SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 5, 1997
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Harrow Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-9440 52-1499045
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
2627 East Beltline, SE, Grand Rapids, Michigan 49546
(Address of principal executive offices)
(616) 942-1440
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Following the execution of an Asset Purchase Agreement dated as of December
5, 1997 (the "Agreement"), to be effective as of November 30, 1997, between
Harrow Products, Inc., a wholly-owned subsidiary of the Registrant ("Harrow
Products") and Rutt Custom Cabinetry LLC, a Pennsylvania limited liability
company ("RCCLLC"), Harrow Products completed the sale to RCCLLC of
substantially all of the assets of its Rutt Division. The determination of the
purchase price was a result of arms-length negotiation. It is anticipated that
the cash purchase price will be approximately Twelve Million Dollars
($12,000,000), plus Seller retained Notes Receivable and the aggregate amount of
Assumed Liabilities (as such terms are defined in the Agreement), subject to
adjustment pursuant to the terms of the Agreement which will be based on a
Working Capital Statement to be prepared as of December 5, 1997. The sale is
expected to result in a gain.
There were no material relationships between RCCLLC and the Company or any
of its affiliates, directors, officers or associates of any such director or
officer.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pro Forma Condensed Financial Information
The pro forma financial information shall be filed by Registrant on Form 8
as soon as practicable, but not later than February 20, 1998.
(b) Exhibits
Asset Purchase Agreement dated as of December 5, 1997, between Harrow
Products and RCCLLC.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
reporting person has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HARROW INDUSTRIES, INC.
(Registrant)
December 19, 1997 By: /s/ John S. Hogan
Name: John S. Hogan
Title: VP & CFO
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ASSET PURCHASE AGREEMENT
By and Among
HARROW PRODUCTS, INC., HARROW INDUSTRIES, INC.
and
RUTT CUSTOM CABINETRY, LLC
Dated December 5, 1997
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Table of Contents
Page
1. DEFINITIONS............................................................... 1
2. SALE OF ASSETS; ASSUMPTION OF LIABILITIES; CLOSING........................ 13
2.1 Sale of Asset; Assumption of Liabilities.............................. 13
2.2 Purchase Price........................................................ 13
2.3 Closing............................................................... 14
2.4 Closing Obligations................................................... 14
2.5 Adjustment Amount; Adjustment Procedure............................... 15
2.6 No Assumption of Retained Liabilities................................. 16
2.7 Allocation of Purchase Price.......................................... 16
3. REPRESENTATIONS AND WARRANTIES OF SELLER.................................. 16
3.1 Organization and Good Standing........................................ 16
3.2 Authority; No Conflict................................................ 17
3.3 Capitalization........................................................ 18
3.4 Financial Statements.................................................. 18
3.5 Books and Records..................................................... 19
3.6 Title to Properties; Encumbrances..................................... 19
3.7 Condition and Sufficiency of Assets................................... 20
3.8 Accounts Receivable................................................... 20
3.9 Inventory............................................................. 21
3.10 No Undisclosed Liabilities........................................... 21
3.11 Taxes................................................................ 21
3.12 No Material Adverse Change........................................... 21
3.13 Employee Benefits.................................................... 22
3.14 Compliance with Applicable Legal Requirements;
Governmental Authorizations.......................................... 22
3.15 Legal Proceedings; Orders............................................ 23
3.16 Absence of Certain Changes and Events................................ 24
3.17 Contracts; No Defaults............................................... 26
3.18 Insurance............................................................ 28
3.19 Environmental Matters................................................ 28
3.20 Employees............................................................ 30
3.21 Labor Relations; Compliance.......................................... 30
3.22 Intellectual Property................................................ 31
3.23 Certain Payments..................................................... 34
3.24 Disclosure........................................................... 34
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3.25 Relationships with Related Persons................................... 34
3.26 Brokers or Finders................................................... 35
3.27 Knowledge............................................................ 35
3.28 Warranties........................................................... 35
3.29 Warranty Reserve..................................................... 35
3.30 Inventory Reserve.................................................... 35
3.31 Accounts Receivable Reserve.......................................... 35
4. REPRESENTATIONS AND WARRANTIES OF BUYER................................... 35
4.1 Organization and Good Standing........................................ 35
4.2 Authority; No Conflict................................................ 36
4.3 Certain Proceedings................................................... 36
4.4 Brokers or Finders.................................................... 37
4.5 Solvency.............................................................. 37
5. COVENANTS OF SELLER....................................................... 37
5.1 Access and Investigation.............................................. 37
5.2 Operation of the Rutt Division Business............................... 37
5.3 Negative Covenant..................................................... 37
5.4 Required Approvals.................................................... 38
5.5 Notification.......................................................... 38
5.6 No Negotiation........................................................ 38
5.7 Best Efforts.......................................................... 38
5.8 Conversion of Flagship Receivables.................................... 38
5.9 Assignment of Merchandise Mart Lease.................................. 39
5.10 Operations Between Effective Date and Closing Date................... 39
5.11 Environmental Matters................................................ 39
5.12 Product Liability Insurance.......................................... 39
6. COVENANTS OF BUYER........................................................ 39
6.1 Approvals of Governmental Bodies...................................... 39
6.2 Best Efforts.......................................................... 40
6.3 Assumption of Merchandise Mart Lease.................................. 40
6.4 Product Liability Insurance........................................... 40
6.5 Reimbursement of Seller............................................... 40
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE....................... 40
7.1 Accuracy of Representations........................................... 40
7.2 Seller's Performance.................................................. 41
7.3 Consents.............................................................. 41
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7.4 Additional Documents.................................................. 41
7.5 No Proceedings........................................................ 41
7.6 No Claim Regarding Sale Proceeds...................................... 42
7.7 No Prohibition........................................................ 42
7.8 Delivery of Buyer Flagship Notes...................................... 42
7.9 Financing............................................................. 42
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE...................... 42
8.1 Accuracy of Representations........................................... 42
8.2 Buyer's Performance................................................... 43
8.3 Consents.............................................................. 43
8.4 Additional Documents.................................................. 43
8.5 No Injunction......................................................... 43
8.6 No Proceedings........................................................ 43
8.7 No Prohibition........................................................ 43
8.8 Delivery of Seller Flagship Notes..................................... 44
9. TERMINATION............................................................... 44
9.1 Termination Events.................................................... 44
9.2 Effect of Termination................................................. 44
10. INDEMNIFICATION; REMEDIES................................................ 45
10.1 Survival; Right to Indemnification Not Affected by Knowledge......... 45
10.2 Indemnification and Payment of Damages by Seller..................... 45
10.3 Indemnification and Payment of Damages by Seller
--Environmental Matters.............................................. 46
10.4 Indemnification and Payment of Damages by Buyer...................... 48
10.5 Time Limitations..................................................... 48
10.6 Limitations on Amount--Seller........................................ 49
10.7 Limitations on Amount--Buyer......................................... 50
10.8 Procedure for Indemnification--Third Party Claims.................... 50
10.9 Procedure for Indemnification--Other Claims.......................... 51
11. GENERAL PROVISIONS....................................................... 52
11.1 Employees of Seller.................................................. 52
11.2 Expenses............................................................. 52
11.3 Public Announcements................................................. 52
11.4 Confidentiality...................................................... 52
11.5 Notices.............................................................. 53
11.6 Jurisdiction; Service of Process..................................... 54
11.7 Further Assurances................................................... 54
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11.8 Waiver............................................................... 54
11.9 Entire Agreement and Modification.................................... 54
11.10 Schedules........................................................... 55
11.11 Assignments, Successors, and No Third-Party Rights.................. 55
11.12 Severability........................................................ 55
11.13 Section Headings, Construction...................................... 55
11.14 Governing Law....................................................... 56
11.15 Counterparts........................................................ 56
11.16 Guaranty............................................................ 56
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of December 5,
1997, to be effective as of November 30, 1997 (the "Effective Date") by RUTT
CUSTOM CABINETRY. LLC, a Pennsylvania Limited Liability Company (the "Buyer"),
HARROW PRODUCTS, INC., a Delaware corporation (the "Seller") and HARROW
INDUSTRIES, INC., a Delaware corporation ("Industries").
RECITALS
A. Industries indirectly owns all of the outstanding capital stock of the
Seller.
B. The Seller desires to sell, and the Buyer desires to purchase, certain
assets of the Seller and the Buyer desires to assume certain liabilities of the
Seller, on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the parties hereto, intending to be legally bound, hereby agree as follows:
1 . DEFINITIONS. For purposes of this Agreement, the following terms have
the meanings specified or referred to in this Section 1:
"Accounts Receivable Reserve"--as defined in Section 3.31.
"Adjustment Amount "--as defined in Section 2.5.
"Applicable Contract"--any Contract (a) under which the Seller has or will
acquire any rights relating to the operation of the current business of the Rutt
Division, (b) under which the Seller has or will become subject to any
obligation or liability relating to the operation of the current business of the
Rutt Division, or (c) by which the Seller or any of the assets owned or used by
it relating to the operation of the current business of the Rutt Division is or
will become bound.
"Applicable Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty applicable to
the Facilities, Assets or the business of the Rutt Division as in effect as of
the Effective Date.
"Assets"--all of the Seller's property and assets, as of the Closing Date,
necessary for the operation of the current business of the Rutt Division, real,
personal or mixed, tangible and
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intangible, of every kind and description, wherever located, other than the
Excluded Assets, including, without limitation, the following, each as it is
necessary for the operation of the current business of the Rutt Division:
(a) all fee, leasehold and other title to all real property owned and
leased by the Seller and necessary for the operation of the current
business of the Rutt Division, including the real property described in
Schedule l(a), together with all improvements, buildings, and fixtures
located thereon or therein and all construction in progress;
(b) all machinery, fixtures, equipment, computer hardware and software
(subject to any restrictions by the licensor on the assignment thereof),
tools, supplies, spare parts, furniture, vehicles and other tangible
personal property assets owned or leased by the Seller and necessary for
the operation of the current business of the Rutt Division, including,
without limitation, those items described in Schedule l(b) hereto (which
includes an appraisal dated December 1, 1997);
(c) all inventories of raw materials, work-in-progress and finished
goods of the Seller relating to the operation of the current business of
the Rutt Division;
(d) except as provided for in the definition of "Excluded Assets," all
trade accounts receivable and other rights to receive payments relating to
the operation of the current business of the Rutt Division from customers
of the Seller (including without limitation the Buyer Flagship Receivables
but excluding the Seller Flagship Receivables), including all trade
accounts receivable representing amounts receivable in respect of goods
shipped and/or products sold and/or services rendered to customers of the
Seller on or prior to the Closing Date, and the full benefit of all
security for such accounts and debts, and those other accounts receivable
and notes receivable (including any claims, remedies and other rights
relating to any of the foregoing) listed on Schedule l(d);
(e) except as provided for in the definition of "Excluded Assets," all
of the Seller's interest in (including all rights, benefits and
obligations) all Contracts related to the operation of the current business
of the Rutt Division (subject to any restrictions on the assignment
thereof), including those described on Schedule l(e), and all outstanding
offers of solicitations to enter into any Contract to the extent such
offers are valid with respect to the Buyer, except for any Contract
included in the Excluded Assets;
(f) all Governmental Authorizations owned, held or utilized by the
Seller in connection with the ownership of the Assets and the operation of
the current business of the Rutt Division, and all pending applications
therefor, in each case to the extent transferrable to the Buyer, including
those listed on Schedule 1(f);
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(g) except as provided for in the definition of "Excluded Assets", all
data and records relating solely to the operations of the current business
of the Rutt Division, including client and customer lists and records,
referral sources, research and development reports and records, production
reports and records, equipment logs, operating guides and manuals, copies
of financial records, correspondence and other similar documents and
records; provided, however, that to the extent that any such data and
records do not solely relate to the current business of the Rutt Division
("Joint Data"), the Assets shall only include those which relate solely to
the current business of the Rutt Division and the Seller shall deliver at
Closing to Buyer copies of the Joint Data;
(h) all of the intangible rights and property and Intellectual
Property Assets of the Seller related to the operation of the current
business of the Rutt Division (subject to any restrictions on the
assignment thereof), including all software (including all source codes and
object codes), products, trade secrets, know-how, processes, methods,
plans, research data, marketing plans and strategies, forecasts, telephone
and fax numbers, domain names and web sites, trademarks, service marks,
trade names, patents and patent rights, logos and copyrights, and all
applications for trademark, service mark, trade name, patent and copyright
registrations, including those listed on Schedule l(h);
(i) except as provided for in the definition of "Excluded Assets," all
claims of the Seller against third parties relating to the Seller's
business or the Assets, whether choate or inchoate, known or unknown,
contingent or otherwise, including all such claims listed on Schedule 1(i);
(j) all property insurance proceeds (including applicable deductibles,
copayments or self-insured requirements) arising in connection with damage
to the Assets occurring prior to the Closing Date, to the extent not
expended prior to the Closing Date and to the extent such proceeds do not
serve as reimbursement to the Seller for payment previously made for the
repair or replacement of Assets covered by such insurance, for the repair
or restoration of the Assets;
(k) those prepaid expenses relating to the Assets which are listed on
Schedule l(k);
(1) the goodwill of the Rutt Division;
(m) except as provided for in the definition of "Excluded Assets," all
other properties and assets of every kind, character or description,
tangible or intangible, owned by the Seller and necessary for the operation
of the current business of the Rutt Division, to the extent assignable in
the case of intangible properties and assets, whether or not similar to the
items specifically set forth above, except the Excluded Assets; and
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(n) all cash and cash equivalents of the Rutt Division acquired after
the Effective Date to the extent such cash and cash equivalents do not
relate to the Excluded Assets.
"Assumed Liabilities"--(i) all trade accounts payable and accrued liabilities of
the type listed on Schedule 2 that are reflected on the Rutt Interim Balance
Sheet (other than trade accounts payable and accrued liabilities with respect to
a Related Person of the Seller); (ii) all trade accounts payable and accrued
liabilities of the type listed on Schedule 2 (other than trade accounts payable
to any Related Person of the Seller) that have been incurred in the ordinary
course of business between the date of the Rutt Interim Balance Sheet and the
Effective Date; (iii) all trade accounts payable and accrued liabilities of the
type listed on Schedule 2 (other than trade accounts payable to any Related
Person of the Seller) that have been incurred in the ordinary course of business
between the Effective Date and the Closing Date, but only to the extent such
payables and accrued liabilities, other than those necessary to fill customer
orders placed or to be placed in the ordinary course of business, were approved
in writing by Buyer prior to being incurred; (iv) all liabilities and
obligations to the Rutt Division's customers for work orders outstanding and
work-in-progress as of the Effective Date; (v) all liabilities and obligations
to the Rutt Division's customers under written warranty agreements given by the
Rutt Division to its customers prior to the Closing Date; (vi) all liabilities
and obligations of the Rutt Division arising after the Effective Date (other
than any liability or obligation for a breach or default which occurred prior to
the Effective Date) under the Contracts described on Schedule 1(e); (vii) all
liabilities and obligations of the Seller arising after the Effective Date
(other than any liability or obligation for a breach or default which occurred
prior to the Effective Date) under any Contract included in the Assets and
entered into by the Rutt Division in the ordinary course of business between the
Effective Date and the Closing Date, but only to the extent such liabilities and
obligations, other than those necessary to fill customer orders placed or to be
placed in the ordinary course of business, were approved in writing by Buyer
prior to being incurred; (viii) all liabilities and obligations of the Rutt
Division described on Schedule 2 hereto; (ix) real estate taxes related to any
real property included in the Assets accruing from and after the Effective Date;
(x) all product liability and warranty claims with respect to all products
manufactured by Buyer on or after the Closing Date, except for those claims
covered in clause xi; (xi) warranty claims with respect to formulation changes
(such changes are identified on Schedule 2) in coatings and sealers contained on
products manufactured by the Buyer, except with respect to such products as will
have been manufactured by Buyer at any time within the six (6) month period
commencing on the Effective Date and with respect to which such warranty claims
are asserted within the eighteen (18) month period commencing on the Effective
Date; and (xii) fifty percent (50%) of any taxes, other than income taxes,
arising from the sale of the Assets contemplated hereby.
"Best Efforts"--the efforts that a prudent Person desirous of achieving a result
would use in similar circumstances to ensure that such result is achieved as
expeditiously as possible; provided, however, that an obligation to use Best
Efforts under this Agreement does not
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require the Person subject to that obligation to expend any money other than
inconsequential amounts or to take actions that would result in a materially
adverse change in the benefits to such Person of this Agreement and the
Contemplated Transactions.
"Buyer"--as defined in the first paragraph of this Agreement.
"Buyer Flagship Notes" --as defined in Section 5.8(b).
"Buyer Flagship Receivables" --all trade accounts receivable and other rights to
receive payment from the following two Rutt Division dealers of the Seller as of
the Effective Date in the aggregate amount of $300,000: (1) Kitchen & Bath
Studios (d/b/a Rutt of Seattle), and (2) The Kitchen Showcase of Vancouver.
"Buyer Indemnified Persons "--as defined in Section 10.2.
"Closing"--as defined in Section 2.3.
"Closing Date "--the date and time as of which the Closing actually takes place.
"Consent"--any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
"Contemplated Transactions"--all of the transactions contemplated by this
Agreement.
"Contract"--any agreement, contract, obligation, promise, or undertaking that is
legally binding on the Seller with respect to the business of the Rutt Division.
"Damages "--as defined in Section 10.2.
"Effective Date" --as defined in the first paragraph of the Agreement.
"Encumbrance"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
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"Environmental, Health, and Safety Liabilities"--any cost, damages, expense,
liability, obligation, or other responsibility (including financial) arising
from or under Environmental Law or Occupational Safety and Health Law and
consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, cleanup or inspection costs and expenses arising
under Environmental Law or Occupational Safety and Health Law; or
(c) corrective action, including any compliance or corrective
measures, investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law or natural resource
damages;
The terms "removal." "remedial," and "response action," have the meanings set
forth in the Comprehensive Environmental Response, Compensation, and Liability
Act, 42 U.S.C. Sections 9601 et seq., as amended ("CERCLA") and the Pennsylvania
Hazardous Sites Cleanup Act, 35 P.S. Sections 6020, et seq., as amended
("HSCA").
"Environmental Law"--CERCLA, HSCA the Resource Conversation and Recovery Act,
the Clean Air Act, the Clean Water Act, the Solid Waste Management Act, the
Storage Tank and Spill Prevention Act and any Applicable Legal Requirement that
requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual Releases or Threat of Releases of Hazardous Materials,
violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction,
that could have impact on the Environment;
(b) preventing or reducing to acceptable levels the Release of
Hazardous Materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of Hazardous Materials that are generated;
(d) regulating Hazardous Activities that impact, or could impact, that
Environment or protecting resources, species, or ecological amenities;
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(e) reducing to acceptable levels the risks inherent in the
transportation of Hazardous Materials;
(f) Cleanup of Hazardous Materials that have been released, preventing
the Threat of Release, or paying the costs of such Cleanup or prevention;
or
(g) making responsible parties pay to private parties or into
governmental trusts for actual or potential damages done to their health or
Environment, or for failure to comply with any Applicable Legal Requirement
relating to Hazardous Activities or a Release or Threat of Release of
Hazardous Materials.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"Escrow Agreement "--as defined in Section 2.4.
"Exchange Act"--the Securities Exchange Act of 1934, as amended.
"Excluded Assets "--notwithstanding anything to the contrary contained in this
Agreement, the following assets of Seller relating to the current business of
the Rutt Division (collectively, the "Excluded Assets") are not part of the sale
and purchase contemplated hereunder, are excluded from the Assets being conveyed
hereunder, and shall remain the property of the Seller after the Closing:
(a) all cash and cash equivalents and securities and short term
investments but only to the extent existing as of the Effective Date;
(b) the minute books, stock records and corporate seals of the Seller;
(c) the shares of capital stock of the Seller;
(d) all inventory disposed of or exhausted on or prior to the Closing
Date in the ordinary course of business;
(e) all prepaid expenses not listed in Schedule l(k), claims for
refunds and rights to offset in respect thereof;
(f) all of Seller's insurance policies and rights related thereto as
of the Closing Date, including any rights arising with respect to any
refunds due with regard to insurance premiums payable to the extent related
to insurance policies constituting Excluded Assets;
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(g) all contracts listed on Schedule 3(g),
(h) all of Seller's personnel records,;
(i) all records that the Seller is required by law to retain in its
possession;
(j) all claims for refunds of taxes and other governmental charges of
whatever nature for all periods prior to the Closing Date;
(k) all rights and funds in connection with any Plan including but not
limited to employee benefit plans or welfare plans and any trust relating
thereto;
(l) all rights and funds in connection with any worker's compensation
insurance;
(m) the assets comprising the Seller's management information system
in Coopersville, Michigan;
(n) any assets expressly designated in Schedule 3(n) as Excluded
Assets;
(o) the Seller Flagship Receivables;
(p) the Moser claim, pending in the Court of Common Pleas of Lancaster
County, Pennsylvania and docketed at No. 01733-1997; and
(q) any assets which are not necessary for the operation of the
current business of the Rutt Division.
"Facilities"--any real property, leaseholds, or other interests currently or
formerly owned or operated by the Seller in connection with the Rutt Division
and any buildings, plants, structures, or equipment (including motor vehicles,
tank cars, and rolling stock) currently or formerly owned or operated by the
Seller.
"Family" of an individual includes (i) the individual, (ii) the individual's
spouse, (iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual.
"GAAP"--generally accepted United States accounting principles, applied on a
consistent basis.
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"Governmental Authorization "--any approval, consent, license, permit, waiver,
or other authorization issued. granted, given, or otherwise made available by or
under the authority of any Governmental- Body or pursuant to any Applicable
Legal Requirement.
"Governmental Body "--any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature,
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity
and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
"Hazardous Activity "--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses any unreasonable risk of harm to persons or property on or off the
Facilities, or that may adversely affect the value of the Facilities, relating
to the presence, Release or Threat of Release of Hazardous Materials.
"Hazardous Materials"--any waste or substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, and specifically including petroleum and petroleum products
(including fuel oil or any fraction thereof) and asbestos or asbestos-containing
materials.
"Indemnified Persons "--as defined in Section 10.4.
"Industries"--Harrow Industries, Inc., a Delaware corporation.
"Industries Audited Balance Sheet"--as defined in Section 3.4.
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"Intellectual Property Assets "--as defined in Section 3.22.
"Inventory Reserve "--as defined in Section 3.30.
"IRC" --the Internal Revenue Code of 1986, as amended, or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a particular
fact or other matter if such individual is actually aware of such fact or other
matter. The Seller will be deemed to have "Knowledge" of a particular fact or
matter only if one or more of the following individuals are actually aware of
such fact or other matter. James Dahlke, John Hogan, Jerry Price, Betsy Raymond,
Russ Orban, Ed Stone, Dennis Smith, Richard Boone, and Don Hesse (collectively
the "Management Group").
"Management Group "--James Dahlke, John Hogan, Jerry Price, Betsy Raymond, Russ
Orban, Ed Stone, Dennis Smith, Richard Boone and Don Hesse.
"Material Interest "--direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act) of voting securities or other voting
interests representing at least 10% of the outstanding voting power of a Person
or equity securities or other equity interests representing at least 10% of the
outstanding equity securities or equity interests in a Person.
"Merchandise Mart Lease "--The lease dated November 3, 1994 and effective as of
December 1, 1994 (including any amendments or riders thereto) entered into
between the Seller, as lessee, and Merchandise Mart, as lessor, relating to
certain real property located at Merchandise Mart Plaza, World Trade Center
Chicago, Chicago, IL, 60654.
"MIS Fees and Expenses" --the following fees, as well as all expenses related to
the Seller's provisions of the MIS Services, to be paid by the Buyer to the
Seller as consideration for the Seller's provision to the Buyer of the MIS
Services pursuant to an MIS Service Agreement: (1) $6,250 per month for the
first twelve months following the Closing Date; and (2) $10,000 per month for
the subsequent six months.
"MIS Services" --services to be performed by the Seller on behalf of the Buyer
pursuant to an MIS Services Agreement related to the management information
systems utilized in the carrying out of the business of the Rutt Division. Such
services shall be limited to routine maintenance on such management information
systems which existed prior to the Closing Date and shall not include bringing
such systems into compliance for the year 2000.
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"Noncompetition Agreement"--as defined in Section 2.4(a)(ii).
"Occupational Safety and Health Law "--any Applicable Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards.
"Order"--any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
"Organizational Documents "--(a) the articles or certificate of incorporation
and the bylaws of a corporation; (b) the partnership agreement and any statement
of partnership of a general partnership; (c) the limited partnership agreement
and the certificate of limited partnership of a limited partnership; (d) any
charter or similar document adopted or filed in connection with the creation,
formation, or organization of a Person; and (e) any amendment to any of the
foregoing.
"Person "--any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"Plan "--as defined in Section 3.13.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Related Person "--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
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With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
"Release"--any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional, except as permitted by and in compliance with all
Environmental Laws.
"Representative"--with respect to a particular Person, any director, member,
manager, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Retained Liabilities "-- all liabilities and obligations of the Seller whether
known or unknown and whether absolute, accrued, contingent, or otherwise
(including, but not limited to, liabilities and obligations incurred prior to
the Effective Date related to salaries and wages, Pennsylvania state sales
taxes, FICA taxes, federal and state unemployment taxes, management incentive
programs, gain sharing programs, workers' compensation, group
insurance/surcharge, general liability insurance, automobile insurance, and
property insurance) other than the Assumed Liabilities.
"Rutt Division "--the Rutt Custom Kitchens Division of the Seller.
"Rutt Interim Balance Sheet"--as defined in Section 3.4.
"Securities Act"--the Securities Act of 1933, as amended, or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
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"Seller"--as defined in the first paragraph of this Agreement.
"Seller Flagship Notes" -- as defined in Section 5.8(a).
"Seller Flagship Receivables "--all trade accounts receivable and other rights
to receive payments from the following four Rutt Division dealers of the Seller
as of the Effective Date in the aggregate amount of $700,000: (1) Kitchen & Bath
Studios (d/b/a Rutt of Seattle), (2) Marimar Designs, Inc. (d/b/a Rutt of Los
Angeles), (3) Deborah Williams Oertle, Ltd. (d/b/a Rutt of Chicago) and (4) The
Kitchen Showcase of Vancouver.
"Seller Indemnified Persons "--as defined in Section 10.4.
"Subsidiary "--with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries.
"Tax Return "--any return (including any information return), report, statement,
schedule, notice, form-n, or other document or information filed with or
submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Applicable Legal Requirement relating to any tax.
"Threat of Release "--a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"Warranty Reserve "--as defined in Section 3.29.
2. SALE OF ASSETS; ASSUMPTION OF LIABILITIES: CLOSING.
2.1 Sale of Assets: Assumption of Liabilities. Subject to the terms and
conditions of this Agreement, at the Closing, and effective as of the Effective
Date (a) the Seller will sell and transfer the Assets to the Buyer, and the
Buyer will purchase the Assets from the Seller; and (b) the Buyer will assume
only the Assumed Liabilities.
2.2 Purchase Price. The purchase price (the "Purchase Price") for the
Assets will be (a) the amount of Twelve Million Dollars ($12,000,000), as
adjusted by an amount equal to the Adjustment Amount and (b) the assumption of
the Assumed Liabilities.
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2.3 Closing. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of counsel for Buyer's lender, Davis,
Polk & Wardwell, at 9:00 a.m. on December 5, 1997, or at such other time and
place as the parties may agree. Subject to the provisions of Section 9, failure
to consummate the purchase and sale provided for in this Agreement on the date
and time and at the place determined pursuant to this Section 2.3 will not
result in the termination of this Agreement and will not relieve any party of
any obligation under this Agreement.
2.4 Closing Obligations. At the Closing:
(a) The Seller will deliver to the Buyer:
(i) an Assignment and Bill of Sale in the form of Exhibit 2.4(i)
executed by the Seller (the "Bill of Sale");
(ii) a noncompetition agreement in the form of Exhibit
2.4(a)(ii), executed by the Seller and Industries (the "Noncompetition
Agreement"); and
(iii) a certificate executed by an officer of the Seller,
certifying to the Buyer that each of the Seller's representations and
warranties in this Agreement was accurate in all respects as of the
date of this Agreement and, except as to those representations and
warranties that contain express materiality qualifications, is
accurate in all material respects as of the Closing Date as if made on
the Closing Date.
(b) The Buyer will deliver:
(i) Eleven Million Six Hundred Thousand Dollars ($11,600,000), by
wire transfer to the account specified by the Seller;
(ii) to the Seller an Assumption of Liabilities instrument
executed by the Buyer in the form of Exhibit 2.4(b)(ii) (the
"Assumption Agreement");
(iii) to the escrow agent referred to in Section 2.4(d), the sum
of Four Hundred Thousand Dollars ($400,000) by wire transfer; and
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(iv) to the Seller, a certificate executed by the sole member of
the Buyer certifying to the Seller that each of the Buyer's
representations and warranties in this Agreement was accurate in all
respects as of the date of this Agreement and, except as to those
representations and warranties that contain express materiality
qualifications, is accurate in all material respects as of the Closing
Date as if made on the Closing Date.
(c) The Seller and Buyer will execute and deliver an MIS Services
Agreement substantially in the form of Exhibit 2.4(c).
(d) The obligations of the Seller under Section 2.5 of this Agreement
shall be secured, in part, by the delivery into escrow of cash in the
amount of Four Hundred Thousand Dollars ($400,000) by the Buyer, pursuant
to the terms of the Escrow Agreement substantially in the form of Exhibit
2.4(d) hereto to be entered into between and among the Buyer, the Seller,
and the escrow agent named therein (the "Escrow Agreement"). The remedies
of the Buyer under the Escrow Agreement to enforce the obligations of the
Seller under Section 2.5 of this Agreement shall be in addition to any
other remedies the Buyer has under this Agreement and the other documents
executed in connection herewith.
2.5 Adjustment Amount: Adjustment Procedure.
(a) The Adjustment Amount (which may be a positive or negative number)
will be calculated in accordance with GAAP as follows: If "Working Capital"
(as defined in Schedule 2.5 and Attachment A thereto) as of the Effective
Date is greater than Two Million Four Hundred Thousand Dollars
($2,400,000), the amount of such excess ("Excess") shall be the Adjustment
Amount and shall be added to the Purchase Price. If "Working Capital" (as
defined in Schedule 2.5 and Attachment A thereto) as of the Effective Date
is less than Two Million Dollars ($2,000,000), the amount of such
deficiency ("Deficiency") shall be the Adjustment Amount and shall be
subtracted from the Purchase Price.
(b) The Seller will prepare, and will cause Seller's accountant, Ernst
& Young, LLP to review, a statement of Working Capital of the Rutt Division
as of the Effective Date (the "Working Capital Statement"). The Seller will
deliver the Working Capital Statement to the Buyer and Buyer's accountant,
Arthur Andersen, LLP within sixty (60) days after the Effective Date. If
within thirty (30) days following delivery of the Working Capital
Statement, the Buyer has not given the Seller notice of its objection to
the Working Capital Statement (such notice must contain a statement of the
basis of the Buyer's
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objection), then the Working Capital reflected in the Working Capital
Statement will be used in computing the Adjustment Amount. If the Buyer
gives such notice of objection then the Buyer and the Seller, and their
respective accountants, shall attempt to resolve all issues in dispute
contained in the Working Capital Statement. If the Buyer and the Seller
cannot resolve all such issues within forty-five (45) days from the
delivery of the Working Capital Statement, then the remaining issues in
dispute will be submitted to Deloitte & Touche (LLP) certified public
accountants (the "Accountants"), for resolution. Each party will furnish to
the other and to the Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants or the other
party may request and are available to that party (or its independent
public accountants). Each party will be afforded the opportunity to present
to the Accountants any material relating to the determination and to
discuss the determination with the Accountants. The determination by the
Accountants, as set forth in a notice delivered to both parties by the
Accountants, will be binding and conclusive on the parties. The Buyer and
the Seller will each bear 50% of the fees of the Accountants for such
determination.
(c) On the tenth business day following the final determination of the
Adjustment Amount, the Seller shall pay the full amount of any Deficiency
to the Buyer, or the Buyer shall pay the full amount of any Excess to the
Seller, as applicable. All payments of Deficiency or Excess will be made
together with interest at 7 % per annum beginning on the Closing Date and
ending on the date of payment. Payments must be made in immediately
available funds. Payments must be made by wire transfer to such bank
account as the Buyer or the Seller, as the case may be, will specify.
2.6 No Assumption of Retained Liabilities. The Buyer shall not assume any
of the Retained Liabilities, and the Seller agrees to pay all Retained
Liabilities in full.
2.7 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in the manner required by Section 1060 of IRC in the manner set
forth on Exhibit 2.7.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller represents and
warrants to the Buyer as follows:
3.1 Organization and Good Standing. Schedule 3.1 contains a complete and
accurate list for the Seller of its name, its jurisdiction of incorporation, and
any other jurisdictions in which it is authorized to do business relating to the
operation of the current business of the Rutt Division. Each of the Seller and
Industries is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation, and has full
corporate power and authority to conduct its business as it is now being
conducted and to own or use the properties and assets that it purports to own or
use, all
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as relating to the operation of the current business of the Rutt Division.
Seller has full authority to perform all its obligations under Applicable
Contracts. The Seller is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or other Jurisdiction in
which either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification with
respect to the operation of the current business of the Rutt Division except
where a failure to so qualify would not have a materially adverse effect on the
Assets or the business of the Rutt Division. The Seller has delivered to the
Buyer copies of the Organizational Documents of the Seller and Industries as
currently in effect.
3.2 Authority: No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Seller and Industries, enforceable against the Seller and
Industries in accordance with its terms. Upon the execution and delivery by
the Seller of the Escrow Agreement, MIS Services Agreement, the Bill of
Sale and the Noncompetition Agreement to which the Seller is a party
(collectively, the "Sellers' Closing Documents"), the Sellers' Closing
Documents will constitute the legal, valid, and binding obligations of the
Seller, enforceable against the Seller in accordance with their respective
terms. The Seller has the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and the
Sellers' Closing Documents and to perform its obligations under this
Agreement and the Seller's Closing Documents.
(b) Except as set forth in Schedule 3.2, neither the execution and
delivery of this Agreement by the Seller or Industries nor the consummation
or performance of any of the Contemplated Transactions by the Seller or
Industries will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of the Seller or
Industries, or (B) any resolution adopted by the board of directors or
the stockholders of the Seller relating to the operation of the
current business of the Rutt Division or Industries;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any
of the Contemplated Transactions or to exercise any remedy or obtain
any relief under, any Applicable Legal Requirement or any Order to
which the Seller or Industries or any of the Assets, may be subject
relating to the operation of the current business of the Rutt
Division;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw,
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suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by the Seller or any of the Assets or Industries and that
relates to the operation of the current business of the Rutt Division,
(iv) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable
Contract, other than any Applicable Contract the rights and
obligations under which, by law or its terms, cannot be assigned from
the Buyer to the Seller; or
(v) result in the 'imposition or creation of any Encumbrance upon
or with respect to any of the Assets.
Except as set forth in Schedule 3.2, neither the Seller nor Industries is, and
will not be, required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
3.3 Capitalization. The authorized equity securities of the Seller consist
of 1,000 shares of common stock, par value $1.00 per share, of which 1,000
shares are issued and outstanding. Industries indirectly is and will be on the
Closing Date the record and beneficial owner and holder of all issued and
outstanding capital stock of the Seller.
3.4 Financial Statements.
(a) The Seller has delivered to the Buyer audited consolidated balance
sheets of Industries as of December 1, 1996, and December 3, 1995, and the
related audited consolidated statements of operations, stockholders' equity
and cash flows for each of the periods then ended, together with the report
thereon of Ernst & Young LLP, independent certified public accountants,
(the audited December 1, 1996 balance sheet included therein is referred to
as the "Industries Audited Balance Sheet"), and an interim balance sheet
and related income statement and statement of cash flow for Industries for
the ten month period ended September 30, 1997. Such financial statements
and notes fairly present the financial position and the results of
operations, stockholders' equity, and cash flows of Industries as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal year-end adjustments and the absence of
notes.
(b) The Seller has delivered to the Buyer: (i) unaudited balance
sheets of the Rutt Division as of December 1, 1996 and December 3, 1995
(ii) an unaudited balance sheet of the Rutt Division as of August 3, 1997
and (iii) an unaudited balance sheet of
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the Rutt Division as of October 5, 1997 (the "Rutt Interim Balance Sheet"),
and the related unaudited statements of operations and cash flows for the
respective periods then ended. Such financial statements fairly present the
financial position and the results of operations and cash flows of the Rutt
Division as at the respective dates of and for the periods referred to in
such financial statements, all in accordance with GAAP, subject, in the
case of interim financial statements, to normal year-end adjustments and
the absence of notes.
(c) The financial statements referred to in this Section 3.4 reflect
the consistent application of such accounting principles throughout the
periods involved, except as disclosed in Schedule 3.4 and the notes to such
financial statements. Except as provided in Schedule 3.4, no financial
statements of any Person other than the Seller are required by GAAP to be
included in the consolidated financial statements of Industries.
3.5 Books and Records.
(a) The books of account and other records of the Rutt Division, all
of which have been made available to the Buyer, are complete and correct in
all material respects and have been maintained in accordance with sound
business practices and the requirements of Section 13(b)(2) of the Exchange
Act, including the maintenance of an adequate system of internal controls.
(b) The minute books, stock record books, and other records of the
Seller which relate to the operation of the current business of the Rutt
Division, all of which have been made available to the Buyer, are complete
and correct and have been maintained in accordance with sound business
practices including the maintenance of an adequate system of internal
controls. The minute books of the Seller contain accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of
Directors of the Seller which relate to the operation of the current
business of the Rutt Division, and no meeting of any such stockholders,
Board of Directors, or committee has been held for which minutes have not
been prepared and are not contained in such minute books.
3.6 Title to Properties: Encumbrances. Schedule 3.6 hereto contains a
complete and accurate list of all real property, leaseholds, or other interests
therein owned by the Seller that relate to the operation of the current business
of the Rutt Division. The Seller has delivered or made available to the Buyer
copies of the deeds and other instruments (as recorded) by which the Seller
acquired such real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of the Seller
relating to such property or interests. The Seller owns (with good and
marketable title in the case of real property, subject only to the matters
permitted by the following sentence) all the Assets (whether real, personal, or
mixed and whether tangible or intangible) that it purports to own
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located in the facilities owned by the Seller and operated by the Rutt Division
or reflected as owned in the books and records of the Seller, including all of
the Assets reflected in the Industries Audited Balance Sheet and the Rutt
Interim Balance Sheet (except for Assets held under capitalized leases disclosed
or not required to be disclosed in Schedule 3.6 hereto and personal property
sold since the date of the Industries Audited Balance Sheet and the Rutt Interim
Balance Sheet, as the case may be, in the ordinary course of business), and all
such Assets purchased or otherwise acquired by the Seller since the date of the
Industries Audited Balance Sheet (except for personal property acquired and sold
since the date of the Industries Audited Balance Sheet in the ordinary course of
business and consistent with past practice), which subsequently purchased or
acquired Assets (other than inventory and short-term investments) are listed in
Schedule 3.6. Except as set forth in Schedule 3.6, all material Assets reflected
in the Industries Audited Balance Sheet and the Rutt Interim Balance Sheet which
relate to the operation of the current business of the Rutt Division are free
and clear of all Encumbrances and are not, in the case of real property, subject
to any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature except, with respect to all Assets,
(a) mortgages or security interests shown on the Industries Audited Balance
Sheet or the Rutt Interim Balance Sheet as securing specified liabilities or
obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (b) mortgages or
security interests incurred in connection with the purchase of property or
assets after the date of the Rutt Interim Balance Sheet (such mortgages and
security interests being limited to the property or assets so acquired), with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (c) liens for current taxes not yet
due, and (d) with respect to real property, (i) minor imperfections of title, if
any, none of which is substantial in amount, materially detracts from the value
or impairs the use of the property subject thereto, or impairs the operations of
the Rutt Division, and (ii) zoning laws and other land use restrictions that do
not impair the present or anticipated use of the property subject thereto. All
buildings, plants, and structures owned by the Seller and used by the Rutt
Division and to be transferred hereunder lie wholly within the boundaries of the
real property owned by the Seller and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person.
3.7 Condition and Sufficiency of Assets. The buildings, plants, structures,
and equipment owned by the Seller and used in connection with the operation of
the current business of the Rutt Division are structurally sound and are in good
operating condition and repair, ordinary wear and tear excepted.
3.8 Accounts Receivable. All accounts receivable of the Rutt Division that
are reflected on the Rutt Interim Balance Sheet or on the accounting records of
the Rutt Division as of the Effective Date, except for the Buyer Flagship
Receivables and Seller Flagship Receivables (collectively, the "Accounts
Receivable"), represent or will represent
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valid obligations owned by the account debtors arising from sales actually made
or services actually performed in the ordinary course of business. There is no
contest, claim, or right of set-off, other than returns in the ordinary course
of business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Schedule 3.8
contains a complete and accurate list of all Accounts Receivable as of the date
of the Rutt Interim Balance Sheet, which list sets for-th the aging of such
Accounts Receivable.
3.9 Inventory. All inventory of the Rutt Division, whether or not reflected
in the Rutt Interim Balance Sheet, consists of a quality and quantity usable and
salable in the ordinary course of business, except for obsolete items and items
of below-standard quality, all of which have been written off or written down to
net realizable value in the Rutt Interim Balance Sheet or on the accounting
records of the Rutt Division as of the Closing Date, as the case may be. All
inventories not written off have been priced at the lower of cost or market on a
last in, first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Rutt Division business.
3.10 No Undisclosed Liabilities. Except as set forth in Schedule 3.10
hereto and in the definition of Retained Liabilities, the Rutt Division has no
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Rutt Interim Balance Sheet and
current liabilities incurred in the ordinary course of business since the date
thereof.
3.11 Taxes. The Seller has filed or caused to be filed all Tax Returns that
are or were required to be filed by or with respect to the Rutt Division, either
separately or as a member of a group of corporations, pursuant to Applicable
Legal Requirements. The Seller" has paid, or made provision for the payment of,
all Taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by the Seller related to the
Rutt Division except such Taxes, if any, that are being contested in good faith
and as to which adequate reserves (determined in accordance with GAAP) have been
provided in the Seller Audited Balance Sheet and the Rutt Interim Balance Sheet.
3.12 No Material Adverse Change. Since the date of the Industries Audited
Balance Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or condition of Industries, the
Seller, or the Rutt Division, and no event has occurred or circumstance exists
that may result in such a material adverse change.
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3.13 Employee Benefits. The Seller has delivered or made available to the
Buyer a copy of all documents relating to each plan, welfare plan or benefit
plan (collectively a "Plan") available to employees of the Rutt Division
immediately prior to the Closing, including a summary description of each such
plan, welfare plan or benefit plan.
3.14 Compliance with Applicable Legal Requirements: Governmental
Authorizations.
(a) Except as set forth in Schedule 3.14:
(i) the Seller, with respect to the Rutt Division, is, and at all
times since December 1, 1996 has been, in material compliance with
each Applicable Legal Requirement.
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
material violation by the Seller of, or a failure on the part of the
Seller to be in material compliance with, any Applicable Legal
Requirement, or (B) may give rise to any obligation on the part of the
Seller to undertake, or to bear all or any portion of the cost of, any
material remedial action; and
(iii) the Seller has not received, at any time since December 1,
1996, any written notice or other written communication from any
Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential material violation of, or material
failure to comply with, any Applicable Legal Requirement, or (B) any
actual, alleged, possible, or potential obligation on the part of the
Seller to undertake, or to bear all or any portion of the cost of, any
material remedial action related to the operation of the current
business of the Rutt Division.
(b) Schedule 3.14 contains a complete and accurate list of each
Governmental Authorization that is held by the Seller and that relates to
the business of, or to any of the Assets owned or used by, the Rutt
Division. Each Governmental Authorization listed or required to be listed
in Schedule 3.14 is valid and in full force and effect. Except as set forth
in Schedule 3,14:
(i) the Seller is, and at all times since December 1, 1996 has
been, in material compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be
identified in Schedule 3.14;
(ii) no event has occurred or circumstance exists that will (with
or without notice or lapse of time) (A) constitute or result directly
or indirectly in a violation of or a failure to comply with any
material term or requirement of any Governmental
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Authorization listed or required to be listed in Schedule 3.14, or (B)
result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to,
any material Governmental Authorization listed or required to be
listed in Schedule 3.14;
(iii) the Seller has not received, at any time since December 1,
1996, any written notice or other written communication from any
Governmental Body or any other Person regarding (A) any actual,
alleged, or potential violation of or failure to comply with any
material term or requirement of any Governmental Authorization, or (B)
any actual, proposed, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any material
Governmental Authorization; and
(iv) all applications required to have been filed for the renewal
of any material Governmental Authorizations listed or required to be
listed in Schedule 3.14 have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to
have been made with respect to such material Governmental
Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies.
The Governmental Authorizations listed in Schedule 3.14 collectively
constitute all of the Governmental Authorizations necessary to permit the Seller
to lawfully conduct and operate its Rutt Division business in the manner it
currently conducts and operates such business and to permit the Seller to own
and use the Assets, subject to necessary transfers, assignments or reissuances,
in the manner in which it currently owns and uses such Assets.
3.15 Legal Proceedings: Orders.
(a) Except as set forth in Schedule 3.15, there is no pending
Proceeding (to the extent Seller has been served with legal process):
(i) that has been commenced by or against the Seller that relates
to or may affect the business of the Rutt Division, or any of the
Assets or that would have a material adverse affect on the Seller's
ability to perform its obligations arising hereunder; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To the Knowledge of the Seller, (1) no such
Proceeding has been threatened, and (2) no event has occurred or
circumstance exists that is reasonably likely to give rise to the
commencement of any such Proceeding. The Seller has delivered to the
Buyer copies of all pleadings, correspondence, and other documents
relating to each Proceeding listed in Schedule 3.15. The
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Proceedings listed in Schedule 3.15 are not reasonably likely to have
a material adverse effect on the business of the Rutt Division or the
Assets.
(b) Except as set forth in Schedule 3.15:
(i) there is no Order to which the Seller is subject that would
have a material adverse affect on the Seller's ability to perform its
obligations arising hereunder; and
(ii) the Seller is not subject to any Order that relates to the
business of the Rutt Division or the Assets.
(c) Except as set forth in Schedule 3.15:
(i) the Seller is, and at all times since December 1, 1996, has
been, in material compliance with all of the terms and requirements of
each Order to which it, in connection with the business of the Rutt
Division, or any of the Assets is or has been subject;
(ii) no event has occurred or circumstance exists that is
reasonably likely to constitute or result in (with or without notice
or lapse of time) a material violation of or failure to comply with
any material term or requirement of any Order to which the Seller, in
connection with the business of the Rutt Division, or any of the
Assets, is subject; and
(iii) the Seller has not received, at any time since December 1,
1996, any written notice or other written communication from any
Governmental Body or any other Person regarding any actual, alleged,
possible, or potential violation of, or failure to comply with, any
material term or requirement of any Order to which the Seller, in
connection with the business of the Rutt Division, or any of the
Assets, is or has been subject.
3.16 Absence of Certain Changes and Events. Except as set forth in Schedule
3.16, since the date of the Industries Audited Balance Sheet, the Seller has
conducted the business of the Rutt Division only in the ordinary course of
business and there has not been any:
(a) change in the Seller's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of the
Seller; issuance of any security convertible into such capital stock; grant
of any registration rights; purchase, redemption, retirement, or other
acquisition by the Seller of any shares of any such capital
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stock; or declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock materially and adversely
affecting the business of the Rutt Division,
(b) amendment to the Organizational Documents of the Seller or
Industries materially and adversely affecting the business of the Rutt
Division;
(c) payment or increase by the Rutt Division of any bonuses, salaries,
or other compensation to any stockholder, director, officer, or (except in
the ordinary course of business) employee of the Seller or entry into any
employment, severance, or similar Contract with any such director, officer,
or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Rutt Division other than the gain sharing plan described in Schedule
3.16(d);
(e) damage to or destruction or loss of any Asset, whether or not
covered by insurance, materially and adversely affecting the business of
the Rutt Division;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, relating to the business of the Rutt
Division or (ii) any Contract or transaction involving a total remaining
commitment by or to the Rutt Division of at least $10,000;
(g) sale (other than sales of inventory in the ordinary course of
business), lease, or other disposition of any Asset or mortgage, pledge, or
imposition of any lien or other encumbrance on any material Asset of the
Rutt Division, including the sale, lease, or other disposition of any of
the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to the
Rutt Division in excess of $10,000;
(i) material change in the accounting methods used by the Seller
relating to the Assets or the business of the Rutt Division, except as
otherwise disclosed in Schedule 3.4; or
(j) legally binding agreement, by the Seller, Industries, or the Rutt
Division, as the case may be, to do any of the foregoing.
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3.17 Contracts: No Defaults.
(a) Except for such contracts relating to the Seller's Management
Information System in Coopersville, Michigan, which are Excluded Assets,
Schedule 3.17(a) contains a complete and accurate list, and the Seller has
delivered to the Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Rutt Division of an
amount or value in excess of $50,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Rutt Division of an
amount or value in excess of $50,000;
(iii) each Applicable Contract that was not entered into in the
ordinary course of business and that involves expenditures or receipts
of the Rutt Division in excess of $10,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or
any leasehold or other interest in, any real or personal property
included in the Assets (except personal property leases and
installment and conditional sales agreements having a value per item
or aggregate payments of less than $10,000 and with terms of less than
one year);
(v) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual
property relating to the business of the Rutt Division, including
agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any
of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative
of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Seller with any other Person;
(viii) each Applicable Contract containing covenants that in any
way purport to restrict the business activity of the Seller with
respect to the Rutt Division or
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limit the freedom of the Seller to engage in any line of business or
to compete with any Person;
(ix) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct
payments for goods;
(x) each Applicable Contract entered into other than in the
ordinary course of business that contains or provides for an express
undertaking by the Rutt Division to be responsible for consequential
damages;
(xi) each Applicable Contract for capital expenditures in excess
of $20,000;
(xii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the
Rutt Division other than in the ordinary course of business;
(xiii) each dealer contract; and
(xiv) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
(b) Except as set forth in Schedule 3.17(b):
(i) the Seller (and to the Seller's Knowledge any Related Person
of the Seller) has no, and may acquire no rights under, and has not
and may not become subject to any obligation or liability under, any
Contract that relates to the business of, or any of the Assets of the
Rutt Division; and
(ii) no officer, director, agent, employee, consultant, or
contractor of the Seller is bound by any Contract that purports to
limit the ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any conduct,
activity, or practice relating to the business of the Rutt Division,
or (B) assign to the Seller or to any other Person any rights to any
invention, improvement, or discovery with respect to the business of
the Rutt Division.
(c) Except as set forth in Schedule 3.17(c), each Contract identified
on Schedule 3.17(a) is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Schedule 3.17(d):
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(i) the Seller is, and at all times since December 1, 1996 has
been, in full compliance with all material terms and requirements of
each Contract under which the Rutt Division has any obligation or
liability or by which the Rutt Division or any of the Assets owned or
used by the Rutt Division is or was bound;
(ii) each other Person that has any obligation or liability under
any Contract under which the Rutt Division has any rights is, and at
all times since December 1, 1996 has been, in material compliance with
all applicable terms and requirements of such Contract;
(iii) to the Knowledge of Seller, no event has occurred or
circumstance exists that (with or without notice or lapse of time) is
reasonably likely to contravene, conflict with, or result in a
violation or breach of, or give the Seller or any other Person the
right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract; and
(iv) the Seller has not given to or received from any other
Person, at any time since December 1, 1996, any written notice or
other written communication regarding any actual, alleged, possible,
or potential violation or breach of, or default under, any Applicable
Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to
the Rutt Division under current or completed Contracts with any Person and
no such Person has made written demand for such renegotiation other than
with respect to the Seller and Buyer Flagship Receivables.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Rutt Division have been entered
into in the ordinary course of business and have been entered into without
the commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in
violation of any Applicable Legal Requirement.
3.18 Insurance. The Seller has delivered to the Buyer a description of all
insurance coverage with respect to the Rutt Division, including the amount of
such coverage, the type of coverage, the premiums paid, exclusions to coverage
and any self insurance coverage, The Seller has also provided the Buyer an
insurance claims run for the past year with respect to the Rutt Division.
3.19 Environmental. Except as set forth in Schedule 3.19:
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(a) The Seller is in material compliance with all Environmental Laws
with respect to the Rutt Division.
(b) The Seller has no basis to expect to receive, nor has the Seller
or, to the Seller's Knowledge, any other Person for whose conduct it is or
may be held responsible, received, any actual or threatened citation,
directive, inquiry, notice, claim, Order, summons, warning, or other
communication from any person that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or failure to
comply by, at or relating to the Rutt Division with any Environmental Law,
or of any alleged, actual, or potential obligation of or relating to the
Rutt Division to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities or with
respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by, for or
relating to the Rutt Division, or any other Person for whose conduct it is
or may be held responsible, have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(c) Except as to material compliance with Environmental Laws, which is
subject to the representation at 3.19(a), neither the Seller nor any other
Person for whose conduct it is or may be held responsible, has any
Environmental, Health, and Safety Liabilities with respect to the
Facilities or relating to the Rutt Division or with respect to any property
geologically or hydrologically adjoining the Facilities.
(d) Except for those Hazardous Materials presently being used in
compliance with all Environmental Laws in the manufacturing operations of
the current business of the Rutt Division, there are no Hazardous Materials
present on or in (but not Released to) the Environment at or from the
Facilities or, to the Seller's Knowledge, at any geologically or
hydrologically adjoining property, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills, land
deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water,
sumps, or any other part of the Facilities or, to Seller's Knowledge, such
adjoining property, or incorporated into any structure at the Facilities.
Neither the Seller, or, to Seller's Knowledge, any other Person has
permitted or conducted any Hazardous Activity at the Facilities, except
those Hazardous Activities relating to the manufacturing operation of the
Rutt Division conducted in compliance with Environmental Laws.
(e) There has been no Release or, to the Knowledge of the Seller,
Threat of Release, of any Hazardous Materials at or from the Facilities or,
to the Seller's Knowledge, at any other locations where any Hazardous
Materials were generated, manufactured, refined, transferred, produced,
imported, used, or processed from or by the Facilities or, to the Seller's
Knowledge, onto the Facilities from any geologically or
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hydrologically adjoining property, whether by the Rutt Division or any
other Person. No Facilities, and to the Seller's Knowledge no site or
property used for the transportation, disposal or processing of Hazardous
Materials from the Rutt Division, is listed or is proposed for listing on
the National Priorities List pursuant to CERCLA, the Comprehensive
Environmental Response, Compensation and Liability Information System List,
or on any similar state or foreign list of sites requiring investigation or
Cleanup; and no lien or Encumbrance has been filed or to Seller's Knowledge
is threatened against either the Facilities or the Rutt Division under any
Environmental Laws.
(f) The Seller has delivered to the Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed
or initiated by the Seller pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance by the
Rutt Division or with respect to the Facilities with Environmental Laws,
including, without limitation, all Goverrunental Authorizations required by
Environmental Laws.
3.20 Employees.
(a) Schedule 3.20 contains a complete and accurate list of the
following information for each active employee (full time or part time) of
the Rutt Division: employer; name; job title; current compensation paid or
payable and any change in compensation since December 1, 1996; vacation
accrued; and seniority.
(b) Except as set forth in Schedule 3.20, no employee of the Rutt
Division is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or proprietary
rights agreement, between such employee and any other Person ("Proprietary
Rights Agreement") that in any way adversely affects or will affect (i) the
performance of his duties as an employee of the Rutt Division, or (ii) the
ability of the Rutt Division to conduct its business, including any
Proprietary Rights Agreement with the Seller by any such employee. To
Seller's Knowledge, no director, officer, or other key employee of the Rutt
Division has expressed the intention to terminate his or her employment.
3.21 Labor Relations; Compliance. Since December 1, 1996, the Seller has
not been a party to any collective bargaining or other labor Contract with
respect to the employees and business of the Rutt Division. Since December 1,
1996, there has not been, there is not presently pending or existing, and to
Sellers' Knowledge there is not threatened with respect to the employees and
business of the Rutt Division, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against or affecting
the Seller relating to the alleged violation of any Applicable Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment
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Opportunity Commission, or any comparable Governmental Body, organizational
activity, or other labor or employment dispute against or affecting the Seller
or its premises, or (c) any application for certification of a collective
bargaining agent. To the Seller's Knowledge, no event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute with respect to the employees and business of the Rutt Division.
There is no lockout of any employees of the Rutt Division by the Seller, and no
such action is contemplated by the Seller. The Seller has complied in all
material respects with all Applicable Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes and occupational safety and health. The Seller is not liable for the
payment of any compensation, damages, taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Applicable
Legal Requirements.
3.22 Intellectual Property.
(a) Intellectual Property Assets--The term "Intellectual Property
Assets" includes the following Assets (excluding the Excluded Assets) that
are necessary to operate the current business of the Rutt Division:
(i) the name "Rutt Custom Kitchens" and all fictional business
names, trading names, registered and unregistered trademarks, service
marks and applications, to the extent transferable by the Seller
(collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable, to the extent transferable by the
Seller (collectively, "Patents");
(iii) all copyrights in both published works and unpublished
works (collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in Mask
Works"); and
(v) all know-how, trade secrets (as defined under Pennsylvania
law, and including, but not limited to, confidential information,
business plans, customer lists, customer profiles, cost and pricing
data, sources of supply, systems and methods of manufacture, books and
records, and known business opportunities) (collectively, "Trade
Secrets"), software, technical information, data, process technology,
plans, drawings, and blue prints, owned, used, or licensed by the
Seller or the Rutt Division as licensee or licensor and necessary for
the operation of the current business of the Rutt Division.
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(b) Agreements--Schedule 3.22(b) contains a complete and accurate list
and summary description, including any royalties paid or received by the
Seller or the Rutt Division, of all Contracts relating to the Intellectual
Property Assets to which the Seller or the Rutt Division is a party or by
which the Seller or the Rutt Division is bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses for
commonly available software programs with a value of less than $ 2,500
under which the Seller or the Rutt Division is the licensee. There are no
outstanding and, to the Seller's Knowledge, no threatened disputes or
disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business
(i) The Seller or the Rutt Division is the owner of all right,
title, and interest in and to each of the Intellectual Property
Assets, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims, and has the right to
use without payment to a third party all of the Intellectual Property
Assets.
(ii) Except as set forth in Schedule 3.22(c), all former and
current employees of the Rutt Division have executed written Contracts
with the Rutt Division that assign to the Rutt Division all rights to
any inventions, improvements, discoveries, or information relating to
the business of the Rutt Division. To the Seller's Knowledge, no
employee of the Rutt Division has entered into any Contract that
restricts or limits in any way the scope or type of work in which the
employee may be engaged or requires the employee to transfer, assign,
or disclose information concerning his work to anyone other than the
Rutt Division.
(d) Patents
(i) Schedule 3.22(d) contains a complete and accurate list and
summary description of all Patents. The Seller or the Rutt Division is
the owner of all right, title, and interest in and to each of the
Patents, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
(ii) All of the issued Patents are currently in material
compliance with formal legal requirements (including payment of
filing, examination, and maintenance fees and proofs of working or
use), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions failing due within ninety days
after the Closing Date.
(iii) No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To the Seller's
Knowledge, there is no potentially interfering patent or patent
application of any third party.
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(iv) No Patent is infringed or, to the Seller's Knowledge, has
been challenged or threatened in any way. To the Seller's Knowledge,
none of the products manufactured and sold, nor any process or
know-how used, by the Rutt Division infringes or is alleged to
infringe any patent or other proprietary right of any other Person.
(v) All products made, used, or sold under the Patents have been
marked with the proper patent notice.
(e) Trademarks
(i) Schedule 3.22(e) contains a complete and accurate list and
summary description of all Marks. The Seller or the Rutt Division is
the owner of all right, title, and interest in and to each of the
Marks, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
(ii) All Marks that have been registered with the United States
Patent and Trademark Office are currently in material compliance with
all Applicable Legal Requirements (including the timely
post-registration filing of affidavits of use and incontestability and
renewal applications), are valid and enforceable, and are not subject
to any material maintenance fees or taxes or actions failing due
within ninety days after the Closing Date.
(iii) No Mark has been or is now involved in any opposition,
invalidation, or cancellation and, to the Seller's Knowledge, no such
action is threatened with the respect to any of the Marks.
(iv) To the Seller's Knowledge, there is no trademark or
trademark application of any third party which potentially interferes
with any of the Marks.
(v) No Mark is infringed or, to the Seller's Knowledge, has been
challenged or threatened in any way. To the Seller's Knowledge, none
of the Marks used by the Rutt Division infringes or is alleged to
infringe any trade name, trademark, or service mark of any third
party.
(vi) All products and materials containing a Mark bear the proper
federal registration notice where permitted by law.
(f) Copyrights. Neither the Seller nor the Rutt Division has any
Copyrights necessary to operate the current business of the Rutt Division.
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(g) Trade Secrets. To the Seller's Knowledge there are no Trade
Secrets relating to the conduct of the current business of the Rutt
Division, other than the business plan, a true and correct copy of which
was delivered by Seller to Buyer, that must be protected or prevented from
being disclosed to members of the public, including, but not limited to,
those individuals and entities considered by the Rutt Division to be its
competitors. With respect to the business plan, the Seller has taken all
reasonable steps to protect the secrecy, confidentiality, and value of the
business plan. To the Seller's Knowledge, the business plan has not been
used, divulged, or appropriated either for the benefit of any Person (other
than the Seller, the Rutt Division, Industries and the Buyer) or to the
detriment of the Seller.
3.23 Certain Payments. Since December 3, 1995, neither the Seller nor, to
the Seller's Knowledge, any director, officer, agent, or employee of the Seller
acting for or on behalf of the Seller, or any other Person associated with or
acting for or on behalf of the Seller, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of the Seller or any Affiliate of the Seller, or (iv) in violation of
any Applicable Legal Requirement, (b) established or maintained any fund or
asset for or on behalf of the Seller that has not been recorded in the books and
records of the Seller.
3.24 Disclosure. No representation or warranty of the Seller in this
Agreement and no statement in the Schedules hereto contains an untrue statement
of material fact or omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
3.25 Relationship With Related Persons. Neither the Seller nor any Related
Person of the Seller has, or since the first day of the next to last completed
fiscal year of the Seller has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or relating to
the business of the Rutt Division. Neither the Seller nor any Related Person of
the Seller has, or since the first day of the next to last completed fiscal year
of the Seller has owned (of record or as a beneficial owner) an equity interest
or any other financial or profit interest in, a Person that has (i) had business
dealings or a material financial interest in any transaction with the Seller
relating to the business of the Rutt Division other than business dealings or
transactions conducted in the ordinary course of business with the Seller
relating to the business of the Rutt Division at substantially prevailing market
prices and on substantially prevailing market terms, or (ii) engaged in
competition with the Seller with respect to any line of the products or services
of the Seller relating to the business of the Rutt Division (a "Competing
Business") in any market
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presently served by the Seller relating to the business of the Rutt Division.
Except as set forth in Schedule 3.25, to Seller's Knowledge no Related Person of
the Seller is a party to any Contract with, or has any claim or right against,
the Seller relating to the business of the Rutt Division.
3.26 Brokers or Finders. The Seller and its agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3.27 Knowledge. To the extent that any representations or warranties made
in this Section 3 are based upon the Knowledge of the members of the Management
Group, such 'individuals, either as a part of their regular responsibilities or
as a result of inquiries by them or appropriate persons designated by them, or
any of them, for such purpose, in connection with the execution of this
Agreement, have sufficient Knowledge of the business of the Rutt Division and
the Seller to make such representations or warranties in good faith with no
actual knowledge of any fact which would materially impair their respective
abilities to make such representations and warranties.
3.28 Warranties. The Seller, with respect to the business of the Rutt
Division, has not entered into any warranty agreements with any customer of the
Rutt Division, other than warranty agreements in the form(s) provided to the
Buyer by the Seller pursuant to Schedule 3.28.
3.29 Warranty Reserve. The reserve for product warranty claims of the Rutt
Division ("Warranty Reserve") as of August 3, 1997 was in the amount of
approximately $426,000 and will be no greater than $426,000 as of the Closing
Date.
3.30 Inventory Reserve. The reserve against inventory, exclusive of the
LIFO reserve ("Inventory Reserve"), of the Rutt Division as of August 3, 1997
was in the amount of approximately $84,000 and will be no greater than $84,000
as of the Closing Date.
3.31 Accounts Receivable Reserve. The reserves for uncollectible accounts
receivable and cash discounts of the Rutt Division ("Accounts Receivable
Reserve") as of August 3, 1997 was in the amount of approximately $317,000 and
will be no greater than $317,000 as of the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. The Buyer represents and
warrants to the Seller as follows:
4.1 Organization and Good Standing. The Buyer is a limited liability
company duly organized, validly existing, and in good standing under the laws of
the
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Commonwealth of Pennsylvania, and is not authorized to do business in any other
jurisdiction. The Buyer has full power and authority to conduct its business as
it is now being conducted and to own or use the properties and assets that it
purports to own or use. The Buyer has delivered to the Seller copies of the
Organizational Documents of the Buyer as currently in effect.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Buyer, enforceable against the Buyer in accordance with
its terms. Upon the execution and delivery by the Buyer of the Escrow
Agreement, the MIS Service Agreement, the Assumption Agreement, and the
Noncompetition Agreement (collectively, the "Buyer's Closing Documents"),
the Buyer's Closing Documents will constitute the legal, valid, and binding
obligations of the Buyer, enforceable against the Buyer in accordance with
their respective terms. The Buyer has the absolute and unrestricted right,
power, and authority to execute and deliver this Agreement and the Buyer's
Closing Documents and to perform its obligations under this Agreement and
the Buyer's Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement by the Buyer nor the consummation or performance
of any of the Contemplated Transactions by the Buyer will give any Person
the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of the Buyer's Organizational Documents;
(ii) any resolution adopted by the sole members of the Buyer;
(iii) any Applicable Legal Requirement or Order to which the
Buyer may be subject; or
(iv) any Contract to which the Buyer is a party or by which the
Buyer may be bound.
Except as set forth in Schedule 4.2, the Buyer is not and will not be required
to obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 Certain Proceedings. There is no pending Proceeding that has been
commenced against the Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To the Buyer's Knowledge, no such Proceeding has been
threatened.
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4.4 Brokers or Finders. The Buyer and its officers and agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold the Seller harmless from any such payment
alleged to be due by or through the Buyer as a result of the action of the Buyer
or its officers or agents.
4.5 Solvency. Buyer will be solvent immediately following the Closing.
5. COVENANTS OF SELLER
5.1 Access and Investigation. Between the date of this Agreement and the
Closing Date, the Seller will (a) afford the Buyer and its Representatives and
prospective lenders and their Representatives (collectively, "Buyer's Advisors")
access upon reasonable notice and during business hours to the Seller's
personnel, properties (including subsurface testing), contracts, books and
records, and other documents and data, which relate to the business of the Rutt
Division (b) furnish the Buyer and Buyer's Advisors with copies of all such
contracts, books and records, and other existing documents and data which relate
to the business of the Rutt Division as the Buyer may reasonably request, and
(c) furnish the Buyer and Buyer's Advisors with such additional financial,
operating, and other data and information which relate to the business of the
Rutt Division as the Buyer may reasonably request.
5.2 Operation of the Rutt Division Business. Between the date of this
Agreement and the Closing Date, the Seller will:
(a) conduct the business of the Rutt Division only in the ordinary
course of business;
(b) use its Best Efforts to preserve intact the current business
organization of the Rutt Division, keep available the services of the
current employees, and agents of the Rutt Division, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Rutt
Division;
(c) confer with the Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to the Buyer concerning the status
of the business, operations, and finances of the Rutt Division.
5.3 Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, the Seller
will not
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without the prior consent of the Buyer, take any affirmative action, or fail to
take any reasonable action within their or its control, as a result of which any
of the changes or events listed in Section 3.16 is likely to occur.
5.4 Required Approvals. As promptly as practicable after the date of this
Agreement, the Seller will make all filings required by Applicable Legal
Requirements to be made by it in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, the
Seller will (a) cooperate with the Buyer with respect to all filings, if any,
that Buyer elects to make or is required by Applicable Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
the Buyer in obtaining all consents identified in Schedule 4.2.
5.5 Notification. Between the date of this Agreement and the Closing Date,
the Seller will promptly notify the Buyer in writing if the Seller becomes aware
of any fact or condition that causes or constitutes a breach of any of the
Seller's representations and warranties as of the date of this Agreement, or if
the Seller becomes aware of the occurrence after the date of this Agreement of
any fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in the Schedules hereto if the Schedules hereto were dated the date
of the occurrence or discovery of any such fact or condition, the Seller will
promptly deliver to the Buyer a supplement to the Schedules hereto specifying
such change. During the same period, the Seller will promptly notify the Buyer
of the occurrence of any breach of any covenant of the Seller in this Section 5
or of the occurrence of any event that may make the satisfaction of the
conditions in Section 7 impossible or unlikely.
5.6 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, the Seller will not directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than the Buyer)
relating to any transaction involving the sale of the business or assets (other
than in the ordinary course of business) of the Rutt Division or similar
transaction involving the Rutt Division which would affect the Contemplated
Transactions.
5.7 Best Efforts. Between the date of this Agreement and the Closing Date,
the Seller will use its Best Efforts to cause the conditions in Sections 7 and 8
to be satisfied.
5.8 Conversion of Flagship Receivables. The Seller shall, on or prior to
the Closing Date, convert the Seller Flagship Receivables into (a) four (4)
notes due to the Seller from the applicable account debtors substantially in the
forms of Exhibits 5.8(a)-(d) with
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respect to $700,000 of the Seller Flagship Receivables (the "Seller Flagship
Notes") and (b) two (2) notes due to the Buyer from the applicable account
debtors substantially in the forms of Exhibits 5.8(e)-(f) with respect to
$300,000 of the Buyer Flagship Receivables (the "Buyer Flagship Notes").
5.9 Assignment of Merchandise Mart Lease. At the Closing, the Seller will
assign all of its rights and obligations under the Merchandise Mart Lease to the
Buyer and, except as otherwise expressly set forth herein, the Buyer shall be
responsible for all payments thereunder. The Seller will reimburse the Buyer for
all rent payments made by the Buyer under the Merchandise Mart Lease with
respect to unutilized space for any months subsequent to the first twelve (12)
months following the Closing Date, provided. however, that the Buyer shall give
the Seller one hundred eighty (180) days' notice of its intent not to use
unutilized space under the Merchandise Mart Lease and provided further, that the
Seller will not reimburse the Buyer for rent payments made for any month
occurring prior to one hundred eighty (180) days after notice is provided to the
Seller by the Buyer.
5.10 Operations Between Effective Date and Closing Date. Between the
Effective Date and the Closing Date, Seller will hold all cash receipts of the
Rutt Division in trust for the benefit of Buyer, to be paid to the Buyer at
Closing (as contemplated in subparagraph (n) of the definition of Assets) and
will not, without the prior written consent of Buyer, pay any liabilities of the
type described in the definition of Assumed Liabilities.
5.11 Environmental Matters. Within 90 days from the Closing Date, the
Seller at its expense will complete, with Buyer's reasonable cooperation, all of
the work listed in Schedule 5.11 relating to environmental conditions at the
Facilities. If the Seller has not completed all such work within 90 days from
the Closing Date, the Buyer may elect to complete any unfinished work called for
in Schedule 5.11, in which case the Seller shall indemnify and hold harmless the
Buyer for, and will pay to Buyer, the reasonable costs, fees, and expenses
(including reasonable attorneys', engineers' and consultants' fees), incurred by
Buyer to complete such work. This indemnity will not be exclusive of or limit
any other remedies that may be available to the Buyer.
5.12 Product Liability Insurance. Following the Closing Date, the Seller
will maintain product liability insurance covering all products of the Rutt
Division manufactured or shipped prior to the Closing Date.
6. COVENANTS OF BUYER
6.1 Approvals of Governmental Bodies. As promptly as practicable after the
date of this Agreement, the Buyer will, and will cause each of its Related
Persons to, make all filings required by Applicable Legal Requirements to be
made by them to consummate the
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Contemplated Transactions. Between the date of this Agreement and the Closing
Date, the Buyer will, and will cause each Related Person to, cooperate with the
Seller with respect to all filings that the Seller is required by Applicable
Legal Requirements to make in connection with the Contemplated Transactions, and
(ii) cooperate with the Seller in obtaining all Consents identified on Schedule
3.2; provided that this Agreement will not require the Buyer to dispose of or
make any change in any portion of its business or to incur any other burden to
obtain a Governmental Authorization.
6.2 Best Efforts. Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, the Buyer will use its
Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
6.3 Assumption of Merchandise Mart Lease. At the Closing, the Buyer will:
(a) assume all of the rights and obligations of the Seller under the
Merchandise Mart Lease including but not limited to the obligation to make
all rent payments under such lease (subject to the Buyer's right to be
reimbursed under Section 5.9); and
(b) (i) use its best efforts to have the property subject to the
Merchandise Mart Lease utilized at all times, either by the Buyer or a
third party; (ii) immediately notify the Seller in the event any such
property is not being utilized at any time; and (iii) provide the Seller
with one hundred eighty (180) day prior written notice of the Buyer's
intention not to use any such property which becomes unutilized.
6.4 Product Liability Insurance. Following the Closing Date, the Buyer
shall maintain product liability insurance covering all products of the Rutt
Division manufactured from and after the Closing Date.
6.5 Reimbursement of Seller. At the Closing, the Buyer will reimburse
Seller for those trade accounts payable and accrued liabilities paid by Seller
between the Effective Date and the Closing Date, but only to the extent such
payables and accrued liabilities, other than those necessary to fill customer
orders received in the ordinary course of business, were approved in writing by
Buyer prior to being incurred.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. The Buyer's
obligation to purchase the Assets and to take the other actions required to be
taken by the Buyer at the Closing is subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions (any of which may be
waived by the Buyer, in whole or in part):
7.1 Accuracy of Representations. All of the Seller's representations and
warranties in this Agreement (considered collectively), and each of these
representations and
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warranties (considered individually), must have been accurate In all respects as
of the date of this Agreement, and except as to those representations and
warranties that contain express material qualifications, must be accurate in all
material respects as of the Closing Date as if made on the Closing Date.
7.2 Seller's Performance.
(a) All of the covenants and obligations that the Seller is required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to Section 2.4
must have been delivered, and each of the other covenants and obligations
in Section 5 must have been performed and complied with in all material
respects.
7.3 Consents. Each of the Consents identified in Schedules 3.2 and 4.2 must
have been obtained and must be in full force and effect.
7.4 Additional Documents. Each of the following documents must have been
delivered to the Buyer:
(a) an opinion of counsel to the Seller, dated the Closing Date, in
the form of Exhibit 7.4(a);
(b) estoppel certificates executed on behalf of. (i) each landlord of
real estate leased by Seller in respect of the Rutt Division, and (ii) each
dealer of the Rutt Division, dated as of the Closing Date, each in the form
of Exhibit 7.4(b)(i)-(ii), respectively; and
(c) such other documents as the Buyer may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.4(a), (ii) evidencing the accuracy of any of the Seller's
representations and warranties, (iii) evidencing the performance by the
Seller of, or the compliance by the Seller with, any covenant or obligation
required to be performed or complied with by the Seller, (iv) evidencing
the satisfaction of any condition referred to in this Section 7, or (v)
otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
7.5 No Proceeding. Since the date of this Agreement, there must not have
been commenced or threatened against the Buyer, or against any Person affiliated
with the Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in
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connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
7.6 No Claim Regarding Sale Proceeds. There must not have been made or
threatened by any Person any claim asserting that such Person is entitled to all
or any portion of the Purchase Price payable for the Assets.
7.7 No Prohibition. Neither the consummation nor the performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause the Buyer or any Person affiliated with the
Buyer to suffer any material adverse consequence under, (a) any Applicable Legal
Requirement or applicable Order, or (b) any Applicable Legal Requirement or
Order that has been published, introduced, or otherwise formally proposed by or
before any Governmental Body.
7.8 Delivery of Buyer Flagship Notes. The Buyer will have received delivery
of the Buyer Flagship Notes.
7.9 Financing. Receipt by Buyer of (i) a commitment from Nations Credit
Commercial Corporation to make available to Buyer certain credit facilities in
an amount and upon terms satisfactory to Buyer, and (ii) loan proceeds
representing the requested portion of those credit facilities.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. The Seller's
obligation to sell the Assets and to take the other actions required to be taken
by the Seller at the Closing is subject to the satisfaction, at or prior to the
Closing Date, of each of the following conditions (any of which may be waived by
the Seller, in whole or in part):
8.1 Accuracy of Representations. All of the Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all respects as of the date of this Agreement and, except as to
those representations and warranties that contain express materiality
qualifications, must be accurate in all material respects as of the Closing Date
as if made on the Closing Date.
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8.2 Buyer's Performance.
(a) All of the covenants and obligations that the Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and
compiled with in all material respects.
(b) The Buyer must have delivered each of the documents required to be
delivered by the Buyer pursuant to Section 2.4 and must have made the cash
payments required to be made by Buyer pursuant to Sections 2.4(b)(i) and
2.4(b)(iii).
8.3 Consents. Each of the Consents identified in Schedule 3.2 must have
been obtained and must be in full force and effect.
8.4 Additional Documents. The Buyer must have caused the following
documents to be delivered to the Seller:
(a) an opinion of Duane, Morris & Heckscher LLP, dated the Closing
Date, in the form of Exhibit 8.4(a); and
(b) such other documents as the Seller may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 7.4(a), (ii) evidencing the accuracy of any representation or
warranty of the Buyer, (iii) evidencing the performance by the Buyer of, or
the compliance by the Buyer with, any covenant or obligation required to be
performed or complied with by the Buyer, (iv) evidencing the satisfaction
of any condition referred to in this Section 8, or (v) otherwise
facilitating the consummation of any of the Contemplated Transactions.
8.5 No Injunction. There must not be in effect any Applicable Legal
Requirement or any injunction or other Order that prohibits the sale of the
Assets by the Seller to the Buyer.
8.6 No Proceed Since the date of this Agreement, there must not have been
commenced or threatened against the Seller, or against any Person affiliated
with the Seller, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
8.7 No Prohibition. Neither the consummation nor the performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of
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time), materially contravene, or conflict with, or result in a material
violation of, or cause the Seller or any Person affiliated with the Seller to
suffer any material adverse consequence under, (a) any Applicable Legal
Requirement or applicable Order, or (b) any Applicable Legal Requirement or
Order that has been published, introduced, or otherwise formally proposed by or
before any Governmental Body.
8.8 Delivery of Seller Flagship Notes. The Seller will have received
delivery of the Seller Flagship Notes.
9. TERMINATION.
9.1 Termination Events. This Agreement may, by notice given prior to or at
the Closing Date, be terminated:
(a) by either the Buyer or the Seller if a breach of any provision of
this Agreement has been committed by the other party and such breach has
not been waived;
(b) (i) by the Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of the
Buyer to comply with its obligations under this Agreement) and the Buyer
has not waived such condition on or before the Closing Date; or (ii) by the
Seller, if any of the conditions in Section 8 has not been satisfied as of
the Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of the Seller to comply with its
obligations under this Agreement) and the Seller has not waived such
condition on or before the Closing Date;
(c) by mutual consent of the Buyer and the Seller; or
(d) by either the Buyer or the Seller if the Closing has not occurred
(other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before December 20, 1997, or such later date as the parties may agree upon.
9.2 Effect of Termination. Each party's right of termination under Section
9.1 is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 9.1, all further
obligations of the parties under this Agreement will terminate, except that
the obligations in Sections 11.2 and 11.4 will survive; provided, however, that
if this Agreement is terminated by a party because of the breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure
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to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES.
10.1 Survival, Right to Indemnification Not Affected by Knowledge@e. All
representations, warranties, covenants, and obligations in this Agreement, the
Schedules hereto, any supplements to the Schedules hereto, the certificate
delivered pursuant to Section 2.4(a)(iii), and any other certificate or document
delivered pursuant to this Agreement will survive the Closing except to the
extent otherwise expressly provided herein. The right to indemnification,
payment of Damages or other remedy based on such representations, warranties,
covenants, and obligations will not be affected by any investigation conducted
with respect to, or any Knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant, or obligation; provided.
however, that if Buyer (i) accepts in writing prior to the Closing any Schedule
or supplement to such Schedule delivered by the Seller, by Buyer's initialing
such Schedule or supplement, and (ii) consummates the Closing of Contemplated
Transactions, the Buyer shall have no right to indemnification hereunder with
respect to matters that come within the scope of Assumed Liabilities and are
disclosed in such Schedule or supplement.
10.2 Indemnification and Payment of Damages by Seller. The Seller will
indemnify and hold harmless the Buyer and its Representatives, controlling
persons, and affiliates (collectively, the " Buyer Indemnified Persons") for,
and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage, or expense (including costs of Cleanup and defense and reasonable
attorneys', engineers' and consultants' fees), whether or not involving a
third-party claim and all costs and expenses (including reasonable attorneys'
fees with respect to claims for which a party claiming indemnity is entitled to
such indemnity pursuant to this Section) incurred to enforce this
indemnification (collectively, "Damages"), arising, directly or indirectly, from
or in connection with:
(a) any breach of any representation or warranty made by the Seller in
this Agreement, the Schedules hereto, the supplements to the Schedules
hereto, or any other certificate or document delivered by the Seller
pursuant to this Agreement;
(b) any breach by the Seller of any covenant or obligation of the
Seller in this Agreement;
(c) any product shipped or manufactured b , or any services provided
by, the Seller, with respect to the Rutt Division, prior to the Closing
Date;
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(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with the Seller (or any Person
acting on its behalf) in connection with any of the Contemplated
Transactions',
(e) any warranty claims with respect to formulation changes in
coatings and sealers, contained on products manufactured by the Buyer
within six (6) months from the Closing Date provided such claims are
asserted within eighteen (18) months from the Closing Date, or in the case
of any reformulation required with respect to items I and 2 on Schedule
5.11, within six (6) months of when such reformulation is incorporated into
the manufacturing process, provided such claims are asserted within
eighteen (18) months of when such reformulation is incorporated into the
manufacturing process;
(f) any warranty claims in an amount exceeding the Warranty Reserve
with respect to written warranties given on or prior to the Closing Date by
the Rutt Division to its customers;
(g) the amount by which the book value of inventory items which are
obsolete, unusable, unsaleable or below-standard as of the Closing Date
exceeds the Inventory Reserve;
(h) any claims with respect to uncollectible accounts receivable
(other than with respect to the validity thereof, which is covered by
Section 3.8 and clause (a) of this Section) as of the Closing Date in an
amount exceeding the Accounts Receivable Reserve.
(i) any Retained Liabilities.
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to the Buyer or the other
Indemnified Persons.
10.3 Indemnification and Payment of Damages by Seller--Environmental
Matters. In addition to the provisions of Section 10.2, the Seller will
indemnify and hold harmless the Buyer, and the other Indemnified Persons for,
and will pay to the Buyer, and the other Indemnified Persons the amount of, any
Damages for which the Buyer and such other Indemnified Persons are or may become
liable (including costs of Cleanup) arising, directly or indirectly, from or in
connection with:
(a) any Environmental, Health, and Safety Liabilities arising out of
or relating to: (i) (A) the ownership (but not operation) of the Facilities
at any time on or prior to the Closing Date, (B) any Hazardous Activity or
operation at the Facilities (or at any other
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property, if such Hazardous Activity or operation is conducted by the Rutt
Division or any Person for whose conduct the Rutt Division is or may be
held responsible) at any time on or prior to the Closing Date, except those
Hazardous Activities and operations relating to the manufacturing operation
of the Rutt Division that are, at the Closing Date, being conducted at the
Facilities in compliance with all Environmental Laws, (C) any Hazardous
Materials that were Released or present on or at the Facilities at any time
on or prior to the Closing Date, except to the extent such Hazardous
Materials were, at the Closing Date, being used in the manufacturing
operations of the Rutt Division in compliance with all Environmental Laws;
(D) any Hazardous Materials, located off of the Facilities, that were
generated, transported, stored, treated, Released, or otherwise handled at
any time on or prior to the Closing Date by the Rutt Division or by any
Person for whose conduct the Rutt Division is or may be held responsible,
or (ii) any of the matters identified in Schedule 5.11 or Seller's
covenants in Section 5.11 relating thereto; or
(b) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property),
or other damage of or to any Person, including any employee or former
employee of the Rutt Division in any way arising (i) from any Hazardous
Activity conducted with respect to the Facilities or the operation of the
Rutt Division prior to the Closing Date, or (ii) from Hazardous Material
that was (A) present (but not Released to the Environment) at any time on
or before the Closing Date on or at the Facilities (or at any other
property, if such Hazardous Material emanated from any of the Facilities)
or (B) Released or Threatened to be Released (whether such Release or
Threat of Release is permitted by or in compliance with all Environmental
Laws) at any time on or prior to the Closing Date by the Rutt Division or
any Person for whose conduct the Rutt Division is or may be held
responsible.
The Buyer will be entitled to control any Cleanup, any related Proceeding,
and, except as provided in the following sentence, any other Proceeding with
respect to which indemnity may be sought under this Section 10.3. The procedure
described in Section 10.9 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 10.3. Except as provided in this
paragraph, the procedures of Section 10.8 shall apply to the indemnification and
defense of third party claims relating to this Section 10.3. Buyer shall provide
to Seller notice and, to the extent practicable and reasonable, opportunity for
comment with regard to reports, work plans and significant filings and other
communications regarding any Cleanup or related Proceeding for which
indemnification is sought under this Section 10.3; however, the failure to
provide such notice or opportunity for comment does not release, waive or
relieve Seller from its indemnity responsibilities hereunder except to the
extent Seller can prove that Seller is actually prejudiced thereby. Buyer shall
take reasonable steps to
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minimize and mitigate Damages related to any Cleanup or other Proceeding for
which indemnity is sought hereunder.
The foregoing provisions shall neither limit nor expand the scope of
Assumed Liabilities and Retained Liabilities.
10.4 Indemnification and Payment of Damages by Buyer. The Buyer will
indemnify and hold harmless the Seller and Seller's Representatives, controlling
stockholders and affiliates (collectively "Seller Indemnified Persons") (Seller
Indemnified Persons and Buyer Indemnified persons together to be referred to as
"Indemnified Persons"), and will pay to the Seller the amount of any Damages
arising, directly or indirectly, from or in connection with (a) any breach of
any representation or warranty made by the Buyer in this Agreement or in any
certificate delivered by the Buyer pursuant to this Agreement, (b) any breach by
the Buyer of any covenant or obligation of the Buyer in this Agreement, (c) any
claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
such Person with the Buyer (or any Person acting on Buyer's behalf) in
connection with any of the Contemplated Transactions, (d) any product
manufactured by Buyer after the Closing Date except those covered by the
provisions of Section 10.2(e), and (e) Assumed Liabilities.
10.5 Time Limitations. If the Closing occurs, the Seller will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to or after the Closing Date, except with respect to (i) the Retained
Liabilities and (ii) those in Article 3 and Sections 5.9, 5.11, 5.12, 10.2 and
10.3, provided that,
(a) with respect to Sections 3.30, 3.31, and Sections 10.2(c), (d),
(g), and (h), the Seller shall have no liability unless on or before 15
months after the Closing Date, the Buyer notifies the Seller of a claim
specifying the factual basis of that claim in reasonable detail to the
extent then known by the Buyer;
(b) claims with respect to the Retained Liabilities or Sections 3.3,
3.6, and 5.12, or a claim with respect to any breach of any of the Seller's
representations and warranties of which the Seller had Knowledge at any
time prior to the date on which such representation or warranty is made or
any intentional breach by the Seller of any covenant or obligation, may be
made at any time;
(c) claims with respect to Sections 3.11, 3.13, or 5.9 may be made
until the expiration of the applicable statute of limitations for such
claim;
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(d) claims with respect to Section 3.19, Section 5.11 and Section 10.3
may be made within five (5) years after the Closing Date;
(e) with respect to Section 10.2(e) the Seller's liability shall be
limited to claims for products manufactured within six (6) months from the
Closing Date, and for which such claim is asserted within eighteen (18)
months from the Closing Date;
(f) claims with respect to Section 3.29 and Section 10.2(f) may be
made within eighteen (18) months from the Closing Date;
(g) with respect to all other claims against the Seller relating to
any representation or warranty, or covenant or obligation to be performed
and complied with prior to or after the Closing Date (e.g., except for
those claims addressed in clauses (a), (b), (c), (d), (e) and (f) above),
the Seller shall have no liability unless on or before 15 months after the
Closing Date, the Buyer notifies the Seller of such claim specifying the
factual basis of that claim in reasonable detail to the extent then known
by the Buyer.
If the Closing occurs, the Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, unless, on or before fifteen (15) months after the Closing Date, the
Seller notifies the Buyer of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by the Seller, except for (i)
claims with respect to Section 6.3, which may be made until the expiration of
the applicable statute of limitations for such claim, and (ii) claims with
respect to Section 6.4, which may be made at any time.
10.6 Limitations on Amount--Seller. The Seller will have no liability (for
indemnification or otherwise) with respect to the matters described in clauses
(a), (b), (c), (f), (g) and (h) of Section 10.2, until the total of all Damages
with respect to such matters exceeds $120,000, and then only for the amount by
which such Damages exceed $120,000, except that claims with respect to the
covenants in Sections 5. 1 1 and 5.12 will not be subject to such limitations.
Seller shall have no liability for Damages in excess of $3,000,000 with respect
to the matters described in Section 3.19, Section 10.3 and in clauses (a), (b),
(c), (d), (e), (f), (g) and (h) of Section 10.2. However, this Section 10.6 will
not apply to any breach of any of the Seller's representations and warranties of
which the Seller had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional breach by the Seller of
any covenant or obligation, and the Seller shall be fully liable for all Damages
with respect to any such breach. This Section 10.6 also shall not apply to
claims relating to Section 5.1 1. The foregoing shall neither limit nor expand
the scope of Assumed Liabilities and Retained Liabilities.
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10.7 Limitations on Amount--Buyer. The Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a), (b) or (d) of Section 10.4 until the total of all Damages with respect to
such matters exceeds $120,000, and then only for the amount by which such
Damages exceed $120,000, except that claims with respect to the covenants in
Section 6.4 will not be subject to such limitations. However, this Section 10.7
will not apply to any breach of any of the Buyer's representations and
warranties of which the Buyer had Knowledge at any time prior to the date on
which such representation and warranty is made or any intentional breach by the
Buyer of any covenant or obligation, and the Buyer will be liable for all
Damages with respect to any such breach.
10.8 Procedure for Indemnification--Third Party Claims.
(a) Promptly after receipt by an indemnified party (including
Indemnified Persons) under Section 10.2, 10.4, or (to the extent provided
in the second to last paragraph of Section 10.3) Section 10.3 of notice of
a claim or the commencement of any Proceeding made or asserted by a third
party against it, such indemnified party will, if a claim is to be made
against an indemnifying party under such Sections, give written notice to
the indemnifying party of such claim or commencement of such Proceeding,
within thirty (30) days of the indemnified party's receipt of notice of the
claim or Proceeding, but the failure to notify the indemnifying party
within such thirty (30) day period will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the
extent that the indemnifying party demonstrates that the defense of such
claim or Proceedings is prejudiced by the indemnifying party's failure to
give such notice in a timely manner.
(b) If any Proceeding referred to in Section 10.8(a) is brought
against an indemnified party and the indemnified party gives notice to the
indemnifying party of commencement of such Proceeding, the indemnifying
party will, unless the Proceeding involves Taxes, be entitled to
participate in such Proceeding and, to the extent that it wishes (unless
(i) the indemnifying party is a party to such Proceeding and the
indemnified party determines in good faith that joint representation would
be inappropriate, or (ii) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial capacity to
defend a Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under
this Section 10 for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently
incurred by the indemnified party in connection with the defense of such
Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims
made in that Proceeding are within the scope of and subject
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to indemnification; (ii) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Applicable
Legal Requirements or any violation of the rights of any Person and no
effect on any other claims that may be made against the indemnified party,
and (B) the sole relief provided is monetary damages that are paid in full
by the indemnifying party, and (iii) the indemnified party will have no
liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party
of the commencement of any Proceeding and the indemnifying party does not,
within ten days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the
indemnified party.
(c) No claim made pursuant to this Section 10 shall be deemed to be an
"indemnifiable claim" unless and until either: the parties hereto have
agreed, or a court of competent jurisdiction has issued a final,
non-appealable order or determination, in each case, that such claim is an
indemnifiable claim and the extent to which such claim is indemnifiable by
the parties.
(d) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a claim or
Proceeding may adversely affect it or its affiliates other than as a result
of monetary damages for which it would be entitled to indemnification under
this Agreement, the indemnified party may, by notice to the indemnifying
party, assume the exclusive right to defend, compromise, or settle such
claim or Proceeding, but the indemnifying party will not be bound by any
determination of a claim or Proceeding so defended or any compromise or
settlement effected without its consent (which may not be unreasonably
withheld).
(e) The Seller and Buyer hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may
have under this Agreement with respect to such Proceeding or the matters
alleged therein, and agree that process may be served on the Seller and
Buyer with respect to such a claim anywhere in the world.
10.9 Procedure for Indemnification--Other Claims. A claim for
indemnification for any matter not involving a third-party claim shall be
asserted by written notice given by the indemnified party to the indemnifying
party. The indemnifying party shall have a period of thirty (30) days within
which to respond thereto. If the indemnifying party does not respond within such
thirty (30) day period, the indemnifying party shall be deemed to have accepted
responsibility for such indemnity, and shall have no further right to contest
the validity of such claim. If the indemnifying party does respond within such
thirty (30) day
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period and rejects such claim in whole or in part, the indemnified party shall
be free to pursue such remedies as may be available to it under applicable law.
11. GENERAL PROVISIONS.
11.1 Employees of Seller. Immediately prior to the Closing Date, the Seller
will terminate and the Buyer will offer employment to, all active full-time and
part-time Rutt Division Associates that are on the payroll of the Rutt Division
as of such date and who are identified on Schedule 3.20. The Buyer expressly
assumes any and all liability arising under the Federal Workers Adjustment and
Retraining Act or any equivalent Pennsylvania statute as a result of the
consummation of the Contemplated Transactions.
11.2 Expenses. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a breach of this Agreement by another
party.
11.3 Public Announcements. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as the Buyer and the Seller
determine. Unless consented to by the other party in advance or required by
Applicable Legal Requirements, prior to the Closing each party shall keep this
Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person. The Seller and the Buyer will consult with each other
concerning the means by which the Rutt Division employees, customers, and
suppliers and others having dealings with the Rutt Division will be informed of
the Contemplated Transactions, and the Buyer will have the right to be present
for any such communication.
11.4 Confidentiality. Between the date of this Agreement and the Closing
Date, the Buyer and the Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of the Buyer and the Seller
to maintain in confidence any written, oral, or other information obtained in
confidence from another party or the Seller in connection with this Agreement or
the Contemplated Transactions, unless (a) such information is already known to
such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required by legal proceedings.
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If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
11.5 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Seller:
Harrow Products, Inc.
2627 East Beltline, SE
Grand Rapids, MI 49546
Fax: (616) 942-2170
Attention: James S. Dahlke,
President and Chief Operating Officer
with a copy to:
Curtis, Mallet-Prevost, Colt & Mosle
101 Park Avenue
New York, NY 10178
Fax: (212) 697-1559
Attention: Eileen P. Matthews, Esquire
Buyer:
Rutt Custom Cabinetry, LLC
c/o Berwind Financial Group, L.P.
3000 Centre Square West
Philadelphia, PA 19102
Fax: (215) 564-5402
Attention: Peter Askey
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with a copy to:
Duane, Morris & Heckscher LLP
One Liberty Place
Philadelphia, PA 19103
Fax: (215) 979-1020
Attention: Vincent F. Garrity, Jr., Esquire
11.6 Jurisdiction: Service of Process. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the Commonwealth of
Pennsylvania, County of Philadelphia, or, if it has or can acquire Jurisdiction,
in the United States District Court for the Eastern District of Pennsylvania,
and each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on any party anywhere in the world.
11.7 Further Assurances. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.8 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.9 Entire Agreement and Modification. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter (including the
Letter of Intent between Berwind Financial Group, L.P. and the Seller dated
September 5, 1997 and
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accepted by the Seller on September 11, 1997) and constitutes (along with the
documents referred to In this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
11.10 Schedules.
(a) The disclosures in the Schedules to this Agreement, and those in
any supplement(s) thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate
and not to any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Schedules to this Agreement (other
than an exception expressly set forth as such in the Schedules with respect
to a specifically identified representation or warranty), the statements in
the body of this Agreement will control.
11.11 Assignments, Successors, and No Third-Party Rights. Neither party may
assign any of its rights under this Agreement without the prior consent of the
other party, except that the Buyer may assign any of its rights under this
Agreement to any Subsidiary of the Buyer. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
11.12 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.13 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
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11.14 Governing Law. This Agreement will be governed by the laws of the
Commonwealth of Pennsylvania without regard to conflicts of laws principles.
11.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
11.16 Guaranty. Industries hereby joins in this Agreement for the limited
purpose of guaranteeing, and does hereby irrevocably and unconditionally
guarantee to the Buyer the full and faithful performance, keeping, observance
and fulfillment by the Seller of all agreements, covenants, and obligations of
the Seller contained in the Agreement or any document executed in connection
herewith (the "Seller's Obligations"). The liability of Industries in respect of
this guaranty ("Guaranty") shall be immediate and shall not be contingent upon
the exercise or enforcement by the Buyer of whatever remedies it may have
against the Seller. Industries shall indemnify and hold harmless the Buyer from
and against any loss, liability, claim, obligations, Damages, cost or expense
(including reasonable attorney's fees) arising out of Industries' breach of this
Guaranty. Industries hereby represents and warrants to the Buyer as follows, all
of which shall survive the execution of this Agreement:
(a) Industries has the capacity to execute and deliver the Agreement
and perform this Guaranty thereunder; and
(b) The Agreement has been duly executed and delivered by Industries
to effect this Guaranty, and constitutes the legal, valid, and binding
obligation of Industries enforceable against Industries in accordance with
its terms; and all acts, conditions, consents, grants of approval, and
things required to be done and performed and to have happened or been
granted precedent to the execution, delivery, and performance of this
Agreement and Guaranty (without violating any law, regulation, governmental
requirement, judgment, order or decree or any agreement binding on
Industries or on any property of Industries or resulting in the creation or
imposition of or the obligation to create or impose any lien on any
property of Industries) have been effected in compliance with all
Applicable Legal Requirements.
This Guaranty constitutes a continuing guarantee and shall: (i) remain in
full force and effect until all of the Seller's Obligations have been performed;
(ii) be binding upon Industries and its successors and assigns; and (iii) inure
to the benefit of and be enforceable by the Buyer and its successors and
assigns.
If the Buyer shall have instituted any proceeding to enforce any right or
remedy under this Guaranty or the Agreement and such proceeding shall have been
discontinued or
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abandoned for any reason, or shall have been determined adversely to the Buyer,
then, except as otherwise provided in any such determination, the Buyer, the
Seller and Industries shall, subject to any determination in such proceeding, be
restored severally and respectively to their respective former positions
hereunder and thereunder, and thereafter all rights and remedies of the Buyer
shall continue as though no such proceeding had been instituted.
The foregoing Guaranty constitutes a contract for surety under Pennsylvania
law running in favor and for the benefit of Buyer.
Nothing herein shall be construed to require that notice to or consent of
Industries be obtained in order to amend or modify the provisions of the
Agreement or settle any dispute arising thereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
RUTT CUSTOM CABINETRY, LLC
By: CLASSIC KITCHENS, LLC, its sole member
By: BFG HERITAGE INVESTORS, L.P., its sole
member
By: BERWIND FINANCIAL GROUP, L.P., its
general partner
By: BERWIND FINANCIAL MANAGEMENT,
INC., its general partner
By /s/ Peter M. Askey
Name: Peter M. Askey
Title: Principal
HARROW PRODUCTS, INC.
By /s/ John S. Hogan
Name: John S. Hogan
Title: VP & CFO
HARROW INDUSTRIES, INC.
By /s/ John S. Hogan
Name: John S. Hogan
Title: VP & CFO
105027
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