<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-20416
EAGLE INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3384361
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two North Riverside Plaza
Chicago, Illinois 60606
(Address of Principal Executive Office)
(312) 906-8700
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
1,000 shares of Common Stock as of August 1, 1994
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EAGLE INDUSTRIES, INC.
FORM 10-Q
JUNE 30, 1994
INDEX
PART I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Income
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition
PART II. Other Information:
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
JUNE 30, DECEMBER 31,
1994 1993
(UNAUDITED) (RESTATED)
ASSETS
Current assets:
Cash and cash equivalents $ 17.9 $ 4.4
Accounts receivable, net 25.5 109.0
Inventories, net 119.5 112.0
Other current assets 87.1 44.9
Net assets of discontinued
operations 42.1 173.7
Total current assets 292.1 444.0
Property, plant and equipment, net 156.7 158.9
Goodwill 294.7 299.0
Other long-term assets 119.3 82.9
Total assets $ 862.8 $ 984.8
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion long-term debt $ 27.4 $ 17.8
Accounts payable 63.2 50.1
Accrued liabilities 82.9 68.8
Total current liabilities 173.5 136.7
Senior subordinated notes 208.3 421.9
Other long-term debt 246.2 217.3
Accrued employee benefit obligations 51.6 47.9
Other long-term liabilities 82.5 68.9
Total liabilities 762.1 892.7
Stockholder's equity:
Common stock ---- ----
Additional paid-in capital 188.7 138.7
Accumulated deficit (80.5) (37.0)
Cumulative translation adjustments (2.9) (5.0)
Pension liability adjustment (4.6) (4.6)
Total stockholder's equity 100.7 92.1
Total liabilities and stockholder's
equity $ 862.8 $ 984.8
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS)
(UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1994 1993 1994 1993
(RESTATED) (RESTATED)
Net sales $ 233.2 $ 191.8 $ 438.0 $ 361.5
Cost of sales 181.6 150.5 342.7 285.8
Gross earnings 51.6 41.3 95.3 75.7
Selling and administrative expenses 34.5 23.3 62.4 44.1
Goodwill amortization 2.2 2.2 4.4 4.4
Operating income 14.9 15.8 28.5 27.2
Net interest expense 9.1 16.5 20.8 31.1
Income (loss) from continuing
operations before income taxes 5.8 (0.7) 7.7 (3.9)
Provision (benefit) for income
taxes from continuing operations 2.5 (1.0) 3.6 (0.9)
Income (loss) from continuing
operations 3.3 0.3 4.1 (3.0)
Discontinued Operations:
Loss from discontinued
operations, less income tax
benefit of $1.1 and $0.7,
respectively in the quarter and
six months ended June, 1994 and
$0.5 and $0.4, respectively for
the quarter and six months ended
June, 1993 (4.1) (0.7) (3.8) (1.3)
Loss on disposal of businesses,
net of applicable income tax
benefit of $7.9 (27.2) ---- (27.2) ----
Loss before extraordinary item (28.0) (0.4) (26.9) (4.3)
Extraordinary loss from early
retirement of debt, net of income
tax benefit of $9.4 in 1994 ---- ---- (16.6) ----
Loss before cumulative effect of
change in accounting principle (28.0) (0.4) (43.5) (4.3)
Cumulative effect of change in
accounting principle ---- ---- ---- (4.0)
Net loss $ (28.0) $ (0.4) $ (43.5) $ (8.3)
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
1994 1993
(RESTATED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations $ 4.1 $ (3.0)
Adjustments to reconcile income (loss) from
continuing operations to net cash flow used in
operations:
Depreciation 11.4 10.7
Amortization 6.4 8.1
Accretion of discount on subordinated debt 10.5 ----
Proceeds from sales of accounts receivable 110.3 ----
Cash effects of changes in other working
capital balances, accrued employee benefit
obligations, and other long-term liabilities
(excluding the effects of dispositions of
businesses) (2.8) (11.5)
Net cash flow from continuing operating
activities 139.9 4.3
Net cash flow used in discontinued
operations (20.9) (3.6)
Net cash flow from operations 119.0 0.7
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of businesses 59.9 22.9
Capital expenditures (9.5) (9.0)
Other (9.2) (4.4)
Net cash flow from investing activities 41.2 9.5
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of senior subordinated debt (234.1) ----
Repayment of senior credit facilities (221.1) ----
Capital contribution 50.0 ----
Proceeds from new credit facility 325.0 ----
Payments on long-term debt (25.1) (13.6)
Net (payment) borrowing on revolving credit
facilities (41.4) 31.0
Net cash flow from (used in) financing
activities (146.7) 17.4
CHANGE IN CASH AND CASH EQUIVALENTS 13.5 27.6
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4.4 12.7
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 17.9 $ 40.3
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION:
The accompanying unaudited Condensed Consolidated Financial Statements of
Eagle Industries, Inc. (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for a
complete set of financial statements. In the opinion of management, all
adjustments considered necessary, consisting only of normal recurring
adjustments are included for fair presentation. Operating results for the
quarter and six months ended June 30, 1994 are not necessarily indicative
of results that may be expected for the full year. The unaudited Condensed
Consolidated Financial Statements for the quarters and six months ended
June 30, 1994 and 1993 should be read in conjunction with the audited
Consolidated Financial Statements of the Company for the year ended
December 31, 1993. The historical statements of the Company have been
restated for companies being reported as discontinued operations.
(2) DISCONTINUED OPERATIONS
During the quarter ended June 30, 1994, the Company decided to pursue the
sales of certain of the businesses in the Industrial Products Group and
all of the businesses in the Specialty Products Group. As a result of this
decision, the Company has reflected the net assets and results of operation
of Pfaudler, Inc. (worldwide operations) ("Pfaudler"), Chemineer, Inc.
("Chemineer"), Hill Refrigeration, Inc. ("Hill"), Caron International, Inc.
("Caron") and Gerry Sportswear, Inc. ("Gerry") as discontinued operations.
The Company recorded a pretax provision of $53.2 million and applicable tax
benefits of $12.9 million in the quarter ended June 30, 1994 for estimated
losses from operations and the ultimate disposition of Hill, Caron and
Gerry. In addition, the Company recorded a pretax provision of $6.8
million and applicable tax benefits of $2.5 million, related to Lapp
Insulator Company which has been previously reported as a discontinued
operation. The Company also recorded pretax charges of $5.8 million and
applicable tax benefits of $2.3 million to establish additional self-
insurance reserves for businesses previously sold by the Company.
In June 1994, the Company sold the stock of Pfaudler and Chemineer to
Robbins & Myers, Inc. The Company received cash proceeds of $59.9 million
and a $50.0 million, 5.5%, subordinated note (which the Company recorded
at a discounted value of $40.0 million). In addition, the Company received
stock appreciation rights with respect to 2.0 million shares of common
stock of Robbins & Myers, Inc. The Company recorded a pretax gain of $30.7
million, and applicable taxes of $9.8 million with respect to the sale of
these businesses. In August 1994, the Company completed the sale of
certain assets and liabilities of Hill to an indirect subsidiary of Dover
Corporation for cash proceeds of $8.8 million. In connection with the
sale, the Company's parent, Great American Management and Investment, Inc.
("GAMI") guaranteed in favor of the buyer (i) all of the obligations of
Hill not assumed by the buyer for a period of six years up to a limit of
$6.5 million, and (ii) on an unsecured basis, and without limitation to
time, Hill's liabilities for environmental matters and pension and retiree
medical benefits.
The following table summarizes key financial data related to the
discontinued operations of Lapp (1993), Chemineer, Pfaudler, Caron, Gerry
and Hill (in millions):
SIX MONTHS ENDED
JUNE 30,
1994 1993
Net sales $ 162.9 $ 221.1
Operating income (loss) (3.0) 2.3
Allocated interest expense 1.5 4.5
Income tax benefit applicable
to discontinued businesses (0.7) (0.4)
Change in accounting principle ---- 0.5
Loss from operations of
discontinued businesses,
net of applicable income taxes (3.8) (1.3)
The net current assets of discontinued operations included in the Condensed
Consolidated Balance Sheet at June 30, 1994 and December 31, 1993 amounted
to $42.1 million and $173.7 million, respectively, and consisted primarily
of cash, trade receivables, inventories, property, plant and equipment and
goodwill net of trade payables, accrued liabilities and accrued employee
benefit obligations. These amounts have all been classified as current
based on the intent to dispose of them within one year.
(3) INVENTORIES
Inventory consists of the following (in millions):
JUNE 30, DECEMBER 31,
1994 1993
(UNAUDITED) (RESTATED)
Raw materials and supplies $ 38.5 $ 36.1
Work in process 28.6 25.1
Finished goods 52.4 50.8
$ 119.5 $ 112.0
(4) LONG-TERM DEBT
In January 1994, the Company consummated a refinancing (the "Refinancing"),
involving the repayment and redemption of all of its senior bank credit
facilities, its 13% Senior Subordinated Notes ("13% Notes") and its 13.75%
Senior Subordinated Notes ("13.75% Notes"). In January 1994, the senior
bank credit facilities were fully repaid and the agreements terminated.
The 13% Notes were called for redemption on February 27, 1994 at 104% of
their principal amount plus accrued interest. The 13.75% Notes were called
for redemption on March 15, 1994 at 105.5% of their principal amount plus
accrued interest. The Company recorded an extraordinary pretax charge of
$26.0 million in the first quarter of 1994 in connection with the
Refinancing. A portion of the proceeds to consummate the Refinancing were
derived from a new senior bank credit facility made available to Eagle
Industrial Products Corporation, ("Eagle Industrial") a newly formed
wholly-owned subsidiary of the Company which owns all of the operating
subsidiaries of the Company. Refer to Note 5 for a further discussion of
other sources of proceeds for the Refinancing.
On January 31, 1994, Eagle Industrial entered into a new $425 million
senior credit facility consisting of a $290 million term loan and a $135
million revolving credit facility with a group of banks (the "Credit
Facility"). As a result of the sale of Pfaudler and Chemineer, an
additional term loan payment of $18.0 million was made and the Credit
Facility was amended. At June 30, 1994, the Credit Facility consists of:
(i) a $204.5 million term loan due in quarterly installments increasing
from $5.9 million per quarter during 1994 to $13.8 million in 1999
commencing with the quarter ending September 30, 1994; (ii) a $60.8 million
term loan due in equal quarterly installments aggregating $0.3 million in
1994, $0.5 million in 1995, $0.9 million per year in 1996 through 1999 and
$56.3 million in 2000; and (iii) a $135 million revolving credit facility
(subject to borrowing base availability) that expires in 1999, which may be
extended through 2000.
Borrowings under the Credit Facility bear interest at alternative floating
rate structures, at management's option (6.4% at June 30, 1994), and are
secured by substantially all domestic property, plant, equipment, inventory
and certain receivables of Eagle Industrial and its subsidiaries. The
Credit Facility requires an annual commitment fee of 0.5% on the average
daily unused amount of the revolving portion of the Credit Facility. At
June 30, 1994, the revolving credit portion was unused and $265.3 million
was outstanding under the term loan portion of the Credit Facility.
Additionally, the Credit Facility provides for a letter of credit facility
of up to $50 million. Borrowing availability under the revolving portion
of the Credit Facility is reduced by the outstanding amount of letters of
credit. At June 30, 1994, an additional $51.5 million was available to
borrow under the Credit Facility.
The Credit Facility contains various financial covenants, the more
restrictive requirements being; the maintenance of minimum levels of net
worth; limitations on incurring additional indebtedness; restrictions on
the payment of dividends or the making of loans to the Company; maintenance
of certain ratios of cash flow to interest expense and indebtedness;
maintenance of a minimum level of cash flow to fixed charges; and a
prohibition on payments to the Company for management services in excess of
$3 million per year. The Company has provided a guarantee as to the
repayment of amounts outstanding under the Credit Facility. Additionally,
the Credit Facility requires that the Samuel Zell Group (as defined in the
Credit Facility) directly or indirectly maintain at least 30% of the voting
power to elect members of the board of directors of the Company and that
the Company directly own 100% of Eagle Industrial.
In March 1994, the Company entered into an unsecured revolving credit
agreement with GAMI whereby the Company may borrow up to $20.0 million.
Advances under this credit facility bear interest at the London Eurodollar
Interbank Offered Rate plus 0.75%. The agreement is scheduled to mature in
March 1999, however, GAMI may request partial or full repayment of amounts
outstanding by giving not less than three days notice. There were no
amounts outstanding under this facility at June 30, 1994.
Amounts outstanding under the Company's Senior Subordinated Notes are as
follows (in millions):
JUNE 30, DECEMBER 31,
1994 1993
(UNAUDITED)
Senior Deferred Coupon Notes $ 208.3 $ 197.9
13% Notes ---- 149.0
13.75% Notes ---- 75.0
$ 208.3 $ 421.9
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Components of other long-term debt are as follows (in millions):
JUNE 30, DECEMBER 31,
1994 1993
(UNAUDITED) (RESTATED)
Eagle Industrial Credit Facility $ 265.3 $ ----
Senior Bank Credit Facilities ---- 224.0
Industrial Revenue Bonds and
Debentures 2.6 2.5
Other 5.7 8.6
273.6 235.1
Less current portion (27.4) (17.8)
Total other long-term debt $ 246.2 $ 217.3
The Company and its subsidiaries complied with all covenants of their
respective debt agreements at June 30, 1994.
(5) REFINANCING AND SECURITIZATION
As discussed in Note 4, in January 1994 the Company consummated the
Refinancing. In addition to the establishment of the Credit Facility,
proceeds for the Refinancing were derived from a $50 million capital
contribution from GAMI and an asset securitization program (the
"Securitization") whereby the Company sold certain of its accounts
receivable for proceeds of $110.3 million and a residual interest in a
trust to which the receivables were transferred. Total cash proceeds for
the Refinancing were $485 million.
In connection with the Securitization, the Company entered into a
receivable sale agreement whereby it will sell, with limited recourse, on a
continuous basis, an undivided interest in certain of its accounts
receivable. Under the agreement, which expires in June 1999, the maximum
amount of proceeds which may be accessed through this agreement at any one
time is $145 million and is subject to change based on the level of
eligible receivables and restrictions on concentration of receivables. At
June 30, 1994, uncollected receivables sold under the agreement were $152.6
million. The cash proceeds for the period ended June 30, 1994 of $578.8
million (including the initial proceeds of $110.3 million) were reported as
a component of cash flows from operating activities. The loss on the sale
of receivables under this program was $2.1 million and $1.4 million in the
six months and three months ended June 30, 1994, respectively, and is
included in selling and administrative expenses. The difference between
the amount of receivables sold and proceeds received at June 30, 1994 was
$38.5 million. This residual interest in the trust is reflected in other
current assets.
(6) OTHER
In June 1994, the Company recorded pretax charges of $6.0 million to
establish additional self-insurance reserves related to continuing
operations. In addition, as discussed in Note 2, the Company recorded
pretax charges of $5.8 million and applicable tax benefits of $2.3 million
to establish additional self-insurance reserves for businesses previously
sold by the Company. These revisions in estimated self-insurance reserves
for workers' compensation, product liability and general liability were the
result of a comprehensive review of existing self-insurance reserves
related to continuing operations and retained liabilities related to
previously owned businesses.
<PAGE>
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following is a discussion of the results of operations of Eagle
Industries, Inc. (the "Company") and subsidiaries for the quarter and six
months ended June 30, 1994 as compared to the quarter and six months ended
June 30, 1993 and should be read in conjunction with the Condensed
Consolidated Financial Statements included herein and the Company's Annual
Report on Form 10-K for the year ended December 31, 1993 and the audited
Consolidated Financial Statements of the Company for the year ended
December 31, 1993 included therein.
As discussed in Note 2, the Company decided to pursue the sales of all the
businesses in the Specialty Products Group and sold certain businesses in
the Industrial Products Group. As a result, the Company has three
reportable segments. The operations of Burns Aerospace are now combined
with Corporate.
QUARTER ENDED JUNE 30, 1994 COMPARED TO THE QUARTER ENDED JUNE 30, 1993
The following table shows net sales and operating income by business group
(in millions):
NET SALES OPERATING INCOME
QUARTER ENDED QUARTER ENDED
JUNE 30, JUNE 30,
1994 1993 1994 1993
Building Products Group $ 112.1 $ 88.5 $ 12.1 $ 11.8
Electrical Products Group 51.4 43.7 5.7 4.4
Automotive Products Group 46.6 42.6 2.0 2.2
Corporate and Other 23.1 17.0 (4.9) (2.6)
Total $ 233.2 $ 191.8 $ 14.9 $ 15.8
NET SALES
Net sales of $233.2 million for the second quarter of 1994 were $41.4
million or 21.6% higher than net sales for the second quarter of 1993.
This increase was primarily due to increased volume in most of the
Company's businesses.
Net sales of $112.1 million for the Building Products Group were $23.6
million or 26.8% higher than net sales for the 1993 period. This increase
was due to increased volume as a result of increased market penetration by
Hart & Cooley in its flexible duct product line, and to a lesser extent
improved pricing, increased sales to Sears Roebuck and Co. by DeVilbiss Air
Power and increased sales of ultra-low-flush toilets by Mansfield.
Net sales of $51.4 million for the Electrical Products Group were $7.7
million or 17.5% higher than net sales for the 1993 period. This increase
was primarily due to increased volume at Elastimold due to an improvement
in the economy and a product line acquisition in 1993. Hendrix also
contributed to the increase due to increased volume.
Net sales of $46.6 million for the Automotive Products Group were $4.0
million or 9.6% higher than net sales for the 1993 period. This increase
was primarily due to increased volume at the automotive parts distribution
businesses as a result of increased market penetration.
Other net sales of $23.1 million were $6.1 million or 35.7% higher than net
sales for the 1993 period. This increase was primarily due to shipments
under a major order at Burns Aerospace.
GROSS EARNINGS
Gross earnings of $51.6 million were $10.3 million or 24.8% higher than
gross earnings for the 1993 period. This increase was primarily due to the
higher volume in the 1994 period. Gross margin was 22.1% in 1994 and 21.5%
in 1993.
OPERATING INCOME
Operating income of $14.9 million for the second quarter of 1994 was $0.9
million or 5.7% lower than operating income for the comparable period in
1993. Increases in the Building Products and Electrical Products Group
were offset by declines in the Automotive Products Group and increased
corporate and other expenses due primarily to $6.5 million of charges
recorded to establish self-insurance reserves.
Operating income of $12.1 million for the Building Products Group was $0.3
million or 2.8% higher than in the 1993 period. This increase was due to
the increased volume at all of the Company's businesses within this group.
Improved pricing at Hart & Cooley and the increased sales of higher margin
ultra-low-flush toilets at Mansfield also contributed to the increase in
operating income. These increases were partially offset by $3.6 million of
charges to establish self-insurance reserves.
Operating income of $5.7 million for the Electrical Products Group was $1.3
million or 30.4% higher than in the 1993 period. This increase was
primarily due to the increased volume at Elastimold and Hendrix partially
offset by declines at IEP and $0.8 million of charges recorded in 1994 to
establish self-insurance reserves.
Operating income of $2.0 million for the Automotive Products Group was $0.2
million or 8.2% lower than in the 1993 period. This decrease was primarily
due to $0.5 million of charges recorded to establish self-insurance
reserves.
Corporate and other expenses of $4.9 million were $2.3 million higher than
in the 1993 period. This increase was primarily due to $1.4 million of
expenses associated with the Company's asset securitization program in 1994
as well as $1.6 million of charges for self-insurance reserves.
INTEREST EXPENSE
Net interest expense was $9.1 million for the quarter ended June 30, 1994
compared to $16.5 million for the comparable 1993 period, a decrease of
$7.4 million or 44.8%. This decrease was primarily due to the overall
decrease in the level of debt coupled with the decrease in interest rates
associated with the Refinancing which was completed on January 31, 1994.
PROVISION FOR INCOME TAXES
The effective tax rate for the first quarter of 1994 reflects non-
deductible expenses, primarily goodwill amortization and state and non U.S.
income taxes.
SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
1993
The following table shows net sales and operating income by business group
(in millions):
NET SALES OPERATING INCOME
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1994 1993 1994 1993
Building Products Group $ 212.6 $ 164.4 $ 24.6 $ 21.1
Electrical Products Group 96.5 82.1 9.1 7.1
Automotive Products Group 87.5 77.9 3.6 2.9
Corporate and Other 41.4 37.1 (8.8) (3.9)
Total $ 438.0 $ 361.5 $ 28.5 $ 27.2
NET SALES
Net sales of $438.0 million for the six months ended June 30, 1994 were
$76.5 million or 21.1% higher than net sales for the comparable period in
1993. This increase was primarily due to increased volume at most of the
Company's businesses with the most significant increases in the Building
Products Group.
Net sales of $212.6 million for the Building Products Group were $48.2
million or 29.3% higher for the first six months of 1994 compared to the
first six months of 1993. This increase was primarily due to increased
volume at Hart & Cooley in its flexible duct product line due to increased
market penetration and the improved residential market, increased sales to
Sears Roebuck and Co. by DeVilbiss Air Power and increased sales of ultra-
low-flush toilets by Mansfield.
Net sales of $96.5 million for the Electrical Products Group were $14.4
million or 17.6% higher in the first six months of 1994 compared to the
first six months of 1993. This increase was primarily due to increased
volume at Elastimold as a result of an improvement in the economy as well
as the acquisition of a product line in 1993. Hendrix and IEP also had
improvements in volume which contributed to the increase.
Net sales of $87.5 million for the Automotive Products Group were $9.6
million or 12.2% higher in the first six months of 1994 compared to the
first six months of 1993. This increase was primarily due to increased
volume at the automotive parts distribution businesses as a result of new
distribution channels and increased market penetration. Denman also
contributed to the increase due to price increases established in January
1994 and increased volume.
Other net sales increased $4.3 million or 11.5% compared to 1993. This
increase was primarily due to shipments under a major order at Burns
Aerospace.
GROSS EARNINGS
Gross earnings of $95.3 million were $19.6 million or 25.8% higher than
gross earnings for the first six months of 1993. This increase was
primarily due to the increased volume in the 1994 period. Gross margin was
21.8% in the first six months of 1994 compared to 21.0% in the comparable
1993 period.
OPERATING INCOME
Operating income of $28.5 million for the six months ended June 30, 1994
was $1.3 million or 4.8% higher than operating income for the comparable
period in 1993. This increase was due to increases at most of the
Company's businesses partially offset by increased corporate expenses due
primarily to $6.9 million of charges recorded to establish self-insurance
reserves.
Operating income of $24.6 million for the Building Products Group was $3.5
million or 16.7% higher than in the 1993 period. This increase was
primarily due to increased volume at all of the Company's businesses within
this group as well as improved pricing at Hart & Cooley. The contribution
of increased sales of higher margin ultra-low-flush toilets at Mansfield
was partially offset by competitive pricing. These increases were
partially offset by $3.9 million of charges to establish self-insurance
reserves.
Operating income of $9.1 million for the Electrical Products Group was $2.0
million or 28.7% higher than in the 1993 period. This increase was
primarily due to increased volume at most of the businesses within this
group partially offset by charges of $0.9 million recorded in 1994 to
establish self-insurance reserves.
Operating income of $3.6 million for the Automotive Products Group was $0.7
million or 22.4% higher than in the 1993 period. This increase was due to
increased volume at all the businesses within this group partially offset
by charges of $0.5 million recorded in 1994 to establish self-insurance
reserves.
Corporate and other expenses of $8.8 million were $4.9 million higher than
in the 1993 period. This increase was primarily due to $1.6 million of
charges recorded to establish self-insurance reserves and $2.1 million of
expenses associated with the Company's asset securitization program. In
addition, in 1993, the Company recorded a one time curtailment gain
associated with a pension plan as well as a gain on the sale of equity
securities which totaled $1.7 million.
INTEREST EXPENSE
Net interest expense was $20.8 million for the six months ended June 30,
1994 compared to $31.1 million for the comparable 1993 period. This
decrease was primarily due to the overall decrease in the level of debt
coupled with the decrease in interest rates associated with the Refinancing
which was completed on January 31, 1994.
PROVISION FOR INCOME TAXES
The effective tax rate for the six months ended June 30, 1994 reflects non-
deductible expenses, primarily goodwill amortization and state income
taxes.
DISCONTINUED OPERATIONS
During the quarter ended June 30, 1994, the Company decided to pursue the
sales of certain of the businesses in the Industrial Products Group and all
of the businesses in the Specialty Products Group. As a result of this
decision, the Company has reflected the net assets and results of operation
of Pfaudler, Inc. (worldwide operations) ("Pfaudler"), Chemineer, Inc.
("Chemineer"), Hill Refrigeration, Inc. ("Hill"), Caron International, Inc.
("Caron") and Gerry Sportswear, Inc. ("Gerry") as discontinued operations.
The Company recorded a pretax provision of $53.2 million and applicable tax
benefits of $12.9 million in the quarter ended June 30, 1994 for estimated
losses from operations and the ultimate disposition of Hill, Caron and
Gerry. Net losses recorded by these businesses were $4.1 million and $3.8
million for the quarter and six months ended June 30, 1994, respectively.
In addition, the Company recorded a pretax provision of $6.8 million and
applicable tax benefits of $2.5 million, related to Lapp Insulator Company
which has been previously reported as a discontinued operation. The
Company also recorded pretax charges of $5.8 million and applicable tax
benefits of $2.3 million to establish additional self-insurance reserves
for businesses previously sold by the Company. These revisions in
estimated self-insurance reserves for workers' compensation, product
liability and general liability were the result of a comprehensive review
of existing self-insurance reserves related to continuing operations and
retained liabilities related to previously owned businesses.
In June 1994, the Company sold the stock of Pfaudler and Chemineer to
Robbins & Myers, Inc. The Company received cash proceeds of $59.9 million
and a $50.0 million, 5.5%, subordinated note (which the Company recorded
at a discounted value of $40.0 million). In addition, the Company received
stock appreciation rights with respect to 2.0 million shares of common
stock of Robbins & Myers, Inc. The Company recorded a pretax gain of $30.7
million, and applicable taxes of $9.8 million with respect to the sale of
their businesses. In August 1994, the Company completed the sale of
certain assets of Hill to an indirect subsidiary of Dover Corporation for
cash proceeds of $8.8 million. The Company is pursuing the sales of Caron,
Gerry and Lapp.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its debt service, capital expenditure
requirements and operating needs through a combination of operating cash
flow and external financing. Cash flow from continuing operating
activities was $139.9 million and $4.3 million for the six months ended
June 30, 1994 and 1993, respectively. The increase was primarily due to
proceeds received from the sale of accounts receivable as part of the
Company's asset securitization program (the "Securitization"). Excluding
the effects of these proceeds, cash flow from continuing operating
activities was $29.6 million for the quarter ended June 30, 1994, compared
to $4.3 million in the comparable 1993 period. This increase was primarily
due to the increased level of operating income, improved working capital
management and a reduction in the amount of interest paid as a result of
the Refinancing described in Note 4 of the Company's Condensed Consolidated
Financial Statements.
At June 30, 1994, the Credit Facility consists of: (i) a $204.5 million
term loan due in quarterly installments increasing from $5.9 million per
quarter during 1994 to $13.8 million in 1999 commencing with the quarter
ending September 30, 1994; (ii) a $60.8 million term loan due in equal
quarterly installments aggregating $0.3 million in 1994, $0.5 million in
1995, $0.9 million per year in 1996 through 1999 and $56.3 million in 2000;
and (iii) a $135 million revolving credit facility (subject to borrowing
base availability) that expires in 1999, which may be extended through
2000.
Borrowings under the Credit Facility bear interest at alternative floating
rate structures, at management's option (6.4% at June 30, 1994), and are
secured by substantially all domestic property, plant, equipment, inventory
and certain receivables of Eagle Industrial and its subsidiaries. At June
30, 1994, the revolving credit portion was unused and $265.3 million was
outstanding under the term loan portion of the Credit Facility.
Additionally, the Credit Facility provides for a letter of credit facility
of up to $50 million. Borrowing availability under the revolving portion
of the Credit Facility is reduced by the outstanding amount of letters of
credit. At June 30, 1994, an additional $51.5 million was available to
borrow under the Credit Facility. The Company and its subsidiaries
complied with all covenants of their respective debt agreements at June 30,
1994.
In March 1994, the Company entered into an unsecured revolving credit
agreement with its parent, GAMI whereby the Company may borrow up to $20.0
million. Advances under this credit facility bear interest at the London
Eurodollar Interbank Offered Rate plus 0.75%. The agreement is scheduled
to mature in March 1999, however, GAMI may request partial or full
repayment of amounts outstanding by giving not less than three days notice.
There were no amounts outstanding under this facility at June 30, 1994.
Management believes that cash flow from continuing operations along with
availability under the Credit Facility will be sufficient to pay interest
on outstanding debt, meet current maturities, pay income taxes, fund
capital expenditures and meet other operating needs.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Effective August 5, 1994, Eagle Industries, Inc. (the "Company") sold
certain assets and liabilities of Hill Refrigeration, Inc. ("Hill") to an
indirect subsidiary of Dover Corporation pursuant to an Asset Purchase
Agreement (the "Agreement") dated August 5, 1994. Hill is a manufacturer
of commercial refrigeration equipment. Under the terms of the Agreement,
total consideration received amounted to $8.8 million in cash.
The proforma effects of reporting this business as a discontinued operation
is included in the Condensed Consolidated Financial Statements of the
Company included herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
2.1 Asset Purchase Agreement among Hill Phoenix, Inc., Refrigeration
Systems, Inc., Phoenix Refrigeration Systems, Inc., Dover Diversified,
Inc., Hill Refrigeration, Inc and Eagle Industries, Inc.
b) Reports on Form 8-K
Current Report on Form 8-K dated June 30, 1994 regarding the sale of
Pfaudler (United States), Inc. and Chemineer, Inc. to Robbins &
Myers, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EAGLE INDUSTRIES, INC.
By: /s/ Sam A. Cottone
_____________________
Sam A. Cottone
Senior Vice President and
Chief Financial Officer
Dated: August 15, 1994
Exhibit 2.1
ASSET PURCHASE AGREEMENT
AMONG
HILL PHOENIX, INC.
REFRIGERATION SYSTEMS, INC.
PHOENIX REFRIGERATION SYSTEMS, INC.
DOVER DIVERSIFIED, INC.
HILL REFRIGERATION, INC.
and
EAGLE INDUSTRIES, INC.
August 5, 1994
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
1. PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . .
1.1. Assets to be Transferred . . . . . . . . . . . . . .
1.2. Excluded Assets. . . . . . . . . . . . . . . . . . .
2. ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . .
2.1. Liabilities to be Assumed. . . . . . . . . . . . . .
2.2. Liabilities Not to be Assumed. . . . . . . . . . . .
3. PURCHASE PRICE - PAYMENT. . . . . . . . . . . . . . . . .
3.1. Purchase Price . . . . . . . . . . . . . . . . . . .
3.2. Payment of Purchase Price. . . . . . . . . . . . . .
3.3. Determination of Purchase Price. . . . . . . . . . .
3.4. Other Payments and Adjustments . . . . . . . . . . .
3.5. Allocation of Purchase Price . . . . . . . . . . . .
4. REPRESENTATIONS AND WARRANTIES OF COMPANY . . . . . . . .
4.1. Corporate. . . . . . . . . . . . . . . . . . . . . .
4.2. Authority. . . . . . . . . . . . . . . . . . . . . .
4.3. No Violation . . . . . . . . . . . . . . . . . . . .
4.4. Financial Statements . . . . . . . . . . . . . . . .
4.5. Tax Matters. . . . . . . . . . . . . . . . . . . . .
4.6. Accounts Receivable. . . . . . . . . . . . . . . . .
4.7. Inventory. . . . . . . . . . . . . . . . . . . . . .
4.8. Absence of Certain Changes . . . . . . . . . . . . .
4.9. Intentionally Omitted. . . . . . . . . . . . . . . .
4.10.No Litigation. . . . . . . . . . . . . . . . . . . .
4.11.Compliance With Laws and Orders. . . . . . . . . . .
4.12.Title to and Condition of Properties . . . . . . . .
4.13.Insurance. . . . . . . . . . . . . . . . . . . . . .
4.14.Contracts and Commitments. . . . . . . . . . . . . .
4.15.Contract Defaults. . . . . . . . . . . . . . . . . .
4.16.Labor Matters. . . . . . . . . . . . . . . . . . . .
4.17.Employee Benefit Plans . . . . . . . . . . . . . . .
4.18.Employment Compensation. . . . . . . . . . . . . . .
4.19.Trade Rights . . . . . . . . . . . . . . . . . . . .
4.20.Major Customers and Suppliers. . . . . . . . . . . .
4.21.Product Warranty and Product Liability . . . . . . .
4.22.Assets Necessary to Business . . . . . . . . . . . .
4.23.No Brokers or Finders. . . . . . . . . . . . . . . .
5. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . .
5.1. Corporate. . . . . . . . . . . . . . . . . . . . . .
5.2. Authority. . . . . . . . . . . . . . . . . . . . . .
5.3. No Brokers or Finders. . . . . . . . . . . . . . . .
6. EMPLOYEES - EMPLOYEE BENEFITS . . . . . . . . . . . . . .
6.1. Affected Employees . . . . . . . . . . . . . . . . .
6.2. Retained Responsibilities. . . . . . . . . . . . . .
6.3. Payroll Tax. . . . . . . . . . . . . . . . . . . . .
6.4. Employee Benefit Plans . . . . . . . . . . . . . . .
7. COVENANTS OF THE PARTIES. . . . . . . . . . . . . . . . .
7.1. Noncompetition; Confidentiality. . . . . . . . . . .
7.2. Use of Company's Name. . . . . . . . . . . . . . . .
7.3. Sales Tax Matters. . . . . . . . . . . . . . . . . .
7.4. Unemployment Compensation. . . . . . . . . . . . . .
7.5. Bulk Sales Compliance. . . . . . . . . . . . . . . .
7.6. Access to Information and Records. . . . . . . . . .
7.7. Change of Corporate Name . . . . . . . . . . . . . .
7.8. Environmental Matters. . . . . . . . . . . . . . . .
7.9. Health Insurance Coverage. . . . . . . . . . . . . .
7.10.Insurance. . . . . . . . . . . . . . . . . . . . . .
7.11.Taxes Resulting from Transaction . . . . . . . . . .
7.12.Oryx Payment . . . . . . . . . . . . . . . . . . . .
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . .
8.1. By Company and Shareholder . . . . . . . . . . . . .
8.2. By Buyer . . . . . . . . . . . . . . . . . . . . . .
8.3. Indemnification of Claims. . . . . . . . . . . . . .
8.4. Payment. . . . . . . . . . . . . . . . . . . . . . .
8.5. Indemnification for Environmental Matters. . . . . .
8.6. No Waiver. . . . . . . . . . . . . . . . . . . . . .
8.7. Guaranty; Escrow Agreement . . . . . . . . . . . . .
9. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . .
10. RESOLUTION OF DISPUTES. . . . . . . . . . . . . . . . . .
10.1.Arbitration. . . . . . . . . . . . . . . . . . . . .
10.2.Arbitrators. . . . . . . . . . . . . . . . . . . . .
10.3.Procedures; No Appeal. . . . . . . . . . . . . . . .
10.4.Authority. . . . . . . . . . . . . . . . . . . . . .
10.5.Entry of Judgment. . . . . . . . . . . . . . . . . .
10.6.Confidentiality. . . . . . . . . . . . . . . . . . .
10.7.Continued Performance. . . . . . . . . . . . . . . .
10.8.Tolling. . . . . . . . . . . . . . . . . . . . . . .
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . .
11.1.Disclosure Schedule. . . . . . . . . . . . . . . . .
11.2.Further Assurance. . . . . . . . . . . . . . . . . .
11.3.Disclosures and Announcements. . . . . . . . . . . .
11.4.Assignment; Parties in Interest. . . . . . . . . . .
11.5.Law Governing Agreement. . . . . . . . . . . . . . .
11.6.Amendment and Modification . . . . . . . . . . . . .
11.7.Notice . . . . . . . . . . . . . . . . . . . . . . .
11.8.Expenses . . . . . . . . . . . . . . . . . . . . . .
11.9.Knowledge. . . . . . . . . . . . . . . . . . . . . .
11.10.Entire Agreement. . . . . . . . . . . . . . . . . .
11.11.Counterparts. . . . . . . . . . . . . . . . . . . .
11.12.Headings. . . . . . . . . . . . . . . . . . . . . .
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT ("Agreement"), dated August 5,
1994, by and among Refrigeration Systems, Inc., a Delaware
corporation ("Buyer"), Hill Phoenix, Inc., a Delaware corporation
("HPI"), Phoenix Refrigeration Systems, Inc., a Georgia
corporation ("Phoenix"), Dover Diversified, Inc., a Delaware
corporation ("DDI"), Hill Refrigeration, Inc., a Delaware
corporation ("Company") and Eagle Industries, Inc., a Delaware
corporation ("Shareholder").
RECITALS
A. Company is engaged in the design, manufacture,
marketing, distribution, sale and related research and
development of refrigeration cases and refrigeration systems for
commercial use (the "Business"). Shareholder, through a
subsidiary, owns all of the issued and outstanding capital stock
of Company.
B. Prior to January 1994 the Business was operated as
the Hill Refrigeration Division of Falcon Manufacturing, Inc.
(such division is referred to herein as "Falcon"). In January
1994, Falcon contributed all of its assets and assigned its
liabilities to the Company. All references to the Company in
this Agreement are intended to refer both to Hill Refrigeration,
Inc. and to Falcon.
C. Company's facilities consist of (i) plant and
offices located at 360 Pennington Avenue, Trenton, New Jersey,
(ii) plant and offices located at 501 Prospect Street, Trenton,
New Jersey, (iii) offices and warehouse space located at 6761
Sierra Court, Suite C, Dublin, California, (iv) offices and
warehouse space located at 3601 and 3615 Walnut Avenue, San
Bernadino, California and (v) plant and offices located at 1
South Gold Drive, Hamilton Township, New Jersey and (vi) an
office located at Unit #9, 301 Byrne Drive, Barrie Ontario Canada
(collectively, the "Facilities").
D. Buyer desires to purchase from Company, and
Company desires to sell to Buyer the Business and substantially
all of the property and assets of Company other than certain real
estate and improvements, subject to and in accordance with the
terms of this Agreement.
NOW THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants, agreements
and conditions hereinafter set forth, and intending to be legally
bound hereby, the parties hereto agree as follows.
1. PURCHASE AND SALE OF ASSETS
1.1. Assets to be Transferred. Subject to the terms and
conditions of this Agreement, on the Closing Date (as hereinafter
defined) Company shall sell, transfer, convey, assign, and
deliver to Buyer (or upon Buyer's direction, to HPI), and Buyer
(or HPI, as the case may be) shall purchase and accept all of the
Business, rights, claims and assets (of every kind, nature,
character and description, whether tangible or intangible,
whether accrued, contingent or otherwise, and wherever situated)
of Company, excepting only the Excluded Assets (as hereinafter
defined) (collectively the "Purchased Assets"). The Purchased
Assets shall include, but not be limited to, the following
(notwithstanding itemization, the Purchased Assets shall not
include the Excluded Assets):
1.1.(a) Personal Property. All machinery,
equipment, vehicles, tools, supplies, spare parts, furniture
and all other tangible personal property (other than
tangible personal property leased pursuant to Personal
Property Leases as hereinafter defined) owned, utilized or
held for use by Company in the Business on the Closing Date
or otherwise located at the Facilities. Buyer directs that
all machinery, equipment and vehicles shall be sold directly
to HPI.
1.1.(b) Inventory. All inventories of raw
materials, work-in-process and finished goods (including all
such in transit to the Company) of Company on the Closing
Date, together with related packaging materials
(collectively the "Inventory").
1.1.(c) Personal Property Leases. All leases of
machinery, equipment, vehicles, furniture and other personal
property leased by Company (the "Personal Property Leases")
including all such leases described in Schedule 1.1.(c).
Buyer directs that all machinery, equipment and vehicle
leases shall be assigned and sold directly to HPI.
1.1.(d) Trade Rights. All the Company's interest
in any Trade Rights. As used herein, the term "Trade
Rights" shall mean and include: (i) all trademark rights,
business identifiers, trade dress, service marks, trade
names, and brand names, all registrations thereof and
applications therefor and all goodwill associated with the
foregoing; (ii) all copyrights, copyright registrations and
copyright applications, and all other rights associated with
the foregoing and the underlying works of authorship; (iii)
all patents and patent applications and all international
proprietary rights associated therewith; (iv) all contracts
or agreements granting any right, title, license or
privilege under the intellectual property rights of any
third party including, without limitations, the agreements
described on Schedule 1.1(d); (v) all inventions, mask works
and mask work registrations, know-how, discoveries,
improvements, designs, trade secrets, shop and royalty
rights, employee covenants and agreements respecting
intellectual property and non-competition and all other
types of intellectual property; and (vi) all claims for
infringement or breach of any of the foregoing. Buyer
directs that all Trade Rights shall be assigned and sold
directly to HPI.
1.1.(e) Contracts. All the Company's rights in,
to and under the contracts, purchase orders and sales orders
(collectively "Contracts") identified below, (collectively
the "Assumed Contracts"):
(i) Any Contract entered into by Company in
the ordinary course of its business
which does not involve consideration or
other expenditure by Company payable or
performable on or after the Closing
Date (excluding amounts included in
trade payables assumed by Buyer
hereunder) in excess of $10,000 or
performance over a period of more than
six (6) months.
(ii) Contracts identified in any of
Schedules 1.1(c), 1.1(d), 1.1(e),
1.1(m) or 4.14 (other than items 2, 3,
4 and 5 on Schedule 4.14(g) and the
powers of attorney listed on Schedule
4.14(f)) and all purchase commitments
for inventory items and supplies in
excess of $10,000 shown on the
Company's Weekly Report of Open
Purchase Orders by Vendor as of August
4, 1994 delivered to Buyer at Closing.
(iii) Every other Contract to which Company
is a party, other than Excluded
Contracts (as hereinafter defined),
which Buyer assumes pursuant to the
provisions of Section 11.2 hereof or
which Buyer elects to assume at any
reasonable time after the Closing Date
by giving written notice to Company as
set forth in Section 11.7 hereof. Such
contracts shall be deemed to have been
assumed as of the Closing Date.
(iv) Contracts to which Affiliates of the
Company are parties the benefits of
which are made available to the
Business and which are identified on
Schedule 1.1(f).
To the extent that any Assumed Contract for which assignment
to Buyer is provided herein is not assignable without the
consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof
if such assignment or attempted assignment would constitute
a breach thereof. Company and Buyer agree to use reasonable
efforts (without any requirement on the part of Buyer or
Company to pay any money or agree to any change in the terms
of any such Assumed Contract) to obtain the consent of such
other party to the assignment of any such Assumed Contract
to Buyer in all cases in which such consent is or may be
required for such assignment. If any such consent shall not
be obtained, Company and Buyer shall cooperate in any
reasonable arrangement designed to provide for Buyer the
benefits intended to be assigned to Buyer under the relevant
Assumed Contract, including enforcement at the cost and for
the account of Buyer of any and all rights of Company
against the other party thereto arising out of the breach or
cancellation thereof by such other party or otherwise.
Buyer shall assume the Liabilities arising after the Closing
Date pursuant to Section 2.1(b) hereof under any Contract
with respect to which Buyer has purchased Contract rights
under this Section 1.1(e).
1.1.(f) Computer Software. All computer source
codes, programs and other software of Company used, held for
use or acquired or developed for use in the Business,
including all machine readable code, printed listings of
code, documentation and related property and information of
Company.
1.1.(g) Literature. All sales literature,
promotional literature, catalogs and similar materials of
Company.
1.1.(h) Records and Files. All records, files,
invoices, customer lists, blueprints, specifications,
designs, drawings, accounting records, business records,
operating data and other data of Company used in connection
with the Business or otherwise located at the Facilities.
1.1.(i) Notes and Accounts Receivable. All notes
and accounts receivable of or generated by the Company,
excluding the account receivable from Oryx Retail Fixtures,
Inc. Buyer acknowledges that title to certain accounts
receivable that are a part of the Purchased Assets is held
by Continental Bank, National Association, as Trustee under
the Eagle Trade Receivables Master Trust (the "Receivables
Trustee") and that the Company shall sell such receivables
as herein provided by causing the Receivables Trustee to
transfer the receivables to Buyer at Closing pursuant to
that certain Receivables Sale Agreement (herein so called)
of even date herewith by and between Buyer, Company and the
Receivables Trustee.
1.1.(j) Licenses; Permits. All licenses, permits
and approvals of Company issued by any Government Entities,
except those listed on Schedule 1.2(h).
1.1.(k) Corporate Name. The name "Hill
Refrigeration", "Hill Canada" and similar names and all
rights to use or allow others to use such name.
1.1.(l) General Intangibles. All prepaid items,
all causes of action arising out of occurrences before or
after the Closing, and other intangible rights and assets
arising out of or relating to the Business, except for those
items described in Section 1.2(f).
1.1.(m) Leased Real Property. All of the
leases of real property by the Company, including the
leases described on Schedule 1.1(m) (the "Real
Property Leases") with respect to the real property
described therein (the "Leased Real Property").
1.2. Excluded Assets. The provisions of Section 1.1
notwithstanding, Company shall not sell, transfer, assign, convey
or deliver to Buyer, and Buyer will not purchase or accept the
following assets of Company, whether recorded or unrecorded,
accrued, contingent or otherwise (collectively the "Excluded
Assets"):
1.2.(a) Cash and Cash Equivalents. All cash and
cash equivalents and checks and drafts in the possession of
the Company.
1.2.(b) Consideration. The consideration
delivered by Buyer to Company pursuant to this Agreement.
1.2.(c) Tax Credits and Records. Federal, state
and local income and franchise tax credits and tax refund
claims and associated returns and records. Buyer shall have
reasonable access to such returns and records and may make
excerpts therefrom and copies thereof to the extent
necessary for the preparation of Buyer's tax returns, or for
other proper business purposes.
1.2.(d) Corporate Franchise. Company's franchise
to be a corporation, its certificate of incorporation,
corporate seal, stock books, minute books and other
corporate records having principally to do with the
corporate organization and capitalization of Company.
1.2.(e) Obligations of Affiliates. Notes, drafts
or accounts receivable or other obligations for the payment
of money made or owed by any Affiliate of Company (excepting
amounts owed to the Company by employees of the Company and
other obligations of Affiliates specifically referred to in
this Agreement as included in the Purchased Assets). For
purposes of this agreement, the term "Affiliate" shall mean
and include, as to any person or entity, all shareholders,
directors and officers of such entity; the spouse of any
such person; or any entity controlling, controlled by or
under common control with the entity as to which the
affiliation is to exist.
1.2.(f) Certain General Intangibles. The
rights of the Company respecting causes of action
associated with obligations and liabilities of the
Company that are not Assumed Liabilities (including,
without limitation, the rights of the Company under and
with respect to any financing affecting the Purchased
Assets that is not an Assumed Liability and the
benefits under any Contract applicable to the period
prior to Closing unless and to the extent the
liabilities under such Contract are Assumed
Liabilities), and the account receivable from Oryx
Retail Fixtures, Inc.
1.2.(g) Owned Real Property. The Facilities
and such other real property, including fixtures,
buildings, improvements and all appurtenant rights as
are described on Schedule 4.12(c).
1.2.(h) Certain Licenses and Permits. The
licenses and permits of the Company described on Schedule
1.2(h).
2. ASSUMPTION OF LIABILITIES
2.1. Liabilities to be Assumed. As used in this
Agreement, the term "Liability" shall mean and include any direct
or indirect indebtedness, guaranty, endorsement, claim, loss,
damage, deficiency, cost, expense, liability, obligation or
responsibility, fixed or unfixed, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured.
Subject to the terms and conditions of this Agreement, on the
Closing Date, Buyer (or HPI, with respect to obligations relating
to machinery, equipment and vehicle leases and Trade Rights)
shall assume and agree to perform and discharge the following,
and only the following Liabilities of Company (collectively the
"Assumed Liabilities"):
2.1.(a) Accounts Payable, Equipment Lease,
Obligations and Certain Accrued Items. Accounts payable
(excluding accounts owed to Oryx Retail Fixtures, Inc.),
equipment lease obligations, and Liabilities for vacation
and holiday pay, but in the case of accounts payable, only
in the amounts accrued on the Closing Account Schedule and
specifically identified on a schedule to the Closing Account
Schedule. The term "accounts payable" shall include,
without limitation, sales tax payable, accrued payroll and
accrued payroll taxes.
2.1.(b) Contractual Liabilities. Company's
Liabilities arising on and from and after the Closing Date
under and pursuant to Assumed Contracts (including without
limitation the customer deposits identified on Schedule
4.14(d)), provided that Buyer shall not assume any
obligation to deliver product or services with respect to
which any payment has been paid to the Company prior to the
Closing Date, unless (A) Company shall remit to Buyer the
amount of such payment or (B) a direct credit in such amount
shall be provided to Buyer in the computation of the
Purchase Price (as hereinafter defined). Liabilities with
respect to Personal Property Leases assigned to HPI pursuant
to Section 1.1(c) shall be assumed by HPI, and not by Buyer.
2.1.(c) Liabilities Under Permits and Licenses.
Company's Liabilities arising from and after the Closing
Date under any permits, licenses or approvals assigned to
Buyer at or after the Closing.
2.1.(d) Product and Service Warranties. All
Liabilities of the Company for product and service
warranties given by the Company in accordance with its
normal written product warranty terms for any product sold
by the Company prior to Closing.
2.1.(e) [Intentionally Omitted]
2.1.(f) Union Contract. All Liabilities of the
Company arising on and from and after Closing under the
Agreement between the Company and United Steelworkers of
America, AFL-CIO-CLC Local Union No. 5298 ("Union"), dated
January 12, 1992, as modified by that certain Memorandum of
Understanding between Buyer and the Union regarding the
assumption of such agreement.
2.1.(g) Product Liability. Any Liability arising
out of or in any way related to or resulting from any
product sold by Buyer following the Closing, including
products contained in the Inventory purchased by Buyer
hereunder (including any Liability for claims made for
injury to person, damage to property or other damage,
whether made in product liability, tort or otherwise).
2.2. Liabilities Not to be Assumed. Except as and to the
extent specifically set forth in Section 2.1, Buyer is not
assuming any Liabilities of Company and all such Liabilities
shall be and remain the responsibility of Company.
Notwithstanding the provisions of Section 2.1, Buyer is not
assuming and Company shall not be deemed to have transferred to
Buyer the following Liabilities of Company:
2.2.(a) Certain Contracts. The Liabilities of
Company under and pursuant to the following Contracts
("Excluded Contracts"):
(i) Any Contract which is not an Assumed
Contract
(ii) Any agreement or order relating to
environmental conditions at the
Facilities (subject, however, to
Buyer's obligations under the Facility
Lease).
(iii) Employee benefit or pension plans or
agreements, except the United
Steelworkers 401(k) Savings Plan
referred to in Section 6.4(a).
(iv) Agreements related to borrowed money or
financing of the Company or its
Affiliates, including without
limitation loan agreements, promissory
notes, security agreements or
receivable sales agreements (excepting
equipment lease obligations with
respect to equipment leases included in
the Purchased Assets).
2.2.(b) Taxes Arising from Transaction. Any taxes
imposed upon Company arising out of the sale or transfer of
the Purchased Assets to Buyer and the other transactions
contemplated by this Agreement, including but not limited to
any income, transfer, use, gross receipts or documentary
stamp taxes, except as provided in Section 11.8.
2.2.(c) Income and Franchise Taxes. Any Liability
of Company for Federal income taxes and any state or local
income, profit or franchise taxes (and any penalties or
interest due on account thereof).
2.2.(d) Insured Claims. Any Liability of Company
insured against, to the extent such Liability is or will be
paid by an insurer.
2.2.(e) Product Liability. Any Liability of
Company arising out of or in any way relating to or
resulting from any product sold prior to the Closing Date
(including any Liability of Company for claims made for
injury to person, damage to property or other damage,
whether made in product liability, tort or otherwise),
excepting only Liabilities for product and service
warranties described in Section 2.1(d).
2.2.(f) Litigation Matters. Any Liability with
respect to any action, suit, proceeding, arbitration,
investigation or inquiry, whether civil, criminal or
administrative brought by or before any court, governmental
agency or recognized arbitral authority with respect to
matters occurring prior to Closing ("Litigation"), whether
or not described in Schedule 4.10.
2.2.(g) Infringements. Any Liability of Company
or its Affiliates to a third party for infringement of such
third party's Trade Rights.
2.2.(h) Transaction Expenses. All Liabilities
incurred by Company in connection with this Agreement and
the transactions contemplated herein, except as provided in
Section 11.8.
2.2.(i) Liability For Breach. Liabilities of
Company for any breach or failure to perform any of
Company's covenants and agreements contained in, or made
pursuant to, this Agreement, or, with respect to matters
occurring prior to the Closing, any other Contract, whether
or not assumed hereunder.
2.2.(j) Liabilities to Affiliates. Liabilities of
Company to its Affiliates, except only that Buyer is
assuming Company's Liabilities for vacation and holiday pay
pursuant to Section 2.1(a) and severance pay owed to
employees of the Company pursuant to Section 2.1(e).
2.2.(k) Violation of Laws or Orders. Liabilities
of Company for any violation of or failure to comply with
any statute, law, ordinance, rule or regulation
(collectively, "Laws") or any order, writ, injunction,
judgment, plan or decree (collectively, "Orders") of any
court, arbitrator, department, commission, board, bureau,
agency, authority, instrumentality or other governmental
body, whether federal, state, municipal, foreign or other
(collectively, "Government Entities").
2.2.(l) Environmental Liabilities. Any
Liabilities arising out of, related to or incurred in
connection with any pollution, threat to the environment, or
exposure to, or manufacture, processing, distribution, use,
treatment, generation, transport or handling, disposal,
emission, discharge, storage or release of Waste (as defined
in Section 4.11(c)) that (i) results from Company's or any
previous owner's or operator's ownership, operation or
occupancy of the Facilities or the Company's Business,
properties or assets, including without limitation any
failure to comply with the Environmental Laws (as defined in
Section 4.11(c)), or (ii) occurred, existed, arose out of
conditions or circumstances that existed, or was caused on
or before the Closing Date.
2.2.(m) Employee Welfare and Benefit Plan
Liabilities. Any Liabilities arising under, or in
connection with, any employee welfare benefit or pension
benefit plan currently or previously maintained or
contributed to by Company or any member of its controlled
group (as defined in Section 4001(a)(13) of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA")), including, without limitation, retiree medical
or other post-retirement or post-termination welfare
Liabilities and Liabilities in connection with any defined
benefit pension plan or multiemployer pension plan;
provided, however, that Buyer shall assume sponsorship of
the United Steelworkers 401(k) Savings Plan pursuant to the
terms of Section 6.4(a) hereof.
2.2.(n) Facility Closedown and Disposal Costs.
Any Liabilities (other than those for severance pay to the
extent assumed by Buyer pursuant to Section 2.1(e)) arising
out of, related to or incurred in connection with the
closedown and disposal of the Facilities by the Company,
regardless of whether such costs are incurred before or
after the Closing Date, including without limitation,
compliance with Environmental Laws, vacant building security
costs, utility disconnection costs, sale expenses,
demolition costs and removal and transport and storage costs
for Excluded Assets (subject, however, to Buyer's
obligations under the Lease, dated even date herewith
between Buyer and the Company ("Facility Lease") with
respect to environmental matters, removal of equipment,
fixtures and other property, restoration costs and other
matters) and except as provided in Section 7.8.
2.2.(o) Successor Liabilities. Any Liability of
the Company which any person seeks to impose upon Buyer by
virtue of any theory of successor liability or as a result
of Buyer's failure to comply with any bulk transfer or
similar statue, including without limitation Liabilities
relating to environmental matters, pension plans, product
liability, taxes and labor and employment matters, unless
otherwise expressly assumed by Buyer hereunder.
2.2.(p) Severance. Any Liability of the Company
for severance or other termination benefits.
2.2.(q) Collective Bargaining Agreements. Any
Liability with respect to Collective Bargaining Agreements,
other than pursuant to 2.1(f).
Nothing in this Agreement or in any document executed pursuant
hereto or in connection herewith shall affect in any way the
right of the Company, in its sole and absolute discretion, to
pay, resolve, compromise, settle or otherwise handle any
Liability of the Company or any Affiliate of the Company that is
not an Assumed Liability.
3. PURCHASE PRICE - PAYMENT
3.1. Purchase Price. The purchase price (the "Purchase
Price") for the Purchased Assets shall be sum of (i) the face
value of accounts receivable included in the Purchased Assets
reflected on the Closing Account Schedule, plus (ii) Fifteen
Million Eight Hundred Ten Thousand Dollars ($15,810,000.00) plus
(iii) the amount by which the inventory reflected on the Closing
Account Schedule exceeds Seventeen Million Nine Hundred Thirty
Thousand Dollars ($17,930,000.00), less (iv) the amount by which
inventory reflected on the Closing Account Schedule is less than
Seventeen Million Seven Hundred Eighty Thousand Dollars
($17,780,000.00), less (v) Forty-Nine Thousand Five Hundred
Dollars ($49,500).
3.2. Payment of Purchase Price. The Purchase Price shall
be paid as follows:
3.2.(a) Accounts Payable. Buyer shall receive a
credit to the Purchase Price equal to the book value of
accounts payable assumed by Buyer pursuant to and as defined
in Section 2.1(a) ("Accounts Payable Value").
3.2.(b) Cash to Company. At the Closing, HPI
shall deliver to Company the sum of Eight Million Dollars
($8,000,000) in respect of the Purchased Assets purchased by
HPI hereunder and Buyer shall deliver to Company the sum of
the Estimated Purchase Price (excluding the payment by HPI)
less the Estimated Accounts Payable Value reflected on the
Estimated Closing Account Schedule (as hereinafter defined).
The Company hereby directs Buyer to pay to the Receivables
Trustee that portion of the Purchase Price attributable to
the accounts receivable that are included in the Purchased
Assets that are held by the Receivables Trustee and
acknowledges that receipt of such payment by the Receivables
Trustee (whether or not the amount is correctly allocable to
the accounts receivable) shall constitute payment by Buyer
of such portion of the Purchase Price hereunder.
3.2.(c) Adjustment of Estimated Closing Payments.
On or before the fifth business day following the
determination of the Closing Account Schedule (pursuant to
Section 3.3, below), either (i) Company shall pay to Buyer
the amount, if any, by which (A) the Estimated Purchase
Price, less the Estimated Accounts Payable Value, exceeds
(B) the Purchase Price less the Accounts Payable Value; or
(ii) Buyer shall pay to Company the amount, if any, by which
(A) the Purchase Price less the Accounts Payable Value,
exceeds (B) the Estimated Purchase Price less the Estimated
Accounts Payable Value.
3.2.(d) Method of Payment. All payments under
this Section 3.2 shall be made in the form of certified or
bank cashier's check payable to the order of the recipient
or, at the recipient's option, by wire transfer of
immediately available funds to an account designated by the
recipient not less than 48 hours prior to the time for
payment specified herein.
3.3. Determination of Purchase Price.
3.3.(a) Estimated Closing Account Schedule. The
Estimated Purchase Price and the Estimated Accounts Payable
Value shall be determined in accordance with this Section
3.3(a) for purposes of calculating the cash payment to
Company at the Closing. Prior to the Closing Date, Company
shall, in consultation with the Buyer, prepare and deliver
to Buyer a projected schedule ("Estimated Closing Account
Schedule") setting forth in reasonable detail the estimated
accounts receivable, inventory and accounts payable of the
Company as of the Closing Date. Such schedule shall contain
sufficient detail for the estimation of the Purchase Price
("Estimated Purchase Price") and the estimation of the
Assumed Accounts Payable Value ("Estimated Accounts Payable
Value").
3.3.(b) Closing Account Schedule. Within 45 days
after the Closing Date, Buyer shall deliver to Company a
proposed schedule of the Company setting forth in reasonable
detail the accounts receivable, inventory and accounts
payable of the Company as of the Closing Date, prepared in
accordance with generally accepted accounting principles
from the books and records of Company in accordance with the
provisions of Section 3.3(d) ("Closing Account Schedule").
The proposed Closing Account Schedule shall be accompanied
by a report (1) containing sufficient detail for the
determination of and setting forth the amount of the
Purchase Price and the Accounts Payable Value and (2)
setting forth the amount of any payment to be paid and by
whom pursuant to Section 3.2(c) hereof. Buyer shall make
available or cause to be made available the personnel and
records necessary and allow the Company and its
representatives to conduct any necessary physical inspection
to assist in its review of the proposed Closing Account
Schedule. Upon receipt of these documents as proposed by
Buyer, the Company and its representatives may study the
proposed Closing Account Schedule (together with the
detailed backup information and other books and records
related to the assets and liabilities shown or to be shown
therein) and may conduct any necessary physical inspections
to determine whether the Company believes that the amounts
shown thereon have been correctly computed. If the Company
believes any such amounts have been incorrectly computed,
then the Company shall so notify Buyer in writing within
sixty (60) days after the Company's receipt of the Closing
Account Schedule as proposed by Buyer, and the Company and
Buyer shall attempt to resolve any resulting discrepancies
and make any appropriate adjustments to the Closing Account
Schedule to reflect such resolution. If no such notice is
received by Buyer within such 60-day period, the Closing
Account Schedule as proposed by Buyer shall be deemed
approved by the Company and final. If, within forty-five
(45) days after the receipt by Buyer of such a notice from
the Company, the Company and Buyer are unable to resolve any
resulting discrepancies, they shall resolve the matter in
accordance with Section 3.3(c) below.
3.3.(c) Resolving Disputes. In the event of a
dispute or disagreement relating to the Closing Account
Schedule or schedules thereto which Buyer and Company are
unable to resolve as provided in Section 3.3(b) above,
either party may elect to have all such disputes or
disagreements resolved by an accounting firm of nationally
recognized standing (the "Third Accounting Firm") to be
mutually selected by Company and Buyer. The Third
Accounting Firm shall make a resolution of the Closing
Account Schedule and the Purchase Price and Accounts Payable
Value, which shall be final and binding for purposes of this
Article 3. The Third Accounting Firm shall be instructed to
use every reasonable effort to perform its services within
30 days of submission of the Closing Account Schedule to it
and, in any case, as soon as practicable after such
submission. The fees and expenses for the services of the
Third Accounting Firm shall be shared equally by Buyer and
Company.
3.3.(d) Accounting Conventions. The Closing
Account Schedule shall be prepared in a manner consistent
with Company's past practices in accordance with generally
accepted accounting principles. The only accounts on the
Closing Account Schedule which shall affect the computation
of the Purchase Price and the Assumed Accounts Payable Value
shall be accounts receivable, inventory and accounts
payable, and all such accounts shall be determined as gross
values without regard to reserves or other allowances. For
purposes of the Closing Account Schedule, all account
determinations shall be made as of the close of business on
the Closing Date.
3.4. Other Payments and Adjustments. The amount of wages
and other remuneration due employees of Company in respect of
periods prior to the Closing Date will be paid by Company
directly to such employees, except for unpaid holiday and
vacation pay.
3.5. Allocation of Purchase Price. The aggregate Purchase
Price (including the assumption by Buyer of the Assumed
Liabilities) shall be allocated among the Purchased Assets for
tax purposes as reasonably directed by Buyer. Company and Buyer
will follow and use such allocation in all tax returns, filings
or other related reports made by them to any governmental
agencies. To the extent that disclosures of this allocation are
required to be made by the parties to the Internal Revenue
Service ("IRS") under the provisions of Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code") or any
regulations thereunder, Buyer and Company will disclose such
reports to the other prior to filing with the IRS.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY
Company makes the following representations and warranties
to Buyer, each of which is true and correct on the date hereof,
shall be unaffected by any investigation heretofore or hereafter
made by Buyer, or any knowledge of Buyer other than as
specifically disclosed in the schedules delivered to Buyer at the
time of the execution of this Agreement, and shall survive the
Closing of the transactions provided for herein but only to the
extent hereinafter provided.
4.1. Corporate.
4.1.(a) Organization. Each of Company and
Shareholder is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware.
4.1.(b) Corporate Power. Company has all
requisite corporate power and authority to own, operate and
lease its properties, to carry on its business as and where
such is now being conducted, to enter into this Agreement
and the other documents and instruments to be executed and
delivered by Company pursuant hereto and to carry out the
transactions contemplated hereby and thereby.
4.1.(c) Qualification. Company is duly licensed
or qualified to do business as a foreign corporation, and is
in good standing, in each jurisdiction wherein the character
of the properties owned or leased by it, or the nature of
its business, makes such licensing or qualification
necessary except where the failure to so license or qualify
does not have a material adverse effect on the Purchased
Assets or the financial conditions, business operations or
prospects of the Company. The states in which Company is
licensed or qualified to do business are listed in Schedule
4.1(c).
4.1.(d) No Subsidiaries. Company does not own any
interest in any corporation, partnership or other entity.
4.2. Authority. The execution and delivery of this
Agreement and the other documents and instruments to be executed
and delivered by Company and/or Shareholder pursuant hereto and
the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors and
shareholder of Company and Shareholder, as the case may be. No
other or further corporate act or proceeding on the part of
Company, Shareholder or their respective shareholders is
necessary to authorize this Agreement or the other documents and
instruments to be executed and delivered by Company and/or
Shareholder pursuant hereto or the consummation of the
transactions contemplated hereby and thereby. It is not
presently intended that Company be dissolved until all of its
Liabilities have been paid or otherwise provided for in full, to
the extent required by law. This Agreement constitutes, and when
executed and delivered, the other documents and instruments to be
executed and delivered by Company and/or Shareholder, pursuant
hereto will constitute, valid binding agreements of Company
and/or Shareholder, as the case may be, enforceable in accordance
with their respective terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
4.3. No Violation. Except as set forth on Schedule 4.3,
neither the execution and delivery of this Agreement or the other
documents and instruments to be executed and delivered by Company
pursuant hereto, nor the consummation by Company or Shareholder
of the transactions contemplated hereby and thereby (a) will
violate any applicable Law or Order, (b) except for applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"), will require any authorization, consent,
approval, exemption or other action by or notice to any
Government Entity, or (c) subject to obtaining the consents
referred to in Schedule 4.3, will violate or conflict with, or
constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or will result
in the termination of, or accelerate the performance required by,
or result in the creation of any Lien (as defined in Section
4.12(a)) upon any of the assets of Company or Shareholder under,
any term or provision of the Certificate of Incorporation or
By-laws of Company or Shareholder or of any contract, commitment,
understanding, arrangement, agreement or restriction of any kind
or character to which Company and/or Shareholder is a party or by
which Company or Shareholder or any of their respective assets or
properties may be bound or affected.
4.4. Financial Statements. Included as Schedule 4.4 are
true and correct copies of the financial statements of Falcon
consisting of balance sheets of Falcon as of March 4, 1994 and
December 31, 1993, 1992 and 1991, and the related statements of
income and cash flows for the years 1991 and 1992 and statement
of income for December 31, 1993 (including the notes contained
therein or annexed thereto). These balance sheets, income
statements and cash flow statements are unaudited and are based
on results as they were reported for internal purposes. They
have been prepared in accordance with the accounting policies and
procedures established by Shareholder, and accordingly do not
reflect all costs, accruals and reserves which are recorded by
Shareholder. These statements fairly present the balance sheet,
statement of income and cash flows and were prepared in
accordance with the principles set forth above.
4.5. Tax Matters.
4.5.(a) Provision For Taxes. The provision made
for taxes on the July 1, 1994 balance sheet of the Company
("Recent Balance Sheet") is, to the knowledge of Company,
sufficient for the payment of all federal, state, foreign,
county, local and other income, ad valorem, excise, profits,
franchise, occupation, property, payroll, sales, use, gross
receipts and other taxes (and any interest and penalties)
and assessments, whether or not disputed at the date of the
Recent Balance Sheet, and for all years and periods prior
thereto. Since the date of the Recent Balance Sheet,
Company has not incurred any taxes other than taxes incurred
in the ordinary course of business consistent in type and
amount with past practices of Company.
4.5.(b) Tax Returns Filed. Except as set forth on
Schedule 4.5(b), all federal, state, foreign, county, local
and other tax returns required to be filed by or on behalf
of Company or Falcon have been timely filed and when filed
were true and correct in all material respects, and the
taxes shown as due thereon were paid or adequately accrued.
Each of Company and Falcon has duly withheld and paid all
taxes which it is required to withhold and pay relating to
salaries and other compensation heretofore paid to the
employees of Company or Falcon.
4.5.(c) Consolidated Group. Schedule 4.5(c) lists
every year Company or Falcon Manufacturing, Inc. was a
member of an affiliated group of corporations that filed a
consolidated tax return on which the statute of limitations
does not bar a federal tax assessment, and each corporation
that has been part of such group.
4.5.(d) Other. Except as set forth in Schedule
4.5(d), since January 1, 1989, neither Company nor Falcon
Manufacturing, Inc. has (i) filed any consent or agreement
under Section 341(f) of the Code, (ii) applied for any tax
ruling, (iii) entered into a closing agreement with any
taxing authority, (iv) filed an election under Section
338(g) or Section 338(h)(10) of the Code (nor has a deemed
election under Section 338(e) of the Code occurred), (v)
made any payments, or been a party to an agreement
(including this Agreement) that under any circumstances
could obligate it to make payments that will not be
deductible because of Section 280G of the Code, or (vi) been
a party to any tax allocation or tax sharing agreement.
4.6. Accounts Receivable. All trade accounts receivable
of Company included in the Purchased Assets represent arm's
length sales actually made in the ordinary course of business.
4.7. Inventory. Except as set forth in Schedule 4.7, all
inventory of Company is located on premises owned or leased by
Company as reflected in this Agreement.
4.8. Absence of Certain Changes. Except as and to the
extent set forth in Schedule 4.8, since December 31, 1993, there
has not been:
4.8.(a) Adverse Change. Any material adverse
change in the financial condition, assets, Liabilities,
business, or operations of Company;
4.8.(b) Damage. Any material casualty loss,
damage or destruction, whether covered by insurance or not,
affecting the Business or Purchased Assets, which has not
heretofore been corrected;
4.8.(c) Increase in Compensation. Any increase of
more than five percent (5%) in the compensation, salaries or
wages payable or to become payable to any employee of
Company (including, without limitation, any increase or
change pursuant to any bonus, pension, profit sharing,
retirement or other plan or commitment), or any bonus or
other employee benefit granted, made or accrued;
4.8.(d) Commitments. Any commitment or
transaction by Company with respect to the Business
(including, without limitation, any borrowing or capital
expenditure) other than in the ordinary course of business
consistent with past practice;
4.8.(e) Disposition of Property. Any sale, lease
or other transfer or disposition of any properties or assets
of Company, except for the sale of inventory items and the
replacement or retirement of obsolete property in the
ordinary course of business;
4.8.(f) Amendment of Contracts. Any waiver of
material rights under an Assumed Contract, other than in the
ordinary course of business; or
4.8.(g) Distribution Terms. Any material change
in the terms extended to any customer or distributor.
4.9. Intentionally Omitted.
4.10. No Litigation. Except as set forth in Schedule 4.10
there is no Litigation pending or to the knowledge of Company
threatened against Company, its Business or any of its assets,
nor does Company know of any basis for any Litigation that would
have a material adverse effect on the Business. Schedule 4.10
also identifies all Litigation to which Company or Falcon have
been parties since January 9, 1990.
4.11. Compliance With Laws and Orders.
4.11.(a) Compliance. Except as set forth in
Schedule 4.11(a), to the knowledge of Company, Company is in
material compliance with all applicable Laws and Orders,
including, without limitation, those applicable to
discrimination in employment, occupational safety and
health, trade practices, competition and pricing, product
warranties, zoning, building and sanitation, employment,
labor relations, product advertising and the Environmental
Laws as hereinafter defined. Except as set forth in
Schedule 4.11(a), Company has not received notice of any
violation or alleged violation of, and is subject to no
Liability for past or continuing violation of, any Laws or
Orders which notice is still outstanding. To the knowledge
of Company, all reports and returns required to be filed by
Company with any Government Entities have been filed, and
were accurate when filed in all material respects.
4.11.(b) Licenses and Permits. To the knowledge of
the Company, Company has all licenses, permits, approvals,
authorizations and consents of all Government Entities and
all certification organizations required for the conduct of
the Business (as presently conducted) and operation of the
Facilities. To the knowledge of the Company, all such
licenses, permits, approvals, authorizations and consents
are described in Schedule 4.11(b), are in full force and
effect and, except as described in Schedule 4.11(b), are
assignable to Buyer in accordance with the terms thereof.
Except as set forth in Schedule 4.11(b), Company is and has
been in compliance with all such permits and licenses,
approvals, authorizations and consents in all material
respects.
4.11.(c) Environmental Matters. The applicable
Laws relating to pollution or protection of the environment,
including Laws relating to emissions, discharges,
generation, storage, releases or threatened releases of
pollutants, contaminants, toxic, hazardous or petroleum or
petroleum-based substances or wastes ("Waste") into the
environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface
strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Waste (including, without
limitation, the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances
Control Act and the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), as amended, and
their state and local counterparts) are herein collectively
referred to as the "Environmental Laws". Except as set
forth in Schedule 4.11(c), to the knowledge of Company,
Company is in material compliance with all limitations,
restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any
regulations, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered,
promulgated or approved thereunder. Except as set forth in
Schedule 4.11(c), there is no Litigation nor any demand,
claim, hearing or notice of violation pending or to
Company's knowledge threatened against Company relating in
any way to the Environmental Laws or any Order issued,
entered, promulgated or approved thereunder.
4.12. Title to and Condition of Properties.
4.12.(a) Title to Assets. Company has transferable
title to all the Purchased Assets (excepting only accounts
receivable owned by the Receivables Trustee), free and clear
of all mortgages, liens (statutory or otherwise), security
interests, pledges, licenses, equities, options, conditional
sales contracts, or encumbrances of any nature whatsoever
(collectively, "Liens") except those described in Schedule
4.12(a)(i). At Closing, Buyer will receive title to all the
Purchased Assets, free and clear of all Liens of any nature
whatsoever, except as described in Schedule 4.12(a)(ii).
4.12.(b) Condition. The tangible assets
constituting Purchased Assets and the buildings, plants and
other structures of the Company used in the Business, are
sufficient to operate the Business as presently conducted in
light of anticipated production volumes. Subject to the
foregoing, and except as otherwise expressly provided in
this Agreement, Buyer and HPI are acquiring the tangible
Purchased Assets in their "AS-IS" physical condition and
Seller makes no representation with respect to the condition
of the tangible assets included in the Purchased Assets.
4.12.(c) Real Property. Schedule 4.12(c) sets
forth all real property owned, used or occupied by Company
(the "Real Property"), including an indication of whether
such Real Property is owned or leased. Company has no
notice or knowledge of any planned or proposed increase in
assessed valuations of any Real Property.
4.12.(d) No Condemnation or Expropriation. Neither
the whole nor any portion of the property or any other
assets of Company is subject to any Order to be sold or is
being condemned, expropriated or otherwise taken by any
Government Entities with or without payment of compensation
therefor, nor to the Company's knowledge has any such
condemnation, expropriation or taking been proposed by any
Government Entities.
4.13. Insurance. Set forth in Schedules 4.13 and 4.17 is a
list of all policies of fire, liability, product liability,
workers compensation, and other forms of insurance presently in
effect with respect to the business and properties of Company.
All such policies are valid, outstanding and enforceable
policies. No notice of cancellation or termination has been
received with respect to any such policy, and Company has no
knowledge of any act or omission of Company which could result in
cancellation of any such policy prior to its scheduled expiration
date. Company has not been refused any insurance with respect to
any aspect of the operations of the business of Company nor has
coverage been limited by any insurance carrier to which Company
has applied for insurance or with which Company has carried
insurance during the last three years. Since January 9, 1990,
all products liability and general liability policies maintained
by or for the benefit of Company have been "occurrence" policies
and not "claims made" policies. There is no claim by Company or
Falcon pending under any such policies as to which coverage has
been questioned, denied or disputed by the underwriters of such
policies. To the knowledge of Company, such policies are
sufficient in all material respects for compliance by Company
with all requirements of law and with the requirements of all
material contracts to which Company is a party.
4.14. Contracts and Commitments.
Except as set forth in Schedule 4.14 or any other
Schedule hereto:
4.14.(a) Real Property Leases. Company has no
leases of real property.
4.14.(b) Personal Property Leases. Company has no
leases of personal property involving consideration or other
expenditure in excess of $10,000 or involving performance
over a period of more than 6 months.
4.14.(c) Purchase Commitments. Company has no
purchase commitments for inventory items or supplies that,
together with amounts on hand, are in excess of normal usage
consistent with past practice, or which are at an excessive
price.
4.14.(d) Sales Commitments. Company has no sales
contracts or commitments to customers or distributors which
aggregate in excess of $10,000 to any one customer or
distributor (or group of affiliated customers or
distributors). Company has no sales contracts or
commitments except those made in the ordinary course of
business and at arm's length. Company has received no
advance payments or progress payments toward products which
have not been invoiced and shipped.
4.14.(e) Contracts With Affiliates and Certain
Others. Company has no Contract (written or oral) with any
Affiliate or any other officer, employee, agent, consultant,
distributor, dealer or franchisee that is not cancelable by
Company on notice of not longer than 30 days without
liability, penalty or premium.
4.14.(f) Powers of Attorney. The Company has not
given a power of attorney, which is currently in effect, to
any person, firm or corporation for any purpose whatsoever.
4.14.(g) Collective Bargaining Agreements. Company
is not a party to any collective bargaining agreements with
any unions, guilds, shop committees or other collective
bargaining groups. Copies of all such agreements have
heretofore been delivered to Buyer.
4.14.(h) Guarantees. Company has not guaranteed
the payment or performance of any person, firm or
corporation, agreed to indemnify any person or act as a
surety, or otherwise agreed to be contingently or
secondarily liable for the obligations of any person, except
pursuant to financing arrangements for the Company and its
Affiliates with banks and other financial institutions.
4.14.(i) Contracts Subject to Renegotiation.
Company is not a party to any Contract with any governmental
body which is subject to renegotiation.
4.14.(j) Restrictive Agreements. Company is not a
party to nor is it bound by any agreement requiring Company
to assign any interest in any trade secret or proprietary
information that is included in the Purchased Assets or with
respect to the Business, or prohibiting or restricting
Company from competing in any business or geographical area
or soliciting customers or otherwise restricting it from
carrying on its business anywhere in the world.
4.14.(k) Other Material Contracts. Company has no
lease, license, contract or commitment relating to the
Business involving consideration or other expenditure in
excess of $10,000, or involving performance over a period of
more than 6 months, or which is otherwise individually
material to the operations of Company, except as explicitly
described in the Schedules to this Agreement.
4.15. Contract Defaults. Except as specifically described
in Schedule 4.15, Company is not in default under any Assumed
Contract, nor, to the knowledge of Company has any event or
omission occurred which through the giving of notice, would
constitute a default thereunder. To the Company's knowledge, no
third party is in default under any Assumed Contract to which
Company is a party, nor has any event or omission occurred which,
through the giving of notice would constitute a default
thereunder. The foregoing representation shall not affect
Buyer's obligation to perform warranty service pursuant to
Section 2.1(d).
4.16. Labor Matters. Except as set forth in Schedule 4.16,
since January 9, 1990 Company has experienced no labor disputes,
union organization attempts or any work stoppage due to labor
disagreements in connection with the Business. Except to the
extent set forth in Schedule 4.16, (a) Company is in compliance
with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice; (b) there
is no unfair labor practice charge or complaint against Company
pending or threatened; (c) there is no labor strike, dispute,
request for representation, slowdown or stoppage actually pending
or threatened against or affecting Company nor any secondary
boycott with respect to products of Company; (d) no question
concerning representation has been raised or is threatened
respecting the employees of Company; (e) no grievance which might
have a material adverse effect on Company, nor any arbitration
proceeding arising out of or under collective bargaining
agreements, is pending and no such claim therefor exists; and (f)
there are no administrative charges or court complaints against
Company concerning alleged employment discrimination or other
employment related matters pending or threatened before the U.S.
Equal Employment Opportunity Commission or any Government Entity.
4.17. Employee Benefit Plans.
4.17.(a) Disclosure. Schedule 4.17(a) sets forth
all pension, thrift, savings, profit sharing, retirement,
incentive bonus or other bonus, medical, dental, life,
accident insurance, benefit, employee welfare, disability,
group insurance, executive or deferred compensation,
hospitalization and other similar fringe or employee benefit
plans, programs and arrangements, and any employment or
consulting contracts, "golden parachutes," severance
agreements or plans, vacation and sick leave plans,
programs, arrangements and policies, including, without
limitation, all "employee benefit plans" (as defined in
Section 3(3) of ERISA), all employee manuals, and all
written or binding oral statements of policies, practices or
understandings relating to employment, which are provided
to, for the benefit of, or relate to, any persons ("Company
Employees") employed by Company. The items described in the
foregoing sentence are hereinafter sometimes referred to
collectively as "Employee Plans/Agreements," and each
individually as an "Employee Plan/Agreement." True and
correct copies of all the Employee Plans/Agreements,
including all amendments thereto, and all summary plan
descriptions and summaries of material modifications related
to such Employee Plan/Agreements, have heretofore been
provided to Buyer.
4.17.(b) Defined Benefit and Multiemployer Pension
Plans. With respect to each Employee Plan/Agreement
described in Schedule 4.17(a) or any other plan, fund or
program maintained or ever maintained or contributed to by
Company or any member of Company's controlled group (as
defined in Section 4001(a)(14) of ERISA) that is subject to
Title IV of ERISA), all required contributions have been
made to such plan, no such plan has incurred an "accumulated
funding deficiency" under Section 302 of ERISA or Section
412 of the Code, whether or not such deficiency has been
waived, and no such plan has been terminated so as to
subject, directly or indirectly, any assets of Company to
any liability, contingent or otherwise, or the imposition of
any lien under Title IV of ERISA. With respect to any
multiemployer pension plan (as defined in Section 4001(a)(3)
of ERISA) to which the Company or any member of its
controlled group (as defined 4001(a)(14) of ERISA)
contributes or was previously obligated to contribute, all
contributions required to be made to such plan have been
made, and except as set forth in Schedule 4.17.(b), neither
the Company nor any controlled group member has incurred a
partial or complete withdrawal (as defined in Sections 4203
and 4205 of ERISA) with respect to any such multiemployer
plan.
4.17.(c) Prohibited Transactions, etc. There have
been no "prohibited transactions" within the meaning of
Section 406 or 407 of ERISA or Section 4975 of the Code for
which a statutory or administrative exemption does not exist
with respect to any Employee Plan/Agreement, and no event or
omission has occurred in connection with which the Company
or any of its assets or any Employee Plan/Agreement,
directly or indirectly, could be subject to any Liability
under ERISA, the Code or any other Law or Order applicable
to any Employee Plan/Agreement, or under any agreement,
instrument, Law or Order pursuant to which Company is
required to indemnify any person against liability incurred
under any such Law or Order.
4.17.(d) Payments and Compliance. With respect to
each Employee Plan/Agreement, (i) all payments due from
Company to date have been made and all amounts properly
accrued to date as Liabilities of Company which have not
been paid have been properly recorded on the books of
Company and are reflected in the Recent Balance Sheet; (ii)
Company has complied with, and each such Employee
Plan/Agreement conforms in form and operation to, all
applicable laws and regulations, including but not limited
to ERISA and the Code, in all respects and all reports and
information relating to such Employee Plan/Agreement
required to be filed with any governmental entity have been
timely filed; (iii) all reports and information relating to
each such Employee Plan/Agreement required to be disclosed
or provided to participants or their beneficiaries have been
timely disclosed or provided; (iv) except as disclosed on
Schedule 4.17(d), each such Employee Plan/Agreement which is
intended to qualify under Section 401 of the Code has
received a favorable determination letter from the Internal
Revenue Service with respect to such qualification, its
related trust has been determined to be exempt from taxation
under Section 501(a) of the Code, and nothing has occurred
since the date of such letter that has or is likely to
adversely affect such qualification or exemption; (v) there
are no actions, suits or claims pending (other than routine
claims for benefits) or threatened with respect to such
Employee Plan/Agreement or against the assets of such
Employee Plan/Agreement; and (vi) no Employee Plan/Agreement
is a plan which is established and maintained outside the
United States primarily for the benefit of individuals
substantially all of whom are nonresident aliens.
4.17.(e) No Triggering of Obligations. The
consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former
employee of Company to severance pay, unemployment
compensation or any other payment, except as expressly
provided in this Agreement, (ii) except as described in
Section 6.5, accelerate the time of payment or vesting, or
increase the amount of compensation due to any such employee
or former employee or (iii) result in any prohibited
transaction described in Section 406 of ERISA or Section
4975 of the Code for which an exemption is not available.
4.17.(f) Future Commitments. Company has no
announced plan or legally binding commitment to create any
additional Employee Plans/Agreements or to amend or modify
any existing Employee Plan/Agreement.
4.18. Employment Compensation. Schedule 4.18 contains a
list of all employees to whom the Company paid compensation in
1993, including bonuses and incentives, at an annual rate in
excess of Thirty Thousand Dollars ($30,000) for services rendered
or otherwise.
4.19. Trade Rights. Schedule 4.19 includes all Trade
Rights of the type described in clauses (i), (ii), (iii) or (iv)
of Section 1.1(d) in which Company now has any interest,
specifying whether such Trade Rights are owned, controlled, used
or held (under license or otherwise) by Company, and also
indicating which of such Trade Rights are registered. Except as
shown on Schedule 4.19, all Trade Rights shown as registered in
Schedule 4.19 have been properly registered, all pending
registrations and applications have been properly made and filed
and all annuity, maintenance, renewal and other fees relating to
registrations or applications are current. To the knowledge of
the Company, in order to conduct the Business, as such is
currently being conducted or proposed to be conducted, Company
does not require any Trade Rights that it does not already have.
To the knowledge of the Company, Company is not infringing, has
not infringed and, to the extent of current development, the
Company's Origin II design product line will not infringe, any
Trade Rights of another in the operation of the business of
Company, nor, to the Company's knowledge, is any other person
infringing the Trade Rights of Company. Company has not granted
any license or made any assignment of any Trade Right listed on
Schedule 4.19, and no other person has any right to use any Trade
Right owned or held by Company, except as listed in Schedule
1.1.(e). Except as set forth in Schedule 1.1.(d), Company does
not pay any royalties or other consideration for the right to use
any Trade Rights of others. There is no Litigation pending or,
to the knowledge of the Company, threatened to challenge
Company's right, title and interest with respect to its continued
use and right to preclude others from using any Trade Rights of
Company. All Trade Rights of Company are valid, enforceable and
in good standing, and, to the knowledge of the Company, there are
no equitable defenses to enforcement based on any act or omission
of Company, except as indicated on Schedule 4.19.
4.20. Major Customers and Suppliers.
4.20.(a) Major Customers. Schedule 4.20(a)
contains a list of the twenty five (25) largest customers,
including distributors, of Company for each of the two (2)
most recent calendar years (determined on the basis of the
total dollar amount of net sales) showing the total dollar
amount of net sales to each such customer during each such
year. Company has no knowledge or information of any facts
indicating, nor any other reason to believe, that any of the
customers listed on Schedule 4.20(a) will not continue to be
customers of the Business after the Closing at substantially
the same level of purchases as heretofore.
4.20.(b) Major Suppliers. Schedule 4.20(b)
contains a list of the twenty five (25) largest suppliers to
Company for calendar year 1993 and year to date 1994
(determined on the basis of the total dollar amount of
purchases) showing the total dollar amount of purchases from
each such supplier during each such year. Company has no
knowledge or information of any facts indicating, nor any
other reason to believe, that any of the suppliers listed on
Schedule 4.20(b) will not continue to be suppliers to the
Business after the Closing and will not continue to supply
the Business with substantially the same quantity and
quality of goods at competitive prices.
4.20.(c) Dealers and Distributors. Schedule
4.20(c) contains a list by product line of all sales
representatives, dealers, distributors and franchisees of
Company, together with representative copies of all sales
representative, dealer, distributor and franchise contracts
and policy statements, and a description of all substantial
modifications or exceptions.
4.21. Product Warranty and Product Liability. Schedule
4.21 contains a description of Company's standard warranty or
warranties for sales of Products (as defined below). Schedule
4.21 sets forth each warranty claim and product liability claim
since 1990 and through June 2, 1994, and the disposition thereof.
Schedule 4.21 contains a description of all product liability
claims and similar Litigation relating to Products manufactured
or sold, or services rendered, which are presently pending or
which to Company's knowledge are threatened, or which have been
asserted or commenced against Company since January 9, 1990, in
which a party thereto either requests injunctive relief or
alleges damages (whether or not covered by insurance). To
Company's knowledge, there have been no consistent or common
problems among product lines in the field which have resulted in
or could reasonably be expected to result in a replacement, field
fix, retrofit modification or recall campaign with respect to any
such product. As used in this Section 4.21, the term "Products"
means any and all products currently or at any time previously
sold by Company, or by any predecessor of Company under any brand
name or mark under which products are or have been sold by
Company or such predecessor.
4.22. Assets Necessary to Business. The Purchased Assets
together with the Facility Lease include all property and assets,
tangible and intangible, and all leases, licenses and other
agreements (excepting the licenses and permits listed in Schedule
1.2(h) and Assumed Contracts with respect to which any required
consent has not been obtained) which are necessary to carry on
the Business as presently conducted.
4.23. No Brokers or Finders. Neither Company nor any of
its directors, officers, employees, Affiliates or agents have
retained, employed or used any broker or finder in connection
with the transaction provided for herein or in connection with
the negotiation thereof.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to
Company, each of which is true and correct on the date hereof,
shall be unaffected by any investigation heretofore or hereafter
made by Company or any notice to Company, and shall survive the
Closing of the transactions provided for herein.
5.1. Corporate.
5.1.(a) Organization. Each of Buyer, HPI, Phoenix
and DDI is a corporation duly organized, validly existing
and in good standing under the laws of their respective
states of incorporation.
5.1.(b) Corporate Power. Buyer, HPI, Phoenix and
DDI each has all requisite corporate power to enter into
this Agreement and the other documents and instruments to be
executed and delivered by them and to carry out the
transactions contemplated hereby and thereby.
5.2. Authority. The execution and delivery of this
Agreement and the other documents and instruments to be executed
and delivered by Buyer, HPI, Phoenix, and DDI pursuant hereto and
the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors of
Buyer, HPI, Phoenix and DDI as the case may be. No other
corporate act or proceeding on the part of Buyer, HPI, Phoenix,
or DDI is necessary to authorize this Agreement or the other
documents and instruments to be executed and delivered by them
pursuant hereto or the consummation of the transactions
contemplated hereby and thereby. It is not presently intended
that DDI be dissolved unless all of its Liabilities have been
paid or otherwise provided for in full, to the extent required by
law. This Agreement constitutes, and when executed and
delivered, the other documents and instruments to be executed and
delivered by Buyer, HPI, Phoenix or DDI pursuant hereto will
constitute, valid and binding agreements of such signatories
thereto, enforceable in accordance with their respective terms,
except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights
generally, and by general equitable principles.
5.3. No Brokers or Finders. Neither Buyer nor any of its
Affiliates, directors, officers, employees or agents have
retained, employed or used any broker or finder in connection
with the transaction provided for herein or in connection with
the negotiation thereof.
6. EMPLOYEES - EMPLOYEE BENEFITS
6.1. Affected Employees. Buyer agrees to offer employment
to each person who is employed by Company immediately prior to
the Closing. Such employment shall be subject to and conditioned
upon agreement by such employees to terms and conditions of
employment established by Buyer. "Affected Employees" shall mean
employees of the Company who are employed by Buyer immediately
after the Closing.
6.2. Retained Responsibilities. Company agrees to
satisfy, or cause its insurance carriers to satisfy, all claims
for benefits, whether insured or otherwise (including, but not
limited to, workers' compensation, life insurance, medical and
disability programs), under Company's employee benefit programs
brought by, or in respect of, Affected Employees and other
employees and former employees of the Company, which claims arise
out of events occurring on or prior to the Closing Date, in
accordance with the terms and conditions of such programs or
applicable workers' compensation statutes. Buyer shall not be
responsible for any such claims.
6.3. Payroll Tax. Company agrees to make a clean cut-off
of payroll and payroll tax reporting with respect to the Affected
Employees paying over to the federal, state and city governments
those amounts respectively withheld or required to be withheld
for periods ending on or prior to the Closing Date. Company also
agrees to issue, by the date prescribed by IRS Regulations, Forms
W-2 for wages paid through the Closing Date. Except as set forth
in this Agreement, Buyer shall be responsible for all payroll and
payroll tax obligations after the Closing Date for Affected
Employees.
6.4. Employee Benefit Plans.
6.4.(a) Defined Contribution Plans. Company shall
vest and make non-forfeitable as of the Closing Date the
interest of each Affected Employee, who is a participant in
the Hill Refrigeration Tax Sheltered Savings Plan or the
Hill Refrigeration United Steelworkers of America (USWA)
Savings Program - 401(k) Plan. As of the Closing Date,
Buyer shall assume sponsorship of the United Steelworkers
401(k) Savings Plan. Upon the transfer of sponsorship,
Buyer shall be responsible for the operation and
administration of such plan on or after the Closing Date,
but shall not assume or otherwise be responsible for any
fines, penalties or other obligations or liabilities that
accrued prior to the Closing Date or will accrue following
the Closing Date on account of actions or omissions
occurring prior to the Closing Date. Within 30 days
following the Closing Date, Buyer and Company shall adopt
appropriate and mutually acceptable resolutions to provide
for the transfer of sponsorship of the plan to Buyer.
6.4.(b) Hourly Employee Defined Benefit Plans.
(i) Buyer shall not assume the Hill Refrigeration Employee
Non-Contributory Pension Plan ("Hill Pension Plan") or any
obligations in connection with the Hill Pension Plan. Buyer
shall provide a pension plan of its own for employees
covered by the Union Agreement ("Buyer's Pension Plan")
which shall contain substantially similar terms to the Hill
Pension Plan, and shall recognize all prior employment with
Seller to the extent that such employment is recognized as
Continuous Service and Credited Service under the Hill
Pension Plan as in effect on the Closing Date; provided,
that an employee's accrued normal retirement benefit under
Buyer's Pension Plan shall be reduced by the product of
$24.50 multiplied by the employee's years of service that
are recognized for benefit accrual purposes under the Hill
Pension Plan as of the Closing Date. In the event the
employee qualifies for the $300 minimum disability benefit,
the benefit provided from the Buyer's Pension Plan shall be
$300 multiplied by a fraction, the numerator of which is the
employee's Continuous Service recognized under the Buyer's
Pension Plan for periods of employment on or after the
Closing Date, and the denominator of which is the employee's
total period of Continuous Service, including service with
Seller prior to the Closing Date.
(ii) Seller shall vest and make non-forfeitable the
accrued benefit of each Affected Employee who is a
participant in the Hill Pension Plan. For purposes of
determining whether a participant is entitled to begin
receiving payment of his pension benefits and for purposes
of determining whether a participant qualifies for a normal,
early, deferred vested or disability pension (but not for
benefit accrual purposes), Company shall recognize
employment with Buyer after the Closing Date as if such
employment had been performed for Company, so that a plan
participant who becomes an employee of Buyer in accordance
with Section 6.1 shall not be deemed to have terminated
employment with Company until such time as the employee
terminates employment with Buyer. In the event the employee
qualifies for the $300 minimum disability benefit described
in Section 4.04(c)(1) of the Hill Pension Plan, the benefit
provided from the Hill Pension Plan shall be $300 multiplied
by a fraction, the numerator of which is the employee's
Continuous Service recognized under the Hill Pension Plan as
of the Closing Date and the denominator of which is the
employee's total period of Continuous Service, including
service with Buyer on or after the Closing Date. Seller
shall adopt appropriate amendments to the Hill Pension Plan
to effectuate the provisions of this Section 6.4(b)(ii).
Buyer shall not assume or otherwise become liable for or
become a successor to any Company defined benefit plan,
including, without limitation, the Hill Pension Plan.
6.4.(c) Salaried Employee Defined Benefit Plan.
Company shall vest and make non-forfeitable the accrued
benefit of each Affected Employee who is a participant in
the Hill Refrigeration Salaried Employees Retirement Plan
("Salaried Plan"). Solely for purposes of determining
whether a participant is entitled to begin receiving payment
of his pension benefits, Company shall recognize employment
with Buyer after the Closing Date as if such employment had
been performed for Company, so that a plan participant who
becomes an employee of Buyer in accordance with Section 6.1
shall not be deemed to have terminated employment with
Company until such time as the employee terminates
employment with Buyer. Buyer shall not assume or otherwise
become liable for or become a successor to any Company
defined benefit plan, including, without limitation, the
Salaried Plan.
6.4.(d) No Third-Party Rights. Nothing in this
Agreement, express or implied, is intended to confer upon
any of Company's employees, former employees, collective
bargaining representatives, job applicants, any association
or group of such persons or any Affected Employees any
rights or remedies of any nature or kind whatsoever under or
by reason of this Agreement, including, without limitation,
any rights of employment.
6.4(e) Severance Plan. Buyer shall provide a
severance plan to salaried Affected Employees whose employment is
terminated by Buyer within six (6) months following the Closing
Date (other than for cause or in connection with the future sale
of the business by Buyer) that provides a benefit at least equal
to one week salary for each year of service completed through the
Closing Date with Company (or predecessor companies), to a
maximum of twenty-six (26) weeks.
7. COVENANTS OF THE PARTIES
7.1. Noncompetition; Confidentiality. Subject to the
Closing, and as an inducement to Buyer to execute this Agreement
and complete the transactions contemplated hereby, and in order
to preserve the goodwill associated with the Business being
acquired pursuant to this Agreement, and in addition to and not
in limitation of any other covenants contained in any agreement
executed and delivered to Buyer hereof, Company and Shareholder
hereby covenant and agree as follows:
7.1.(a) Covenant Not to Compete. For a period of
five (5) years from the Closing Date, neither Company nor
Shareholder will, directly or indirectly:
(i) engage in, continue in or carry on any
business which competes with the
Business, including owning or
controlling any financial interest in
any corporation, partnership, firm or
other form of business organization
which is so engaged;
(ii) consult with, advise or assist in any
way, whether or not for consideration,
any corporation, partnership, firm or
other business organization which is
now or at the time of the consultation,
advise or assistance is or intends to
become a competitor of Buyer or HPI in
any aspect with respect to the Business
including, but not limited to,
advertising or otherwise endorsing the
products of any such competitor;
soliciting customers or otherwise
serving as an intermediary for any such
competitor; loaning money or rendering
any other form of financial assistance
to or engaging in any form of business
transaction on other than an arm's
length basis with any such competitor;
(iii) offer employment to an Affected
Employee, without the prior written
consent of Buyer, unless (x) such
Affected Employee has been terminated
by Buyer or HPI without cause or (y)
the employment with Buyer or HPI of
such Affected Employee has otherwise
been terminated for more than one year;
or
(iv) engage in any practice the purpose of
which is to evade the provisions of
this covenant not to compete;
provided, however, that the foregoing shall not prohibit the
ownership of securities of corporations which are listed on
a national securities exchange or traded in the national
over-the-counter market in an amount which shall not exceed
5% of the outstanding shares of any such corporation and
further provided that the foregoing shall not prohibit the
purchasing, owning, managing or operating of or having an
interest in any business that is included in a larger
acquisition by Company, Shareholder or their Affiliates
after the date hereof, if such business generates at the
time of the acquisition less than ten percent (10%) of the
gross revenues of all of the businesses acquired. The
parties agree that the geographic scope of this covenant not
to compete shall extend to each of the fifty states within
the United States of America. The parties agree that Buyer
or HPI may sell, assign or otherwise transfer this covenant
not to compete, in whole or in part, to any person,
corporation, firm or entity that purchases or operates all
or part of the Business or the Purchased Assets being
acquired by Buyer and HPI hereunder. In the event a court
of competent jurisdiction determines that the provisions of
this covenant not to compete are excessively broad as to
duration, geographical scope or activity, it is expressly
agreed that this covenant not to compete shall be construed
so that the remaining provisions shall not be affected, but
shall remain in full force and effect, and any such over
broad provisions shall be deemed, without further action on
the part of any person, to be modified, amended and/or
limited, but only to the extent necessary to render the same
valid and enforceable in such jurisdiction.
7.1.(b) Covenant of Confidentiality. Neither
Company nor Shareholder shall at any time subsequent to the
Closing, except as explicitly requested by Buyer or as is
otherwise required by law (including Company's legal
reporting requirements) or as necessary to enforce its
rights hereunder, (i) use for any purpose, (ii) disclose to
any person, or (iii) keep or make copies of documents,
tapes, discs or programs containing, any confidential
information concerning the Business. For purposes hereof,
"confidential information" shall mean and include, without
limitation, all Trade Rights in which Company has an
interest, all customer lists and customer information, and
all other information concerning Company's processes,
apparatus, equipment, packaging, products, marketing and
distribution methods, not previously disclosed to the public
by Company.
7.1.(c) Equitable Relief for Violations. Company
and Shareholder agree that the provisions and restrictions
contained in this Section 7.1 are necessary to protect the
legitimate continuing interests of Buyer and HPI in
acquiring the Business and goodwill of the Business through
the purchase of the Purchased Assets and the assumption of
the Assumed Liabilities, and that any violation or breach of
these provisions will result in irreparable injury to Buyer
and HPI for which a remedy at law would be inadequate and
that, in addition to any relief at law which may be
available to Buyer or HPI for such violation or breach and
regardless of any other provision contained in this
Agreement, Buyer and HPI shall be entitled to injunctive and
other equitable relief as a court may grant after
considering the intent of this Section 7.1.
7.2. Use of Company's Name. Following the Closing,
neither Company nor any Affiliate shall, without the prior
written consent of Buyer, make any use of the name "Hill
Refrigeration" or any other name confusingly similar thereto,
except as may be necessary for Company to pay its liabilities,
prepare tax returns and other reports, and to otherwise wind up
and conclude its business.
7.3. Sales Tax Matters. Promptly following the Closing,
Company shall obtain a sales tax clearance certificate from the
New Jersey Department of Revenue with respect to sales tax
payable by the Company as of the Closing Date.
7.4. Unemployment Compensation. Company shall, upon the
request of Buyer, reasonably cooperate with Buyer in any efforts
by Buyer to obtain the transfer of Company's portion of the New
Jersey unemployment compensation fund applicable to Affected
Employees, to the extent Buyer elects to transfer and assume such
amounts. In connection therewith, Company will execute such
documents as Buyer may reasonably request in order to effectuate
such transfer.
7.5. Bulk Sales Compliance. Buyer and Company waive
compliance with the provisions of the bulk sales or bulk transfer
statutes applicable to this transaction, subject to Company's and
Shareholder's indemnification of Buyer with respect to
Liabilities resulting from such noncompliance as provided in
Article 8.
7.6. Access to Information and Records. For six years
after the Closing Date (and permanently for personnel-related
records), Buyer shall grant to the Company, Shareholder and their
representatives, at the request of the Company or Shareholder,
access to and the right to make copies, at the Company's or
Shareholder's expense, of those records and documents relating to
the Purchased Assets and the Business possession of which is
transferred to Buyer, and Buyer shall maintain such records and
documents in accordance with sound business practices. If at the
expiration of such six year period any tax audit or judicial
proceeding is pending or the applicable statute of limitations is
extended, at Company's request, Buyer shall maintain such records
and documents for such longer period as such audit or proceeding
is pending or such statutory period is extended. At the
termination of the term of the Facility Lease, Buyer may deliver
possession of such records as are no longer required by Buyer by
notifying Company that it is delivering such records to Company
and Buyer shall leave such records at the Facilities upon
departure.
7.7. Change of Corporate Name. Concurrently with the
Closing, Company shall change its corporate name to a new name
bearing no resemblance to its present name so as to permit the
use of its present name by Buyer.
7.8. Environmental Matters. It is agreed that this
transaction constitutes the sale or transfer of more than 50% of
the assets of an industrial establishment, such that the Company
is obligated to provide notice of this transaction to the New
Jersey Department of Environmental Protection and Energy pursuant
to the New Jersey Industrial Site Recovery Act ("ISRA"). Any
future termination of Buyer's operations at the Facilities may
also require a notice under ISRA. Following the Closing, Company
shall file all such notices and take all such actions as are
required to be filed or taken under ISRA and other applicable
Environmental Laws with respect to the Facilities, including, but
not limited to, obtaining required approvals and performing any
required remediation, regardless of whether such notices or
actions are required as a result of acts, occurrences or events
caused by Company or Buyer or occurring before or after Closing
(including, but not limited to, any notices and actions required
upon the termination of Buyer's use of the Facilities); however,
as to Buyer's acts and occurrences, or events after the Closing,
Company shall not be required to perform any required remediation
to the extent Buyer has indemnified Company for such acts,
occurrences or events under the Facility Lease. Company, as
owner of the Facilities, agrees to be responsible for all such
filings and all such actions notwithstanding Buyer's use of the
Facilities, subject only to Buyer's obligations under the
Facility Lease.
7.9. Health Insurance Coverage. Buyer covenants and
agrees to provide to employees who are offered and accept
employment with Buyer health coverage under an employee welfare
benefit plan (as defined in Section 3(1) of ERISA) maintained or
contributed to by Buyer which provides for coverage without any
pre-existing condition limitation or waiting period condition.
7.10. Insurance. Company and Buyer shall reasonably
cooperate to provide to Buyer the benefit of Company's insurance
for any claims relating to the Purchased Assets for occurrences
arising prior to the Closing, except to the extent that such
claims would exhaust the availability of Company's insurance
coverage for other matters and except to the extent that such
claims adversely affect the Company's right of recovery for
claims arising from Liabilities which are not Assumed
Liabilities.
7.11. Taxes Resulting From Transaction. Except as provided
in Section 11.8, Buyer shall pay all taxes imposed upon it and
Company shall pay all taxes imposed upon it, if any, arising out
of the transactions contemplated hereby.
7.12. Oryx Payment. Within thirty (30) business days
following Closing, Company shall pay to Oryx Retail Fixtures,
Inc. the amount of the account payable owed by the Company to
Oryx in excess of the account receivable owed by Oryx to the
Company.
8. INDEMNIFICATION
8.1. By Company and Shareholder. Subject to the terms and
conditions of this Article 8, Hill Refrigeration, Inc. and
Shareholder, jointly and severally, hereby agree to indemnify,
defend and hold harmless Buyer, and its directors, officers,
employees, and Affiliates (hereinafter "Buyer's Affiliates"),
from and against all Claims asserted against, imposed upon, or
incurred by Buyer, Buyer's Affiliates or the Business or the
Purchased Assets, and arising out of or resulting from:
8.1.(a) the inaccuracy or breach of any
representation or warranty of Company contained in this
Agreement or in any document executed pursuant to this
Agreement, including without limitation, the Facility Lease
(regardless of whether such breach is deemed "material");
8.1.(b) the breach of any covenant of Company or
Shareholder contained in this Agreement or any document
executed pursuant to this Agreement, including without
limitation, the Facility Lease (regardless of whether such
breach is deemed "material");
8.1.(c) Liabilities of the Company or any of its
Affiliates which are not Assumed Liabilities (whether
arising before or after the Closing) or Liabilities
associated with Excluded Assets;
8.1.(d) any Claim of or against Buyer or Buyer's
Affiliates with respect to any Liabilities (excepting
Liabilities assumed by Buyer pursuant to Section 2.1(e))
arising out of, related to or incurred in connection with
the closedown and disposal of the Facilities by Company,
regardless of whether such costs are incurred before or
after the Closing Date, including without limitation, costs
for compliance with Environmental Laws, vacant building
security costs, utility disconnection costs, sale expenses,
demolition costs and removal, transport and storage costs
for Excluded Assets (excepting Buyer's obligations under the
Facility Lease and Buyer's Liabilities to its employees
under its employee pension and welfare benefit plans);
As used in this Article 8, the term "Claim" shall include
(i) all losses, damages (including reasonable and foreseeable
consequential damages), judgments, awards, settlements, costs and
expenses (including, without limitation, interest (including
prejudgment interest in any litigated or arbitrated matter),
penalties, court costs and attorneys fees and expenses); and (ii)
all demands, claims, suits, actions, costs of investigation,
causes of action, proceedings and assessments, whether or not
ultimately determined to be valid.
The Company shall not be liable to Buyer under either
Section 8.1(a) or 8.1(b) unless and only to the extent the
aggregate dollar value of all Claims thereunder exceeds
$50,000.00 (at which point Buyer shall be entitled to recover as
to Claims in excess of an aggregate of $50,000.00) (the
"Deductible"), except with respect to a breach of any
representation or warranty of the Company made in Sections 4.1,
4.2 and 4.12(a) or a breach of the covenants set forth in Article
6, Section 7.1, or Section 7.8 or in the Facility Lease, as to
which the Deductible shall not apply. The Deductible shall not
apply to any other Claim or right of indemnification, including
without limitation indemnification sought pursuant to Section
8.1(c) or (d), Section 8.5, or to any adjustments to the Purchase
Price pursuant to Article 3 hereof. A claim by Buyer made under
either Sections 8.1(a) or 8.1(b) and under another provision of
this Agreement shall not be subject to the Deductible to the
extent that the claim can be brought under a provision of this
Agreement other than Section 8.1(a) or 8.1(b).
8.2. By Buyer. Subject to the terms and conditions of
this Article 8, Buyer, Phoenix and DDI, jointly and severally,
hereby agree to indemnify, defend and hold harmless Company, its
directors, officers, employees and Affiliates from and against
all Claims asserted against, imposed upon or incurred by any such
person and arising out of or resulting from
8.2.(a) the inaccuracy or breach of any
representation or warranty of Buyer contained in this
Agreement or in any document executed pursuant to this
Agreement including, without limitation, the Facility Lease
(regardless of whether such breach is deemed "material");
8.2.(b) the breach of any covenant of Buyer
contained in this Agreement or in any document executed
pursuant to this Agreement including, without limitation,
the Facility Lease (regardless of whether such breach is
deemed "material"); or
8.2.(c) Liabilities of the Company which are
Assumed Liabilities hereunder.
8.2.(d) Court costs and attorneys fees incurred in
connection with the defense of Claims against the Company
for payment or performance obligations of Buyer or HPI
created following the Closing and for which Company is not
otherwise expressly responsible under the terms of this
Agreement or the agreements executed in connection herewith.
8.3. Indemnification of Claims. The obligations and
liabilities of any party to indemnify any other under this
Article 8 with respect to Claims shall be subject to the
following terms and conditions:
8.3.(a) Notice and Defense. The party or parties
to be indemnified (whether one or more, the "Indemnified
Party") will give the party from whom indemnification is
sought (the "Indemnifying Party") prompt written notice of
any such Claim, and the Indemnifying Party may undertake the
defense thereof by representatives chosen by it. Such
notice shall describe the Claim with reasonable specificity
to the extent facts are known at the time of the notice.
Failure to give such prompt written notice shall not affect
the Indemnifying Party's duty or obligations under this
Article 8, except to the extent the Indemnifying Party is
prejudiced thereby. So long as the Indemnifying Party is
defending any such Claim actively and in good faith, the
Indemnified Party shall not settle such Claim. The
Indemnified Party shall make available to the Indemnifying
Party or its representatives all records and other materials
required by them and in the possession or under the control
of the Indemnified Party, for the use of the Indemnifying
Party and its representatives in defending any such Claim,
and shall in other respects give reasonable cooperation in
such defense.
8.3.(b) Failure to Defend. If the Indemnifying
Party, within ten days after notice of any such Claim, fails
to defend such Claim actively and in good faith, the
Indemnified Party will (upon further notice) have the right
to undertake the defense, compromise or settlement of such
Claim or consent to the entry of a judgment with respect to
such Claim at the risk of the Indemnifying Party, and the
Indemnifying Party shall thereafter have no right to
challenge the Indemnified Party's defense, compromise,
settlement or consent to judgment.
8.3.(c) Indemnified Party's Rights. Anything in
this Article 8 to the contrary notwithstanding, (i) if there
is a reasonable probability that a Claim may materially and
adversely affect the Indemnified Party other than as a
result of money damages or other money payments, the
Indemnified Party shall have the right to defend, compromise
or settle such Claim (at the risk of the Indemnifying
Party), and (ii) the Indemnifying Party shall not, without
the written consent of the Indemnified Party (such consent
not to be unreasonably withheld), settle or compromise any
Claim or consent to the entry of any judgment which does not
include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party of a
release from all Liability in respect of such Claim.
8.3.(d) Time Limitations On Notice. Any notice
for indemnification sought pursuant to Section 8.1(a) hereof
(excepting with respect to a breach of warranty or
representation made in Section 4.1, 4.2 or 4.12(a)) shall be
delivered on or before the first anniversary of the Closing
Date. There shall be no time limitation on any other claim
for indemnification brought under this Agreement or any
other agreement between the parties, including claims for
indemnification brought under any other section of this
Agreement or any other agreement which might also be brought
under Section 8.1(a) hereof. The parties hereto waive any
limitation which may operate to otherwise bar a claim for
indemnification hereunder
8.4. Payment. The Indemnifying Party shall promptly pay
the Indemnified Party any amount due under this Article 8, which
payment may be accomplished in whole or in part, at the option of
the Indemnified Party, by the Indemnified Party setting off any
amount owed to the Indemnifying Party by the Indemnified Party.
To the extent set-off is made by an Indemnified Party in
satisfaction or partial satisfaction of an indemnity obligation
under this Article 8 that is disputed by the Indemnifying Party,
upon a subsequent determination by final judgment not subject to
appeal or by agreement of the parties that all or a portion of
such indemnity obligation was not owed to the Indemnified Party,
the Indemnified Party shall pay the Indemnifying Party the amount
which was set off and not owed, together with interest at seven
percent (7%) per annum. Upon judgment, determination, settlement
or compromise of any Claim in accordance with the provisions of
this Article 8, the Indemnifying Party shall pay promptly on
behalf of the Indemnified Party, and/or to the Indemnified Party
in reimbursement of any amount theretofore required to be paid by
it, the amount so determined by judgment, determination,
settlement or compromise and all other Claims of the Indemnified
Party with respect thereto, unless in the case of a judgment an
appeal is made from the judgment. If the Indemnifying Party
desires to appeal from an adverse judgment, then the Indemnifying
Party shall post and pay the cost of any required security or
bond to stay execution of the judgment pending appeal. Upon the
payment in full by the Indemnifying Party of such amounts, the
Indemnifying Party shall succeed to the rights of such
Indemnified Party, to the extent not waived in settlement in
accordance herewith, against the third party who made such third
party Claim.
8.5. Indemnification for Environmental Matters. Without
limiting the generality of any other provision of this Article 8:
8.5.(a) Indemnification. Company and Shareholder,
jointly and severally agree to indemnify, reimburse, hold
harmless and defend Buyer and Buyer's Affiliates for, from,
and against all Claims asserted against, imposed on, or
incurred by Buyer, directly or indirectly, in connection
with any pollution, threat to the environment, or exposure
to, or manufacture, processing, distribution, use,
treatment, generation, transport or handling, disposal,
emission, discharge, storage or release of Waste that (A)
results from Company's or any previous owner's or operator's
ownership, operation or occupancy of the Facilities or the
Business, properties and assets being transferred to Buyer,
or (B) occurred, existed, arose out of conditions or
circumstances that existed, or was caused on or before the
Closing Date; or (C) results from any act(s) or omission(s)
of Buyer after the date of Closing that constitute(s) a
substantial continuation of any act(s) or omission(s) of
Company prior to the Closing Date to the extent such Claims
relate to the remediation of Waste, the release of which
began prior to the Closing Date. Such indemnification shall
remain effective notwithstanding any act of Buyer or
occurrence following the Closing.
8.5.(b) Transfers of Permits. Company and
Shareholder, jointly and severally, agree to indemnify,
reimburse, defend, and hold harmless Buyer and Buyer's
Affiliates from, for and against all demands, claims,
actions or causes of action arising from or in connection
with the operation of the Purchased Assets by Buyer in the
absence of a permit required by law, subsequent to the
Closing Date and prior to transfer to the Buyer of any
permits currently applicable to the Purchased Assets.
8.5.(c) Dealings with Government Authorities.
Company shall file all such notices and take all such
actions as are required to be filed or taken under the New
Jersey Environmental Cleanup Responsibility Act and other
applicable Environmental Laws, including obtaining required
approvals and performing any required remediation,
regardless of whether such notices or actions are required
as a result of acts, occurrences or events occurring before
or after Closing except as provided in Section 7.8. Company
and Shareholder jointly and severally, agree to indemnify
and hold harmless Buyer and Buyer's Affiliates from any
Liabilities arising out of Company's failure to take such
actions, file such notices or obtain such approvals.
8.6. No Waiver. The closing of the transactions
contemplated by this Agreement shall not constitute a waiver by
any party of its rights to indemnification hereunder, regardless
of whether the party seeking indemnification has knowledge of the
breach, violation or failure of condition constituting the basis
of the Claim at or before the Closing, and regardless of whether
such breach, violation or failure is deemed to be "material".
All claims of any party hereto with respect to the transactions
contemplated hereby shall be brought exclusively under the terms
of this Agreement and the other agreements executed in connection
herewith.
8.7. Guaranty; Escrow Agreement. Great American
Management and Investment, Inc. ("GAMI"), the parent company of
Shareholder, shall guaranty certain obligations of Company and
Shareholder hereunder pursuant to that certain Guaranty Agreement
executed in connection herewith and GAMI and Buyer shall enter
into an escrow agreement pursuant to which GAMI shall deposit
$6.5 million in marketable securities with an escrow agent
pursuant to the terms of that certain Escrow Agreement executed
in connection herewith.
9. CLOSING
The closing of this transaction ("the Closing") shall take
place at the offices of Foley & Lardner, 777 East Wisconsin
Avenue, Milwaukee, Wisconsin 53211, at 10:00 A.M. on August 5,
1994, or at such other time and place as the parties hereto shall
agree upon. Such date is referred to in this Agreement as the
"Closing Date".
10. RESOLUTION OF DISPUTES
10.1. Arbitration. Any dispute, controversy or claim
arising out of or relating to this Agreement or any contract or
agreement entered into pursuant hereto or the performance by the
parties of its or their terms shall be settled by binding
arbitration held in Chicago, Illinois in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association then in effect, except as specifically otherwise
provided in this Article 10. Notwithstanding the foregoing,
Buyer may, in its discretion, apply to a court of competent
jurisdiction for equitable relief from any violation or
threatened violation of the covenants of Company and/or any
Shareholder under Section 7.1 of this Agreement.
10.2. Arbitrators. If the matter in controversy (exclusive
of attorney fees and expenses) shall appear, as at the time of
the demand for arbitration, to exceed $250,000.00, then the panel
to be appointed shall consist of three neutral arbitrators;
otherwise, one neutral arbitrator.
10.3. Procedures; No Appeal. The arbitrator(s) shall allow
such discovery as the arbitrator(s) determine appropriate under
the circumstances and shall resolve the dispute as expeditiously
as practicable, and if reasonably practicable, within 120 days
after the selection of the arbitrator(s). The arbitrator(s)
shall give the parties written notice of the decision, with the
reasons therefor set out, and shall have 30 days thereafter to
reconsider and modify such decision if any party so requests
within 10 days after the decision. Thereafter, the decision of
the arbitrator(s) shall be final, binding, and nonappealable with
respect to all persons, including (without limitation) persons
who have failed or refused to participate in the arbitration
process.
10.4. Authority. The arbitrator(s) shall have authority to
award relief under legal or equitable principles, including
interim or preliminary relief, and to allocate responsibility for
the costs of the arbitration and to award recovery of attorneys
fees and expenses in such manner as is determined to be
appropriate by the arbitrator(s).
10.5. Entry of Judgment. Judgment upon the award rendered
by the arbitrator(s) may be entered in any court having in
personam and subject matter jurisdiction. Company, Buyer and
Shareholder hereby submit to the in personam jurisdiction of the
Federal and State courts in Illinois, for the purpose of
confirming any such award and entering judgment thereon.
10.6. Confidentiality. All proceedings under this Article
10, and all evidence given or discovered pursuant hereto, shall
be maintained in confidence by all parties.
10.7. Continued Performance. The fact that the dispute
resolution procedures specified in this Article 10 shall have
been or may be invoked shall not excuse any party from performing
its obligations under this Agreement and during the pendency of
any such procedure all parties shall continue to perform their
respective obligations in good faith, subject to the right of
setoff provided in Section 8.4 hereof.
10.8. Tolling. All applicable statutes of limitation shall
be tolled while the procedures specified in this Article 10 are
pending. The parties will take such action, if any, required to
effectuate such tolling.
11. MISCELLANEOUS
11.1. Disclosure Schedule. Information set forth in the
schedules to this Agreement specifically refers to the article
and section of this Agreement to which such information is
responsive and such information shall not be deemed to have been
disclosed with respect to any other article or section of this
Agreement or for any other purpose.
11.2. Further Assurance. From time to time, upon request
of any party hereto, the other parties will execute and deliver
such documents and take such other action as may be reasonably
appropriate in order to consummate more effectively the
transactions contemplated hereby, to vest in Buyer good, valid
and marketable title to the business and assets being transferred
hereunder, and to enable each party to perform its obligations
hereunder (provided that neither party shall be required to
expend any unreimbursed out-of-pocket costs or other unreasonable
expenses). In the event Company has failed to disclose any
Contract in the schedules to this Agreement noted in Section
1.1(e), Buyer agrees to use its best efforts to assume such
Contract following Closing so long as such Contract relates to
the Business, was entered into in the ordinary course, is not in
material default, will not result in a loss to Buyer of more than
$5000 and does not impose any material adverse contingent
liability on Buyer.
11.3. Disclosures and Announcements. Both the timing and
the content of all disclosure to third parties and public
announcements concerning the transactions provided for in this
Agreement by either Company or Buyer shall be subject to the
approval of the other in all essential respects, except that
approval shall not be required as to any statements and other
information which Buyer, Company or other respective officials
may be required to make pursuant to any rule or regulation of the
Securities and Exchange Commission or otherwise required by law.
11.4. Assignment; Parties in Interest.
11.4.(a) Assignment. Except as expressly provided
herein, the rights and obligations of a party hereunder may
not be assigned, transferred or encumbered without the prior
written consent of the other parties. Notwithstanding the
foregoing, Buyer may, without consent of any other party,
cause HPI to carry out all or any part of the transactions
contemplated hereby and each of Company's obligations to
Buyer hereunder shall also be deemed to run to HPI, as well;
but the foregoing shall not allow for recovery by Company
and HPI of duplicative claims against the Company.
11.4.(b) Parties in Interest. This Agreement shall
be binding upon, inure to the benefit of, and be enforceable
by the respective successors and permitted assigns of the
parties hereto. Nothing contained herein shall be deemed to
confer upon any other person any right or remedy under or by
reason of this Agreement. The obligations of the parties
hereunder, including without limitation the indemnification
obligations pursuant to Article 8, are for the exclusive
benefits of the parties hereto, and may not be enforced by
or on behalf of any other person or entity (including
without limitation any Government Entities, union, customer
or supplier).
11.5. Law Governing Agreement. This Agreement may not be
modified or terminated orally, and shall be construed and
interpreted according to the internal laws of the State of
Illinois, excluding any choice of law rules that may direct the
application of the laws of another jurisdiction.
11.6. Amendment and Modification. Buyer, Company and
Shareholder may amend, modify and supplement this Agreement in
such manner as may be agreed upon by them in writing.
11.7. Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be:
(a) personally delivered; (b) sent by telecopier, facsimile
transmission or other electronic means of transmitting written
documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail,
return receipt requested and postage prepaid, or by private
overnight mail courier service. The respective addresses to be
used for all such notices, demands or requests are as follows:
(a) If to Buyer or Buyer's Affiliates, to:
Phoenix Refrigeration Systems, Inc.
709 Sigman Road
Conyers, Georgia
Attention: Grant M. Brown
Facsimile: (404) 483-2063
(with a copy to)
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Attention: Martin D. Mann
Facsimile: (414) 289-3791
or to such other person or address as Buyer shall furnish to
Company in writing.
(b) If to Company or Shareholder or their
respective Affiliates, to:
Eagle Industries, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: William Hall
Facsimile: (312) 906-8402
(with copies to)
Eagle Industries, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: Gus J. Athas
General Counsel
Facsimile: (312) 906-8402
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza
Suite 1600
Chicago, Illinois 60606
Attention: Donald J. Liebentritt
Facsimile: (312) 454-0335
or to such other person or address as Company shall furnish to
Buyer in writing.
If personally delivered, such communication shall be deemed
delivered upon actual receipt; if electronically transmitted
pursuant to this paragraph, such communication shall be deemed
delivered the next business day after transmission (and sender
shall bear the burden of proof of delivery); if sent by overnight
courier pursuant to this paragraph, such communication shall be
deemed delivered upon receipt; and if sent by U.S. mail pursuant
to this paragraph, such communication shall be deemed delivered
as of the date of delivery indicated on the receipt issued by the
relevant postal service, or, if the addressee fails or refuses to
accept delivery, as of the date of such failure or refusal. Any
party to this Agreement may change its address for the purposes
of this Agreement by giving notice thereof in accordance with
this Section.
11.8. Expenses. Regardless of whether or not the
transactions contemplated hereby are consummated:
11.8.(a) Sales Taxes. Company and Buyer shall each
pay one half of any sales or similar tax imposed with
respect to the transactions provided for in this Agreement,
and any interest or penalties related thereto, except that
Buyer's obligation pursuant to this Section 11.8(a) shall be
limited to $7,500 and Company shall pay any excess.
11.8.(b) Professional Fees. Except as otherwise
provided herein, each of the parties shall bear its own
expenses and the expenses of its counsel and other
professional advisors and agents in connection with the
transactions contemplated hereby.
11.8.(c) Costs of Litigation or Arbitration. The
parties agree that (subject to the discretion, in an
arbitration proceeding, of the arbitrator as set forth in
Section 10.4) the prevailing party in any action brought
with respect to or to enforce any right or remedy under this
Agreement shall be entitled to recover from the other party
or parties all reasonable costs and expenses of any nature
whatsoever incurred by the prevailing party in connection
with such action, including without limitation attorneys'
fees and prejudgment interest.
11.9. Knowledge. Knowledge of the Company shall mean the
actual knowledge possessed by any of Dean Flatt, James Healy,
John Vana, Bradley Schwichtenberg, or Edward Finnegan.
11.10. Entire Agreement. This instrument embodies the
entire agreement between the parties hereto with respect to the
transactions contemplated herein, and there have been and are no
agreements, representations or warranties between the parties
other than those set forth or provided for herein.
11.11. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
11.12. Headings. The headings in this Agreement are
inserted for convenience only and shall not constitute a part
hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date and year first above written.
REFRIGERATION SYSTEMS, INC.
("Buyer")
By /s/ Roland Parker
-----------------
Roland Parker
Vice President
HILL PHOENIX, INC.
("HPI")
By /s/ Roland Parker
-----------------
Roland Parker
Vice President
PHOENIX REFRIGERATION SYSTEMS, INC.
("Phoenix")
By /s/ Grant M. Brown
------------------
Grant M. Brown
President
DOVER DIVERSIFIED, INC.
("DDI")
By /s/ Jerry W. Yochum
-------------------
Jerry W. Yochum
President
HILL REFRIGERATION, INC.
("Company")
By /s/ Gus J. Athas
----------------
Gus J. Athas
Vice President
EAGLE INDUSTRIES, INC.
("Shareholder")
By /s/ Gus J. Athas
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Gus J. Athas
Vice President
