sales of products,
dealings with customers, invoices, customer lists,
inventories, supplier lists, personnel records and taxes,
(ii) the stock books, stock ledgers and minute books of the
Companies, and (iii) computer software and data in computer
readable and human readable form used to maintain such books
and records together with the media on which such software
and data are stored and all documentation relating thereto)
accurately record all transactions relating to the Business
in all material respects, and have been maintained
consistent with good business practice.
(ac) Warranty Costs. Set forth on the Schedule
entitled "Warranty Costs" is a description of all
litigation, actions, suits, investigations, claims and
proceedings asserted, brought or threatened against the
Companies within the last three (3) years preceding the date
of this Agreement, together with a description of the
outcome or present status thereof, relating to any claim for
warranty costs involving amounts in excess of $10,000,
individually or in the aggregate. As used herein, "warranty
costs" means the costs and expenses of servicing, repairing,
returning and/or replacing, or allowances for service,
repair, return or replacement, of defective or allegedly
defective or improperly selected or shipped Products or the
performance of services related thereto, including
installation of Products or parts or components thereof
manufactured, installed or sold by the Companies and the
costs of materials and expenses of replacing materials or
correcting any jobs or materials inadequately performed or
manufactured by the Companies, together with such legal
liability, if any, as may exist in connection with sales of
Products or the performance of services related thereto,
including installation of Products, whether such costs and
expenses relate to or arise out of claims or causes of
action which assert causes sounding in tort, contract or
warranty, or any combination of the foregoing.
(ad) Penalties and Renegotiation of Contracts. Except
as otherwise specifically disclosed on the Schedule entitled
"Contracts", no Company has any liabilities or obligations
under any contracts providing for (i) penalties in the event
of misfeasance by it in the performance of its duties
thereunder, or (ii) the renegotiation or redetermination of
profits or prices, nor will any Company's costs which are
incurred or accruable prior to the Closing under contracts
or under subcontracts between the a Company and any other
Person, firm or corporation be subject to disallowance.
(ae) Pricing Practices. The prices to be received or
paid by the Companies under all outstanding contracts,
agreements, commitments and undertakings with its customers
and suppliers and others in connection with the Business
have been determined in accordance with the Companies'
established past pricing policies, and there are no
outstanding contracts, agreements, commitments or
undertakings relating to the Business that individually or
in the aggregate are expected to result in any material loss
to any Company or the Business.
(af) Copies of Documents. The Companies have delivered
to Buyer true, correct and complete copies of all contracts,
agreements and other documents listed in the Schedules to,
or referenced in, this Agreement, and all modifications and
amendments thereto.
(ag) [Intentionally omitted]
(ah) Insider Interests; Advances. Except as set forth
in the Schedule entitled "Insider Interests", no
shareholder, officer, director or employee of any Seller or
any Company has any material interest in any property, real
or personal, tangible or intangible, including without
limitation, inventions, patents, trademarks or trade names,
used in or pertaining to the Business or Seller. Except for
travel advances, and advances on accrued salary or bonuses
due or to become due in the ordinary and normal course of
business, which salary advances and bonuses are specifically
described in the Schedule entitled "Employees", there are no
receivables of any of the Companies owed by any director,
officer or employee of any of the Companies or owing by any
corporations, partnerships, firms or organizations in which
directors, officers or employees of any of the Companies
have any interest.
(ai) Year 2000 Compliance. (i) As to Systems used in
operating the Business:
(A) The Companies have conducted, and provided Buyer
with a description of, an inventory and assessment
of all of the Companies' software, computers,
network equipment, technical infrastructure,
production equipment and other equipment and
systems that are material to the operation of the
Business and that rely or utilize date or time
processing (collectively, "Systems");
(B) To Sellers' knowledge, all of such Systems are
"Year 2000 Compliant," as defined below;
(C) Schedule 5.1(ii) attached hereto sets forth the
nature and scope of the Companies' Year 2000
compliance strategy and program; and
(D) The Companies have complied with all applicable
Laws relating to Year 2000 Compliance, except in
the case where failure to comply would not,
individually or in the aggregate, have a Material
Adverse Effect upon the Companies, taken as a
whole.
(ii) "Year 2000 Compliant" means a System will at
all times:
(A) Consistently and accurately handle and process
date and time information and data with values
before, during and after January 1, 2000,
including but not limited to accepting date input,
providing date output, and performing calculations
on or utilizing dates or portions of dates;
(B) Function accurately and in accordance with its
specifications without interruption, abnormal
endings, degradation, change in operation or other
impact, or disruption of other systems, resulting
from processing data or time data with values,
before, during and after January 1, 2000;
(C) Respond to and process two-digit date input in a
way that resolves any ambiguity as to century; and
(D) Store and provide output of date information in
ways that are unambiguous as to century.
(aj) Disclosure. No representation or warranty made by
any Company or Seller contained in this Agreement, on any
Schedules or in any other agreement or certificate executed
by any Company or a Seller pursuant to Article IV contains
an untrue statement of a material fact or omits to state a
material fact necessary to make the statements and facts
contained herein or therein, in light of the circumstances
in which they were or are made, not false or misleading.
5.2 [Intentionally omitted]
5.3 Representations and Warranties of HON. HON (and
as used in this Section 5.3, neither HON nor Buyer shall be
deemed to include any Company or Seller or Allied Fireside, Inc.,
a Wisconsin corporation ("Allied"), Madison, Minocqua or FPSI, or
any of their respective assets, operations, properties, rights
or interests) represents and warrants to Sellers that:
(a) Organization and Standing; Power and Authority.
HON is a corporation duly organized, validly existing and in
good standing under the laws of the State of Iowa, and has
full corporate power and authority to operate its business,
to own or lease its assets and to enter into and perform
this Agreement and the transactions and other agreements and
instruments contemplated by this Agreement. HON is duly
qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in
which the ownership or lease of its assets or the operation
of its business requires such qualification, except where
the failure to be so qualified or licensed would not have a
Material Adverse Effect on HON. This Agreement and all
other Transaction Documents to be executed and delivered by
HON in connection herewith have been, or upon execution
thereof will be, duly executed and delivered by HON. This
Agreement and the transactions and other agreements and
instruments contemplated hereby have been duly approved by
the Board of Directors of HON, in accordance with applicable
law, and constitute the valid and binding obligations of
HON, enforceable in accordance with their respective terms.
(b) Conflicts; Defaults. Neither the execution and
delivery of this Agreement and the other agreements and
instruments executed or to be executed in connection
herewith by HON, nor the performance by HON of the
transactions contemplated hereby or thereby, will
(i) violate, conflict with, or constitute a default under,
any of the terms of HON's charter or By-Laws, or any
provisions of, or result in the acceleration of any
obligation under, any material contract, license, security
agreement, mortgage, note, deed, lease, agreement or
instrument, or any order, judgment or decree by which HON or
any of its assets are bound, or (ii) violate any Law.
(c) Brokers, Finders and Agents. HON is not directly
or indirectly obligated to anyone acting as a broker, finder
or in any other similar capacity in connection with this
Agreement or the transactions contemplated hereby, except
Robert W. Baird & Co. Incorporated.
(d) Consents. Schedule 5.3(d) sets forth a list of
all consents, novations and waivers prescribed by Law or any
contract, agreement, commitment or undertaking and which
must be obtained or satisfied by HON in order for HON to
consummate the transactions contemplated by this Agreement
or the other agreements to be executed and delivered in
connection herewith. All such consents prescribed by any
Law or any contract, agreement, commitment or undertaking,
and which must be obtained or satisfied by HON for the
consummation of the transactions contemplated by this
Agreement, or for the continued performance by it of its
rights and obligations thereunder, have been, or shall by
the Closing have been, made, obtained and satisfied.
5.4 Representations and Warranties Relating to Buyer.
Buyer and HON (and as used in this Section 5.4, neither HON nor
Buyer shall be deemed to include any Company or Seller or Allied,
FPSI, Minocqua or Madison, or any of their respective assets,
operations, properties, rights or interests) hereby jointly and
severally represent and warrant to Sellers that:
(a) Organization and Standing; Power and Authority.
Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Iowa, and
has full corporate power and authority to operate its
business, to own or lease its assets and to enter into and
perform this Agreement and the transactions and other
agreements and instruments contemplated by this Agreement.
Buyer is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each
jurisdiction in which the ownership or lease of its assets
or the operation of its business requires such
qualification, except where the failure to be so qualified
or licensed would not have a Material Adverse Effect on
Buyer. This Agreement and all other Transaction Documents
to be executed and delivered by Buyer in connection herewith
have been, or upon execution thereof will be, duly executed
and delivered by Buyer. This Agreement and the transactions
and other agreements and instruments contemplated hereby
have been duly approved by the Board of Directors of Buyer,
in accordance with applicable law, and constitute the valid
and binding obligations of Buyer, enforceable in accordance
with their respective terms.
(b) Capitalization. The authorized capital stock of
Buyer on the date hereof consists of 100,000 shares of
common stock, $1.00 par value per share, of which
5,000 shares are issued and outstanding. The authorized
capital stock of Buyer at the time of Closing shall be as
set forth on Schedule 5.4(b)(i). All of the issued and
outstanding shares of Buyer are owned by HON. All issued
shares have been validly issued and are fully paid and
nonassessable. There are no outstanding obligations,
options, warrants, preemptive rights or other agreements or
commitments (whether oral or written) to which Buyer is a
party, or by which Buyer is otherwise bound, providing for
the issuance of any additional shares of capital stock of
Buyer, the repurchase of shares of capital stock of Buyer or
otherwise relating to capital stock of Buyer other than as
set forth on Schedule 5.4(b)(ii) pursuant to the 7%
Convertible Debentures due October 1, 1999, as amended, and
the Securityholders' Agreement dated as of October 2, 1996,
as amended, among HON, Buyer, D&K Family Limited
Partnership, LLP and the other parties listed on the
signature page thereto.
(c) Articles and By-Laws. The copy of the Articles of
Incorporation of Buyer, certified by the Secretary of State
of the State of Iowa, and the By-Laws of Buyer, furnished to
Sellers are true, correct and complete.
(d) Conflicts; Defaults. Neither the execution and
delivery of this Agreement and the other agreements and
instruments executed or to be executed in connection
herewith by Buyer, nor the performance by Buyer of the
transactions contemplated hereby or thereby, will
(i) violate, conflict with, or constitute a default under,
any of the terms of Buyer's charter or By-Laws, or any
provisions of, or result in the acceleration of any
obligation under, any material contract, license, security
agreement, mortgage, note, deed, lease, agreement or
instrument, or any order, judgment or decree by which Buyer
or any of its assets are bound, or (ii) violate any Law.
(e) Compliance with Other Instruments, etc. Buyer is
not in violation of any terms of (i) its charter or By-laws,
(ii) any agreement or instrument related to indebtedness for
borrowed money or any other agreement to which it is a party
or by which it is bound, (iii) any applicable Law or (iv)
any applicable order, judgment or decree of any court,
arbitrator or Governmental Authority, the consequences of
which violation, whether individually or in the aggregate,
have or would be reasonably expected (so far as can be
foreseen at the time) to (x) have a Material Adverse Effect
on Buyer, or (y) have the effect of preventing or materially
delaying the performance by Buyer of its obligations under
this Agreement.
(f) Financial Statements. Buyer has heretofore
delivered to Sellers (i) the unaudited Balance Sheet of
Buyer as of November 27, 1999, (ii) the unaudited Balance
Sheets of Buyer as of December 31, 1998, December 31, 1997,
December 31, 1996 and the eleven (11) months ended
November 27, 1999, (iii) the unaudited Statements of Income
of Buyer for the fiscal years ended December 31, 1998,
December 31, 1997 and December 31, 1996, and for the
eleven (11) months ended November 27, 1999 and (iv) the
Statement of Cash Flows of Buyer for the eleven (11) months
ended November 27, 1999 (collectively, the "Buyer Financial
Statements"). Each of the Buyer Financial Statements was
prepared from the books and records kept by Buyer, and
fairly presents the financial position of Buyer as of such
dates, and the results of operations of Buyer for the
periods then ended in accordance with the internal
accounting practices and policies of Buyer consistently
applied, except that the Buyer Financial Statements do not
contain normal year-end adjustments required by GAAP and the
Buyer Financial Statements omit footnote disclosures
required by GAAP.
(g) Litigation. There are no actions, suits,
investigations or proceedings pending or, to the knowledge
of Buyer, threatened against Buyer in any court or before
any arbitrator of any kind or before or by any Governmental
Authority, except actions, suits, investigations or
proceedings which, in the aggregate, do not have and would
not be reasonably expected (so far as can be foreseen at the
time) to (a) have a Material Adverse Effect on Buyer or
(b) have the effect of preventing or materially delaying the
performance by Buyer of its obligations under this
Agreement.
(h) Absence of Certain Changes or Events. During the
period since November 27, 1999, the business of Buyer has
been conducted only in the ordinary course, consistent with
past practice, and Buyer has not entered into any material
transaction other than in the ordinary course, consistent
with past practice, and there has not been (i) any change
(other than changes affecting generally the fireplace,
hearth products and building products industries as a whole,
including but not limited to, changes in or affecting
interest rates, housing markets, applicable Laws or
comparable events) in the business, financial condition,
results of operations, properties, assets or liabilities of
Buyer that, individually or in the aggregate, has or would
reasonably be expected to have (so far as can be foreseen at
the time) a Material Adverse Effect on Buyer, (ii) any
damage, destruction or loss (whether or not covered by
insurance) with respect to any property or asset of Buyer
which, individually or in the aggregate, has or would
reasonably be expected (so far as can be foreseen at the
time) to have a Material Adverse Effect on Buyer, or (iii)
any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Buyer, other
than intercompany advances between HON and Buyer.
(i) Brokers, Finders and Agents. Buyer is not
directly or indirectly obligated to anyone acting as a
broker, finder or in any other similar capacity in
connection with this Agreement or the transactions
contemplated hereby, except Robert W. Baird & Co.
Incorporated.
(j) Consents. Schedule 5.3(d) sets forth a list of
all consents, novations and waivers prescribed by Law or any
contract, agreement, commitment or undertaking and which
must be obtained or satisfied by Buyer in order for Buyer to
consummate the transactions contemplated by this Agreement
or the other agreements to be executed and delivered in
connection herewith. All such consents prescribed by any
Law or any contract, agreement, commitment or undertaking,
and which must be obtained or satisfied by Buyer for the
consummation of the transactions contemplated by this
Agreement, or for the continued performance by it of its
rights and obligations thereunder, have been, or shall by
the Closing have been, made, obtained and satisfied.
(k) Ability to Pay Cash Amount. On the Closing Date,
Buyer will have sufficient cash to pay the Cash Amount in
immediately available funds.
5.5 General. The representations and warranties of
the parties hereto made in this Agreement, subject to the
exceptions thereto, shall not be affected by any information
furnished to, or any investigation conducted by, any of them or
their representatives in connection with the subject matter of
this Agreement. The representations and warranties made in this
Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Closing for the respective periods
set forth in Section 11.5.
ARTICLE VI. CONDITIONS TO CLOSING
6.1 Conditions to Buyer's Obligations. The obligation
of Buyer to consummate the transactions provided for by this
Agreement is subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions, any of which
may be waived by Buyer except for the conditions set forth in
subsection (d) (as to Consents of Governmental Authorities) of
this Section 6.1:
(a) Representations and Warranties. Each of the
representations and warranties of Sellers made in
Section 5.1 of this Agreement shall be true and correct in
all material respects both on the date hereof and as of the
Closing Date as though made at such time except (excluding
the representations and warranties set forth in
Section 5.1(h)) where the failure to be so true and correct
(without giving effect to any limitations as to
"materiality," "substantial," "Material Adverse Effect," or
"material adverse change" set forth therein) (i) does not
have, and would not reasonably be expected to have, a
Material Adverse Effect on the Companies, taken as a whole,
or a material adverse impact on the ability of Sellers to
perform their obligations hereunder (other than as a result
of any matter set forth in the proviso to Section 6.1(c)),
and (ii) relates to a Retained Liability against which
Sellers have agreed to indemnify Buyers hereunder.
(b) Covenants. Sellers shall have performed and
complied with all covenants and agreements required to be
performed or complied with by each of them at or prior to
the Closing Date.
(c) Material Adverse Change. Since the date hereof,
there shall have occurred no material adverse change, or
condition or occurrence of any event which would reasonably
be expected to result in any such change, in the condition
(financial or otherwise), business, assets, properties or
operations of the Companies, taken as a whole, or the
Business; provided, however, that if and so long as Sellers
have performed their obligations under this Agreement, the
following shall not be deemed to be any such change:
(i) the inability of Buyer to reach an agreement with any of
the Companies' employees (other than the Key Employees)
regarding their employment by Buyer after the Closing or the
resignation of any of the Companies' employees (other than
the Key Employees) prior to the Closing, (ii) any actual or
projected decrease in dollar sales to any of its customers
or any change in the Companies' relations with any of their
suppliers, including without limitation, such changes
resulting from or related to the transactions contemplated
under this Agreement, or (iii) changes affecting generally
the fireplace, hearth products and building products
industries as a whole, including, but not limited to,
changes in or affecting interest rates, housing markets,
applicable laws or comparable events.
(d) Consents. All Consents of Governmental
Authorities and Required Consents of third parties described
in Sections 1.4, 5.1(y) and 9.6 and necessary to consummate
the transactions contemplated hereunder shall have been
obtained and satisfied and the applicable waiting period
under the H-S-R Act shall have expired or been terminated.
(e) No Proceeding or Litigation. No litigation,
action, suit, investigation, claim or proceeding challenging
the legality of, or seeking to restrain, prohibit or
materially modify, the transactions provided for in this
Agreement shall have been instituted and not settled or
otherwise terminated, except for any such litigation,
action, suit, claim or proceeding claiming breach of the
agreements described in paragraph III.7 of the Schedule
entitled "Contracts" or the paragraph entitled "CFM
Majestic" on the Schedule entitled "Non-Assigned Contracts"
as a result of the transactions contemplated hereby, other
than any action, litigation, suit, claim or proceeding
arising as a result of any other breach by any Seller of any
such agreements.
(f) Legal Matters. The form and substance of all
legal papers, instruments and documents delivered under
Section 4.2 (and not attached in form hereto) shall, in the
reasonable judgment of Buyer, be satisfactory to Buyer, and
if requested by Buyer, to Jones, Day, Reavis & Pogue,
Buyer's counsel, in its reasonable judgment.
(g) Certificate of Seller. At the Closing, Sellers
shall have delivered to Buyer a Certificate signed by each
Company's President, and attested to by its Secretary or an
Assistant Secretary, and dated the Closing Date, to the
effect that to the best of the knowledge and belief of such
officers the conditions specified in Sections 6.1(a), (b),
(c) and (d) have been fulfilled.
(h) Certificate; Documents. Sellers and the other
Persons shall have delivered the certificates, opinion of
counsel and other documents required by Sections 4.2, 4.5
and 4.6.
(i) Tax Certificates. Sellers shall have delivered to
Buyer such forms and certificates as may be necessary to
exclude or reduce payment of state sales taxes otherwise
incurred as a result of Buyer's acquisition of the Acquired
Assets.
(j) Lender Consents. HON shall have received duly
executed consents from the holders of its industrial revenue
bonds, in form and substance reasonably satisfactory to HON.
(k) Other Closing. The closing of the transactions
contemplated by the Purchase Agreement of even date herewith
among HON, Buyer, Ron F. Skoronski, Kirk R. Sorensen,
Madison, FPSI and Minocqua (the "Allied Agreement") shall
have been consummated.
6.2 Conditions to Sellers' Obligations. The
obligations of Sellers to consummate the transactions provided
for by this Agreement are subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions,
any of which may be waived by Sellers except for the conditions
set forth in subsection (c) of this Section 6.2:
(a) Representations and Warranties. Each of the
representations and warranties of Buyer and HON made in
Sections 5.3 and 5.4 of this Agreement shall be true and
correct in all material respects both on the date hereof and
as of the Closing Date as though made at such time except
(excluding the representations and warranties set forth in
Section 5.4(f)) where the failure to be so true and correct
(without giving effect to any limitations as to
"materiality," "substantial," "Material Adverse Effect," or
"material adverse change" set forth therein) does not have,
and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on HON and
Buyer, taken as a whole, or a material adverse impact on the
ability of HON and Buyer to perform their obligations
hereunder.
(b) Covenants. Buyer shall have performed and
complied with all covenants and agreements required to be
performed or complied with by it at or prior to the Closing
Date.
(c) Material Adverse Change. Since the date hereof,
there shall have occurred no material adverse change, or
condition or occurrence of any event which would reasonably
be expected to result in any such change, in the condition
(financial or otherwise), business, assets, properties or
operations of Buyer; provided, however, that changes
affecting generally the fireplace, hearth products and
building products industries as a whole, including, but not
limited to, changes in or affecting interest rates, housing
markets, applicable laws or comparable events shall not be
deemed to be any such change.
(d) Consents. All Consents of Governmental
Authorities, including those described in Sections 5.3(d),
5.4(j) and 9.6, necessary to consummate the transactions
contemplated hereunder shall have been obtained and the
applicable waiting period under the H-S-R Act shall have
expired or been terminated.
(e) No Proceeding or Litigation. No litigation,
action, suit, investigation, claim or proceeding challenging
the legality of, or seeking to restrain, prohibit or
materially modify, the transactions provided for in this
Agreement shall have been instituted and not settled or
otherwise terminated.
(f) Legal Matters. The form and substance of all
legal papers, instruments and documents delivered under
Section 4.4 (and not attached in form hereto) shall, in the
reasonable judgment of Sellers, be satisfactory to Sellers,
and if requested by Sellers, to Sellers' Counsel, in its
reasonable judgment.
(g) Certificates of Buyer and HON. At the Closing,
Buyer and HON shall have delivered to Sellers a Certificate
signed by the respective Presidents or Vice Presidents of
Buyer and HON, and attested to by the respective Secretaries
or Assistant Secretaries of Buyer and HON, and dated the
Closing Date, to the effect that to the best of the
knowledge of such officers the conditions specified in
Section 6.2(a), (b) and (c) have been fulfilled.
(h) Certificates; Documents. Buyer shall have
delivered the certificates and other documents required by
Sections 4.4 and 4.5.
(i) LaSalle Loan. The Sellers shall have received a
term sheet or executed commitment letter from LaSalle Bank
N.A. obligating it to loan certain Sellers or Affiliates of
Sellers approximately $7,000,000 on the Closing Date.
(j) Other Closing. The closing of the transactions
contemplated by the Allied Agreement shall have been
consummated.
ARTICLE VII. COVENANTS OF SELLER
7.1 Conduct of Business. During the period from the
date hereof through the Closing Date, Sellers shall conduct the
Business and operate the Assets in the ordinary and normal course
and consistent with past practice (including, without limitation,
using their best efforts to preserve beneficial relationships
between the Companies and their distributors, agents, lessors,
suppliers and customers, as reasonably directed by Buyer) and
continue normal maintenance, marketing, advertising,
distributional and promotional expenditures in connection with
the Business. No Company shall engage in any transactions,
including transactions relating to the purchase or sale of goods,
raw materials, inventories or other operating or production
items, intracorporate or otherwise, with any of its Affiliates
from the date hereof until the Closing other than
(i) transactions approved by Buyer in writing, (ii) transactions
in the ordinary and normal course consistent with past practice
pursuant to the leases disclosed on the Schedule entitled "Real
Estate and Leases", or (iii) transactions on terms no more
favorable to the Companies or their Affiliates than would have
been obtainable in arm's-length dealing. Without limiting the
generality of the foregoing and except as otherwise expressly
provided in this Agreement, during the period from the date
hereof through the Closing Date, no Company shall:
(a) Obligations for Borrowed Money. (i) create, incur
or assume any debt (including obligations in respect of
capital leases) or any debt for money borrowed (whether
long- or short-term), other than trade payables incurred in
the ordinary course of business consistent with past
practice and amounts constituting Retained Liabilities drawn
on existing lines of credit or similar extensions of credit,
(ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise)
for the obligation of any other Person, or (iii) make any
loans, advances or capital contributions to any other Person
other than advances of expenses to employees in the ordinary
and normal course consistent with past practices;
(b) Employee Matters. (i) Increase in any manner the
rate of compensation of any of its officers or other
employees other than the increases for the persons and in
the amounts described on Schedule 7.1, (ii) make or agree to
make any payment pursuant to any Company Plan, including,
without limitation, any payment of any pension, retirement
allowance, severance or other employee benefit, except as
expressly required by any existing Company Plan disclosed on
the Schedules to this Agreement, to any such officers or
employees, whether past or present; (iii) enter into or
modify any collective bargaining agreement; or (iv) commit
itself to any additional Company Plan, or employment or
consulting agreement with a Person, or to amend any of such
Plans or agreements, except as required by Law;
(c) Sale of Assets. Sell, transfer, license or
otherwise dispose of or agree to sell, transfer, license or
otherwise dispose of any Assets, except Inventory in the
ordinary and normal course of business consistent with past
practice;
(d) Commitments. Enter into any other agreements,
commitments, contracts or undertakings, except agreements,
commitments, contracts or undertakings made in the ordinary
and normal course of business consistent with past practice
and the representations and warranties of Sellers contained
in this Agreement;
(e) Leased Facilities. Terminate, modify or amend the
Lease Agreements;
(f) Encumbrances. Encumber or grant or create a Lien
on any of the Assets other than Liens on after-acquired
assets arising as a result of security agreements disclosed
on the Schedule entitled "Contracts";
(g) Insurance. Cause any of the policies of insurance
referred to in Section 5.1(x) to terminate, lapse or be
canceled, unless equivalent replacement policies, without
lapse of coverage, shall be put in place;
(h) Litigation. Enter into any compromise or
settlement of any litigation, action, suit, claim,
proceeding or investigation, except settlements made in the
ordinary and normal course of business or by insurers,
involving amounts not in excess of $20,000;
(i) Representations and Warranties. Take any action
the taking of which, or omit to take any action the omission
of which, would cause any of the representations and
warranties contained in Sections 5.1(f), (g), (s), (u) or
(z) to fail to be true and correct as of the Closing as
though made at and as of the Closing; or
(j) Commitments. Agree or commit to do any of the
foregoing.
7.2 Disclosure Supplements.
(a) From time to time prior to the Closing, Sellers
shall promptly supplement or amend the Schedules to this
Agreement with respect to any matter (i) which may arise
hereafter and which, if existing or occurring at or prior to
the date hereof, would have been required to be set forth or
described in the Schedules to this Agreement, or (ii) which
makes it necessary to correct any information in the
Schedules to this Agreement or in any representation and
warranty of any Seller which has been rendered inaccurate
thereby. No supplement or amendment to the Schedules to
this Agreement or any delivery of Schedules after the date
hereof, unless expressly consented in writing by Buyer,
shall be deemed to cure any breach of any representation or
warranty made in this Agreement, or modify, affect or
diminish Buyer's right to terminate this Agreement pursuant
to Section 10.1(c).
(b) During the period from the date hereof to the
Closing, Sellers shall promptly (i) furnish or make
available to Buyer copies of all operating reports and
monthly, quarterly and year-end financial statements of each
Company as soon as they become available, all certified by
such Company's chief financial officer that such financial
statements fairly present the financial position and results
of operations of such Company for the periods covered by
such statements and for year-end financial statements in
accordance with GAAP consistently applied, and (ii) notify
Buyer of (A) any material change in the condition (financial
or otherwise), business, assets, properties, operations or
prospects of any Company or the Business, and (B) the
institution or settlement of any litigation, action, suit,
investigation, claim or proceeding and of any material
developments therein.
7.3 Closing. Sellers shall use their best efforts to
cause the conditions set forth in Section 6.1 to be satisfied by
the Closing Date.
7.4 Confidentiality. Sellers shall, and shall cause
their Affiliates, officers, employees, representatives,
consultants and advisors to, hold in confidence and not use all
confidential information which remains after Closing in the
possession of Sellers or such Affiliates or other persons,
including information concerning the Business and the Assets.
Sellers shall not release or disclose any such information to any
Person other than Buyer and its authorized representatives.
Notwithstanding the foregoing, the confidentiality obligations of
this Section shall not apply to information:
(a) which a Seller is compelled to disclose by
judicial or administrative process, or, in the opinion of
counsel, by other mandatory requirements of Law;
(b) which can be shown to have been generally
available to the public other than as a result of a breach
of this Section; or
(c) which can be shown to have been provided to a
Seller by a third party who obtained such information other
than from a Seller or any Company or other than as a result
of a breach of this Section.
7.5 Maintenance of Insurance. Each Seller will
(a) maintain all policies of insurance in effect on the date
hereof through and until the Closing; and (b) after the Closing
use its best efforts to maintain any policies of insurance which
cover liabilities associated with the operation of the Business
prior to the Closing; provided, that after the Closing Sellers
shall not be required to pay any additional premiums in respect
of such policies or maintain in effect any insurance coverage.
7.6 Inventories. Prior to the Closing, Sellers will
maintain levels of all Inventories, including materials and
supplies, at levels consistent with current practice in the
ordinary and normal course of business.
7.7 Maintenance of, and Access to, Records. After the
Closing Date, each Seller shall provide Buyer with access (with
an opportunity to make copies), during normal business hours, and
upon reasonable notice, to any records relating to the Business
which are retained by it. Each Seller shall preserve and
maintain any books and records relating to the Business and
retained by such Seller for at least five years after the Closing
Date.
7.8 Non-Competition.
(a) Period and Conduct. As further consideration for
the purchase and sale of the Acquired Assets and the
transactions contemplated by this Agreement, during the
period commencing on the Closing Date, and ending on the
date which is five years thereafter, no Seller shall:
(i) compete with Buyer in the manufacture,
production, design, engineering, importation, purchase,
marketing, sale, distribution, installation, research
or development of any Products;
(ii) solicit, or accept orders or business of any
kind relating to the manufacture, production, design,
engineering, importation, purchase, marketing, sale,
distribution, installation, research or development of
any Products from any customer or active prospect of
Buyer, or any former customer of any Company;
(iii)solicit any employee of Buyer or former
employee of any Company to terminate his or her
employment with Buyer; or
(iv) use, or incorporate or otherwise create any
business organization utilizing any name which uses any
words contained in any Company's corporate name or name
under which any Company conducted business prior to the
Closing ("Corporate Names") or which are confusingly
similar to such words.
(b) Territory. Each Seller shall refrain from
engaging in the activities described in this Section 7.8
during the period specified in Section 7.8(a) hereof in any
of the United States of America, Puerto Rico, the Virgin
Islands, Canada and Mexico.
(c) Definition. Sellers shall be deemed to be
competing with Buyer if any of them or any of their
respective Affiliates is engaged or participates in any
activity or activities described in subsection (a) of this
Section 7.8, directly or indirectly, whether for its own
account or for that of any other Person, firm or
corporation, and whether as a shareholder, partner or
investor controlling any such entity or as principal, agent,
representative, proprietor, or partner, or in any other
capacity.
(d) Remedies. Inasmuch as a breach, or failure to
comply with, Section 7.8 of this Agreement will cause
serious and substantial damage to Buyer, if any Seller or
any of its respective Affiliates should in any way breach,
or fail to comply with, the terms of this Section 7.8, Buyer
shall be entitled to an injunction restraining such Seller
and such Affiliates from any such breach or failure. All
remedies expressly provided for herein are cumulative of any
and all other remedies now existing at law or in equity.
Buyer shall, in addition to the remedies herein provided, be
entitled to avail itself of all such other remedies as may
now or hereafter exist at law or in equity for compensation,
and for the specific enforcement of the covenants contained
herein. Resort to any remedy provided for hereunder or
provided for by law shall not preclude or bar the concurrent
or subsequent employment of any other appropriate remedy or
remedies, or preclude the recovery by Buyer or monetary
damages and compensation.
(e) Subsidiaries, Divisions and Affiliates. For the
purpose of this Section 7.8, "Buyer" shall include its
subsidiaries, divisions and Affiliates as they may exist
from time to time, HON and any Person deriving title to the
goodwill of the Business or the Assets from Buyer.
(f) Severability. Each subsection of this Section 7.8
constitutes a separate and distinct provision hereof. In
the event that any provision of this Section 7.8 shall
finally be judicially determined to be invalid, ineffective
or unenforceable, such determination shall apply only in the
jurisdiction in which such adjudication is made and every
other provision of this Section 7.8 shall remain in full
force and effect. The invalid, ineffective or unenforceable
provision shall, without further action by the parties, be
automatically amended to effect the original purpose and
intent of the invalid, ineffective or unenforceable
provision; provided, however, that such amendment shall
apply only with respect to the operation of such provision
in the particular jurisdiction in which such adjudication is
made.
7.9 Accounts Receivable. In the event that any Seller
or any of its Affiliates receives any payment relating to any
Account Receivable outstanding on or after the Closing Date, such
payment shall be the property of, and shall be immediately
forwarded and remitted to, Buyer. Sellers or such Affiliates
will promptly endorse and deliver to Buyer any cash, checks or
other documents received by any Seller on account of any such
Accounts Receivable. Sellers or such Affiliates shall advise
Buyer (promptly following any Seller's becoming aware thereof) of
any counterclaims or set-offs that may arise subsequent to the
Closing Date with respect to any Account Receivable.
7.10 Name Change Filings. Each Asset Seller shall,
within three (3) days following the Closing, deliver to Buyer
evidence of filing with the Secretary of State of its State of
incorporation of an amendment to such Sellers' Articles of
Incorporation to change its name to a name which is not
deceptively similar to its Corporate Names. Each Asset Seller
shall, within thirty (30) days after the Closing, take such
actions and file such documents as shall be necessary to
(a) reflect such name changes in all States in which each Asset
Seller is qualified to do business as a foreign corporation, and
shall deliver to Buyer copies of such documents evidencing such
name change filings, (b) discontinue the use of the trademarks
and trade names associated with any products available through
such Asset Seller, and (c) otherwise discontinue the use of such
trademarks and trade names in connection with Seller's business
operations.
7.11 No Shopping. From the date hereof through and
until the earlier of termination of this Agreement pursuant to
Article X or Closing, no Seller nor any of its Affiliates,
employees, officers, agents or advisors shall, directly or
indirectly, (a) solicit, initiate or encourage any inquiries,
proposals or offers from any Person relating to any acquisition
(or sublease as the case may be) of the Assets or the Business,
or any assets or securities of, or any merger, consolidation or
business combination with, any Company, or (b) with respect to
any effort or attempt by any other Person to do or seek any of
the foregoing, (i) participate in any discussions or
negotiations, (ii) furnish to any other Person any information
with respect to, or afford access to the properties, books or
records of or relating to, any Company, the Assets or the
Business, or (iii) otherwise cooperate in any way with, or assist
or participate in, or facilitate or encourage any such effort.
Sellers shall promptly notify Buyer if any such proposal or offer
or any inquiry or contact with any Person with respect thereto is
made.
7.12 Plant Closing Obligations. If any Seller or any
of its Affiliates takes any action which could be construed as a
"plant closing" or "mass layoff", or which results in any
employee retained or employed suffering or deeming to have
suffered any "employment loss", as those terms are defined in
WARN, Sellers and such Affiliates shall be solely responsible for
providing any notice required by WARN and for making payments, if
any, which may be required under WARN for failure to provide
appropriate notice; provided, however, that for purposes of this
Section 7.12, employees of the Sellers immediately prior to the
Closing shall be deemed to be employees of the Buyer as of the
Closing Date.
7.13 Further Assurances; Customer and Supplier
Relationships; Assertion of Claims. Sellers shall use their best
efforts to implement the provisions of this Agreement, and for
such purpose Sellers, at the request of Buyer, at or after the
Closing, shall, without further consideration, promptly execute
and deliver, or cause to be executed and delivered, to Buyer such
deeds, assignments, bills of sale, Required Consents and other
instruments in addition to those required by this Agreement, in
form and substance satisfactory to Buyer, and take all such other
actions, as Buyer may reasonably deem necessary or desirable to
implement any provision of this Agreement or to more effectively
transfer, convey and assign to Buyer good and marketable title
to, and to put Buyer in actual possession and operating control
of, all of the Assets, free and clear of all Liens other than
Permitted Liens, including, without limitation, such instruments
and documents as may be necessary or advisable to vest in Buyer
all of Sellers' benefits and interest in any Liens (including
mechanics' liens) obtained by any Seller on or in any assets or
properties of Sellers' customers.
7.14 Appointment of Representative. Each Seller hereby
designates and appoints Philip T. Mercer ("Mercer") as the
Sellers' representative and attorney-in-fact (the
"Representative") to act for and on behalf of the Sellers as
provided in this Agreement and to serve in accordance with the
terms of this Agreement. The Representative hereby accepts such
appointment and agrees to be bound by the terms of this Agreement
and to act in furtherance of the interests of the Sellers
hereunder. In the event that Mercer is unable to serve as
Representative due to death or disability, or resigns (by
providing at least thirty (30) days' prior written notice to each
party to this Agreement), the Sellers shall select a successor
Representative. Mercer's rights and obligations under this
Agreement as the Representative shall be separate and distinct
from Mercer's other rights and obligations hereunder or as an
officer or director of any Company, and any reference to Mercer
in his capacity as Representative shall not be deemed a reference
to Mercer in any other capacity.
7.15 Payment of Indebtedness; Releases. On or before
the Closing Date, each Seller will (a) pay, perform and discharge
any and all liabilities or obligations for indebtedness of each
Company, whether fixed, contingent or otherwise (including,
without limitation, notes payable to Affiliates of any Company),
and (b) obtain copies of all executed releases, in form and
substance reasonably satisfactory to Buyer, necessary to release
of any and all Liens relating to such indebtedness, including,
without limitation, the Liens described on the Schedule hereto
entitled "Liens" (in each case other than Liens that are
Permitted Liens). The Sellers will cause the releases referenced
in the foregoing clause (b) to be filed promptly, but no later
than two (2) business days, after payment of the related
indebtedness and in any event promptly after the Closing Date.
ARTICLE VIII. COVENANTS OF BUYER AND HON
8.1 Covenants of Buyer.
(a) Maintenance of, and Access to, Records. From and
after the Closing, Buyer shall, whenever reasonably
requested by the Representative, permit the Sellers to have
access to such business records turned over to Buyer
pursuant to this Agreement as may be reasonably requested by
such Seller in connection with any audit or investigation by
any Governmental Authority, or any matter relating to
insurance coverage or third party claims, in each such case
to the extent relating to the operation of the Business by
such Seller prior to the Closing. Buyer shall preserve and
maintain the records relating to the Business which are part
of the Assets for at least five (5) years after the Closing
Date.
(b) Closing. Buyer shall use its best efforts to
cause the conditions set forth in Section 6.2 to be
satisfied by the Closing Date.
(c) Disclosure Supplements. From time to time prior
to the Closing, Buyer shall promptly supplement or amend its
Schedules to this Agreement with respect to any matter
(i) which may arise hereafter and which, if existing or
occurring at or prior to the date hereof, would have been
required to be set forth or described in Buyer's Schedules
to this Agreement, or (ii) which makes it necessary to
correct any information in Buyer's Schedules to this
Agreement or in any representation and warranty of HON or
Buyer which has been rendered inaccurate thereby. No
supplement or amendment to the Schedules to this Agreement
or any delivery of Schedules after the date hereof, unless
expressly consented in writing by Sellers, shall be deemed
to cure any breach of any representation or warranty made in
this Agreement, or modify, affect or diminish Sellers' right
to terminate this Agreement pursuant to Section 10.1(d).
(d) Copies. During the period from the date hereof to
the Closing, Buyer shall promptly furnish or make available
to Seller copies of an income statement and balance sheet as
of each month-end after the date of this Agreement and prior
to Closing.
(e) Insurance. After the Closing Buyer will use its
best efforts to maintain any policies of insurance that
cover Buyer's assets and properties, including, without
limitation, Acquired Assets owned by Buyer, and the
liabilities associated with the operation of its business.
(f) Supply of Products. Buyer agrees to supply
Sellers, during the term of this Agreement and prior to
Closing, and upon request, with products manufactured or
sold by Buyer to the extent necessary to replace any
reduction in Sellers' supply of Products occurring after the
date of this Agreement, on terms and conditions similar to
those provided by Buyer to Sellers immediately prior to the
date of this Agreement, subject to sufficient availability
and capacity by Buyer.
(g) Further Assurances. Buyer, at the request of
Sellers and at or after the Closing, shall promptly execute
and deliver, or cause to be executed and delivered, such
other agreements, certificates, instruments and other
writings required by it by this Agreement to satisfy the
payment terms set forth in Section 3.1.
8.2 Covenants of HON.
(a) Closing. HON shall use its best efforts to cause
the conditions set forth in Section 6.2 to be satisfied by
the Closing Date.
(b) IRB Consents. HON shall use its reasonable best
efforts to obtain the consents referred to in Section
6.1(j)(i).
(c) Buyer Note. HON shall cause the Buyer Note to be
purchased by a financial institution at the face value
thereof, or shall repurchase the Buyer Note at the face
value thereof within ninety (90) days of the Closing.
ARTICLE IX. CERTAIN ADDITIONAL COVENANTS
9.1 Access to Records and Properties. Prior to the
Closing, (a) Buyer shall be entitled, and each Seller shall
permit Buyer, to conduct such investigation of the condition
(financial or otherwise), business, assets, properties or
operations of the Companies and the Business as Buyer shall
reasonably deem appropriate, and (b) each Seller shall
(i) provide Buyer and its agents and representatives, including
its independent accountants, internal auditors and attorneys,
full and complete access to all the facilities, offices and
management and supervisory personnel of the Companies, and to all
of the books and records of the Companies (including work papers
of any accountants), (ii) cause the Companies' officers,
employees and advisors to furnish Buyer with such financial and
operating data (including the data described in Section 7.2(b))
and other information with respect to the condition (financial or
otherwise), business, assets, properties or operations of the
Companies and the Business as Buyer shall reasonably request, and
(iii) permit Buyer to make such inspections and copies thereof as
Buyer may reasonably require, including without limitation, to
conduct such environmental assessments and investigations of the
Property and surrounding property as Buyer or its advisors and
consultants may deem necessary or appropriate, and sampling and
analysis of environmental media to detect the presence or confirm
the absence of contamination, including any contamination which
may be present in groundwater and the sources of any such
contamination. In addition, Buyer shall be provided with full
and complete access to the customers and suppliers of the
Business and the opportunity to make, in conjunction with
Sellers, cooperative calls on purchasers of Products.
9.2 Expenses; Transfer Taxes. Each party hereto will
bear the legal, accounting and other expenses incurred by such
party in connection with the negotiation, preparation and
execution of this Agreement, the Transaction Documents, and the
transactions contemplated hereby. Buyer shall be responsible for
all obligations to Robert W. Baird & Co. Incorporated. Sellers
shall be responsible for all obligations to Bowles, Hollowell,
Conner and First Union Capital Markets Corporation and counsel to
the Sellers, or any of them. All sales, transfer, recordation
and documentary Taxes and fees which may be payable in connection
with the sale of the Acquired Assets shall be borne by Buyer;
provided, however, that Sellers will fully cooperate with Buyer
in preparing and filing all certificates and other documents the
filing of which will reduce the amount of Taxes and fees payable
in connection with the sale of the Acquired Assets.
9.3 Bulk Transfer Laws. Buyer hereby waives
compliance by Sellers with the laws of any jurisdiction relating
to bulk transfers which may be applicable in connection with the
transfer of the Acquired Assets to Buyer.
9.4 Press Releases and Disclosure. The parties agree
that neither Sellers, Buyer nor their respective Affiliates shall
issue or cause publication of any press release or other
announcement or public communication with respect to this
Agreement or the transactions contemplated hereby or otherwise
disclose this Agreement or the transactions contemplated hereby
to any third party (other than attorneys, advisors and
accountants to Sellers or Buyer) without the consent of the other
party hereto, which consent shall not be unreasonably withheld;
provided, that nothing herein shall prohibit any party from
issuing or causing publication of any press release, announcement
or public communication to the extent that such party deems such
action to be required by Law or stock exchange regulations;
provided further that such party shall, whenever practicable
consult with the other party concerning the timing and content of
such press release, announcement or communication before the same
is issued or published.
9.5 Cooperation in the Defense of Claims. In the
event that a claim is asserted against Buyer, any of its direct
or indirect subsidiaries or Affiliates, with respect to events or
conditions occurring or existing in connection with, or arising
out of, the operation of the Business prior to the Closing, or
the ownership, possession, use or sale of the Assets prior to the
Closing, Sellers shall cooperate with Buyer in the defense of any
such claim.
9.6 Regulatory Approvals. Sellers will, and will
cause its appropriate Affiliates to, and Buyer will, use, in each
case, its best efforts to obtain any authorizations, consents,
orders and approvals of any Governmental Authority necessary for
the performance of its respective obligations pursuant to this
Agreement and any of the other transaction documents, and the
consummation of the transactions contemplated hereby and thereby,
and will cooperate fully with each other in all reasonable
respects in promptly seeking to obtain such authorizations,
consents, orders and approvals. Neither Sellers nor Buyer will
take any action that will have the effect of delaying, impairing
or impeding the receipt of any required regulatory approvals.
Without limiting the generality of the foregoing, Sellers and
Buyer will promptly file or cause to be filed with the FTC and
the DOJ, Notification and Report Forms and documentary materials
that substantially comply with the provisions of the H-S-R Act
and the rules thereunder. Buyer shall pay all fees associated
with the filing of any such Notification and Report Forms or
related materials and information (other than the fees and
expenses of Buyer's legal, financial or other professionals
engaged to provide services in respect of such filing). Buyer
and Sellers will promptly file any additional information
requested as soon as practicable after receipt of a request for
additional information. Buyer and Sellers will use reasonable
efforts to obtain early termination of the applicable waiting
period under the H-S-R Act. The parties hereto will coordinate
and cooperate with one another in exchanging such information and
providing such reasonable assistance as may be requested in
connection with such filing. Sellers will supply Buyer with
copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between Sellers or
its representatives, on the one hand, and the FTC, the DOJ or any
other Governmental Authority or members of their respective
staffs, on the other hand, with respect to this Agreement or the
transactions contemplated hereby.
9.7 Employee Matters. (a) Buyer shall offer
employment as of the Closing Date to such currently active
employees employed in the Business by the Asset Sellers as of the
Closing Date as Buyer may determine (each a "Transferred
Employee").
(b) Immediately following the Closing Date, Buyer
shall provide to each Transferred Employee employee benefits
(including hospitalization, medical, prescription drug,
dental, disability, 401(k), pre-tax premium payment,
vacation, life and accidental death and dismemberment,
incentive, bonus, fringe benefits and other similar benefits
but excluding any plan or program (or feature thereof) which
provides any opportunity to, directly or indirectly, acquire
or invest in the equity of any Asset Seller) which are, in
the aggregate, substantially similar to the employee
benefits provided as of the date hereof to such Transferred
Employee, but only to the extent such Transferred Employee
is eligible for such benefits as of such date. Each
Transferred Employee shall be credited for eligibility,
benefit accrual and vesting purposes with their periods of
service with the Asset Sellers counted under a Company Plan
prior to the Closing Date under any similar employee benefit
plan, program or arrangement established, maintained,
continued or made available by Buyer after the Closing Date
in which such Transferred Employees are eligible to
participate (excluding for this purpose accruals under any
retirement plan for the period prior to Closing).
(c) Effective as of the Closing Date, Buyer shall
assume the sponsorship of the AFC Flexible Benefits Program
(the "Assumed Plan"), and, prior to Closing, AFC shall take
all action necessary to amend such plan to reflect the
change in sponsorship, to exclude participation by any
employees who are not Transferred Employees (except for
deferred vested participants) and make other conforming
changes and to transfer to Buyer the assets attributable to
the Assumed Plan. Effective as of the later of the Closing
Date or such date as AFC supplies Buyer with evidence
reasonably acceptable to Buyer that the Internal Revenue
Service has concluded its audit of the American Fireplace
Company Tax-Sheltered Thrift Plan and Trust ("AFC Plan") for
all years under audit as of the date hereof without
disqualifying the AFC Plan and without requiring any
correction, sanction or adjustment with respect to such AFC
Plan, Buyer shall assume the sponsorship of the AFC Plan,
and, prior to such transfer of sponsorship, AFC shall take
all action necessary to amend the AFC Plan to reflect the
change in sponsorship and make other conforming changes and
to transfer to Buyer the assets attributable to such AFC
Plan.
(d) The Asset Sellers shall be responsible for all
claims for welfare benefits which are incurred prior to the
Closing Date by any Transferred Employee (or the eligible
spouse or dependent of such Transferred Employee) that are
payable under the terms and conditions of any Company Plan,
except to the extent accrued for as a liability on
Schedule 2.1(b). The Asset Sellers shall cease to provide
any group health plan to any employees as of the Closing
Date, and therefore shall have no obligation to provide
medical continuation coverage to such employees. Pursuant
to the provisions of this Section 9.7, Buyer shall be
considered a successor employer within the meaning of
Prop. Treas. Reg. Section 54.4980B-9 and therefore shall be
responsible for providing medical continuation coverage
pursuant to COBRA to former employees of the Asset Sellers
(and their eligible spouses and dependents) who terminate
employment at or prior to the Closing Date. Buyer shall
recognize copayments and deductibles paid by each
Transferred Employee (or eligible spouse or dependent of
such Transferred Employee) under the Plans prior to the
Closing Date for the applicable period and shall not exclude
any Transferred Employee (or eligible spouse or dependent of
such Transferred Employee) from medical coverage based on
any preexisting condition.
(e) Nothing herein expressed or implied shall confer
upon any Transferred Employee (or any spouse or dependent of
such Transferred Employee) or legal representative thereof
any rights or remedies, including without limitation any
right to employment for any specified period, of any nature
or kind whatsoever under or by reason of this Agreement.
(f) Sellers shall be responsible for the claims for
workers compensation benefits which are incurred prior to
the Closing Date.
(g) To the extent assumed under Section 2.1(b), Buyer
shall assume liability for normal and ordinary vacation
accruals attributable to each Transferred Employee as a
result of such Transferred Employee's service with an Asset
Seller.
(h) In no event shall Buyer be liable for any
severance payments that may be payable to any employee of
the Business as a result of the transactions set forth in
this Agreement. The Asset Sellers shall use their best
efforts to assign to Buyer as of the Closing Date the
employment agreements currently in effect with their respect
to the employees and to obtain from each employee covered by
any such employment agreement in a form acceptable to Buyer
(a) an acknowledgment that the transactions contemplated by
this Agreement will not result in a termination of
employment for purposes of such employment agreement, and
(b) a waiver and release of any claim for payment or
benefits under such employment agreement based on the
transactions contemplated by this Agreement.
(i) On the Closing Date, each of the Asset Sellers
shall transfer the personnel files of the employees of the
Business, or copies thereof, to Buyer.
(j) Sellers shall pay all annual incentive bonuses
payable for 1999 and any prior years under any incentive
arrangements.
9.8 [Intentionally omitted]
9.9 Product Warranty Work. After the Closing Date,
Buyer shall perform, without recourse to Sellers, the Companies'
obligations under Ordinary Warranty Commitments. With respect to
warranty claims other than Ordinary Warranty Commitments, Buyer
may seek indemnification from Sellers for such Liability, as
provided in Article XI.
ARTICLE X. TERMINATION
10.1 Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the
Closing:
(a) Mutual Consent. By the Representative and Buyer;
(b) Termination Date. By Sellers, by the
Representative or by Buyer, if the Closing shall not have
occurred on or before March 31, 2000 (the "Termination
Date"); provided, however, that (i) if the HSR Approvals
shall not have been obtained by March 31, 2000, the
Termination Date shall be extended to May 31, 2000 and (ii)
the right to terminate this Agreement pursuant to this
Section 10.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the
Closing to occur on or before the Termination Date;
(c) Sellers Misrepresentation or Breach. By Buyer, if
there has been a breach by any Seller of any of its
representations, warranties, covenants, obligations or
agreements set forth in this Agreement or in any writing
delivered pursuant hereto by any Seller, which breach
(A) would give rise to a failure of a condition set forth in
Section 6.1, and (B) is incapable of being cured by Sellers
or is not cured within ten (10) business days of written
notice thereof;
(d) Buyer Misrepresentation or Breach. By Sellers or
by the Representative, if there has been a breach by Buyer
of any of its representations, warranties, covenants,
obligations or agreements set forth in this Agreement or in
any writing delivered pursuant hereto by Buyer, which breach
(A) would give rise to a failure of a condition set forth in
Section 6.2. and (B) is incapable of being cured by Buyer
and is not cured within the (10) business days of written
notice thereof;
(e) Court Order. By Sellers, by the Representative or
by Buyer, if consummation of the transactions contemplated
hereby shall violate any non-appealable final order, decree
or judgment of any court or Governmental Authority having
competent jurisdiction;
(f) Material Adverse Change. By Buyer, if since the
date of this Agreement there has been a material adverse
change, or the occurrence of a condition or event which
would reasonably be expected to result in a material adverse
change, in the condition (financial or otherwise), business,
assets, properties, or operations of the Companies, taken as
a whole (other than as a result of any matter set forth in
the proviso to Section 6.1(c));
(g) Buyer's Conditions. By Buyer, if any condition
precedent to Buyer's obligation to effect the Closing as set
forth in Section 6.1 is not satisfied, or shall have become
incapable of fulfillment, and such condition is not waived,
if waivable, by Buyer on or prior to the Termination Date;
and
(h) Sellers' Conditions. By Sellers or by the
Representative, if any condition precedent to Sellers'
obligation to effect the Closing as set forth in Section 6.2
is not satisfied, or shall have become incapable of
fulfillment, and such condition is not waived, if waivable,
by Sellers or by the Representative on or prior to the
Termination Date.
10.2 Effect of Termination. If this Agreement is
terminated pursuant to Section 10.1, written notice thereof shall
forthwith be given to the other parties and this Agreement shall
thereafter become void and have no further force and effect and
all further obligations of Sellers, HON and Buyer under this
Agreement shall terminate without further liability of Sellers,
HON or Buyer, except that (a) each party will return all
documents, workpapers and other material of any other party
relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party
furnishing the same, and all confidential information received by
any party hereto with respect to the business of any other party
shall be treated in accordance with Section 7.4 and the
Confidentiality Agreements (as hereinafter defined); (b) the
obligations of Sellers and Buyer under Section 9.2 shall survive
such termination; and (c) such termination shall not constitute a
waiver by any party of any claim it may have for damages caused
by reason of, or relieve any party from liability for, any breach
of this Agreement prior to termination under Section 10.1.
ARTICLE XI. INDEMNIFICATION
11.1 Indemnification by Buyer. From and after the
Closing, Buyer and HON, jointly and severally, shall indemnify,
defend and hold Sellers, its Affiliates, and their respective
directors, officers, representatives, employees and agents
harmless from and against any and all claims, actions, suits,
demands, assessments, judgments, losses, liabilities, damages,
costs and expenses (including, without limitation, interest,
penalties, attorneys' fees to the extent permitted by law, and
accounting fees and investigation costs) (collectively,
"Liabilities") that may be incurred by any Seller or other such
persons resulting or arising from or related to, or incurred in
connection with: (a) the failure of Buyer to assume, pay,
perform and discharge the Assumed Liabilities, (b) the failure of
Buyer to report the purchase of the Acquired Assets in accordance
with the allocations required by Section 3.6, and (c) any breach
of any representation, warranty, covenant, obligation or
agreement of Buyer contained herein or in any other Transaction
Document.
11.2 Indemnification by Sellers.
(I) General. From and after the Closing, Sellers
shall jointly and severally indemnify, defend and hold Buyer, its
Affiliates, and their respective directors, officers,
representatives, employees and agents harmless from and against
any and all Liabilities that may be incurred by Buyer or other
such persons resulting or arising from, related to or incurred in
connection with: (a) the failure of Sellers to assume, pay,
perform and discharge the Retained Liabilities, (b) the failure
of Sellers to report the sale of the Acquired Assets in
accordance with the allocations required by Section 3.6, (c) any
breach of any representation, warranty, covenant, obligation or
agreement of Sellers contained herein or in any other Transaction
Document, (d) any failure to comply with the laws of any
jurisdiction relating to bulk transfers which may be applicable
in connection with the transfer of the Acquired Assets to Buyer,
(e) the litigation, actions, suits, investigations, claims,
Company Plan audits and proceedings described, or required to be
described, in the Schedules to this Agreement, (f) any failure to
obtain any Required Consent, and (g) the failure by AFC to obtain
all air quality permits required by Law for its facility
described on the Schedule entitled "Environmental Matters".
(II) Environmental Indemnification. Sellers jointly
and severally agree to indemnify, defend, reimburse and hold
harmless:
(A) Buyer, its Affiliates and their respective
directors, officers, representatives, employees
and agents; and
(B) any other Person who acquires a portion of the
Property in any manner, including but not limited
to, through purchase, at a foreclosure sale or
otherwise through the exercise of the rights and
remedies of Buyer under this Agreement; and
(C) the contractors, subcontractors, experts,
licensees, lessees, mortgagees, trustees, heirs,
devisees, successors, assigns and invitees of any
Persons referred to in subsections (A) or (B) of
this Section 11.2(II);
from and against any and all Environmental Damages (as
hereinafter defined) arising from the presence, use, generation,
storage, treatment, discharge, release or disposal (including off-
site disposal) of Hazardous Materials upon, about, from or
beneath the Property or migrating to or from the Property, or
arising in any manner whatsoever out of the violation of any
Environmental Requirements pertaining to the Property and the
activities thereon, in each case to the extent that such
Environmental Damages or violation of any Environmental
Requirements are attributable to, or the result of, any act or
omission by any Company prior to the Closing Date. This
obligation to indemnify shall include, but not be limited to, the
expense of defending all claims, suits and administrative
proceedings (with counsel reasonably approved by the indemnified
parties), even if such claims, suits or proceedings are
groundless, false or fraudulent, and paying and discharging, when
and as the same become due, any and all judgments, penalties or
other sums due against such indemnified Persons; provided,
however, that Buyer will be entitled to control any clean-up or
remediation, and any related proceeding, and, except as provided
in the following sentence, any other proceeding with respect to
which indemnity may be sought under this Section. The procedures
described in Section 11.3 shall apply to any claim solely for
monetary damages relating to a matter covered by this Section.
11.3 Notice of Claim; Right to Participate in and
Defend Third Party Claim.
(a) If any indemnified party receives notice of the
assertion of any claim, the commencement of any suit, action
or proceeding, or the imposition of any penalty or
assessment by a third party in respect of which indemnity
may be sought hereunder (a "Third Party Claim"), and the
indemnified party intends to seek indemnity hereunder, then
the indemnified party shall promptly provide the
indemnifying party with prompt written notice of the Third
Party Claim, but in any event not later than thirty (30)
calendar days after receipt of such notice of Third Party
Claim. The failure by an indemnified party to notify an
indemnifying party of a Third Party Claim shall not relieve
the indemnifying party of any indemnification responsibility
under this Article XI, unless such failure materially
prejudices the ability of the indemnifying party to defend
such Third Party Claim.
(b) The indemnifying party shall have the right to
control the defense or settlement of such Third Party Claim
with counsel of its choosing provided the indemnifying party
shall have acknowledged in writing its obligations to
indemnify the indemnified party with respect to such Third
Party Claim; provided, however, that the indemnifying party
shall not settle or compromise any Third Party Claim without
the indemnified party's prior written consent, unless the
terms of such settlement or compromise release the
indemnified party from any and all liability with respect to
the Third Party Claim. The indemnified party shall be
entitled (at the indemnified party's expense) to participate
in the defense of any Third Party Claim with its own
counsel.
(c) Any indemnifiable claim hereunder that is not a
Third Party Claim shall be asserted by the indemnified party
by promptly delivering notice thereof to the indemnifying
party.
11.4 Setoff. (a) In addition to any and all other
remedies hereunder or at law or in equity, Buyer shall be
entitled to recover any indemnification payment or other amounts
due from any Seller or Affiliate of a Seller hereunder, under an
Employment and Non-Competition Agreement or a Non-Competition
Agreement, or by a guarantor under a Shareholder Guaranty and (i)
which have not been duly and punctually paid, or (ii) with
respect to which any such Seller or Affiliate shall not have
acknowledged its indemnification obligations under Article XI, by
retaining and setting off the amounts (whether or not such
amounts are liquidated or reduced to judgment) against any
amounts due from Buyer to any Seller, Affiliate of a Seller or
guarantor under any such agreement or the Convertible Debentures
or any securities into which Convertible Debentures have been
converted; provided, however, that any setoff associated with a
breach or amounts due under any Employment and Non-Competition
Agreement or any Non-Competition Agreement shall be set off
solely against the Seller or Affiliate of Seller committing such
breach. Pending final judgment by a court of competent
jurisdiction (which shall, for purposes of this Agreement, be
deemed to include any decision of any mediator to which the
parties thereto have consented, and any arbitration decision
rendered, pursuant to Section 11.8) that Buyer is entitled to any
such payments or other amounts, the setoff amounts shall be
deposited into an interest bearing escrow account with a
financial institution designated by Buyer (the "Escrow Agent").
(b) (i) If such judgment holds that Buyer in whole or
in part wrongfully setoff, and that Buyer had reasonable
grounds for its assertion that such Seller, Affiliate or
guarantor was in breach of, or had otherwise failed to
comply with, the agreement under which setoff was claimed
and the amount setoff, Buyer shall pay the Person entitled
to such wrongfully setoff funds such wrongfully setoff funds
plus an amount equal to (x) 10% interest computed thereon
less (y) interest earned on the escrowed funds from the date
of the earlier of escrow deposit or setoff to the date of
payment and such person shall be entitled to such escrow
interest. (ii) If such judgment holds that Buyer in whole
or in part wrongfully setoff, and that Buyer did not have
reasonable grounds for its assertion that such Seller,
Affiliate or guarantor was in breach of, or had otherwise
failed to comply with, the agreement under which setoff was
claimed and the amount setoff, Buyer shall pay the Person
entitled to such wrongfully setoff funds an amount equal to
(x) such wrongfully setoff funds plus (y) interest actually
earned thereon as reflected in account statements from the
Escrow Agent, plus (z) an additional 15% interest computed
on the wrongfully setoff funds from the date of the earlier
of escrow deposit or setoff to the date of payment.
(c) If such judgment holds that Buyer in whole or in
part was entitled to setoff, the Person otherwise entitled
to any such setoff amount shall pay Buyer an amount equal to
(x) 10% interest computed on the amount of such judgment
less (y) interest earned on any escrowed amounts from the
date of setoff to the date of such judgment, and Buyer shall
be entitled to such escrow interest.
(d) Buyer's rights to set off amounts immediately
prior to the expiration of the period set forth in Section
11.5(e) with respect to any claim referred to in such
Section which is a Third Party Claim shall be conditioned
upon HTI or any Affiliate of HTI having received written
notice of such Claim, including, without limitation, any
such written notice from an insurance company asserting any
such Claim.
11.5 Time Limitations on Claims for Indemnification.
The right of Buyer to indemnification pursuant to
Sections 11.2(I)(a) and 11.2(I)(c), and the right of Sellers to
indemnification for breach of representations and warranties
pursuant to Section 11.1(c) or pursuant to the Securityholders'
Agreement, shall apply only to those claims for indemnification
which are given pursuant to this Agreement on or before the
respective dates set forth below:
(a) Any claim for indemnification relating to any
breach of the representations and warranties set forth in
Section 5.1(v) shall be made on or before the second
anniversary of the Closing Date;
(b) No time limit shall apply to any right to
indemnification with respect to any breach of any
representation or warranty contained in Sections 5.1(a),
(b), (d) or (e), Section 5.3(a) or (b), or Section 5.4(a),
(b) or (c);
(c) Any claim for indemnification relating to any
breach of the representations and warranties set forth in
Section 5.1(t) shall be made on or before the second
anniversary of the Closing Date;
(d) Any claim for indemnification with respect to any
breach of any representation or warranty set forth in any
subsection of Section 5.1, Section 5.3 or Section 5.4 not
referred to in subsections (a), (b) or (c) of this Section
11.5 shall be made on or before the day that is 455 days
after the Closing Date; and
(e) Any claim for indemnification made pursuant to
Section 11.2(I)(a) or (g) shall be made on or before the
third anniversary of the Closing Date.
11.6 Maximum and DeMinimis Amounts.
(a) The maximum amount of indemnification which can be
required of Sellers in the aggregate under Section
11.2(I)(c) for any breach of any representation or warranty
set forth in Section 5.1 (or any portion thereof), Section
11.2(II) and Section 11.2(I)(a) shall not exceed
$10,000,000.
(b) Sellers shall not be required to indemnify, defend
or hold Buyer harmless from and against any Liabilities
under Section 11.2(I)(c) with respect to any breach of any
representation or warranty (without giving effect to any
limitations as to "materiality," "substantial," "Material
Adverse Effect," or "material adverse change" set forth
therein) (other than a breach of any representation and
warranty described in Sections 5.1(d) or (l)), unless and
until the amount of such Liabilities equals $375,000 in the
aggregate (the "Threshold Amount") in which event Sellers
shall be obligated to indemnify Buyer, and Buyer may assert
its right to indemnification hereunder to the full extent of
all Liabilities relating to such breach, including
Liabilities that are less than the Threshold Amount.
11.7 Exclusions. No limitation set forth in
Sections 11.5 or 11.6 shall apply with respect to any
representations and warranties made by any Seller which any
Seller knew were untrue or false.
11.8 Dispute Resolution. (a) In the event that any
party to this Agreement or the Securityholders' Agreement has any
claim, right or cause of action against any other party to this
Agreement or the Securityholders' Agreement, which the parties
shall be unable to settle by agreement between themselves, such
claim, right or cause of action, to the extent that the relief
sought by such party is for monetary damages or awards, shall be
submitted to non-binding mediation, pursuant to clause (b) below,
and if not successfully mediated, determined by arbitration in
accordance with the provisions of this Section 11.8.
(b) The party or parties requesting mediation shall
serve upon the other or others a demand therefor, in
writing, specifying the matter to be submitted to mediation.
Within ten (10) business days after receipt of such written
demand, the parties shall agree in writing to the
appointment of a mutually acceptable mediator, who shall fix
a time and place of the mediation which shall be as soon as
conveniently possible (but in no event later than ten (10)
business days after the appointment of the mediator), at
which time and place the parties to the controversy shall
appear and be heard with respect to the right, claim or
cause of action. If the parties do not agree upon a
mediator within the time specified, the matter shall proceed
to arbitration under the procedures set forth in this
Section 11.8. At mediation, each party shall present such
testimony, examinations and investigations in accordance
with such procedures and regulations as may be determined by
the mediator and shall also recommend to the mediator a
monetary award to be adopted by the mediator. After hearing
the parties in regard to the matter in dispute, the mediator
shall adopt as his or her determination with respect to such
claim, right or cause of action, within ten (10) business
days of the completion of the examination, by decision
signed in writing (together with a brief written statement
of the reasons for adopting such recommendation), one of the
recommendations submitted by the parties to the dispute and
shall grant no other relief or remedy. The decision of said
mediator shall be non-binding and may be appealed by any
party to arbitration under the arbitration procedures set
forth in this Section 11.8 The expense and cost of
mediation, including fees and expenses of counsel to the
parties, shall be borne by the party or parties whose
recommendation was not adopted by the mediator.
(c) The party or parties requesting arbitration shall
serve upon the other or others a demand therefor, in
writing, specifying the matter to be submitted to
arbitration, and nominating a competent disinterested person
to act as an arbitrator. Within ten (10) business days
after receipt of such written demand and nomination, the
other party or parties shall, in writing, nominate a
competent disinterested person, and the two (2) arbitrators
so designated shall, within ten (10) business days
thereafter, select a third arbitrator. The three (3)
arbitrators shall give immediate written notice of such
selection to the parties and shall fix in said notice a time
and place of the meeting of the arbitrators which shall be
as soon as conveniently possible (but in no event later than
ten (10) business days after the appointment of the third
arbitrator), at which time and place the parties to the
controversy shall appear and be heard with respect to the
right, claim or cause of action.
(d) In case the notified party or parties shall fail
to make a selection upon notice within the time period
specified in Section 11.8(c), the party asserting such claim
shall appoint an arbitrator on behalf of the notified party.
In the event that the first two (2) arbitrators selected
shall fail to agree upon a third arbitrator within ten (10)
business days after their selection, then such arbitrator
may, upon application made by either of the parties to the
controversy, be appointed by any judge of any United States
court of record having jurisdiction in the State of
Maryland.
(e) At arbitration, each party shall present such
testimony, examinations and investigations in accordance
with such procedures and regulations as may be determined by
the arbitrators and shall also recommend to the arbitrators
a monetary award to be adopted by the arbitrators as the
complete disposition of such claim, right or cause of
action. After hearing the parties in regard to the matter
in dispute, the arbitrators shall adopt as their
determination with respect to such claim, right or cause of
action, within ten (10) business days of the completion of
the examination, by majority decision signed in writing
(together with a brief written statement of the reasons for
adopting such recommendation), one of the recommendations
submitted by the parties to the dispute and shall grant no
other relief or remedy. The decision of said arbitrators,
absent fraud, duress or manifest error, shall be final and
binding upon the parties to such controversy and may be
enforced in any court of competent jurisdiction.
(f) The expense and cost of arbitration, including
fees and expenses of counsel to the parties, shall be borne
by the party or parties whose recommendation was not adopted
by the arbitrator.
(g) Notwithstanding any other provisions of this
Section 11.8, in the event that a party against whom any
claim, right or cause of action is asserted commences, or
has commenced against it, bankruptcy, insolvency or similar
proceedings, the party or parties asserting such claim,
right or cause of action shall have no obligations under
this Section 11.8 and may assert such claim, right or cause
of action in the manner and forum it deems appropriate,
subject to applicable laws. No determination or decision by
the mediator or arbitrators pursuant to this Section 11.8
shall limit or restrict the ability of any party hereto to
obtain or seek in any appropriate forum, any relief or
remedy that is not a monetary award or money damages.
(h) Any reference to any judicial decision or
determination by any court contained herein, in the
Securityholders' Agreement, in the Debentures or in any
other agreement executed pursuant hereto, shall include any
decision of a mediator by which the parties have agreed to
be bound, and any decision of arbitrators reached pursuant
to this Section 11.8.
ARTICLE XII. MISCELLANEOUS
12.1 Amendments. This Agreement may be amended only by
a writing executed by Buyer and the Representative, acting on
behalf of Sellers.
12.2 Entire Agreement. This Agreement, the
Confidentiality Agreement dated September 14, 1999 between
Bowles, Hollowell, Conner (on behalf of Sellers) and HON (the
"Seller Confidentiality Agreement"), the letter agreement
regarding confidentiality dated November 19, 1999 among HON,
Allied, AFC, Madison, Minocqua and Bowles, Hollowell, Conner
(together with the Seller Confidentiality Agreement, the
"Confidentiality Agreements") and the other agreements expressly
provided for herein and the Schedules hereto, set forth the
entire understanding of the parties hereto with respect to the
subject matter hereof, and supersede all prior contracts,
agreements, arrangements, communications, discussions,
representations and warranties, whether oral or written, between
the parties.
12.3 Governing Law. This Agreement shall in all
respects be governed by and construed in accordance with the laws
of the State of Maryland, without regard to its conflicts of law
doctrine. Each Seller hereby agrees to submit to the personal
jurisdiction of the state or federal courts located in the State
of Maryland, and hereby appoint the Representative, as its agent
for purpose of service of process in any such state or federal
court. Notwithstanding the foregoing, any party may initiate and
prosecute any legal proceeding or seek enforcement of any
judgment in any proper court having jurisdiction in the United
States or elsewhere.
12.4 Notices. Any notice, request or other
communication required or permitted hereunder shall be in writing
and shall be deemed to have been duly given (a) when received if
personally delivered, (b) within five (5) days after being sent
by registered or certified mail, return receipt requested,
postage prepaid, (c) within twelve (12) hours after being sent by
telecopy, with confirmed answerback, or (d) within one (1)
business day of being sent by priority delivery by established
overnight courier, to the parties at their respective addresses
set forth below.
To Sellers: Philip T. Mercer
11208 Ridermark Row
Columbia, MD 21044
With a copy to: McGuire, Woods, Battle & Boothe LLP
7 St. Paul Street, Suite 1000
Baltimore, MD 21202
Fax No.: (410) 659-4599
Attention: James P. O'Hare
To Buyer or HON: Hearth Technologies Inc.
c/o HON INDUSTRIES Inc.
414 East Third Street
Muscatine, IA 52761
Attention: Chief Financial Officer
With a copy to: HON INDUSTRIES Inc.
414 East Third Street
Muscatine, IA 52761
Attention: General Counsel
and: Jones, Day, Reavis & Pogue
77 West Wacker, 35th Floor
Chicago, Illinois 60601-1692
Fax No.: (312) 782-8585
Attention: Elizabeth C. Kitslaar
Any party by written notice to the others given in accordance
with this Section 12.4 may change the address or the Persons to
whom notices or copies thereof shall be directed.
12.5 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original, and all of which together will constitute one and the
same instrument.
12.6 Assignment. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of each party
hereto, but no rights, obligations or liabilities hereunder shall
be assignable by (a) any Seller without the prior written consent
of Buyer, or (b) Buyer without the consent of the Representative.
12.7 Waivers. Except as otherwise provided herein, Buyer
or Sellers may waive in writing compliance by the other parties
hereto (to the extent such compliance is for the benefit of the
party giving such waiver) with any of the terms, covenants or
conditions contained in this Agreement or in any of the other
Transaction Documents (except such as may be imposed by law).
Any waiver by any party of any violation of, breach of, or
default under, any provision of this Agreement or any of the
other Transaction Documents, by any other party shall not be
construed as, or constitute, a continuing waiver of such
provision, or waiver of any other violation of, breach of or
default under any other provision of this Agreement or any of the
other Transaction Documents.
12.8 Third Parties. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or
give any Person or entity other than Buyer, Sellers and the
Representative any rights or remedies under or by reason of this
Agreement.
12.9 Schedules. The Schedules attached to this Agreement
are incorporated herein and shall be part of this Agreement for
all purposes.
12.10 Headings. The headings in this Agreement are solely
for convenience of reference and shall not be given any effect in
the construction or interpretation of this Agreement.
12.11 Certain Definitions.
(a) For purposes of this Agreement, the term "Affiliate"
shall mean any Person that directly, or indirectly through one
or more Persons, controls, is controlled by, or is under common
control with, the Person specified or, directly or indirectly,
is related to or otherwise associated with any such Person or
entity.
(b) For purposes of this Agreement and of any other
Transaction Document, the phrases, "to the best knowledge",
"knowledge", "Sellers' knowledge" or "Seller's knowledge" shall
be deemed to include all information that is actually known
after due inquiry or, in the exercise of reasonable diligence
in light of the scope of such person's authority and
responsibilities with any Company or Seller, should be known,
by any of the following individuals: Mercer,
Richard A. Grove, Jr., David E. Scott, James Setree or
Cheri Taylor.
12.12 Remedies Not Exclusive. Except with respect to
matters for which a remedy is provided by Article XI, no remedy
conferred by any of the specific provisions of this Agreement is
intended to be exclusive of any other remedy and each remedy
shall be cumulative and shall be in addition to every other
remedy given hereunder or hereafter existing at law or in equity
or by statute or otherwise. No remedy shall be deemed to be a
limitation on the amount or measure of damages resulting from any
breach of this Agreement. The election of any one or more
remedies shall not constitute a waiver of the right to pursue
other available remedies.
12.13 Gender and Number. The masculine, feminine or
neuter gender and the singular or plural number shall each be
deemed to include the others whenever the context so indicates.
12.14 Attorney's Fees. In the event of any dispute
among the parties hereto arising out of or related to this
Agreement involving mediation, arbitration and/or litigation, the
parties agree, except as may be otherwise agreed by the parties
or ordered by any mediator, arbitrator or court of competent
jurisdiction, that the party or parties against whom a final
determination is made will reimburse the other party or parties
for all fees, costs and expenses of counsel incurred by such
party or parties with respect to such mediation, arbitration
and/or litigation.
IN WITNESS WHEREOF, the parties have caused their duly
authorized representatives to execute this Agreement as of the
date first above written.
AMERICAN FIREPLACE COMPANY
By /s/ P.T. Mercer
Philip T. Mercer, President
HEARTH & HOME, INC.
By /s/ James E. Setree
James E. Setree, President
PHILIP T. MERCER
By /s/ P.T. Mercer
Philip T. Mercer, as
Representative
HEARTH TECHNOLOGIES INC.
By /s/ Daniel C. Shimek
Daniel C. Shimek, President
HON INDUSTRIES INC.
By /s/ David C. Stuebe
David C. Stuebe
Vice President and Chief
Financial Officer
EXHIBIT 2.1(ii)
PURCHASE AGREEMENT
By and Among
RON F. SKORONSKI, KIRK R. SORENSEN,
MADISON FIRE PLACE, INC., FIREPLACE & SPA, INC. and
THE MINOCQUA FIREPLACE COMPANY, as SELLERS,
HEARTH TECHNOLOGIES INC., as BUYER, and
HON INDUSTRIES INC.
Dated as of January 28, 2000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. PURCHASE AND SALE 2
1.1 Purchase and Sale of Assets 2
(a) [Intentionally omitted] 2
(b) Prepaids 2
(c) Inventory 2
(d) Accounts Receivable 2
(e) Fixed Assets 2
(f) [Intentionally omitted] 2
(g) Leased Property 2
(h) Intellectual Property Rights 2
(i) Business Records 3
(j) Rights Under Confidentiality
Agreements and Warranties 3
(k) Customer List 3
(l) Catalogs and Advertising Materials 3
(m) Purchase Orders 3
(n) Contracts 3
(o) Permits 4
(p) [Intentionally omitted] 4
(q) Goodwill 4
(r) Miscellaneous 4
1.2 Retained Assets 4
(a) Designated Assets 4
(b) Non-Assigned Contracts 4
(c) Employee Plan Assets 4
(d) Corporate Records 5
(e) [Intentionally omitted] 5
(f) Insurance 5
1.3 Purchase and Sale of Shares 5
1.4 Assignability and Consents 5
(a) Required Consents 5
(b) Nonassignable Items 6
ARTICLE II. LIABILITIES 6
2.1 Assumption of Liabilities 6
(a) [Intentionally omitted] 6
(b) Accrued Liabilities 6
(c) Contracts 6
(d) Warranty Commitments 7
2.2 Retained Liabilities 7
(a) Pre-Closing 7
(b) Liabilities Relating to the Sale of
Acquired Assets 7
(c) Employee-Related Liabilities 7
(d) Litigation 8
(e) Product, Environmental and Safety
Liability 8
(f) Taxes 8
(g) [Intentionally omitted] 8
(h) Liabilities Relating to Retained 9
Assets
(i) Post-Closing Date 9
(j) Shutdown Costs 9
(k) Acquisition Payments 9
ARTICLE III. PURCHASE PRICE 9
3.1 Payment 9
3.2 [Intentionally omitted] 10
3.3 [Intentionally omitted] 10
3.4 Intercompany Obligations 10
3.5 Satisfaction of Indebtedness 10
3.6 Purchase Price Allocation 10
ARTICLE IV. CLOSING 11
4.1 General 11
4.2 Documents to be Delivered by Asset Seller 11
4.3 Documents to be Delivered by Allied
Shareholders 13
4.4 Documents to be Delivered by Buyer 14
4.5 Documents to be Delivered by Buyer and
Sellers 15
4.6 Other Documents to be Delivered 15
ARTICLE V. REPRESENTATIONS AND WARRANTIES 16
5.1 Joint and Several Representations and
Warranties of Sellers 16
(a) Organization and Standing; Power and
Authority 16
(b) Articles and By-Laws 16
(c) Conflicts; Defaults 17
(d) Acquired Assets; Title to the
Acquired Assets; Allied Shares 18
(e) Real Property 19
(f) Leases 19
(g) Contracts 20
(h) Financial Statements 21
(i) Liabilities 23
(j) Accounts Receivable; Collection;
Trade Payables 23
(k) Inventories 24
(l) Litigation 24
(m) Customers and Suppliers 24
(n) Regulatory Compliance 25
(o) Brokers, Finders and Agents 25
(p) Intellectual Property 25
(q) Permits 26
(r) Employee Relations; Collective
Bargaining Agreements 26
(s) Employees and Employee Plans 27
(t) Environmental and Safety Compliance 29
(i) General 29
(ii) Specific Environmental
Representations and Warranties 30
(iii) Definitions 31
(u) Changes in Circumstances 32
(v) Taxes 33
(w) Product Warranties 36
(x) Insurance 36
(y) Approvals 37
(z) Absence of Certain Commercial
Practices 37
(aa) Bank Accounts 37
(bb) Books and Records 37
(cc) Warranty Costs 38
(dd) Penalties and Renegotiation of
Contracts 38
(ee) Pricing Practices 38
(ff) Copies of Documents 38
(gg) [Intentionally omitted] 38
(hh) Insider Interests; Advances 38
(ii) Year 2000 Compliance 39
(jj) Disclosure 39
5.2 Representations and Warranties of the
Allied Shareholders 40
(a) Shareholders; Title to Shares 40
(b) Capacity of Shareholders; Consents;
Execution of Agreement; Good Title to
Buyer 40
(c) Other Businesses 40
5.3 Representations and Warranties of HON 40
(a) Organization and Standing; Power and
Authority 40
(b) Conflicts; Defaults 41
(c) Brokers, Finders and Agents 41
(d) Consents 41
5.4 Representations and Warranties Relating
to Buyer 41
(a) Organization and Standing; Power and
Authority 41
(b) Capitalization 42
(c) Articles and By-Laws 42
(d) Conflicts; Defaults 42
(e) Compliance with Other Instruments,
etc. 42
(f) Financial Statements 43
(g) Litigation 43
(h) Absence of Certain Changes or Events 43
(i) Brokers, Finders and Agents 43
(j) Consents 43
(k) Ability to Pay Cash Amount 44
5.5 General 44
ARTICLE VI. CONDITIONS TO CLOSING 44
6.1 Conditions to Buyer's Obligations 44
(a) Representations and Warranties 44
(b) Covenants 44
(c) Material Adverse Change 44
(d) Consents 45
(e) No Proceeding or Litigation 45
(f) Legal Matters 45
(g) Certificate of Seller 45
(h) Certificate; Documents 45
(i) Tax Certificates 45
(j) Lender Consents 46
(k) Other Closing 46
6.2 Conditions to Sellers' Obligations 46
(a) Representations and Warranties 46
(b) Covenants 46
(c) Material Adverse Change 46
(d) Consents 46
(e) No Proceeding or Litigation 46
(f) Legal Matters 47
(g) Certificates of Buyer and HON 47
(h) Certificates; Documents 47
(i) Other Closing 47
ARTICLE VII. COVENANTS OF SELLER 47
7.1 Conduct of Businesss 47
(a) Obligations for Borrowed Money 47
(b) Employee Matters 48
(c) Sale of Assets 48
(d) Commitments 48
(e) Leased Facilities 48
(f) Encumbrances 48
(g) Insurance 48
(h) Litigation 48
(i) Representations and Warranties 48
(j) Commitments 48
7.2 Disclosure Supplements 48
7.3 Closing 49
7.4 Confidentiality 49
7.5 Maintenance of Insurance 49
7.6 Inventories 49
7.7 Maintenance of, and Access to, Records 50
7.8 Non-Competition 50
(a) Period and Conduct 50
(b) Territory 50
(c) Definition 50
(d) Remedies 51
(e) Subsidiaries, Divisions and 51
Affiliates
(f) Severability 51
7.9 Accounts Receivable 51
7.10 Name Change Filings 51
7.11 No Shopping 52
7.12 Plant Closing Obligations 52
7.13 Further Assurances; Customer and Supplier
Relationships; Assertion of Claims 52
7.14 Appointment of Representative 52
7.15 Payment of Indebtedness; Releases 53
ARTICLE VIII. COVENANTS OF BUYER AND HON 53
8.1 Covenants of Buyer 53
(a) Maintenance of, and Access to,
Records 53
(b) Closing 53
(c) Disclosure Supplements 53
(d) Copies 54
(e) Insurance 54
(f) Supply of Products 54
(g) Further Assurances 54
8.2 Covenants of HON 54
(a) Closing 54
(b) IRB Consents 54
(c) Buyer Note 54
ARTICLE IX. CERTAIN ADDITIONAL COVENANTS 54
9.1 Access to Records and Properties 54
9.2 Expenses; Transfer Taxes 55
9.3 Bulk Transfer Laws 55
9.4 Press Releases and Disclosure 55
9.5 Cooperation in the Defense of Claims 55
9.6 Regulatory Approvals 55
9.7 Employee Matters 56
9.8 [Intentionally omitted] 58
9.9 Product Warranty Work 58
ARTICLE X. TERMINATION 58
10.1 Termination 58
(a) Mutual Consent 58
(b) Termination Date 58
(c) Sellers Misrepresentation or Breach 58
(d) Buyer Misrepresentation or Breach 58
(e) Court Order 58
(f) Material Adverse Change 59
(g) Buyer's Conditions 59
(h) Sellers' Conditions 59
10.2 Effect of Termination 59
ARTICLE XI. INDEMNIFICATION 59
11.1 Indemnification by Buyer 59
11.2 Indemnification by Sellers 60
(I) General 60
(II) Environmental Indemnification 60
(III) Tax Indemnification 61
(A) Tax Indemnification by Allied
Shareholders 61
(B) Tax Indemnification by Buyer 61
(C) Straddle Period 62
(D) Procedures Relating to Tax
Indeminification 62
(E) Miscellaneous Tax Matters 63
(F) Delivery of Tax Information 63
(G) Tax Dispute Resolution Mechanism 63
(H) Survival of Tax Provisions 64
(I) Conveyance Taxes 64
(J) Return Filings; Refunds and
Credits 64
(K) Exclusivity 65
(L) Tax Sharing Agreements 65
(M) Carryforwards of Losses 65
11.3 Notice of Claim; Right to Participate in
and Defend Third Party Claim 65
11.4 Setoff 66
11.5 Time Limitations on Claims for
Indemnification 67
11.6 Maximum and DeMinimis Amounts 68
11.7 Exclusions 68
11.8 Dispute Resolution 68
ARTICLE XII. MISCELLANEOUS 70
12.1 Amendments 70
12.2 Entire Agreement 70
12.3 Governing Law 70
12.4 Notices 70
12.5 Counterparts 71
12.6 Assignment 71
12.7 Waivers 71
12.8 Third Parties 72
12.9 Schedules 72
12.10 Headings 72
12.11 Certain Definitions 72
12.12 Remedies Not Exclusive 72
12.13 Gender and Number 72
12.14 Attorney's Fees 72
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") dated as of
January 28, 2000, is among RON F. SKORONSKI ("Skoronski"), KIRK
R. SORENSEN ("Sorensen", and together with Skoronski, the "Allied
Shareholders"), MADISON FIRE PLACE, INC., a Wisconsin corporation
("Madison"), FIREPLACE & SPA, INC., a Wisconsin corporation
("FPSI"), and THE MINOCQUA FIREPLACE COMPANY, a Wisconsin
corporation ("Minocqua") (collectively, "Sellers"), HEARTH
TECHNOLOGIES INC., an Iowa corporation ("Buyer"), and HON
INDUSTRIES INC., an Iowa corporation ("HON").
W I T N E S S E T H:
WHEREAS, the Allied Shareholders own all of the issued
and outstanding shares of Allied Fireside, Inc., a Wisconsin
corporation ("Allied"), Madison, FPSI and Minocqua (collectively,
the "Companies");
WHEREAS, the Companies carry on the business (the
"Business") of (1) designing, manufacturing, distributing,
marketing, selling and installing hearth and fireplace products,
including gas and wood burning fireplaces, inserts, stoves, logs,
mantels, surrounds, fascia, cabinetry, venting parts and
accessories ("Hearth Products") and (2) distributing, marketing,
selling and installing spas, outdoor kitchens, barbecues and
grills, and related products, such as outdoor and patio
furniture, shelving and garage doors ("Other Products," and
together with Hearth Products, the "Products");
WHEREAS, the Allied Shareholders desire to sell to
Buyer, and Buyer desires to purchase from the Allied
Shareholders, all of the issued and outstanding shares of Common
Stock, without par value, of Allied (collectively, the "Allied
Shares");
WHEREAS, Madison, FPSI, and Minocqua (each, an "Asset
Seller" and collectively, the "Asset Sellers") desire to sell
substantially all of their respective assets, properties, rights
and interests to Buyer; and
WHEREAS, Buyer desires to purchase and acquire from
each Asset Seller substantially all of such assets, properties,
rights and interests of such Asset Seller in consideration of
certain payments by Buyer and the assumption by Buyer of certain
liabilities and obligations of such Asset Seller specifically
disclosed in this Agreement.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants hereinafter contained and other good and
valuable consideration had and received, HON, Buyer, the Asset
Sellers and the Allied Shareholders, on the basis of, and in
reliance upon, the representations, warranties, covenants,
obligations and agreements set forth in this Agreement, and upon
the terms and subject to the conditions contained herein, hereby
agree as follows:
ARTICLE I PURCHASE AND SALE
1.1 Purchase and Sale of Assets. At the Closing (as
hereinafter defined) and effective as of the Closing Date (as
hereinafter defined), Buyer shall purchase and acquire from each
Asset Seller, and each Asset Seller shall sell, transfer, convey,
assign and deliver to Buyer, on a going concern basis, all of the
assets, properties, rights and interests owned, used, occupied or
held by or for the benefit of such Asset Seller wherever
situated, as the same shall exist as of the Closing Date, and
wherever situated, including, without limitation, the following:
(a) [Intentionally omitted];
(b) Prepaids. All prepaid expenses, advance payments,
deposits, surety accounts and other similar assets,
including, without limitation, prepaid deposits with
landlords, suppliers and utilities;
(c) Inventory. All inventories of products,
work-in-process, finished goods, raw materials, supplies and
parts (collectively, "Inventory" or "Inventories"),
including, without limitation, all Inventories located at
the facilities listed on the Schedule entitled "Real Estate
and Leases";
(d) Accounts Receivable. All accounts receivable, any
payments received with respect thereto after the Closing
Date, unpaid interest accrued on any such accounts
receivable and any security or collateral relating thereto
(collectively, "Accounts Receivable");
(e) Fixed Assets. All tangible personal property,
plant and equipment, including, without limitation,
buildings, structures, fixtures, machinery and equipment,
dies, jigs, molds, patterns, tools, tooling, production
fixtures, maintenance machinery and equipment, office
furniture and office equipment, other furnishings, trucks,
automobiles and other vehicles and transportation equipment,
leasehold improvements and construction-in-process, and all
tangible personal property set forth on the Schedule
entitled "Fixed Assets" attached hereto (collectively, the
"Fixed Assets");
(f) [Intentionally omitted];
(g) Leased Property. All rights and interests under
the lease agreements (the "Lease Agreements") more
particularly described under the heading "Leased Property"
on the Schedule entitled "Real Estate and Leases" attached
hereto, which descriptions are incorporated herein by
reference (the premises subject to the Lease Agreements
being hereinafter collectively referred to as the "Leased
Property");
(h) Intellectual Property Rights. All inventions,
discoveries, trademarks, patents, trade names, copyrights,
know-how, intellectual property, software, shop rights,
licenses, developments, research data, designs, technology,
discoveries, trade secrets, test procedures, processes,
research data, formulas and other confidential information,
intellectual and similar intangible property rights, whether
or not patentable (or otherwise subject to legally
enforceable restrictions or protections against unauthorized
third party usage), and any and all applications for, and
extensions, divisions and reissuances of, any of the
foregoing, and rights therein, including, without
limitation, (i) the names "Madison Fire Place, Inc.",
"Fireplace & Spa, Inc." and "The Minocqua Fireplace Company"
and all related trade and business names and trademarks,
(ii) the intellectual and intangible property rights
described on the Schedule entitled "Intellectual Property"
attached hereto, (iii) the production methods, formulas,
know-how and technical expertise relating to the Products
and (iv) any and all domain names, World Wide Web sites and
related content and software, including electronic commerce
and ordering software, rights of use and access to related
computer servers and programs, and rights under related
contracts, agreements and licenses (collectively, the
"Intangibles");
(i) Business Records. All books and records,
including, without limitation, all files, invoices, forms,
accounts, correspondence, production records, technical,
accounting, manufacturing and procedural manuals, employment
records, studies, reports or summaries relating to any
Environmental Requirements (as hereinafter defined), and
other books and records relating to the operation of the
Business or other assets or properties, and any confidential
information which has been reduced to writing or other
tangible medium;
(j) Rights Under Confidentiality Agreements and
Warranties. All rights, claims and benefits of such Asset
Seller in, to or under any (i) (A) employee confidentiality
agreements entered into by such Asset Seller and (B)
confidentiality or secrecy agreements entered into by such
Asset Seller with third parties that relate to the use or
disclosure of information; (ii) express or implied
warranties from the suppliers of goods or services
(including any coverage rights under product liability or
other insurance maintained by any of such suppliers for the
benefit of such Asset Seller); and (iii) non-competition or
non-solicitation agreements, restrictive covenants and
similar agreements;
(k) Customer List. Lists of all of the Persons to
whom or to which such Asset Seller has sold or otherwise
furnished Products, directly or indirectly (individually, a
"Customer" and collectively, the "Customers," such terms to
include any assignee or successor of any such Person,
whether by consolidation, merger, sale of assets or
otherwise), including related information as to the unit and
dollar volume of such sales, the type of Products so sold or
furnished, the method of distribution and other relevant
marketing and product information for each Customer (the
"Customer Lists");
(l) Catalogs and Advertising Materials. All
promotional and advertising materials, including, without
limitation, all catalogs, brochures, plans, supplier lists,
manuals, handbooks, equipment and parts lists, dealer and
distributor lists, and labels and packaging materials;
(m) Purchase Orders. All unfilled purchase and sale
orders (including releases of quantities pursuant thereto);
(n) Contracts. Subject to Sections 1.2(b) and 1.4,
all rights, benefits and interests of such Asset Seller in
and to all licenses, leases, contracts, agreements,
commitments and undertakings;
(o) Permits. All licenses, permits, approvals,
variances, waivers or consents (collectively, the
"Permits"), to the extent transferable, issued by any
foreign, United States, state or local governmental entity
or municipality or subdivision thereof or any authority,
department, commission, board, bureau, agency, court or
instrumentality (collectively, "Governmental Authorities");
(p) [Intentionally omitted];
(q) Goodwill. The goodwill of such Asset Seller as a
going concern; and
(r) Miscellaneous. Except for the Retained Assets (as
hereinafter defined), all other assets, properties, rights
and interests of such Asset Seller, of every kind, nature
and description, whether tangible or intangible, real,
personal or mixed, and wherever situated, including, without
limitation, those assets, properties, rights and interests
set forth on the Unaudited Balance Sheet (as hereinafter
defined), all of which are to be sold, transferred,
conveyed, assigned and delivered to Buyer at the Closing
pursuant to this Agreement.
All of the assets, properties, rights and interests owned, used,
occupied or held by or for the benefit of such Asset Seller,
which are to be sold, transferred, conveyed, assigned and
delivered by such Asset Seller to Buyer at the Closing as
contemplated herein, including without limitation, those
described in clauses (a) through (r) above, but excluding the
Retained Assets, are referred to herein collectively as the
"Acquired Assets".
1.2 Retained Assets. Anything in Section 1.1 to the
contrary notwithstanding, the following assets (collectively, the
"Retained Assets") shall be retained by each Asset Seller, and
Buyer shall in no way be construed to have purchased or acquired
(or to be obligated to purchase or to acquire) any interest
whatsoever in any of the following:
(a) Designated Assets. The assets, properties, rights
and/or interests, owned, used, occupied or held by or for
the benefit of such Asset Seller that are listed on Schedule
1.2 as not being included within, or constituting a part of,
the Acquired Assets (collectively, the "Designated Assets");
(b) Non-Assigned Contracts. All of the rights and
interests, and all of the liabilities and obligations, of
each Asset Seller in, under or pursuant to any license,
lease, contract, agreement, commitment or undertaking set
forth on the Schedule entitled "Non-Assigned Contracts"
(collectively, the "Non-Assigned Contracts");
(c) Employee Plan Assets. Except as otherwise
provided in Section 9.7, the rights of such Asset Seller
under, and any funds and property held in trust or any other
funding vehicle pursuant to, any "employee benefit plan"
(within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA")) or any other bonus, stock option, stock
appreciation, stock purchase, severance, termination, lay-
off, leave of absence, disability, workers compensation,
pension, profit sharing, retirement, vacation or holiday
pay, insurance, deferred compensation or other employee or
welfare benefit plan, agreement or arrangement of such Asset
Seller applicable to such Asset Seller's past, present or
future employees (collectively, "Employee Plans"); and
(d) Corporate Records. Such Asset Seller's minute
books, stock books, stock ledger and corporate seal;
(e) [Intentionally omitted]; and
(f) Insurance. All rights, claims and benefits of
such Asset Seller in, to or under all insurance policies
maintained by such Asset Seller, or by any Affiliate of such
Asset Seller for the Business or the Acquired Assets.
1.3 Purchase and Sale of Shares. At the Closing, each
Allied Shareholder shall sell, assign, transfer and deliver to
Buyer, and Buyer shall purchase from each Allied Shareholder, the
Allied Shares, free from any restrictions, liens, encumbrances,
claims (including any "adverse claim" as such term is defined in
the Uniform Commercial Code), options, calls, pledges, trusts and
other commitments, agreements or arrangements (collectively,
"Claims"). The number of Allied Shares to be sold by each Allied
Shareholder is as set forth on Schedule 1.3. Each Allied
Shareholder shall pay any and all state and/or federal transfer
taxes and governmental charges assessable against such
Shareholder regarding the transfer of such Shareholder's Allied
Shares to Buyer.
1.4 Assignability and Consents.
(a) Required Consents. The Schedule entitled
"Assignments and Consents" sets forth a list of those
material assets, properties, rights and interests of Allied
(all assets, properties, rights and interests of Allied,
whether or not material, being referred to as the "Allied
Assets"), and all material Acquired Assets, including
material Contracts, Permits and Lease Agreements, which are
non-assignable or non-transferable or cannot be subleased to
Buyer without, or with respect to which the transactions
contemplated by this Agreement would require, a consent,
novation, approval, authorization, waiver, agreement, or
satisfaction of any other requirement (including filing and
registration requirements) of or from some other individual,
partnership, corporation, association, joint stock company,
trust, joint venture, limited liability company or
Governmental Authority (each, a "Person") ("Consents").
Each Seller has commenced and shall continue to take, or
cause to be taken by others, all necessary actions required
to obtain or satisfy, at the earliest practicable date, all
Consents, from any Persons necessary to authorize, approve
or permit, and to consummate and make effective, the
transactions contemplated by this Agreement, including full
and complete sale, conveyance, assignment, sublease or
transfer of the Acquired Assets and the indirect transfer or
deemed transfer or assignment of the Allied Assets, and to
continue such efforts as may be required after the Closing
Date; provided, however, that (i) the Sellers shall not be
required to take any such action with respect to contracts
with home builders specified on the Schedule entitled
"Builder Contracts" ("Builder Contracts"), and (ii) Sellers
shall only be required under this Section 1.4, as a
condition precedent to Buyer's obligations to consummate the
transactions provided for by this Agreement, to obtain
consents to the assignment of material Lease Agreements (the
"Required Consents").
(b) Nonassignable Items. Anything in this Agreement
to the contrary notwithstanding, this Agreement shall not
constitute, or be deemed to constitute, an Agreement to
sell, convey, assign, sublease or transfer any Allied
Assets, or Acquired Assets, including Contracts, Permits and
Lease Agreements, if an attempted or deemed sale,
conveyance, assignment, sublease or transfer thereof,
without the Consent of another party thereto or a
Governmental Authority would constitute a breach of, or in
any way affect the rights of Allied, any Seller or Buyer
with respect thereto ("Nonassignable Items"). Each Seller
shall use his or its best efforts, and Buyer shall cooperate
in all reasonable respects with Sellers, to obtain and
satisfy all Consents and to resolve all impracticalities of
sale, conveyance, assignment, sublease or transfer necessary
to convey to Buyer all Nonassignable Items. If any such
Consents are not obtained and satisfied or if an attempted
sale, conveyance, assignment, sublease or transfer would be
ineffective, each Seller and its appropriate Affiliate, and
Buyer, shall, at and after the Closing (i) enter into such
arrangements (including related written agreements) as Buyer
may reasonably request to provide Buyer the benefit of any
such Nonassignable Items (it being acknowledged that such
arrangement may include obligations imposed on Sellers and
such Affiliates promptly to pay to Buyer when received all
monies and other items of value received by Sellers and such
Affiliates under any such Nonassignable Item) in exchange
for the performance by Buyer of Sellers' obligations in
respect of such Nonassignable Items under Section 2.1(c) and
(ii) use their reasonable best efforts to assure that the
Companies' current customers and suppliers shall continue to
do business with Buyer in accordance with the terms and for
the periods of time set forth in any Nonassignable Item.
ARTICLE II LIABILITIES
2.1 Assumption of Liabilities. On the terms and
subject to the conditions set forth in this Agreement, Buyer
shall assume, at the Closing and effective as of the Closing
Date, and shall thereafter pay, perform and discharge as and when
due, except as otherwise provided in Section 9.7, the following,
and only the following, liabilities and obligations of each Asset
Seller with respect to its operation of its Business
(collectively, the "Assumed Liabilities"):
(a) [Intentionally omitted];
(b) Accrued Liabilities. All accounts payable,
accrued expenses and other liabilities referred to under the
caption "Assumed" on Schedule 2.1(b) in the amounts set
forth thereon or such greater amounts as may arise or accrue
after the date of such Schedule in the ordinary and normal
course and consistent with the representations, warranties,
covenants, obligations and agreements set forth in this
Agreement;
(c) Contracts. All ordinary and normal liabilities
and obligations of Sellers arising under the terms of the
Contracts disclosed on the Schedule entitled "Contracts"
other than contracts that constitute Non-Assigned Contracts
or are included in the Designated Assets (the "Assumed
Contracts") but only to the extent such liabilities and
obligations arise or accrue after the Closing Date in the
ordinary and normal course and consistent with the
representations, warranties, covenants, obligations and
agreements set forth in this Agreement; provided, however,
that Buyer shall not assume or be responsible for any such
liabilities or obligations that (i) arise from breaches
thereof or defaults thereunder by Sellers (other than any
breach of any Builder Contract deemed to arise solely as a
result of the assignment of any such Builder Contract to
Buyer pursuant to this Agreement), (ii) require any payment
or other consideration including any earn-out or contingent
purchase price, in connection with any merger, acquisition
or similar transaction, (iii) arise under instruments or
agreements evidencing indebtedness of Sellers (other than
those installment contracts, capital leases or vehicle or
computer hardware and software sales contracts that are
disclosed on the Schedule entitled "Contracts" and pursuant
to which Acquired Assets are being purchased or leased by
any Company), or (iv) arise under the Agreement for Shared
Facilities, Equipment and Employees, dated as of January 1,
1999, among Allied, Madison, Minocqua, Madison Lighting,
Ltd. ("Lighting") and Benson Pool & Patio, Inc. ("Benson")
(the "Agreement for Shared Facilities") as a result of the
change of control of Allied, all of which liabilities and
obligations shall constitute Retained Liabilities (as
hereinafter defined); and
(d) Warranty Commitments. The Ordinary Warranty
Commitments (as defined in Section 5.1(w)).
2.2 Retained Liabilities. Except to the extent
assumed as provided in Section 2.1 or Section 9.7, each Asset
Seller shall retain, and Buyer shall not assume, or be
responsible or liable with respect to, any liabilities or
obligations of such Asset Seller, whether or not of, associated
with, or arising from, any of the Acquired Assets, and whether
fixed, contingent or otherwise, known or unknown (collectively
referred to hereinafter as the "Retained Liabilities"),
including, without limitation, the following:
(a) Pre-Closing. All liabilities and obligations
relating to, based in whole or in part on events or
conditions occurring or existing in connection with, or
arising out of, the Business as operated prior to the
Closing Date, or the ownership, possession, use, operation
or sale or other disposition prior to the Closing Date of
any Products or any of the Acquired Assets (or any other
assets, properties, rights or interests associated, at any
time prior to the Closing Date, with the Business);
(b) Liabilities Relating to the Sale of Acquired
Assets. All liabilities and obligations of such Asset
Seller or any of its Affiliates, or their respective
directors, officers, shareholders or agents, arising out of,
or relating to, this Agreement or the transactions
contemplated hereby, whether incurred prior to, at, or
subsequent to the Closing Date, including, without
limitation, all liabilities to shareholders or former
shareholders of any Seller, finder's or broker's fees and
expenses, and any and all fees and expenses of any
attorneys, accountants or other professionals retained by or
on behalf of such Asset Seller or any of its Affiliates;
(c) Employee-Related Liabilities. All liabilities and
obligations to any persons at any time employed by such
Asset Seller or its Affiliates or their respective
predecessors-in-interest in the Business or otherwise, at
any time or to any such person's spouse, children, other
dependents or beneficiaries, with respect to incidents,
events, exposures or circumstances occurring at any time
during the period or periods of any such persons' employment
by such Asset Seller or its Affiliates or their respective
predecessors-in-interest, whenever such claims mature or
are asserted, including, without limitation, all liabilities
and obligations arising (i) under any Employee Plans,
(ii) under any employment, wage and hour restriction, equal
opportunity, discrimination, plant closing or immigration
and naturalization laws, (iii) under any collective
bargaining Laws, agreements or arrangements, or (iv) in
connection with any workers' compensation or any other
employee health, accident, disability or safety claims;
(d) Litigation. All liabilities and obligations
relating to any litigation, action, suit, claim,
investigation or proceeding pending on the date hereof, or
constituted hereafter, based in whole or in part on events
or conditions occurring or existing in connection with, or
arising out of, or otherwise relating to, the Business as
operated by such Asset Seller or any of its Affiliates (or
any of their respective predecessors-in-interest), or the
ownership, possession, use, operation, sale or other
disposition prior to the Closing Date of any Products or any
of the Acquired Assets (or any other assets, properties,
rights or interests associated, at any time prior to the
Closing Date, with such Asset Seller);
(e) Product, Environmental and Safety Liability.
Without limiting the rights of Sellers against any third
party, all liabilities and obligations relating to the
Business, any Products or the Acquired Assets (or any other
assets, properties, rights or interests associated, at any
time prior to the Closing Date, with the Business, Products
or the Acquired Assets), based in whole or in part on events
or conditions occurring or existing prior to the Closing
Date and connected with, arising out of or relating to (i)
any dispute for services rendered or goods manufactured,
including, without limitation, product warranty claims
(other than Ordinary Warranty Commitments) and product
liability claims, and claims for refunds (other than
customer deposits), returns, personal injury and property
damage, (ii) Hazardous Materials, Environmental Requirements
or Environmental Damages (all as hereinafter defined)
including costs to obtain permits required to be, but not
obtained, prior to Closing and to document hazardous waste
disposals, (iii) claims relating to employee health and
safety, including claims for injury, sickness, disease or
death of any Person, or (iv) compliance with any statutes,
laws, rules, regulations, orders, ordinances, codes and
decrees of Governmental Authorities (collectively, "Laws")
relating to any of the foregoing;
(f) Taxes. All liabilities and obligations of such
Asset Seller or any of its Affiliates (or any of their
respective predecessors-in-interest) for any Taxes (as
hereinafter defined) due or becoming due by reason of
(i) the conduct of the Business, or (ii) the ownership,
possession, use, operation, purchase, acquisition, sale or
disposition, of any Products or any of the Acquired Assets,
including, without limitation, (1) Taxes attributable to the
sale of inventory and employee withholding tax obligations;
(2) Taxes imposed on, or accruing as a result of the
purchase and sale of the Acquired Assets (except state sales
or other similar transfer taxes arising in connection with
the transfer of assets to Buyer as provided in Section 9.2);
and (3) Taxes attributable to, or resulting from, recapture
of depreciation, other tax benefit items, or otherwise
arising from the transactions contemplated by, this
Agreement;
(g) [Intentionally omitted];
(h) Liabilities Relating to Retained Assets. All
liabilities and obligations relating to, based in whole or
in part on events or conditions occurring or existing in
connection with, or arising out of, any and all assets,
properties, rights and interests that are not being acquired
by Buyer hereunder, including, without limitation, the
Retained Assets;
(i) Post-Closing Date. All liabilities and
obligations incurred by such Asset Seller or its Affiliates
or their respective directors, officers, shareholders,
agents or employees, other than on behalf of Buyer or its
Affiliates, after the Closing Date;
(j) Shutdown Costs. Any liabilities or obligations
relating to, based in whole or in part on events or
conditions occurring or existing in connection with, or
arising out of, the shutdown prior to the Closing of any of
the operations and facilities utilized by such Asset Seller,
including, without limitation, any action which could be
construed as a "plant closing" or "mass layoff," as those
terms are defined in the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Sections 2101-2109 ("WARN"), or any
"employment loss," as defined in WARN, which any employee of
such Asset Seller or any of its Affiliates may suffer;
provided, however, that, for purposes of this
Section 2.2(j), employees of the Asset Sellers immediately
prior to the Closing shall be deemed to be employees of
Buyer as of the Closing Date; and
(k) Acquisition Payments. All liabilities and
obligations of any Company to make any payment or provide
consideration in connection with any merger, acquisition or
similar transaction.
ARTICLE III PURCHASE PRICE
3.1 Payment. In full consideration for the transfer
of the Allied Shares and the Acquired Assets, at the Closing
Buyer shall:
(i) deliver and pay to the Asset Sellers Thirty-six
Million Two Hundred Fifty Thousand Dollars
($36,250,000) (the "Cash Amount") in immediately
available funds by bank wire transfer to an
account designated in writing for this purpose by
Axley Brynelson, LLP, special counsel to Sellers
("Sellers' Counsel"), on behalf of Sellers to
Buyer prior to the Closing;
(ii) execute and deliver to Sellers a Promissory Note
(the "Buyer Note"), dated as of the Closing Date,
payable in the original principal amount of Two
Million Two Hundred Fifty Thousand Dollars
($2,250,000) to Sellers, and in substantially the
form of Schedule 3.1(ii) hereto; and
(iii)execute and deliver to the Allied
Shareholders Convertible Debentures with a
combined face amount of $26,500,000, dated as
of the Closing Date, payable in such
denominations and in such amounts to such
payees as set forth in, and in substantially
the form of, Schedule 3.1(iii) hereto
("Convertible Debentures", and collectively
with the Cash Amount and the Buyer Note, the
"Purchase Price").
3.2 [Intentionally omitted]
3.3 [Intentionally omitted]
3.4 Intercompany Obligations. (a) Notwithstanding
anything in the Schedules to this Agreement to the contrary,
immediately prior to the Closing, all Intercompany Obligations
(as hereinafter defined) due and payable as of the Closing Date
or attributable to any period ending on or prior to the Closing
Date shall, for all purposes of this Agreement, be settled and
paid, with the result that as of and following the Closing, there
shall be no further obligation or liability with respect to any
Intercompany Obligations as of the Closing Date.
(b) For purposes of this Section 3.4, (i) the term
"Intercompany Obligations" means all intercompany notes, cash
advances and payables between any Seller Company, on the one
hand, and Allied, on the other hand, except for ordinary and
normal trade payables, if any, arising from transactions between
Allied, on the one hand, and any of the Seller Companies, on the
other hand, as shown on the books and records of Allied as of the
Closing Date and (ii) the term "Seller Company" means any Allied
Shareholder or his Affiliates, other than Allied.
3.5 Satisfaction of Indebtedness. At or prior to the
Closing, each Company shall take such actions (including without
limitation paying, or directing Buyer to apply a portion of the
Cash Amount to pay to, the creditors of such Company) as may be
required to fully pay, satisfy and discharge all of the
indebtedness of such Company, including the promissory notes and
other evidence of indebtedness listed or described on the
Schedule entitled "Existing Indebtedness to be Discharged by
Closing," and to obtain and deliver to Buyer copies of all
executed releases, in form and substance reasonably satisfactory
to Buyer, necessary to secure the release of all Liens other than
Permitted Liens (as hereinafter defined) on the Acquired Assets
and the Allied Assets relating thereto (all of which releases
Sellers shall cause to be filed promptly, but no later than two
(2) business days, after payment of the related indebtedness and
in any event promptly after the Closing Date).
3.6 Purchase Price Allocation. The Purchase Price
represents the amount agreed upon by the parties to be the
aggregate value of the Acquired Assets and the Allied Shares, and
shall be allocated both between the Allied Shares and the
Acquired Assets, and among the Acquired Assets, in accordance
with their respective fair market values, which the parties have
agreed are or shall be as set forth on the Schedule entitled
"Agreed Allocation of Purchase Price" attached hereto. Any
excess of the Purchase Price over the fair market value of the
Acquired Assets shall be allocated to goodwill. Each of the
parties shall report the purchase and sale of the Acquired Assets
and the Allied Shares, including, without limitation, in all
federal, foreign, state, local and other Tax returns and reports
prepared and filed by or for any Seller or Buyer, in accordance
with the basis of allocation described in this Section 3.6.
ARTICLE IV CLOSING
4.1 General. As used in this Agreement, the "Closing"
shall mean the time at which Sellers consummate the sale,
assignment, transfer and delivery of the Acquired Assets and the
Allied Shares to Buyer as provided herein by the execution and
delivery by Sellers of the documents and instruments referred to
in Sections 4.2 and 4.3 against delivery by Buyer of the
documents and payments provided in Sections 3.1 and 4.4, and
Sellers, Buyer and the other Persons referred to herein deliver
the additional documents referred to in Sections 4.5 and 4.6.
In the absence of a prior termination of this Agreement by one of
the parties in accordance with Article X, the Closing shall take
place at the offices of Jones, Day, Reavis & Pogue, 77 West
Wacker, 35th Floor, Chicago, Illinois 60601-1692 at 10:00 A.M. on
the second business day following the day on which the waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "H-S-R Act") shall have expired or been terminated (the
"HSR Approvals"), or at such other time and place and on such
other day as shall be mutually agreed upon in writing by the
parties hereto (the "Closing Date"). Legal title, equitable
title and risk of loss with respect to the Acquired Assets and
the Allied Shares shall not pass to Buyer until the Acquired
Assets and the Allied Shares are transferred at the Closing,
which transfer, once it has occurred, shall be deemed effective
for tax, accounting and other computational purposes as of
12:01 A.M. (Central Time) on the Closing Date.
4.2 Documents to be Delivered by Asset Seller. At the
Closing, each Asset Seller shall deliver to Buyer:
(a) Copies of (i) the resolutions of the Boards of
Directors and shareholders of such Asset Seller, authorizing
and approving this Agreement and all other transactions and
agreements contemplated hereby, (ii) such Asset Seller's
respective Articles of Incorporation, and (iii) such Asset
Seller's respective Bylaws, all certified by the respective
corporate Secretary or Assistant Secretary of such Asset
Seller to be true, correct, complete and in full force and
effect and unmodified as of the Closing Date;
(b) A bill of sale transferring such Asset Seller's
Acquired Assets to Buyer, free and clear of any and all
liens, equities, claims, prior assignments, mortgages,
charges, security interests, pledges, conditional sales
contracts, collateral security arrangements and other title
retention arrangements, restrictions (including, in the case
of real property, rights of way, use restrictions, and other
variances, reservations or limitations of any nature) or
encumbrances whatsoever (collectively, "Liens") except for
Permitted Liens and subject to filing of those releases and
documents referred to in Sections 3.5, 4.2(k) and 4.3(k);
(c) An opinion, dated as of the Closing Date, of
Sellers' Counsel, addressed to Buyer, substantially in the
form attached hereto as Schedule 4.2(c);
(d) Copies of all Required Consents, together with the
related estoppel certificate from such landlord with respect
to each such Lease Agreement for which a Required Consent is
provided;
(e) Instruments of assignment to Buyer of all of such
Asset Seller's trademarks, trade names, service marks and
patents (and all applications for, and extensions and
reissuances of, any of the foregoing and rights therein)
identified on the Schedule entitled "Intellectual Property";
(f) The certificate required by Section 6.1(g);
(g) Good standing or status certificates for such
Asset Seller from the appropriate state authorities in each
jurisdiction in which such Asset Seller is either
incorporated or qualified to do business as a foreign
corporation, each dated not more than thirty (30) days prior
to the Closing, together with facsimiles or telegrams, if
available, or, if not, oral advice as to good standing as of
the Closing from each of such jurisdictions;
(h) Evidence of the due filing by each Asset Seller's
ultimate parent with the Federal Trade Commission ("FTC")
and the Antitrust Division of the United States Department
of Justice ("DOJ") pursuant to the H-S-R Act and the
expiration or early termination of the waiting periods
thereunder;
(i) An incumbency certificate of the officers of each
Asset Seller;
(j) Instruments of assignment of each Lease Agreement
to which such Asset Seller is a party;
(k) Copies of executed releases, in form and substance
reasonably satisfactory to Buyer, including, without
limitation, termination statements under the Uniform
Commercial Code of any financing statements filed against
any Acquired Assets, evidencing discharge, removal and
termination of all Liens (other than Permitted Liens) to
which the Acquired Assets are subject including, without
limitation, Liens securing the indebtedness described in the
Schedule entitled "Existing Indebtedness to be Discharged by
Closing", together with evidence satisfactory to Buyer that
the indebtedness described on such Schedule shall have been
satisfied and extinguished, which releases Sellers shall
cause to be filed upon payment of the related indebtedness
and in any event promptly after the Closing Date;
(l) A receipt from each of the Asset Sellers
acknowledging receipt of the Purchase Price allocable to the
Acquired Assets and the Assumed Liabilities of such Asset
Seller;
(m) Such other deeds, bills of sale, endorsements,
assignments, affidavits, and other good and sufficient
instruments of sale, assignment, conveyance and transfer in
form and substance satisfactory to Buyer and its counsel, as
are required to effectively vest in Buyer good and
marketable title in and to all of the Acquired Assets
(including such certificates of title or other documents as
are so required with respect to any vehicles included in the
Acquired Assets), free and clear of any and all Liens except
Permitted Liens, and subject to filing of those releases and
documents referred to in Sections 3.5, 4.2(k) and 4.3(k);
and
(n) Copies of resolutions transferring sponsorship of
the Assumed Plan (as hereinafter defined) to Buyer, the
Assignment Agreement dated as of the Closing transferring
sponsorship of the Assumed Plan, and amendments to the
Assumed Plan pursuant to Section 9.7 reflecting the transfer
of sponsorship of the Assumed Plan to Buyer.
4.3 Documents to be Delivered by the Allied
Shareholders. At the Closing, the Allied Shareholders shall
deliver to Buyer:
(a) Certificates representing all of the Allied
Shares, duly endorsed (or accompanied by appropriate stock
powers duly endorsed) in blank by the registered holders
thereof for transfer, together with such supporting
documents, endorsements, assignments, affidavits, and other
good and sufficient instruments of sale and transfer, in
form and substance satisfactory to Buyer and its counsel, as
are necessary to permit Buyer to acquire the Allied Shares
free of any Claim;
(b) The stock books, stock ledgers, minute books and
corporate seal of Allied;
(c) An opinion of Sellers' Counsel substantially in
the form attached hereto as Schedule 4.2(c), dated as of the
Closing Date, addressed to Buyer;
(b) Good standing or status certificates for Allied
from the Secretary of State of the State of Wisconsin, and
each other jurisdiction in which Allied is qualified to do
business as a foreign corporation, each dated not more than
thirty (30) days prior to the Closing, together with
facsimiles or telegrams, if available, or if not oral
advice, as to good standing as of the Closing from each of
the foregoing jurisdictions;
(c) Resignations tendered by each of the Directors of
Allied;
(d) Certified copies of Allied's Articles of
Incorporation and Allied's Bylaws, all certified by the
Secretary or an Assistant Secretary of Allied;
(e) Copies of all Required Consents relating to the
sale of the Allied Shares;
(f) Evidence of the due filing by the Allied
Shareholders with the FTC and the DOJ pursuant to the H-S-R
Act and the expiration or early termination of the waiting
period thereunder;
(g) The certificate required by Section 6.1(g);
(h) A receipt from each of the Allied Shareholders
acknowledging receipt of the Purchase Price allocable to the
Allied Shares delivered at Closing;
(i) Copies of executed releases, in form and substance
reasonably satisfactory to Buyer, including, without
limitation, termination statements under the Uniform
Commercial Code of any financing statements filed against
any Allied Assets, evidencing discharge, removal and
termination of all Liens (other than Permitted Liens) to
which the Allied Assets are subject including, without
limitation, Liens securing the indebtedness described in the
Schedule entitled "Existing Indebtedness to be Discharged by
Closing", together with evidence satisfactory to Buyer that
the indebtedness described on such Schedule shall have been
satisfied and extinguished, which releases Sellers shall
cause to be filed upon payment of the related indebtedness
and in any event promptly after the Closing Date;
(j) Such other agreements, endorsements, assignments,
affidavits, and other good and sufficient instruments of
sale, assignment, conveyance and transfer in form and
substance satisfactory to Buyer and its counsel, as are
required to effectively vest in Buyer good and marketable
title in and to all of the Shares, free and clear of any and
all Claims; and
(k) A bill of sale from Allied transferring the assets
listed on Schedule 1.2 owned by Allied to the Allied
Shareholders.
4.4 Documents to be Delivered by Buyer. At the
Closing, Buyer shall deliver or cause to be delivered to Sellers:
(a) A copy of (i) the resolutions of the Board of
Directors of Buyer and HON authorizing and approving this
Agreement and all other transactions and agreements
contemplated hereby, (ii) HON's Articles of Incorporation,
(iii) Buyer's Articles of Incorporation, as amended to
increase the number of authorized shares of common stock of
Buyer to 10,000,000, and (iv) HON's and Buyer's respective
Bylaws, all certified by the Secretary or an Assistant
Secretary of Buyer or HON to be true, correct, complete and
in full force and effect as of the Closing Date;
(b) The certificate required by Section 6.2(g);
(c) Evidence of the payment of the Cash Amount in the
manner and the amount set forth in Section 3.1;
(d) the Buyer Note, duly executed on behalf of Buyer,
and in substantially the form attached hereto as Schedule
3.1(ii);
(e) evidence of the due filing by Buyer's ultimate
parent, HON, with the FTC and the DOJ pursuant to the H-S-R
Act and the expiration or early termination of the waiting
period thereunder;
(f) An opinion, dated the Closing Date, of James I.
Johnson, Vice President and General Counsel of HON,
addressed to Sellers, substantially in the form attached
hereto as Schedule 4.4(f);
(g) Good standing and tax certificates for Buyer and
HON from the Secretary of State of Iowa, each dated not more
than thirty (30) days prior to the Closing, together with
facsimiles or telegrams, if available, or, if not, oral
advice, as to good standing as of the Closing from each of
such jurisdictions;
(h) An Incumbency Certificate of the officers of each
of Buyer and HON;
(i) An Instrument of Assumption of the Assumed
Liabilities, substantially in the form attached hereto as
Schedule 4.4(i);
(j) The Convertible Debentures, in substantially the
form attached hereto as Schedule 3.1(iii), duly executed on
behalf of Buyer and issued to the persons and in the
denominations set forth on Schedule 3.1(iii);
(k) A Guaranty, in substantially the form attached
hereto as Schedule 4.4(k), duly executed on behalf of HON
(the "HON Guaranty"); and
(l) Resolutions accepting the transfer of sponsorship
of the Assumed Plan from Madison and FPSI, and the
Assumption Agreement dated as of the Closing transferring
sponsorship of the Assumed Plan.
4.5 Documents to be Delivered by Buyer and Sellers.
At the Closing, Buyer and Sellers shall execute and deliver
Amendments to Lease Agreements with Affiliates relating to the
properties described on Schedule 4.5 providing for an eight (8)
year term with an option to terminate by the tenant any time
after the fifth year for a termination fee equal to 50% of the
annual base rent applicable at the time such option is exercised,
a five (5) year option to renew on the part of the tenant, annual
rent increases of no more than three percent (3%), placing
responsibility for structural and roof maintenance and repairs on
the landlord, and, in the case of the Lease Agreement covering
the property located at 2700 N. Fairview, Roseville, MN 55113,
increasing the square footage of leased property from
17,200 square feet to 22,000 square feet and increasing the
initial base rent from $8 per square foot to $10 per square foot.
4.6 Other Documents to be Delivered. At the Closing:
(a) Buyer shall execute and deliver an Employment and
Non-Competition Agreement with each of Skoronski and
Sorensen (the "Key Employees") in substantially the form
attached hereto as Schedule 4.6(a) (each, an "Employment and
Non-Competition Agreement").
(b) [Intentionally omitted]
(b) Each shareholder of the Asset Sellers shall
execute and deliver a Guaranty Agreement substantially in
the form attached hereto as Schedule 4.6(c) (each, a
"Shareholder Guaranty").
(c) [Intentionally omitted]
(d) An amendment and consent to the Agreement for
Shared Facilities, Equipment and Employees, duly executed by
all parties to such Agreement and Buyer, in form and
substance satisfactory to Buyer, waiving any payment
otherwise required to be made under such Agreement because
of any change in control of Allied, adding Buyer as a party
thereto, continuing the effectiveness of such Agreement
until, but no longer than, the one year anniversary of the
Closing, and otherwise amending such Agreement in an
equitable fashion to all parties in light of the
transactions contemplated by this Agreement.
(e) [Intentionally omitted]
(f) Sellers shall deliver such instruments of
satisfaction, release, waiver and settlement relating to the
acquisition and related agreements and instruments,
including promissory notes and rights of first refusal, to
which the Companies are a party, including (i) payment of
all promissory notes, (ii) payment and satisfaction of
contingent purchase price agreements, (iii) releases of
Liens on any Assets, and (iv) waiver of right of first
refusal provisions.
(g) Deutsche Bank Securities Inc. shall deliver an
executed commitment letter obligating it or one of its
Affiliates to purchase the Buyer Note from Sellers on the
Closing Date.
(h) Benson, Lighting, Buyer and HON will execute and
deliver a Transition Services Agreement in substantially the
form attached hereto as Schedule 4.6 (i) or as the parties
may otherwise agree, with all obligations of Benson and
Lighting to Buyer or HON under or related to such Agreement
fully guaranteed by Skoronski and Sorenson.
(i) HON, Buyer, Sellers, American Fireplace Company, a
Maryland corporation ("AFC"), Hearth & Home, Inc., a
Maryland corporation ("H&H") and the other parties listed on
the signature page thereto shall execute and deliver a
Securityholders' Agreement, in substantially the form
attached hereto as Schedule 4.6(j).
ARTICLE V REPRESENTATIONS AND WARRANTIES
5.1 Joint and Several Representations and Warranties
of Sellers. Subject only to those exceptions and qualifications
listed and described (including an identification by section
reference to the representations and warranties to which such
exceptions and qualifications relate) on the Schedules referred
to in this Section 5.1 and attached to this Agreement, Sellers
hereby jointly and severally represent and warrant to Buyer that:
(a) Organization and Standing; Power and Authority.
Each Company is a corporation duly organized, validly
existing and in good standing under the laws of the states
described on Schedule 5.1(a), and has full corporate power
and authority to operate its business, to own or lease its
assets, to carry on its business as now being conducted, and
to enter into and perform this Agreement and the
transactions and other agreements and instruments
contemplated by this Agreement. Except as disclosed on the
Schedule entitled "Affiliate Companies", the Companies have
no subsidiary corporations, own no interest, direct or
indirect, in any other business enterprise, firm or
corporation, and are the only business enterprises, firms or
corporations through which the Business (or any business
competing with or similar to the Business) is conducted, or
which owns, leases or uses assets related to the Business.
Each Company is duly qualified or licensed to do business as
a foreign corporation and is in good standing in each
jurisdiction in which the failure to so qualify would have,
or might reasonably be expected to have, individually or in
the aggregate, a material adverse effect upon the condition
(financial or otherwise), business, assets, properties or
operations (a "Material Adverse Effect") of the Companies,
taken as whole. This Agreement and all other agreements and
instruments executed and delivered or to be executed and
delivered by any Person in connection herewith
(collectively, the "Transaction Documents") to which any
Seller is party have been, or upon execution thereof will
be, duly executed and delivered by such Seller. This
Agreement and the transactions and other agreements and
instruments contemplated hereby have been duly approved by
the Directors and shareholders of each such Company, and
constitute the valid and binding obligations of each Seller,
enforceable in accordance with their respective terms. Each
Asset Seller represents and warrants that it has been duly
authorized by its shareholders to make the agreements set
forth in Section 7.8 and to bind all of its shareholders
thereto.
(b) Articles and By-Laws. The copies of the Articles
of Incorporation and Bylaws of each Company heretofore
delivered to Buyer are true, correct and complete.
(c) Conflicts; Defaults. Neither the execution and
delivery of this Agreement and the other agreements and
instruments executed or to be executed in connection
herewith by any Seller, nor the performance by Sellers of
the transactions contemplated hereby or thereby, will
(i) violate, conflict with, or constitute a default under,
any of the terms of any Company's Articles of Incorporation
or By-Laws, (ii) except for any default arising solely from
the failure to obtain any Consent other than any Required
Consent, violate, conflict with, or constitute a default
under any provisions of, or result in the acceleration of
any obligation under, (x) the Contracts, (y) any order,
judgment or decree, relating to the Business, the Allied
Assets or the Acquired Assets or the Allied Shares, or by
which any Company, the Allied Assets or the Acquired Assets
or the Allied Shares are bound, or (z) any contract, sales
commitment, license, purchase order, security agreement,
mortgage, note, deed, lien, lease, agreement or instrument,
relating to the Business, the Allied Assets or the Acquired
Assets or the Allied Shares, or by which any Company, the
Allied Assets or the Acquired Assets or the Allied Shares
are bound, which violation, conflict, default or
acceleration described in this clause (z) would result in a
Material Adverse Effect upon the Companies, taken as a
whole, (iii) result in the creation or imposition of any
Liens or Claims in favor of any third Person or entity upon
any of the Allied Assets or the Acquired Assets or the
Allied Shares, (iv) violate any law, statute, judgment,
decree, order, rule or regulation of any Governmental
Authority, (v) constitute an event which, after notice or
lapse or time or both, would result in such violation,
conflict, default, acceleration, or creation or imposition
of Liens or Claims, (vi) constitute an event which, after
notice of lapse of time or otherwise would create, or cause
to be exercisable or enforceable, any option, agreement or
right of any kind to purchase any of the Allied Assets or
Acquired Assets or the Allied Shares. Except as set forth
in the Schedule entitled "Assignment and Consents", no
consent, novation, approval, filing or authorization will be
required to be obtained or satisfied for the continued
performance by Buyer following the Closing of any contract,
agreement, commitment or undertaking included in the Allied
Assets or Acquired Assets. No Company is in violation of or
in default under its Articles of Incorporation or Bylaws.
No Company is in violation of or in default under or any
provision of (x) the Contracts, (y) any order, judgment or
decree, relating to the Business, the Allied Assets or the
Acquired Assets or the Allied Shares, or by which any
Company, the Allied Assets or the Acquired Assets or the
Allied Shares are bound, or (z) any contract, sales
commitment, license, purchase order, security agreement,
mortgage, note, deed, lien, lease, agreement or instrument,
including without limitation, the Contracts, or any order,
judgment or decree, relating to the Business, the Allied
Assets or the Acquired Assets, or by which Sellers, the
Allied Assets or the Acquired Assets or the Allied Shares is
bound described in this clause (z), which violation or
default would result in a Material Adverse Effect upon the
Companies, taken as a whole, or in the payment of any
monetary obligations or debts relating to the Business, and
there exists no condition or event which, after notice or
lapse of time or both, would result in any such violation or
default.
(d) Acquired Assets; Title to the Acquired Assets;
Allied Shares. (I) Except for the Retained Assets, the
Acquired Assets and the Allied Assets are the only assets,
properties, rights and interests used by the Companies or
Allied in connection with the Business. The Acquired Assets
to be conveyed to Buyer under this Agreement, together with
cash, and the Allied Assets constitute all of the assets,
properties, rights and interests necessary to conduct the
Business in substantially the same manner as conducted by
the Companies prior to the date of this Agreement. None of
the Acquired Assets or the Allied Assets have any material
defects or are in need of maintenance or repair, except for
ordinary maintenance and repairs. Each Company has good,
marketable and exclusive title to, and the valid and
enforceable power and unqualified right to use and, in the
case of the Asset Sellers, transfer to Buyer, each of their
respective Assets, including, without limitation, all dies,
molds or other tooling or equipment use in the Business,
whether located at the Companies' facilities or at the
facilities of their Customers or suppliers, and the Acquired
Assets and the Allied Assets (collectively, the "Assets")
are free and clear of all Liens and Claims of any kind or
nature whatsoever, except for Permitted Liens and the Liens
required to be released under Sections 3.2, 4.2(k) and
4.3(k). The consummation of the transactions contemplated
by this Agreement (including, without limitation, the
transfer or assignment of the Acquired Assets, and all
rights and interests therein, to Buyer as contemplated
herein) will not adversely affect such title or rights, or
any terms of the applicable agreements (whether written or
oral) evidencing, creating or granting such title or rights.
Except as otherwise disclosed in the Schedule entitled
"Contracts", none of the Assets are subject to, or held
under, any lease, mortgage, security agreement, conditional
sales contract or other title retention agreement, or are
other than in the sole possession and under the sole control
of the Companies. Each Company has the right under valid
and existing leases to occupy, use or control all properties
and assets leased by it. The delivery to Buyer of the
instruments of transfer of ownership contemplated by this
Agreement will vest good, marketable and exclusive title (as
to all Acquired Assets owned by an Asset Seller) or full
right to possess and use (as to all Acquired Assets not
owned by an Asset Seller) to the Acquired Assets in Buyer,
free and clear of all Liens and Claims of any kind or nature
whatsoever, except for current real estate Taxes or
governmental charges or levies which are a Lien but not yet
due and payable and Liens securing obligations under those
installment contracts, capital leases or vehicle or computer
hardware and software sales contracts that are disclosed on
the Schedule entitled "Contracts" and that will be assumed
by Buyer (collectively, "Permitted Liens"). The Schedule
entitled "Fixed Assets" attached hereto contains true,
correct and complete lists of all fixed assets with an
individual net book value in excess of $10,000 used in
connection with the Business as of the dates specified
therein. No Company owns or holds any marketable
Securities.
(II) Allied has an authorized capital consisting solely
of 9000 shares of Common Stock, without par value, of which
928 shares, and only 928 shares, are issued and outstanding,
and of which none are held as treasury shares. All of such
Allied Shares are duly authorized, validly issued, fully
paid and non-assessable, and there are no other securities
of Allied of any class issued, reserved for issuance or
outstanding. There are no options, offers, warrants,
conversion rights, subscriptions, or agreements or rights of
any kind to subscribe for or to purchase, or commitments to
issue (either formal or informal, firm or contingent) shares
of capital stock or other securities of Allied, whether
debt, equity or a combination thereof, or obligating Allied
to grant, extend or enter into any such agreement or
commitment. The Allied Shareholders are the sole holders of
record and beneficial owners of such number of Allied Shares
as are set forth on Schedule 1.3. Good, valid and
marketable title to the Allied Shares which the Allied
Shareholders purport to own is held by the Allied
Shareholders, free and clear of all Liens and Claims. The
certificates and other documents representing the Allied
Shares to be delivered to Buyer at the Closing are valid and
genuine.
(e) Real Property. The Schedule entitled "Real Estate
and Leases" attached hereto contains a true, correct and
complete list of all instruments and agreements creating any
interest or right in real property relating to the Business,
or leased or occupied by any Company. No Seller other than
the Allied Shareholders owns or has any rights to any fee
interest in real property; neither Allied Shareholder owns
or has any rights to any fee interest in real property that
has ever been used in connection with the Business. True,
correct and complete copies of the instruments and
agreements identified in such Schedule have been delivered
to Buyer. Each such instrument and agreement is in full
force and effect and is a legal, binding, and enforceable
obligation of the applicable Seller or Allied. Each Company
has the right to quiet enjoyment of all real property
subject to leaseholds under any such instruments, for the
full term of each such lease and, subject to proper exercise
thereof, any renewal option related thereto. There has been
no disturbance of or challenge to any Company's quiet
possession under each such lease, and no leasehold or other
interest of any Company in such real property is subject to
or subordinate to any Liens except Permitted Liens.
Neither the whole nor any portion of any real property
leased or occupied by any Company has been condemned,
requisitioned or otherwise taken by any Governmental
Authority, and, to Sellers' knowledge, no such condemnation,
requisition or taking is threatened or contemplated. To
Sellers' knowledge, no building, structure, fixture or
appurtenance comprising part of the real properties of any
Company has any material defects or is in need of
maintenance or repair, except for ordinary maintenance and
repairs.
(f) Leases. Each Lease Agreement described on the
Schedule entitled "Real Estate and Leases" has not been
modified, altered, terminated or revoked, and is in full
force and effect. No Company, as the present tenant under
its respective Lease Agreements, is in default under any of
the terms of such Lease Agreements, and there are no
existing facts or conditions which could give rise to any
such default. To Sellers' knowledge, the present lessors
under the Lease Agreements, are not in default thereunder,
or in breach thereof, and there are no existing facts or
conditions which could give rise to any such breach or
default.
(g) Contracts. The Schedule entitled "Contracts"
attached hereto contains a complete list or summary
description of (i) each license, contract, agreement,
commitment and undertaking (whether written or oral)
(A) relating to the Business or to which any Company is a
party (1) which involves the purchase of inventories or the
sale of products, and involves aggregate future payments in
excess of $50,000, or which extends for a period of more
than one year, or (2) which does not involve the purchase of
inventories or the sale of products, and involves aggregate
future payments in excess of $50,000 or extends for a period
of more than one year, (B) between any Company and any
distributor, manufacturers' agent or selling agent used or
retained in connection with the Business, or pursuant to
which any Company sells or distributes Products, in each
case described in this subsection (B) regardless of the size
or term or such licenses, contracts, agreements, commitments
and undertakings, (ii) each loan or credit agreement,
promissory note, security agreement, guaranty, indenture,
mortgage, pledge or other agreement or instrument evidencing
indebtedness of any Company, or to which any Company is a
party, (iii) any conditional sale or other title retention
agreement, equipment obligation, or lease purchase agreement
involving (in the aggregate) amounts annually in excess of
$25,000 relating to any Company or the Business, or to which
any Company is a party, (iv) any power of attorney given by
any Company to any Person, firm or corporation or otherwise
relating to the Business or the Assets, (v) any non-
competition, restrictive covenant or other agreement that
restricts any Company or any employee, consultant, agent or
director of any Company from conducting the Business
anywhere in the world, (vi) each contract, agreement,
commitment or undertaking presently in effect, whether or
not fully performed, between any Company and any current or
former officer, director, consultant or other employee (or
group thereof) retained or employed in connection with the
Business, or any current or former shareholder (or group of
shareholders) of any Company, (vii) any contract, agreement,
commitment or undertaking evidencing the acquisition or
disposition by any Company of any business, all or
substantially all assets (other than Inventories in the
normal and ordinary course of business), or shares of
capital stock of any Person during the past five years or as
to which any material obligation or liability (contingent or
not) still exists, and (viii) any other contract, agreement,
commitment or undertaking that is material to the condition
(financial or otherwise), results of operations, properties,
assets, liabilities or business of any Company or the
Business (the items described in clauses (i) through (viii)
being herein collectively referred to as the "Contracts").
Each Company has performed all obligations required to be
performed by it to date under the Contracts, and neither any
Company nor, to Sellers' knowledge, any other party to any
Contract has breached or improperly terminated any Contract
by which it is bound, and there exists no condition or event
which after notice or lapse of time or both, would
constitute any such breach, termination or default by
Sellers or, to Sellers' knowledge, by any other party. No
Company is a party to, and the Business does not involve,
any contracts, agreements, commitments or undertakings which
are subject to the Federal Acquisition Regulations,
Chapter 48 of the Code of Federal Regulations and all agency
supplements thereto, the Cost Accounting Standards set forth
in Chapter 4 of the Code of Federal Regulations, or the Cost
Principles set forth in Chapter 31 of the Code of Federal
Regulations. Each of the Contracts is in full force and
effect, and is a legal, binding and enforceable obligation
of or against Sellers, except as such enforceability may be
limited by (i) bankruptcy, insolvency or similar laws
affecting creditors' rights generally or (ii) general
principles of equity, whether considered in a proceeding in
equity or at law.
(h) Financial Statements. Each Company has heretofore
delivered to Buyer the following financial statements
(collectively, together with the notes thereto and the
financial statements to be delivered pursuant to
Section 7.2(b), the "Financial Statements"):
(i) the unaudited Balance Sheet of such Company
(the "Unaudited Balance Sheet") as of
November 30, 1999 (the "Balance Sheet Date"),
and the unaudited Statement of Income of such
Company for the eleven (11) months ended
November 30, 1999 (collectively, the
"Unaudited Financial Statements");
(ii) (A) the audited Balance Sheet of Allied as of
May 31 1999, and the audited Statement of
Income for the year ended May 31, 1999, and
the audited Statement of Cash Flows for the
year ended May 31, 1999, together with the
footnotes thereto and the report thereon by
Virchow, Krause & Co. LLP, certified public
accountants, the audited Balance Sheet of
Allied as of May 31,1998; the audited
Statement of Income for the year ended
May 31, 1998, and the audited Statement of
Cash Flows for the year ended May 31, 1998,
together with the footnotes thereto and the
report thereon by Larson, Allen, Weishair &
Co. LLP, certified public accountants; and
the audited Balance Sheet of Allied as of
May 31, 1997, the audited Statement of Income
for the year ended May 31, 1997, and the
audited Statement of Cash Flows for the year
ended May 31, 1997, together with the
footnotes thereto and the report thereon by
Virchow, Krause & Co. LLP, certified public
accountants; (B) the audited Balance Sheet of
FPSI as of December 31, 1998, and the audited
Statement of Income for the year ended
December 31, 1998, and the audited Statement
of Cash Flows for the year ended December 31,
1998, together with the footnotes thereto and
the report thereon by Virchow, Krause & Co.
LLP, certified public accountants; the
audited Balance Sheet of FPSI as of
December 31, 1997, the audited Statement of
Income for the year ended December 31, 1997,
and the audited Statement of Cash Flows for
the year ended December 31, 1997, together
with the footnotes thereto and the report
thereon by Virchow, Krause & Co. LLP,
certified public accountants; (C) the
reviewed Balance Sheet of Madison as of
December 31, 1998, and the reviewed Statement
of Income for the year ended December 31,
1998, and the reviewed Statement of Cash
Flows for the year ended December 31, 1998,
together with the footnotes thereto and the
report thereon by Virchow, Krause & Co. LLP,
certified public accountants, the reviewed
Balance Sheet of Madison as of December 31,
1997, and the reviewed Statement of Income
for the year ended December 31, 1997, and the
reviewed Statement of Cash Flows for the year
ended December 31, 1997, together with the
footnotes thereto and the report thereon by
Virchow, Krause & Co. LLP, certified public
accountants, the reviewed Balance Sheet of
Madison as of December 31, 1996, and the
reviewed Statement of Income for the year
ended December 31, 1996, and the reviewed
Statement of Cash Flows for the year ended
December 31, 1996, together with the
footnotes thereto and the report thereon by
Virchow, Krause & Co. LLP, certified public
accountants; and (D) the compiled Balance
Sheet of Minocqua as of September 30, 1998,
and the compiled Statement of Income for the
year ended September 30, 1998, and the
compiled Statement of Cash Flows for the year
ended September 30, 1998, together with the
footnotes thereto and the report thereon by
Virchow, Krause & Co. LLP, certified public
accountants, the compiled Balance Sheet of
Minocqua as of September 30, 1997, and
compiled Statement of Income for the year
ended September 30, 1997, and the compiled
Statement of Cash Flows for the year ended
September 30, 1997, together with the
footnotes thereto and the report thereon by
Virchow, Krause & Co. LLP, certified public
accountants, the compiled Balance Sheet of
Minocqua as of September 30, 1996, and the
compiled Statement of Income for the year
ended September 30, 1996, and the compiled
Statement of Cash Flows for the year ended
September 30, 1996, together with the
footnotes thereto and the report thereon by
Virchow, Krause & Co. LLP, certified public
accountants (collectively, the "Audited
Financial Statements"); and
(iii)Each of the Financial Statements was prepared
from the books and records kept by each
Company for the Business, and fairly presents
the financial position of each Company as of
such dates, and the results of each Company's
operations and each Company's cash flows for
the periods then ended in accordance with
generally accepted accounting principals
("GAAP") consistently applied (except, in the
case of the Unaudited Financial Statements,
for normally recurring year-end adjustments,
which adjustments will not be material,
either individually or in the aggregate and
without a Statement of Cash Flows) and
without footnote disclosures, and the
related internal accounting practices and
policies of such Company disclosed on the Schedule
entitled "Financial Statements" or in the
notes to the Audited Financial Statements
(the "Accounting Practices"). Except as
set forth in the Schedule entitled "Changes
in Circumstances" or the Financial Statements,
since the Balance Sheet Date, (x) the
Companies' business, working capital and
cash flow have been managed and operated in
the ordinary and normal course of business
consistent with past practice, (y) neither
the Companies nor any of their affiliates
have accelerated or materially altered
the collection or management of any Accounts
Receivable, or extended the payment term
of or materially altered any Assumed
Liabilities, including, without limitation,
account payables and expenses of the
Companies, and (z) there has been no
material adverse change in the condition
(financial or otherwise), results of operations,
properties, assets, liabilities or business
of any Company or the Business, nor has
there been any event or condition of any
character which has materially and adversely
affected, or which would reasonably be expected to
materially and adversely affect, the
condition (financial or otherwise), results
of operations, properties, assets,
liabilities or business of any Company
(other than as a result of any matter set forth
in the proviso to Section 6.1(c)). The
Unaudited Balance Sheet reflects all
properties and assets, real, personal or
mixed, that are currently used in connection
with each Company's Business and which
would be required under GAAP to be shown in
the Financial Statements, except for
(A) inventory purchased or sold consistent
with past practice and in the ordinary
and normal course of business since the
Balance Sheet Date, (B) other immaterial
properties and assets (other than capital assets)
purchased or sold since the Balance Sheet
Date consistent with past practice and
in the ordinary and normal course of business,
(C) capital assets purchased since the Balance
Sheet Date in the ordinary course of
business consistent with past practice,
and (D) purchase commitments that are for
immaterial properties and assets or are
disclosed on the Schedule entitled
"Liabilities".
(i) Liabilities. Except as disclosed in paragraphs 1
or 3 of the Schedule entitled "Changes in Circumstances",
no Company has any liabilities or obligations of any nature
whatsoever, whether absolute, accrued, contingent or
otherwise, and whether known or unknown, including, without
limitation, liabilities for Taxes, forward or long-term
commitments, or unrealized or anticipated losses from any
unfavorable conditions or occurrences, or from write-downs
or write-offs of assets (including Inventories and Accounts
Receivable), except for those (i) reflected or reserved on
the Unaudited Balance Sheet, (ii) incurred or accrued since
the Balance Sheet Date in the ordinary and normal course of
the Companies' business in transactions in the ordinary and
normal course, consistent with past practice, which
transactions are consistent with the representations,
warranties, covenants, obligations and agreements contained
in this Agreement, (iii) arising, in the ordinary course of
business, under Contracts (exclusive of any liabilities or
obligations arising from breaches or defaults by any
Company), or (iv) set forth on Schedule 2.1(b) attached
hereto.
(j) Accounts Receivable; Collection; Trade Payables.
Except for Accounts Receivable with respect to which
applicable reserves are set forth on the Unaudited Balance
Sheet, all Accounts Receivable included in the Assets and
outstanding as of the Closing Date will represent sales
actually made in the ordinary and normal course of business.
To Sellers' knowledge, other than as provided for in
reserves as contemplated above, there are no counterclaims
or setoffs against (or any basis therefor), or any other
matter or condition likely to interfere with full and timely
collection of, any of such Accounts Receivable. The
Schedule entitled "Accounts Receivable" sets forth an aged
listing by Customer of the Accounts Receivable included in
the Assets that are outstanding as of December 31, 1999. No
Company has experienced or suffered undue delay in its
payment of its liabilities and obligations to its trade
creditors (including suppliers) or trade debt.
(k) Inventories. Except as set forth in the Schedule
entitled "Financial Statements", the value at which the
Inventory included in the Assets is carried on the Unaudited
Balance Sheet reflects the lower of cost or market value or
as otherwise described in the notes to the Financial
Statements and reflects writeoffs or writedowns for damaged
or obsolete items, or items of below standard quality, in
accordance with the historical inventory policy and
practices of the Companies, a complete and accurate
description of which is included in the description of the
Accounting Practices set forth in the Schedule entitled
"Financial Statements". The Inventory, taken as a whole,
included in the Assets is not (as of the date hereof) and
will not be (as of the Closing Date) excessive in kind or
amount in light of the ordinary and normal course of conduct
and reasonably anticipated needs of the Business.
(l) Litigation. Except as set forth on the Schedule
entitled "Litigation", no Company is subject to any order
of, or written agreement or memorandum or understanding
with, any Governmental Authority, and there exists no
litigation, action, suit, claim or proceeding pending, or,
to Sellers' knowledge, any litigation, action, suit,
investigation, claim or proceeding threatened against or
affecting any Company, the Business or the Assets, or which
would affect the transactions contemplated by this
Agreement, at law or in equity or before any Governmental
Authority, including, without limitation, claims for product
warranty, product liability, antitrust, unfair competition,
price discrimination or other liability or obligation
relating to Products, whether manufactured, installed or
sold by any Company, any of its Affiliates or any of their
respective predecessors-in-interest in respect of the
Business, or which would adversely affect the transactions
contemplated by this Agreement, and, to Sellers' knowledge,
no one has grounds to assert any such litigation, action,
suit, claim or proceeding. Set forth on the Schedule
entitled "Litigation" is a description of (i) all
litigation, actions, suits, investigations, claims and
proceedings asserted, brought or threatened against any
Company or its Affiliates or predecessors-in-interest in
respect of the Business during the three-year period
preceding the date hereof, together with a description of
the outcome or present status thereof, and (ii) all
judgments, orders, decrees, writs or injunctions entered
into by, in favor of, or against any Company.
(m) Customers and Suppliers. No Company is involved
in any material controversy with any of the customers or
suppliers to the Business. The Schedule entitled "Customers
and Suppliers" sets forth a true, correct and complete list
of the Companies' (i) 20 largest customers in terms of sales
of the Companies, taken as a whole, during the twelve (12)-
month period ended December, 1999 and (ii) suppliers that,
during the twelve (12) months ended December, 1999,
individually accounted for $200,000 or more of the
Companies', taken as a whole, orders for the purchase of raw
materials, supplies, equipment or parts. Except for the
customers and suppliers named in the Schedule entitled
"Customers and Suppliers", the Companies have not had any
customer who accounted for more than 5% of the Companies'
sales during the period from January to December 1999, or
any supplier from whom the Companies purchased more than 5%
of the goods or services purchased during the period from
January to December 1999. Except as otherwise disclosed in
the Schedule entitled "Contracts", no Company has been
advised by any such customer or supplier, that such customer
or supplier was or is intending to terminate its
relationship with such Company or would not continue to
purchase supplies or services for future periods on account
of any dissatisfaction with such Company's performance. All
business placed by all employees of each Company has been
placed in the name of such Company, and all fees on such
business have been paid to and are the property of such
Company.
(n) Regulatory Compliance. Except as set forth on the
Schedule entitled "Litigation", the Business has been
conducted, all Assets have been maintained and each Company
is currently in compliance with all applicable Laws
(including, without limitation, all laws relating to zoning,
building codes, civil rights, occupational health and
safety, antitrust, consumer protection, currency exchange,
equal opportunity, pensions, securities and trading-with-the-
enemy), except to the extent that failure to comply would
not, individually or in the aggregate, result in a Material
Adverse Effect upon the Companies, taken as a whole, and no
material expenditures are or will be required to comply with
any such laws, regulations and orders of Governmental
Authorities. No Company is in default under, and no event
has occurred which, with the lapse of time or action by a
third party, could result in default under, the terms of any
judgment, decree, order, writ or injunction of any
Governmental Authority, whether at law or in equity, to
which such Company is a party.
(o) Brokers, Finders and Agents. No Company is
directly or indirectly obligated to anyone acting as a
broker, finder or in any other similar capacity in
connection with this Agreement or the transactions
contemplated hereby, except as provided in Section 9.2.(p)
Intellectual Property. The Schedule entitled "Intellectual
Property" attached hereto sets forth a complete and correct
list (with an indication of the record owner and identifying
number) of all patents, trademarks, service marks, trade
names, domain names and copyrights for which registrations
have been obtained (and all applications for, or extensions
or reissuances of, any of the foregoing) which are or have
been used in the conduct of, or which relate to, the
Business or which are owned by any Company. True, correct
and complete copies of such patents, trademarks, service
marks, trade names, domain names and copyrights (and all
applications for, or extensions or reissuances of, any of
the foregoing) identified on such Schedule have been
delivered to Buyer. Except as otherwise disclosed in the
Schedule entitled "Intellectual Property", each Company is
the sole owner and has the exclusive right to use, free and
clear of any payment, restriction or encumbrance, all such
patents, trademarks, service marks, trade names, domain
names and copyrights listed on such Schedule under such
Company's name No patents, trademarks, service marks, trade
names, domain names and copyrights (or applications for, or
extensions or reissuances of any of the foregoing) which are
or have been used in the conduct of, or which relate to, the
Business are owned otherwise than by such Company. There is
no claim or demand of any Person pertaining to, or any
proceedings which are pending or, to Sellers' knowledge,
threatened, which challenge (i) the exclusive rights of the
Companies in respect of any patents, trademarks, service
marks, trade names, domain names or copyrights (or
applications for, or extensions or reissuances of, any of
the foregoing) which are or have been used in the conduct
of, or which relate to, the Business or which are owned by
such Company, or (ii) the rights of any Company in respect
of any processes, formulas, confidential information, trade
secrets, know-how, engineering data, technology or other
intellectual property (including the Intangibles) which are
or have been used in the conduct of, or which relate to, the
Business or which are owned by such Company. No patent,
trademark, service mark, trade name, domain name, copyright,
process, formulas, confidential information, trade secret,
know-how, engineering data, technology or other intellectual
property (including the Intangibles) which is owned by any
Company or which is or has been used in the conduct of, or
which relates to, the Business is subject to any outstanding
order, ruling, decree, judgment or stipulation by or with
any Governmental Authority or any contract, agreement,
commitment or undertaking with any Person, or infringes or,
to Sellers' knowledge, is being infringed by others or is
used by others (whether or not such use constitutes
infringement). To Sellers' knowledge, the Business does not
involve employment of any Person in a manner which violates
any non-competition or non-disclosure agreement which such
Person entered into in connection with any former
employment. All patents, trademarks, service marks, trade
names, domain names or copyrights (or applications for, or
extensions or reissuances of, any of the foregoing) or
processes, formulas, confidential information, trade
secrets, know-how, engineering data, technology or other
intellectual property, or rights thereto, owned or held,
directly or indirectly by any officer, director,
shareholder, employee or any Affiliate of any Company or any
Seller have been, or prior to the Closing Date will have
been, duly and effectively transferred to the Companies.
Set forth on the Schedule entitled "Intellectual Property"
is a description all litigation, actions, suits,
investigations, claims and proceedings, asserted, brought or
threatened against the Company within the three (3) years
preceding the date hereof, together with a description of
the outcome or present status thereof, relating to any
patent, trademark, service mark, trade name, domain name,
copyright, process, formula, confidential information, trade
secret, know-how, engineering data, technology or other
intellectual property.
(q) Permits. The Schedule entitled "Permits" attached
hereto contains a true, correct and complete list of all
Permits issued to any Company. Each Company has, and is in
full compliance with, all Permits which are necessary or
required for the operation of the Business as it is
currently being operated and its present activities on its
properties and facilities, all of which Permits are in full
force and effect, except to the extent (i) detailed on the
Schedule entitled "Permits" (all of which such Permits not
in full force and effect at Closing will be obtained, at
Sellers' sole cost and expense, within ninety (90) days of
Closing) or (ii) that failure to obtain such Permits or so
comply would not, individually or in the aggregate, result
in a Material Adverse Effect upon the Companies, taken as a
whole. No Company's operation of the Business during the
pendency of its applications, if any, for Permits violates
any law, regulation or order of any Governmental Authority.
(r) Employee Relations; Collective Bargaining
Agreements. There are no material controversies, including
strikes, disputes, slowdowns or work stoppages, pending, or
to Sellers' knowledge, threatened which involve any
employees of any Company. Each Company has complied and is
complying with all Laws relating to the employment of labor,
including, without limitation, any provision thereof
relating to wages, hours, collective bargaining, employee
health, safety and welfare, and the payment of social
security and similar taxes, except to the extent that
failure to comply would not, individually or in the
aggregate, result in a Material Adverse Effect upon the
Companies, taken as a whole. No Company has experienced any
material labor difficulties, including, without limitation,
strikes, slowdowns, or work stoppages, within the five-year
period preceding the date hereof. No Company is a party to
any collective bargaining or union contract, and to Sellers'
knowledge, there exists no current union organizational
effort with respect to any Company's employees.
(s) Employees and Employee Plans. (1) Except as set
forth on Schedule 5.1(s)(2), no Company is or was a party
to, maintains or has maintained, or contributes or has
contributed to, any (A) severance or employment agreement
with any current or former director, officer or employee,
(B) severance plan, program, policy or arrangement, (C) plan
or arrangement relating to its current or former directors,
officers or employees which contains change in control
provisions, (D) any Employee Plan, or (E) any collective
bargaining agreement or consulting agreement (clauses (A)
through (E) are, collectively, the "Company Plans"), nor has
any such Company or any officers or directors of any such
Company, taken any action directly or indirectly which
obligates such Company to institute or modify or change any
such Company Plan, any change in any actuarial or other
assumption used to calculate funding obligations with
respect to any Company Plan, or any change in the manner in
which contributions to any Company Plan are made or the
basis on which such contributions are determined.
(2) Schedule 5.1(s)(2) lists each Company Plan.
True, complete and correct copies of each Company Plan
and summary plan description, the most recent Internal
Revenue Service determination letters, the most recent
annual reports on Internal Revenue Service Form 5500
and actuarial reports, if applicable, and if not
applicable, statement of trust assets, have been made
available and delivered to Buyer.
(3) With respect to each Company Plan, and to any
other employee benefit plan, program, agreement or
arrangement to which a Company or any other trade or
business, whether or not incorporated (an "ERISA
Affiliate"), that together with such Company would be
deemed a "single employer" within the meaning of
Section 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended (the "Code"), has made, or was
required to make, contributions at any time prior to
the date hereof, no event has occurred, and to Seller's
knowledge there exists no condition or set of
circumstances, in connection with which any such
Company could be subject to any liability under ERISA,
the Code or any other applicable law.
(4) Each Company Plan has been administered in
accordance with its terms, and each Company Plan has
been operated and is in compliance with the applicable
provisions of ERISA, the Code and all other applicable
laws. Each Company Plan that is intended to be
qualified under Section 401(a) or 401(k) of the Code is
so qualified and has received a favorable determination
letter from the Internal Revenue Service (the "IRS")
with respect to its qualified status covering the Tax
Reform Act of 1986 and any other legislation for which
the applicable remedial amendment period has expired,
and each trust established in connection with any
Company Plan that is intended to be exempt from federal
income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that such
trust is so exempt, and no fact or event has occurred
since the date of any determination letter from the IRS
which is reasonably likely to adversely affect the
qualified status of any such Company Plan or the exempt
status of any such trust. There are no pending or
threatened or anticipated claims, investigations or
audits under or with respect to any Company Plan by or
on behalf of any current or former director, officer or
employee, or dependent or beneficiary thereof, or
otherwise (other than routine claims for benefits).
All contributions required to be made by each Company
under applicable Law or the terms of any Company Plan
or collective bargaining agreement as of the Closing
Date have been made as of such date.
(5) No Company Plan is, and no Company or ERISA
Affiliate has ever maintained or contributed to, (i) a
"defined benefit plan"(as defined in Section 3(35) of
ERISA), (ii) a "multiemployer plan" within the meaning
of Section 3(37) of ERISA, (iii) a "multiple employer
plan" within the meaning of Code Section 413 or a
"multiple employer welfare arrangement" within the
meaning of Section 3(40) of ERISA, or (iv) a "welfare
benefit fund" as defined in Section 419(e) of the Code.
(6) Except as disclosed on Schedule 5.1(s)(2), no
Company Plan provides medical, life or other welfare
benefits (whether or not insured), with respect to any
current or former employee of any Company after
retirement or other termination of service (other than
coverage mandated by applicable law). With respect to
any contract or arrangement with an insurance company
providing funding under any Company Plan, there is no
material liability for any retroactive rate adjustment.
Each Company has the right to amend or terminate its
participation with respect to each Company Plan which
it maintains or in which participates. Each Company
Plan that is a "group health plan," as defined in
Section 5000 of the Code has been operated in
compliance with Section 4980B of the Code and the
secondary payor requirements of Section 1862(b) of the
Social Security Act.
(7) Except as disclosed on Schedule 5.1(s)(2), no
current or former employee of any Company will be
entitled to any payment, additional benefits or any
acceleration of the time of payment or vesting of any
benefits under any Company Plan as a result of the
transactions contemplated by this Agreement (either
alone or in conjunction with any other event such as a
termination of employment) and no trustee under any
"rabbi trust" or similar arrangement in connection with
any Company Plan will be entitled to any payment as a
result of the transactions contemplated by this
Agreement.
(8) None of the Companies or any of their current
or former directors, officers, employees or any other
"fiduciary", as such term is defined in Section 3(21)
of ERISA, has committed any breach of fiduciary
responsibility imposed by ERISA or any other applicable
law with respect to the Company Plans which would
subject Buyer, any Company or any of their respective
directors, officers or employees to any material
liability under ERISA or any applicable law.
(9) None of the Companies has incurred any
liability under Title IV of ERISA, any lien under Code
Section 401(a)(29) or any material liability for any
tax or civil penalty imposed by Sections 4971, 4975 or
4976 of the Code or Section 502 of ERISA and no
condition or set of circumstances exists that presents
a risk to any of the Companies of incurring any such
lien or liability.
(10) Each Company (A) is in compliance in all
material respects with all applicable laws respecting
employment, employment practices, terms and conditions
of employment and wages and hours (including, but not
limited to, WARN, the Age Discrimination in Employment
Act, as amended, the Civil Rights Act of 1964, as
amended, the Equal Pay Act, the Occupational Safety and
Health Act, the Fair Labor Standards Act, the Americans
with Disability Act of 1990, the Family and Medical
Leave Act of 1993, the Immigration and Nationality Act
of 1952, as amended by the Immigration Reform and
Control Act of 1986 and the regulations promulgated
thereunder, and any other federal, state or local law
regulating employment or protecting employee rights),
in each case, with respect to current and former
employees and independent contractors of the Company,
(B) has withheld all material amounts required by
applicable laws or by agreement to be withheld from the
wages, salaries and other payments to such current and
former employees and independent contractors, (C) is
not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the
foregoing, and (D) is not liable for any payment to any
trust or other fund or to any governmental entity with
respect to unemployment compensation benefits, workers
compensation, social security or other benefits for
current or former employees and independent contractors
of any Company.
(11) Except as provided on Schedule 5.1(s)(11),
each Company Plan covers only those employees who are
employed by a Company (and their eligible spouses and
beneficiaries), except for persons covered for medical
benefits under an employee welfare benefit plan
pursuant to COBRA (as hereinafter defined).
(t) Environmental and Safety Compliance.
(i) General. Except as disclosed on the Schedule
entitled "Environmental Matters", no Company, nor, to
Sellers' knowledge, any other previous owner, tenant,
occupant or user of the real property, including Leased
Property, listed on the Schedule entitled "Real Estate
and Leases," (hereinafter collectively referred to as
the "Property") nor, to Sellers' knowledge, any other
Person, has engaged in or permitted any operations or
activities upon, or any use or occupancy of the
Property, or any portion thereof, resulting in the
emission, release, discharge, transport, dumping or
disposal of any Hazardous Materials (as hereinafter
defined) on, from, under, in or about the Property,
nor, to Sellers' knowledge, have any Hazardous
Materials migrated or been transported from the
Property to, upon, about or beneath other properties,
nor, to Sellers' knowledge, have any Hazardous
Materials migrated or been transported or threatened to
migrate or be transported from other properties to,
upon, about or beneath the Property.
(ii) Specific Environmental Representations and
Warranties. Except as specified in the Schedule
entitled "Environmental Matters":
(A) To Sellers' knowledge, there is not, nor has there
been, constructed, placed, deposited, stored,
disposed of or located on the Property any
asbestos in any form which has become friable.
(B) To Sellers' knowledge, no underground
improvements, including but not limited to
treatment or storage tanks, sumps, or water, gas
or oil wells, are or have been located on the
Property.
(C) To Sellers' knowledge, there are no
polychlorinated biphenyls (PCBs) or transformers,
capacitors, ballasts, or other equipment which
contains dielectric fluid containing PCBs at
levels in excess of fifty parts per million
(50ppm) constructed, placed, deposited, stored,
disposed of or located on the Property.
(D) The Property and its existing uses and activities
and, to Sellers' knowledge, its prior uses and
activities, comply and have at all times complied
in all material respects with all Environmental
Requirements (as hereinafter defined), and each
Company has obtained all Permits necessary under
applicable Environmental Requirements, except to
the extent that failure to comply or obtain such
Permits would not, individually or in the
aggregate, result in a Material Adverse Effect
upon the Companies, taken as a whole.
(E) No Company, nor to Sellers' knowledge, any prior
owner or occupant of the Property, has received
any notice or other communication concerning any
alleged violation of Environmental Requirements,
whether or not corrected to the satisfaction of
the appropriate authority, nor any notice or other
communication concerning alleged liability for
Environmental Damages in connection with the
Property, and there exists no judgment, decree,
order, writ or injunction outstanding, nor any
litigation, action, suit, claim (including
citation or directive) or proceeding pending or,
to the Sellers' knowledge, any litigation, action,
suit, investigation, claim or proceeding
threatened, relating to the ownership, use,
maintenance or operation of the Property by any
Person, or from the alleged violation of
Environmental Requirements, or from the suspected
presence of quantities of Hazardous Material
thereon or potential migration thereto, nor, to
Sellers' knowledge, are there any existing facts
or conditions which could give rise to any such
violation or liabilities.
(iii) Definitions.
(A) For purposes of this Section 5.1(t), the term
"Hazardous Material" means any substance:
(1) the presence of which requires investigation
or remediation under any federal, state or
local statute, regulation, ordinance, order,
action, policy or common law; or
(2) which is or has been identified as a
potential "hazardous waste," "hazardous
substance," pollutant or contaminant under
any federal, applicable state or local
statute, regulation, rule or ordinance or
amendments thereto including, without
limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42
U.S.C. Sections 9601 et seq.) and/or the Resource
Conservation and Recovery Act (42 U.S.C.
Sections 6901 et seq.); or
(3) which is toxic, explosive, corrosive,
flammable, infectious, radioactive,
carcinogenic, mutagenic, reactive, or
otherwise hazardous and has been identified
as regulated by any Governmental Authority.
(B) For purposes of this Section 5.1(t) the term
"Environmental Requirements" means all applicable
Laws, Permits and similar items of all
Governmental Authorities and all applicable
judicial, administrative, and regulatory
judgments, decrees, orders, writs or injunctions
relating to the protection of human health or the
environment, including, without limitation:
(1) All requirements pertaining to reporting,
licensing, permitting, investigation, and
remediation of emissions, discharges,
releases, or threatened releases of Hazardous
Materials;
(2) All requirements pertaining to the protection
of the health and safety of employees or the
public; and
(3) All other limitations, restrictions,
conditions, standards, prohibitions,
obligations, schedules and timetables
contained therein or in any notice or demand
letter issued, entered, promulgated or
approved thereunder.
(C) For purposes of this Section 5.1(t), the term
"Environmental Damages" means any and all
Liabilities (as defined in Section 11.1) which are
incurred at any time as a result of the existence
or disposal prior to Closing of Hazardous Material
upon, about, from, beneath the Property or
migrating or threatening to migrate to or from the
Property, or the existence of a violation of
Environmental Requirements pertaining to the
Property, regardless of whether the existence of
such Hazardous Material or the violation of
Environmental Requirements arose prior to the
present ownership or operation of the Property,
and including without limitation:
(1) Damages for personal injury, or injury to
property or natural resources occurring upon
or off of the Property, foreseeable or
unforeseeable, including, without limitation,
lost profits, consequential damages, the cost
of demolition and rebuilding of any
improvements on real property, interest and
penalties;
(2) Fees incurred for the services of attorneys,
consultants, contractors, experts,
laboratories and all other costs incurred in
connection with the investigation or
remediation of such Hazardous Materials or
violation of Environmental Requirements
including, but not limited to, the
preparation of any feasibility studies or
reports or the performance of any cleanup,
remediation, removal, response, abatement,
containment, closure, restoration or
monitoring work required by any Governmental
Authority, or reasonably necessary to make
full economic use of the Property or any
other property in a manner consistent with
its intended use or otherwise expended in
connection with such conditions, and
including without limitation any attorneys'
fees, costs and expenses incurred in
enforcing this Agreement or collecting any
sums due hereunder;
(3) Liability to any third Person or Governmental
Authority to indemnify such Person or agency
for costs expended in connection with the
items referenced in subparagraph (C)(2) of
this Section 5.1(t); and
(4) Diminution of the value of the Property, and
damages for the loss of business and
restriction on the use of or adverse impact
on the marketing of rentable or usable space
or of any amenity of the Property.
(u) Changes in Circumstances. Except as disclosed in
the Schedule entitled "Changes in Circumstances", since the
Balance Sheet Date no Company has (i) sold, transferred or
otherwise disposed of any properties or assets (including
the Assets) outside the ordinary and normal course of
business or to any Affiliate of any Company; (ii) mortgaged,
pledged or subjected to any Lien, any of the Assets;
(iii) acquired any property or assets (including the Assets)
outside the ordinary and normal course of business or from
any Affiliate of any Company; (iv) sustained any material
damage, loss or destruction of or to the Assets (whether or
not covered by insurance); (v) entered into any transaction
or otherwise conducted the Business other than in the
ordinary and normal course; (vi) except as disclosed on the
Schedule entitled "Employee Benefits", granted any salary
increase or bonus or permitted any advance to any officer,
director or employee, instituted or granted any general
salary increase to the employees of any Company or entered
into any new, or altered or amended any existing, Employee
Plan or any employment or consulting agreement; (vii) made
any borrowing, whether or not in the ordinary and normal
course of business, issued any commercial paper or
refinanced any existing borrowings (other than Retained
Liabilities representing amounts drawn on existing lines of
credit or similar extensions of credit disclosed on the
Schedule entitled "Changes in Circumstances"); (viii) paid
any obligation or liability (fixed or contingent), other
than in the ordinary and normal course of business,
discharged or satisfied any Lien, or settled any claim,
liability or suit pending or threatened; (ix) entered into
any licenses or leases other than in the ordinary and normal
course of business; (x) made any loans or gifts other than
in the ordinary and normal course of business;
(xi) modified, amended, canceled or terminated any contracts
or commitments under circumstances that have had or could
reasonably be expected to have, a Material Adverse Effect
upon the Companies, taken as a whole; (xii) declared or
paid, or become obligated to declare or pay, any dividend or
disbursed or become obligated to disburse cash except in the
ordinary and normal course; (xiii) made capital expenditures
or commitments other than in the ordinary course of business
consistent with past practice for additions to property,
plant or equipment; (xiv) written down the value of any
Inventory or written off as uncollectible any notes or
Accounts Receivable or any portion thereof; (xv) canceled
any other debts or claims or waived any rights of
substantial value; (xvi) made any material change in any
method of accounting or accounting practice; (xvii) paid,
accrued or incurred any management or similar fees to any
Related Party (as hereinafter defined) or made any other
payment or incurred any other liability to a Related Party
or paid any amounts to or in respect of, or sold or
transferred any assets to, any company or other entity, a
substantial portion of the equity ownership interest of
which is owned by any Company, any Seller or a Related Party
individually or as a group; (xviii) taken or omitted to take
any action which would cause to be breached, or might result
in a breach of, any of the representations, warranties,
covenants, obligations and agreements of any Seller
contained in Sections 5.1(e), (f), (g), (s) or (z) if the
same were made anew immediately after such act or omission;
or (xix) agreed to, or obligated itself to, do anything
identified in (i) through (xviii) above. For purposes of
this Agreement, a "Related Party" is any trust, corporation,
partnership, limited liability company or other entity in
which any Seller or any of their Affiliates has a material
interest.
(v) Taxes. Except as set forth on Schedule 5.1(v)
attached hereto:
(i) Each Company has prepared in good faith and
duly filed or caused to be duly filed all Tax
Returns (including without limitation in
respect of estimated Taxes) required to be
filed by it with the appropriate Governmental
Authorities, or requests for extensions to
file such Tax Returns have been timely filed
and granted and have not expired. All such
Tax Returns were at the time of filing and
are as of the date hereof true, correct and
complete in all material respects. All Taxes
owed by each Company have been paid within
the time and in the manner prescribed by law.
(ii) No claim has ever been made by a Taxing
authority in a jurisdiction where any Company
has never filed a Tax Return that any Company
is or may be subject to taxation by that
jurisdiction. The attached Schedule 5.1(v)
sets forth each state, local and foreign
jurisdiction in which each Company (i) filed
an income or franchise Tax Return, whether on
a consolidated, combined or separate return
basis, during the five year-period ended
December 31, 1998, or (ii) collected or
remitted any sales and/or use Taxes during
the five-year period ended December 31, 1998.
(iii)The Financial Statements reflect an adequate
reserve in accordance with GAAP consistently
applied for all Taxes payable by each Company
for all Taxable periods and portions thereof
accrued through the respective dates of such
Financial Statements. Any Taxes incurred or
accrued by each Company since the Balance
Sheet Date have arisen in the ordinary
and usual course of business determined in
the same manner as for the most recent
taxable period ending on or before such date.
All deficiencies for any Taxes that have
been assessed against each Company have been
fully paid, or are fully reflected as a
liability in such Financial Statements in
accordance with GAAP, or are being contested and an
adequate reserve therefor has been
established and is fully reflected in such
Financial Statements.
(iv) No Company is a party to any pending audit,
examination, action or proceeding for the
assessment or collection of any Taxes, nor,
to Sellers' knowledge, is any such audit,
examination, action or proceeding threatened.
(v) There are no Liens for Taxes (other than for
current Taxes not yet due and payable) on the
assets of any Company or the Allied Shares.
(vi) No issue has been raised by the IRS or any
other applicable taxing authority in any
examination of the federal, state, local or
foreign income Tax Returns of any Company
which, by application of the same or similar
principles, reasonably could be expected to
result in a proposed deficiency for any other
period not so examined. No Company is
subject to any agreements, waivers or other
arrangements extending the statute of
limitations for the assessment, collection or
levy of any Taxes for any Taxable year or
other period. Copies of all income or
informational income Tax Returns of each
Company filed for each of the past three (3)
Taxable years have heretofore been delivered
to Buyer and all such Tax Returns are listed
on the attached Schedule 5.1(v).
(vii)Copies of all Tax agreements (including,
without limitation, agreements providing
for the allocation or sharing of or
indemnification with respect to Taxes)
to which any Company is a party, including
any novations, transfers or assignments
thereof, have heretofore been delivered to Buyer,
and all such agreements are listed on the
attached Schedule 5.1(v).
(viii)Allied has not filed a consent pursuant to,
or agreed to the application of, Section 341(f)
of the Code.
(ix) No Company has made any payments, is
obligated to make any payments, or is a party
to any agreement that could obligate it to
make any payments, the deductibility of which
would be disallowed (in whole or in part)
under Section 280G of the Code.
(x) None of the Allied Shareholders is a foreign
person within the meaning of Section 1445 of
the Code.
(xi) To Sellers' knowledge, there are no matters
which give rise to a claim of any substantial
understatement of federal income Taxes within
the meaning of Section 6662 of the Code.
(xii)All Taxes that are required by law to be
withheld or collected by each Company have
been duly withheld or collected and, to
the extent required, have been paid to the
proper Governmental Authority or properly
segregated or deposited as required by applicable
law.
(xiii)No Company (A) has been a member of an
affiliated group filing a consolidated
federal income Tax Return, and (B) has any
liability for the Taxes of any other person
under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign
law), as a transferee or successor, by
Contract or otherwise.
(xiv)No Company has executed or entered into any
closing agreement pursuant to Section 7121 of
the Code, or any predecessor provision
thereof, or any similar provision of
state or local law.
(xv) No Company has taken any action in
anticipation of the Closing not expressly
required by this Agreement, or not in
accordance with past practice, that would
have the effect of deferring any liability
for Taxes of any of the Companies to any
Taxable period (or portion thereof) ending
after the Closing Date.
(xvi)No Company is or will be required to include
any amount in its gross income or exclude any
amount of its deductions in any Taxable
period ending after the Closing Date by
reason of a change in accounting method
in any Taxable period ending on or before
the Closing Date.
(xvii)Except as may have been granted to the
Companies' attorneys or accountants (which
will be terminated at closing), no power
of attorney has been granted by any Company
with respect to any matter relating to Taxes
which is currently in force.
For purposes of this Agreement, (i) the term "Tax"
(including, with correlative meaning, the terms "Taxes" and
"Taxable") means all federal, state, local, and foreign net
income, gross income, profits, franchise, gross receipts,
payroll, sales, employment, use, occupation, license, value
added, property, ad valorem, withholding, excise, user,
fuel, excess or windfall profits, alternative or add-on
minimum, custom duties, gains, transfer, documentary, stamp,
and other taxes, duties, fees, assessments or charges of any
nature whatsoever, together with all interest, penalties,
fines and additions to tax or additional amounts imposed
with respect thereto, and (ii) the term "Tax Returns" means
any return, report, statement, election, information return
or other document (including schedules or any related or
supporting information) filed or required to be filed with
any Governmental Authority in connection with the
determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative
requirements relating to any Tax.
(w) Product Warranties. Except for (i) written
product or service warranties made by the Companies on their
sales order forms, packages and product catalogues, true,
accurate and complete copies of which have been provided to
Buyer, (ii) product warranties of manufacturers of the
Products, and (iii) minor Product service or Product
replacement work made by a Company at its sole discretion in
the ordinary course of business in furtherance of
maintaining customer satisfaction and the goodwill of such
Company which are not material, individually or in the
aggregate, no Company makes express product or service
warranties or commitments in connection with the sale of
Products or the performance of services related thereto,
including installation of Products. Except as otherwise
disclosed in the Schedule entitled "Warranty Costs", no
Company has received any notice of any claim that it is
under any warranty liability or obligation with respect to
the sale of Products or the performance of services related
thereto, including installation of Products other than
ordinary and normal warranty and service commitments
consistent with past practice which are neither
(a) material, individually or in the aggregate, or (b) of
the type described on the Schedule entitled "Litigation"
(such ordinary and normal commitments being referred to
herein as "Ordinary Warranty Commitments").
(x) Insurance. The Schedule entitled "Insurance"
contains a list of all insurance policies (specifying the
location, insured, insurer, amount of coverage, type of
insurance and policy number) maintained and in effect by
each Company. All premiums with respect to such policies
covering all periods up to and including the date of Closing
which have come due have been paid, and no notice of
cancellation or termination has been received with respect
to any such policy. Such policies (i) are, to Sellers'
knowledge, sufficient for compliance with all requirements
of law and of all agreements (including Lease Agreements) to
which any Company is a party; (ii) are, to Sellers'
knowledge, valid, outstanding and enforceable policies;
(iii) to Sellers' knowledge, provide adequate insurance
coverage for the assets and operations of the Companies; and
(iv) will not, to Sellers' knowledge, in any way be affected
by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. The Schedule entitled
"Insurance" identifies all risks which the Companies or its
officers have designated as being self insured. Except for
refusals or proposed coverage limitations occurring in the
normal course of renewing insurance coverages from time to
time, no Company has been refused any insurance with respect
to its assets or operations, nor has its coverage been
limited, by any insurance carrier to which it has applied
for any such insurance or with which it has carried
insurance during the last five years.
(y) Approvals. The Schedule entitled "Assignments and
Consents" attached hereto sets forth a list of all Consents,
which must be obtained or satisfied pursuant to the terms of
the related Contract, Lease Agreement or Permit. All
Required Consents have been, or shall by the Closing have
been, obtained.
(z) Absence of Certain Commercial Practices. No
Company nor, to Sellers' knowledge, any officer, director,
employee or agent of any Company (or any Person acting on
behalf of any of the foregoing) has given or agreed to give
(i) any gift or similar benefit of more than nominal value
to any Customer, supplier, Governmental Authority (including
any governmental employee or official) or any other Person
who is or may be in a position to help, hinder or assist any
Company, the Business or the Person giving such gift or
benefit in connection with any actual or proposed
transaction relating to the Business, which gifts or similar
benefits would individually or in the aggregate subject any
Company or any officer, director, employee or agent of any
Company to any fine, penalty, cost or expense or to any
criminal sanctions, (ii) receipts from or payments to any
governmental officials or employees, (iii) commercial bribes
or kick-backs, (iv) political contributions, or (v) any
receipts or disbursements in connection with any unlawful
boycott. No such gift or benefit is required in connection
with the operation of the Business to avoid any fine,
penalty, cost, expense or Material Adverse Effect upon the
Companies, taken as a whole.
(aa) Bank Accounts. The Schedule entitled "Bank
Accounts" attached hereto sets forth the names and locations
of all banks, trust companies, savings and loan associations
and other financial institutions at which any Company
maintains any safe deposit boxes or accounts (specifying the
identifying numbers), and the names of all persons
authorized to draw thereon, make withdrawals therefrom or
have access thereto.
(bb) Books and Records. The books and records of the
Companies maintained in connection with the Business
(including, without limitation, (i) books and records
relating to the purchase of materials and supplies,
manufacture or processing of products, sales of products,
dealings with customers, invoices, customer lists,
inventories, supplier lists, personnel records and taxes,
(ii) the stock books, stock ledgers and minute books of the
Companies, and (iii) computer software and data in computer
readable and human readable form used to maintain such books
and records together with the media on which such software
and data are stored and all documentation relating thereto)
accurately record all transactions relating to the Business
in all material respects, and have been maintained
consistent with good business practice.
(cc) Warranty Costs. Set forth on the Schedule
entitled "Warranty Costs" is a description of all
litigation, actions, suits, investigations, claims and
proceedings asserted, brought or threatened against the
Companies within the last three (3) years preceding the date
of this Agreement, together with a description of the
outcome or present status thereof, relating to any claim for
warranty costs involving amounts in excess of $10,000,
individually or in the aggregate. As used herein, "warranty
costs" means the costs and expenses of servicing, repairing,
returning and/or replacing, or allowances for service,
repair, return or replacement, of defective or allegedly
defective or improperly selected or shipped Products or the
performance of services related thereto, including
installation of Products or parts or components thereof
manufactured, installed or sold by the Companies and the
costs of materials and expenses of replacing materials or
correcting any jobs or materials inadequately performed or
manufactured by the Companies, together with such legal
liability, if any, as may exist in connection with sales of
Products or the performance of services related thereto,
including installation of Products, whether such costs and
expenses relate to or arise out of claims or causes of
action which assert causes sounding in tort, contract or
warranty, or any combination of the foregoing.
(dd) Penalties and Renegotiation of Contracts. Except
as otherwise specifically disclosed on the Schedule entitled
"Contracts", no Company has any liabilities or obligations
under any contracts providing for (i) penalties in the event
of misfeasance by it in the performance of its duties
thereunder, or (ii) the renegotiation or redetermination of
profits or prices, nor will any Company's costs which are
incurred or accruable prior to the Closing under contracts
or under subcontracts between the a Company and any other
Person, firm or corporation be subject to disallowance.
(ee) Pricing Practices. The prices to be received or
paid by the Companies under all outstanding contracts,
agreements, commitments and undertakings with its customers
and suppliers and others in connection with the Business
have been determined in accordance with the Companies'
established past pricing policies, and there are no
outstanding contracts, agreements, commitments or
undertakings relating to the Business that individually or
in the aggregate are expected to result in any material loss
to any Company or the Business.
(ff) Copies of Documents. The Companies have delivered
to Buyer true, correct and complete copies of all contracts,
agreements and other documents listed in the Schedules to,
or referenced in, this Agreement, and all modifications and
amendments thereto.
(gg) [Intentionally omitted]
(hh) Insider Interests; Advances. Except as set forth
in the Schedule entitled "Insider Interests", no
shareholder, officer, director or employee of any Seller or
any Company has any material interest in any property, real
or personal, tangible or intangible, including without
limitation, inventions, patents, trademarks or trade names,
used in or pertaining to the Business or Seller. Except for
travel advances, and advances on accrued salary or bonuses
due or to become due in the ordinary and normal course of
business, which salary advances and bonuses are specifically
described in the Schedule entitled "Employees", there are no
receivables of any of the Companies owed by any director,
officer or employee of any of the Companies or the Allied
Shareholders or owing by any corporations, partnerships,
firms or organizations in which directors, officers or
employees of any of the Companies or the Allied Shareholders
have any interest.
(ii) Year 2000 Compliance. (i) As to Systems used in
operating the Business:
(A) The Companies have conducted, and provided Buyer
with a description of, an inventory and assessment
of all of the Companies' software, computers,
network equipment, technical infrastructure,
production equipment and other equipment and
systems that are material to the operation of the
Business and that rely or utilize date or time
processing (collectively, "Systems");
(B) To Sellers' knowledge, all of such Systems are
"Year 2000 Compliant," as defined below;
(C) Schedule 5.1(ii) attached hereto sets forth the
nature and scope of the Companies' Year 2000
compliance strategy and program; and
(D) The Companies have complied with all applicable
Laws relating to Year 2000 Compliance, except in
the case where failure to comply would not,
individually or in the aggregate, have a Material
Adverse Effect upon the Companies, taken as a
whole.
(ii) "Year 2000 Compliant" means a System will at
all times:
(A) Consistently and accurately handle and process
date and time information and data with values
before, during and after January 1, 2000,
including but not limited to accepting date input,
providing date output, and performing calculations
on or utilizing dates or portions of dates;
(B) Function accurately and in accordance with its
specifications without interruption, abnormal
endings, degradation, change in operation or other
impact, or disruption of other systems, resulting
from processing data or time data with values,
before, during and after January 1, 2000;
(C) Respond to and process two-digit date input in a
way that resolves any ambiguity as to century; and
(D) Store and provide output of date information in
ways that are unambiguous as to century.
(jj) Disclosure. No representation or warranty made by
any Company or Seller contained in this Agreement, on any
Schedules or in any other agreement or certificate executed
by any Company or a Seller pursuant to Article IV contains
an untrue statement of a material fact or omits to state a
material fact necessary to make the statements and facts
contained herein or therein, in light of the circumstances
in which they were or are made, not false or misleading.
5.2 Representations and Warranties of the Allied
Shareholders. Each Allied Shareholder hereby jointly and
severally represents and warrants to Buyer that:
(a) Shareholders; Title to Shares. Such Allied
Shareholder is the sole holder of record and beneficial
owner of such number of Shares as is set forth on Schedule
1.3. Good, valid and marketable title to such Allied Shares
is held by such Allied Shareholder, free and clear of all
Claims. The certificates and other documents representing
such Allied Shareholder's Shares to be delivered to Buyer at
the Closing, and the signatures and endorsements thereof or
stock powers or powers of attorney delivered therewith, are
valid and genuine.
(b) Capacity of Shareholders; Consents; Execution of
Agreement; Good Title to Buyer. Such Allied Shareholder has
all requisite power, authority and capacity to enter into
and perform this Agreement and all other agreements and
instruments to be entered into by such Shareholder in
connection herewith, and to perform the obligations required
to be performed by such Shareholder hereunder and
thereunder. All Consents from any Governmental Authorities
and other persons and entities, required to be obtained by
such Shareholder so as to sell such Shareholder's Allied
Shares to Buyer pursuant to the terms and conditions of this
Agreement, or which are necessary for the consummation by
such Shareholder of the transactions contemplated by this
Agreement, have been, or by the Closing shall have been,
obtained. This Agreement and all other agreements and
instruments entered into or to be entered into by such
Shareholder in connection herewith have been, or upon
execution and delivery will be, duly authorized, executed
and delivered by, and constitute, or upon execution and
delivery will constitute, the valid and legally binding
obligations of such Shareholder, enforceable against such
Shareholder in accordance with their respective terms. Upon
delivery by such Shareholder of such Shareholder's Allied
Shares to Buyer as herein contemplated, Buyer shall acquire
legal and beneficial ownership of, and shall have good title
to, (i) such Shareholder's Allied Shares, and (ii) all of
the issued and outstanding shares of capital stock of
Allied, free and clear of all Claims.
(c) Other Businesses. Except as disclosed on the
Schedule entitled "Affiliate Companies", such Allied
Shareholder has no direct or indirect interest in any
corporation or business which competes with or conducts any
business similar to any business conducted by the Companies.
5.3 Representations and Warranties of HON. HON (and
as used in this Section 5.3, neither HON nor Buyer shall be
deemed to include any Company or Seller or AFC or H&H, or any of
their respective assets, operations, properties, rights or
interests) represents and warrants to Sellers that:
(a) Organization and Standing; Power and Authority.
HON is a corporation duly organized, validly existing and in
good standing under the laws of the State of Iowa, and has
full corporate power and authority to operate its business,
to own or lease its assets and to enter into and perform
this Agreement and the transactions and other agreements and
instruments contemplated by this Agreement. HON is duly
qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in
which the ownership or lease of its assets or the operation
of its business requires such qualification, except where
the failure to be so qualified or licensed would not have a
Material Adverse Effect on HON. This Agreement and all
other Transaction Documents to be executed and delivered by
HON in connection herewith have been, or upon execution
thereof will be, duly executed and delivered by HON. This
Agreement and the transactions and other agreements and
instruments contemplated hereby have been duly approved by
the Board of Directors of HON, in accordance with applicable
law, and constitute the valid and binding obligations of
HON, enforceable in accordance with their respective terms.
(b) Conflicts; Defaults. Neither the execution and
delivery of this Agreement and the other agreements and
instruments executed or to be executed in connection
herewith by HON, nor the performance by HON of the
transactions contemplated hereby or thereby, will
(i) violate, conflict with, or constitute a default under,
any of the terms of HON's charter or By-Laws, or any
provisions of, or result in the acceleration of any
obligation under, any material contract, license, security
agreement, mortgage, note, deed, lease, agreement or
instrument, or any order, judgment or decree by which HON or
any of its assets are bound, or (ii) violate any Law.
(c) Brokers, Finders and Agents. HON is not directly
or indirectly obligated to anyone acting as a broker, finder
or in any other similar capacity in connection with this
Agreement or the transactions contemplated hereby, except
Robert W. Baird & Co. Incorporated.
(d) Consents. Schedule 5.3(d) sets forth a list of
all consents, novations and waivers prescribed by Law or any
contract, agreement, commitment or undertaking and which
must be obtained or satisfied by HON in order for HON to
consummate the transactions contemplated by this Agreement
or the other agreements to be executed and delivered in
connection herewith. All such consents prescribed by any
Law or any contract, agreement, commitment or undertaking,
and which must be obtained or satisfied by HON for the
consummation of the transactions contemplated by this
Agreement, or for the continued performance by it of its
rights and obligations thereunder, have been, or shall by
the Closing have been, made, obtained and satisfied.
5.4 Representations and Warranties Relating to Buyer.
Buyer and HON (and as used in this Section 5.3, neither HON nor
Buyer shall be deemed to include any Company or Seller or AFC or
H&H, or any of their respective assets, operations, properties,
rights or interests) hereby jointly and severally represent and
warrant to Sellers that:
(a) Organization and Standing; Power and Authority.
Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Iowa, and
has full corporate power and authority to operate its
business, to own or lease its assets and to enter into and
perform this Agreement and the transactions and other
agreements and instruments contemplated by this Agreement.
Buyer is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each
jurisdiction in which the ownership or lease of its assets
or the operation of its business requires such
qualification, except where the failure to be so qualified
or licensed would not have a Material Adverse Effect on
Buyer. This Agreement and all other Transaction Documents
to be executed and delivered by Buyer in connection herewith
have been, or upon execution thereof will be, duly executed
and delivered by Buyer. This Agreement and the transactions
and other agreements and instruments contemplated hereby
have been duly approved by the Board of Directors of Buyer,
in accordance with applicable law, and constitute the valid
and binding obligations of Buyer, enforceable in accordance
with their respective terms.
(b) Capitalization. The authorized capital stock of
Buyer on the date hereof consists of 100,000 shares of
common stock, $1.00 par value per share, of which
5,000 shares are issued and outstanding. The authorized
capital stock of Buyer at the time of Closing shall be as
set forth on Schedule 5.4(b)(i). All of the issued and
outstanding shares of Buyer are owned by HON. All issued
shares have been validly issued and are fully paid and
nonassessable. There are no outstanding obligations,
options, warrants, preemptive rights or other agreements or
commitments (whether oral or written) to which Buyer is a
party, or by which Buyer is otherwise bound, providing for
the issuance of any additional shares of capital stock of
Buyer, the repurchase of shares of capital stock of Buyer or
otherwise relating to capital stock of Buyer other than as
set forth on Schedule 5.4(b)(ii) pursuant to the 7%
Convertible Debentures due October 1, 1999, as amended, and
the Securityholders' Agreement dated as of October 2, 1996,
as amended, among HON, Buyer, D&K Family Limited
Partnership, LLP and the other parties listed on the
signature page thereto.
(c) Articles and By-Laws. The copy of the Articles of
Incorporation of Buyer, certified by the Secretary of State
of the State of Iowa, and the By-Laws of Buyer, furnished to
Sellers are true, correct and complete.
(d) Conflicts; Defaults. Neither the execution and
delivery of this Agreement and the other agreements and
instruments executed or to be executed in connection
herewith by Buyer, nor the performance by Buyer of the
transactions contemplated hereby or thereby, will
(i) violate, conflict with, or constitute a default under,
any of the terms of Buyer's charter or By-Laws, or any
provisions of, or result in the acceleration of any
obligation under, any material contract, license, security
agreement, mortgage, note, deed, lease, agreement or
instrument, or any order, judgment or decree by which Buyer
or any of its assets are bound, or (ii) violate any Law.
(e) Compliance with Other Instruments, etc. Buyer is
not in violation of any terms of (i) its charter or By-laws,
(ii) any agreement or instrument related to indebtedness for
borrowed money or any other agreement to which it is a party
or by which it is bound, (iii) any applicable Law or (iv)
any applicable order, judgment or decree of any court,
arbitrator or Governmental Authority, the consequences of
which violation, whether individually or in the aggregate,
have or would be reasonably expected (so far as can be
foreseen at the time) to (x) have a Material Adverse Effect
on Buyer, or (y) have the effect of preventing or materially
delaying the performance by Buyer of its obligations under
this Agreement.
(f) Financial Statements. Buyer has heretofore
delivered to Sellers (i) the unaudited Balance Sheet of
Buyer as of November 27, 1999, (ii) the unaudited Balance
Sheets of Buyer as of December 31, 1998, December 31, 1997,
December 31, 1996 and the eleven (11) months ended
November 27, 1999, (iii) the unaudited Statements of Income
of Buyer for the fiscal years ended December 31, 1998,
December 31, 1997 and December 31, 1996, and for the
eleven (11) months ended November 27, 1999 and (iv) the
Statement of Cash Flows of Buyer for the eleven (11) months
ended November 27, 1999 (collectively, the "Buyer Financial
Statements"). Each of the Buyer Financial Statements was
prepared from the books and records kept by Buyer, and
fairly presents the financial position of Buyer as of such
dates, and the results of operations of Buyer for the
periods then ended in accordance with the internal
accounting practices and policies of Buyer consistently
applied, except that the Buyer Financial Statements do not
contain normal year-end adjustments required by GAAP and the
Buyer Financial Statements omit footnote disclosures
required by GAAP.
(g) Litigation. There are no actions, suits,
investigations or proceedings pending or, to the knowledge
of Buyer, threatened against Buyer in any court or before
any arbitrator of any kind or before or by any Governmental
Authority, except actions, suits, investigations or
proceedings which, in the aggregate, do not have and would
not be reasonably expected (so far as can be foreseen at the
time) to (a) have a Material Adverse Effect on Buyer or
(b) have the effect of preventing or materially delaying the
performance by Buyer of its obligations under this
Agreement.
(h) Absence of Certain Changes or Events. During the
period since November 27, 1999, the business of Buyer has
been conducted only in the ordinary course, consistent with
past practice, and Buyer has not entered into any material
transaction other than in the ordinary course, consistent
with past practice, and there has not been (i) any change
(other than changes affecting generally the fireplace,
hearth products and building products industries as a whole,
including but not limited to, changes in or affecting
interest rates, housing markets, applicable Laws or
comparable events) in the business, financial condition,
results of operations, properties, assets or liabilities of
Buyer that, individually or in the aggregate, has or would
reasonably be expected to have (so far as can be foreseen at
the time) a Material Adverse Effect on Buyer, (ii) any
damage, destruction or loss (whether or not covered by
insurance) with respect to any property or asset of Buyer
which, individually or in the aggregate, has or would
reasonably be expected (so far as can be foreseen at the
time) to have a Material Adverse Effect on Buyer, or (iii)
any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Buyer, other
than intercompany advances between HON and Buyer.
(i) Brokers, Finders and Agents. Buyer is not
directly or indirectly obligated to anyone acting as a
broker, finder or in any other similar capacity in
connection with this Agreement or the transactions
contemplated hereby, except Robert W. Baird & Co.
Incorporated.
(j) Consents. Schedule 5.3(d) sets forth a list of
all consents, novations and waivers prescribed by Law or any
contract, agreement, commitment or undertaking and which
must be obtained or satisfied by Buyer in order for Buyer to
consummate the transactions contemplated by this Agreement
or the other agreements to be executed and delivered in
connection herewith. All such consents prescribed by any
Law or any contract, agreement, commitment or undertaking,
and which must be obtained or satisfied by Buyer for the
consummation of the transactions contemplated by this
Agreement, or for the continued performance by it of its
rights and obligations thereunder, have been, or shall by
the Closing have been, made, obtained and satisfied.
(k) Ability to Pay Cash Amount. On the Closing Date,
Buyer will have sufficient cash to pay the Cash Amount in
immediately available funds.
5.5 General. The representations and warranties of
the parties hereto made in this Agreement, subject to the
exceptions thereto, shall not be affected by any information
furnished to, or any investigation conducted by, any of them or
their representatives in connection with the subject matter of
this Agreement. The representations and warranties made in this
Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Closing for the respective periods
set forth in Section 11.5.
ARTICLE VI CONDITIONS TO CLOSING
6.1 Conditions to Buyer's Obligations. The obligation
of Buyer to consummate the transactions provided for by this
Agreement is subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions, any of which
may be waived by Buyer except for the conditions set forth in
subsection (d) (as to Consents of Governmental Authorities) of
this Section 6.1:
(a) Representations and Warranties. Each of the
representations and warranties of Sellers made in
Sections 5.1 and 5.2 of this Agreement shall be true and
correct in all material respects both on the date hereof and
as of the Closing Date as though made at such time except
(excluding the representations and warranties set forth in
Section 5.1(h)) where the failure to be so true and correct
(without giving effect to any limitations as to
"materiality," "substantial," "Material Adverse Effect," or
"material adverse change" set forth therein) (i) does not
have, and would not reasonably be expected to have, a
Material Adverse Effect on the Companies, taken as a whole,
or a material adverse impact on the ability of Sellers to
perform their obligations hereunder (other than as a result
of any matter set forth in the proviso to Section 6.1(c)),
and (ii) relates to a Retained Liability against which
Sellers have agreed to indemnify Buyers hereunder.
(b) Covenants. Sellers shall have performed and
complied with all covenants and agreements required to be
performed or complied with by each of them at or prior to
the Closing Date.
(c) Material Adverse Change. Since the date hereof,
there shall have occurred no material adverse change, or
condition or occurrence of any event which would reasonably
be expected to result in any such change, in the condition
(financial or otherwise), business, assets, properties or
operations of the Companies, taken as a whole, or the
Business; provided, however, that if and so long as Sellers
have performed their obligations under this Agreement, the
following shall not be deemed to be any such change:
(i) the inability of Buyer to reach an agreement with any of
the Companies' employees (other than the Key Employees)
regarding their employment by Buyer after the Closing or the
resignation of any of the Companies' employees (other than
the Key Employees) prior to the Closing, (ii) any actual or
projected decrease in dollar sales to any of its customers
or any change in the Companies' relations with any of their
suppliers, including without limitation, such changes
resulting from or related to the transactions contemplated
under this Agreement, or (iii) changes affecting generally
the fireplace, hearth products and building products
industries as a whole, including, but not limited to,
changes in or affecting interest rates, housing markets,
applicable laws or comparable events.
(d) Consents. All Consents of Governmental
Authorities and Required Consents of third parties described
in Sections 1.4, 5.1(y) and 9.6 and necessary to consummate
the transactions contemplated hereunder shall have been
obtained and satisfied and the applicable waiting period
under the H-S-R Act shall have expired or been terminated.
(e) No Proceeding or Litigation. No litigation,
action, suit, investigation, claim or proceeding challenging
the legality of, or seeking to restrain, prohibit or
materially modify, the transactions provided for in this
Agreement shall have been instituted and not settled or
otherwise terminated, except for any such litigation,
action, suit, claim or proceeding claiming breach of the
agreements described in paragraph III.7 of the Schedule to
the Purchase Agreement of even date herewith among Buyer,
HON, AFC and H&H (the "AFC Purchase Agreement") entitled
"Contracts" or the paragraph entitled "CFM Majestic" on the
Schedule to the AFC Purchase Agreement entitled
"Non-Assigned Contracts" as a result of the transactions
contemplated hereby, other than any action, litigation,
suit, claim or proceeding arising as a result of any other
breach by AFC or H&H of any such agreements.
(f) Legal Matters. The form and substance of all
legal papers, instruments and documents delivered under
Sections 4.2 or 4.3 (and not attached in form hereto) shall,
in the reasonable judgment of Buyer, be satisfactory to
Buyer, and if requested by Buyer, to Jones, Day, Reavis &
Pogue, Buyer's counsel, in its reasonable judgment.
(g) Certificate of Seller. At the Closing, Sellers
shall have delivered to Buyer a Certificate signed by each
Company's President, and attested to by its Secretary or an
Assistant Secretary, and dated the Closing Date, to the
effect that to the best of the knowledge and belief of such
officers the conditions specified in Sections 6.1(a), (b),
(c) and (d) have been fulfilled.
(h) Certificate; Documents. Sellers and the other
Persons shall have delivered the certificates, opinion of
counsel and other documents required by Sections 4.2, 4.3,
4.5 and 4.6.
(i) Tax Certificates. Sellers shall have delivered to
Buyer such forms and certificates as may be necessary to
exclude or reduce payment of state sales taxes otherwise
incurred as a result of Buyer's acquisition of the Acquired
Assets and the Allied Shares.
(j) Lender Consents. HON shall have received duly
executed consents from the holders of its industrial revenue
bonds, in form and substance reasonably satisfactory to HON.
(k) Other Closing. The closing of the transactions
contemplated by the AFC Purchase Agreement shall have been
consummated.
6.2 Conditions to Sellers' Obligations. The
obligations of Sellers to consummate the transactions provided
for by this Agreement are subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions,
any of which may be waived by Sellers except for the conditions
set forth in subsection (c) of this Section 6.2:
(a) Representations and Warranties. Each of the
representations and warranties of Buyer and HON made in
Sections 5.3 and 5.4 of this Agreement shall be true and
correct in all material respects both on the date hereof and
as of the Closing Date as though made at such time except
(excluding the representations and warranties set forth in
Section 5.4(f)) where the failure to be so true and correct
(without giving effect to any limitations as to
"materiality," "substantial," "Material Adverse Effect," or
"material adverse change" set forth therein) does not have,
and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on HON and
Buyer, taken as a whole, or a material adverse impact on the
ability of HON and Buyer to perform their obligations
hereunder.
(b) Covenants. Buyer shall have performed and
complied with all covenants and agreements required to be
performed or complied with by it at or prior to the Closing
Date.
(c) Material Adverse Change. Since the date hereof,
there shall have occurred no material adverse change, or
condition or occurrence of any event which would reasonably
be expected to result in any such change, in the condition
(financial or otherwise), business, assets, properties or
operations of Buyer; provided, however, that changes
affecting generally the fireplace, hearth products and
building products industries as a whole, including, but not
limited to, changes in or affecting interest rates, housing
markets, applicable laws or comparable events shall not be
deemed to be any such change.
(d) Consents. All Consents of Governmental
Authorities, including those described in Sections 5.3(d),
5.4(j) and 9.6, necessary to consummate the transactions
contemplated hereunder shall have been obtained and the
applicable waiting period under the H-S-R Act shall have
expired or been terminated.
(e) No Proceeding or Litigation. No litigation,
action, suit, investigation, claim or proceeding challenging
the legality of, or seeking to restrain, prohibit or
materially modify, the transactions provided for in this
Agreement shall have been instituted and not settled or
otherwise terminated.
(f) Legal Matters. The form and substance of all
legal papers, instruments and documents delivered under
Section 4.4 (and not attached in form hereto) shall, in the
reasonable judgment of Sellers, be satisfactory to Sellers,
and if requested by Sellers, to Sellers' Counsel, in its
reasonable judgment.
(g) Certificates of Buyer and HON. At the Closing,
Buyer and HON shall have delivered to Sellers a Certificate
signed by the respective Presidents or Vice Presidents of
Buyer and HON, and attested to by the respective Secretaries
or Assistant Secretaries of Buyer and HON, and dated the
Closing Date, to the effect that to the best of the
knowledge of such officers the conditions specified in
Section 6.2(a), (b) and (c) have been fulfilled.
(h) Certificates; Documents. Buyer shall have
delivered the certificates and other documents required by
Sections 4.4 and 4.5.
(i) Other Closing. The closing of the transactions
contemplated by the AFC Purchase Agreement shall have been
consummated.
ARTICLE VII COVENANTS OF SELLER
7.1 Conduct of Business. During the period from the
date hereof through the Closing Date, Sellers shall conduct the
Business and operate the Assets in the ordinary and normal course
and consistent with past practice (including, without limitation,
using their best efforts to preserve beneficial relationships
between the Companies and their distributors, agents, lessors,
suppliers and customers, as reasonably directed by Buyer) and
continue normal maintenance, marketing, advertising,
distributional and promotional expenditures in connection with
the Business. No Company shall engage in any transactions,
including transactions relating to the purchase or sale of goods,
raw materials, inventories or other operating or production
items, intracorporate or otherwise, with any of its Affiliates
from the date hereof until the Closing other than
(i) transactions approved by Buyer in writing, (ii) transactions
in the ordinary and normal course consistent with past practice
pursuant to the leases disclosed on the Schedule entitled "Real
Estate and Leases", or (iii) transactions on terms no more
favorable to the Companies or their Affiliates than would have
been obtainable in arm's-length dealing. Without limiting the
generality of the foregoing and except as otherwise expressly
provided in this Agreement, during the period from the date
hereof through the Closing Date, no Company shall:
(a) Obligations for Borrowed Money. (i) create, incur
or assume any debt (including obligations in respect of
capital leases) or any debt for money borrowed (whether
long- or short-term), other than trade payables incurred in
the ordinary course of business consistent with past
practice and amounts constituting Retained Liabilities drawn
on existing lines of credit or similar extensions of credit,
(ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise)
for the obligation of any other Person, or (iii) make any
loans, advances or capital contributions to any other Person
other than advances of expenses to employees in the ordinary
and normal course consistent with past practices;
(b) Employee Matters. (i) Increase in any manner the
rate of compensation of any of its officers or other
employees other than the increases for the persons and in
the amounts described on Schedule 7.1, (ii) make or agree to
make any payment pursuant to any Company Plan, including,
without limitation, any payment of any pension, retirement
allowance, severance or other employee benefit, except as
expressly required by any existing Company Plan disclosed on
the Schedules to this Agreement, to any such officers or
employees, whether past or present; (iii) enter into or
modify any collective bargaining agreement; or (iv) commit
itself to any additional Company Plan, or employment or
consulting agreement with a Person, or to amend any of such
Plans or agreements, except as required by Law;
(c) Sale of Assets. Sell, transfer, license or
otherwise dispose of or agree to sell, transfer, license or
otherwise dispose of any Assets, except Inventory in the
ordinary and normal course of business consistent with past
practice;
(d) Commitments. Enter into any other agreements,
commitments, contracts or undertakings, except agreements,
commitments, contracts or undertakings made in the ordinary
and normal course of business consistent with past practice
and the representations and warranties of Sellers contained
in this Agreement;
(e) Leased Facilities. Terminate, modify or amend the
Lease Agreements;
(f) Encumbrances. Encumber or grant or create a Lien
on any of the Assets other than Liens on after-acquired
assets arising as a result of security agreements disclosed
on the Schedule entitled "Contracts";
(g) Insurance. Cause any of the policies of insurance
referred to in Section 5.1(x) to terminate, lapse or be
canceled, unless equivalent replacement policies, without
lapse of coverage, shall be put in place;
(h) Litigation. Enter into any compromise or
settlement of any litigation, action, suit, claim,
proceeding or investigation, except settlements made in the
ordinary and normal course of business or by insurers,
involving amounts not in excess of $20,000;
(i) Representations and Warranties. Take any action
the taking of which, or omit to take any action the omission
of which, would cause any of the representations and
warranties contained in Sections 5.1(f), (g), (s), (u) or
(z) to fail to be true and correct as of the Closing as
though made at and as of the Closing; or
(j) Commitments. Agree or commit to do any of the
foregoing.
7.2 Disclosure Supplements.
(a) From time to time prior to the Closing, Sellers
shall promptly supplement or amend the Schedules to this
Agreement with respect to any matter (i) which may arise
hereafter and which, if existing or occurring at or prior to
the date hereof, would have been required to be set forth or
described in the Schedules to this Agreement, or (ii) which
makes it necessary to correct any information in the
Schedules to this Agreement or in any representation and
warranty of any Seller which has been rendered inaccurate
thereby. No supplement or amendment to the Schedules to
this Agreement or any delivery of Schedules after the date
hereof, unless expressly consented in writing by Buyer,
shall be deemed to cure any breach of any representation or
warranty made in this Agreement, or modify, affect or
diminish Buyer's right to terminate this Agreement pursuant
to Section 10.1(c).
(b) During the period from the date hereof to the
Closing, Sellers shall promptly (i) furnish or make
available to Buyer copies of all operating reports and
monthly, quarterly and year-end financial statements of each
Company as soon as they become available, all certified by
such Company's chief financial officer that such financial
statements fairly present the financial position and results
of operations of such Company for the periods covered by
such statements and for year-end financial statements in
accordance with GAAP consistently applied, and (ii) notify
Buyer of (A) any material change in the condition (financial
or otherwise), business, assets, properties, operations or
prospects of any Company or the Business, and (B) the
institution or settlement of any litigation, action, suit,
investigation, claim or proceeding and of any material
developments therein.
7.3 Closing. Sellers shall use their best efforts to
cause the conditions set forth in Section 6.1 to be satisfied by
the Closing Date.
7.4 Confidentiality. Sellers shall, and shall cause
their Affiliates, officers, employees, representatives,
consultants and advisors to, hold in confidence and not use all
confidential information which remains after Closing in the
possession of Sellers or such Affiliates or other persons,
including information concerning the Business and the Assets.
Sellers shall not release or disclose any such information to any
Person other than Buyer and its authorized representatives.
Notwithstanding the foregoing, the confidentiality obligations of
this Section shall not apply to information:
(a) which a Seller is compelled to disclose by
judicial or administrative process, or, in the opinion of
counsel, by other mandatory requirements of Law;
(b) which can be shown to have been generally
available to the public other than as a result of a breach
of this Section; or
(c) which can be shown to have been provided to a
Seller by a third party who obtained such information other
than from a Seller or any Company or other than as a result
of a breach of this Section.
7.5 Maintenance of Insurance. Each Seller will
(a) maintain all policies of insurance in effect on the date
hereof through and until the Closing; and (b) after the Closing
use its best efforts to maintain any policies of insurance which
cover liabilities associated with the operation of the Business
prior to the Closing; provided, that after the Closing Sellers
shall not be required to pay any additional premiums in respect
of such policies or maintain in effect any insurance coverage.
7.6 Inventories. Prior to the Closing, Sellers will
maintain levels of all Inventories, including materials and
supplies, at levels consistent with current practice in the
ordinary and normal course of business.
7.7 Maintenance of, and Access to, Records. After the
Closing Date, each Seller shall provide Buyer with access (with
an opportunity to make copies), during normal business hours, and
upon reasonable notice, to any records relating to the Business
which are retained by it. Each Seller shall preserve and
maintain any books and records relating to the Business and
retained by such Seller for at least five years after the Closing
Date.
7.8 Non-Competition.
(a) Period and Conduct. As further consideration for
the purchase and sale of the Acquired Assets and the Allied
Shares and the transactions contemplated by this Agreement,
during the period commencing on the Closing Date, and ending
on the date which is five years thereafter, no Seller shall:
(i) compete with Buyer in the manufacture,
production, design, engineering, importation, purchase,
marketing, sale, distribution, installation, research
or development of any Products;
(ii) solicit, or accept orders or business of any
kind relating to the manufacture, production, design,
engineering, importation, purchase, marketing, sale,
distribution, installation, research or development of
any Products from any customer or active prospect of
Buyer or Allied, or any former customer of any Company;
(iii) solicit any employee of Buyer or Allied
or former employee of any Company to terminate his or
her employment with Buyer or Allied; or
(iv) use, or incorporate or otherwise create any
business organization utilizing any name which uses any
words contained in any Company's corporate name or name
under which any Company conducted business prior to the
Closing ("Corporate Names") or which are confusingly
similar to such words.
(b) Territory. Each Seller shall refrain from
engaging in the activities described in this Section 7.8
during the period specified in Section 7.8(a) hereof in any
of the United States of America, Puerto Rico, the Virgin
Islands, Canada and Mexico.
(c) Definition. Sellers shall be deemed to be
competing with Buyer if any of them or any of their
respective Affiliates is engaged or participates in any
activity or activities described in subsection (a) of this
Section 7.8, directly or indirectly, whether for its own
account or for that of any other Person, firm or
corporation, and whether as a shareholder, partner or
investor controlling any such entity or as principal, agent,
representative, proprietor, or partner, or in any other
capacity; provided, however, that the Allied Shareholders
may continue to operate in Wisconsin, Minnesota and the
Upper Peninsula of Michigan the pool, spa, barbeque, patio
furniture and related patio businesses, but no other
Business, currently carried on in Madison, Wisconsin, by
Benson.
(d) Remedies. Inasmuch as a breach, or failure to
comply with, Section 7.8 of this Agreement will cause
serious and substantial damage to Buyer, if any Seller or
any of its respective Affiliates should in any way breach,
or fail to comply with, the terms of this Section 7.8, Buyer
shall be entitled to an injunction restraining such Seller
and such Affiliates from any such breach or failure. All
remedies expressly provided for herein are cumulative of any
and all other remedies now existing at law or in equity.
Buyer shall, in addition to the remedies herein provided, be
entitled to avail itself of all such other remedies as may
now or hereafter exist at law or in equity for compensation,
and for the specific enforcement of the covenants contained
herein. Resort to any remedy provided for hereunder or
provided for by law shall not preclude or bar the concurrent
or subsequent employment of any other appropriate remedy or
remedies, or preclude the recovery by Buyer or monetary
damages and compensation.
(e) Subsidiaries, Divisions and Affiliates. For the
purpose of this Section 7.8, "Buyer" shall include its
subsidiaries, divisions and Affiliates as they may exist
from time to time, HON and any Person deriving title to the
goodwill of the Business or the Assets from Buyer.
(f) Severability. Each subsection of this Section 7.8
constitutes a separate and distinct provision hereof. In
the event that any provision of this Section 7.8 shall
finally be judicially determined to be invalid, ineffective
or unenforceable, such determination shall apply only in the
jurisdiction in which such adjudication is made and every
other provision of this Section 7.8 shall remain in full
force and effect. The invalid, ineffective or unenforceable
provision shall, without further action by the parties, be
automatically amended to effect the original purpose and
intent of the invalid, ineffective or unenforceable
provision; provided, however, that such amendment shall
apply only with respect to the operation of such provision
in the particular jurisdiction in which such adjudication is
made.
7.9 Accounts Receivable. In the event that any Seller
or any of its Affiliates receives any payment relating to any
Account Receivable outstanding on or after the Closing Date, such
payment shall be the property of, and shall be immediately
forwarded and remitted to, Buyer. Sellers or such Affiliates
will promptly endorse and deliver to Buyer any cash, checks or
other documents received by any Seller on account of any such
Accounts Receivable. Sellers or such Affiliates shall advise
Buyer (promptly following any Seller's becoming aware thereof) of
any counterclaims or set-offs that may arise subsequent to the
Closing Date with respect to any Account Receivable.
7.10 Name Change Filings. Each Asset Seller shall,
within three (3) days following the Closing, deliver to Buyer
evidence of filing with the Secretary of State of its State of
incorporation of an amendment to such Sellers' Articles of
Incorporation to change its name to a name which is not
deceptively similar to its Corporate Names. Each Asset Seller
shall, within thirty (30) days after the Closing, take such
actions and file such documents as shall be necessary to
(a) reflect such name changes in all States in which each Asset
Seller is qualified to do business as a foreign corporation, and
shall deliver to Buyer copies of such documents evidencing such
name change filings, (b) discontinue the use of the trademarks
and trade names associated with any products available through
such Asset Seller, and (c) otherwise discontinue the use of such
trademarks and trade names in connection with Seller's business
operations.
7.11 No Shopping. From the date hereof through and
until the earlier of termination of this Agreement pursuant to
Article X or Closing, no Seller nor any of its Affiliates,
employees, officers, agents or advisors shall, directly or
indirectly, (a) solicit, initiate or encourage any inquiries,
proposals or offers from any Person relating to any acquisition
(or sublease as the case may be) of the Allied Shares, the Assets
or the Business, or any assets or securities of, or any merger,
consolidation or business combination with, any Company, or
(b) with respect to any effort or attempt by any other Person to
do or seek any of the foregoing, (i) participate in any
discussions or negotiations, (ii) furnish to any other Person any
information with respect to, or afford access to the properties,
books or records of or relating to, any Company, the Assets or
the Business, or (iii) otherwise cooperate in any way with, or
assist or participate in, or facilitate or encourage any such
effort. Sellers shall promptly notify Buyer if any such proposal
or offer or any inquiry or contact with any Person with respect
thereto is made.
7.12 Plant Closing Obligations. If any Seller or any
of its Affiliates takes any action which could be construed as a
"plant closing" or "mass layoff", or which results in any
employee retained or employed suffering or deeming to have
suffered any "employment loss", as those terms are defined in
WARN, Sellers and such Affiliates shall be solely responsible for
providing any notice required by WARN and for making payments, if
any, which may be required under WARN for failure to provide
appropriate notice; provided, however, that for purposes of this
Section 7.12, employees of the Sellers immediately prior to the
Closing shall be deemed to be employees of the Buyer as of the
Closing Date.
7.13 Further Assurances; Customer and Supplier
Relationships; Assertion of Claims. Sellers shall use their best
efforts to implement the provisions of this Agreement, and for
such purpose Sellers, at the request of Buyer, at or after the
Closing, shall, without further consideration, promptly execute
and deliver, or cause to be executed and delivered, to Buyer such
deeds, assignments, bills of sale, Required Consents and other
instruments in addition to those required by this Agreement, in
form and substance satisfactory to Buyer, and take all such other
actions, as Buyer may reasonably deem necessary or desirable to
implement any provision of this Agreement or to more effectively
transfer, convey and assign to Buyer good and marketable title
to, and to put Buyer in actual possession and operating control
of, the Allied Shares and all of the Assets, free and clear of
all Liens other than Permitted Liens, including, without
limitation, such instruments and documents as may be necessary or
advisable to vest in Buyer all of Sellers' benefits and interest
in any Liens (including mechanics' liens) obtained by any Seller
on or in any assets or properties of Sellers' customers.
7.14 Appointment of Representative. Each Seller hereby
designates and appoints Skoronski as the Sellers' representative
and attorney-in-fact (the "Representative") to act for and on
behalf of the Sellers as provided in this Agreement and to serve
in accordance with the terms of this Agreement. The
Representative hereby accepts such appointment and agrees to be
bound by the terms of this Agreement and to act in furtherance of
the interests of the Sellers hereunder. In the event that
Skoronski is unable to serve as Representative due to death or
disability, or resigns (by providing at least thirty (30) days'
prior written notice to each party to this Agreement), the
Sellers shall select a successor Representative. Skoronski's
rights and obligations under this Agreement as the Representative
shall be separate and distinct from Skoronski's other rights and
obligations hereunder or as an officer or director of any
Company, and any reference to Skoronski in his capacity as
Representative shall not be deemed a reference to Skoronski in
any other capacity.
7.15 Payment of Indebtedness; Releases. On or before
the Closing Date, each Seller will, and the Allied Shareholders
shall cause Allied to, (a) pay, perform and discharge any and all
liabilities or obligations for indebtedness of each Company,
whether fixed, contingent or otherwise (including, without
limitation, notes payable to Affiliates of any Company), and
(b) obtain copies of all executed releases, in form and substance
reasonably satisfactory to Buyer, necessary to release of any and
all Liens relating to such indebtedness, including, without
limitation, the Liens described on the Schedule hereto entitled
"Liens" (in each case other than Liens that are Permitted Liens).
The Sellers will cause the releases referenced in the foregoing
clause (b) to be filed promptly, but no later than two (2)
business days, after payment of the related indebtedness and in
any event promptly after the Closing Date.
ARTICLE VIII COVENANTS OF BUYER AND HON
8.1 Covenants of Buyer.
(a) Maintenance of, and Access to, Records. From and
after the Closing, Buyer shall, whenever reasonably
requested by the Representative, permit the Sellers to have
access to such business records turned over to Buyer
pursuant to this Agreement as may be reasonably requested by
such Seller in connection with any audit or investigation by
any Governmental Authority, or any matter relating to
insurance coverage or third party claims, in each such case
to the extent relating to the operation of the Business by
such Seller prior to the Closing. Buyer shall preserve and
maintain the records relating to the Business which are part
of the Assets for at least five (5) years after the Closing
Date.
(b) Closing. Buyer shall use its best efforts to
cause the conditions set forth in Section 6.2 to be
satisfied by the Closing Date.
(c) Disclosure Supplements. From time to time prior
to the Closing, Buyer shall promptly supplement or amend its
Schedules to this Agreement with respect to any matter
(i) which may arise hereafter and which, if existing or
occurring at or prior to the date hereof, would have been
required to be set forth or described in Buyer's Schedules
to this Agreement, or (ii) which makes it necessary to
correct any information in Buyer's Schedules to this
Agreement or in any representation and warranty of HON or
Buyer which has been rendered inaccurate thereby. No
supplement or amendment to the Schedules to this Agreement
or any delivery of Schedules after the date hereof, unless
expressly consented in writing by Sellers, shall be deemed
to cure any breach of any representation or warranty made in
this Agreement, or modify, affect or diminish Sellers' right
to terminate this Agreement pursuant to Section 10.1(d).
(d) Copies. During the period from the date hereof to
the Closing, Buyer shall promptly furnish or make available
to Seller copies of an income statement and balance sheet as
of each month-end after the date of this Agreement and prior
to Closing.
(e) Insurance. After the Closing Buyer will use its
best efforts to maintain any policies of insurance that
cover Buyer's assets and properties, including, without
limitation, Acquired Assets owned by Buyer, and the
liabilities associated with the operation of its business.
(f) Supply of Products. Buyer agrees to supply
Sellers, during the term of this Agreement and prior to
Closing, and upon request, with products manufactured or
sold by Buyer to the extent necessary to replace any
reduction in Sellers' supply of Products occurring after the
date of this Agreement, on terms and conditions similar to
those provided by Buyer to Sellers immediately prior to the
date of this Agreement, subject to sufficient availability
and capacity by Buyer.
(g) Further Assurances. Buyer, at the request of
Sellers and at or after the Closing, shall promptly execute
and deliver, or cause to be executed and delivered, such
other agreements, certificates, instruments and other
writings required by it by this Agreement to satisfy the
payment terms set forth in Section 3.1.
8.2 Covenants of HON.
(a) Closing. HON shall use its best efforts to cause
the conditions set forth in Section 6.2 to be satisfied by
the Closing Date.
(b) IRB Consents. HON shall use its reasonable best
efforts to obtain the consents referred to in Section
6.1(j)(i).
(c) Buyer Note. HON shall cause the Buyer Note to be
purchased by a financial institution at the face value
thereof, or shall repurchase the Buyer Note at the face
value thereof within ninety (90) days of the Closing.
ARTICLE IX CERTAIN ADDITIONAL COVENANTS
9.1 Access to Records and Properties. Prior to the
Closing, (a) Buyer shall be entitled, and each Seller shall
permit Buyer, to conduct such investigation of the condition
(financial or otherwise), business, assets, properties or
operations of the Companies and the Business as Buyer shall
reasonably deem appropriate, and (b) each Seller shall
(i) provide Buyer and its agents and representatives, including
its independent accountants, internal auditors and attorneys,
full and complete access to all the facilities, offices and
management and supervisory personnel of the Companies, and to all
of the books and records of the Companies (including work papers
of any accountants), (ii) cause the Companies' officers,
employees and advisors to furnish Buyer with such financial and
operating data (including the data described in Section 7.2(b))
and other information with respect to the condition (financial or
otherwise), business, assets, properties or operations of the
Companies and the Business as Buyer shall reasonably request, and
(iii) permit Buyer to make such inspections and copies thereof as
Buyer may reasonably require, including without limitation, to
conduct such environmental assessments and investigations of the
Property and surrounding property as Buyer or its advisors and
consultants may deem necessary or appropriate, and sampling and
analysis of environmental media to detect the presence or confirm
the absence of contamination, including any contamination which
may be present in groundwater and the sources of any such
contamination. In addition, Buyer shall be provided with full
and complete access to the customers and suppliers of the
Business and the opportunity to make, in conjunction with
Sellers, cooperative calls on purchasers of Products.
9.2 Expenses; Transfer Taxes. Each party hereto will
bear the legal, accounting and other expenses incurred by such
party in connection with the negotiation, preparation and
execution of this Agreement, the Transaction Documents, and the
transactions contemplated hereby. Buyer shall be responsible for
all obligations to Robert W. Baird & Co. Incorporated. Sellers
shall be responsible for all obligations to Bowles, Hollowell,
Conner and First Union Capital Markets Corporation and counsel to
Allied and the Sellers, or any of them. All sales, transfer,
recordation and documentary Taxes and fees which may be payable
in connection with the sale of the Acquired Assets shall be borne
by Buyer; provided, however, that Sellers will fully cooperate
with Buyer in preparing and filing all certificates and other
documents the filing of which will reduce the amount of Taxes and
fees payable in connection with the sale of the Acquired Assets.
9.3 Bulk Transfer Laws. Buyer hereby waives
compliance by Sellers with the laws of any jurisdiction relating
to bulk transfers which may be applicable in connection with the
transfer of the Acquired Assets to Buyer.
9.4 Press Releases and Disclosure. The parties agree
that neither Sellers, Buyer nor their respective Affiliates shall
issue or cause publication of any press release or other
announcement or public communication with respect to this
Agreement or the transactions contemplated hereby or otherwise
disclose this Agreement or the transactions contemplated hereby
to any third party (other than attorneys, advisors and
accountants to Sellers or Buyer) without the consent of the other
party hereto, which consent shall not be unreasonably withheld;
provided, that nothing herein shall prohibit any party from
issuing or causing publication of any press release, announcement
or public communication to the extent that such party deems such
action to be required by Law or stock exchange regulations;
provided further that such party shall, whenever practicable
consult with the other party concerning the timing and content of
such press release, announcement or communication before the same
is issued or published.
9.5 Cooperation in the Defense of Claims. In the
event that a claim is asserted against Buyer, any of its direct
or indirect subsidiaries or Affiliates, with respect to events or
conditions occurring or existing in connection with, or arising
out of, the operation of the Business prior to the Closing, or
the ownership, possession, use or sale of the Assets prior to the
Closing, Sellers shall cooperate with Buyer in the defense of any
such claim.
9.6 Regulatory Approvals. Sellers will, and will
cause its appropriate Affiliates to, and Buyer will, use, in each
case, its best efforts to obtain any authorizations, consents,
orders and approvals of any Governmental Authority necessary for
the performance of its respective obligations pursuant to this
Agreement and any of the other transaction documents, and the
consummation of the transactions contemplated hereby and thereby,
and will cooperate fully with each other in all reasonable
respects in promptly seeking to obtain such authorizations,
consents, orders and approvals. Neither Sellers nor Buyer will
take any action that will have the effect of delaying, impairing
or impeding the receipt of any required regulatory approvals.
Without limiting the generality of the foregoing, Sellers and
Buyer will promptly file or cause to be filed with the FTC and
the DOJ, Notification and Report Forms and documentary materials
that substantially comply with the provisions of the H-S-R Act
and the rules thereunder. Buyer shall pay all fees associated
with the filing of any such Notification and Report Forms or
related materials and information (other than the fees and
expenses of Buyer's legal, financial or other professionals
engaged to provide services in respect of such filing). Buyer
and Sellers will promptly file any additional information
requested as soon as practicable after receipt of a request for
additional information. Buyer and Sellers will use reasonable
efforts to obtain early termination of the applicable waiting
period under the H-S-R Act. The parties hereto will coordinate
and cooperate with one another in exchanging such information and
providing such reasonable assistance as may be requested in
connection with such filing. Sellers will supply Buyer with
copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between Sellers or
its representatives, on the one hand, and the FTC, the DOJ or any
other Governmental Authority or members of their respective
staffs, on the other hand, with respect to this Agreement or the
transactions contemplated hereby.
9.7 Employee Matters. (a) Buyer shall offer
employment as of the Closing Date to such currently active
employees employed in the Business by the Asset Sellers as of the
Closing Date as Buyer may determine (each a "Transferred
Employee").
(b) Immediately following the Closing Date, Buyer
shall provide to each Transferred Employee employee benefits
(including hospitalization, medical, prescription drug,
dental, disability, 401(k), pre-tax premium payment,
vacation, life and accidental death and dismemberment,
incentive, bonus, fringe benefits and other similar benefits
but excluding any plan or program (or feature thereof) which
provides any opportunity to, directly or indirectly, acquire
or invest in the equity of any Asset Seller) which are, in
the aggregate, substantially similar to the employee
benefits provided as of the date hereof to such Transferred
Employee, but only to the extent such Transferred Employee
is eligible for such benefits as of such date. Each
Transferred Employee shall be credited for eligibility,
benefit accrual and vesting purposes with their periods of
service with the Asset Sellers counted under a Company Plan
prior to the Closing Date under any similar employee benefit
plan, program or arrangement established, maintained,
continued or made available by Buyer after the Closing Date
in which such Transferred Employees are eligible to
participate (excluding for this purpose accruals under any
retirement plan for the period prior to Closing).
(c) Effective as of the Closing Date, Buyer shall
assume the sponsorship of the Fireplace & Spa, Inc. 401(k)
Profit Sharing Plan (the "Assumed Plan"), and, prior to
Closing, FPSI shall take all action necessary to amend such
plan to reflect the change in sponsorship, to exclude
participation by any employees who are not Transferred
Employees (except for deferred vested participants) and make
other conforming changes and to transfer to Buyer the assets
attributable to the Assumed Plan.
(d) The Asset Sellers shall be responsible for all
claims for welfare benefits which are incurred prior to the
Closing Date by any Transferred Employee (or the eligible
spouse or dependent of such Transferred Employee) that are
payable under the terms and conditions of any Company Plan,
except to the extent accrued for as a liability on
Schedule 2.1(b). The Asset Sellers shall cease to provide
any group health plan to any employees as of the Closing
Date, and therefore shall have no obligation to provide
medical continuation coverage to such employees. Pursuant
to the provisions of this Section 9.7, Buyer shall be
considered a successor employer within the meaning of
Prop. Treas. Reg. Section 54.4980B-9 and therefore shall be
responsible for providing medical continuation coverage
pursuant to COBRA to former employees of the Asset Sellers
(and their eligible spouses and dependents) who terminate
employment at or prior to the Closing Date. Buyer shall
recognize copayments and deductibles paid by each
Transferred Employee (or eligible spouse or dependent of
such Transferred Employee) under the Plans prior to the
Closing Date for the applicable period and shall not exclude
any Transferred Employee (or eligible spouse or dependent of
such Transferred Employee) from medical coverage based on
any preexisting condition.
(e) Nothing herein expressed or implied shall confer
upon any Transferred Employee (or any spouse or dependent of
such Transferred Employee) or legal representative thereof
any rights or remedies, including without limitation any
right to employment for any specified period, of any nature
or kind whatsoever under or by reason of this Agreement.
(f) Sellers shall be responsible for the claims for
workers compensation benefits which are incurred prior to
the Closing Date.
(g) To the extent assumed under Section 2.1(b), Buyer
shall assume liability for normal and ordinary vacation
accruals attributable to each Transferred Employee as a
result of such Transferred Employee's service with an Asset
Seller.
(h) In no event shall Buyer be liable for any
severance payments that may be payable to any employee of
the Business as a result of the transactions set forth in
this Agreement. The Asset Sellers shall use their best
efforts to assign to Buyer as of the Closing Date the
employment agreements currently in effect with their respect
to the employees and to obtain from each employee covered by
any such employment agreement in a form acceptable to Buyer
(a) an acknowledgment that the transactions contemplated by
this Agreement will not result in a termination of
employment for purposes of such employment agreement, and
(b) a waiver and release of any claim for payment or
benefits under such employment agreement based on the
transactions contemplated by this Agreement.
(i) On the Closing Date, each of the Asset Sellers
shall transfer the personnel files of the employees of the
Business, or copies thereof, to Buyer.
(j) Sellers shall pay all annual incentive bonuses
payable for 1999 and any prior years under any incentive
arrangements.
(k) Effective prior to the Closing Date, Allied shall
transfer out of Allied the life insurance policies covering
Sorenson, Skoronski, S. Thiers, and C. R. Daniels (excluding
of this purpose any coverage under a group life insurance
plan).
9.8 [Intentionally omitted]
9.9 Product Warranty Work. After the Closing Date,
Buyer shall perform, without recourse to Sellers, the Companies'
obligations under Ordinary Warranty Commitments. With respect to
warranty claims other than Ordinary Warranty Commitments, Buyer
may seek indemnification from Sellers for such Liability, as
provided in Article XI.
ARTICLE X TERMINATION
10.1 Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the
Closing:
(a) Mutual Consent. By the Representative and Buyer;
(b) Termination Date. By Sellers, by the
Representative or by Buyer, if the Closing shall not have
occurred on or before March 31, 2000 (the "Termination
Date"); provided, however, that (i) if the HSR Approvals
shall not have been obtained by March 31, 2000, the
Termination Date shall be extended to May 31, 2000 and (ii)
the right to terminate this Agreement pursuant to this
Section 10.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the
Closing to occur on or before the Termination Date;
(c) Sellers Misrepresentation or Breach. By Buyer, if
there has been a breach by any Seller of any of his or its
representations, warranties, covenants, obligations or
agreements set forth in this Agreement or in any writing
delivered pursuant hereto by any Seller, which breach
(A) would give rise to a failure of a condition set forth in
Section 6.1, and (B) is incapable of being cured by Sellers
or is not cured within ten (10) business days of written
notice thereof;
(d) Buyer Misrepresentation or Breach. By Sellers or
by the Representative, if there has been a breach by Buyer
of any of its representations, warranties, covenants,
obligations or agreements set forth in this Agreement or in
any writing delivered pursuant hereto by Buyer, which breach
(A) would give rise to a failure of a condition set forth in
Section 6.2. and (B) is incapable of being cured by Buyer
and is not cured within the (10) business days of written
notice thereof;
(e) Court Order. By Sellers, by the Representative or
by Buyer, if consummation of the transactions contemplated
hereby shall violate any non-appealable final order, decree
or judgment of any court or Governmental Authority having
competent jurisdiction;
(f) Material Adverse Change. By Buyer, if since the
date of this Agreement there has been a material adverse
change, or the occurrence of a condition or event which
would reasonably be expected to result in a material adverse
change, in the condition (financial or otherwise), business,
assets, properties, or operations of the Companies, taken as
a whole (other than as a result of any matter set forth in
the proviso to Section 6.1(c));
(g) Buyer's Conditions. By Buyer, if any condition
precedent to Buyer's obligation to effect the Closing as set
forth in Section 6.1 is not satisfied, or shall have become
incapable of fulfillment, and such condition is not waived,
if waivable, by Buyer on or prior to the Termination Date;
and
(h) Sellers' Conditions. By Sellers or by the
Representative, if any condition precedent to Sellers'
obligation to effect the Closing as set forth in Section 6.2
is not satisfied, or shall have become incapable of
fulfillment, and such condition is not waived, if waivable,
by Sellers or by the Representative on or prior to the
Termination Date.
10.2 Effect of Termination. If this Agreement is
terminated pursuant to Section 10.1, written notice thereof shall
forthwith be given to the other parties and this Agreement shall
thereafter become void and have no further force and effect and
all further obligations of Sellers, HON and Buyer under this
Agreement shall terminate without further liability of Sellers,
HON or Buyer, except that (a) each party will return all
documents, workpapers and other material of any other party
relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party
furnishing the same, and all confidential information received by
any party hereto with respect to the business of any other party
shall be treated in accordance with Section 7.4 and the
Confidentiality Agreements (as hereinafter defined); (b) the
obligations of Sellers and Buyer under Section 9.2 shall survive
such termination; and (c) such termination shall not constitute a
waiver by any party of any claim it may have for damages caused
by reason of, or relieve any party from liability for, any breach
of this Agreement prior to termination under Section 10.1.
ARTICLE XI INDEMNIFICATION
11.1 Indemnification by Buyer. From and after the
Closing, Buyer and HON, jointly and severally, shall indemnify,
defend and hold Sellers, its Affiliates, and their respective
directors, officers, representatives, employees and agents
harmless from and against any and all claims, actions, suits,
demands, assessments, judgments, losses, liabilities, damages,
costs and expenses (including, without limitation, interest,
penalties, attorneys' fees to the extent permitted by law, and
accounting fees and investigation costs) (collectively,
"Liabilities") that may be incurred by any Seller or other such
persons resulting or arising from or related to, or incurred in
connection with: (a) the failure of Buyer to assume, pay,
perform and discharge the Assumed Liabilities, (b) the failure of
Buyer to report the purchase of the Allied Shares and the
Acquired Assets in accordance with the allocations required by
Section 3.6, and (c) any breach of any representation, warranty,
covenant, obligation or agreement of Buyer contained herein or in
any other Transaction Document.
11.2 Indemnification by Sellers.
(I) General. From and after the Closing, Sellers
shall jointly and severally indemnify, defend and hold Buyer, its
Affiliates, and their respective directors, officers,
representatives, employees and agents harmless from and against
any and all Liabilities that may be incurred by Buyer or other
such persons resulting or arising from, related to or incurred in
connection with: (a) (i) the failure of Sellers to assume, pay,
perform and discharge the Retained Liabilities, or (ii) the
incurrence by Buyer of any Liabilities of Allied other than the
Liabilities described under Paragraph I of Schedule
11.2(I)(a)(ii), including Liabilities described under Paragraph
II of Schedule 11.2(I)(a)(ii), (b) the failure of Sellers to
report the sale of the Acquired Assets in accordance with the
allocations required by Section 3.6, (c) any breach of any
representation, warranty, covenant, obligation or agreement of
Sellers contained herein or in any other Transaction Document,
(d) any failure to comply with the laws of any jurisdiction
relating to bulk transfers which may be applicable in connection
with the transfer of the Acquired Assets to Buyer, (e) the
litigation, actions, suits, investigations, claims, Company Plan
audits and proceedings described, or required to be described, in
the Schedules to this Agreement, (f) any failure to obtain any
Required Consent, and (g) Liabilities under the Agreement for
Shared Facilities resulting from a change of control of Allied,
Madison or Minocqua.
(II) Environmental Indemnification. Sellers jointly
and severally agree to indemnify, defend, reimburse and hold
harmless:
(A) Buyer, its Affiliates and their respective
directors, officers, representatives, employees
and agents; and
(B) any other Person who acquires a portion of the
Property in any manner, including but not limited
to, through purchase, at a foreclosure sale or
otherwise through the exercise of the rights and
remedies of Buyer under this Agreement; and
(C) the contractors, subcontractors, experts,
licensees, lessees, mortgagees, trustees, heirs,
devisees, successors, assigns and invitees of any
Persons referred to in subsections (A) or (B) of
this Section 11.2(II);
from and against any and all Environmental Damages (as
hereinafter defined) arising from the presence, use, generation,
storage, treatment, discharge, release or disposal (including off-
site disposal) of Hazardous Materials upon, about, from or
beneath the Property or migrating to or from the Property, or
arising in any manner whatsoever out of the violation of any
Environmental Requirements pertaining to the Property and the
activities thereon, in each case to the extent that such
Environmental Damages or violation of any Environmental
Requirements are attributable to, or the result of, any act or
omission by any Company prior to the Closing Date. This
obligation to indemnify shall include, but not be limited to, the
expense of defending all claims, suits and administrative
proceedings (with counsel reasonably approved by the indemnified
parties), even if such claims, suits or proceedings are
groundless, false or fraudulent, and paying and discharging, when
and as the same become due, any and all judgments, penalties or
other sums due against such indemnified Persons; provided,
however, that Buyer will be entitled to control any clean-up or
remediation, and any related proceeding, and, except as provided
in the following sentence, any other proceeding with respect to
which indemnity may be sought under this Section. The procedures
described in Section 11.3 shall apply to any claim solely for
monetary damages relating to a matter covered by this Section.
(III) Tax Indemnification.
(A) Tax Indemnification by Allied Shareholders. The
Allied Shareholders shall jointly and severally indemnify,
defend and hold Buyer and its Affiliates (including Allied)
harmless from and against: (i) any and all liability for
Taxes (including without limitation any obligation to
contribute to the payment of a Tax determined on a
consolidated, combined, or unitary basis with respect to a
group of corporations that includes or included Allied) of
Allied for all Taxable periods ending on or before the
Closing Date (the "Pre-Closing Tax Period") and for the
portion of any Taxes (including without limitation any
obligation to contribute to the payment of a Tax determined
on a consolidated, combined, or unitary basis with respect
to a group of corporations that includes or included Allied)
of Allied for any Straddle Period (as defined in
Section 11.2(III)(C)) that is allocated (pursuant to Section
11.2(III)(C)) to the Pre-Closing Tax Period (such
liabilities collectively, "Pre-Closing Tax Liabilities");
(ii) any and all liability (as a result of Treasury
Regulation ' 1.1502-6 or any similar provision of state,
local or foreign law or otherwise) for Taxes of the Allied
Shareholders or any other person (other than Allied) which
is or has ever been affiliated with Allied, or with whom
Allied otherwise joins or has ever joined (or is or has ever
been required to join) in filing any consolidated, combined
or unitary Tax Return prior to the Closing, (iii) any and
all liability for Conveyance Taxes; (iv) any and all Taxes
payable by the Allied Shareholders or their Affiliates
(including their beneficiaries) in connection with the sale
of the Allied Shares to Buyer and any other payments made or
to be made to the Allied Shareholders or their Affiliates
(including their beneficiaries) by Buyer pursuant to this
Agreement or the transactions and agreements contemplated
hereby, including, without limitation, all income and
capital gain Taxes payable, whether by assessment,
withholding or otherwise; (v) any and all liability for
Taxes or other Liabilities arising out of a breach or
inaccuracy of any representation or warranty contained in
Section 5.1(v); and (vi) any and all liability for
reasonable legal, accounting and appraisal fees and expenses
with respect to any item described in clauses (i), (ii),
(iii), (iv) or (v) above; provided, however, that the amount
of the indemnity obligation of the Allied Shareholders for
Taxes pursuant to this Section 11.2(III)(A) shall be reduced
to the extent that the aggregate reserves for Taxes
(excluding deferred income Taxes) reflected on the Financial
Statements exceed the aggregate liability for Taxes for the
periods covered by such reserves.
(B) Tax Indemnification by Buyer. Buyer shall
indemnify, defend and hold the Allied Shareholders and their
Affiliates harmless from and against (i) any liability for
Taxes of Allied for any Taxable period ending after the
Closing Date (except with respect to a Straddle Period, in
which case Buyer's indemnity will cover only Taxes (other
than Conveyance Taxes) that are not Pre-Closing Tax
Liabilities, and (ii) any liability (as a result of Treasury
Regulation Section 1.1502-6 or any similar provision of state,
local or foreign law or otherwise) for Taxes of Buyer or any
other person (other than Allied) which is or has ever been
affiliated with Buyer, or with whom Buyer joins or has ever
joined (or is or has ever been required to join) in filing
any consolidated, combined or unitary Tax Return.
(C) Straddle Period. In the case of any Taxable
period that includes but does not end on the Closing Date (a
"Straddle Period"), Taxes of Allied for the Straddle Period
shall be computed in a manner consistent with past practice
and shall be allocated to the Pre-Closing Tax Period using
an interim-closing-of-the-books method assuming that such
Taxable period ended at the close of the Closing Date,
except that (X) exemptions, allowances or deductions that
are calculated on an annual basis (such as the deduction for
depreciation) shall be apportioned on a per-diem basis and
(Y) real property, personal property, intangibles and other
similar Taxes shall be allocated in accordance with the
principles of Section 164(d) of the Code.
(D) Procedures Relating to Tax Indemnification.
(1) If any claim for Taxes, including, without
limitation, notice of a pending or threatened audit,
shall be made by any Taxing authority in writing (a
"Tax Claim"), which, if successful, would result in an
indemnity payment pursuant to Section 11.2(III)(A) or
(B), the party seeking indemnification (the
"Indemnified Tax Party") shall notify the other party
(the "Indemnifying Tax Party") in writing of the Tax
Claim within forty-five (45) days of receipt of such
Tax Claim and in sufficient detail to apprise the
Indemnifying Tax Party of the nature of the Tax Claim.
If notice of a Tax Claim (a "Tax Notice") is not given
to the Indemnifying Tax Party within such forty-five-
day period or in detail sufficient to apprise the
Indemnifying Tax Party of the nature of the Tax Claim,
the Indemnifying Tax Party shall not be liable to the
Indemnified Tax Party to the extent that the
Indemnifying Tax Party's position is actually and
materially prejudiced as a result thereof.
(2) The Allied Shareholders shall have the sole
right to represent the interests of Allied in the
defense of any claim for Taxes relating to Taxable
periods ending on or before the Closing Date, and to
employ counsel of their choice at their expense.
Notwithstanding the foregoing, the Allied Shareholders
shall not be entitled to settle, either
administratively or after the commencement of
litigation, any claim for Taxes that would adversely
affect the liability for Taxes of Buyer or Allied for
any Taxable period ending after the Closing Date
(including, but not limited to, the imposition of
income tax deficiencies, the reduction of asset basis
or cost adjustments, the lengthening of any
amortization or depreciation periods, the denial of
amortization or depreciation deductions or the
reduction of loss or credit carryforwards) without the
prior written consent of Buyer. Such consent shall not
be unreasonably withheld, and shall not be necessary to
the extent that the Allied Shareholders have
indemnified Buyer against the effects of any such
settlement.
(3) Buyer shall have the sole right to represent
the interests of Allied in the defense of any claim for
Taxes relating to Taxable periods ending after the
Closing Date. Notwithstanding the foregoing, the
Allied Shareholders shall be entitled to participate at
their expense in the defense of any claim for Taxes for
a Taxable year or period ending after the Closing Date
that may be subject to indemnification by the Allied
Shareholders pursuant to Section 11.2(III)(A). Neither
Buyer nor Allied may agree to settle any Tax Claim for
the portion of the Taxable year or period ending on the
Closing Date that may be the subject of indemnification
by the Allied Shareholders under Section 11.2(III)(A)
without the prior written consent of the Allied
Shareholders, which consent shall not be unreasonably
withheld.
(E) Miscellaneous Tax Matters. After the Closing
Date, the Allied Shareholders and Buyer shall:
(1) assist (and cause their respective Affiliates
to assist) the other party in preparing any Tax Returns
that such other party is responsible for preparing and
filing in accordance with this Section 11.2(III);
(2) cooperate fully in preparing for any audits
of, or disputes with Taxing authorities regarding, any
Tax Returns of Allied;
(3) make available to the other and to any Taxing
authority as reasonably requested all information,
records and documents in such party's possession
relating to Taxes of Allied;
(4) provide timely notice to the other in writing
of any pending or threatened Tax audits or assessments
of Allied for Taxable periods for which the other may
have a liability under this Section 11.2(III); and
(5) furnish the other with copies of all
correspondence received from any Taxing authority in
connection with any Tax audit or information request
relating to Allied with respect to any such Taxable
period.
(F) Delivery of Tax Information. Within sixty (60)
days following the Closing Date, the Allied Shareholders and
the Allied Representative shall deliver or cause to be
delivered to Buyer copies of all Tax Returns of Allied for
any Taxable year or other period commencing on or after
December 31, 1995 and all schedules, work papers and other
documents (including without limitation appraisals and other
background information) that is in the possession of any of
the Allied Shareholders and which relate to such Tax
Returns, which documents shall be subject to the terms of
the Confidentiality Agreements.
(G) Tax Dispute Resolution Mechanism. Wherever in
this Section 11.2(III) it is provided that a dispute shall
be resolved pursuant to the "Tax Dispute Resolution
Mechanism," such dispute shall be resolved as follows: The
parties shall submit the dispute to a jointly selected
nationally recognized accounting firm (the "Settlement
Accountants") for resolution, which resolution shall be
final, conclusive and binding on the parties.
Notwithstanding anything in this Agreement to the contrary,
the fees and expenses of the Settlement Accountants in
resolving a dispute shall be borne equally by the Allied
Shareholders and by Buyer, other than fees and expenses
relating to a dispute as to the amount of Taxes owed by
either of the parties with respect to a Tax Return for a
Straddle Period, in which case such fees and expenses shall
be paid by Buyer and by the Allied Shareholders in
proportion to each party's respective liability for Taxes as
determined by the Settlement Accountants.
(H) Survival of Tax Provisions. The obligations of
the parties set forth in this Section 11.2(III) shall be
unconditional and absolute and shall remain in effect until
the date ninety (90) days after the expiration of the
relevant statute of limitations (giving effect to all valid
waivers or extensions thereof) applicable to the Taxes at
issue. Claims for indemnification arising under or with
respect to Section 5.1(v) or this Section 11.2(III) may not
be made unless notice of such claims has been given on or
prior to the date that is ninety (90) days after the
expiration of the relevant statute of limitations applicable
to the Taxes at issue, giving effect to all valid waivers or
extensions thereof.
(I) Conveyance Taxes. Notwithstanding any other
provision of this Agreement to the contrary, the Allied
Shareholders shall be jointly and severally liable for, and
shall timely pay, any and all gains, transfer, sales, use,
bulk sales, recording, registration, documentary, stamp, and
other Taxes that may result from, or be incurred in
connection with, the transactions contemplated by this
Agreement ("Conveyance Taxes"). The Allied Shareholders
shall, at their own expense, properly complete, sign, and
timely file any and all required Tax Returns with respect to
such Taxes and, if required by applicable Law, Buyer will
join in the execution of any such Tax Returns.
(J) Return Filings, Refunds and Credits.
(1) The Allied Shareholders shall cause Allied to
prepare and file on a timely basis all Tax Returns with
respect to Allied that are required to be filed (after
giving effect to any valid extensions thereof) on or
prior to the Closing Date.
(2) Buyer shall prepare or cause to be prepared
and shall file or cause to be filed on a timely basis
all other Tax Returns with respect to Allied. In
connection therewith, the Allied Shareholders shall be
responsible for and shall pay any Taxes for which the
Allied Shareholders have agreed to indemnify Buyer
pursuant to Section 11.2(III)(A). Before filing any
Tax Return with respect to any Straddle Period or any
other Tax Return with respect to Taxes for which the
Allied Shareholders have agreed to indemnify Buyer
pursuant to Section 11.2(III)(A), Buyer shall provide
the Allied Shareholders with a copy of such Tax Return
at least thirty (30) days prior to the last date for
timely filing such Tax Return (giving effect to any
valid extensions thereof), accompanied by a statement
calculating in reasonable detail the Allied
Shareholders' indemnification obligation pursuant to
Section 11.2(III)(A). If for any reason the Allied
Shareholders do not agree with Buyer's calculation of
their indemnification obligation, the Allied
Shareholders shall notify Buyer of their disagreement
within ten (10) days of receiving a copy of the Tax
Return and Buyer's calculation, and such dispute shall
be resolved pursuant to the Tax Dispute Resolution
Mechanism. If the Allied Shareholders agree with
Buyer's calculation of their indemnification
obligation, the Allied Shareholders shall pay Buyer the
amount of the Allied Shareholders' indemnification
obligation at least five (5) business days prior to the
last date for timely filing such Tax Return (including
any valid extensions thereof).
(3) Any refunds or credits of Taxes of Allied
plus any interest received with respect thereto from an
applicable Taxing authority for any Taxable period
ending on or before the Closing Date (including,
without limitation, refunds or credits arising by
reason of amended Tax Returns filed after the Closing
Date) shall, except as otherwise provided in Section
11.2(III)(M) and except to the extent any such refund
or claim is reflected as an asset on the Unaudited
Financial Statements, be for the account of the Allied
Shareholders and shall be paid by Buyer to the Allied
Shareholders within thirty (30) days after Buyer
receives such refund or after the relevant Tax Return
is filed in which the credit is applied against
Buyer's, the Company's or any of their Affiliates' or
any of their successors' liability for Taxes. Any
refunds or credits of Taxes of Allied plus any interest
received with respect thereto from an applicable Taxing
authority for any Taxable period beginning after the
Closing Date shall be for the account of Buyer. Any
refunds or credits of Taxes of Allied for any Straddle
Period shall be apportioned between the Allied
Shareholders, on the one hand, and Buyer, on the other
hand, in the same manner as the liability for such
Taxes is apportioned pursuant to Section 11.2(III)(C).
(K) Exclusivity. All rights and obligations of the
parties hereto with respect to Taxes, including all rights
of either party to indemnification with respect to Taxes,
shall be governed exclusively by the provisions of this
Section 11.2(III) and Section 5.1(v), and in particular the
provisions of Sections 11.1, 11.2(I), 11.3, 11.5 and 11.6
shall not apply to obligations arising under this
Section 11.2(III).
(L) Tax Sharing Agreements. Any and all existing
agreements or practices relating to the allocation or
sharing of Taxes (the "Tax Sharing Agreements") between
Allied and any member of an affiliated group, within the
meaning of Section 1504(a) of the Code, of which Allied is
or was a member shall be terminated as of the Closing Date
without payment by or other obligation of Allied. After the
Closing Date, neither the Company, nor any member of any
such group shall have any further rights or obligations
under any such Tax Sharing Agreement.
(M) Carryforwards of Losses. Buyer shall be free to
cause Allied to elect, where permitted by applicable law, to
carry forward any net operating loss, net capital loss,
charitable contribution or other item arising after the
Closing Date, including, without limitation, any such loss
or other item that would, absent such election, be carried
back to a Taxable period ending on or before the Closing
Date. Notwithstanding anything to the contrary in Section
11.2(III)(J), Buyer shall be entitled to any refund of
income Taxes paid before the Closing Date, to the extent
that such refund is attributable to carryback of losses or
deductions of Allied that accrue after the Closing Date.
11.3 Notice of Claim; Right to Participate in and
Defend Third Party Claim.
(a) If any indemnified party receives notice of the
assertion of any claim, the commencement of any suit, action
or proceeding, or the imposition of any penalty or
assessment by a third party in respect of which indemnity
may be sought hereunder (a "Third Party Claim"), and the
indemnified party intends to seek indemnity hereunder, then
the indemnified party shall promptly provide the
indemnifying party with prompt written notice of the Third
Party Claim, but in any event not later than thirty (30)
calendar days after receipt of such notice of Third Party
Claim. The failure by an indemnified party to notify an
indemnifying party of a Third Party Claim shall not relieve
the indemnifying party of any indemnification responsibility
under this Article XI, unless such failure materially
prejudices the ability of the indemnifying party to defend
such Third Party Claim.
(b) The indemnifying party shall have the right to
control the defense or settlement of such Third Party Claim
with counsel of its choosing provided the indemnifying party
shall have acknowledged in writing its obligations to
indemnify the indemnified party with respect to such Third
Party Claim; provided, however, that the indemnifying party
shall not settle or compromise any Third Party Claim without
the indemnified party's prior written consent, unless the
terms of such settlement or compromise release the
indemnified party from any and all liability with respect to
the Third Party Claim. The indemnified party shall be
entitled (at the indemnified party's expense) to participate
in the defense of any Third Party Claim with its own
counsel.
(c) Any indemnifiable claim hereunder that is not a
Third Party Claim shall be asserted by the indemnified party
by promptly delivering notice thereof to the indemnifying
party.
11.4 Setoff. (a) In addition to any and all other
remedies hereunder or at law or in equity, Buyer shall be
entitled to recover any indemnification payment or other amounts
due from any Seller or Affiliate of a Seller hereunder, under an
Employment and Non-Competition Agreement or a Non-Competition
Agreement, or by a guarantor under a Shareholder Guaranty and (i)
which have not been duly and punctually paid, or (ii) with
respect to which any such Seller or Affiliate shall not have
acknowledged its indemnification obligations under Article XI, by
retaining and setting off the amounts (whether or not such
amounts are liquidated or reduced to judgment) against any
amounts due from Buyer to any Seller, Affiliate of a Seller or
guarantor under any such agreement or the Convertible Debentures
or any securities into which Convertible Debentures have been
converted; provided, however, that any setoff associated with a
breach or amounts due under any Employment and Non-Competition
Agreement or any Non-Competition Agreement shall be set off
solely against the Seller or Affiliate of Seller committing such
breach. Pending final judgment by a court of competent
jurisdiction (which shall, for purposes of this Agreement, be
deemed to include any decision of any mediator to which the
parties thereto have consented, and any arbitration decision
rendered, pursuant to Section 11.8) that Buyer is entitled to any
such payments or other amounts, the setoff amounts shall be
deposited into an interest bearing escrow account with a
financial institution designated by Buyer (the "Escrow Agent").
(b) (i) If such judgment holds that Buyer in whole or
in part wrongfully setoff, and that Buyer had reasonable
grounds for its assertion that such Seller, Affiliate or
guarantor was in breach of, or had otherwise failed to
comply with, the agreement under which setoff was claimed
and the amount setoff, Buyer shall pay the Person entitled
to such wrongfully setoff funds such wrongfully setoff funds
plus an amount equal to (x) 10% interest computed thereon
less (y) interest earned on the escrowed funds from the date
of the earlier of escrow deposit or setoff to the date of
payment and such person shall be entitled to such escrow
interest. (ii) If such judgment holds that Buyer in whole
or in part wrongfully setoff, and that Buyer did not have
reasonable grounds for its assertion that such Seller,
Affiliate or guarantor was in breach of, or had otherwise
failed to comply with, the agreement under which setoff was
claimed and the amount setoff, Buyer shall pay the Person
entitled to such wrongfully setoff funds an amount equal to
(x) such wrongfully setoff funds plus (y) interest actually
earned thereon as reflected in account statements from the
Escrow Agent, plus (z) an additional 15% interest computed
on the wrongfully setoff funds from the date of the earlier
of escrow deposit or setoff to the date of payment.
(c) If such judgment holds that Buyer in whole or in
part was entitled to setoff, the Person otherwise entitled
to any such setoff amount shall pay Buyer an amount equal to
(x) 10% interest computed on the amount of such judgment
less (y) interest earned on any escrowed amounts from the
date of setoff to the date of such judgment, and Buyer shall
be entitled to such escrow interest.
(d) Buyer's rights to set off amounts immediately
prior to the expiration of the period set forth in Section
11.5(e) with respect to any claim referred to in such
Section which is a Third Party Claim shall be conditioned
upon HTI or any Affiliate of HTI having received written
notice of such Claim, including, without limitation, any
such written notice from an insurance company asserting any
such Claim.
11.5 Time Limitations on Claims for Indemnification.
The right of Buyer to indemnification pursuant to
Sections 11.2(I)(a) and 11.2(I)(c), and the right of Sellers to
indemnification for breach of representations and warranties
pursuant to Section 11.1(c) or pursuant to the Securityholders'
Agreement, shall apply only to those claims for indemnification
which are given pursuant to this Agreement on or before the
respective dates set forth below:
(a) Any claim for indemnification relating to any
breach of the representations and warranties set forth in
Section 5.1(v) shall be made on or before the second
anniversary of the Closing Date; provided, however, that
notwithstanding the foregoing provisions of this
Section 11.5(a), any claim for indemnification pursuant to
Section 11.2(III) shall be made during the period described
in Section 11.2(III)(H);
(b) No time limit shall apply to any right to
indemnification with respect to any breach of any
representation or warranty contained in Section 5.1(a), (b),
(d) or (e), Section 5.2(a) or (b), Section 5.3(a) or (b), or
Section 5.4(a), (b) or (c);
(c) Any claim for indemnification relating to any
breach of the representations and warranties set forth in
Section 5.1(t) shall be made on or before the second
anniversary of the Closing Date;
(d) Any claim for indemnification with respect to any
breach of any representation or warranty set forth in any
subsection of Section 5.1, Section 5.2, 5.3 or 5.4 not
referred to in subsections (a), (b) or (c) of this Section
11.5 shall be made on or before the day that is 455 days
after the Closing Date; and
(e) Any claim for indemnification made pursuant to
Section 11.2(I)(a) shall be made on or before the third
anniversary of the Closing Date.
11.6 Maximum and DeMinimis Amounts.
(a) The maximum amount of indemnification which can be
required of Sellers in the aggregate under Section
11.2(I)(c) for any breach of any representation or warranty
set forth in Section 5.1 (or any portion thereof), Section
11.2(II) and Section 11.2(I)(a) shall not exceed
$10,000,000.
(b) Sellers shall not be required to indemnify, defend
or hold Buyer harmless from and against any Liabilities
under Section 11.2(I)(c) with respect to any breach of any
representation or warranty (without giving effect to any
limitations as to "materiality," "substantial," "Material
Adverse Effect," or "material adverse change" set forth
therein) (other than a breach of any representation and
warranty described in Sections 5.1(d) or (l) or 5.2) unless
and until the amount of such Liabilities equals $375,000 in
the aggregate (the "Threshold Amount") in which event
Sellers shall be obligated to indemnify Buyer, and Buyer may
assert its right to indemnification hereunder to the full
extent of all Liabilities relating to such breach, including
Liabilities that are less than the Threshold Amount.
11.7 Exclusions. No limitation set forth in
Sections 11.5 or 11.6 shall apply with respect to any
representations and warranties made by any Seller which any
Seller knew were untrue or false.
11.8 Dispute Resolution. (a) In the event that any
party to this Agreement or the Securityholders' Agreement has any
claim, right or cause of action against any other party to this
Agreement or the Securityholders' Agreement, which the parties
shall be unable to settle by agreement between themselves, such
claim, right or cause of action, to the extent that the relief
sought by such party is for monetary damages or awards, shall be
submitted to non-binding mediation, pursuant to clause (b) below,
and if not successfully mediated, determined by arbitration in
accordance with the provisions of this Section 11.8.
(b) The party or parties requesting mediation shall
serve upon the other or others a demand therefor, in
writing, specifying the matter to be submitted to mediation.
Within ten (10) business days after receipt of such written
demand, the parties shall agree in writing to the
appointment of a mutually acceptable mediator, who shall fix
a time and place of the mediation which shall be as soon as
conveniently possible (but in no event later than ten (10)
business days after the appointment of the mediator), at
which time and place the parties to the controversy shall
appear and be heard with respect to the right, claim or
cause of action. If the parties do not agree upon a
mediator within the time specified, the matter shall proceed
to arbitration under the procedures set forth in this
Section 11.8. At mediation, each party shall present such
testimony, examinations and investigations in accordance
with such procedures and regulations as may be determined by
the mediator and shall also recommend to the mediator a
monetary award to be adopted by the mediator. After hearing
the parties in regard to the matter in dispute, the mediator
shall adopt as his or her determination with respect to such
claim, right or cause of action, within ten (10) business
days of the completion of the examination, by decision
signed in writing (together with a brief written statement
of the reasons for adopting such recommendation), one of the
recommendations submitted by the parties to the dispute and
shall grant no other relief or remedy. The decision of said
mediator shall be non-binding and may be appealed by any
party to arbitration under the arbitration procedures set
forth in this Section 11.8 The expense and cost of
mediation, including fees and expenses of counsel to the
parties, shall be borne by the party or parties whose
recommendation was not adopted by the mediator.
(c) The party or parties requesting arbitration shall
serve upon the other or others a demand therefor, in
writing, specifying the matter to be submitted to
arbitration, and nominating a competent disinterested person
to act as an arbitrator. Within ten (10) business days
after receipt of such written demand and nomination, the
other party or parties shall, in writing, nominate a
competent disinterested person, and the two (2) arbitrators
so designated shall, within ten (10) business days
thereafter, select a third arbitrator. The three (3)
arbitrators shall give immediate written notice of such
selection to the parties and shall fix in said notice a time
and place of the meeting of the arbitrators which shall be
as soon as conveniently possible (but in no event later than
ten (10) business days after the appointment of the third
arbitrator), at which time and place the parties to the
controversy shall appear and be heard with respect to the
right, claim or cause of action.
(d) In case the notified party or parties shall fail
to make a selection upon notice within the time period
specified in Section 11.8(c), the party asserting such claim
shall appoint an arbitrator on behalf of the notified party.
In the event that the first two (2) arbitrators selected
shall fail to agree upon a third arbitrator within ten (10)
business days after their selection, then such arbitrator
may, upon application made by either of the parties to the
controversy, be appointed by any judge of any United States
court of record having jurisdiction in the State of
Wisconsin.
(e) At arbitration, each party shall present such
testimony, examinations and investigations in accordance
with such procedures and regulations as may be determined by
the arbitrators and shall also recommend to the arbitrators
a monetary award to be adopted by the arbitrators as the
complete disposition of such claim, right or cause of
action. After hearing the parties in regard to the matter
in dispute, the arbitrators shall adopt as their
determination with respect to such claim, right or cause of
action, within ten (10) business days of the completion of
the examination, by majority decision signed in writing
(together with a brief written statement of the reasons for
adopting such recommendation), one of the recommendations
submitted by the parties to the dispute and shall grant no
other relief or remedy. The decision of said arbitrators,
absent fraud, duress or manifest error, shall be final and
binding upon the parties to such controversy and may be
enforced in any court of competent jurisdiction.
(f) The expense and cost of arbitration, including
fees and expenses of counsel to the parties, shall be borne
by the party or parties whose recommendation was not adopted
by the arbitrator.
(g) Notwithstanding any other provisions of this
Section 11.8, in the event that a party against whom any
claim, right or cause of action is asserted commences, or
has commenced against it, bankruptcy, insolvency or similar
proceedings, the party or parties asserting such claim,
right or cause of action shall have no obligations under
this Section 11.8 and may assert such claim, right or cause
of action in the manner and forum it deems appropriate,
subject to applicable laws. No determination or decision by
the mediator or arbitrators pursuant to this Section 11.8
shall limit or restrict the ability of any party hereto to
obtain or seek in any appropriate forum, any relief or
remedy that is not a monetary award or money damages.
(h) Any reference to any judicial decision or
determination by any court contained herein, in the
Securityholders' Agreement, in the Debentures or in any
other agreement executed pursuant hereto, shall include any
decision of a mediator by which the parties have agreed to
be bound, and any decision of arbitrators reached pursuant
to this Section 11.8.
ARTICLE XII MISCELLANEOUS
12.1 Amendments. This Agreement may be amended only by
a writing executed by Buyer and the Representative, acting on
behalf of Sellers.
12.2 Entire Agreement. This Agreement, the
Confidentiality Agreement dated September 14, 1999 between
Bowles, Hollowell, Conner (on behalf of Sellers) and HON (the
"Seller Confidentiality Agreement"), the letter agreement
regarding confidentiality dated November 19, 1999 among HON,
Allied, AFC, Madison, Minocqua and Bowles, Hollowell, Conner
(together with the Seller Confidentiality Agreement, the
"Confidentiality Agreements") and the other agreements expressly
provided for herein and the Schedules hereto, set forth the
entire understanding of the parties hereto with respect to the
subject matter hereof, and supersede all prior contracts,
agreements, arrangements, communications, discussions,
representations and warranties, whether oral or written, between
the parties.
12.3 Governing Law. This Agreement shall in all
respects be governed by and construed in accordance with the laws
of the State of Wisconsin, without regard to its conflicts of
law doctrine. Each Seller hereby agrees to submit to the
personal jurisdiction of the state or federal courts located in
the State of Wisconsin, and hereby appoint the Representative, as
its agent for purpose of service of process in any such state or
federal court. Notwithstanding the foregoing, any party may
initiate and prosecute any legal proceeding or seek enforcement
of any judgment in any proper court having jurisdiction in the
United States or elsewhere.
12.4 Notices. Any notice, request or other
communication required or permitted hereunder shall be in writing
and shall be deemed to have been duly given (a) when received if
personally delivered, (b) within five (5) days after being sent
by registered or certified mail, return receipt requested,
postage prepaid, (c) within twelve (12) hours after being sent by
telecopy, with confirmed answerback, or (d) within one (1)
business day of being sent by priority delivery by established
overnight courier, to the parties at their respective addresses
set forth below.
To Sellers: Ron F. Skoronski
6709 Watts Road
Madison, Wisconsin 53719
With a copy to: Axley Brynelson, LLP
Manchester Place
2 East Mifflin Street, Suite 200
Madison, WI 53703
Fax No.: (608) 257-5444
Attention: Bruce Harms
To Buyer or HON: Hearth Technologies Inc.
c/o HON INDUSTRIES Inc.
414 East Third Street
Muscatine, IA 52761
Attention: Chief Financial Officer
With a copy to: HON INDUSTRIES Inc.
414 East Third Street
Muscatine, IA 52761
Attention: General Counsel
and: Jones, Day, Reavis & Pogue
77 West Wacker, 35th Floor
Chicago, Illinois 60601-1692
Fax No.: (312) 782-8585
Attention: Elizabeth C. Kitslaar
Any party by written notice to the others given in accordance
with this Section 12.4 may change the address or the Persons to
whom notices or copies thereof shall be directed.
12.5 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original, and all of which together will constitute one and the
same instrument.
12.6 Assignment. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of each party
hereto, but no rights, obligations or liabilities hereunder shall
be assignable by (a) any Seller without the prior written consent
of Buyer, or (b) Buyer without the consent of the Representative.
12.7 Waivers. Except as otherwise provided herein, Buyer
or Sellers may waive in writing compliance by the other parties
hereto (to the extent such compliance is for the benefit of the
party giving such waiver) with any of the terms, covenants or
conditions contained in this Agreement or in any of the other
Transaction Documents (except such as may be imposed by law).
Any waiver by any party of any violation of, breach of, or
default under, any provision of this Agreement or any of the
other Transaction Documents, by any other party shall not be
construed as, or constitute, a continuing waiver of such
provision, or waiver of any other violation of, breach of or
default under any other provision of this Agreement or any of the
other Transaction Documents.
12.8 Third Parties. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or
give any Person or entity other than Buyer, Sellers and the
Representative any rights or remedies under or by reason of this
Agreement.
12.9 Schedules. The Schedules attached to this Agreement
are incorporated herein and shall be part of this Agreement for
all purposes.
12.9 Headings. The headings in this Agreement are solely
for convenience of reference and shall not be given any effect in
the construction or interpretation of this Agreement.
12.10 Certain Definitions.
(a) For purposes of this Agreement, the term "Affiliate"
shall mean any Person that directly, or indirectly through one
or more Persons, controls, is controlled by, or is under common
control with, the Person specified or, directly or indirectly,
is related to or otherwise associated with any such Person or
entity.
(b) For purposes of this Agreement and of any other
Transaction Document, the phrases, "to the best knowledge",
"knowledge", "Sellers' knowledge" or "Seller's knowledge" shall
be deemed to include all information that is actually known
after due inquiry or, in the exercise of reasonable diligence
in light of the scope of such person's authority and
responsibilities with any Company or Seller, should be known,
by any of the following individuals: Skoronski, Sorensen,
Steve Frederickson or Dennis Smith.
12.11 Remedies Not Exclusive. Except with respect to
matters for which a remedy is provided by Article XI, no remedy
conferred by any of the specific provisions of this Agreement is
intended to be exclusive of any other remedy and each remedy
shall be cumulative and shall be in addition to every other
remedy given hereunder or hereafter existing at law or in equity
or by statute or otherwise. No remedy shall be deemed to be a
limitation on the amount or measure of damages resulting from any
breach of this Agreement. The election of any one or more
remedies shall not constitute a waiver of the right to pursue
other available remedies.
12.12 Gender and Number. The masculine, feminine or
neuter gender and the singular or plural number shall each be
deemed to include the others whenever the context so indicates.
12.13 Attorney's Fees. In the event of any dispute
among the parties hereto arising out of or related to this
Agreement involving mediation, arbitration and/or litigation, the
parties agree, except as may be otherwise agreed by the parties
or ordered by any mediator, arbitrator or court of competent
jurisdiction, that the party or parties against whom a final
determination is made will reimburse the other party or parties
for all fees, costs and expenses of counsel incurred by such
party or parties with respect to such mediation, arbitration
and/or litigation.
IN WITNESS WHEREOF, the parties have caused their duly
authorized representatives to execute this Agreement as of the
date first above written.
/s/ Ron F. Skoronski
Ron F. Skornonski
/s/ Kirk R. Sorensen
Kirk R. Sorensen
MADISON FIRE PLACE, INC.
By /s/ Ron F. Skoronski
Ron F. Skoronski, President
FIREPLACE & SPA, INC.
By /s/ Ron F. Skoronski
Ron F. Skornonski, Chairman
THE MINOCQUA FIREPLACE COMPANY
By /s/ Ron F. Skoronski
Ron F. Skoronski, President
RON F. SKORONSKI
/s/ Ron F. Skoronski
Ron F. Skoronski, as
Representative
HEARTH TECHNOLOGIES INC.
By /s/ Daniel C. Shimek
Daniel C. Shimek, President
HON INDUSTRIES INC.
By /s/ David C. Stuebe
David C. Stuebe
Vice President and Chief
Financial Officer
EXHIBIT 2.1(iii)
NOTICE: THIS DEBENTURE AND THE RIGHTS REPRESENTED
HEREBY ARE SUBJECT TO THE RESTRICTIONS AND OPTIONS
STATED IN, AND MAY NOT BE SOLD, TRANSFERRED,
ENCUMBERED, OR OTHERWISE DISPOSED OF IN ANY MANNER,
VOLUNTARILY OR INVOLUNTARILY, EXCEPT UPON COMPLIANCE
WITH THE PROVISIONS OF, THE SECURITYHOLDERS' AGREEMENT
(AND ANY AMENDMENTS THERETO) DATED FEBRUARY 29, 2000,
BY AND AMONG HEARTH TECHNOLOGIES INC. AND CERTAIN
SECURITYHOLDERS THEREOF (THE "SECURITYHOLDERS'
AGREEMENT"). COPIES OF SUCH AGREEMENT ARE ON FILE IN
THE OFFICES OF HEARTH TECHNOLOGIES INC., AND THE
PROVISIONS OF SUCH AGREEMENT ARE INCORPORATED HEREIN BY
REFERENCE.
No. [C-__] [D-__] $[___________]
HEARTH TECHNOLOGIES INC.
5.5% Convertible Debenture due February 28, 2005
FOR VALUE RECEIVED, the undersigned, HEARTH TECHNOLOGIES
INC., an Iowa corporation (the "Company"), promises to duly and
punctually pay to _____________ (the "Holder") the principal sum
of $[__________] (or, if greater, the Equity Value (as defined
in, and in accordance with, the Securityholders' Agreement)
hereof as if converted), on February 28, 2005, plus interest on
the unpaid balance of principal at the rate of five and one-half
percent (5-1/2%) per annum, such interest to be payable on a
monthly basis no later than 10 days following the end of each
month beginning March, 2000 until paid in full (whether paid at
maturity or upon a repurchase of this Debenture pursuant to the
Securityholders' Agreement). Payments of principal and interest
hereunder shall be made to the Holder (or such other person as
may be named by written notice to the Company signed by the
Holder), at _______________________________ (or such other
address as the Holder's representative may specify by written
notice to the Company) in lawful money of the United States of
America. The Company shall not have the right to prepay this
Debenture except as provided in the Securityholders' Agreement.
The foregoing notwithstanding, following any Payment Default
(as hereinafter defined), any amount of principal hereof and
interest hereon that is not paid when due shall bear interest
from the day when due until such amount is paid in full at an
interest rate equal at all times thereafter to the lesser of 10%
per annum or the maximum interest rate permitted by applicable
law. "Payment Default" means the default in the payment, when
due in accordance with this Debenture or the Securityholders'
Agreement, of principal of and interest on, or the Put Price or
First Call Price of, this Debenture, which default continues
unremedied for a period of five (5) business days after notice of
default has been received by the Company; provided, however, that
the exercise by the Company or any affiliate of the Company
pursuant to the Purchase Agreement referred to in clause [(i)]
[(ii)] of the following paragraph or any [Employment and] Non-
Competition Agreement (as defined in the Purchase Agreements) of
setoff rights with respect to any amounts owing hereunder shall
not be a Payment Default, but shall otherwise be subject to the
provisions of the final paragraph of this Debenture.
This Debenture is one of the duly authorized and issued
Debentures of the Company known as its "5.5% Convertible
Debentures due February 28, 2005" (herein referred to as the
"Debentures"), in the original principal amount of Fifty-three
Million Dollars ($53,000,000), issued pursuant to (i) the
Purchase Agreement, dated as of February 29, 2000, among Ron F.
Skoronski, Kirk R. Sorensen, Madison Fire Place, Inc., Fireplace
& Spa, Inc. and The Minocqua Fireplace Company, as sellers, the
Company, as buyer, and HON INDUSTRIES Inc. ("HON") (the "Allied
Purchase Agreement") and (ii) the Purchase Agreement, dated as of
February 29, 2000, among American Fireplace Company and Hearth &
Home, Inc., as sellers, the Company, as buyer, and HON (the "AFC
Purchase Agreement", and collectively with the Allied Purchase
Agreement, the "Purchase Agreements").
It is expressly understood and agreed that in the event: (a)
the Company becomes Bankrupt (as hereinafter defined), (b) any
Payment Default shall occur and be continuing, (c) a Change of
Control (as hereinafter defined) of HON shall have occurred, or
(d) the ratio of (i) Consolidated Debt (as defined in the Credit
Agreement, dated as of June 11, 1997, among HON, Bankers Trust
Company, and the other financial institutions from time to time
party thereto(the "Credit Agreement") and whether or not the
Credit Agreement is still in effect) on the last day of any
fiscal quarter of HON (the "Measurement Date") (after giving
effect to all payments and prepayments made under the Credit
Agreement on such date) to (ii) Consolidated EBITDA (as defined
in the Credit Agreement) for the period of four consecutive
fiscal quarters ending on the Measurement Date, exceeds 3.50 to
1.00, (e) if the Holder is a Seller (or an Affiliate thereof)
under the Allied Purchase Agreement, a Payment Default has
occurred and is continuing with respect to a Debenture held by
any other such Seller or Affiliate, or (f) if the Holder is a
Seller (or an Affiliate thereof) under the AFC Purchase
Agreement, a Payment Default has occurred and is continuing with
respect to a Debenture held by any other such Seller or Affiliate
(each, an "Event of Default"), the Company shall immediately
notify the Holder of the occurrence of any Event of Default
referred to in clauses (a), (c), or (d), as applicable, (the
"Default Notice") and the whole sum of principal (and accrued but
unpaid interest thereon) evidenced by this Debenture shall, at
the written election of the Holder made no later than thirty (30)
days following the first to occur of the receipt by the Holder of
the Default Notice or actual knowledge of such Event of Default,
become immediately due and payable. "Bankrupt" means the
occurrence of any of the following: (a) the making by the Company
of an assignment for the benefit of creditors; (b) the voluntary
filing by the Company of a petition seeking an adjudication of
bankruptcy; (c) the filing by the Company of a pleading in any
court admitting its inability to pay its debts as they come due
or admitting the material allegations of an involuntary petition
for adjudication of bankruptcy; or (d) an order, judgment or
decree by any court of competent jurisdiction adjudicating the
Company a bankrupt or appointing a receiver, trustee or other
administrator of its assets which continues in effect and
unstayed for a period of sixty days. "Change of Control" of HON
means (a) the consummation of any reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of HON or an issuance of
additional shares of HON, whether in one transaction or a series
of related transactions (a "Business Combination"), in each case,
unless, following such Business Combination, all or substantially
all of the individuals and entities who were the beneficial
owners, respectively, of the common stock of HON and securities
entitled to vote generally in the election of Directors of HON
outstanding immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of Directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns HON or all or substantially
all of HON's assets either directly or through one or more
subsidiaries), or (b) approval by the shareholders of HON of a
complete liquidation or dissolution.
Subject to the provisions hereof, the Holder is entitled
after the earlier to occur of (i) a Public Offering (as defined
in the Securityholders' Agreement), or (ii) the fourth
anniversary of the date hereof, and prior to the earlier to occur
of (a) payment in full of all amounts owing hereunder, whether at
maturity or upon acceleration hereof, or (b) maturity hereof,
with 35 days prior written notice of election to convert in
substantially the form attached to this Debenture (duly executed
by the registered holder or by his, her or its duly authorized
attorney), to convert all, or to the extent allowed under the
next sentence, a part, of this Debenture into shares of Common
Stock, $1.00 par value ("Common Stock") of the Company at the
rate of 1.2709 shares of Common Stock for each $1,000.00 in
principal amount of Debenture, as adjusted as provided herein and
in the Securityholders' Agreement (the "Conversion Rate"), upon
surrender of this Debenture to the Company at the offices of the
Company in Muscatine, Iowa. The Holder may convert less than the
full amount of this Debenture on no more than four occasions and,
in any case, only in an amount no less than, and in multiples of,
25% of the face value of this Debenture.
The Company covenants and agrees that for so long as this
Debenture is convertible into Common Stock and shall remain
outstanding, it will (i) cause to be reserved and kept available
out of its authorized and unissued shares of Common Stock such
number of shares that will be sufficient to permit the conversion
in full of this Debenture, and (ii) take any and all necessary
action to ensure that all shares of Common Stock delivered upon
conversion of this Debenture shall, at the time of delivery of
the certificates for such shares, be duly authorized, validly
issued, fully paid and non-assessable.
The Conversion Rate shall be adjusted up or down from time
to time to equitably reflect any stock split, stock dividend or
similar recapitalization or reorganization of the Company (other
than in connection with a business combination, merger, sale of
assets or similar transaction) that results in a change in the
number of issued and outstanding shares of Common Stock of the
Company in order to prevent any dilution or enlargement of the
Holder's rights and obligations under this Debenture. Upon the
occurrence of any such adjustment or readjustment of the
Conversion Rate (whether pursuant to this Debenture or the
Securityholders' Agreement), the Company at its expense promptly
shall compute such adjustment or readjustment and furnish to the
Holder a certificate signed by the Chief Financial Officer of the
Company (the "Conversion Certificate") disclosing the Conversion
Rate, as adjusted or readjusted, and the basis upon which such
adjustment was made.
Holders of a majority in aggregate principal amount of
Debentures ("Majority Holders") shall have 10 business days from
the date of delivery of the Conversion Certificate in which to
review the Conversion Certificate, and if, in the Majority
Holders' reasonable judgment, the adjusted or readjusted
Conversion Rate contained therein is not an equitable adjustment
or readjustment appropriate pursuant to the first sentence of the
preceding paragraph, the Majority Holders shall have the right to
propose a different adjustment or readjustment to the Conversion
Rate within such 10-day period. Any such proposed adjustment
shall be in writing (the "Adjustment Request"), shall be
submitted to the Company within the 10-day period referred to in
the preceding sentence, and shall specify (i) the proposed
adjustment or readjustment and (ii) the facts and circumstances
supporting the reasonableness and propriety of such adjustment
under the standards set forth in the preceding paragraph. Unless
the Majority Holders notify the Company within such 10-day period
that the Majority Holders object to the adjustment or
readjustment contained in the Conversion Certificate, the
Conversion Certificate shall be binding upon all holders of
Debentures ("Holders") and the Company. The Majority Holders and
the Company shall use their best efforts for 15 business days
after the submission of any Adjustment Request to agree upon any
proposed adjustments or readjustments to the Conversion Rate.
Any dispute as to a proposed adjustment or readjustment of the
Conversion Rate that is not resolved by the Majority Holders and
the Company during such 15-day period shall be submitted for
resolution to a mutually acceptable "Big Four" independent public
accounting firm (other than the accounting firm then serving the
Company, HON, or any of their Affiliates), whose costs shall be
borne half by the Company and half by the objecting Holders. The
decision of such firm shall be final and binding on all Holders
and the Company.
Prior to the earlier of maturity, repurchase or conversion
of this Debenture, the Company shall not issue any additional
shares of capital stock (other than (1) such shares of Common
Stock as may be required to be issued, including pursuant to the
exercise of preemptive rights, pursuant to the 7% Convertible
Debentures due October 1, 1999, as amended, issued pursuant to
the Agreement and Plan of Merger dated as of October 2, 1996
between the Company and Heat-N-Glo Fireplace Products, Inc. and
the Securityholders' Agreement, dated as of October 2, 1996, as
amended, among the Company, HON, and the securityholders party
thereto, or (2) such shares of Common Stock as may be required to
be issued, including pursuant to the exercise of preemptive
rights, pursuant to the other Debentures issued in connection
with the Purchase Agreements, or (3) such shares of Common Stock
as may be issued pursuant to a stock split, stock dividend or
similar recapitalization or reorganization in which the Holder's
pro-rata ownership of the Company does not change on an as
converted basis) unless (a) HON has repaid to the Company all
Excess Distributions, and (b) the Company has given the Holder
(i) at least thirty (30) days prior written notice thereof and
(ii) the opportunity to purchase, at the same price per share and
on the same terms as the additional shares to be issued, up to
that portion of such shares of capital stock of the Company
proposed to be issued which equals the proportion that the number
of shares of Common Stock issued and then held by the Holder (or
then issuable upon conversion by the Holder of this Debenture or
other securities then exercisable or convertible in Common Stock
of the Company) bears to the total number of shares of Common
Stock of the Company then outstanding (assuming full conversion
and exercise of all convertible or exercisable securities of the
Company). "Excess Distributions" shall mean the amount by which
(A) (i) any Distributions (as defined in the Securityholders
Agreement) paid to HON or its Affiliates (other than the Company
or subsidiaries of the Company) prior to the fourth anniversary
of the date of this Debenture which are not also paid to other
holders of Debenture Securities (as defined in the
Securityholders' Agreement) pro rata in accordance with such
holders' as-converted equity interests in HTI, plus (ii) the
amount set forth on the balance sheet of HTI as intercompany
advances owed by HON (other than the Company or subsidiaries of
the Company) to HTI as of the date on which the Excess
Distributions are determined, exceeds (B) the cumulative amount
of all interest paid on the Debenture Securities through the date
on which such Excess Distributions are determined.
This Debenture shall be binding upon the Company's
successors and assigns. Except as otherwise provided in this
Debenture or in the Securityholders' Agreement, no remedy
conferred hereby shall be exclusive of any other remedy referred
to herein or now or hereafter available at law, in equity, by
statute or otherwise. In the event of any dispute among HON, the
Company and the Holder arising out of or related to this
Debenture involving mediation, arbitration and/or litigation,
HON, HTI and the Holder agree that, except as may be otherwise
agreed by the parties or ordered by any mediator, arbitrator or
court of competent jurisdiction, the party or parties against
whom a final determination is made will reimburse the other party
or parties for all fees, costs and expenses of counsel incurred
by such party or parties with respect to such mediation,
arbitration and/or litigation.
This Debenture and the obligations hereunder shall be
governed by and construed under the laws of the State of Iowa.
This Debenture is one of the Debentures referred to in the
Securityholders' Agreement and is entitled to the benefits
thereof and is subject to the restrictions therein. This
Debenture is one of the Debentures referred to in the HON
Guaranty (as defined in the Purchase Agreements) and is entitled
to the benefits thereof. The Company hereby represents and
warrants that (a) it has full corporate power and authority to
execute and deliver, and to perform its obligations under, this
Debenture, and (b) this Debenture has been duly authorized,
executed and delivered by the Company.
Payments pursuant to this Debenture are subject to offset by
the Company in accordance with and to the extent permitted by the
Purchase Agreements and the Securityholders' Agreement.
In any year that is not a leap year, the anniversary date of
this Debenture shall be February 28th of such year.
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed as of the date indicated below.
Dated: February 29, 2000
HEARTH TECHNOLOGIES INC.
By:_____________________
<PAGE>
CONVERSION NOTICE
To: Hearth Technologies, Inc.
c/o HON INDUSTRIES Inc.
414 East Third Street
Muscatine, Iowa 52761-7109
Attention: Chief Financial Officer
The undersigned holder of this Debenture hereby irrevocably
exercises his or her option to convert this Debenture into shares
of Common Stock of Hearth Technologies Inc. in accordance with
the terms of this Debenture, and directs that the shares issuable
and deliverable upon the conversion, be issued and delivered to
the registered holder hereof.
Face amount of Debenture being converted: $_______________
Dated: _______________________________
Signature
Fill in for registration of (must conform in all respects
shares of Common Stock to name(s) of holder(s)
appearing on face hereof).
Signature guarantee
___________________________
(Name of Holder)
___________________________ (Signature(s) must be guaranteed
(Address) by a commercial bank or trust
company or by a brokerage firm
having a membership in one of
Please print name and address the major stock exchanges)
(including zip code number)
Social Security or Other
Taxpayer Indentifying Number
_____________________________
EXHIBIT 2.1(iv)
SECURITYHOLDERS' AGREEMENT
THIS SECURITYHOLDERS' AGREEMENT (this "Agreement") is made
and entered into as of February 29, 2000 by and among HON
INDUSTRIES INC., an Iowa corporation ("HON"), HEARTH TECHNOLOGIES
INC., an Iowa corporation ("HTI"), RON F. SKORONSKI
("Skoronski"), KIRK R. SORENSEN ("Sorensen"), MADISON FIRE PLACE,
INC., a Wisconsin corporation ("Madison"), FIREPLACE & SPA, INC.,
a Wisconsin corporation ("FPSI"), THE MINOCQUA FIREPLACE COMPANY,
a Wisconsin corporation ("Minocqua", and collectively with
Skoronski, Sorensen, Madison and FPSI, the "Allied Sellers"),
AMERICAN FIREPLACE COMPANY, a Maryland corporation ("AFC"),
HEARTH & HOME, INC., a Maryland corporation ("H&H", and
collectively with AFC, the "AFC Sellers") and each of the other
persons who will become securityholders of HTI and who are set
forth on Exhibit 1.1(b) to this Agreement (the "Additional
Securityholders"). The Allied Sellers, the AFC Sellers and the
Additional Securityholders are hereinafter sometimes referred to
individually each as a "Securityholder" and collectively as the
"Securityholders". Capitalized terms used herein but not defined
herein shall have the meanings set forth in the Purchase
Agreements referred to below.
W I T N E S S E T H:
WHEREAS, the authorized capital stock of HTI consists of
10,000,000 shares of Common Stock, $1.00 par value per share (the
"Shares");
WHEREAS, pursuant to the Purchase Agreement dated as of the
January 28, 2000 among HON, HTI and the Allied Sellers (the
"Allied Purchase Agreement"), and the Purchase Agreement dated as
of January 28, 2000 among HON, HTI and the AFC Sellers (the "AFC
Purchase Agreement", and collectively with the Allied Purchase
Agreement, the "Purchase Agreements"), HTI acquired substantially
all the assets of Madison, FPSI, Minocqua and the AFC Sellers and
all issued and outstanding stock of Allied Fireside, Inc., a
Wisconsin corporation (the "Acquisitions"), as of the date
hereof;
WHEREAS, as a result of the Acquisitions, the
Securityholders will receive $53,000,000 in aggregate principal
amount of 5.5% Convertible Debentures due February 28, 2005 of
HTI ("Debentures"), convertible into 67,358 Shares as of the date
hereof;
WHEREAS, after the AFC Sellers' acquisition pursuant to the
AFC Purchase Agreement of Debentures in an aggregate principal
amount of $26,500,000, the AFC Sellers will distribute all such
Debentures to the Additional Securityholders in the respective
amounts set forth on Exhibit 1.1(b) hereto;
WHEREAS, HON owns all of the issued and outstanding Shares;
and
WHEREAS, it is a condition precedent to the consummation of
the Acquisitions that HON, HTI and the Securityholders enter into
this Agreement.
NOW THEREFORE, in consideration of the premises and mutual
covenants and agreements of the parties herein contained, the
parties agree as follows:
ARTICLE I - REPRESENTATIONS AND WARRANTIES
1.1 Representations and Warranties of the Securityholders.
The Securityholders hereby severally, but not jointly, represent
and warrant to HON and HTI that:
(a) Power and Authority. Each of the Securityholders
has the full legal right, capacity and power, and all
authorization and approval, if any, required to enter into
this Agreement.
(b) Ownership of Debentures. (i) Immediately after
the Effective Time, the Allied Sellers and the AFC Sellers
(collectively, the "Sellers") will own beneficially and of
record the respective principal amount of Debentures set
forth opposite their respective names on Exhibit 1.1(b)
attached hereto, in each case with valid marketable title
thereto, free and clear of all Liens other than Permitted
Pledges (as hereinafter defined).
(ii) Following the receipt by the AFC Sellers of
their Debentures, the AFC Sellers will distribute to
the Additional Securityholders the respective principal
amount of Debentures set forth opposite their
respective names on Exhibit 1.1(b) attached hereto, who
will then own beneficially and of record such
Debentures, in each case with valid marketable title
thereto, free and clear of all Liens other than
Permitted Pledges.
(c) Investment Matters. (i) Each Securityholder is
a resident of the state set forth opposite their respective
name on Exhibit 1.1(b) and, if acquiring Debentures, is
acquiring the Debentures solely for investment, for such
Securityholder's own account, and has no present intention
of reselling or otherwise distributing the Debentures or the
Shares into which the Debentures are convertible
(collectively, the "Debenture Securities"). Except for this
Agreement, the Securityholders have no present or
contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for, or
that is likely to compel, a disposition in any manner of any
of the Debenture Securities except as described in Section
1.1(b)(ii). Each Securityholder has been represented by
First Union Securities, Inc. (f/k/a Bowles, Hollowell,
Conner) as such Securityholder's "purchaser representative"
("Purchaser Representative") within the meaning of
Regulation D promulgated by the Securities and Exchange
Commission under the Act.
(ii) Each Securityholder, alone or with such
Securityholders' Purchaser Representative, has
sufficient knowledge and experience in financial and
business matters that he, she or it is capable of
evaluating the economic risks of an investment in the
Debenture Securities (including, without limitation,
the information described in Section 1.1(x)). Each
Securityholder's financial condition is currently
adequate to bear the economic risks of an investment in
the Debenture Securities. Each Securityholder has
received such written information respecting the
business and financial condition of HTI and the
Companies as is necessary to evaluate the merits and
risks of an investment in the Debenture Securities
(including, without limitation, the information
described in Section 1.1(x)). Each Securityholder has
read and understands such information in its entirety,
and is not relying on any other information (whether
written or oral) with respect to his, her or its
decision to invest in the Debenture Securities. Each
Securityholder has had an opportunity to ask questions
of officers of HON and HTI regarding the financial
merits and risks of the investment in the Debenture
Securities, and, to the extent any Securityholder has
taken advantage of such opportunity, such
Securityholder has received satisfactory answers
concerning such matters.
(iii) Each Securityholder is aware that the
Debenture Securities have not been registered under the
Securities Act of 1933, as amended (the "Act"), or
applicable state securities laws ("Blue Sky Laws"),
based in part on the Securityholders' representations
herein. Each Securityholder is aware that such
Debenture Securities may therefore not be sold or
transferred unless (A) subsequently registered under
the Act and/or the Blue Sky Laws, or (B) in the written
opinion of counsel (in form and substance reasonably
satisfactory to HTI), a sale or transfer may be made
without registration thereunder. Each Securityholder
understands that he, she or it must bear the economic
risk of the investment in the Debenture Securities
until either condition (A) or (B) of this paragraph is
satisfied.
(iv) Each Securityholder understands and
acknowledges that, in accordance with the requirements
of the Act, the rules and regulations thereunder and
the Blue Sky Laws, a legend will be placed on any
certificate representing the Debenture Securities to
the effect that such Debenture Securities have not been
registered under the Act or any applicable Blue Sky
Laws and that such Debenture Securities may not be
resold unless registered under the Act and any
applicable Blue Sky Laws or is exempt therefrom.
(v) Each Securityholder understands that there is
no public market for the Debenture Securities and,
accordingly, it may not be possible for him, her or it
to liquidate his, her or its interest in the Debenture
Securities for a substantial period of time. Each
Securityholder understands that there can be no
assurance that any public market for the Debenture
Securities will exist at any time in the future, and
that HON has no present plan or intention of "spinning
off" HTI or otherwise making an initial public offering
of any or all of its Shares. In addition, each
Securityholder understands that immediately after the
Acquisitions, HON will be the owner of more than 99% of
the issued and outstanding shares of capital stock of
HTI and that even after conversion of all Debentures,
HON will be entitled to elect all members of the Board
of Directors of HTI.
(vi) Each Securityholder, alone or with such
Securityholder's Purchaser Representative, has such
knowledge and experience in financial and business
matters that he, she or it is capable of evaluating the
merits and risks of the transactions contemplated by
the Purchase Agreement to which such Securityholder is
party.
(vii) Each Securityholder understands that any
financial projections provided by HON or HTI should be
considered speculative and qualified by the assumptions
stated therein. Each Securityholder understands that
such projections are based on assumptions believed to
be reasonable at the time of their preparation, but
they are subject to a high degree of uncertainty and
cannot be relied upon as a prediction of future
results.
(viii) Each Securityholder understands and
acknowledges that none of HON, HTI, or any of their
officers, directors, affiliates, employees, agents or
advisors, has made any representation, warranty or
assurance regarding the tax consequences of the
Acquisitions, and that he, she or it is relying upon
the advice of his, her or its own tax advisor with
respect to the tax consequences of the Acquisitions.
(ix) Each Securityholder qualifies as an
"accredited investor" under Regulation D promulgated by
the Securities and Exchange Commission under the Act.
(x) Each Securityholder has been provided with
copies of HON's 1998 Annual Report to Shareholders and
Form 10-K for the fiscal year ended January 2, 1999,
Notice of Annual Meeting and Proxy Statement dated
March 29, 1999, and Form 10-Qs for each of the fiscal
quarters ended April 3, 1999, July 3, 1999, and
October 2, 1999, which include, among other things,
information regarding HTI.
1.2 Representations and Warranties of HON and HTI. HON and
HTI hereby jointly and severally represent and warrant to each of
the other Securityholders that each of the representations and
warranties made in Sections 5.3 and 5.4 of the Purchase
Agreements are true and correct, each of which are incorporated
herein by reference, but which representations and warranties
shall expire on the respective dates set forth in Section 11.5 of
the Purchase Agreements.
ARTICLE II - RESTRICTIONS ON TRANSFER; ADVISORY BOARD
2.1 Restriction Prior to Fifth Anniversary. Except for
Transfers of Securities to HON or HTI in accordance with this
Agreement or as provided in Section 1.1(b)(ii), during the period
ending on the fifth anniversary of this Agreement, no
Securityholder shall sell, assign, transfer, give away or in any
other manner dispose of or alienate, whether by operation of law
or otherwise (hereinafter sometimes collectively referred to as a
"Transfer") any securities of HTI including, without limitation,
any capital stock or any securities evidencing the right to
acquire capital stock, any convertible debentures or other
convertible debt, that now is or hereafter may be owned by such
Securityholder, including the Debenture Securities (collectively,
the "Securities").
2.2 Restriction On and After Fifth Anniversary. Except for
Transfers of Securities to HON or HTI in accordance with this
Agreement or as provided in Section 1.1(b)(ii), on and after the
fifth anniversary of the date of this Agreement, no
Securityholder shall Transfer (as defined in Sections 2.1 and
2.3) any Securities which now or hereafter may be owned by him,
her or it until such Securityholder (hereinafter sometimes
referred to as the "Offeror") first shall have offered in writing
to HON the Securities which he, she or it then so desires to
Transfer, and HON shall have rejected the offer in writing or
shall have failed to accept the offer to purchase all such
Securities within 20 days of receipt of the offer or failed after
such acceptance to purchase all such Securities in violation of
Section 2.6. Any Transfer occurring after such rejection or
failure to accept or close by HON shall be subject to the terms
of Section 2.12.
2.3 Definition of "Transfer". For purposes of this
Agreement, a Transfer of Securities shall include what is
normally and customarily considered a sale, exchange, assignment,
transfer, distribution, gift, disposition or alienation.
Notwithstanding the foregoing, a Transfer of Securities shall not
include a transfer, assignment or gift of Securities to or from
any other Securityholder, or to any member of the Immediate
Family of a Securityholder during the life of the Securityholder
or upon the death of the Securityholder, provided that such
transferee agrees in writing to be bound by the terms of this
Agreement. "Immediate Family", as used herein, shall mean (a)
the spouse, any child or grandchild, any sibling and any child of
any such sibling, of a Securityholder, and (b) any trust or
limited partnership created for the benefit of the
Securityholder, or any of the persons described in clause (a) of
this Section 2.3. Notwithstanding the foregoing, a Transfer
shall not be deemed to include any conversion of Debentures into
Shares by any Securityholder pursuant to the terms of the
Debentures.
2.4 Terms of Offer. The offer of the sale of the
Securities by the Offeror to HON shall be signed by the Offeror,
and shall include a statement of intention to Transfer said
Securities, the name and address of the prospective purchaser of
said Securities, if any, the number of Securities involved, and
the price and terms of any such transaction (including a copy of
any written offer or purchase contract). The purchase price for
the Securities offered by the Offeror shall be equal to the price
that the prospective purchaser has offered or agreed to pay.
2.5 Acceptance of Offer. If HON accepts such offer within
the applicable time period, the acceptance shall create a legally
binding contract between the Offeror and HON to acquire the
Securities on the same terms and conditions as those agreed to by
the third party prospective purchaser (excluding any due
diligence conditions or contingencies required by such
purchaser).
2.6 Transfer Closing. The closing of a Transfer of
Securities pursuant to an offer that has been validly accepted by
HON shall take place within 30 days after the acceptance of the
offer. At the closing, the Offeror shall deliver to HON the
certificate(s) evidencing the Securities subject to the Transfer,
properly endorsed for transfer or accompanied by stock powers
endorsed to HON or its designated assignee, and HON shall deliver
to the Offeror such certified or cashier's checks and such other
documents as are reasonably necessary and customary to consummate
such transaction.
2.7 Release From Restriction. If HON does not purchase all
the Securities proposed to be transferred by the Offeror, the
Offeror may (a) sell to HON such number of offered Securities as
HON has agreed to purchase pursuant to the terms of this
Article II, (b) make a bona fide Transfer of all the Securities
so offered to the prospective purchaser named in the offer
theretofore made by the Offeror to HON, or (c) sell to HON such
number of offered Securities as HON has agreed to purchase
pursuant to the terms of this Article II and Transfer the
remainder of the Securities to the prospective purchaser in a
bona fide Transfer; provided, however, that any such Transfer
shall not be made at any price or on any terms that are more
favorable than those stipulated in such offer. If the Offeror
shall fail to make any such Transfer within 90 days following the
expiration of the periods of time provided above for the election
by HON, such Securities shall again become subject to the
Transfer restrictions of this Article II.
2.8 Restrictions on Pledging; Improper Transfer.
Notwithstanding any other provision of this Agreement, except for
a pledge to HON or the lender making the loan referred to in
Section 4.5 of the AFC Purchase Agreement by a Securityholder who
is an Affiliate of an AFC Seller (a "Permitted Pledge"), no
Securityholder may pledge or hypothecate all or any portion of
the Securities in any manner without the prior written consent of
HON. Any purported Transfer, pledge or hypothecation in
violation of this Agreement shall be null and void and of no
force or effect.
2.9 Involuntary Transfers. In the event of a Transfer of
any Securities owned by any Securityholder by operation of law or
pursuant to or by virtue of any proceeding at law, in equity or
otherwise, or by the involuntary act of the holder or owner of
said Securities and such Securities shall not have been offered
to HON pursuant to this Article II, then the right of first
refusal provided for in Section 2.2 shall become effective upon
the happening of any such event and the period of time within
which HON may exercise its rights to acquire said Securities
shall commence as of the date HON actually receives notice of the
occurrence of any such event. The purchase of such Securities
shall be effected in the same manner as provided in this
Article II, except that the purchase price of such Securities
shall be the Put Price (as hereinafter defined).
2.10 Debenture Certificate Legend. Upon the execution of
this Agreement, certificates evidencing the Debentures subject to
this Agreement issued to the respective Securityholders shall be
endorsed with the following notice:
"NOTICE: This debenture and the rights represented
hereby are subject to the restrictions and options stated
in, and may not be sold, transferred, encumbered, or
otherwise disposed of in any manner, voluntarily or
involuntarily, except upon compliance with the provisions of
the Securityholders' Agreement (and any amendments thereto)
dated February 29, 2000, by and among HON INDUSTRIES Inc.,
Hearth Technologies Inc., and certain Securityholders
thereof. Copies of such agreement are on file in the
offices of Hearth Technologies Inc., and the provisions of
such agreement are incorporated herein by reference."
2.11 Stock Certificate Legend. Following the execution of
this Agreement, certificates evidencing any Securities, other
than Debentures, subject to this Agreement which may be issued
from time to time to the respective Securityholders shall be
endorsed with the following notice:
"NOTICE: This certificate and the shares of stock
represented hereby are subject to the restrictions and
options stated in, and may not be sold, transferred,
encumbered, or otherwise disposed of in any manner,
voluntarily or involuntarily, except upon compliance with
the provisions of the Securityholders' Agreement (and any
amendments thereto) dated February 29, 2000, by and among
HON INDUSTRIES Inc., Hearth Technologies Inc., and certain
Securityholders thereof. Copies of such agreement are on
file in the offices of Hearth Technologies Inc., and the
provisions of such agreement are incorporated herein by
reference."
2.12 Rights of Transferees. The Transfer of Securities by
a Securityholder to any transferee (other than as provided in
Section 1.1(b)(ii)) shall not be deemed to have been consummated
until the transferee executes and delivers to HTI, HON and to
each of the other Securityholders a written agreement to be bound
by all of the terms and conditions of this Agreement (including,
without limitation, the terms and conditions of this Article II).
2.13 Securities Owned by HON. Nothing in this Agreement
shall be construed to restrict or prevent HON from any Transfer
of any or all Securities owned by it in any manner whatsoever.
2.14 Termination of Restriction on Transfer. Following the
consummation of a Public Offering prior to the third anniversary
of the date of this Agreement, the restrictions on transfer set
forth in this Article II, and the right of HTI to purchase
Debenture Securities pursuant to Section 4.2, shall terminate as
to the following percentages of the original principal amount of
the Debenture Securities on the dates set forth below provided
that during the period from the Closing through such dates (each
a "Release Date") and with respect to holders of Debenture
Securities who have executed an Employment Agreement (as
hereinafter defined), such holders shall have been continuously
employed pursuant to such holder's Employment Agreement:
Percentage Released Date Through Which
Securityholder Must Be
Employed
33 1/3% First Anniversary of Closing
33 1/3% Second Anniversary of Closing
33 1/3% Third Anniversary of Closing
The restrictions on transfer set forth in this Article II shall
terminate upon the consummation of a Public Offering after the
third anniversary of the date of this agreement. "Public
Offering" means the consummation of the sale of Shares of HTI
pursuant to an effective registration statement filed by HTI
under the Securities Act of 1933 in connection with the initial
firm commitment underwritten offering to the general public of
Shares following which the Shares are either listed on a national
securities exchange or authorized for quotation on NASDAQ.
2.15 Advisory Board. The AFC Sellers and any Additional
Securityholders receiving Debentures upon any dissolution of an
AFC Seller (the "AFC Group") shall be entitled to designate, by
vote of holders of a majority of Securities held by the AFC Group
(which shall be measured as to debt securities (including Related
Debentures) on the basis of the principal amount of the debt
securities held by the Securityholders), one representative
member of HTI's advisory board (the "Advisory Board") so long as
Securities held by the AFC Group remain outstanding and are
subject to the provisions of Section 3.1, 4.1 or 4.2. The Allied
Sellers and any Additional Securityholders receiving Debentures
upon any dissolution of an Allied Seller (the "Allied Group")
shall also be entitled to designate, by vote of holders of a
majority of Securities held by the Allied Group (measured as
aforesaid), one representative member of the Advisory Board so
long as Securities held by the Allied Group remain outstanding
and are subject to the provisions of Sections 3.1, 4.1 or 4.2.
Any such designee must be a full-time employee of HTI or one of
its subsidiaries (or, if the Allied Group designates Skoronski,
serving in accordance with the terms of his Employment Agreement)
to be eligible to serve on the Advisory Board.
ARTICLE III - PUT RIGHT
3.1 Put Right. After the third and prior to the fifth
anniversary of the date of this Agreement, each Securityholder
shall have the right (the "Put Option"), exercisable by giving
written notice to HTI (a "Put Notice"), to require HTI to
purchase from such Securityholder, at a price equal to the Put
Price (as defined in Section 3.2), all or any portion of the
Securities owned by such Securityholder; provided, however, that
if the Securityholder or any Affiliate or shareholder of such
Securityholder has executed an Employment and Non-Competition
Agreement with HTI or one of its Affiliates (a "Restricted
Holder"), such Securityholder may not exercise the Put Option
under the circumstances entitling HTI to a First Call Option.
3.2 Put Price. The purchase price for any Securities
subject to a Put Option (the "Put Price") shall be equal, as
applicable, to: (a) in the case of Debenture Securities subject
to the Put Option, the greater of (I) the face value of the
Debentures plus accrued but unpaid interest thereon to the date
of redemption, and in the case of Shares converted from
Debentures that are subject to the Put Option, the face value of
the Debentures from which such Shares were converted, plus
accrued but unpaid interest thereon, if any, to the date of
conversion (such Debentures, the "Related Debentures"), or (II)
the Equity Value (as hereinafter defined) of the Shares (on an as
converted basis) subject to the Put Option; (b) with respect to
Securities, other than Debenture Securities described in (a)
above, which are non-convertible debt ("Nonconvertible Debt"),
the face amount of such debt, plus accrued and compound interest
thereon, if any, to the date of redemption, without any
discount; (c) with respect to Shares other than Debenture
Securities set forth in (a) above ("Additional Shares"), the
Equity Value of such Shares, and (d) with respect to debt
securities, other than Debenture Securities, that are convertible
into Shares ("Additional Convertible Securities"), the applicable
price as may be agreed to by the Securityholders and HTI and set
forth in such Additional Convertible Securities.
"Equity Value" shall be equal to (a) (i) 7.25 times the
Consolidated EBITDA (as defined on Exhibit 3.2) of HTI for the
four full fiscal quarters immediately preceding the month in
which the Put Option is exercised (the "Measurement Period"),
minus (ii) total Average Indebtedness of HTI on a consolidated
basis for the applicable Measurement Period, plus (iii) total
Average Cash of HTI on a consolidated basis during the applicable
Measurement Period, multiplied by (b) (i) the number of Shares
(on an as converted basis) subject to the Put Option divided by
(ii) the number of issued and outstanding Shares (on a fully-
diluted, as converted basis) at the time the Put Option is
exercised. The Equity Value shall be increased by the amount, if
any, of Pro Rata Disposition Proceeds (as defined below) if the
amount of Pro Rata Disposition Proceeds is a positive amount.
"Indebtedness" means (i) any obligation for money borrowed,
including any money borrowed from any Affiliate of HTI, (ii) any
obligation evidenced by bonds, debentures, notes, or other
similar instruments, including, without limitation, any such
obligations incurred in connection with the acquisition of
property, assets or businesses, excluding trade accounts payable
made in the ordinary course of business, (iii) any obligation
issued or assumed as the deferred purchase price of property or
services (but excluding trade accounts payable arising in the
ordinary course of business), (iv) any capital lease obligation,
and (v) any indebtedness with respect to any sale and leaseback
transaction that would appear on the balance sheet of HTI in
accordance with generally accepted accounting principles;
provided, however, any convertible Indebtedness which is treated
as Shares in the Equity Value calculation shall be excluded from
the calculation of Indebtedness.
"Average Indebtedness" means the average monthly balance of
Indebtedness owing by HTI during the applicable Measurement
Period (measured on the basis of month-end balances during the
Measurement Period); provided, however, that if Indebtedness is
incurred to finance any acquisition completed during a
Measurement Period the financial results of which are included in
Consolidated EBITDA for such Measurement Period, "Average
Indebtedness" shall include the amount of such acquisition
Indebtedness owing by HTI as of the end of the applicable
Measurement Period.
"Average Cash" means the lesser of (a) the sum of (i) the
average monthly cash (or cash equivalents) balance during the
applicable Measurement Period of HTI (measured on the basis of
month-end balances during the Measurement Period), (ii) the
average monthly amount owing after the date hereof to HTI from
Affiliates of HTI in respect of intercompany advances to such
Affiliates (measured on the basis of month-end balances during
the Measurement Period), and (iii) amounts distributed after the
date hereof to shareholders of HTI as a dividend on, or otherwise
in respect of, ownership of shares ("Distributions") (other than
(A) any amounts that are otherwise accounted for in computing
Equity Value, including as Disposition Proceeds, or (B) any
Distributions that are made to or in respect of shareholders of
HTI, which are Distributions to the Securityholders in accordance
with their pro rata fully diluted, as converted, equity
interest), or (b) the total Average Indebtedness during the
applicable Measurement Period.
"Average Indebtedness" and "Average Cash" shall be measured
without regard to any Indebtedness, or cash or other amounts
described in clauses (i), (ii) and (iii) of the definition of
Average Cash, existing, incurred, made or distributed, as the
case may be, or otherwise set forth on the Financial Statements
of HTI, prior to the date of this Agreement.
"Disposition" means any sale or disposition, whether by
stock sale, asset sale, merger, consolidation, spin-off or other
sale transaction or series of related sale transactions, prior to
the third anniversary of the Closing of any business unit or line
of business of HTI which had total annual revenues for the four
(4) fiscal quarters completed immediately prior to the
consummation of the sale or disposition equal to or greater than
ten percent (10%) of the consolidated revenues of HTI for such
four (4) fiscal quarters, adjusted to give effect to the
transactions contemplated by the Purchase Agreements as if they
had been consummated as of the first day of such four (4) fiscal
quarter period, to an entity or individual which or who is not an
affiliate of HTI or HON (an "Unrelated Acquiror").
"Pro Rata Disposition Proceeds" shall be equal to (DP
divided by FDS) times SS.
As used in this Section:
"DP" or "Disposition Proceeds" equals the proceeds
ultimately received by HTI from a Disposition, net of (1) all
fees, taxes, repayment of Indebtedness, legal costs, incurred or
reserved indemnification amounts, and similar costs, expenses and
reserves paid or payable, or that arise or accrue, in connection
with such Disposition ("Transaction Costs"), and (2) all
Protection Amounts paid or payable, or that arise or accrue,
pursuant to the Securityholders' Agreement dated as of October 2,
1996, as amended by Amendment No. 1 to Securityholders' Agreement
dated September 30, 1999 and Amendment No. 2 to Securityholders'
Agreement dated February 28, 2000 (the "Heat-N-Glo
Securityholders' Agreement"). For the avoidance of doubt,
"Protection Amounts" shall be computed and disclosed prior to or
at the time at which any Put Price is actually paid to a
Securityholder whose payments are being reduced by any Protection
Amounts. The value of the Disposition Proceeds received and the
Transaction Costs shall be reasonably determined in good faith by
the Board of Directors of HTI, and an internally prepared
computation thereof will be delivered, at the request of any
Securityholder, to any such requesting Securityholder, which
Schedule shall be considered HTI Information as defined in
Section 7.10. To the extent Disposition Proceeds are based upon
consideration that is deferred or contingent, including any
reserves ultimately released, the inclusion in Equity Value of
Pro Rata Disposition Proceeds attributable to such Disposition
Proceeds shall be deferred until the receipt of such
consideration.
"FDS" has the meaning set forth in Section 4.5.
"SS" means the number of fully-diluted Shares held by
persons who, at the time the Disposition is consummated, hold
securities of HTI, including without limitation, any capital
stock or any securities evidencing the right to acquire capital
stock, any convertible debentures or other convertible debt that
now is or hereafter may be issued, assuming conversion of all
options, warrants, debentures and other rights to acquire Shares.
3.3 Put Closing. The closing of the purchase of Securities
pursuant to a Put Option shall take place at the offices of HON
at 10:00 a.m. local time on a date not more than thirty (30) days
after the later to occur of (a) the date the Put Notice is
received by HTI or (b) the date on which any dispute as to the
Relevant EBITDA Report (as hereinafter defined) shall have been
resolved pursuant to Section 3.6, as HTI shall specify by notice
to each Securityholder that has delivered a Put Notice. HTI
shall be entitled to receive customary representations and
warranties as to title, no liens, authority and capacity to sell
from the selling Securityholder regarding such sale. At the
closing, the selling Securityholder shall deliver to HTI a
certificate or certificates evidencing the number of Securities
then to be purchased by HTI (properly endorsed or accompanied by
stock powers or similar appropriate documentation of authority to
transfer) against payment at Closing of the Put Price for the
Securities subject to the Put Option to such Securityholder by
certified or cashier's check or wire transfer.
3.4 Termination and Limitation of Put Right. (a) The right
of Securityholders to put Securities to HTI pursuant to Section
3.1 shall terminate upon the consummation after the third
anniversary of this Agreement of a Public Offering.
(b) HTI shall have no obligation to purchase Securities
under Section 3.1 so long as, immediately after giving effect to
such purchase, HTI or any of its Affiliates, in the good faith
judgment of HTI's or any of its Affiliates' Board of Directors,
violates, or is likely to violate, any provision of the Iowa
Business Corporation Act or any agreement to which HTI or any of
its Affiliates is subject in respect of indebtedness for borrowed
money or the deferred purchase price of property, in either of
which events HON shall instead purchase such Securities in
accordance with the terms and conditions of this Agreement.
3.5 Adjustment of Equity Value. HTI or its Board of
Directors shall adjust the Equity Value as may be necessary to
equitably reflect any stock split, stock dividend or similar
recapitalization or reorganization of HTI (other than in
connection with a business combination, merger, sale of assets or
similar transaction) that results in a change in the number of
issued and outstanding shares of Common Stock of HTI in order to
prevent any dilution or enlargement of Securityholders' rights
and obligations under this Article III upon exercise of any Put
Option hereunder.
3.6 Review of Relevant EBITDA Report. Any Securityholder
exercising his, her or its Put Option or whose Securities are
called pursuant to Article IV shall have 10 business days from
the date of such exercise or call in which to review the EBITDA
Report (as defined on Exhibit 3.2) setting forth the Consolidated
EBITDA for the measurement period governing the computation of
the Put Price payable in connection with such exercise or call
(the "Relevant EBITDA Report"), and if, in such Securityholder's
reasonable judgment, the Relevant EBITDA Report does not fairly
present Consolidated EBITDA for the Measurement Period in
accordance with Section 3.2 and Exhibit 3.2, any such
Securityholder shall have the right to propose an adjustment
thereto within such 10-day period. HTI shall, during such 10-day
period, provide access to the objecting Securityholders, at such
Securityholders' cost, to such supporting documentation as is
reasonably requested to evaluate the Relevant EBITDA Report
(which documentation shall be considered HTI Information for
purposes of Section 7.10). Any such proposed adjustment shall be
in writing (the "Adjustment Request"), shall be submitted to HTI
within the 10-day period referred to in the preceding sentence of
this Section 3.6, and shall specify (i) the amount of the
proposed adjustment, (ii) the item to which such proposed
adjustment relates, and (iii) the facts and circumstances
supporting the reasonableness and propriety of such adjustment
under the standards set forth in Section 3.2 and Exhibit 3.2.
Unless a Securityholder exercising his, her or its Put Option
notifies HTI within such 10-day period that such Securityholder
objects to the findings contained in the Relevant EBITDA Report,
the Relevant EBITDA Report shall be binding upon all such
Securityholders and HTI. HTI and all such Securityholders shall
use their best efforts for 15 business days after the submission
of any Adjustment Request to agree upon any proposed adjustments
to the Relevant EBITDA Report. Any dispute as to any item or
items set forth in the Adjustment Request of the Relevant EBITDA
Report that is not resolved by HTI and the Securityholders during
such 15-day period shall be submitted for resolution of such item
or items to a mutually acceptable "Big Five" independent public
accounting firm (other than the accounting firm then serving HON,
HTI, or their Affiliates), whose costs shall be borne half by HTI
and half by the objecting Securityholder(s). The decision of
such firm shall be final and binding on HTI and such
Securityholders.
ARTICLE IV - CALL RIGHTS
4.1 First Call Right. (a) If Hearth Services Inc., an
Iowa corporation ("HSI"), or HTI terminates the employment of any
Restricted Holder pursuant to Section 9(e)(ii) or (iii) of the
Employment and Non-Competition Agreement between the terminated
Restricted Holder and HSI or one of its Affiliates (any
Restricted Holder's "Employment Agreement") or if a Restricted
Holder terminates his employment with HSI or any Affiliate of
HSI, other than on account of (x) death or (y) Disability (as
defined in Section 9(f) of such Restricted Holder's Employment
Agreement), HTI shall have the right (the "First Call Option"),
exercisable by giving written notice to such Restricted Holder
(the "First Call Notice") within 90 days after the date of such
termination, to purchase from such Restricted Holder, at a price
equal to the First Call Price, all (but not less than all) of the
Securities owned by such Restricted Holder.
(b) Except as otherwise provided in Section 4.1(c), the
purchase price for any Securities subject to the First Call
Option (the "First Call Price") shall be equal to the Applicable
Repurchase Price (as defined below) of such Restricted Holder's
Securities.
(c) The "Applicable Repurchase Price" shall be equal:
(i) with respect to Debentures, the percentage of the principal
amount of such Debentures as is set forth below for the period in
which the Restricted Holder of such Debentures was terminated,
plus accrued but unpaid interest thereon, if any (or the Put
Price, if applicable); (ii) with respect to Shares converted from
Debentures, the percentage of the principal amount of such
Share's Related Debentures as is set forth below for the period
in which the Restricted Holder of such Shares was terminated,
plus accrued but unpaid interest thereon, if any (or the Put
Price, if applicable); (iii) with respect to Nonconvertible Debt,
the face amount of such Securities plus accrued but unpaid
interest thereon, if any, to the date of redemption, without any
discount; (iv) with respect to Additional Shares, the amount paid
for such Additional Shares, without any discount; and (v) with
respect to Additional Convertible Securities, the applicable
price as may be agreed to by the Securityholders and HTI and set
forth in such Additional Convertible Securities.
If Terminated: Repurchase Price as a
Percentage of Principal
Amount
Before the first anniversary 70%
of the date of this Agreement
On or after the first 80%
anniversary of the date of
this Agreement but before the
second anniversary of the date
of this Agreement
On or after the second 90%
anniversary of the date of
this Agreement but before the
third anniversary of the date
of this Agreement
On or after the third The greater of 100% or
anniversary of the date of the Put Price
this Agreement
provided, however, that in the case of a Restricted Holder, HTI
may repurchase such Restricted Holder's Debenture Securities for
an amount equal to the Applicable Repurchase Price less any
damages, as determined by a judgment which has become final and
non-appealable of a court of competent jurisdiction (which shall,
for purposes of this Agreement, be deemed to include any
mediation to which the Restricted Holder and the Company have
consented, and any arbitration decision rendered, pursuant to
Section 11.8 of either Purchase Agreement) that (i) such
Restricted Holder materially breached Section 10 or 11 of such
Restricted Holder's Employment Agreement and (ii) in the event
such breach was of a type or nature which is susceptible to cure,
such Restricted Holder did not cure such breach within 10 days of
written notice of such breach; provided further, however, that
pending any such judgment, (i) the Restricted Holder may not
exercise any rights he may have as a Securityholder and (ii) the
subject Debenture Securities and any principal or interest, and
dividends or distributions, thereon shall be deposited into an
interest bearing escrow account with a financial institution
designated by HTI. If such judgment holds that HTI is not
entitled to repurchase Debenture Securities pursuant to the first
proviso of this Section 4.1(c) and (i) that HTI had reasonable
grounds for its assertion that it was entitled to repurchase such
Debenture Securities pursuant to the first proviso of this
Section 4.1(c), then HTI shall return to the appropriate
Restricted Holder all wrongfully escrowed Debenture Securities,
principal, interest, dividends and distributions, plus a total of
10% interest (i.e., including interest earned on the escrow
account) computed thereon (in the case of Debenture Securities,
on such Debenture Securities' face value) from the date of escrow
to the date of return or (ii) that HTI did not have reasonable
grounds for its assertion that it was entitled to repurchase
Debenture Securities pursuant to the first proviso of this
Section 4.1(c), then HTI shall return to the appropriate
Restricted Holder all wrongfully escrowed Debenture Securities,
principal, interest, dividends and distributions, plus interest
earned on the escrow account, plus 15% interest computed on all
escrowed Debenture Securities, principal, interest, dividends and
distributions (in the case of Debenture Securities, on such
Debenture Securities' face value) from the date of escrow to the
date of return. If such judgment holds that HTI was entitled to
repurchase Debenture Securities pursuant to the first proviso of
this Section 4.1(c), the appropriate Restricted Holder shall pay
HTI 10% interest on all escrowed amounts (less any interest
thereon from the date of escrow to the date of such judgment).
4.2 Second Call Right. After the fourth anniversary of the
date hereof, HTI shall have the right (the "Second Call Option")
exercisable by giving written notice to a Securityholder (the
"Second Call Notice") to purchase from such Securityholder, at a
price equal to the Put Price, all (but not less than all) of the
Securities owned by such Securityholder; provided, however, that
(A) the purchase price for any Additional Shares shall be the
greater of the Put Price or the original purchase price paid by
the Securityholder for such Shares, and (B) in the case of a
Restricted Holder, HTI may repurchase such Restricted Holder's
Debenture Securities for an amount equal to the Applicable
Repurchase Price less any damages, as determined by a judgment
which has become final and non-appealable of a court of competent
jurisdiction (which shall, for purposes of this Agreement, be
deemed to include any mediation to which the Restricted Holder
and the Company have consented and any arbitration decision
rendered, pursuant to Section 11.8 of either Purchase Agreement)
that (i) such Restricted Holder materially breached Section 10 or
11 of such Restricted Holder's Employment Agreement and (ii) in
the event such breach was of a type or nature which is
susceptible to cure, such Restricted Holder did not cure such
breach within 10 days of written notice of such breach; provided
further, however, that pending any such judgment, (i) the
Restricted Holder may not exercise any rights he may have as a
Securityholder and (ii) the subject Debenture Securities and any
principal or interest, and dividends or distributions, thereon,
shall be deposited into an interest bearing escrow account with a
financial institution designated by HTI. If such judgment holds
that HTI is not entitled to repurchase Debenture Securities
pursuant to the first proviso of this Section 4.2 and (i) that
HTI had reasonable grounds for its assertion that it was entitled
to repurchase such Debenture Securities pursuant to the first
proviso of this Section 4.2, then HTI shall return to the
appropriate Restricted Holder all wrongfully escrowed Debenture
Securities, principal, interest, dividends and distributions,
plus a total of 10% interest (i.e., including interest earned on
the escrow account) computed thereon (in the case of Debenture
Securities, on such Debenture Securities' face value) from the
date of escrow to the date of return or (ii) that HTI did not
have reasonable grounds for its assertion that it was entitled to
repurchase Debenture Securities pursuant to the first proviso of
this Section 4.2, then HTI shall return to the appropriate
Restricted Holder all wrongfully escrowed Debenture Securities,
principal, interest, dividends and distributions, plus interest
earned on the escrow account plus 15% interest computed on all
escrowed Debenture Securities, principal, interest, dividends and
distributions (in the case of Debenture Securities, on such
Debenture Securities' face value) from the date of escrow to the
date of return. If such judgment holds that HTI was entitled to
repurchase Debenture Securities pursuant to the first proviso of
this Section 4.2, the appropriate Restricted Holder shall pay HTI
10% interest on all escrowed amounts (less any interest thereon
from the date of escrow to the date of such judgment).
4.3 Call Closing. The closing of the purchase of the
Securities pursuant to a First Call Option or Second Call Option
(each, a "Call Option") shall take place at the offices of HON at
10:00 a.m. local time on a date not more than thirty (30) days
after the later to occur of (a) the date the First Call Notice or
Second Call Notice, as applicable (each, a "Call Notice"), is
received by the Securityholder or (b) the date on which any
dispute as to the Relevant EBITDA Report shall have been resolved
pursuant to Section 3.2, as HTI shall specify in the Call Notice
or, if clause (b) is applicable, subsequent notice to the
applicable Securityholder(s). HTI shall be entitled to receive
customary representations and warranties as to title, no liens,
authority and capacity to sell from such Securityholder regarding
such sale. At the closing, the selling Securityholder shall
deliver to HTI a certificate or certificates evidencing the
Securities then to be purchased by HTI (properly endorsed or
accompanied by stock powers or similar appropriate documentation
of authority to transfer), against payment of the applicable
purchase price for the Securities subject to the Call Option to
such Securityholder by certified or cashier's check or wire
transfer.
4.4 Termination of Call Right. The right of HTI to
purchase Securities from Securityholders pursuant to Section 4.2
shall terminate upon the consummation after the third anniversary
of the Closing of a Public Offering.
4.5 Price Protection. If a Securityholder's Debenture
Securities have been repurchased by HTI pursuant to Sections 3.1
or 4.2 or at the final stated maturity date thereof (other than
in connection with a material breach by a Restricted Holder of
his obligations under Section 10 or 11 of such Restricted Holder
Employment Agreement which is not cured within the applicable
cure period) within 365 days prior to consummation of a Public
Offering or a Sale (as hereinafter defined) which Public Offering
or Sale is consummated during the Protection Period (as
hereinafter defined) (a "Qualifying Repurchase"), then HTI shall
pay to each Securityholder whose Debenture Securities were so
repurchased (the "Covered Securityholders"), such
Securityholder's Protection Amount (as hereinafter defined).
"Protection Period" shall mean the period commencing on the day
after the third anniversary of the date of this Agreement, and
ending one year following the final stated maturity date of the
Debentures. "Protection Amount" means:
(i) in the case of a Public Offering, the amount, if
positive, equal to (OP minus RP) times NS; and
(ii) in the case of a Sale, the amount, if positive,
equal to ((SP divided by FDS) minus RP) times NS.
As used in this Section:
(i) "OP" equals the per share offering price to the
public in connection with such Public Offering;
(ii) "RP" equals the applicable price paid per
Security in connection with such Qualifying Repurchase to
the Covered Securityholder;
(iii) "NS" equals the number of shares repurchased by
HTI from the Covered Securityholder in the Qualifying
Repurchase;
(iv) "SP" equals the value of the proceeds ultimately
received by the shareholders of HTI from the Sale, net of
(A) all Transaction Costs, and (B) any Protection Amounts
paid or payable, or that arise or accrue pursuant to, this
Agreement or the Heat-N-Glo Securityholders' Agreement; and
(v) "FDS" means the number of fully-diluted Shares,
assuming conversion of all options, warrants, debentures and
other rights to acquire Shares.
The value of the consideration received and the Transaction
Costs shall be reasonably determined in good faith by the Board
of Directors of HTI, and an internally prepared computation
thereof will be delivered, at the request of any Securityholder,
to any such requesting Securityholder, which Schedule shall be
considered HTI Information as defined in Section 7.10.
"Sale" means a transaction or a series of related
transactions in which: (A) all or substantially all of HTI's
assets are sold to an Unrelated Acquiror; (B) HTI is merged or
consolidated with or into an Unrelated Acquiror; or (C) one or
more stockholders of HTI sell, transfer or otherwise convey to an
Unrelated Acquiror more than 50% of the total outstanding equity
interests (assuming conversion of all options, warrants,
debentures and other rights to acquire Shares) in HTI.
Protection Amounts shall be payable no later than ten (10)
business days following the receipt by HTI or the shareholders of
HTI of proceeds of the Sale or Public Offering; provided,
however, that to the extent Protection Amounts are based upon
proceeds that are deferred or contingent, the payment of such
Protection Amounts shall be deferred until the receipt of such
consideration.
If a Sale is structured as a transaction described in
clauses (B) or (C) of the above definition of "Sale", each
Securityholder hereby acknowledges and agrees that any
consideration otherwise payable to such Securityholder in
connection with such Sale shall be reduced by such
Securityholder's pro rata amount of any amounts payable to
Covered Securityholders pursuant to this Section 4.5 or
comparable amounts payable to holders of shares who are parties
to the Heat-N-Glo Securityholders' Agreement.
4.6 Adjustment of First Call Price. HTI or its Board of
Directors shall adjust the First Call Price or the Put Price, as
the case may be, as may be necessary to equitably reflect any
stock split, stock dividend or similar recapitalization or
reorganization of HTI (other than in connection with a business
combination, merger, sale of assets or similar transaction) that
results in a change in the number of issued and outstanding
shares of Common Stock of HTI in order to prevent any dilution or
enlargement of Securityholders' rights and obligations under this
Article IV upon exercise of any First Call Option or Second Call
Option.
ARTICLE V - SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF
Any person against whom enforcement of this Agreement
is sought hereby declares that it is impossible to measure in
money the damages that will accrue to a party hereto by reason of
a failure to perform any of the obligations under this Agreement,
including but not limited to the failure to transfer Securities
to HON or HTI, and the attempted Transfer of Securities to a
third party in contravention of the terms of this Agreement.
Therefore, if anyone shall institute any action or proceeding to
enforce the provisions hereof or to enjoin any Transfer in
contravention of the provisions hereof, any person against whom
such action or proceeding is brought hereby waives the claim or
defense therein that the person instituting such action or
proceeding has an adequate remedy at law, and such person shall
not urge in any such action or proceeding the claim or defense
that such remedy at law exists, and also waives any requirement
that the party instituting such action furnish a bond of any
type.
ARTICLE VI - CO-SALE PROVISIONS
6.1 Drag Along Rights.
(a) Applicability. In connection with a sale by HON
or issuance by HTI of more than fifty percent (50%) of the
outstanding Shares (assuming conversion of all options,
warrants, debentures and other rights to acquire shares) of
HTI (a "Majority Sale"), HON shall have the right to require
each Securityholder to transfer the portion of its Equity
Rights (as defined in Section 6.2) that represents (i) the
same percentage of the Shares held by such Securityholder on
a fully-diluted as converted basis as the Shares being
disposed of by HON represent of the Shares held by HON on a
fully-diluted basis; or, if applicable, (ii) the same
percentage of the Shares held by such Securityholder on a
fully diluted as converted basis as the shares being issued
by HTI represent to the total number of shares outstanding
before such issuance, calculated on a fully diluted as
converted basis. If HON exercises such right in accordance
with this Section 6.1(a), each Securityholder shall convert
his, her or its Equity Rights into Shares (to the extent a
sufficient number of such Equity Rights are not already so
converted) in an amount sufficient to satisfy such
Securityholder's obligations hereunder no later than
immediately prior to the consummation of such Majority Sale.
(b) Notice of Majority Sale. HON shall give each
Securityholder at least ten (10) days' prior written notice
of any Majority Sale as to which HON intends to exercise its
rights under this Section 6.1. If HON elects to exercise
its rights under this Section 6.1, each Securityholder shall
take such actions as may be reasonably required and
otherwise cooperate in good faith with HON in connection
with consummating the Majority Sale (including, without
limitation, the voting of any Shares or other voting capital
stock of HTI owned by such Securityholder or any affiliate
of such Securityholder to approve such Majority Sale). At
the closing of such Majority Sale, each Securityholder shall
deliver certificates for all Shares to be sold by such
Securityholder, duly endorsed for transfer, with the
signature guaranteed, to the purchaser against payment of
the appropriate purchase price.
6.2 Co-Sale Rights.
(a) Applicability. In the event HON proposes to
effect a Majority Sale, then at least ten (10) days prior to
the closing of such Majority Sale, HON shall make an offer
(the "Participation Offer") to each Securityholder to
include in the proposed Majority Sale a portion of each
Securityholder's Shares, Debenture Securities and Additional
Convertible Securities ("Equity Rights") which represents
the same percentage of the Shares held by such
Securityholder on a fully-diluted basis as the Shares being
sold by HON represent of the total number of Shares held by
HON; provided, that if the consideration to be received by
HON includes any securities, each Securityholder must
evidence to the reasonable satisfaction of HON that the
Securityholder meets applicable state and federal securities
law criteria in order to participate in such transfer.
(b) Terms of Participation Offer. The Participation
Offer shall describe the proposed Majority Sale and shall be
conditioned upon (i) the consummation of the transactions
contemplated in the Participation Offer with the transferee
named therein, (ii) the Securityholder's execution and
delivery of all agreements and other documents as HON is
required to execute and deliver in connection with such
Majority Sale, and (iii) converting its Equity Rights into
Shares (to the extent a sufficient number of such Debentures
are not already so converted) in an amount sufficient to
fulfill the Participation Offer no later than immediately
prior to the consummation of such Majority Sale. If any
Securityholder shall accept the Participation Offer, HON
shall reduce, to the extent necessary, the number of Shares
HON otherwise would have sold in the proposed Majority Sale
so as to permit each Securityholder who accepted the
Participation Offer to sell the number of Shares that it is
entitled to sell under this Section 6.2, and HON shall
Transfer, and each Securityholder who accepted the
Participation Offer shall Transfer, the number of Shares
specified in the Participation Offer to the proposed
transferee in accordance with the terms of such Transfer as
set forth in the Participation Offer.
6.3 Put and Call Inapplicable. The provisions of Articles
II and III shall not apply to any sale pursuant to this
Article VI.
6.4 Sale Other Than Majority Sales. In connection with any
Sale (other than a Majority Sale), each Securityholder shall vote
his or her Securities and take such actions as may be necessary
to consummate such sale.
6.5 Price and Terms. All Securities transferred by
Securityholders pursuant to this Article VI shall be sold at the
same price and terms and otherwise treated identically with the
Securities being sold by HON in all respects except as set forth
below. In the event of any Sale or Majority Sale (i) with
respect to indemnification obligations relating to or resulting
from any such Sale or Majority Sale, each such Securityholder
shall be liable for only (A) those indemnification obligations
relating to the business of HTI and its operating units and
divisions, and indemnification as to matters relating
individually to such Securityholder, and (B) that percentage of
the total indemnification obligations as is equal to the
percentage that the sale proceeds received by such Securityholder
bears to the overall consideration paid in such Sale or Majority
Sale, but in any event not to exceed the sales proceeds actually
received by such Securityholder, (ii) if the price per Security
paid in such Sale or Majority Sale, or the proceeds in any Sale
referred to in clause (A) of the definition of Sale, is less than
(x) the applicable Put Price, less (y) the amount of
indemnification required of a Securityholder (the "Adjusted Put
Price"), at the time of the such Sale or Majority Sale, HTI shall
pay the selling Securityholders an amount equal to the difference
between such price or proceeds and the Adjusted Put Price; and
(iii) in the case of a Sale or Majority Sale consummated before
the third anniversary of the Closing, if at the time such Sale or
Majority Sale is consummated HTI shall have met the EBITDA
criteria set forth in HTI's then-effective consolidated strategic
plan for the four fiscal quarters immediately preceding the
consummation of the Sale or Majority Sale or such shorter period
of combined operations as shall have elapsed since the Closing
(which strategic plan shall be consistent with the projected
financial statements set forth in the Bowles Hollowell
Conner/First Union Capital Markets Corp. Confidential Information
Memorandum dated September 1999, attached as Exhibit 6.5(i), and
the Hearth Technologies Inc. Strategic Plan 2000-2002, attached
as Exhibit 6.5(ii)), HTI shall pay each Securityholders an amount
equal to fifteen percent (15%) of the principal amount of
Debentures held by such Securityholders at the time the Sale or
Majority Sale is consummated.
ARTICLE VII - MISCELLANEOUS
7.1 Term. This Agreement shall commence on the date hereof
and shall continue until terminated upon the first to occur of
either (a) dissolution of HTI or (b) the voluntary agreement, in
writing, of all parties who are then bound by the terms hereof.
7.2 Notices. All notices given under the terms of this
Agreement shall be in writing and shall be deemed given when
delivered in person or sent by courier or U.S. registered or
certified mail, postage prepaid, addressed to the party to be
notified at (a) the principal office of HTI, in case of notices
to HTI, (b) the principal office of HON, in case of notices to
HON, and (c) the address of the Securityholder set forth in the
records of HTI (or such other address as is notified to HTI in
accordance with this terms of this Section 7.2) or the address of
an attorney-in-fact of the Securityholder appointed pursuant to
Section 7.8 hereof, in the case of notices to any Securityholder.
7.3 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective
heirs, personal representatives, successors and assigns, and such
other persons who may from time to time become owners of Shares.
7.4 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Iowa.
7.5 Amendments. No amendments or additions to this
Agreement shall be binding unless in writing and signed by all
the parties.
7.6 Entire Agreement. This Agreement contains the entire
Agreement of the parties and supersedes all other agreements,
oral or written between the parties, with respect to the subject
matter hereof, except for any other agreements signed
contemporaneously herewith.
7.7 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original, and all of which together will constitute one and the
same instrument.
7.8 Power of Attorney. (a) Each Securityholder who is an
Affiliate of an Allied Seller, by executing this Agreement or a
counterpart hereof, does hereby irrevocably constitute and
appoint Skoronski, with full power of substitution, as such
Securityholder's true and lawful attorney-in-fact, in his, her or
its name, place and stead, to execute, deliver and receive any
notices or any other instruments and documents contemplated by or
relating to this Agreement.
(b) Each Securityholder who is an Affiliate of an AFC
Seller, by executing this Agreement or a counterpart hereof, does
hereby irrevocably constitute and appoint, with full power of
substitution, Mercer as such Securityholder's true and lawful
attorney-in-fact, in his, her or its name, place and stead, to
execute, deliver and receive any notices or any other instruments
and documents contemplated by or relating to this Agreement.
7.9 Attorneys' Fees. In the event of any dispute among the
parties hereto arising out of or related to this Agreement
involving mediation, arbitration and/or litigation, HON, HTI and
the Securityholders agree that, except as may be otherwise agreed
by the parties or ordered by any mediator, arbitrator or court of
competent jurisdiction, the party or parties against whom a final
determination is made will reimburse the other party or parties
for all fees, costs and expenses of counsel incurred by such
party or parties with respect to such mediation, arbitration
and/or litigation.
7.10 HTI Information.
(a) Until the consummation of a Public Offering on or
after the third anniversary of this Agreement, HTI shall
mail to each Securityholder, at such Securityholder's
address as it appears on the records of HTI, (i) on a
quarterly basis, a copy of the EBITDA Report for the four
preceding fiscal quarters and (ii) on a monthly basis until
the occurrence of a Public Offering a copy of the regular
monthly financial report provided to HON by HTI
(collectively, "HTI Information"); provided, however, that
neither HON nor HTI shall have any liability with respect to
HTI Information, except to the extent HTI Information is
included in a Relevant EBITDA Report, and then only to the
extent provided in Articles III and IV.
(b) Each Securityholder agrees that he, she or it will
keep all HTI Information in strict confidence, and will
never directly or indirectly make known, divulge, reveal,
furnish, make available, or use any HTI Information (except
in the course of any regular authorized duties on behalf of
HTI such Securityholder may have). Each Securityholder
agrees that the obligations of confidentiality hereunder
shall survive termination of his, her or its status as a
Securityholder, until and unless any such HTI Information
shall have become, through no fault of such Securityholders,
generally known to the public or such Securityholder is
required by law to make disclosure (after giving HTI notice
and an opportunity to contest such requirement). Each
Securityholder's obligations under this Section 7.10 are in
addition to, and not in limitation of or preemption of, all
other obligations of confidentiality that such
Securityholder may have to HTI under general legal or
equitable principles.
(c) Except in the ordinary course of HTI's business,
no Securityholder shall make or cause to be made, any
copies, pictures, duplicates, facsimiles or other
reproductions or recordings or any abstracts or summaries
including or reflecting HTI Information. All such documents
and other property furnished to any Securityholder by HTI or
otherwise acquired or developed by HTI shall at all times be
the property of HTI. Upon termination of any
Securityholder's status as a Securityholder, such
Securityholder will return to HTI any HTI Information that
is in the possession, custody or control of such
Securityholder.
(d) Each Securityholder acknowledges and agrees that a
violation of the foregoing provisions of this Section 7.10
that results in material detriment to HTI would cause
irreparable harm to HTI, and that HTI's remedy at law for
any such violation would be inadequate. In recognition of
the foregoing, each Securityholder agrees that, in addition
to any other relief afforded by law or this Agreement,
including damages sustained by a breach of this Agreement,
and without any necessity or proof of actual damages, HTI
shall have the right to enforce this Agreement by specific
remedies, which shall include, among other things, temporary
and permanent injunctions, it being the understanding of the
undersigned parties hereto that damages, the forfeitures
described above and injunctions shall all be proper modes of
relief and are not to be considered as alternative remedies.
(e) Each Securityholder hereby acknowledges that such
Securityholder is aware HON is a public company, HTI is a
material subsidiary of HON, and that applicable securities
laws may prohibit any Person who has material, non-public
information from purchasing or selling securities of the
company to which such information relates or from
communicating the information to any other Person, and that
any such purchases or sales of a Securityholder when in
possession of material non-public HTI Information may
constitute a violation of federal securities laws.
(f) For the purposes of this Section 7.10, "HTI" shall
include its subsidiaries as they may exist from time to
time.
7.11 CFO Certificate. Upon the occurrence of any
adjustment of the First Call Price, the Equity Value or the Put
Price pursuant to Section 3.5 or 4.6, HTI at its expense promptly
shall furnish to each Securityholder a certificate signed by the
Chief Financial Officer of HTI disclosing the First Call Price,
Equity Value or Put Price, as the case may be, as adjusted, and
the basis upon which such adjustment was made.
7.12 Anniversary Date. In any year that is not a leap
year, the anniversary date of this Agreement shall be February
28th of such year.
IN WITNESS WHEREOF, the parties have executed this
Securityholders' Agreement on the date first above written.
HON INDUSTRIES INC.
By: /s/ James I. Johnson
James I. Johnson
Vice President, General Counsel
and Secretary
HEARTH TECHNOLOGIES INC.
By: /s/ James I. Johnson
James I. Johnson
Vice President and Secretary
SECURITYHOLDERS:
/s/ Ron F. Skoronski
Ron F. Skornonski, individually
/s/ Kirk R. Sorensen
Kirk R. Sorensen, individually
MADISON FIRE PLACE, INC.
By: /s/ Ron F. Skoronski
Ron F. Skoronski, President
FIREPLACE & SPA, INC.
By: /s/ Ron F. Skoronski
Ron F. Skoronski, Chairman
THE MINOCQUA FIREPLACE COMPANY
By: /s/ Ron F. Skoronski
Ron F. Skoronski, President
AMERICAN FIREPLACE COMPANY
By: /s/ Philip T. Mercer
Philip T. Mercer, President
HEARTH & HOME, INC.
By: /s/ James E. Setree
James E. Setree, President
/s/ Philip T. Mercer
Philip T. Mercer, individually
/s/ Amy L. Doody
Amy L. Doody, individually
/s/ Michael D. Mercer
Michael D. Mercer, individually
/s/ Richard A. Grove, Jr.
Richard A. Grove, Jr., individually
/s/ David E. Scott
David E. Scott, individually
/s/ James E. Setree
James E. Setree, individually
<PAGE>
Exhibit 3.2 -- Consolidated EBITDA
"Consolidated EBITDA" shall mean, for any period,
Consolidated Operating Income (as defined below) (i) increased
by, to the extent deducted in arriving at Consolidated Operating
Income, the sum of (A) consolidated depreciation and amortization
expense, (B) non-recurring expense, (C) extraordinary losses (net
of extraordinary gains), and (D) extraordinary professional and
other similar sale expense (other than amortization) arising from
the transactions contemplated by the Purchase Agreements, (ii)
further increased by amortization expense associated with
goodwill that exists on HTI's balance sheet immediately prior to
the consummation of the Acquisitions, (iii) minus any non-
recurring income that is recognized during the Measurement Period
and is included in Consolidated Operating Income, all as
determined by HON (the "EBITDA Report"). "Consolidated Operating
Income" shall mean, for any period, the respective dollar amount
for the account titled "Operating Income" in HTI's internal
consolidated statement of income, calculated on a basis
consistent with the statement of income for the 11-month period
ended November 1999 of HTI. If, during the Measurement Period,
HTI, or any HTI subsidiary, (i) completes any acquisition
accounted for under the purchase method of accounting, or any
Disposition, then Consolidated EBITDA shall be adjusted to
reflect the consolidated EBITDA HTI would have generated had such
acquisition or Disposition been consummated immediately prior to
the Measurement Period, or (ii) operates the Business, the
Acquired Assets, the Allied Assets or any other operating
business unit of HTI other than as an entity or operating unit
consolidated with HTI, then Consolidated EBITDA shall be adjusted
to reflect such operations as if they had been included in HTI's
internal consolidated financial statements.
EXHIBIT 99.1
HON INDUSTRIES P.O. Box 1109, Muscatine, Iowa 52761-0071
News Release
FOR INFORMATION CONTACT: David Stuebe, Chief Financial Officer
(319) 264-7400
Beth Coronelli, Investor Relations
Manager (319) 264-7992
HON INDUSTRIES ACQUIRES
AMERICAN FIREPLACE COMPANY AND ALLIED GROUP
Muscatine, IA (March 1, 2000) - HON INDUSTRIES Inc. (NYSE: HNI)
today announced that its Hearth Technologies Inc. subsidiary has
finalized the acquisition of two leading hearth products distri-
butors, American Fireplace Company (AFC) and the Allied Group
(Allied).
AFC and Allied sell, install, and service a broad range of gas-
and wood-burning fireplaces as well as fireplace mantels, surrounds,
facings and other accessories. Together, AFC and Allied have a
leading presence in all three of the primary distribution channels
for hearth products: builder, retail and dealer. AFC and Allied,
with combined 1999 sales of nearly $200 million, will be joined to
form Hearth Services Inc., a subsidiary of Hearth Technologies Inc.
"This strategic expansion into the service component of the hearth
products business allows us to better serve our customers," said
Jack D. Michaels, HON INDUSTRIES' Chairman, President and CEO.
"With the formation of our new hearth services division, we offer
a strong combination of innovative products, brand names,
technological resources, and manufacturing and distribution
expertise to attract new customers and continue to strengthen our
leadership position in this profitable industry."
HON INDUSTRIES Inc. is the nation's largest producer of value-
oriented office furniture and the third largest manufacturer and
distributor of office furniture in North American sales. It is also
the nation's largest manufacturer and marketer of gas- and wood-
burning fireplaces under its Hearth Technologies operating company.
HON INDUSTRIES' common stock is traded on the New York Stock Exchange
under the symbol HNI.
###
This release contains forward-looking statements relating to
financial performance. Forward-looking statements are not
guarantees of future performance and involve risks and uncertain-
ties, including those relating to the introduction and customer
acceptance of new products, achieving financial benefits from
productivity improvements, the company's ability to attract and
retain the necessary workforce to meet sales demand, and the level
of sales by the company's distributors and dealers. For a more
detailed presentation of risks and uncertainties, see the company's
filings with the Securities and Exchange Commission, including the
company's annual and quarterly reports on forms 10-K and 10-Q.
