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): September 1, 1998
KNAPE & VOGT MANUFACTURING COMPANY
(Exact name of Registrant as specified in its charter)
Michigan 2-18868 380722920
(State or other Jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
2700 Oak Industrial Drive, Grand Rapids, Michigan 49505
(Address of Principal Executive Offices) (Zip Code)
(616) 459-3311
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets.
Effective September 1, 1998, the Registrant sold substantially all the
assets of its wholly-owned subsidiary, The Hirsh Company, to Steelworks, Inc.,
an Iowa corporation. Effective September 4, 1998, the Registrant completed the
sale of the stock of The Hirsh Company, which retained certain shelf
manufacturing equipment, to Edgebanding Line Acquisition Company, a
Michigan-based manufacturer. The Hirsh Company manufactured free-standing
shelving systems, workshop items and other storage products.
The disposition was effected pursuant to an Asset Purchase Agreement dated
August 31, 1998, among Steelworks, Inc., The Hirsh Company and Knape & Vogt
Manufacturing Company. The transfer of assets pursuant to the Asset Purchase
Agreement was effective September 1, 1998. The transfer of the sale of the stock
of The Hirsh Company was effective September 4, 1998.
Pursuant to the Asset Purchase Agreement, Steelworks, Inc. paid The Hirsh
Company approximately $17.0 million in cash and assumed liabilities of The Hirsh
Company totaling approximately $1.0 million, in each case subject to certain
post-closing adjustments pursuant to the Asset Purchase Agreement. Of the
approximately $17.0 million, a total of $3.0 million was allocated to a
Non-compete Agreement between the Registrant and Steelworks, Inc. Following the
sale of substantially all of the assets of The Hirsh Company to Steelworks,
Inc., the Registrant sold the stock of The Hirsh Company to Edgebanding Line
Acquisition Company for approximately $1.7 million in cash.
The terms of the Asset Purchase Agreement and the establishment of the
purchase price were arrived at as a result of arm's length negotiations between
the management of the Registrant and the management of Steelworks, Inc. There
are no material relationships between the Registrant and Steelworks, Inc., or
any of their respective affiliates, directors, officers or associates of any
such directors or officers.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Condensed Consolidated Financial Statements.
The following pro forma condensed consolidated financial statements of
Knape & Vogt Manufacturing Company are filed as part of this report:
(i) Introduction to Pro Forma Condensed Consolidated Financial
Statements;
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(ii) Pro Forma Condensed Consolidated Balance Sheet as of June 30,
1998;
(iii) Pro Forma Condensed Consolidated Income Statement for the fiscal
year ended June 30, 1998; and
(iv) Note to the Pro Forma Condensed Consolidated Financial
Statements.
INTRODUCTION TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated balance sheet as of June 30,
1998 and the pro forma condensed consolidated statement of income for the fiscal
year ended June 30, 1998 give effect to the disposition of The Hirsh Company
based on the historical financial statements of Knape & Vogt Manufacturing
Company and its subsidiaries under the assumptions and adjustments set forth
below and in the accompanying note to the pro forma financial statements.
Effective September 1, 1998, the Registrant sold substantially all the
assets of its wholly-owned subsidiary, The Hirsh Company, to Steelworks, Inc.,
an Iowa corporation. Effective September 4, 1998, the Registrant completed the
sale of the stock of The Hirsh Company, which retained certain shelf
manufacturing equipment, to a Michigan-based manufacturer. The Hirsh Company
manufactured free-standing shelving systems, workshop items and other storage
products.
The disposition was effected pursuant to an Asset Purchase Agreement dated
August 31, 1998, among Steelworks, Inc., The Hirsh Company and Knape & Vogt
Manufacturing Company. The transfer of assets pursuant to the Asset Purchase
Agreement was effective September 1, 1998. The transfer of the sale of the stock
of The Hirsh Company was effective September 4, 1998.
The pro forma condensed consolidated financial statements have been
prepared by the management of Knape & Vogt Manufacturing Company and may not be
indicative of the results that actually would have occurred if the disposition
of The Hirsh Company had been in effect on the dates indicated or which may be
obtained in the future.
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KNAPE & VOGT MANUFACTURING COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
<TABLE>
(B)
Adjustments
Knape & Vogt (A) and
Manufacturing The Hirsh Intercompany Pro Forma
Company Company Eliminations Consolidated
ASSETS
Current:
<S> <C> <C> <C> <C>
Cash and Equivalents $ 3,057,158 ($6,400) $6,204,519 $ 9,255,277
Accounts Receivable - Net 25,677,043 (5,120,728) 0 20,556,315
Income Taxes Receivable 176,204 0 0 176,204
Inventories 12,808,532 (489,000) 0 12,319,532
Prepaid Expenses 2,706,490 0 0 2,706,490
Net Current Assets of
Disc. Op. 0 0 0 0
Assets Held for Sale 18,648,000 (18,648,000) 0 0
------------- -------------- ---------- -----------
Total Current Assets 63,073,427 (24,264,128) 6,204,519 45,013,818
------------- -------------- ---------- -----------
Property & Equipment:
Land and Improvements 1,804,948 0 0 1,804,948
Buildings 14,353,886 0 0 14,353,886
Machinery and Equipment 44,743,067 0 2,538,386 47,281,453
------------- -------------- ---------- -----------
Total 60,901,901 0 2,538,386 63,440,287
Less Accumulated Deprec. 24,247,181 0 2,538,386 26,785,567
------------- -------------- ---------- -----------
Net Property & Equipment: 36,654,720 0 0 36,654,720
------------- -------------- ---------- -----------
Other Assets:
Cash Value of Life Insurance 434,639 0 0 434,639
Goodwill 593,277 0 0 593,277
Deferred Merchandiser Costs 940,902 0 0 940,902
Deferred Packaging Costs 140,567 0 0 140,567
Deferred Reorganization Costs 0 0 0 0
Prepaid Pension Cost 2,195,555 0 0 2,195,555
-------------- --------------- ----------- -----------
Total Other Assets 4,304,940 0 0 4,304,940
-------------- --------------- ----------- -----------
$104,033,087 ($24,264,128) $6,204,519 $85,973,478
============== =============== ========== ===========
</TABLE>
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<TABLE>
LIABILITIES & STOCK-
HOLDERS' EQUITY
<S> <C> <C> <C> <C>
Current Liabilities:
Accounts Payable $17,765,610 ($7,031,912) $0 $10,733,698
Accrued Income Taxes 847,306 (1,000,000) 0 (152,694)
Accrued Other Taxes 860,928 (37,540) 0 823,388
Accrued Salaries and Wages 3,067,186 (306,729) 0 2,760,457
Accrued Restructuring 828,932 0 0 828,932
Miscellaneous Accruals 1,427,298 16,572 0 1,443,870
-------------- -------------- ----------- -----------
Total Current Liabilities 24,797,260 (8,359,609) 0 16,437,651
Deferred Lease Agreement 0 0 0 0
Executive Retirement Plan 1,365,231 0 0 1,365,231
Postretirement Benefit Liability 471,922 0 0 471,922
Deferred Income Taxes 5,942,000 0 0 5,942,000
Long-Term Debt 9,700,000 (5,087,607) (4,612,393) 0
-------------- -------------- ------------ ------------
Total Liabilities 42,276,413 (13,447,216) (4,612,393) 24,216,804
-------------- -------------- ------------ ------------
Stockholders' Equity:
Common Stock 11,871,250 (4,573,165) 4,573,165 11,871,250
Additional Paid-In Capital 33,724,990 (29,240,701) 29,240,701 33,724,990
Foreign Currency Translation 0 0 0 0
Retained Earnings 16,160,434 22,996,954 (22,996,954) 16,160,434
-------------- -------------- ------------ -----------
Total Stockholders' Equity 61,756,674 (10,816,912) 10,816,912 61,756,674
-------------- -------------- ------------ -----------
$104,033,087 ($24,264,128) $6,204,519 $85,973,478
============== ============== ============ ===========
</TABLE>
(A) Represents the financial statements of The Hirsh Company.
(B) Equity and advance balances included in the financial statements of The
Hirsh Company (column A) must be added back to the consolidated totals since the
consolidated totals already reflect the elimination of these balances. This
column includes the net cash received from the sale of The Hirsh Company.
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KNAPE & VOGT MANUFACTURING COMPANY
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE FISCAL YEAR ENDED JUNE 30, 1998
<TABLE>
(B)
Adjustments
Knape & Vogt (A) and
Manufacturing The Hirsh Intercompany Pro Forma
Company Company Eliminations Consolidated
<S> <C> <C> <C> <C>
Gross Sales $192,087,781 ($45,811,734) $9,217,379 $155,493,426
Less Disc and Frt 10,455,211 (959,956) 0 9,495,255
------------- -------------- ------------ --------------
Net Sales 181,632,570 (44,851,778) 9,217,379 145,998,171
Cost of Sales 139,332,670 (38,927,575) 7,937,272 108,342,367
------------- -------------- ------------ --------------
Gross Profit 42,299,900 (5,924,203) 1,280,107 37,655,804
------------- -------------- ------------ --------------
Selling and Shipping 22,594,546 (4,278,326) 9,650 18,325,870
Admin and Gen'l 6,557,842 (660,062) 21,900 5,919,680
Restructuring 15,792,276 (11,800,000) (2,000) 3,990,276
------------- -------------- ------------ --------------
Total Expenses 44,944,664 (16,738,388) 29,550 28,235,826
------------- -------------- ------------ --------------
Operating Income (2,644,764) 10,814,185 1,250,557 9,419,978
------------- -------------- ------------ --------------
Interest 1,224,394 (2,280,303) 2,098,605 1,042,696
Other, net 569,024 24,418 (24,418) 569,024
------------- -------------- ------------ --------------
Total Other Expenses 1,793,418 (2,255,885) 2,074,187 1,611,720
------------- -------------- ------------ --------------
Inc. From Cont. Ops.
Before Income Taxes (4,438,182) 13,070,070 (823,630) 7,808,258
Income Taxes - Cont. Ops. 3,931,000 (718,000) (280,000) 2,933,000
------------- -------------- ------------ --------------
Income From Cont. Ops. (8,369,182) 13,788,070 (543,630) 4,875,258
Income (Loss) from
Disc. Ops., net of inc. taxes (1,368,278) 0 0 (1,368,278)
------------- ------------- ------------ --------------
Net Income ($9,737,460) $13,788,070 ($543,630) $3,506,980
============= -------------- ============ ==============
Basic Share O/S 5,920,380 5,920,380
Diluted Shares O/S 5,954,713 5,954,713
Basic EPS ($1.64) $0.59
Diluted EPS ($1.64) $0.59
</TABLE>
(A) Represents the financial statements of The Hirsh Company.
(B) Intercompany sales/expenses included in the financial statements of the
Hirsh Company(column A)must be added back to the consolidated totals since the
consolidated totals already reflect the elimination of these balances.
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NOTE TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) In 1998, Knape & Vogt Manufacturing Company recognized an $11,800,000 (pre
tax) impairment of assets charge related to the sale of The Hirsh Company. In
connection with the sale, Knape & Vogt Manufacturing Company recognized an
additional tax cost of $1,000,000, resulting in a total loss related to the sale
of The Hirsh Company of $12,800,000. The impairment of assets charge has been
eliminated from income (loss) from continuing operations for 1998. The net loss
from operations and the assets and liabilities of The Hirsh Company have been
eliminated from the pro forma presentation as if the sale of The Hirsh Company
had occurred as of the beginning of the period.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
KNAPE & VOGT MANUFACTURING COMPANY
By /s/ Jack D. Poindexter
Jack D. Poindexter
Chief Financial Officer
Date: September 14, 1998
::ODMA\PCDOCS\GRR\201121\3
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EXHIBIT INDEX
Exhibit 2.1 - Asset Purchase Agreement dated as of August 31, 1998, among
Steelworks, Inc., The Hirsh Company and Knape & Vogt
Manufacturing Company.
Exhibit 2.2 - Noncompetition Agreement dated as of September 1, 1998 by
and between Steelworks, Inc. and Knape & Vogt Manufacturing
Company.
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
DATED AS OF
AUGUST 31, 1998
AMONG
STEELWORKS, INC.,
THE HIRSCH COMPANY
AND
KNAPE & VOGT MANUFACTURING COMPANY
<PAGE>
TABLE OF CONTENTS
Section Page
Section 1. Definitions..................................................2
Section 2. Transaction..................................................9
2.1 Purchase and Sale of Purchased Assets........................9
2.2 Excluded Assets.............................................10
2.3 Assumption of Liabilities...................................12
2.4 Excluded Liabilities........................................12
2.5 Purchase Price..............................................14
2.6 Allocation of Purchase Price................................16
Section 3. Closing and Closing Date....................................16
3.1 Closing.....................................................16
3.2 Deliveries at the Closing...................................16
Section 4. Representations and Warranties of KV and the Seller.........17
4.1 Organization of KV and the Seller...........................17
4.2 Authorization of Transaction................................17
4.3 No Conflicts; Consents......................................17
4.4 Subsidiaries................................................18
4.5 Financial Statements........................................18
4.6 Undisclosed Liabilities.....................................18
4.7 Events Subsequent to Fiscal Year End........................19
4.8 Inventories.................................................20
4.9 Contracts...................................................20
4.10 Machinery and Equipment.....................................21
4.11 Real Property...............................................22
4.12 Title and Related Matters...................................23
4.13 Intellectual Property.......................................23
4.14 Litigation..................................................25
4.15 Employee Benefits...........................................25
4.16 Labor Relations.............................................26
4.17 Environmental Matters.......................................27
4.18 Legal Compliance............................................27
4.19 Permits.....................................................27
4.20 Affiliate Agreements........................................27
4.21 Product Warranties..........................................28
Section 5. Representations and Warranties of the Purchaser.............28
5.1 Organization of the Purchaser...............................28
5.2 Authorization of Transaction................................28
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5.3 Noncontravention; Consents..................................28
5.4 Litigation..................................................28
Section 6. Closing Requirements........................................28
6.1 Obligations of the Seller...................................29
6.2 Obligations of the Purchaser................................29
6.3 Assignment of Contracts, Rights, Etc........................30
Section 7. PostClosing Covenants.......................................30
7.1 General.....................................................30
7.2 Agreements Regarding Tax Matters............................30
7.3 Seller's Confidentiality Obligations........................31
7.4 Covenant Not To Compete.....................................31
7.5 Transition Services.........................................32
7.6 Right of First Refusal......................................33
7.7 License of Marks............................................33
7.8 License of KV Marks.........................................35
7.9 PostClosing Remittances.....................................37
7.10 Product Warranties..........................................38
7.11 Access to Records after Closing.............................38
7.12 Guarantees..................................................39
7.13 Bailment of Properties......................................39
7.14 Cooperative Advertising and Volume Rebates..................40
7.15 Transferred Employees.......................................40
7.16 Environmental Matters.......................................41
7.17 Shared Maintenance..........................................41
Section 8. Remedies for Breaches of this Agreement.....................41
8.1 Survival....................................................41
8.2 Indemnification Provisions for Benefit of the Purchaser.....42
8.3 Indemnification Provisions for Benefit of the
Seller and KV.............................................43
8.4 Procedures for Claims Between the Parties...................44
8.5 Matters Involving Third Parties.............................44
8.6 Limitations.................................................45
Section 9. Miscellaneous...............................................45
9.1 Press Releases and Announcements............................45
9.2 Consent to Amendments.......................................45
9.3 Successors and Assigns......................................45
9.4 Severability................................................46
9.5 Counterparts................................................46
9.6 Descriptive Headings........................................46
9.7 Notices.....................................................46
9.8 No ThirdParty Beneficiaries.................................47
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9.9 Entire Agreement............................................47
9.10 Construction................................................47
9.11 Incorporation of Exhibits and Schedules.....................47
9.12 Expenses....................................................47
9.13 Bulk Transfer Laws..........................................48
9.14 Governing Law; Jurisdiction.................................48
9.15 Indemnification of Brokerage Fees, Etc......................48
9.16 Disclaimer of Other Representations and Warranties..........48
9.17 Computation of Days; Holidays...............................49
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of August 31, 1998 between SteelWorks,
Inc., an Iowa corporation (the "Purchaser"), The Hirsh Company, an Illinois
corporation (the "Seller"), and Knape & Vogt Manufacturing Company, a Michigan
corporation ("KV").
This Agreement contemplates a transaction in which the Purchaser will
purchase for cash specified assets, and will assume specified liabilities, of
the Seller.
In consideration of the mutual agreements contained herein and for other
good and valuable consideration, the value, receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending to be legally bound agree as
follows:
Section 1. Definitions. For purposes of this Agreement, the following terms
have the meanings set forth below:
"Accounting Firm" means PricewaterhouseCoopers LLP or any successor
organization or such other firm of independent certified public accountants who
shall be selected by mutual agreement between KV and the Purchaser.
"Adjustment Inventory Amount" means the book value of raw materials, work
in process, and finished goods inventories of the Products known as Shelf Help
and Iron Horse (including Lumber Lok) as of the Closing Date, determined in
accordance with GAAP, net of a reserve for obsolescence determined in accordance
with GAAP for any quantities of such finished goods that, as of the Closing
Date, exceed the quantity sold during the three-months ended June 30, 1998.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"Agreement" means this Asset Purchase Agreement, as the same may be amended
from time to time in accordance with the terms hereof.
"Assigned Contracts" has the meaning set forth in Section 2.1(b).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Business" means the business and operations of the Seller involving the
manufacture, distribution, and sale of products known as Shelf Help, Iron Horse,
Lumber Lok, and Space Solutions, but does not include the business and
operations of KV involving the manufacture, distribution, and sale of products
known as Shelf Help or Space Solutions that are manufactured at any location
other than the Premises.
<PAGE>
"Claim" has the meaning set forth in Section 8.4.
"Claim Notice" has the meaning set forth in Section 8.4.
"Claimant" has the meaning set forth in Section 8.4.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" means the date on which the Closing actually takes place.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collective Bargaining Agreement" means the collective bargaining agreement
to which the Seller is a party which is listed on Schedule 4.16 of the
Disclosure Schedules.
"Confidential Information" means any proprietary information, in whatever
form or medium, concerning the operations or affairs of the Business; provided
that Confidential Information shall not include any information that was
publicly known prior to the Closing Date (other than by an act or omission of
the Purchaser or its Affiliates) or becomes publicly known after the Closing
Date (other than by an act or omission of the Seller or its Affiliates).
"Confidentiality Agreements" means all confidentiality agreements entered
into for the benefit of the Seller in connection with the possible sale of the
Business to Persons other than the Purchaser.
"Contract" means any legally binding contract, agreement, or understanding,
whether written or oral.
"Disclosure Schedules" means, collectively, the various Schedules referred
to in this Agreement.
"Dispute Notice" has the meaning set forth in Section 2.5(e).
"Employee Benefit Plan" means an Employee Pension Benefit Plan or an
Employee Welfare Benefit Plan, where no distinction is required by the context
in which the term is used.
"Employee Pension Benefit Plan" has the meaning set forth in Section 3(2)
of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in Section 3(1)
of ERISA.
"Environmental Claim" means any accusation, allegation, notice of
violation, claim, demand, abatement, order, directive, judgment, lien, or other
assessment by any Person (including, without limitation, the Purchaser and the
owners of the Premises) for personal injury, sickness or
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death, damage to property, nuisance, pollution, contamination, or other damage
or adverse effects on the environment, or for remedial action, fines, penalties
or restrictions, in any case resulting from or based upon: (a) the occurrence on
or before the Closing Date of any Release of any Hazardous Materials at, in, by,
from, or related to the Facilities; (b) if the Purchaser vacates the Premises on
or before August 31, 2000, the occurrence of any Release of any Hazardous
Materials after the Closing Date at, in, by, from, or related to the Facilities
attributable to any violation of any Environmental Law or Permit or the use,
handling, transfer, transportation, storage, or disposal of any Hazardous
Materials on or before the Closing Date; (c) if the Purchaser does not vacate
the Premises on or before August 31, 2000, the occurrence of any Release of any
Hazardous Materials after the Closing Date and on or before August 31, 2000, at,
in, by, from, or related to the Facilities attributable to any violation of any
Environmental Law or Permit or the use, handling, transfer, transportation,
storage, or disposal of any Hazardous Materials on or before the Closing Date;
(d) if the Purchaser vacates the Premises on or before August 31, 2000, the
occurrence of any Release of any Hazardous Materials after the Closing Date at,
in, by, from, or related to the Facilities attributable to any condition in
existence at the Facilities on or before the Closing Date and arising from the
use, handling, transfer, transportation, storage, or disposal of any Hazardous
Materials after the Closing Date through no action of the Purchaser; (e) if the
Purchaser does not vacate the Premises on or before August 31, 2000, the
occurrence of any Release of any Hazardous Materials after the Closing Date and
on or before August 31, 2000, at, in, by, from, or related to the Facilities
attributable to any condition in existence at the Facilities on or before the
Closing Date and arising from the use, handling, transfer, transportation,
storage, or disposal of any Hazardous Materials after the Closing Date through
no action of the Purchaser; (f) the use, handling, transfer, transportation,
storage, or disposal of any Hazardous Materials in connection with the operation
of the Facilities on or before the Closing Date; or (g) the violation or alleged
violation of any Environmental Law or Permit attributable to any activity or
condition at, on, or under the Facilities on or before the Closing Date by KV,
the Seller, the owners of the Premises, or their respective predecessors.
"Environmental Law" means any Law existing at any time with respect to any
Hazardous Materials, drinking water, groundwater, wetlands, landfills, open
dumps, storage tanks, underground storage tanks, solid waste, waste water, storm
water run-off, waste emissions or wells. Without limiting the generality of the
foregoing, the term will encompass each of the following statutes and the
regulations promulgated thereunder (a) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (codified in scattered sections of 26
U.S.C., 33 U.S.C., 42 U.S.C. and 42 U.S.C. ss. 9601 et seq.), (b) the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. ss. 6901 et seq.), (c) the
Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), (d) the
Toxic Substances Control Act (15 U.S.C. ss. 2061 et seq.), (e) the Clean Water
Act (33 U.S.C. ss. 7401 et seq.), (f) the Clean Air Act (42 U.S.C. ss. 7401 et
seq.), (g) the Safe Drinking Water Act (21 U.S.C. ss. 349); 42 U.S.C. ss. 201
and ss. 300f et seq.), (h) the National Environmental Policy Act of 1969 (42
U.S.C. ss. 4321), (i) the Superfund Amendment and Reauthorization Act of 1986
(codified in scattered sections of 10 U.S.C., 29 U.S.C., 33 U.S.C. and 42
U.S.C.), and (j) Title III of the Superfund Amendment and Reauthorization Act
(40 U.S.C. ss. 1101 et seq.).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.4.
"Facilities" means the Premises and any other real property owned, leased,
or used by the Business at any time prior to the Closing Date.
"Financial Statements" has the meaning set forth in Section 4.5(a).
"GAAP" means United States generally accepted accounting principles, as in
effect as of the date of this Agreement, applied by the Seller on a basis
consistent with its prior practices.
"Governmental Entity" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Guaranty" means the Guaranty dated November 29, 1993, between KV and the
landlord under the Lease.
"Hazardous Materials" means each and every element, compound, chemical
mixture, contaminant, pollutant, material, waste or other substance which is
defined, determined or identified as hazardous or toxic under any Environmental
Law or the Release of which is prohibited under any Environmental Law,
including, without limiting the generality of the foregoing, (a) "hazardous
substances" as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Superfund Amendment and Reauthorization Act of
1986, or Title III of the Superfund Amendment and Reauthorization Act, each as
amended, and regulations promulgated thereunder, (b) "hazardous waste" as
defined in the Resource Conservation and Recovery Act of 1976, as amended, and
regulations promulgated thereunder, (c) "hazardous materials" as defined in the
Hazardous Materials Transportation Act, as amended, and regulations promulgated
thereunder, (d) "chemical substance or mixture" as defined in the Toxic
Substances Control Act, as amended, and regulation promulgated thereunder, and
(e) petroleum products and materials.
"Indemnifying Party" has the meaning set forth in Section 8.4.
"Intellectual Property" has the meaning set forth in Section 2.1(f).
"Inventory Certification" has the meaning set forth in Section 2.5(e).
"IRS" means the Internal Revenue Service of the Department of the Treasury.
"Inventories" has the meaning set forth in Section 2.1(a).
"Knowledge of the Seller" or "to the Seller's knowledge" or any similar
phrase means the actual knowledge of any one or more of the officers of the
Seller or KV, after due inquiry of the
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employees of KV or the Seller having primary responsibility for such matters in
the course of their employment with KV or the Seller if and to the extent such
officer is not the employee with primary responsibility for such matters and
after due examination of relevant records by such officers and other employees
having such primary responsibility.
"KV" has the meaning set forth in the Preamble to this Agreement.
"Law" means any constitutional provision, statute, law, rule or regulation
of any Governmental Entity.
"Lease" means the real estate lease to which the Seller is a party which is
listed on Schedule 4.11 of the Disclosure Schedules.
"Lien" means any mortgage, pledge, security interest, charge, claim or
other encumbrance, other than (a) mechanics', materialmen's and similar liens
with respect to amounts not yet due and payable, (b) liens for Taxes not yet due
and payable, and (c) liens and encumbrances associated with the Assumed
Liabilities.
"Losses" has the meaning set forth in Section 8.2(a).
"Machinery and Equipment" has the meaning set forth in Section 2.1(c).
"Marks" means unregistered marks SHELF HELP, SPACE SOLUTIONS, HIRSH, IRON
HORSE and LUMBER LOK and registered marks HIRSH and Design (U.S. Reg. Nos.
1,255,344; 1,305, 924; 522,311; 1,288,628); HIRSH (Stylized) (U.S. Reg. Nos.
1,631,294; 1,639,777; 1,652,430); IRON HORSE and Design (U.S. Reg. No.
1,141,990); and IRON HORSE WORK SYSTEMS BY HIRSH (U.S. Reg. No. 1,818,555;
Canadian App. No. 731,873).
"Material Adverse Effect" means a material adverse effect on the financial
condition (including, but not limited to, assets, liabilities, sales, expenses,
income, and cash flow) or business (including, but not limited to, operations)
of the Business or the use, condition, value or marketability of the Purchased
Assets taken as a whole or the obligations under any of the Assumed Liabilities;
provided that the effects of any events, circumstances or conditions resulting
from changes, developments or circumstances in worldwide or national conditions
(political, economic, regulatory or otherwise) that adversely affect generally
the markets in which the Business operates or adversely affect a broad group of
industries generally shall not constitute a Material Adverse Effect.
"Material Contracts" means the Lease, the Guaranty, the Collective
Bargaining Agreement, and the other Scheduled Contracts, if any, identified as
Material Contracts in Schedule 4.9 of the Disclosure Schedules.
"Multiemployer Plan" has the meaning set forth in Section 3(37) of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation.
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"Permit" means any license, permit, franchise, certificate of authority or
order, or any waiver of the foregoing, issued by any Governmental Entity.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a Governmental Entity.
"Pre-Closing Environmental Matters" means any Environmental Claim,
Remediation Costs, and any other liability or obligation (whether known or
unknown, absolute, accrued, contingent, or otherwise) occurring before, on or
after the Closing Date by reason of events, occurrences, transactions,
circumstances, practices, or conditions existing in whole or in part on or
before the Closing Date and arising under any Environmental Law and any
environmental obligation under the Lease, the Guaranty, or any other Assigned
Contract.
"Premises" has the meaning set forth in the Lease as in effect immediately
prior to the Closing Date.
"Products" means the products of the Seller consisting of products
manufactured at the Premises and known as Shelf Help, Iron Horse, Lumber Lok,
and Space Solutions, including, but not limited to the products of the Seller
listed on Exhibit 1(a), but does not include the products known as Shelf Help or
Space Solutions that are manufactured by KV at any location other than the
Premises, including but not limited to the products of KV listed on Exhibit
1(b). Products is a generic description and is not a reference to specific items
of inventories.
"Prohibited Transaction" has the meaning set forth in Section 406 of ERISA
and Section 4975 of the Code.
"Purchase Price" has the meaning set forth in Section 2.5(a).
"Purchased Assets" has the meaning set forth in Section 2.1.
"Purchased Records" has the meaning set forth in Section 2.1(j).
"Purchaser" has the meaning set forth in the Preamble to this Agreement.
"Purchaser's Maintenance Obligations" means: (a) any liability or
obligation of the Purchaser to perform ordinary and routine maintenance and
repairs (but not replacements) of the Premises or parts thereof under the Lease
after the Closing Date; (b) any liability or obligation under the Lease (whether
known or unknown, absolute, accrued, contingent, or otherwise) accruing after
the Closing Date by reason of the Purchaser's use and occupancy of the Premises,
including but not limited to any breach or failure in performance of any
obligation of the Purchaser under the Lease at any time after the Closing Date,
other than obligations for repair and maintenance; (c) any liability or
obligation under the Lease to repair or restore the Premises as a result of any
damage or destruction to the Premises resulting from any action or omission of
the Purchaser, other than a failure to perform
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repairs and maintenance of the Premises; and (d) any liability or obligation
under the Lease to repair or restore the Premises as a result of any damage or
destruction resulting from any casualty for which the Purchaser is required to
maintain insurance under the Lease; provided that Purchaser's Maintenance
Obligations shall not include any Remediation Costs or other maintenance, repair
or restoration associated with any Pre-Closing Environmental Matter.
"Reduction Inventory Amount" means the Seller's standard cost of
Inventories of the Products known as Space Solutions as of the Closing Date,
determined in accordance with GAAP; provided that no reserve for obsolete, slow
moving or excess inventory shall be taken or established in making such
computation.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, storing, escaping, leaching, dumping,
discarding, burying, abandoning or disposing into the environment.
"Remediation Costs" means the actual costs incurred after the Closing Date
by reason of, in connection with, or in response to, any Environmental Claim,
including reasonably incurred costs of investigation, evaluation, testing,
remediation, disposal, abatement, monitoring, relocation, and restoration,
including but not limited to the costs of relocation and reinstallation of
manufacturing equipment to the extent required to avoid interruption of
manufacturing operations, and all fines, penalties, liens, and assessments.
"Reportable Event" has the meaning set forth in Section 4043 of ERISA.
"Schedule" means, unless the context otherwise requires, the referenced
Schedule included in the Disclosure Schedules.
"Scheduled Contract" means any Contract required to be listed or disclosed
on Schedule 4.9 of the Disclosure Schedules.
"Seller" has the meaning set forth in the Preamble to this Agreement.
"Shared Maintenance Obligations" means: (a) any liability or obligation
under the Lease (whether known or unknown, absolute, accrued, contingent, or
otherwise) accruing before, on, or after the Closing Date by reason of any
failure of the Seller or the Purchaser to maintain the Premises in the condition
in which the Premises were or are required to be maintained under the Lease, and
any deferred maintenance or deferred capital spending under the Lease; (b) any
liability or obligation under the Lease to replace or repair any portion of the
roof or associated flashings; (c) any liability or obligation under the Lease to
maintain, replace or re-pave parking lots, driveways, sidewalks or other paved
surfaces; (d) any liability or obligation under the Lease to perform any
structural repairs or replacements, including repairs or replacements of
foundations, interior and exterior walls, floors, trusses, columns, doors and
windows; (e) any liability or obligation under the Lease to replace all or any
major component of any plumbing, water service, hot water, sewer, heating,
ventilation, air conditioning, electrical, gas, compressed air, and steam
systems in or serving
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the Premises, including but not limited to piping, ducts, vents, chimneys,
boilers, tanks, valves, conduit, cables and wiring, controls, meters, motors,
pumps, electrical equipment and fixtures, and plumbing fixtures; (f) any
liability or obligation under the Lease to replace any floor covering, ceiling,
ceiling tile, plaster, wall or ceiling finish; and (g) any liability or
obligation under the Lease to replace any other fixtures or leasehold
improvements; provided that Shared Maintenance Obligations shall not include any
Purchaser's Maintenance Obligations or any Remediation Costs or other
maintenance, repair or restoration of the Premises associated with any
Pre-Closing Environmental Matter.
"Significant Customer" means any customer of the Seller accounting for more
than $250,000 of the Seller's net sales of Iron Horse and Shelf Help Products
during either or both of the fiscal years ended June 30, 1997 or June 30, 1998.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power under ordinary circumstances to vote or direct the
voting of sufficient securities to elect a majority of the directors.
"Tax" means any federal, state, local or foreign net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits, license,
lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs,
duties or other tax, fee, assessment or charge, including any interest, penalty
or addition thereto.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto.
"Third-Party Action" has the meaning set forth in Section 8.5.
"Third-Party Action Notice" has the meaning set forth in Section 8.5.
"Transferred Employees" means those persons employed by the Seller and KV
as of the Closing Date who are offered employment by the Purchaser and who
accept such employment with the Purchaser commencing as of the Closing Date.
"Transition Period" means the six-month period following the Closing Date.
"Warranty Claims" means claims for the repair or replacement or refund of
purchase price or offset against accounts receivable for Products sold before
the Closing Date which are determined to be damaged, defective or otherwise in
breach of warranty but not any claims for consequential damages or any injuries
to persons or properties.
"Warranty Reserve" has the meaning set forth in Section 2.5(c).
"Year-End Balance Sheet" has the meaning set forth in Section 4.5(a).
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Section 2. Transaction.
2.1 Purchase and Sale of Purchased Assets. On the terms and subject to the
conditions set forth in this Agreement, at the Closing the Purchaser will
purchase from KV and the Seller, and KV and the Seller will sell, transfer,
assign, convey and deliver to the Purchaser, (i) certain assets owned by KV that
are listed below and (ii) all of the Seller's right, title and interest in and
to all of the assets, other than the Excluded Assets, that are owned by the
Seller, as the same exist on the Closing Date, wherever such assets are located
and whether or not such assets are reflected on the Year-End Balance Sheet, that
are used or held for use in connection with the Business (collectively, the
"Purchased Assets"), including the following assets:
(a) all raw materials, work in process and finished goods inventories,
in each case to the extent relating to the manufacture, distribution and
sale of, or consisting of, the Products (collectively, the "Inventories");
(b) to the extent legally assignable, all Material Contracts, the
Confidentiality Agreements, all unfilled orders outstanding as of the
Closing Date for the purchase of raw materials, goods or services by the
Seller or KV in the usual, regular and ordinary course of the Business, all
unfilled orders outstanding as of the Closing Date for the sale of Products
or services by the Seller or KV in the usual, regular and ordinary course
of the Business (collectively, the "Assigned Contracts");
(c) all machinery, equipment, tools, dies, test equipment, spare
parts, furniture, fixtures (subject to the landlord's rights, if any, under
the Lease), computer equipment located at the Premises, automobiles and
trucks owned by the Seller and used or held for use in connection with the
Business as of the Closing Date, including all machinery and equipment used
or held for use at the Seller's Skokie, Illinois facility on April 30,
1998, and one Minster Press Model No. P2-60 Serial No. 20867 located in
Grand Rapids, Michigan (collectively, the "Machinery and Equipment");
(d) all Lumber Lok displays at customer locations;
(e) the Seller's interest, if any, in all buildings, plants and other
structures and improvements to the property subject to the Lease and, to
the extent covered by the Lease, all fixtures, machinery, installations,
equipment and other property attached thereto or located thereon, other
than those items described in Section 2.2(o);
(f) all patents, patent disclosures, trademarks, service marks, trade
dress, logos, trade names, copyrights and mask works, product designs, the
Marks, telephone numbers and listings, and all registrations, applications
and associated goodwill for each of the foregoing, owned by the Seller or
used or held for use in connection with the Business as of the Closing
Date, including those listed on Schedule 4.13 of the Disclosure Schedules,
and all computer software, computer programs, computer data bases and
related documentation and materials, data, documentation, trade secrets,
confidential business information (including ideas,
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formulas, compositions, inventions, know-how, manufacturing and production
processes and techniques, research and development information, drawings,
designs, plans, proposals and technical data, financial, marketing and
business data, pricing and cost information) and other intellectual
property rights (in whatever form or medium), in each case, owned by the
Seller or used or held for use in connection with the Business as of the
Closing Date (collectively, the "Intellectual Property");
(g) to the extent legally assignable, all Permits held by the Seller
in connection with the Business as of the Closing Date;
(h) all deposits, prepayments, prepaid assets, supplies and repair
parts, but excluding any of such items that are listed as an Excluded
Asset;
(i) all claims, causes of action, rights or recovery, rights of
set-off and rights of recoupment of the Seller as of the Closing Date to
the extent relating to any of the Purchased Assets or any Assumed
Liability, including all rights of the Seller under any property, casualty,
workers' compensation or other insurance policy or related insurance
services contract to the extent such rights relate to any Assumed Liability
or any casualty affecting any of the Purchased Assets, but excluding any of
such items and rights that are listed as an Excluded Asset; and
(j) a printed copy of all books, records and ledgers, and all files,
documents, correspondence, lists, plats, drawings, creative materials,
advertising and promotional materials, studies, reports and other printed
or written materials used or held for use by the Seller in connection with
the Business as of the Closing Date, and the data stored or maintained in
the Seller's or KV's computer systems or related archives representing the
financial books and records of the Seller relating to the Purchased Assets
and Assumed Liabilities (collectively, the "Purchased Records").
2.2 Excluded Assets. Notwithstanding the provisions of Section 2.1, the
Purchased Assets will not include the following (collectively, the "Excluded
Assets"):
(a) all cash and cash equivalents and all securities and short-term
investments of the Seller;
(b) all accounts and notes receivable and other claims (billed or
unbilled) for money due to the Seller or KV arising from the rendering of
services or the sale of goods or materials in connection with the operation
of the Business or any other activity of the Seller, and the full benefit
of all security for such accounts and notes or other claims, remedies, and
other rights relating to any of the foregoing, as the same exist on the
Closing Date;
(c) any rights of the Seller under this Agreement (including the right
to the Purchase Price) or under any other agreement between the Seller or
KV on the one hand and the Purchaser on the other hand;
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(d) the minute books, stock ledgers and Tax Returns of the Seller;
(e) all credits and refund claims relating to Taxes paid or payable by
the Seller as of or for any period prior to, on or after the Closing Date
including but not limited to certain claims for state personal property tax
refunds, which claims and appeals are currently pending;
(f) any rights of the Seller or KV in any insurance policies including
any prepaid insurance policies except as provided in Section 2.1(i);
(g) all books, records, and ledgers and all files, documents,
correspondence, lists, plats, drawings, creative materials, advertising and
promotional materials, studies, reports, and other printed or written
materials of the Seller or KV other than the Purchased Records;
(h) all raw materials, packaging materials, work in process and
finished goods inventories, and supplies, to the extent relating to the
manufacture, distribution and sale of, or consisting of, KV Shelves and
Feeny Wood parts;
(i) the computer equipment of KV or the Seller located off the
Premises and the machinery, equipment, tools, dies, spare parts and
fixtures comprising the KV wood shelf line, including but not limited to
those items listed on Exhibit 2.2(i);
(j) any rights of the Seller or KV under any Contract other than the
Assigned Contracts, whether such rights relate to periods before, on, or
after the Closing Date, including but not limited to the rights of the
Seller and KV under the Stock Acquisition Agreement pursuant to which KV
acquired the Seller;
(k) all computer software, computer programs, and computer databases
and related documentation owned by KV, except for data representing the
financial books and records of the Seller relating to the Purchased Assets
and Assumed Liabilities;
(l) any rights of the Seller or KV under any of the Assigned Contracts
to the extent relating to the period prior to the Closing Date;
(m) all of the real property owned or leased by KV or any of its
Affiliates (other than the Seller) that is used in connection with the
Business other than the Premises;
(n) all rights of KV and the Seller under agreements with sales
representatives and distributors of Products; and
(o) the interest, if any, of the Seller in the underground storage
tanks and related piping and systems located at the Premises and any areas
of subsurface contamination at the Premises as a result of any Pre-Closing
Environmental Matter.
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2.3 Assumption of Liabilities. On the terms and subject to the conditions
set forth in this Agreement, at the Closing the Purchaser will assume and become
responsible for and discharge as and when due the following (and only the
following) liabilities and obligations of the Seller and KV (collectively, the
"Assumed Liabilities"):
(a) all liabilities and obligations of the Seller and KV with respect
to the performance after the Closing Date of the Assigned Contracts
including, but not limited to, Purchaser's Maintenance Obligations,
excluding Shared Maintenance Obligations except as provided in Section
2.3(g) and any liabilities or obligations occasioned by or attributable to
any breach or failure in performance of the Assigned Contracts by the
Seller or KV on or before the Closing Date;
(b) all accrued real property taxes payable under the Lease but not
yet due and payable as of the Closing Date;
(c) all liabilities and obligations of KV or the Seller for severance
or similar benefits payable to employees of the Seller solely by reason of
the termination of their employment with the Seller on the Closing Date or
the subsequent termination of their employment with the Purchaser;
(d) accrued vacation pay of employees of the Seller as of the Closing
Date, to the extent the liability therefor is reflected as a reduction of
the Purchase Price pursuant to Section 2.5(b);
(e) the obligation to pay K-Mart Corporation a "buy-in" payment of
$250,000;
(f) all liabilities of the Seller under the Workers Adjustment and
Retraining Notification Act arising solely by reason of the termination of
employment of the Seller's employees on the Closing Date or the subsequent
termination of their employment with the Purchaser;
(g) Shared Maintenance Obligations but only to the extent any Losses
of the Purchaser attributable to Shared Maintenance Obligations do not
exceed $50,000 in the aggregate;
(h) liabilities for cooperative advertising and volume rebate credits
relating to sales of Products prior to the Closing Date; and
(i) all liabilities and obligations arising out of events or
transactions after the Closing Date in connection with the operation of the
Business or ownership of the Purchased Assets by the Purchaser.
2.4 Excluded Liabilities. Notwithstanding the provisions of Section 2.3,
the Purchaser will not assume or become responsible for, and will not be deemed
to have assumed or to have
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become responsible for, any obligations or liabilities of the Seller or any of
its Affiliates other than the Assumed Liabilities (with all such unassumed
liabilities and obligations referred to herein collectively as "Excluded
Liabilities"). Without limiting the generality of the foregoing, the Assumed
Liabilities shall exclude, and the Excluded Liabilities shall include, the
following:
(a) any liability or obligation arising prior to, on or after the
Closing Date in connection with any Excluded Asset;
(b) any accounts payable, accrued liabilities (except as expressly
provided in Section 2.3(b)), or accrued expenses;
(c) any liability of the Seller or KV occasioned by or attributable to
any breach or failure of performance or delay in performance of any
Assigned Contract by the Seller or KV on or before the Closing Date;
(d) any Shared Maintenance Obligations to the extent any Losses of the
Purchaser attributable to Shared Maintenance Obligations exceed $50,000 in
the aggregate;
(e) any indebtedness for borrowed money or any obligation under any
lease other than the Assigned Contracts;
(f) any Pre-Closing Environmental Matters;
(g) except as provided in Sections 2.3(b) and 7.2(c), any liability or
obligation (whether assessed or unassessed) of the Seller or any of its
Affiliates with respect to any Taxes, including any Taxes arising by reason
of the transactions contemplated by this Agreement as of or for any period
prior to, on or after the Closing Date;
(h) except as provided in Sections 2.3(c) and 2.3(d), any liability or
obligation of the Seller or any of its Affiliates to any current or former
employee or independent contractor in connection with (i) any violation or
alleged violation of any Law on or before the Closing Date relating to
employment, compensation, withholding, or working conditions, (ii) any
claim of discrimination of any nature or similar claim arising out of
actions, events or conditions on or before the Closing Date, (iii) any
claim of wrongful termination or similar claim arising out of actions,
events or conditions on or before the Closing Date, (iv) any unfair labor
practice or charge thereof arising out of actions, events or conditions on
or before the Closing Date, (v) any denial of benefits on or before the
Closing Date, (vi) any claim under any alleged contract, agreement,
arrangement or understanding relating to employment, except to the extent
such alleged contract, agreement, arrangement or understanding is
specifically disclosed in the Disclosure Schedules; or (vii) any other
matter arising out of actions, events or conditions relating to employment
on or before the Closing Date including claims for wages, vacation pay,
health and welfare benefits, withholding obligations, and workers'
compensation claims;
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(i) any liability or obligation of the Seller or any of its Affiliates
with respect to any civil or criminal litigation, proceeding, investigation
or claim, including but not limited to liabilities and obligations arising
out of injuries to persons and properties attributable to any use of
Products manufactured, distributed, or sold before the Closing Date other
than litigation, proceedings, investigations or claims commenced after the
Closing Date and to which the Seller or any of its Affiliates is made a
party to the extent arising out of the Purchaser's ownership of the
Purchased Assets and operation of the Business after the Closing Date;
(j) any liability of the Seller or KV arising out of this Agreement;
and
(k) any other liability or obligation of the Seller , KV or their
Affiliates other than as specifically set forth in Section 2.3.
2.5 Purchase Price.
(a) The purchase price payable for the Purchased Assets (the "Purchase
Price") shall be $13,525,000.00, adjusted as provided in Sections 2.5(b),
2.5(c), 2.5(d) 2.5(e), 2.5(f), and 2.5(g), plus assumption of the Assumed
Liabilities.
(b) The Purchase Price shall be reduced by $115,431.11, representing
the monetary equivalent of accrued vacation as of the Closing Date for
Transferred Employees, and such liability for accrued vacation, to the
extent of such amount, shall be an Assumed Liability.
(c) The Purchaser and KV have established a reserve of $175,000 (the
"Warranty Reserve") for projected Warranty Claims. The Purchase Price shall
not be reduced on the Closing Date by the amount of such reserve. The
Purchase Price shall be reduced after the Closing Date, as and to the
extent provided in Section 7.10, for the actual expense for Warranty
Claims.
(d) On the Closing Date, the Purchaser and KV shall determine the
amount of prepaid rent under the Lease relating to the period after the
Closing Date. The Purchase Price shall be increased by the amount of such
prepaid rent.
(e) On or immediately before the Closing Date, the Purchaser conducted
a physical inventory of the Inventories (or the portions thereof selected
by the Purchaser), using such counting, verification, and sampling methods
as the Purchaser shall reasonably deem advisable to determine the actual
physical quantities of Inventories as of the Closing Date, relying upon
Inventory records of KV where desired by the Purchaser. KV and its
representatives were permitted to observe the physical inventory taken by
the Purchaser. Within 15 days after the Closing Date, the Purchaser shall
prepare and deliver to KV the Purchaser's calculation of the Adjustment
Inventory Amount and the Reduction Inventory Amount, together with a
certificate of the Purchaser as to the accuracy of such calculation
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in accordance with this Agreement (the "Inventory Certification"), based
upon the physical inventory taken by the Purchaser or other verification
methods, extended at the cost or standard costs of each item as mutually
agreed between KV and the Purchaser. If KV disagrees with the calculation
of the Adjustment Inventory Amount or the Reduction Inventory Amount, KV
shall notify the Purchaser in writing within 15 days after receipt of the
Inventory Certification, setting forth the particulars of such disagreement
(the "Dispute Notice"). If KV does not give the Purchaser a Dispute Notice
within such 15 day period, the Inventory Certification shall be deemed to
have been accepted by KV. If a Dispute Notice is timely given, the
Purchaser and KV shall use reasonable efforts for a period of 30 days to
resolve their disagreements with respect to the Inventory Certification. If
at the end of such 30 day period (unless extended by mutual written
agreement), the Purchaser and KV are unable to resolve such disagreement,
the Accounting Firm shall be engaged by the Purchaser and KV to resolve any
remaining disagreements. The Accounting Firm shall determine as promptly as
practicable, and in any event within 30 days after the dispute is referred
to it, whether the Inventory Certification was determined in accordance
with this Agreement and (only with respect to the disputes submitted to the
Accounting Firm) whether the Inventory Certification requires adjustment
and the amount of such adjustment. The determination of the Accounting Firm
shall be final and binding upon the parties. Within five days after the
final determination of the Inventory Certification in accordance with this
Section 2.5(e): (i) the Purchaser shall pay KV the amount, if any, by which
the Adjustment Inventory Amount exceeds $1,700,000, (ii) KV shall pay the
Purchaser the amount, if any, by which $1,700,000 exceeds the Adjustment
Inventory Amount, and (iii) KV shall pay the Purchaser the amount, if any,
by which $1,357,176 exceeds the Reduction Inventory Amount. Any amount
payable pursuant to the preceding clause (i) shall be offset against any
amount payable pursuant to the preceding clause (iii), and the net amount
due to KV or the Purchaser shall be due and payable in cash payable by
certified or cashier's check or wire transfer of immediately available
funds.
(f) In the preparation of the Inventory Certification, in lieu of a
physical count or other verification of Inventory quantities at Perris,
California; Clevelalnd, Ohio; Sparks, Nevada; and Grand Rapids, Michigan as
of the Closing Date, the Purchaser may determine such Inventory quantities
from records of such Inventories maintained for the Seller by KV. The
inclusion of such Inventory quantities in the Inventory Certification will
be done for convenience of the parties and will not be deemed to be a
confirmation, representation, warranty, or other agreement by the Purchaser
of the actual quantities of such Inventories. If it is determined after the
Closing Date that the actual physical quantities of Inventories at Perris,
California; Cleveland, Ohio; Sparks, Nevada; and Grand Rapids, Michigan as
of the Closing Date were less than the amounts included in the Inventory
Certification, the Purchaser shall prepare and deliver to KV an amended
Inventory Certification taking such discrepancies into account and setting
forth the corrected calculation of the Adjustment Inventory Amount and the
Reduction Inventory Amount as of the Closing Date. If KV disagrees with the
calculation of the corrected Adjustment Inventory Amount or the corrected
Reduction Inventory Amount, the Purchaser and KV will raise and resolve
their differences on a basis consistent with the dispute resolution
mechanism in Section 2.5(e), with the time periods for
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action and responsive action being measured from the date of the
Purchaser's delivery of the amended Inventory Certification. Within five
days after final determination of the amended Inventory Certification, the
calculations required by Section 2.5(e) shall be made again based upon the
amended Inventory Certification, and KV shall remit to the Purchaser any
over- payment made by the Purchaser on the Closing Date pursuant to Section
2.5(e).
(g) Within 15 days after the Closing Date, KV shall prepare and
deliver to the Purchaser a final determination of the Seller's liability
for cooperative advertising and volume rebates for sales of Products before
the Closing Date, together with a certificate of KV as to the accuracy
thereof. If the Purchaser disagrees with such calculation, the Purchaser
shall notify KV in writing within 15 days after receipt of such
calculation, setting forth the particulars of such disagreement. If the
Purchaser does not give such notice of disagreement within such 15 day
period, KV's calculation shall be deemed to have been accepted by the
Purchaser. If a notice of the Purchaser's disagreement is timely given, the
Purchaser and KV shall use reasonable efforts for a period of 30 days to
resolve their disagreements with respect to KV's calculation. If at the end
of such 30 day period (unless extended by mutual agreement), the Purchaser
and KV are unable to resolve such disagreement, the Accounting Firm shall
be engaged by the Purchaser and KV to resolve any remaining disagreements.
The Accounting Firm shall determine as promptly as practicable, and in any
event within 30 days after the dispute is referred to it, whether KV's
calculation represents a correct calculation of the Seller's liability for
cooperative advertising and volume rebates for sales of Products before the
Closing Date. The determination of the Accounting Firm shall be final and
binding upon the parties. Within five days after the final determination of
the Seller's liability for cooperative advertising and volume rebates for
sales of Products before the Closing Date in accordance with this Section
2.5(g) KV shall pay the Purchaser an amount equal to the final calculation
of such liability.
2.6 Allocation of Purchase Price. The Purchase Price shall be allocated in
accordance with the methodology set forth in Exhibit 2.6 attached hereto and all
Tax Returns and reports filed by the Purchaser and the Seller will be prepared
consistently with such allocation. Within 120 days after the Closing Date the
Purchaser will provide to the Seller copies of IRS Form 8594 prepared in
accordance with Exhibit 2.6 and any required exhibits thereto (the "Asset
Acquisition Statement"). The costs of preparing the Asset Acquisition Statement
and any supporting materials (including any appraisals) will be borne by the
Purchaser.
Section 3. Closing and Closing Date.
3.1 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Jenner & Block, One
IBM Plaza, Chicago, Illinois, on September 1, 1998 and shall be effective as of
12:01 a.m., Central Daylight Time on such date.
3.2 Deliveries at the Closing. At the Closing, (a) KV and the Seller will
deliver to the Purchaser the various instruments and documents referred to in
Section 6.1, (b) the Seller will
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execute, acknowledge (if appropriate), and deliver to the Purchaser such other
instruments of sale, transfer, conveyance, and assignment as the Purchaser
reasonably may request, (c) the Purchaser will deliver to the Seller the various
instruments and documents referred to in Section 6.2, (d) the Purchaser will
execute, acknowledge (if appropriate), and deliver to the Seller such other
instruments of assumption as the Seller reasonably may request, and (e) the
Purchaser will deliver to the Seller the portion of the Purchase Price that is
payable on the Closing Date by wire transfer of funds to the account designated
in writing by the Seller.
Section 4. Representations and Warranties of KV and the Seller. KV and the
Seller, jointly and severally, represent and warrant to the Purchaser that the
statements contained in this Section 4 are correct and complete. Nothing in any
Schedule of the Disclosure Schedules will be deemed adequate to disclose an
exception to any representation or warranty made herein unless such Schedule
identifies the exception with reasonable particularity.
4.1 Organization of KV and the Seller. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois. KV is a corporation duly organized, validly existing and in good
standing under the laws of the State of Michigan.
4.2 Authorization of Transaction. Each of KV and the Seller has full
corporate power and authority, and each of KV and the Seller, its directors and
stockholders have taken all corporate action required to be taken to enable KV
and the Seller to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of KV and the Seller, enforceable in accordance with its terms and
conditions.
4.3 No Conflicts; Consents. Neither the execution and delivery of this
Agreement by KV or the Seller, nor the consummation by KV or the Seller of the
transactions contemplated hereby, will violate any Law to which KV or the Seller
is subject or any provision of the articles of incorporation or bylaws of KV or
the Seller. Except as set forth on Schedule 4.3 of the Disclosure Schedules,
neither the execution and delivery of this Agreement by the Seller, nor the
consummation by the Seller of the transactions contemplated hereby, will
constitute a violation of, be in conflict with, constitute or create a default
under any Material Contract or result in the creation or imposition of any Lien
upon any of the Purchased Assets pursuant to any agreement or commitment to
which the Seller is a party or by which the Seller or any of the Purchased
Assets is bound or to which the Seller or any of such properties is subject.
Except as set forth on Schedule 4.3, each of KV and the Seller has given all
required notices and obtained all licenses, Permits, consents, approvals,
authorizations, qualifications and orders of Governmental Entities and parties
to contracts relating to the Business as are required in order to enable each of
KV and the Seller to perform its obligations under this Agreement, including all
consents and approvals required to permit it to make the transfers to the
Purchaser contemplated herein, except where the failure to obtain such licenses,
Permits, consents, approvals, authorizations, qualifications and orders would
not reasonably be expected to have a Material Adverse Effect. No Assigned
Contract has been amended to increase the amount payable thereunder in order to
obtain any such consent, approval or authorization.
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4.4 Subsidiaries. The Seller does not have any Subsidiary or control
directly or indirectly, or have any direct or indirect equity participation in,
any other Person.
4.5 Financial Statements.
(a) Set forth as Schedule 4.5(a) of the Disclosure Schedules are
correct and complete copies of:
(i) the unaudited balance sheet of the Seller as of June 30, 1998
(the "Year-End Balance Sheet") and the related statements of income
and cash flow for the fiscal year then ended; and
(ii) the unaudited balance sheets of the Seller as of June 30,
1997, and June 30, 1996, and the related statements of income and cash
flow for each of the fiscal years then ended (together with the
financial statements referred to in the preceding clause (i), the
"Financial Statements").
(b) Except as set forth in Schedule 4.5(b) of the Disclosure
Schedules, the Financial Statements were prepared in accordance with GAAP
and present fairly the financial condition and the results of operations of
the Seller as of the dates and for the periods indicated therein, subject
to the lack of footnotes and audit adjustments (none of which adjustments
would materially and adversely affect the Purchased Assets or Assumed
Liabilities) and are consistent with the books and records of the Seller
(which books and records are correct and complete in all material
respects).
(c) Set forth as Schedule 4.5(c) of the Disclosure Schedules is a
correct and complete list of all reserves for product warranties and
similar reserves maintained by the Seller as of the date of the Year-End
Balance Sheet and a correct and complete statement of the Seller's expense
during each of the fiscal years included in the Financial Statements for
the repair or replacement or refund of the purchase price for Products
manufactured, distributed and sold by the Seller at any time. Except as set
forth in Schedule 4.5(c), since the date of the Year-End Balance Sheet the
Seller has not released, reduced or reclassified any such reserve.
(d) Set forth as Schedule 4.5(d) of the Disclosure Schedules is a
correct and complete summary of all expenditures of the Seller for
advertising, damage, and freight allowances for the fiscal years of the
Seller ended June 30, 1998, June 30, 1997 and June 30, 1996.
4.6 Undisclosed Liabilities. The Seller has no liabilities or obligations
(whether known or unknown, absolute or contingent, liquidated or unliquidated,
or due or to become due) except for (a) liabilities and obligations reflected or
reserved for on the Year-End Balance Sheet, (b) liabilities and obligations that
have arisen since the date of the Year-End Balance Sheet in the ordinary course
of the operation of the Business, (c) Excluded Liabilities, (d) liabilities and
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obligations under any Contract to which the Seller is a party or to which the
Seller's assets, properties, or rights are subject, and (e) liabilities and
obligations set forth on Schedule 4.6 of the Disclosure Schedules.
4.7 Events Subsequent to Fiscal Year End. Since June 30, 1997, there has
not been any occurrence, event, incident, action, failure to act on transaction
that has had or could reasonably be expected to have a Material Adverse Effect.
Without limiting the generality of the foregoing, since such date, except as set
forth on Schedule 4.7 of the Disclosure Schedules:
(a) the Seller has not sold, leased, transferred or assigned any of
its assets, tangible or intangible, other than for fair consideration in
the ordinary course of business;
(b) the Seller has not entered into any agreement, contract, lease or
license (or series of related agreements, contracts, leases and licenses)
either (i) involving more than $100,000 other than purchase orders for raw
materials, goods, and services and sales of Products in the ordinary course
of business or (ii) outside the ordinary course of business;
(c) no party (including the Seller) has accelerated, terminated,
modified or canceled any agreement, contract, lease or license (or series
of related agreements, contracts, leases and licenses) involving more than
$100,000 to which the Seller is a party or by which it is bound;
(d) the Seller has not reduced its pricing for any Significant
Customer, experienced the complete loss or the material curtailment of the
business of any Significant Customer, or received any notice or advice from
any Significant Customer that it will terminate or materially curtail its
purchases from the Seller at any future time, and neither KV nor the Seller
has any knowledge, based upon any action of or communication from a
Significant Customer, that any Significant Customer has requested a price
reduction or may terminate or materially curtail its purchases from the
Seller at any future time;
(e) the Seller has not permitted to be imposed any Lien upon any of
the Purchased Assets which has not been released as of the Closing Date;
(f) the Seller has not experienced any dispute with a customer or
supplier other than disputes of a nature and amount in controversy
consistent with prior experience of the Seller; and the Seller has not
delayed or postponed the payment of any Assumed Liabilities outside the
ordinary course of business, except in those cases where the liability is
subject to a bona fide dispute and the Seller has established adequate
reserves to the extent required by GAAP on the Year-End Balance Sheet for
the payment thereof;
(g) the Seller has not canceled, compromised, waived or released any
right or claim (or series of related rights and claims) either involving
more than $100,000 or outside the ordinary course of business;
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(h) the Seller has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(i) the Seller has not experienced any damage, destruction or loss
(whether or not covered by insurance) to any of the material Purchased
Assets or the Premises;
(j) the Seller has not increased the base compensation of any employee
whose annual base salary was in excess of $50,000 for the fiscal year
ending June 30, 1997, or granted any increase in the base compensation of
any other employees of the Seller, outside the ordinary course of business;
(k) the Seller has not adopted, amended, modified or terminated any
bonus, profit-sharing, incentive, severance or other plan, contract or
commitment for the benefit of any of the employees of the Seller or taken
any such action with respect to any other Employee Benefit Plan other than
benefit changes in the ordinary course of business and in amounts
consistent with prior practice;
(l) the Seller has not made any other material change in employment
terms for any of the employees of the Seller whose annual compensation
during the most recent fiscal year was in excess of $50,000; and
(m) the Seller has not entered into any legally binding commitment to
do any of the foregoing.
4.8 Inventories. Except as set forth on Schedule 4.8 of the Disclosure
Schedules, all Inventories included in the Purchased Assets are of good and
merchantable quality and are salable (in the case of inventory held for sale) or
currently usable (in the case of other inventory) in the ordinary course of
business.
4.9 Contracts.
(a) Except for the Contracts (collectively the "Scheduled Contracts")
listed on Schedule 4.9 of the Disclosure Schedules, the Seller is not a
party to or otherwise bound by any (i) Contract for the sale or lease by
the Seller to any Person of any material amount of its assets other than
the retirement or other disposition of assets no longer useful to the
Business or the sale of finished products and spare parts in the ordinary
course of the operation of the Business, (ii) Contract requiring the
payment by the Seller of more than $25,000 for the purchase or lease of any
machinery, equipment or other capital assets relating to the Business,
(iii) distributor, representative, broker or advertising Contract that is
not terminable by the Seller at will or by giving notice of 90 days or
less, without liability, (iv) employment (excluding collective bargaining
agreements) or consulting Contract providing for severance payments or
other additional rights or benefits (whether or not optional) in the event
of the sale of the Business, (v) partnership or joint venture agreement,
teaming agreement or similar Contract, (vi) Contract requiring the payment
by the Seller to
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any Person of more than $50,000 in any 12-month period for the purchase of
goods or services relating to the Business, other than purchase orders
entered into in the ordinary course of business, (vii) Contract with
respect to any material patent, trademark, service mark, trade dress, logo,
trade name, copyright or mask work (whether as licensor, licensee,
sublicensor or sublicensee), or (viii) Contract that is material to the
financial condition of the Business and that is not otherwise described in
the Disclosure Schedules.
(b) The Seller has delivered or made available to the Purchaser
correct and complete copies of each written Assigned Contract and a written
summary setting forth the terms and conditions of each oral Assigned
Contract. Except as set forth on Schedule 4.9, each Assigned Contract is a
valid, binding and enforceable obligation of the Seller and to the Seller's
knowledge, is a valid, binding, and enforceable obligation of the other
party or parties thereto (subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar Laws
affecting creditors' rights and remedies generally and subject as to
enforceability to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing) and is in full
force and effect. Except as set forth on Schedule 4.9, (i) neither the
Seller nor, to the knowledge of the Seller, any other party thereto is in
material breach of any term of any Assigned Contract or has repudiated any
material term of any Assigned Contract, (ii) no event, occurrence or
condition exists which, with the lapse of time or the giving of notice,
would become a default under any Assigned Contract by the Seller or, to the
knowledge of the Seller, any other party thereto, except for such defaults
by Persons other than the Seller that would not reasonably be expected to
result in the acceleration of an obligation for payment or performance by
the Seller, the termination or cancellation of the Seller's rights
thereunder, the suspension of performance of the other party's obligations
thereunder, or a claim for money damages or equitable relief thereunder,
(iii) the Seller has not taken any affirmative action to release any of its
material rights under any Assigned Contract, (iv) no advance payments have
been made under any Assigned Contract relating to any period after the
Closing Date, except as expressly provided in such Assigned Contract, and
(v) no consents, releases or agreements of any other party are necessary to
permit the Seller's assignment of all of its right, title and interest
under the Assigned Contracts to the Purchaser.
4.10 Machinery and Equipment. The Machinery and Equipment included in the
Purchased Assets represents all of the machinery and equipment required for the
Purchaser to conduct the Business as presently conducted, excepting computer
equipment used by KV in accounting functions for the Seller. The Machinery and
Equipment is in good operating condition and repair, ordinary wear and tear
excepted, except for any of such Machinery and Equipment that is on the Closing
Date undergoing routine maintenance and repair in the ordinary course of
business. Since April 30, 1998, neither KV nor the Seller has sold or otherwise
disposed of any machinery, equipment or tooling used or held for use in
connection with the Business, excepting computer equipment used by KV in
accounting functions for the Seller and excepting machinery, equipment, and
tooling replaced with items of equivalent value and functionality.
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4.11 Real Property.
(a) The Seller does not own any interest in real estate other than the
Lease described in Schedule 4.11 of the Disclosure Schedules.
(b) The Seller has delivered to the Purchaser a correct and complete
copy of the Lease as amended to date. With respect to the Lease:
(i) The Lease is a legal, valid and binding obligation of the
Seller enforceable against the Seller and in full force and effect,
and to the Seller's knowledge, the Lease is a legal, valid and binding
obligation of the other parties thereto, and enforceable against such
other parties (subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect affecting
creditors' rights and remedies generally and subject as to
enforceability to general principles of equity, including principles
of commercial reasonableness, good faith and fair dealing).
(ii) The Lease will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms
immediately following the consummation of the transactions
contemplated by this Agreement, except as otherwise contemplated by
this Agreement.
(iii) The Seller is not in breach or default and, to the Seller's
knowledge, no other party to the Lease is in breach or default, and,
to the Seller's knowledge, no event has occurred or condition exists
which, with notice or lapse of time or both, would constitute a breach
or default or would permit termination, modification or acceleration
thereunder.
(iv) To the Seller's knowledge, no party to the Lease has
repudiated any provision thereof.
(v) Except as set forth on Schedule 4.11, there are no material
disputes, oral agreements or forbearance programs in effect as to the
Lease.
(vi) The Seller has not assigned, subleased, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the
Lease.
(vii) The Premises has received all approvals of Governmental
Entities (including all Permits) required in connection with the
operation of the Business, except where the failure to do so would not
reasonably be expected to interfere with or interrupt the use,
enjoyment and occupancy of the Premises.
(viii) The Premises are supplied with utilities and other
services necessary for the operation of the Business in the manner
presently operated by the Seller.
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(c) Except as set forth on Schedule 4.11, the buildings, fixtures, and
other improvements to the Premises are in good condition and repair,
ordinary wear and tear excepted except for any buildings, fixtures, and
other improvements the failure of which to be in good condition and repair
has not and would not reasonably be expected to result in a Material
Adverse Effect.
4.12 Title and Related Matters. Except as set forth on Schedule 4.12 of the
Disclosure Schedules and except for the Intellectual Property, the Seller has
good and, with respect to personal properties, marketable title to all the
Purchased Assets, free and clear of all Liens. Except for the Seller's interest
in the Premises under the Lease and computer equipment used by KV in accounting
functions for the Seller, and except as set forth on Schedule 4.12, the Seller
owns or leases and the Purchased Assets include sufficient tangible personal
property to conduct the Business as presently conducted. Except as set forth on
Schedule 4.12 and except for the Intellectual Property, upon consummation of the
transactions contemplated by this Agreement, the Purchaser will be entitled to
continue to use all of the Purchased Assets.
4.13 Intellectual Property.
(a) The Seller owns or has the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property necessary for
the operation of the Business as presently conducted. Except as set forth
on Schedule 4.13(a) of the Disclosure Schedules, each item of Intellectual
Property owned or used by the Seller immediately prior to the Closing will
be owned or available for use by the Purchaser on identical terms and
conditions immediately subsequent to the Closing. The Seller has taken all
necessary and desirable action to maintain and protect each item of
Intellectual Property that it owns, except where the failure to do so has
not had and would not reasonably be expected to have a Material Adverse
Effect.
(b) To the Seller's knowledge and except as set forth on Schedule
4.13(b), the Seller has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any intellectual
property rights of third parties, and the Seller has not received any
charge, complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or violation (including any claim that the
Seller must license or refrain from using any intellectual property rights
of any third party). To the Seller's knowledge and except as set forth on
Schedule 4.13(b), no third party has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual
Property rights of the Seller.
(c) Schedule 4.13(c) identifies each (i) registered and unregistered
trademark, service mark, trade name, and company name owned by the Seller;
(ii) patent and patent application owned by the Seller; and (iii) copyright
registration and application owned by the Seller. Schedule 4.13(c) further
identifies each license, agreement or other permission which the Seller has
granted to any third party with respect to any of the Intellectual
Property.
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The Seller has delivered to the Purchaser correct and complete copies of
all such patents, registrations, applications, licenses, agreements and
permissions, each as amended to date, and has made available to the
Purchaser correct and complete copies of all other material written
documentation evidencing ownership and prosecution of each such item. With
respect to each such item of Intellectual Property required to be
identified in Schedule 4.13(c), except as otherwise set forth on Schedule
4.13(c):
(i) To the Seller's knowledge, the Seller possesses all right,
title, and interest in and to the item, free and clear of any Lien,
license or other restriction.
(ii) The item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge.
(iii) No action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or, to the Seller's
knowledge, threatened which challenges the legality, validity,
enforceability, use or ownership of the item.
(iv) The Seller has not agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other
conflict with respect to the item.
(d) Schedule 4.13(d) identifies each material item of Intellectual
Property necessary for the conduct of the Business as presently conducted
that KV or any third party owns and that the Seller uses pursuant to
license, sublicense, agreement or permission. Except as set forth on
Schedule 4.13(d), the Seller has delivered to the Purchaser correct and
complete copies of all such licenses, sublicenses, agreements and
permissions, each as amended to date. With respect to each such item of
Intellectual Property required to be identified on Schedule 4.13(d), except
as otherwise set forth on Schedule 4.13(d):
(i) To the Seller's knowledge, the license, sublicense, agreement
or permission covering the item is legal, valid, binding, enforceable
and in full force and effect (subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect
affecting creditors' rights generally and remedies generally and
subject as to enforceability to general principles of equity,
including principles of commercial reasonableness, good faith and fair
dealing).
(ii) The license, sublicense, agreement or permission will
continue to be legal, valid, binding, enforceable and in full force
and effect on identical terms immediately following the consummation
of the transactions contemplated by this Agreement.
(iii) To the Seller's knowledge, no party to the license,
sublicense, agreement or permission is in breach or default, and no
event has occurred or condition exists which, with notice or lapse of
time or both, would constitute a breach
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or default or permit termination, modification or acceleration
thereunder or would otherwise reasonably be expected to have a
Material Adverse Effect.
(iv) To the Seller's knowledge, no party to the license,
sublicense, agreement or permission has repudiated any provision
thereof.
(v) To the Seller's knowledge, the underlying item of
Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge.
(vi) To the Seller's knowledge, no action, suit, proceeding,
hearing, charge, complaint, claim or demand is pending or under
investigation or threatened which challenges the legality, validity or
enforceability of the underlying item of Intellectual Property.
(vii) The Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement or permission.
(e) To the Seller's knowledge, the Seller will not interfere with,
infringe upon, misappropriate or otherwise come into conflict with any
intellectual property rights of third parties as a result of the continued
operation of the Business as presently conducted.
4.14 Litigation. Schedule 4.14 of the Disclosure Schedules sets forth each
instance in which the Seller is (a) subject to any unsatisfied judgment order,
decree, stipulation, injunction or charge or (b) a party to or, to the Seller's
knowledge, is threatened to be made a party to any charge, complaint, action,
suit, proceeding, hearing or investigation of or in any court or quasi-judicial
or administrative agency of any federal, state, local or foreign jurisdiction.
There are no judicial or administrative actions, proceedings or investigations
pending or, to the Seller's knowledge, threatened that question the validity of
this Agreement or any action taken or to be taken by the Seller in connection
with this Agreement or that, if adversely determined, would have a material
adverse effect upon the Seller's ability to enter into or perform its
obligations under this Agreement. None of the actions, suits, proceedings,
hearings and investigations set forth on Schedule 4.14 could reasonably be
expected to have a material adverse effect on any of the Purchased Assets or
Assumed Liabilities or any of the Seller's rights, benefits or obligations under
any Assigned Contract.
4.15 Employee Benefits.
(a) Schedule 4.15 of the Disclosure Schedules lists each Employee
Benefit Plan that the Seller maintains or to which the Seller contributes.
(b) With respect to each Employee Benefit Plan which covers any
employees or former employees of the Seller that any of the Seller, its
Affiliates and the controlled group of corporations (within the meaning of
Section 1563 of the Code) maintains or ever has maintained, or to which any
of them contributes, ever has contributed or ever has been required to
contribute:
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(i) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan subject to Title IV of ERISA has been completely or
partially terminated or been the subject of a Reportable Event as to
which notices would be required to be filed with the PBGC and no
proceeding by the PBGC to terminate such Employee Pension Benefit Plan
has been instituted or, to the Seller's knowledge, threatened.
(ii) There have been no non-exempt Prohibited Transactions with
respect to such Employee Benefit Plan, to the Seller's knowledge no
fiduciary has any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or
investment of the assets of such Employee Benefit Plan, and no action,
suit, proceeding, hearing or investigation with respect to the
administration or the investment of the assets of such Employee
Benefit Plan (other than routine claims for benefits) is, to the
Seller's knowledge, pending or threatened.
(iii) None of the Seller or any of its Affiliates has incurred
and the Seller has no reason to expect that any of the Seller or any
of its Affiliates will incur any liability to the PBGC (other than
PBGC premium payments) or otherwise under Title IV of ERISA (including
any withdrawal liability) or under the Code with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.
(c) Except as set forth on Schedule 4.15, none of the Seller, its
Affiliates and the other members of the controlled group of corporations
that includes the Seller contributes to, or to the Seller's knowledge, ever
has contributed to or ever has been required to contribute to any
Multiemployer Plan or has any liability (including withdrawal liability)
under any Multiemployer Plan.
(d) Except as set forth on Schedule 4.15, the Seller does not maintain
and, to the Seller's knowledge, never has maintained or contributed, or, to
the Seller's knowledge, ever has contributed, or ever has been required to
contribute to any Employee Welfare Benefit Plan providing medical, health,
life insurance or other welfare benefits for current or future retired or
terminated employees, their spouses or their dependents (other than in
accordance with Section 4980B of the Code or state insurance laws).
(e) Except as set forth on Schedule 4.15, neither KV nor the Seller
has entered into any severance pay or similar arrangement with or for the
benefit of any employee or independent contractor of the Seller that has
resulted or will result in any obligation (absolute or contingent) of the
Seller or the Purchaser to make any payment to any such person following
termination of employment or other services with the Seller.
4.16 Labor Relations. Except as set forth on Schedule 4.16 of the
Disclosure Schedules, there are no material controversies pending or, to the
Seller's knowledge, threatened between the Seller and any employee of the Seller
or any labor or other collective bargaining unit representing any current or
former employee of the Seller that could reasonably be expected to result
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in a labor strike, slow-down or work stoppage or otherwise have a Material
Adverse Effect. Except as set forth on Schedule 4.16, the Seller is not a party
to or otherwise bound by any collective bargaining agreement. The Seller has
delivered to the Purchaser a correct and complete copy of each collective
bargaining agreement listed on Schedule 4.16, as amended to date. To the
Seller's knowledge, the Seller has not committed and has not received any
written allegation that it has committed any unfair labor practice in connection
with the operations of the Seller. The Seller is not aware of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of the Seller. To the Seller's knowledge, no
executive, key employee or group of employees of the Seller has any plan to
terminate employment with the Seller and decline to accept employment with the
Purchaser.
4.17 Environmental Matters. Except as set forth on Schedule 4.17 of the
Disclosure Schedules, (a) each of KV and the Seller is in compliance in all
material respects with all Environmental Laws in effect as of the Closing Date
in connection with the ownership, use, maintenance and operation of the Premises
and otherwise in connection with the operation of the Business, except where
such non-compliance would not reasonably be expected to have a Material Adverse
Effect, (b) to the knowledge of the Seller neither KV nor the Seller has any
liability, whether contingent or otherwise, under any Environmental Law in
effect as of the Closing Date with respect to the operations or properties of KV
or the Seller relating to the Business, (c) no notices of any violation or
alleged violation of, non-compliance or alleged non-compliance with, or any
liability under, any Environmental Law relating to the Premises, operations or
properties of KV or the Seller relating to the Business have been received by KV
or the Seller since January 1, 1995, and (d) no underground storage tank or
other underground storage receptacle for Hazardous Materials is located on the
Premises.
4.18 Legal Compliance. Except as set forth in Schedule 4.18 of the
Disclosure Schedules, the Seller has complied with all applicable Laws, except
where such non-compliance would not reasonably be expected to have a Material
Adverse Effect, and since January 1, 1995, no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced against or, to the Seller's knowledge, has been threatened against the
Seller alleging any failure to so comply.
4.19 Permits. The Seller holds all Permits that are required by any
Governmental Entity to permit it to conduct the Business as presently conducted
and to operate the Purchased Assets and the Premises as they are presently
operated, except for those Permits the absence of which would not reasonably be
expected to interrupt the conduct of the Business or otherwise have a Material
Adverse Effect. Each such Permit is listed on Schedule 4.19 of the Disclosure
Schedules. Seller has not received notice that the suspension, cancellation or
termination of any of such Permit is pending and, to the Seller's knowledge, no
such action is threatened.
4.20 Affiliate Agreements. Schedule 4.20 of the Disclosure Schedules sets
forth a list of all written Contracts and a brief description in reasonable
detail of all oral Contracts and other arrangements which relate to (a) the
provision of any material products or services to the Seller by any Affiliate of
the Seller or (b) the provision of any material products or services by the
Seller to
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any Affiliate of the Seller. The Seller has delivered to the Purchaser correct
and complete copies of each such Contract and a correct and complete description
of each such other arrangement.
4.21 Product Warranties. Schedule 4.21 of the Disclosure Schedules sets
forth the form of all product warranties and guaranties extended by the Seller.
Except as set forth on Schedule 4.21, since January 1, 1995, there have not been
any deviations from such warranties and guaranties other than those deviations
that have not and would not reasonably be expected to materially increase
warranty expenses. Except as set forth in Schedule 4.21, there are no pending
or, to the Seller's knowledge, threatened claims against the Seller with respect
to product warranties and guaranties on products or services provided by the
Seller which exceed, in the aggregate, the Seller's reserves for product
warranties set forth on the Year-End Balance Sheet.
Section 5. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Seller that the statements contained in this
Section 5 are correct and complete.
5.1 Organization of the Purchaser. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Iowa.
5.2 Authorization of Transaction. The Purchaser has full corporate power
and authority, and the Purchaser, its directors and shareholders have taken all
requisite corporate action to enable the Purchaser to execute and deliver this
Agreement and to perform its obligations hereunder and thereunder. This
Agreement constitutes the valid and legally binding obligation of the Purchaser,
enforceable in accordance with its terms and conditions.
5.3 Noncontravention; Consents. Neither the execution and the delivery of
this Agreement by the Purchaser, nor the consummation by the Purchaser of the
transactions contemplated hereby, will violate any Law to which the Purchaser is
subject or any provision of the charter or bylaws of the Purchaser. Neither the
execution and delivery of this Agreement by the Purchaser, nor the consummation
by the Purchaser of the transactions contemplated hereby, will constitute a
violation of, be in conflict with or constitute or create a default under, any
agreement or commitment to which the Purchaser is a party or by which the
Purchaser or any of its properties is bound or to which the Purchaser or any of
such properties is subject. The Purchaser has given all required notices and
obtained all licenses, Permits, consents, approvals, authorizations,
qualifications and orders of Governmental Entities as are required in order to
enable the Purchaser to perform its obligations under this Agreement.
5.4 Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or, to the Purchaser's knowledge,
threatened that question the validity of this Agreement or any action taken or
to be taken by the Purchaser in connection with this Agreement or that, if
adversely determined, would have a material adverse effect upon the Purchaser's
ability to enter into or perform its obligations under this Agreement.
Section 6. Closing Requirements.
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6.1 Obligations of the Seller. KV and the Seller shall perform the
following obligations on the Closing Date in connection with the Closing:
(a) The Seller and KV will deliver to the Purchaser a Bill of Sale and
instruments of assignment of the Intellectual Properties in form and
substance reasonably satisfactory to the Purchaser.
(b) The Seller will deliver to the Purchaser an Assignment and
Assumption of Lease in form and substance reasonably satisfactory to the
Purchaser, duly executed by the Seller.
(c) The Seller will deliver to the Purchaser an Estoppel and Consent
Agreement in form and substance reasonably satisfactory to the Purchaser,
duly executed by the landlord under the Lease.
(d) KV will execute and deliver a Non-Compete Agreement in form and
substance reasonably satisfactory to the Purchaser relating to KV's
competition with the Purchaser with respect to the Business.
(e) The Seller shall amend its articles of incorporation to change its
name to a name not including the word "Hirsh".
(f) Effective as of the Closing, the Seller will terminate the
employment or other services of each of its employees and independent
contractors.
6.2 Obligations of the Purchaser. The Purchaser shall perform the following
obligations on the Closing Date in connection with the Closing:
(a) The Purchaser will deliver to the Seller and KV an Assumption
Agreement in form and substance reasonably satisfactory to the Seller and
KV.
(b) The Purchaser will deliver to the Seller and KV an executed
counterpart of an Assignment and Assumption of Lease in form and substance
reasonably satisfactory to the Seller and KV.
(c) The Purchaser will execute and deliver a Non-Compete Agreement in
form and substance reasonably satisfactory to KV relating to KV's
competition with the Purchaser with respect to the Business. The Purchaser
shall pay KV the consideration required by such Non-Compete Agreement..
(d) Effective as of the Closing, the Purchaser shall extend to Larry
Dechter and each employee of the Seller an offer of employment with the
Purchaser commencing as of the Closing on terms and conditions of
employment with compensation and benefits substantially identical to the
compensation and benefits under which they were employed by
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KV or the Seller immediately prior to the Closing Date and otherwise on
terms and conditions of employment established by the Purchaser.
6.3 Assignment of Contracts, Rights, Etc. Anything contained in this
Agreement or the Bill of Sale to the contrary notwithstanding, this Agreement
and the Bill of Sale shall not constitute an agreement to assign any Assigned
Contract or any claim or any right or benefit arising thereunder or resulting
therefrom if an attempted assignment thereof, without the consent of a third
party thereto, would constitute a breach thereof or in any way affect the rights
of the Purchaser thereunder. If such consent is not obtained, the Seller and KV
will cooperate with the Purchaser in any reasonable arrangement designed to
provide for the Purchaser the benefits thereunder, including, but not limited
to, having (a) the Purchaser act as agent for the Seller, (b) the Purchaser act
as a subcontractor to the Seller, and (c) the Seller enforce for the benefit of
the Purchaser, at the Purchaser's expense, any and all rights of the Seller
against the other party thereto arising.
Section 7. Post-Closing Covenants. The parties agree as follows with
respect to the period following the Closing Date.
7.1 General. In case at any time after the Closing Date any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the parties will take such further action (including the execution and delivery
of such further instruments and documents) as the other party reasonably may
request, at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Section 8).
7.2 Agreements Regarding Tax Matters.
(a) The Seller and the Purchaser will each provide the other party
with such assistance as may reasonably be requested in connection with the
preparation of any Tax Return, audit or other examination by any taxing
authority or judicial or administrative proceeding relating to liability
for Taxes, will each retain and provide to the other party all records and
other information which may be relevant to any such Tax Return, audit or
examination, proceeding or determination and will each provide the other
party with any final determination of any such audit or examination,
proceeding or determination that affects any amount required to be shown on
any Tax Return of the other party for any period. Without limiting the
generality of the foregoing, each of the Purchaser and the Seller will
retain, until the expiration of the applicable statutes of limitation
(including any extensions thereof) copies of all Tax Returns, supporting
work schedules and other records relating to tax periods or portions
thereof ending prior to or on the Closing Date.
(b) Except as provided in Section 2.3(b), the Seller shall be liable
for and shall pay all Taxes (whether assessed or unassessed) applicable to
the Purchased Assets or the Business in each case attributable to periods
(or portions thereof) ending immediately prior to the Closing Date. The
Purchaser shall be liable for and shall pay all Taxes (whether assessed or
unassessed) applicable to the Purchased Assets or the Business, in each
case attributable to periods (or portions thereof) beginning on or after
the Closing Date.
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(c) Notwithstanding anything herein to the contrary, any sales Tax,
use Tax or transfer Tax directly attributable to the sale or transfer of
the Purchased Assets shall be paid by the Purchaser.
(d) The Seller or the Purchaser, as the case may be, shall provide
reimbursement for any Tax paid by one party, all or a portion of which is
the responsibility of the other party in accordance with the terms of this
Section 7.2. Such reimbursement shall be made within 30 days after a party
receives notice that Taxes that are its responsibility under this Section
7.2 have been paid by the other party.
7.3 Seller's Confidentiality Obligations. For a period of three years after
the Closing Date, the Seller and KV will treat and hold as such, and will not
use for the benefit of themselves or others, any Confidential Information. Upon
the request of the Purchaser, the Seller and KV after the Closing Date will
deliver to the Purchaser or destroy, at the option of the Purchaser, all
tangible embodiments and copies of the Confidential Information which are in the
possession of the Seller, KV or any of their respective representatives.
Notwithstanding anything to the contrary contained herein, the Seller and KV
shall be permitted to use, and shall not be required to destroy, any
Confidential Information relating to Excluded Assets, Excluded Liabilities,
Environmental Claims, Taxes for periods prior to the Closing Date, any
Confidential Information that they reasonably determine is necessary for the
performance of their post-Closing obligations hereunder or any other
Confidential Information obtained pursuant to Section 7.11. In the event the
Seller or any of its Affiliates is requested or required (by oral request or
written request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process) to
disclose any Confidential Information, then the Seller will notify the Purchaser
promptly in writing of the request or requirement so that the Purchaser may seek
an appropriate protective order or waive compliance with this Section 7.3. If,
in the absence of a protective order or receipt of a waiver hereunder, the
Seller or any of its Affiliates is, on the advice of its legal counsel,
compelled to disclose any Confidential Information or else stand liable for
contempt, then the Seller or its Affiliate may disclose such Confidential
Information so required to be disclosed; provided that the Seller or such
Affiliate will use its best efforts to obtain at the request (and at the
expense) of the Purchaser an order or other assurance that confidential
treatment will be accorded to such Confidential Information.
7.4 Covenant Not To Compete. For a period of five years from and after the
Closing Date, so long as the Seller is an Affiliate of KV, neither the Seller
nor any Person controlled by the Seller will engage in the United States,
directly or indirectly, in the business of manufacturing, distributing, and
selling freestanding metal shelves, wall-mounted or freestanding wood cabinets,
sawhorses, workbenches and work supports; provided that nothing contained in
this Section 7.4 shall preclude or prohibit any of the Seller's Affiliates from
manufacturing, distributing, or selling any products that the Seller's
Affiliates are manufacturing, distributing, and selling as of the Closing Date.
If the final judgment of a court of competent jurisdiction declares that any
term or provision of this Section 7.4 is invalid or unenforceable, the parties
agree that the court making the determination of invalidity or unenforceability
will have the power to reduce the scope, duration or area of the term or
provision, to delete specific words or phrases or to replace any invalid or
unenforceable term or
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provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision and this Agreement will be enforceable as so modified.
7.5 Transition Services.
(a) During the Transition Period, KV will provide the Purchaser, at no
cost to the Purchaser except as hereinafter provided, warehousing and
related support and invoicing, record-keeping and information technology
services with respect to the Business and Products included in the
Purchased Assets including those located at KV's or its Affiliates'
facilities in Grand Rapids, Michigan, and Sparks, Nevada. Such services
shall be of a kind and quality substantially the same as provided to the
Seller with respect to the Business prior to the Closing Date, and shall
include, but shall not be limited to: general warehousing support; shipping
support and related logistics and receiving and related logistics support;
sales logistics and customer service; record-keeping and management
information systems services and support. The Purchaser shall reimburse KV
for KV's expenses (net of refunds received) for freight, duties, taxes, and
other out-of-pocket expenses incurred by KV in connection with its shipment
of Products.
(b) All management information systems services provided to the
Purchaser by KV pursuant to this Section 7.5 will be provided on an "as-is"
basis without any obligation by KV to conform its practices or management
information systems to the practices or systems of the Purchaser.
(c) After the Closing Date, the Purchaser will be required to make its
own arrangements for maintenance and other services for the computer
equipment and systems included in the purchased assets. Any such services
that KV elects to provide to the Purchaser through KV's own resources
during the Transition Period will be charged to the Purchaser at the
reasonable fair value thereof and shall be provided to the Purchaser by KV
on an "as-is" basis.
(d) KV will provide data transfer services to the Purchaser, at no
cost to the Purchaser, as reasonably requested by the Purchaser to enable
the transfer and conversion of data and related information technology
functions for the business from KV to the information technology systems
maintained by the Purchaser. All data will be transferred within the
established data fields in the data bases maintained by KV.
(e) On or promptly after the Closing Date, the Purchaser will
establish a new 800 number and EDI number for customer orders of Products.
KV will support these new numbers until the end of the Transition Period or
until such earlier date upon which the Purchaser arranges to re-route such
numbers to a location supported by the Purchaser. All bills of lading,
packing lists, shipping labels, and other documentation accompanying
Products shipped from the Purchaser's facility at the Premises will be
printed by the Purchaser on the Purchaser's forms; and all bills of lading,
packing lists, shipping labels, and other
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documentations accompanying shipments of Product from KV's or its
Affiliates' facilities in Grand Rapids, Michigan and Sparks, Nevada, will
be printed by KV on KV forms. All invoices for Products will be printed by
KV on the Purchaser's forms with a notation of the Purchaser's acquisition
of the Product line. During the Transition Period, KV will prepare and
deliver to the Purchaser a daily sales journal and a daily cash receipts
journal reporting sales of Products and KV's cash receipts attributable to
sales of Products. Cash receipts for each week will be reconciled on the
first business day of the succeeding week and the net amount due from or to
KV shall be settled in cash.
7.6 Right of First Refusal. For a period of five years after the Closing
Date, the Purchaser will allow KV the opportunity to bid from time to time to
supply the Purchaser's requirements for drawer slides. If the Purchaser
determines to obtain its requirements for drawer slides from new or additional
sources, the Purchaser will first give KV a reasonable opportunity to supply the
same drawer slide product, or a functionally equivalent product having
substantially the same specifications and quality, at the same price and upon
the other terms and conditions as offered to the Purchaser by the proposed new
source.
7.7 License of Marks.
(a) The Purchaser hereby grants to KV a non-transferrable royalty-free
non-exclusive license to use the Marks that appear on any packaging
materials or supplies or products of KV or the Seller not included in the
Purchased Assets but being sold under the Marks as of the Closing Date (the
"Associated Products"), for the period hereinafter provided, for use only
in connection with the manufacture, distribution, advertisement, promotion,
packaging, sale and invoicing of Associated Products. The license granted
under this Section 7.7 shall continue following the Closing Date, subject
to the limitations in duration and scope as follows:
(i) KV may continue to use any tooling included in its machinery
and equipment that incorporates the Marks into Associated Products
only until such tooling is required to be replaced as a result of
ordinary wear and tear, but in no event more than nine months
following the Closing Date, provided that prior to the expiration of
such nine month period, KV shall use reasonable efforts to modify such
tooling to eliminate the Marks if such modifications can be undertaken
without substantial cost to KV.
(ii) KV may continue to use or affix the Marks on packaging and
sales materials until the exhaustion of any supplies that are on hand
as of the Closing Date or acquired within nine months after the
Closing Date, but in no event more than 24 months following the
Closing Date.
(iii) KV may continue to distribute, advertise, promote, and sell
Associated Products bearing the Marks that are on hand as of the
Closing Date, or acquired or manufactured within nine months after the
Closing Date, until such items are sold by
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KV in the ordinary course of business, but in no event more than 24
months following the Closing Date.
(b) Except as specifically set forth in this Section 7.7, after the
Closing Date, none of KV, its Affiliates, representatives and agents, and
their respective successors and assigns, shall use the Marks in connection
with the manufacture, sale and distribution of the Associated Products or
for any other purpose. KV acknowledges the Purchaser's exclusive right,
title and interest in and to the Marks. KV will not at any time do or cause
any act directly or indirectly, contesting or in any way impairing the
Purchaser's right, title and interest in the Marks. KV shall not in any
manner represent that it has any ownership interest in the Marks, and KV
specifically acknowledges that its permitted use of the Marks shall not
create any right, title or interest in the Marks. The goodwill derived from
every permitted use of the Marks shall inure to the benefit of the
Purchaser.
(c) KV agrees to maintain the quality of each Associated Product using
the Marks in material conformance with the specifications, quality and
finish of the production samples of each Associated Product previously
maintained by KV and agrees not to change materially the Associated
Products or to make any material change in the use of the Marks for the
Associated Products without first submitting to the Purchaser samples
showing the proposed changes and obtaining written approval of the samples
by the Purchaser, which approval shall not be unreasonably withheld. At
reasonable intervals, upon written request of the Purchaser, KV shall
furnish free of charge to the Purchaser, a reasonable number of random
production samples of any Associated Products specified by the Purchaser in
its request.
(d) KV warrants that the Associated Products manufactured by KV will
be in good and usable condition and that the Associated Products will be
manufactured, sold and distributed in material compliance with all
applicable Laws.
(e) The Purchaser shall have the right to disapprove any changes to
Associated Products submitted under Section 7.7(c) if it reasonably
determines that the changes in question would impair the value and goodwill
associated with the Marks by reason of (i) their failure to satisfy
materially the general quality standards set forth in Section 7.7(c); (ii)
their use of artwork, designs, or concepts that fail accurately to depict
the trade names; (iii) their use of materials that are unethical, immoral,
or offensive to good taste; or (iv) their failure to carry proper copyright
or trademark notices.
(f) The Purchaser agrees to notify KV in writing of approval or
disapproval of any Associated Product submitted to the Purchaser as
promptly as possible after receipt of the materials, and agrees, in the
case of a disapproval, to notify KV in writing of the reasons for
disapproval. If KV disagrees with the Purchaser's determination, the
dispute will be submitted to an industry-qualified expert chosen by the KV
and the Purchaser and, in the case of disagreement over the choice of the
expert, by the chief judge of a court of competent jurisdiction for the
resolution of the dispute.
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(g) KV shall indemnify and hold the Purchaser harmless from and
against any and all costs, losses, damages, obligations, expenses and
liabilities arising out of claims made in connection with the business of
KV with which the Marks are used, including but not limited to, third party
claims arising out of injury or death to persons or damage to property
resulting from any occurrence whatsoever, or the performance or failure of
performance of KV's duties under this Section 7.7.
(h) At all times on or after the Closing Date while KV is making use
of the Marks, KV shall maintain product liability insurance with respect to
sale of Associated Products, in amounts and coverages comparable to the
amounts and coverages currently maintained by the Seller or KV and shall
name the Purchaser as an additional insured thereunder.
(i) KV does not have permission to sublicense the Marks or to transfer
any rights granted with respect to the Marks.
(j) Notwithstanding the foregoing, if KV shall breach any of the terms
of this Section 7.7, the Purchaser shall have the right to terminate the
license granted herein upon written notice to KV stating the alleged
breach, unless KV shall completely remedy, cure or cease the breach within
30 days after the Purchaser's notice. Upon termination of the license, KV
shall immediately cease any and all use of the Marks, and shall not
manufacture, sell or distribute any Associated Products bearing or
displaying the Marks.
7.8 License of KV Marks.
(a) KV hereby grants to the Purchaser a non-transferrable royalty-free
non-exclusive license to use the name of KV and the names and marks of KV
that appear on any packaging materials or supplies or Products included in
the Purchased Assets (collectively, the "Licensed KV Marks"), for the
period hereinafter provided, for use only in connection with the
manufacture, distribution, advertisement, promotion, packaging, sale and
invoicing of Products. The license granted under this Section 7.8 shall
continue following the Closing Date, subject to the limitations in duration
and scope as follows:
(i) The Purchaser may continue to use any tooling included in the
Machinery and Equipment that incorporates the names and marks of KV
into finished goods only until such tooling is required to be replaced
as a result of ordinary wear and tear, but in no event more than nine
months following the Closing Date, provided that prior to the
expiration of such nine month period, the Purchaser shall use
reasonable efforts to modify such tooling to eliminate the names and
marks of KV if such modifications can be undertaken without
substantial cost to the Purchaser.
(ii) The Purchaser may continue to use or affix the names and
marks of KV on packaging and sales materials included in the Purchased
Assets until the exhaustion of any supplies that are included in the
Purchased Assets, but in no event more than 24 months following the
Closing Date.
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(iii) The Purchaser may continue to distribute, advertise,
promote, and sell Products included in the Purchased Assets bearing
the names and marks of KV that are on hand as of the Closing Date or
acquired or manufactured within nine months after the Closing Date,
until such items are sold by the Purchaser in the ordinary course of
business, but in no event more than 24 months following the Closing
Date.
(b) Except as specifically set forth in this Section 7.8, after the
Closing Date, none of the Purchaser, its Affiliates, representatives and
agents, and their respective successors and assigns, shall use the Licensed
KV Marks in connection with the manufacture, sale and distribution of the
Products or for any other purpose. The Purchaser acknowledges KV's
exclusive right, title and interest in and to the Licensed KV Marks. The
Purchaser will not at any time do or cause any act, directly or indirectly,
contesting or in any way impairing KV's right, title and interest in the
Licensed KV Marks. The Purchaser shall not in any manner represent that it
has any ownership interest in the Licensed KV Marks, and the Purchaser
specifically acknowledges that its permitted use of the Licensed KV Marks
shall not create any right, title or interest in the Licensed KV Marks. The
goodwill derived from every permitted use of the Licensed KV Marks shall
inure to the benefit of KV.
(c) The Purchaser agrees to maintain the quality of each Product using
the Licensed KV Marks in material conformance with the specifications,
quality and finish of the production samples of each Product previously
maintained by the Seller and agrees not to change materially the Products
using the Licensed KV Marks or to make any material change in the use of
Licensed KV Marks for the Products without first submitting to KV samples
showing the proposed changes and obtaining written approval of the samples
by KV, which approval shall not be unreasonably withheld. At reasonable
intervals and after the Purchaser has commenced manufacturing the Products,
the Purchaser, upon written request of KV, shall furnish free of charge to
KV, a reasonable number of random production samples of any Products using
the Licensed KV Marks specified by KV in its request.
(d) The Purchaser warrants that the Products using the Licensed KV
Marks manufactured by the Purchaser will be in good and usable condition
and that such Products will be manufactured, sold and distributed in
material compliance with all applicable Laws.
(e) KV shall have the right to disapprove any changes to Products
submitted under Section 7.8(c) if it reasonably determines that the changes
in question would impair the value and goodwill associated with the
Licensed KV Marks by reason of (i) their failure to satisfy materially the
general quality standards set forth in Section 7.8(c); (ii) their use of
artwork, designs, or concepts that fail accurately to depict the trade
names; (iii) their use of materials that are unethical, immoral, or
offensive to good taste; or (iv) their failure to carry proper copyright or
trademark notices.
(f) KV agrees to notify the Purchaser in writing of approval or
disapproval by KV of any Product or Licensed KV Marks submitted to KV as
promptly as possible after receipt of the materials, and agrees, in the
case of a disapproval, to notify the Purchaser in
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writing of the reasons for disapproval. If the Purchaser disagrees with
KV's determination, the dispute will be submitted to an industry-qualified
expert chosen by the Purchaser and KV and, in the case of disagreement over
the choice of the expert, by the chief judge of a court of competent
jurisdiction for the resolution of the dispute.
(g) The Purchaser shall indemnify and hold KV and the Seller harmless
from and against any and all costs, losses, damages, obligations, expenses
and liabilities arising out of claims made in connection with the business
of the Purchaser with which the Licensed KV Marks are used, including but
not limited to, third party claims arising out of injury or death to
persons or damage to property resulting from any occurrence whatsoever, or
the performance of the Purchaser's duties under this Section 7.8.
(h) At all times on or after the Closing Date while the Purchaser is
making use of Licensed KV Marks, the Purchaser shall maintain product
liability insurance with respect to sale of Products, in amounts and
coverages comparable to the amounts and coverages currently maintained by
the Purchaser, and shall name the Seller and KV as additional insureds
thereunder.
(i) The Purchaser shall not have permission to sublicense the Licensed
KV Marks or to transfer any rights granted with respect to the Licensed KV
Marks.
(j) Notwithstanding the foregoing, if the Purchaser shall breach any
of the terms of this Section 7.8, KV shall have the right to terminate the
license granted herein upon written notice to the Purchaser stating the
alleged breach, unless the Purchaser shall completely remedy, cure or cease
the breach within 30 days after KV's notice. Upon termination of the
license, the Purchaser shall immediately cease any and all use of the
Licensed KV Marks, and shall not manufacture, sell or distribute any
existing Products bearing or displaying the Licensed KV Marks.
7.9 Post-Closing Remittances. If, after the Closing Date, the Purchaser or
its Affiliates shall receive any remittance from any account debtors with
respect to any sales relating to the Excluded Assets, then the Purchaser or its
Affiliates, as applicable, shall endorse such remittance to the order of KV
without recourse and forward it to KV promptly following receipt thereof. If,
after the Closing Date, KV or the Seller or their Affiliates shall receive any
remittance from any account debtors with respect to any sales of Products
included in the Purchased Assets or manufactured, distributed, or sold by the
Purchaser after the Closing Date, then KV and the Seller and their Affiliates,
as applicable, shall hold such remittance in trust for the benefit of the
Purchaser, and shall endorse such remittance to the order of the Purchaser and
forward it promptly to the Purchaser in the form in which it was received
(except for any necessary endorsement). For purposes of this Section 7.9, any
payment made by an account debtor which does not designate the sale to which
such payment relates will be deemed to relate to the earlier sales with respect
to which the account debtor still owes a payment to the Purchaser, on the one
hand, or the Seller or KV, on the other hand.
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7.10 Product Warranties.
(a) The Purchaser will accept returns of, or extend credits with
respect to, Warranty Claims in accordance with the following provisions.
The Purchaser shall notify KV of each such Warranty Claim, specifying the
customer and shipment order involved and stating whether any consequential
damages are claimed to have been suffered and shall provide a copy of all
notices, documents and other information received by the Purchaser;
provided that the Purchaser shall have no liability for any delay or
failure to provide such notice to KV. If the Products are defective or fail
to conform to the Seller's warranty or the customer's order, the Purchaser
shall repair or replace or refund or credit the purchase price of the
Products, as applicable. If the Purchaser satisfies such Warranty Claim, KV
shall promptly make a corresponding remittance to the Purchaser out of the
then-remaining Warranty Reserve if KV is then holding the Warranty Reserve,
and the Warranty Reserve shall be reduced by the amount of such remittance.
(b) If, after the Closing Date, the Seller or KV receives a Warranty
Claim, KV will handle such claim in accordance with the following
provisions. KV shall notify the Purchaser of each such Warranty Claim,
specifying the customer and shipment order involved and shall provide a
copy of all notices, documents, and other information received by KV or the
Seller or otherwise available to KV or the Seller with respect thereto. If,
as a result of any such Warranty Claim, the customer offsets or otherwise
takes a credit against any account due from such customer to the Seller or
KV, the then-remaining Warranty Reserve shall be reduced by a corresponding
amount if KV is then holding the Warranty Reserve, or the Purchaser shall
promptly make a corresponding remittance to KV upon KV's presentation of
reasonably satisfactory evidence of the satisfaction such Warranty Claim if
KV is not then holding the Warranty Reserve but only to the extent of the
then-remaining amount of the Warranty Reserve.
(c) On October 31, 1998, KV shall remit to the Purchaser in cash the
then- remaining balance of the Warranty Reserve. If and to the extent that
the Seller or KV is required to satisfy aggregate Warranty Claims after the
Closing Date in excess of the remaining Warranty Reserve, if any, KV shall
satisfy such Warranty Claims at its own cost and expense.
(d) If and to the extent that the aggregate cost to the Purchaser for
Warranty Claims exceeds the funds paid or payable to the Purchaser from the
Warranty Reserve, the Purchaser shall satisfy such Warranty Claims at its
own expense.
7.11 Access to Records after Closing. For a period of six months after the
Closing Date, KV and its representatives shall have reasonable access to all of
the Purchased Records to the extent that such access may reasonably be required
by KV in connection with matters relating to or affected by the operations of
the Business prior to the Closing Date, and KV, at its expense, may make copies
thereof as it may reasonably request. For a period of seven years after the
Closing Date, KV and its representatives shall have reasonable access to all of
the Purchased Records that are in
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the possession or control of the Purchaser to the extent that such access may
reasonably be required by KV in connection with matters relating to or affected
by the operations of the Business prior to the Closing Date, and KV, at its
expense, may make copies thereof as it may reasonably request. Such access shall
be afforded upon reasonable advance notice and during normal business hours.
Notwithstanding anything herein to the contrary, KV may retain copies of all
records of the Seller which are part of the Purchased Assets and are embodied in
KV's computer software program.
7.12 Guarantees. Schedule 7.12 sets forth a list of guarantees, bids bonds,
performance bonds, letters of credit and other agreements guaranteeing or
securing liabilities and obligations relating to the Assumed Liabilities under
which the Seller or KV has any liability. From and after the Closing, the
Purchaser will use commercially reasonable efforts to obtain and have issued
replacements for each such guarantee, bid bond, performance bond, letter of
credit and other agreement and to obtain any amendments, releases, waivers,
consents or approvals necessary to release the Seller and KV from all liability
thereunder, in each case as promptly as practicable.
7.13 Bailment of Properties.
(a) KV and the Seller hereby bail to the Purchaser the equipment and
tools listed on Exhibit 2.2(i) (collectively, the "Properties"). The
bailment of the Properties is a bailment not-for-hire, and the Properties
are bailed to the Purchaser at no charge or compensation to the Purchaser.
The Properties shall be held by the Purchaser at the Premises. As promptly
as practicable and in any event within 60 days after the Closing Date, KV
shall, at its own expense, disassemble, crate and remove the Properties
from the Premises. If the Properties are not removed within 30 days after
the Closing Date, KV shall pay rent to the Purchaser at the rate of $500
per day for each day after the expiration of such 30-day period until the
Properties are removed by KV. If the Properties are not so removed within
180 days following the Closing Date, KV and the Seller shall be deemed to
have abandoned the Properties.
(b) Until abandoned or deemed abandoned, the Properties shall be and
remain the property of the Seller. Neither title to nor ownership of the
Properties by the Seller shall be affected by incorporation or attachment
thereof to properties not owned by the Seller, and the Purchaser shall keep
the Properties free and clear of any liens, claims, or encumbrances arising
through the Purchaser. KV and the Seller shall affix markings to the
Properties and file such financing statements as they deem necessary to
identify the Seller as the owner of the Properties or give notice thereof.
(c) KV alone shall be responsible for any loss, damage, destruction,
injury, or expense suffered or incurred by the Purchaser or its officers,
employees, consultants, agents, representatives or invited or uninvited
guests arising out of the Purchaser's possession or control of the
Properties or any defect in or failure of the Properties, or any loss,
damage, or destruction of the Properties while in the possession or control
of the Purchaser. KV and the Seller shall indemnify the Purchaser and hold
the Purchaser harmless from and against all suits, actions, legal
proceedings, claims, losses, damages, costs, and expenses (including
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attorneys' fees) arising directly or indirectly out of the Purchaser's
possession or control of the Properties, including, but not limited to,
claims for injury or damage to persons or properties other than injury or
damage attributable to the gross negligence or willful misconduct of the
Purchaser.
(d) KV and the Seller shall keep the Properties insured against all
risks of loss or damage from every cause whatsoever, and shall carry public
liability insurance in a minimum amount of not less than $10,000,000 per
occurrence. All such insurance shall be in such form and shall be placed
with KV's current insurance carrier or with such other companies as may be
satisfactory to the Purchaser, which expression of satisfaction will not be
unreasonably withheld. All insurance for loss, liability, or damage to or
resulting from the Properties shall name the Purchaser as an additional
insured.
(e) The Purchaser shall permit parties authorized or employed by KV to
(i) make such examination of the Properties at the Premises during normal
business hours as KV may deem appropriate and (ii) disassemble and remove
the Properties from the Premises.
(f) KV shall be responsible for all loss or damage to the Premises and
the Purchaser's other properties and facilities arising out of the removal
of the Properties from the Premises. Without limiting the generality of the
foregoing, KV shall reimburse the Purchaser on demand for the reasonable
costs incurred by the Purchaser in the repair, modification, and
rebalancing of the dust collection system at the Premises, to the extent
required by the disconnection of the Properties from the dust collection
system.
(g) The Purchaser will make its loading dock and related facilities
available to the Seller in connection with the removal of the Properties
from the Premises; provided that the use of such facilities by the Seller
shall not interfere with the Purchaser's business operations.
7.14 Cooperative Advertising and Volume Rebates. If, after the Closing
Date, the Seller or KV receives a claim for credit or offset for cooperative
advertising or volume rebates for sales of Products, KV shall notify the
Purchaser, specifying the customer and providing a copy of all relevant
information with respect thereto. If as a result of any such claim, the customer
offsets or otherwise takes a credit against any account due from such customer
to the Seller or KV, the Purchaser shall make a corresponding remittance to KV
upon KV's presentation of reasonably satisfactory evidence of such offset or
credit; provided that the Purchaser shall have no obligation to make any such
remittances to KV in the aggregate in excess of the amount determined pursuant
to Section 2.5(g) as the liability of the Seller for cooperative advertising and
volume rebates for sales of Products before the Closing Date, less the aggregate
of all claims satisfied by the Purchaser with respect to claims for cooperative
advertising and volume rebates for sales of Products before the Closing Date.
7.15 Transferred Employees
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(a) Credit for Past Service. The Purchaser shall treat the employment
with the Seller and KV of all Transferred Employees to have been employment
with the Purchaser for purposes of eligibility and vesting credit in all of
the Employee Benefit Plans of the Purchaser.
(b) Health Insurance. The Purchaser shall, at its expense, continue
the existing medical insurance benefit plan maintained for the Transferred
Employees (and their covered dependents) through December 31, 1998, and
such or another benefit plan thereafter so that the Transferred Employees
covered by the plan will not incur a "qualifying event" (as defined in
Section 603 of ERISA) as a result of the transactions contemplated hereby.
(c) Vacation Credit. The Purchaser shall credit to each Transferred
Employee a bank of vacation time equal to the amount of accrued and unused
vacation time earned by each such Transferred Employee as of the Closing
Date.
7.16 Environmental Matters. The Purchaser shall grant KV and its
consultants and their respective contractors and subcontractors reasonable
access to the Premises after the Closing Date for so long as the Purchaser has
rights of occupancy to the Premises under the Lease, at any reasonable time that
the Purchaser and KV agree is necessary to investigate, respond to, or remediate
any Pre-Closing Environmental Matters. Any such investigation, response, or
remediation will be made at KV's sole expense and risk, and KV shall indemnify
and hold harmless the Purchaser from any property damage, injury or death caused
by KV and its consultants and their respective contractors or subcontractors
during such investigation, response, or remediation. This Section 7.16 does not
limit or expand the obligation of KV to indemnify the Purchaser beyond what is
expressly provided in this Section 7.16 and Section 8 of this Agreement for
Pre-Closing Environmental Matters.
7.17 Shared Maintenance. After the Closing Date, so long as the Purchaser
has rights of occupancy to the Premises, the Purchaser will use reasonable
efforts to consult with KV and seek KV's concurrence to maintenance of the
Premises that constitutes Shared Maintenance Obligations; provided that the
Purchaser shall not be required to seek or obtain KV's prior approval for Shared
Maintenance Obligations of an emergency or time critical nature.
Section 8. Remedies for Breaches of this Agreement.
8.1 Survival. The representations, warranties and covenants of the parties
contained in this Agreement will survive the Closing and continue in full force
and effect as follows:
(a) in the case of the representations and warranties of KV and the
Seller contained in Section 4.1 (Organization of KV and the Seller),
Section 4.2 (Authorization of Transaction), and Section 4.12 (Title and
Related Matters) or contained in any schedule delivered to the Purchaser
pursuant to this Agreement relating to such representations and warranties,
until the second anniversary of the Closing Date;
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(b) in the case of the representations and warranties of the Purchaser
contained in Section 5.1 (Organization of the Purchaser) and Section 5.2
(Authorization of Transaction) or contained in any schedule delivered to
the Seller pursuant to this Agreement relating to such representations and
warranties, until the second anniversary of the Closing Date;
(c) in the case of the representations and warranties of KV and the
Seller contained in Section 4.17 (Environmental Matters) or contained in
any schedule delivered to the Purchaser pursuant to this Agreement relating
to such representations and warranties, until the third anniversary of the
Closing Date;
(d) in the case of all other representations and warranties of KV and
the Seller and the Purchaser contained in this Agreement or contained in
any schedule delivered to the Purchaser or KV and/or the Seller, as the
case may be, pursuant to this Agreement relating to such representations
and warranties, until the second anniversary of the Closing Date; and
(e) in the case of all covenants of the Purchaser, KV and the Seller
contained in this Agreement until such covenants are fully performed.
8.2 Indemnification Provisions for Benefit of the Purchaser.
(a) In the event KV and/or the Seller breaches any of its
representations, warranties or covenants contained in this Agreement or in
any certificate delivered by KV and/or the Seller pursuant to this
Agreement and provided that the Purchaser makes a written demand for
indemnification against KV and/or the Seller within the applicable survival
period provided in Section 8.1, then KV and the Seller, jointly and
severally, shall indemnify the Purchaser from and against the entirety of
any losses, expenses (including reasonable attorneys' and experts' fees and
expenses), damages, lost profits, lost cash flow and other losses, costs
and liabilities (collectively, "Losses") the Purchaser may suffer resulting
from, arising out of, relating to, or caused by such breach (including any
Losses suffered by the Purchaser with respect to such breach after the
expiration of the applicable survival period).
(b) KV and the Seller, jointly and severally, further shall indemnify
the Purchaser from and against the entirety of any Losses the Purchaser may
suffer resulting from, arising out of, relating to, in the nature of or
caused by any Excluded Liability. In the event and to the extent any Losses
with respect to which the Purchaser is entitled to indemnification under
this Section 8.2(b) result from, arise out of, relate to, or are caused by
any Excluded Liability, the Purchaser will be entitled to be indemnified
from and against the entirety of such Losses notwithstanding the fact that
the matter giving rise to such Losses may also constitute a breach of the
representations and warranties of KV and the Seller contained in this
Agreement; provided that in such case, the Purchaser shall be entitled to
be indemnified with respect to such matter only under this Section 8.2(b).
(c) KV and the Seller, jointly and severally, further shall indemnify
the Purchaser from and against the entirety of any Losses the Purchaser may
suffer resulting from, arising
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out of, relating to, in the nature of or caused by any Shared Maintenance
Obligations, but only to the extent such Losses exceed $50,000. In the
event and to the extent any Losses with respect to which the Purchaser is
entitled to indemnification under this Section 8.2(d) result from, arise
out of, relate to, or are caused by any Shared Maintenance Obligations, the
Purchaser will be entitled to be indemnified from and against the entirety
of such Losses in excess of $50,000 notwithstanding the fact that the
matter giving rise to such Losses may also constitute a breach of the
representations and warranties of KV and the Seller contained in this
Agreement; provided that in such case, the Purchaser shall be entitled to
be indemnified with respect to such matter only under this Section 8.2(c).
(d) In the event that the Seller is no longer an Affiliate of KV, and
for so long as the Seller is not an Affiliate of KV, the Seller, without
any action on the part of the Purchaser, shall be released and discharged
from all liabilities and obligations to the Purchaser under this Section
8.2; provided that KV shall be obligated to pay, perform and discharge as
and when due all liabilities and obligations of the Seller that are so
released and discharged and no such release or discharge shall in any way
affect any other liability or obligation of KV to the Purchaser.
(e) Notwithstanding anything herein to the contrary, the Purchaser
shall not be entitled to indemnification under this Section 8.2 with
respect to a matter to the extent that an adjustment to the Purchase Price
is made for such matters pursuant to Section 2.5.
8.3 Indemnification Provisions for Benefit of the Seller and KV.
(a) In the event the Purchaser breaches any of its representations,
warranties or covenants contained in this Agreement or in any certificate
delivered by the Purchaser pursuant to this Agreement and provided that KV
or the Seller makes a written demand for indemnification against the
Purchaser within the applicable survival period provided in Section 8.1,
then the Purchaser shall indemnify the Seller and KV from and against the
entirety of any Losses the Seller or KV may suffer resulting from, arising
out of, relating to, or caused by such breach (including any losses
suffered by the Seller or KV with respect to such breach after the
expiration of the applicable survival period.)
(b) The Purchaser further shall indemnify the Seller and KV from and
against the entirety of any Losses the Seller or KV may suffer resulting
from, arising out of, relating to, or caused by any Assumed Liability. In
the event and to the extent any Losses with respect to which the Seller and
KV are entitled to indemnification under this Section 8.3(b) result from,
arise out of, relate to, or are caused by any Assumed Liability, the Seller
and KV will be entitled to be indemnified from and against the entirety of
such Losses notwithstanding the fact that the matter giving rise to such
Losses may also constitute a breach of the representations and warranties
of KV and the Seller contained in this Agreement; provided that any
obligation of the Purchaser for such indemnification shall not impair or
otherwise affect the Purchaser's remedies against KV and the Seller for
such breach.
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8.4 Procedures for Claims Between the Parties. If a claim (a "Claim") is to
be made by a party claiming indemnification (the "Claimant") against the other
party (the "Indemnifying Party"), the Claimant shall give written notice (a
"Claim Notice") to the Indemnifying Party as soon as practicable after the
Claimant becomes aware of the facts, condition or event that gave rise to Losses
for which indemnification is sought under this Section 8; provided that no delay
on the part of the Claimant in notifying the Indemnifying Party will relieve the
Indemnifying Party from any obligation hereunder unless, and then only to the
extent that, the Indemnifying Party is prejudiced as a direct consequence
thereof; and provided, further, that in no event shall such notice be effective
if given after the applicable survival period for the relevant representation
and warranty, in the case of a Claim that relates to a breach thereof. Following
receipt of the Claim Notice from the Claimant, the Indemnifying Party shall have
thirty (30) days to make such investigation of the Claim as the Indemnifying
Party deems necessary or desirable. For the purposes of such investigation, the
Claimant agrees to make available to the Indemnifying Party and/or its
authorized representative(s) the information relied upon by the Claimant to
substantiate the Claim. If the Claimant and the Indemnifying Party agree at or
prior to the expiration of said thirty (30) day period to the validity and
amount of such Claim, the Indemnifying Party shall pay to the Claimant the
amount of such Claim.
8.5 Matters Involving Third Parties. If any person not a party to this
Agreement and not an Affiliate of a party to this Agreement notifies a Claimant
with respect to any matter which may give rise to a claim against an
Indemnifying Party under this Section 8 (a "Third-Party Action"), then the
Claimant will notify the Indemnifying Party thereof (the "Third Party Action
Notice") promptly and in any event within 10 days after receiving any written
notice from a third party; provided that no delay on the part of the Claimant in
notifying the Indemnifying Party will relieve the Indemnifying Party from any
obligation hereunder unless, and then only to the extent that, the Indemnifying
Party is prejudiced as a direct consequence thereof; and provided, further, that
in no event shall such notice be effective if given after the applicable
survival period for the relevant representation and warranty, in the case of a
Claim that relates to a breach thereof. In the event the Indemnifying Party
notifies the Claimant within 20 days after the date the Claimant has given
notice of the matter that the Indemnifying Party is assuming the defense of such
matter (a) the Indemnifying Party will defend the Claimant against the matter
with counsel of its choice reasonably satisfactory to the Claimant, (b) the
Claimant may retain separate counsel at its sole cost and expense, (c) the
Claimant will not consent to the entry of a judgment or enter into any
settlement with respect to the matter without the written consent of the
Indemnifying Party (which consent will not be unreasonably withheld, conditioned
or delayed) and (d) the Indemnifying Party will not consent to the entry of a
judgment with respect to the matter or enter into any settlement which does not
include a provision whereby the plaintiff or third-party claimant in the matter
releases the Claimant from all liability with respect thereto, without the
written consent of the Claimant (which consent will not be unreasonably
withheld, conditioned or delayed). If the Indemnifying Party fails to assume the
defense of such Third-Party Action within 20 days after receipt of the
Third-Party Action Notice, the Claimant will (upon delivering notice to such
effect to the Indemnifying Party) have the right to undertake the defense,
compromise or settlement of such Third-Party Action; provided that such
Third-Party Action shall not be compromised or settled without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, conditioned or delayed. In the event the Claimant
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assumes the defense of the Third-Party Action, the Claimant will keep the
Indemnifying Party timely informed of the progress of any such defense,
compromise or settlement; provided that no failure to do so shall impair or
otherwise affect the Claimant's rights to indemnification.
8.6 Limitations. The Indemnifying Party's obligations to indemnify the
Claimant pursuant to this Section 8 shall be subject to the following
limitations:
(a) No indemnification shall be required to be made by the Seller or
KV pursuant to Section 8.2(a) unless the aggregate amount of the Claimant's
Losses exceeds $100,000 and then indemnification shall be required to be
made by the Indemnifying Party to the extent the aggregate amount of the
Claimant's Losses exceeds $100,000.
(b) No indemnification shall be required to be made by pursuant to
Section 8.2(a) for the amount of the Claimant's Losses that is in excess of
$10,000,000.
(c) From and after the Closing Date, the indemnification rights
contained in this Section 8 shall constitute the sole and exclusive
remedies of the parties for monetary damages available with respect to a
breach of any representation, warranty, or covenant in this Agreement, and
shall supersede and displace all other rights that either party may have
under statute or common law other than both (i) equitable relief and (ii)
remedies available at common law or otherwise for fraud, intentional
misrepresentation, intentional omission or intentional breach of this
Agreement.
Section 9. Miscellaneous.
9.1 Press Releases and Announcements. No party will issue any press release
or announcement relating to the subject matter of this Agreement prior to the
Closing Date without the prior written approval of the other parties unless, in
the opinion of either party, such release or announcement is required by law, in
which case such release or announcement may be made only after consultation with
the other party.
9.2 Consent to Amendments. The provisions of this Agreement may be amended
or waived only by a written agreement executed and delivered by KV and the
Purchaser with or without the agreement or consent of the Seller. No course of
dealing between the parties to this Agreement or any delay in exercising any
rights hereunder will operate as a waiver of any rights of such parties.
9.3 Successors and Assigns. No party hereto may assign or delegate any of
such party's rights or obligations under or in connection with this Agreement
without the written consent of the other parties hereto, which consent shall not
be unreasonably withheld, delayed or conditioned by any of the parties hereto;
provided that the Purchaser may without the written consent of KV or the Seller
grant a security interest in or make a collateral assignment of its rights
hereunder to the Purchaser's financing sources. No assignment by any party
pursuant to the provisions of the preceding sentence will release the assigning
party of any of its obligations under this Agreement
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or waive or release any right or remedy any other party may have against the
assigning party hereunder. Except as otherwise expressly provided herein, all
covenants and agreements contained in this Agreement by or on behalf of any of
the parties hereto will be binding upon and enforceable against the respective
successors and assigns of such party and will be enforceable by and will inure
to the benefit of the respective successors and permitted assigns of such party.
9.4 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable Law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable Law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
9.5 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together will constitute one and the
same agreement.
9.6 Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
9.7 Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally to the
recipient (receipt at such address confirmed) or when sent to the recipient by
telecopy (receipt confirmed), one business day after the date when sent to the
recipient by reputable express courier service (charges prepaid) or two business
days after the date when mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid. Such notices, demands and
other communications will be sent to the Purchaser and KV and the Seller at the
addresses indicated below:
If to the Purchaser: SteelWorks, Inc.
1500 Delaware Avenue
Des Moines, IA 50317
Attention: President
Telecopy No. 515/265-7333
With a copy (which
will not constitute
notice) to: Douglas A. Smith, President
Vanguard Investment Company
12700 Preston Road
Suite 200
Dallas, Texas 75230
Telecopy No. 972/980-1503
and
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Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Attention: Bruce G. Wilson
Telecopy No. 312/840-7731
If to KV or the Seller: Knape & Vogt Manufacturing Company
2700 Oak Industrial Blvd.
Grand Rapids, Michigan 49505-6083
Attention: William Dutmers, Chairman
Telecopy No. 616/459-3467
With a copy (which
will not constitute
notice) to: Katten, Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attention: David A. Bronner
Telecopy No. 312/577-8725
or to such other address or to the attention of such other party as the
recipient party has specified by prior written notice to the sending party.
9.8 No Third-Party Beneficiaries. This Agreement will not confer any rights
or remedies upon any Person other than KV, the Seller and the Purchaser and
their respective successors and permitted assigns.
9.9 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements or representations by or among the parties,
written or oral, that may have related in any way to the subject matter hereof.
9.10 Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rule of
strict construction will be applied against any party. The use of the word
"including" in this Agreement means "including without limitation" and is
intended by the parties to be by way of example rather than limitation.
9.11 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
9.12 Expenses. The parties shall share equally the fees and expenses of the
Accounting Firm in the performance of its responsibilities under Section 2.5.
Except as otherwise provided in this Agreement, each party shall bear its own
expenses in connection with the sale, purchase and transfer of the Purchased
Assets and the assumption of the Assumed Liabilities.
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9.13 Bulk Transfer Laws. The Purchaser acknowledges that the Seller will
not comply with the provisions of any bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement. Neither the
Seller's failure to comply with such Laws, nor the Purchaser's consent thereto,
shall affect in any way KV's and the Seller's responsibility for Excluded
Liabilities or KV's and the Seller's indemnification of the Purchaser with
respect to Excluded Liabilities.
9.14 Governing Law; Jurisdiction. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS AND
SCHEDULES HERETO WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF
CONFLICTS, OF THE STATE OF ILLINOIS. EACH OF THE PARTIES HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS OR ILLINOIS STATE COURT SITTING IN COOK COUNTY,
ILLINOIS, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND EACH OF THE PARTIES
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION,
OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORM.
EACH OF THE PARTIES FURTHER CONSENTS THAT ALL SERVICE AND PROCESS UPON IT MAY BE
MADE BY REGISTERED MAIL OR MESSENGER OR COURIER SERVICE DIRECTED OR DELIVERED TO
IT AT THE ADDRESS DESIGNATED IN SECTION 9.8 FOR NOTICES TO BE GIVEN TO SUCH
PARTY AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER
OF ACTUAL RECEIPT OR THREE BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN POSTED
BY SUCH PERSON AT SUCH ADDRESS.
9.15 Indemnification of Brokerage Fees, Etc. KV and the Seller shall
indemnify and save the Purchaser harmless from any claim or demand for
commissions or other compensation by any broker, finder, agent, attorney, or
similar intermediary claiming to have been employed by or on behalf of KV, the
Seller or any Affiliate, and to bear the cost of reasonable legal fees and
expenses incurred in defending against any such claim. The Purchaser shall
indemnify and save KV and the Seller harmless from any claim or demand for
commissions or other compensation by any broker, finder, agent, attorney, or
similar intermediary claiming to have been employed by or on behalf of the
Purchaser or any Affiliate and to bear the cost of reasonable legal fees and
expenses incurred in defending against such claim.
9.16 Disclaimer of Other Representations and Warranties. The Purchaser
acknowledges and agrees that KV and the Seller do not make, and have not made,
any representations or warranties relating to KV, the Seller, the Business or
the Purchased Assets other than the representations and warranties of KV and the
Seller expressly set forth in this Agreement or in any schedule or certificate
delivered pursuant to this Agreement. No person has been authorized by KV and
the Seller to make any representation or warranty in respect of KV, the Seller,
the Business or
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Section Page the Purchased Assets in connection with the transactions
contemplated by this Agreement that is inconsistent with or in addition to the
representations and warranties of KV and the Seller expressly set forth in this
Agreement.
9.17 Computation of Days; Holidays. Whenever this Agreement provides for a
period of time that is expressed in terms of a number of days prior to or within
which actions or events are to occur or not occur, such time period shall be
measured in calendar days unless otherwise expressly provided. Whenever this
Agreement provides for a date, day or period of time on or prior to which
actions or events are to occur or not occur, and if such date, day or last day
of such period of time falls on a Saturday, Sunday, or legal holiday, then the
same shall be deemed to fall on the immediately following business day.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first written above.
STEELWORKS, INC.
By /s/
Its: President
THE HIRSH COMPANY
By /s/ Michael G. Van Rooy
Its: Chief Operating Officer
KNAPE & VOGT MANUFACTURING COMPANY
By /s/ William Dutmers
Its: Chairman of Board
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Exhibit 2.2
NON-COMPETE AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of the 1st day of
September, by and between Steelworks, Inc., an Iowa corporation (the
"Purchaser") and Knape & Vogt Manufacturing Company, a Michigan corporation
("KV").
WHEREAS, pursuant to an Asset Purchase Agreement, dated September 1, 1998
(the "Asset Purchase Agreement"), among the Purchaser, KV and The Hirsh Company,
an Illinois corporation (the "Seller"), the Purchaser is purchasing certain
assets of the Seller on August 31, 1998 (the "Closing Date"); and
WHEREAS, Section 6 of the Asset Purchase Agreement requires that this
Agreement be executed and delivered by KV as a condition to the consummation of
such sale by the Purchaser;
NOW, THEREFORE, for and in consideration of the above recitals incorporated
herein by this reference, the mutual covenants and agreements hereinafter set
forth in this Agreement and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Except as otherwise indicated, capitalized terms used
herein are defined as set forth in the Asset Purchase Agreement.
2. Non-Compete Covenants.
A. For a period of five years from and after the Closing Date, neither
KV nor any Person controlled by KV will engage in the United States,
directly or indirectly, in the business of manufacturing, distributing, and
selling freestanding metal shelves, wall-mounted or freestanding wood
cabinets, sawhorses, workbenches and work supports; provided that nothing
contained herein shall preclude or prohibit KV or any of its Affiliates
from manufacturing, distributing, or selling products that KV or its
Affiliates other than the Seller are manufacturing, distributing, and
selling as of the Closing Date.
B. By execution of this Agreement, KV acknowledges the reasonableness
of the time, scope and geographic parameters of the restrictions imposed
upon them in this Section.
3. Consideration. The consideration for this Agreement is and shall be the
sum of Three Million Dollars ($3,000,000.00) payable in cash by wire transfer of
immediately available funds simultaneously with the execution of this Agreement.
4. Savings Clause. If the final judgment of a court of competent
jurisdiction declares that any term or provision of Section 2 above is invalid
or unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability will have the power to
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reduce the scope, duration or area of the term or provision, to delete specific
words or phrases or to replace any invalid or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision and
this Agreement will be enforceable as so modified.
5. Remedies. KV acknowledges and agrees that in the event of any violation
of the covenants contained in Section 2 hereof, Purchaser's damages will be
difficult to ascertain and the Purchaser's remedy at law will be inadequate.
Accordingly, KV agrees that, in addition to such remedies as Purchaser may have
at law, Purchaser shall be entitled to specific performance of such covenants
and to an injunction to prevent any continuing violation thereof.
6. Miscellaneous.
A. Nonassignability. Neither this Agreement nor any right or interest
hereunder shall be assignable by either party without the other's prior
written consent.
B. Binding Agreement. This Agreement shall inure to the benefit of
each of the Purchaser and KV and their respective successors and assigns.
C. Amendment and Waiver. This Agreement may not be amended, modified
or superseded, and none of the terms, covenants, representations,
warranties or conditions hereof may be waived, unless by written instrument
executed by each of the parties hereto, or in the case of a waiver, by the
party waiving compliance.
D. Governing Law. This Agreement shall be governed by the laws of the
State of Illinois.
E. Paragraph Headings. The paragraph headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
F. Severability. The invalidity or unenforceability of any particular
section, clause or provision of this Agreement shall not effect the other
sections, clauses or provision hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions
were omitted and the remainder construed so as to give them meaningful and
valid effect. It is the intention of the parties that if any particular
provision of this Agreement is capable of two constructions, one of which
would render the provision valid, the provision shall have the meaning
which renders it valid.
G. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be given or made (and shall be
deemed to have been duly given or made upon receipt) by delivery in person,
by courier service, by telecopy, or by registered or certified mail
(postage prepaid, return receipt requested) to
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the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
If to the Purchaser: SteelWorks, Inc.
1500 Delaware Avenue
Des Moines, IA 50317
Attention: President
Telecopy No. 515/265-7333
With a copy (which
will not constitute
notice) to: Douglas A. Smith, President
Vanguard Investment Company
12700 Preston Road
Suite 200
Dallas, Texas 75230
Telecopy No. 972/980-1503
and
Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Attention: Bruce G. Wilson
Telecopy No. 312/840-7731
If to KV: Knape & Vogt Manufacturing Company
2700 Oak Industrial Blvd.
Grand Rapids, Michigan 49505-6083
Attention: William Dutmers, Chairman
Telecopy No. 616/459-3467
With a copy (which
will not constitute
notice) to: Katten, Muchin & Zavis
525 W. Monroe Street
Chicago, Illinois 60661-3693
Attention: David A. Bronner
Telecopy No. 312/577-8725
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H. Entire and Sole Agreement. This Agreement constitutes the entire
agreement between the parties relating to its premises, and supersedes all
prior agreements, representations, warranties and understandings, whether
oral or written, express or implied, with respect to the subject matter
hereof.
I. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original. If less than all
of the parties have executed each counterpart but each party has executed a
counterpart, all counterparts taken together shall constitute one
instrument.
* * * * *
DOCUMENT #=844955.01; AUTHOR=BGODELLA
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IN WITNESS WHEREOF, the parties have executed this Non-Compete Agreement as
of the date first stated above.
STEELWORKS, INC.
By: /s/
Its: President
KNAPE & VOGT MANUFACTURING
COMPANY
By: /s/ William Dutmers
Its: Chairman of Board
DOCUMENT #=844955.01; AUTHOR=BGODELLA
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