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PURCHASE AGREEMENT
By and Among
AMERICAN FIREPLACE COMPANY AND
HEARTH & HOME, INC., as SELLERS,
HEARTH TECHNOLOGIES INC., as BUYER, and
HON INDUSTRIES INC.
Dated as of January 28, 2000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. PURCHASE AND SALE 1
1.1 Purchase and Sale of Assets 1
(a) [Intentionally omitted] 1
(b) Prepaids 2
(c) Inventory 2
(d) Accounts Receivable 2
(e) Fixed Assets 2
(f) [Intentionally omitted] 2
(g) Leased Property 2
(h) Intellectual Property Rights 2
(i) Business Records 3
(j) Rights Under Confidentiality
Agreements and Warranties 3
(k) Customer List 3
(l) Catalogs and Advertising Materials 3
(m) Purchase Orders 3
(n) Contracts 3
(o) Permits 3
(p) [Intentionally omitted] 3
(q) Goodwill 3
(r) Miscellaneous 4
1.2 Retained Assets 4
(a) Designated Assets 4
(b) Non-Assigned Contracts 4
(c) Employee Plan Assets 4
(d) Corporate Records 4
(e) Shares in H&H 4
(f) Insurance 5
1.3 [Intentionally omitted] 5
1.4 Assignability and Consents 5
(a) Required Consents 5
(b) Nonassignable Items 5
ARTICLE II. LIABILITIES 6
2.1 Assumption of Liabilities 6
(a) [Intentionally omitted] 6
(b) Accrued Liabilities 6
(c) Contracts 6
(d) Warranty Commitments 6
2.2 Retained Liabilities 6
(a) Pre-Closing 7
(b) Liabilities Relating to the Sale of
(c) Employee-Related Liabilities 7
(d) Litigation 7
(e) Product, Environmental and Safety
Liability 7
(f) Taxes 8
(g) [Intentionally omitted] 8
(h) Liabilities Relating to Retained 8
Assets
(i) Post-Closing Date 8
(j) Shutdown Costs 8
(k) Acquisition Payments 9
ARTICLE III. PURCHASE PRICE 9
3.1 Payment 9
3.2 [Intentionally omitted] 9
3.3 [Intentionally omitted] 9
3.4 [Intentionally omitted] 9
3.5 Satisfaction of Indebtedness 9
3.6 Purchase Price Allocation 10
ARTICLE IV. CLOSING 10
4.1 General 10
4.2 Documents to be Delivered by Asset Seller 10
4.3 [Intentionally omitted] 12
4.4 Documents to be Delivered by Buyer 12
4.5 Documents to be Delivered by Buyer and
Sellers 13
4.6 Other Documents to be Delivered 13
ARTICLE V. REPRESENTATIONS AND WARRANTIES 14
5.1 Joint and Several Representations and
Warranties of Sellers 14
(a) Organization and Standing; Power and
Authority 14
(b) Articles and By-Laws 15
(c) Conflicts; Defaults 15
(d) Acquired Assets; Title to the
Acquired Assets 16
(e) Real Property 17
(f) Leases 17
(g) Contracts 17
(h) Financial Statements 18
(i) Liabilities 20
(j) Accounts Receivable; Collection;
Trade Payables 21
(k) Inventories 21
(l) Litigation 21
(m) Customers and Suppliers 22
(n) Regulatory Compliance 22
(o) Brokers, Finders and Agents 22
(p) Intellectual Property 22
(q) Permits 23
(r) Employee Relations; Collective
Bargaining Agreements 24
(s) Employees and Employee Plans 24
(t) Environmental and Safety Compliance 27
(i) General 27
(ii) Specific Environmental
Representations and Warranties 27
(iii) Definitions 28
(u) Changes in Circumstances 30
(v) Taxes 30
(w) Product Warranties 33
(x) Insurance 33
(y) Approvals 34
(z) Absence of Certain Commercial
Practices 34
(aa) Bank Accounts 34
(ab) Books and Records 34
(ac) Warranty Costs 35
(ad) Penalties and Renegotiation of
Contracts 35
(ae) Pricing Practices 35
(af) Copies of Documents 35
(ag) [Intentionally omitted] 35
(ah) Insider Interests; Advances 36
(ai) Year 2000 Compliance 36
(aj) Disclosure 37
5.2 [Intentionally omitted] 37
5.3 Representations and Warranties of HON 37
(a) Organization and Standing; Power and
Authority 37
(b) Conflicts; Defaults 37
(c) Brokers, Finders and Agents 37
(d) Consents 38
5.4 Representations and Warranties Relating
to Buyer 38
(a) Organization and Standing; Power and
Authority 38
(b) Capitalization 38
(c) Articles and By-Laws 39
(d) Conflicts; Defaults 39
(e) Compliance with Other Instruments,
etc. 39
(f) Financial Statements 39
(g) Litigation 39
(h) Absence of Certain Changes or Events 40
(i) Brokers, Finders and Agents 40
(j) Consents 40
(k) Ability to Pay Cash Amount 40
5.5 General 40
ARTICLE VI. CONDITIONS TO CLOSING 40
6.1 Conditions to Buyer's Obligations 40
(a) Representations and Warranties 40
(b) Covenants 41
(c) Material Adverse Change 41
(d) Consents 41
(e) No Proceeding or Litigation 41
(f) Legal Matters 42
(g) Certificate of Seller 42
(h) Certificate; Documents 42
(i) Tax Certificates 42
(j) Lender Consents 42
(k) Other Closing 42
6.2 Conditions to Sellers' Obligations 42
(a) Representations and Warranties 42
(b) Covenants 43
(c) Material Adverse Change 43
(d) Consents 43
(e) No Proceeding or Litigation 43
(f) Legal Matters 43
(g) Certificates of Buyer and HON 43
(h) Certificates; Documents 43
(i) LaSalle Loan 43
(j) Other Closing 43
ARTICLE VII. COVENANTS OF SELLER 44
7.1 Conduct of Business 44
(a) Obligations for Borrowed Money 44
(b) Employee Matters 44
(c) Sale of Assets 44
(d) Commitments 44
(e) Leased Facilities 45
(f) Encumbrances 45
(g) Insurance 45
(h) Litigation 45
(i) Representations and Warranties 45
(j) Commitments 45
7.2 Disclosure Supplements 45
7.3 Closing 46
7.4 Confidentiality 46
7.5 Maintenance of Insurance 46
7.6 Inventories 46
7.7 Maintenance of, and Access to, Records 46
7.8 Non-Competition 46
(a) Period and Conduct 46
(b) Territory 47
(c) Definition 47
(d) Remedies 47
(e) Subsidiaries, Divisions and 47
Affiliates
(f) Severability 48
7.9 Accounts Receivable 48
7.10 Name Change Filings 48
7.11 No Shopping 48
7.12 Plant Closing Obligations 48
7.13 Further Assurances; Customer and Supplier
Relationships; Assertion of Claims 49
7.14 Appointment of Representative 49
7.15 Payment of Indebtedness; Releases 49
ARTICLE VIII. COVENANTS OF BUYER AND HON 50
8.1 Covenants of Buyer 50
(a) Maintenance of, and Access to,
Records 50
(b) Closing 50
(c) Disclosure Supplements 50
(d) Copies 50
(e) Insurance 50
(f) Supply of Products 50
(g) Further Assurances 50
8.2 Covenants of HON 51
(a) Closing 51
(b) IRB Consents 51
(c) Buyer Note 51
ARTICLE IX. CERTAIN ADDITIONAL COVENANTS 51
9.1 Access to Records and Properties 51
9.2 Expenses; Transfer Taxes 51
9.3 Bulk Transfer Laws 52
9.4 Press Releases and Disclosure 52
9.5 Cooperation in the Defense of Claims 52
9.6 Regulatory Approvals 52
9.7 Employee Matters 53
9.8 [Intentionally omitted] 54
9.9 Product Warranty Work 54
ARTICLE X. TERMINATION 55
10.1 Termination 55
(a) Mutual Consent 55
(b) Termination Date 55
(c) Sellers Misrepresentation or Breach 55
(d) Buyer Misrepresentation or Breach 55
(e) Court Order 55
(f) Material Adverse Change 55
(g) Buyer's Conditions 55
(h) Sellers' Conditions 55
10.2 Effect of Termination 56
ARTICLE XI. INDEMNIFICATION 56
11.1 Indemnification by Buyer 56
11.2 Indemnification by Sellers 56
(I) General 56
(II) Environmental Indemnification 57
11.3 Notice of Claim; Right to Participate in
and Defend Third Party Claim 57
11.4 Setoff 58
11.5 Time Limitations on Claims for
Indemnification 59
11.6 Maximum and DeMinimis Amounts 59
11.7 Exclusions 60
11.8 Dispute Resolution 60
ARTICLE XII. MISCELLANEOUS 62
12.1 Amendments 62
12.2 Entire Agreement 62
12.3 Governing Law 62
12.4 Notices 62
12.5 Counterparts 63
12.6 Assignment 63
12.7 Waivers 63
12.8 Third Parties 63
12.9 Schedules 63
12.10 Headings 64
12.11 Certain Definitions 64
12.12 Remedies Not Exclusive 64
12.13 Gender and Number 64
12.14 Attorney's Fees 64
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") dated as of
January 28, 2000, is among AMERICAN FIREPLACE COMPANY, a Maryland
corporation ("AFC") formerly known as Thulman Eastern Corporation
(as so known, "TEC"), HEARTH & HOME, INC., a Maryland corporation
("H&H") (collectively, "Sellers" or the "Companies"), HEARTH
TECHNOLOGIES INC., an Iowa corporation ("Buyer"), and HON
INDUSTRIES INC., an Iowa corporation ("HON").
W I T N E S S E T H:
WHEREAS, the Companies carry on the business (the
"Business") of (1) designing, manufacturing, distributing,
marketing, selling and installing hearth and fireplace products,
including gas and wood burning fireplaces, inserts, stoves, logs,
mantels, surrounds, fascia, cabinetry, venting parts and
accessories ("Hearth Products") and (2) distributing, marketing,
selling and installing spas, outdoor kitchens, barbecues and
grills, and related products, such as outdoor and patio
furniture, shelving and garage doors ("Other Products," and
together with Hearth Products, the "Products");
WHEREAS, the Companies (each, an "Asset Seller" and
collectively, the "Asset Sellers") desire to sell substantially
all of their respective assets, properties, rights and interests
to Buyer; and
WHEREAS, Buyer desires to purchase and acquire from
each Asset Seller substantially all of such assets, properties,
rights and interests of such Asset Seller in consideration of
certain payments by Buyer and the assumption by Buyer of certain
liabilities and obligations of such Asset Seller specifically
disclosed in this Agreement.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants hereinafter contained and other good and
valuable consideration had and received, HON, Buyer and the Asset
Sellers, on the basis of, and in reliance upon, the
representations, warranties, covenants, obligations and
agreements set forth in this Agreement, and upon the terms and
subject to the conditions contained herein, hereby agree as
follows:
ARTICLE I. PURCHASE AND SALE
1.1 Purchase and Sale of Assets. At the Closing (as
hereinafter defined) and effective as of the Closing Date (as
hereinafter defined), Buyer shall purchase and acquire from each
Asset Seller, and each Asset Seller shall sell, transfer, convey,
assign and deliver to Buyer, on a going concern basis, all of the
assets, properties, rights and interests owned, used, occupied or
held by or for the benefit of such Asset Seller wherever
situated, as the same shall exist as of the Closing Date, and
wherever situated, including, without limitation, the following:
(a) [Intentionally omitted];
(b) Prepaids. All prepaid expenses, advance payments,
deposits, surety accounts and other similar assets,
including, without limitation, prepaid deposits with
landlords, suppliers and utilities;
(c) Inventory. All inventories of products,
work-in-process, finished goods, raw materials, supplies and
parts (collectively, "Inventory" or "Inventories"),
including, without limitation, all Inventories located at
the facilities listed on the Schedule entitled "Real Estate
and Leases";
(d) Accounts Receivable. All accounts receivable, any
payments received with respect thereto after the Closing
Date, unpaid interest accrued on any such accounts
receivable and any security or collateral relating thereto
(collectively, "Accounts Receivable");
(e) Fixed Assets. All tangible personal property,
plant and equipment, including, without limitation,
buildings, structures, fixtures, machinery and equipment,
dies, jigs, molds, patterns, tools, tooling, production
fixtures, maintenance machinery and equipment, office
furniture and office equipment, other furnishings, trucks,
automobiles and other vehicles and transportation equipment,
leasehold improvements and construction-in-process, and all
tangible personal property set forth on the Schedule
entitled "Fixed Assets" attached hereto (collectively, the
"Fixed Assets");
(f) [Intentionally omitted];
(g) Leased Property. All rights and interests under
the lease agreements (the "Lease Agreements") more
particularly described under the heading "Leased Property"
on the Schedule entitled "Real Estate and Leases" attached
hereto, which descriptions are incorporated herein by
reference (the premises subject to the Lease Agreements
being hereinafter collectively referred to as the "Leased
Property");
(h) Intellectual Property Rights. All inventions,
discoveries, trademarks, patents, trade names, copyrights,
know-how, intellectual property, software, shop rights,
licenses, developments, research data, designs, technology,
discoveries, trade secrets, test procedures, processes,
research data, formulas and other confidential information,
intellectual and similar intangible property rights, whether
or not patentable (or otherwise subject to legally
enforceable restrictions or protections against unauthorized
third party usage), and any and all applications for, and
extensions, divisions and reissuances of, any of the
foregoing, and rights therein, including, without
limitation, (i) the names "American Fireplace Company" and
"Hearth & Home, Inc." and all related trade and business
names and trademarks, (ii) the intellectual and intangible
property rights described on the Schedule entitled
"Intellectual Property" attached hereto, (iii) the
production methods, formulas, know-how and technical
expertise relating to the Products and (iv) any and all
domain names, World Wide Web sites and related content and
software, including electronic commerce and ordering
software, rights of use and access to related computer
servers and programs, and rights under related contracts,
agreements and licenses (collectively, the "Intangibles");
(i) Business Records. All books and records,
including, without limitation, all files, invoices, forms,
accounts, correspondence, production records, technical,
accounting, manufacturing and procedural manuals, employment
records, studies, reports or summaries relating to any
Environmental Requirements (as hereinafter defined), and
other books and records relating to the operation of the
Business or other assets or properties, and any confidential
information which has been reduced to writing or other
tangible medium;
(j) Rights Under Confidentiality Agreements and
Warranties. All rights, claims and benefits of such Asset
Seller in, to or under any (i) (A) employee confidentiality
agreements entered into by such Asset Seller and (B)
confidentiality or secrecy agreements entered into by such
Asset Seller with third parties that relate to the use or
disclosure of information; (ii) express or implied
warranties from the suppliers of goods or services
(including any coverage rights under product liability or
other insurance maintained by any of such suppliers for the
benefit of such Asset Seller); and (iii) non-competition or
non-solicitation agreements, restrictive covenants and
similar agreements;
(k) Customer List. Lists of all of the Persons to
whom or to which such Asset Seller has sold or otherwise
furnished Products, directly or indirectly (individually, a
"Customer" and collectively, the "Customers," such terms to
include any assignee or successor of any such Person,
whether by consolidation, merger, sale of assets or
otherwise), including related information as to the unit and
dollar volume of such sales, the type of Products so sold or
furnished, the method of distribution and other relevant
marketing and product information for each Customer (the
"Customer Lists"), which Customer Lists will be delivered at
Closing via electronic means;
(l) Catalogs and Advertising Materials. All
promotional and advertising materials, including, without
limitation, all catalogs, brochures, plans, supplier lists,
manuals, handbooks, equipment and parts lists, dealer and
distributor lists, and labels and packaging materials;
(m) Purchase Orders. All unfilled purchase and sale
orders (including releases of quantities pursuant thereto);
(n) Contracts. Subject to Sections 1.2(b) and 1.4,
all rights, benefits and interests of such Asset Seller in
and to all licenses, leases, contracts, agreements,
commitments and undertakings;
(o) Permits. All licenses, permits, approvals,
variances, waivers or consents (collectively, the
"Permits"), to the extent transferable, issued by any
foreign, United States, state or local governmental entity
or municipality or subdivision thereof or any authority,
department, commission, board, bureau, agency, court or
instrumentality (collectively, "Governmental Authorities");
(p) [Intentionally omitted];
(q) Goodwill. The goodwill of such Asset Seller as a
going concern; and
(r) Miscellaneous. Except for the Retained Assets (as
hereinafter defined), all other assets, properties, rights
and interests of such Asset Seller, of every kind, nature
and description, whether tangible or intangible, real,
personal or mixed, and wherever situated, including, without
limitation, those assets, properties, rights and interests
set forth on the Unaudited Balance Sheet (as hereinafter
defined), all of which are to be sold, transferred,
conveyed, assigned and delivered to Buyer at the Closing
pursuant to this Agreement.
All of the assets, properties, rights and interests owned, used,
occupied or held by or for the benefit of such Asset Seller,
which are to be sold, transferred, conveyed, assigned and
delivered by such Asset Seller to Buyer at the Closing as
contemplated herein, including without limitation, those
described in clauses (a) through (r) above, but excluding the
Retained Assets, are referred to herein collectively as the
"Acquired Assets".
1.2 Retained Assets. Anything in Section 1.1 to the
contrary notwithstanding, the following assets (collectively, the
"Retained Assets") shall be retained by each Asset Seller, and
Buyer shall in no way be construed to have purchased or acquired
(or to be obligated to purchase or to acquire) any interest
whatsoever in any of the following:
(a) Designated Assets. The assets, properties, rights
and/or interests, owned, used, occupied or held by or for
the benefit of such Asset Seller that are listed on Schedule
1.2 as not being included within, or constituting a part of,
the Acquired Assets (collectively, the "Designated Assets");
(b) Non-Assigned Contracts. All of the rights and
interests, and all of the liabilities and obligations, of
each Asset Seller in, under or pursuant to any license,
lease, contract, agreement, commitment or undertaking set
forth on the Schedule entitled "Non-Assigned Contracts"
(collectively, the "Non-Assigned Contracts");
(c) Employee Plan Assets. Except as otherwise
provided in Section 9.7, the rights of such Asset Seller
under, and any funds and property held in trust or any other
funding vehicle pursuant to, any "employee benefit plan"
(within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA")) or any other bonus, stock option, stock
appreciation, stock purchase, severance, termination, lay-
off, leave of absence, disability, workers compensation,
pension, profit sharing, retirement, vacation or holiday
pay, insurance, deferred compensation or other employee or
welfare benefit plan, agreement or arrangement of such Asset
Seller applicable to such Asset Seller's past, present or
future employees (collectively, "Employee Plans"); and
(d) Corporate Records. Such Asset Seller's minute
books, stock books, stock ledger and corporate seal;
(e) Shares in H&H. All issued and outstanding shares
of capital stock, or other equity interests, including
limited liability company interests, of H&H, TEC-USA, Inc.
and HSA, L.L.C. held by AFC; and
(f) Insurance. All rights, claims and benefits of
such Asset Seller in, to or under all insurance policies
maintained by such Asset Seller, or by any Affiliate of such
Asset Seller for the Business or the Acquired Assets.
1.3 [Intentionally omitted]
1.4 Assignability and Consents.
(a) Required Consents. The Schedule entitled
"Assignments and Consents" sets forth a list of all material
Acquired Assets, including material Contracts, Permits and
Lease Agreements, which are non-assignable or
non-transferable or cannot be subleased to Buyer without, or
with respect to which the transactions contemplated by this
Agreement would require, a consent, novation, approval,
authorization, waiver, agreement, or satisfaction of any
other requirement (including filing and registration
requirements) of or from some other individual, partnership,
corporation, association, joint stock company, trust, joint
venture, limited liability company or Governmental Authority
(each, a "Person") ("Consents"). Each Seller has commenced
and shall continue to take, or cause to be taken by others,
all necessary actions required to obtain or satisfy, at the
earliest practicable date, all Consents, from any Persons
necessary to authorize, approve or permit, and to consummate
and make effective, the transactions contemplated by this
Agreement, including full and complete sale, conveyance,
assignment, sublease or transfer of the Acquired Assets, and
to continue such efforts as may be required after the
Closing Date; provided, however, that (i) the Sellers shall
not be required to take any such action with respect to
contracts with home builders specified on the Schedule
entitled "Builder Contracts" ("Builder Contracts"), and
(ii) Sellers shall only be required under this Section 1.4,
as a condition precedent to Buyer's obligations to
consummate the transactions provided for by this Agreement,
to obtain consents to the assignment of material Lease
Agreements (the "Required Consents").
(b) Nonassignable Items. Anything in this Agreement
to the contrary notwithstanding, this Agreement shall not
constitute, or be deemed to constitute, an Agreement to
sell, convey, assign, sublease or transfer any Acquired
Assets, including Contracts, Permits and Lease Agreements,
if an attempted or deemed sale, conveyance, assignment,
sublease or transfer thereof, without the Consent of another
party thereto or a Governmental Authority would constitute a
breach of, or in any way affect the rights of, any Seller or
Buyer with respect thereto ("Nonassignable Items"). Each
Seller shall use its best efforts, and Buyer shall cooperate
in all reasonable respects with Sellers, to obtain and
satisfy all Consents and to resolve all impracticalities of
sale, conveyance, assignment, sublease or transfer necessary
to convey to Buyer all Nonassignable Items. If any such
Consents are not obtained and satisfied or if an attempted
sale, conveyance, assignment, sublease or transfer would be
ineffective, each Seller and its appropriate Affiliate, and
Buyer, shall, at and after the Closing (i) enter into such
arrangements (including related written agreements) as Buyer
may reasonably request to provide Buyer the benefit of any
such Nonassignable Items (it being acknowledged that such
arrangement may include obligations imposed on Sellers and
such Affiliates promptly to pay to Buyer when received all
monies and other items of value received by Sellers and such
Affiliates under any such Nonassignable Item) in exchange
for the performance by Buyer of Sellers' obligations in
respect of such Nonassignable Items under Section 2.1(c) and
(ii) use their reasonable best efforts to assure that the
Companies' current customers and suppliers shall continue to
do business with Buyer in accordance with the terms and for
the periods of time set forth in any Nonassignable Item.
ARTICLE II. LIABILITIES
2.1 Assumption of Liabilities. On the terms and
subject to the conditions set forth in this Agreement, Buyer
shall assume, at the Closing and effective as of the Closing
Date, and shall thereafter pay, perform and discharge as and when
due, except as otherwise provided in Section 9.7, the following,
and only the following, liabilities and obligations of each Asset
Seller with respect to its operation of its Business
(collectively, the "Assumed Liabilities"):
(a) [Intentionally omitted];
(b) Accrued Liabilities. All accounts payable,
accrued expenses and other liabilities referred to under the
caption "Assumed" on Schedule 2.1(b) in the amounts set
forth thereon or such greater amounts as may arise or accrue
after the date of such Schedule in the ordinary and normal
course and consistent with the representations, warranties,
covenants, obligations and agreements set forth in this
Agreement;
(c) Contracts. All ordinary and normal liabilities
and obligations of Sellers arising under the terms of the
Contracts disclosed on the Schedule entitled "Contracts"
other than contracts that constitute Non-Assigned Contracts
or are included in the Designated Assets (the "Assumed
Contracts") but only to the extent such liabilities and
obligations arise or accrue after the Closing Date in the
ordinary and normal course and consistent with the
representations, warranties, covenants, obligations and
agreements set forth in this Agreement; provided, however,
that Buyer shall not assume or be responsible for any such
liabilities or obligations that (i) arise from breaches
thereof or defaults thereunder by Sellers (other than any
breach of any Builder Contract deemed to arise solely as a
result of the assignment of any such Builder Contract to
Buyer pursuant to this Agreement), (ii) require any payment
or other consideration including any earn-out or contingent
purchase price, in connection with any merger, acquisition
or similar transaction, or (iii) arise under instruments or
agreements evidencing indebtedness of Sellers (other than
those installment contracts, capital leases or vehicle sales
contracts that are disclosed on the Schedule entitled
"Contracts" and pursuant to which Acquired Assets are being
purchased or leased by any Company), all of which
liabilities and obligations shall constitute Retained
Liabilities (as hereinafter defined); and
(d) Warranty Commitments. The Ordinary Warranty
Commitments (as defined in Section 5.1(w)).
2.2 Retained Liabilities. Except to the extent
assumed as provided in Section 2.1 or Section 9.7, each Asset
Seller shall retain, and Buyer shall not assume, or be
responsible or liable with respect to, any liabilities or
obligations of such Asset Seller, whether or not of, associated
with, or arising from, any of the Acquired Assets, and whether
fixed, contingent or otherwise, known or unknown (collectively
referred to hereinafter as the "Retained Liabilities"),
including, without limitation, the following:
(a) Pre-Closing. All liabilities and obligations
relating to, based in whole or in part on events or
conditions occurring or existing in connection with, or
arising out of, the Business as operated prior to the
Closing Date, or the ownership, possession, use, operation
or sale or other disposition prior to the Closing Date of
any Products or any of the Acquired Assets (or any other
assets, properties, rights or interests associated, at any
time prior to the Closing Date, with the Business);
(b) Liabilities Relating to the Sale of Acquired
Assets. All liabilities and obligations of such Asset
Seller or any of its Affiliates, or their respective
directors, officers, shareholders or agents, arising out of,
or relating to, this Agreement or the transactions
contemplated hereby, whether incurred prior to, at, or
subsequent to the Closing Date, including, without
limitation, all liabilities to shareholders or former
shareholders of any Seller, finder's or broker's fees and
expenses, and any and all fees and expenses of any
attorneys, accountants or other professionals retained by or
on behalf of such Asset Seller or any of its Affiliates;
(c) Employee-Related Liabilities. All liabilities and
obligations to any persons at any time employed by such
Asset Seller or its Affiliates or their respective
predecessors-in-interest in the Business or otherwise, at
any time or to any such person's spouse, children, other
dependents or beneficiaries, with respect to incidents,
events, exposures or circumstances occurring at any time
during the period or periods of any such persons' employment
by such Asset Seller or its Affiliates or their respective
predecessors-in-interest, whenever such claims mature or
are asserted, including, without limitation, all liabilities
and obligations arising (i) under any Employee Plans,
(ii) under any employment, wage and hour restriction, equal
opportunity, discrimination, plant closing or immigration
and naturalization laws, (iii) under any collective
bargaining Laws, agreements or arrangements, or (iv) in
connection with any workers' compensation or any other
employee health, accident, disability or safety claims;
(d) Litigation. All liabilities and obligations
relating to any litigation, action, suit, claim,
investigation or proceeding pending on the date hereof, or
constituted hereafter, based in whole or in part on events
or conditions occurring or existing in connection with, or
arising out of, or otherwise relating to, the Business as
operated by such Asset Seller or any of its Affiliates (or
any of their respective predecessors-in-interest), or the
ownership, possession, use, operation, sale or other
disposition prior to the Closing Date of any Products or any
of the Acquired Assets (or any other assets, properties,
rights or interests associated, at any time prior to the
Closing Date, with such Asset Seller);
(e) Product, Environmental and Safety Liability.
Without limiting the rights of Sellers against any third
party, all liabilities and obligations relating to the
Business, any Products or the Acquired Assets (or any other
assets, properties, rights or interests associated, at any
time prior to the Closing Date, with the Business, Products
or the Acquired Assets), based in whole or in part on events
or conditions occurring or existing prior to the Closing
Date and connected with, arising out of or relating to (i)
any dispute for services rendered or goods manufactured,
including, without limitation, product warranty claims
(other than Ordinary Warranty Commitments) and product
liability claims, and claims for refunds (other than
customer deposits), returns, personal injury and property
damage, (ii) Hazardous Materials, Environmental Requirements
or Environmental Damages (all as hereinafter defined)
including costs to obtain permits required to be, but not
obtained, prior to Closing and to document hazardous waste
disposals, (iii) claims relating to employee health and
safety, including claims for injury, sickness, disease or
death of any Person, or (iv) compliance with any statutes,
laws, rules, regulations, orders, ordinances, codes and
decrees of Governmental Authorities (collectively, "Laws")
relating to any of the foregoing;
(f) Taxes. All liabilities and obligations of such
Asset Seller or any of its Affiliates (or any of their
respective predecessors-in-interest) for any Taxes (as
hereinafter defined) due or becoming due by reason of
(i) the conduct of the Business, or (ii) the ownership,
possession, use, operation, purchase, acquisition, sale or
disposition, of any Products or any of the Acquired Assets,
including, without limitation, (1) Taxes attributable to the
sale of inventory and employee withholding tax obligations;
(2) Taxes imposed on, or accruing as a result of the
purchase and sale of the Acquired Assets (except state sales
or other similar transfer taxes arising in connection with
the transfer of assets to Buyer as provided in Section 9.2);
and (3) Taxes attributable to, or resulting from, recapture
of depreciation, other tax benefit items, or otherwise
arising from the transactions contemplated by, this
Agreement;
(g) [Intentionally omitted];
(h) Liabilities Relating to Retained Assets. All
liabilities and obligations relating to, based in whole or
in part on events or conditions occurring or existing in
connection with, or arising out of, any and all assets,
properties, rights and interests that are not being acquired
by Buyer hereunder, including, without limitation, the
Retained Assets;
(i) Post-Closing Date. All liabilities and
obligations incurred by such Asset Seller or its Affiliates
or their respective directors, officers, shareholders,
agents or employees, other than on behalf of Buyer or its
Affiliates, after the Closing Date;
(j) Shutdown Costs. Any liabilities or obligations
relating to, based in whole or in part on events or
conditions occurring or existing in connection with, or
arising out of, the shutdown prior to the Closing of any of
the operations and facilities utilized by such Asset Seller,
including, without limitation, any action which could be
construed as a "plant closing" or "mass layoff," as those
terms are defined in the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Sections 2101-2109 ("WARN"), or any
"employment loss," as defined in WARN, which any employee of
such Asset Seller or any of its Affiliates may suffer;
provided, however, that, for purposes of this
Section 2.2(j), employees of the Asset Sellers immediately
prior to the Closing shall be deemed to be employees of
Buyer as of the Closing Date; and
(k) Acquisition Payments. All liabilities and
obligations of any Company to make any payment or provide
consideration in connection with any merger, acquisition or
similar transaction.
ARTICLE III. PURCHASE PRICE
3.1 Payment. In full consideration for the transfer
of the Acquired Assets, at the Closing Buyer shall:
(i) deliver and pay to Sellers Thirty-eight Million
Seven Hundred Fifty Thousand Dollars ($38,750,000)
(the "Cash Amount") in immediately available funds
by bank wire transfer to an account designated in
writing for this purpose by McGuire, Woods,
Battle & Boothe LLP, special counsel to Sellers
("Sellers' Counsel"), on behalf of Sellers to
Buyer prior to the Closing;
(ii) execute and deliver to Sellers a Promissory Note
(the "Buyer Note"), dated as of the Closing Date,
payable in the original principal amount of Two
Million Two Hundred Fifty Thousand Dollars
($2,250,000) to Sellers, and in substantially the
form of Schedule 3.1(ii) hereto; and
(iii)execute and deliver to Sellers Convertible
Debentures with a combined face amount of
$26,500,000, dated as of the Closing Date,
payable in such denominations and in such amounts to
such payees as set forth in, and in substantially
the form of, Schedule 3.1(iii) hereto
("Convertible Debentures", and collectively with the Cash
Amount and the Buyer Note, the "Purchase Price").
3.2 [Intentionally omitted]
3.3 [Intentionally omitted]
3.4 [Intentionally omitted]
3.5 Satisfaction of Indebtedness. At or prior to the
Closing, each Company shall take such actions (including without
limitation paying, or directing Buyer to apply a portion of the
Cash Amount to pay to, the creditors of such Company) as may be
required to fully pay, satisfy and discharge all of the
indebtedness of such Company, including the promissory notes and
other evidence of indebtedness listed or described on the
Schedule entitled "Existing Indebtedness to be Discharged by
Closing," and to obtain and deliver to Buyer copies of all
executed releases, in form and substance reasonably satisfactory
to Buyer, necessary to secure the release of all Liens other than
Permitted Liens (as hereinafter defined) on the Acquired Assets
relating thereto (all of which releases Sellers shall cause to be
filed promptly, but no later than two (2) business days, after
payment of the related indebtedness and in any event promptly
after the Closing Date).
3.6 Purchase Price Allocation. The Purchase Price
represents the amount agreed upon by the parties to be the
aggregate value of the Acquired Assets and shall be allocated
among the Acquired Assets, in accordance with their respective
fair market values, which the parties have agreed are or shall be
as set forth on the Schedule entitled "Agreed Allocation of
Purchase Price" attached hereto. Any excess of the Purchase
Price over the fair market value of the Acquired Assets shall be
allocated to goodwill. Each of the parties shall report the
purchase and sale of the Acquired Assets, including, without
limitation, in all federal, foreign, state, local and other Tax
returns and reports prepared and filed by or for any Seller or
Buyer, in accordance with the basis of allocation described in
this Section 3.6.
ARTICLE IV. CLOSING
4.1 General. As used in this Agreement, the "Closing"
shall mean the time at which Sellers consummate the sale,
assignment, transfer and delivery of the Acquired Assets to Buyer
as provided herein by the execution and delivery by Sellers of
the documents and instruments referred to in Section 4.2 against
delivery by Buyer of the documents and payments provided in
Sections 3.1 and 4.4, and Sellers, Buyer and the other Persons
referred to herein deliver the additional documents referred to
in Sections 4.5 and 4.6. In the absence of a prior termination
of this Agreement by one of the parties in accordance with
Article X, the Closing shall take place at the offices of Jones,
Day, Reavis & Pogue, 77 West Wacker, 35th Floor, Chicago,
Illinois 60601-1692 at 10:00 A.M. on the second business day
following the day on which the waiting periods under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 (the "H-S-R Act")
shall have expired or been terminated (the "HSR Approvals"), or
at such other time and place and on such other day as shall be
mutually agreed upon in writing by the parties hereto (the
"Closing Date"). Legal title, equitable title and risk of loss
with respect to the Acquired Assets shall not pass to Buyer until
the Acquired Assets are transferred at the Closing, which
transfer, once it has occurred, shall be deemed effective for
tax, accounting and other computational purposes as of 12:01 A.M.
(Central Time) on the Closing Date.
4.2 Documents to be Delivered by Asset Seller. At the
Closing, each Asset Seller shall deliver to Buyer:
(a) Copies of (i) the resolutions of the Boards of
Directors and shareholders of such Asset Seller, including,
in the case of H&H, AFC as the sole shareholder of H&H,
authorizing and approving this Agreement and all other
transactions and agreements contemplated hereby, (ii) such
Asset Seller's respective Articles of Incorporation, and
(iii) such Asset Seller's respective Bylaws, all certified
by the respective corporate Secretary or Assistant Secretary
of such Asset Seller to be true, correct, complete and in
full force and effect and unmodified as of the Closing Date;
(b) A bill of sale transferring such Asset Seller's
Acquired Assets to Buyer, free and clear of any and all
liens, equities, claims, prior assignments, mortgages,
charges, security interests, pledges, conditional sales
contracts, collateral security arrangements and other title
retention arrangements, restrictions (including, in the case
of real property, rights of way, use restrictions, and other
variances, reservations or limitations of any nature) or
encumbrances whatsoever (collectively, "Liens") except for
Permitted Liens and subject to filing of those releases and
documents referred to in Sections 3.5 and 4.2(k);
(c) An opinion, dated as of the Closing Date, of
Sellers' Counsel, addressed to Buyer, substantially in the
form attached hereto as Schedule 4.2(c);
(d) Copies of all Required Consents, together with the
related estoppel certificate from such landlord with respect
to each such Lease Agreement for which a Required Consent is
provided;
(e) Instruments of assignment to Buyer of all of such
Asset Seller's trademarks, trade names, service marks and
patents (and all applications for, and extensions and
reissuances of, any of the foregoing and rights therein)
identified on the Schedule entitled "Intellectual Property";
(f) The certificate required by Section 6.1(g);
(g) Good standing or status certificates for such
Asset Seller from the appropriate state authorities in each
jurisdiction in which such Asset Seller is either
incorporated or qualified to do business as a foreign
corporation, each dated not more than thirty (30) days prior
to the Closing, together with facsimiles or telegrams, if
available, or, if not, oral advice as to good standing as of
the Closing from each of such jurisdictions;
(h) Evidence of the due filing by each Asset Seller's
ultimate parent with the Federal Trade Commission ("FTC")
and the Antitrust Division of the United States Department
of Justice ("DOJ") pursuant to the H-S-R Act and the
expiration or early termination of the waiting periods
thereunder;
(i) An incumbency certificate of the officers of each
Asset Seller;
(j) Instruments of assignment of each Lease Agreement
to which such Asset Seller is a party;
(k) Copies of executed releases, in form and substance
reasonably satisfactory to Buyer, including, without
limitation, termination statements under the Uniform
Commercial Code of any financing statements filed against
any Acquired Assets, evidencing discharge, removal and
termination of all Liens (other than Permitted Liens) to
which the Acquired Assets are subject including, without
limitation, Liens securing the indebtedness described in the
Schedule entitled "Existing Indebtedness to be Discharged by
Closing", together with evidence satisfactory to Buyer that
the indebtedness described on such Schedule shall have been
satisfied and extinguished, which releases Sellers shall
cause to be filed upon payment of the related indebtedness
and in any event promptly after the Closing Date;
(l) A receipt from each of the Asset Sellers
acknowledging receipt of the Purchase Price allocable to the
Acquired Assets and the Assumed Liabilities of such Asset
Seller;
(m) Such other deeds, bills of sale, endorsements,
assignments, affidavits, and other good and sufficient
instruments of sale, assignment, conveyance and transfer in
form and substance satisfactory to Buyer and its counsel, as
are required to effectively vest in Buyer good and
marketable title in and to all of the Acquired Assets
(including such certificates of title or other documents as
are so required with respect to any vehicles included in the
Acquired Assets), free and clear of any and all Liens except
Permitted Liens, and subject to filing of those releases and
documents referred to in Sections 3.5 and 4.2(k);
(n) Copies of resolutions transferring sponsorship of
the Assumed Plan (as hereinafter defined) to Buyer, the
Assignment Agreement dated as of the Closing transferring
sponsorship of the Assumed Plan, and amendments to the
Assumed Plan pursuant to Section 9.7 reflecting the transfer
of sponsorship of the Assumed Plan to Buyer; and
(o) Joinder agreements executed by each Additional
Securityholder (as defined below) party to the
Securityholders' Agreement, dated as of the Closing Date
(the "Securityholders' Agreement"), among HON, Buyer,
Sellers, Ron F. Skoronski, Kirk R. Sorensen, Madison Fire
Place, Inc., a Wisconsin corporation ("Madison"), Fireplace
& Spa, Inc., a Wisconsin corporation ("FPSI"), The Minocqua
Fireplace Company, a Wisconsin corporation ("Minocqua"), and
each of the Persons listed on Schedule 1.1(b) thereto as an
Additional Securityholder (the "Additional
Securityholders").
4.3 [Intentionally omitted]
4.4 Documents to be Delivered by Buyer. At the
Closing, Buyer shall deliver or cause to be delivered to Sellers:
(a) A copy of (i) the resolutions of the Board of
Directors of Buyer and HON authorizing and approving this
Agreement and all other transactions and agreements
contemplated hereby, (ii) HON's Articles of Incorporation,
(iii) Buyer's Articles of Incorporation, as amended to
increase the number of authorized shares of common stock of
Buyer to 10,000,000, and (iv) HON's and Buyer's respective
Bylaws, all certified by the Secretary or an Assistant
Secretary of Buyer or HON to be true, correct, complete and
in full force and effect as of the Closing Date;
(b) The certificate required by Section 6.2(g);
(c) Evidence of the payment of the Cash Amount in the
manner and the amount set forth in Section 3.1;
(d) the Buyer Note, duly executed on behalf of Buyer,
and in substantially the form attached hereto as Schedule
3.1(ii);
(e) evidence of the due filing by Buyer's ultimate
parent, HON, with the FTC and the DOJ pursuant to the H-S-R
Act and the expiration or early termination of the waiting
period thereunder;
(f) An opinion, dated the Closing Date, of James I.
Johnson, Vice President and General Counsel of HON,
addressed to Sellers, substantially in the form attached
hereto as Schedule 4.4(f);
(g) Good standing and tax certificates for Buyer and
HON from the Secretary of State of Iowa, each dated not more
than thirty (30) days prior to the Closing, together with
facsimiles or telegrams, if available, or, if not, oral
advice, as to good standing as of the Closing from each of
such jurisdictions;
(h) An Incumbency Certificate of the officers of each
of Buyer and HON;
(i) An Instrument of Assumption of the Assumed
Liabilities, substantially in the form attached hereto as
Schedule 4.4(i);
(j) The Convertible Debentures, in substantially the
form attached hereto as Schedule 3.1(iii), duly executed on
behalf of Buyer and issued to the persons set forth on
Schedule 3.1(iii);
(k) A Guaranty, in substantially the form attached
hereto as Schedule 4.4(k), duly executed on behalf of HON
(the "HON Guaranty"); and
(l) Resolutions accepting the transfer of sponsorship
of the Assumed Plan from AFC, and the Assumption Agreement
dated as of the Closing transferring sponsorship of the
Assumed Plan.
4.5 Documents to be Delivered by Buyer and Sellers.
At the Closing, Buyer and Sellers shall execute and deliver (i) a
letter of credit in support or a guaranty of Sellers' obligations
under the loan to be made to Sellers referred to in Section
6.2(i), (ii) a reimbursement agreement, in form and substance
satisfactory to Buyer, obligating Sellers to reimburse Buyer for
any liabilities, obligations and costs it incurs, including
amounts paid to LaSalle Bank N.A., related to the transactions
contemplated by this Section 4.5, and (iii) a pledge agreement,
in form and substance satisfactory to Buyer, pledging such amount
of Convertible Debentures to Buyer as may be necessary to fully
secure Sellers' obligations under the documents described in this
Section 4.5.
4.6 Other Documents to be Delivered. At the Closing:
(a) Buyer shall execute and deliver an Employment and
Non-Competition Agreement with each of Richard A. Grove,
Jr., Philip T. Mercer ("Mercer"), James Setree and David E.
Scott (the "Key Employees") in substantially the form
attached hereto as Schedule 4.6(a) (each, an "Employment and
Non-Competition Agreement").
(b) Each of Rodney A. Hempel, L. Denny Mercer,
Philip F. Dwyer, Brenda Gay Mercer, Amy Lynn Doody and
Michael D. Mercer shall execute and deliver a Non-
Competition Agreement to the effect set forth in Section 7.8
(each, a "Non-Competition Agreement".
(c) Each shareholder of the Asset Sellers shall
execute and deliver a Guaranty Agreement substantially in
the form attached hereto as Schedule 4.6(c) (each, a
"Shareholder Guaranty").
(d) [Intentionally omitted]
(e) [Intentionally omitted]
(f) Wayne Newsome, president of H&H, shall execute and
deliver to Buyer a consent to the assignment of the license
agreement dated April 21, 1999 between Wayne Newsome and
AFC.
(g) Sellers shall deliver such instruments of
satisfaction, release, waiver and settlement relating to the
acquisition and related agreements and instruments,
including promissory notes and rights of first refusal, to
which the Companies are a party as described on
Schedule 4.6(g), including (i) payment of all promissory
notes, (ii) payment and satisfaction of contingent purchase
price agreements, (iii) releases of Liens on any Assets, and
(iv) waiver of right of first refusal provisions.
(h) Deutsche Bank Securities Inc. shall deliver an
executed commitment letter obligating it or one of its
Affiliates to purchase the Buyer Note from Sellers on the
Closing Date.
(i) HON, Buyer, Sellers, Ron F. Skoronski, Kirk R.
Sorensen, Madison, FPSI, Minocqua, and the other parties
listed on the signature page thereto shall execute and
deliver a Securityholders' Agreement, in substantially the
form attached hereto as Schedule 4.6(i).
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.1 Joint and Several Representations and Warranties
of Sellers. Subject only to those exceptions and qualifications
listed and described (including an identification by section
reference to the representations and warranties to which such
exceptions and qualifications relate) on the Schedules referred
to in this Section 5.1 and attached to this Agreement, Sellers
hereby jointly and severally represent and warrant to Buyer that:
(a) Organization and Standing; Power and Authority.
Each Company is a corporation duly organized, validly
existing and in good standing under the laws of the states
described on Schedule 5.1(a), and has full corporate power
and authority to operate its business, to own or lease its
assets, to carry on its business as now being conducted, and
to enter into and perform this Agreement and the
transactions and other agreements and instruments
contemplated by this Agreement. Except as disclosed on the
Schedule entitled "Affiliate Companies", the Companies have
no subsidiary corporations, own no interest, direct or
indirect, in any other business enterprise, firm or
corporation, and are the only business enterprises, firms or
corporations through which the Business (or any business
competing with or similar to the Business) is conducted, or
which owns, leases or uses assets related to the Business.
Each Company is duly qualified or licensed to do business as
a foreign corporation and is in good standing in each
jurisdiction in which the failure to so qualify would have,
or might reasonably be expected to have, individually or in
the aggregate, a material adverse effect upon the condition
(financial or otherwise), business, assets, properties or
operations (a "Material Adverse Effect") of the Companies,
taken as whole. This Agreement and all other agreements and
instruments executed and delivered or to be executed and
delivered by any Person in connection herewith
(collectively, the "Transaction Documents") to which any
Seller is party have been, or upon execution thereof will
be, duly executed and delivered by such Seller. This
Agreement and the transactions and other agreements and
instruments contemplated hereby have been duly approved by
the Directors and shareholders of each such Company, and
constitute the valid and binding obligations of each Seller,
enforceable in accordance with their respective terms. Each
Asset Seller represents and warrants that it has been duly
authorized by its shareholders to make the agreements set
forth in Section 7.8 and to bind all of its shareholders
thereto.
(b) Articles and By-Laws. The copies of the Articles
of Incorporation and Bylaws of each Company heretofore
delivered to Buyer are true, correct and complete.
(c) Conflicts; Defaults. Neither the execution and
delivery of this Agreement and the other agreements and
instruments executed or to be executed in connection
herewith by any Seller, nor the performance by Sellers of
the transactions contemplated hereby or thereby, will
(i) violate, conflict with, or constitute a default under,
any of the terms of any Company's Articles of Incorporation
or By-Laws, (ii) except for any default arising solely from
the failure to obtain any Consent other than any Required
Consent, violate, conflict with, or constitute a default
under any provisions of, or result in the acceleration of
any obligation under, (x) the Contracts, (y) any order,
judgment or decree, relating to the Business or the Acquired
Assets, or by which any Company or the Acquired Assets are
bound, or (z) any contract, sales commitment, license,
purchase order, security agreement, mortgage, note, deed,
lien, lease, agreement or instrument, relating to the
Business or the Acquired Assets, or by which any Company or
the Acquired Assets are bound, which violation, conflict,
default or acceleration described in this clause (z) would
result in a Material Adverse Effect upon the Companies,
taken as a whole, (iii) result in the creation or imposition
of any Liens or restrictions, liens, encumbrances, claims
(including any "adverse claim" as such term is defined in
the Uniform Commercial Code), options, calls, pledges,
trusts and other commitments, agreements or arrangements
(collectively, "Claims") in favor of any third Person or
entity upon any of the Acquired Assets, (iv) violate any
law, statute, judgment, decree, order, rule or regulation of
any Governmental Authority, (v) constitute an event which,
after notice or lapse or time or both, would result in such
violation, conflict, default, acceleration, or creation or
imposition of Liens or Claims, (vi) constitute an event
which, after notice of lapse of time or otherwise would
create, or cause to be exercisable or enforceable, any
option, agreement or right of any kind to purchase any of
the Acquired Assets. Except as set forth in the Schedule
entitled "Assignment and Consents", no consent, novation,
approval, filing or authorization will be required to be
obtained or satisfied for the continued performance by Buyer
following the Closing of any contract, agreement, commitment
or undertaking included in the Acquired Assets. No Company
is in violation of or in default under its Articles of
Incorporation or Bylaws. No Company is in violation of or
in default under or any provision of (x) the Contracts, (y)
any order, judgment or decree, relating to the Business, or
the Acquired Assets, or by which any Company, or the
Acquired Assets are bound, or (z) any contract, sales
commitment, license, purchase order, security agreement,
mortgage, note, deed, lien, lease, agreement or instrument,
including without limitation, the Contracts, or any order,
judgment or decree, relating to the Business or the Acquired
Assets, or by which Sellers or the Acquired Assets is bound
described in this clause (z), which violation or default
would result in a Material Adverse Effect upon the
Companies, taken as a whole, or in the payment of any
monetary obligations or debts relating to the Business, and
there exists no condition or event which, after notice or
lapse of time or both, would result in any such violation or
default.
(d) Acquired Assets; Title to the Acquired Assets.
Except for the Retained Assets, the Acquired Assets are the
only assets, properties, rights and interests used by the
Companies in connection with the Business. The Acquired
Assets to be conveyed to Buyer under this Agreement,
together with cash, constitute all of the assets,
properties, rights and interests necessary to conduct the
Business in substantially the same manner as conducted by
the Companies prior to the date of this Agreement. None of
the Acquired Assets have any material defects or are in need
of maintenance or repair, except for ordinary maintenance
and repairs. Each Company has good, marketable and
exclusive title to, and the valid and enforceable power and
unqualified right to use and transfer to Buyer, each of
their respective Assets, including, without limitation, all
dies, molds or other tooling or equipment use in the
Business, whether located at the Companies' facilities or at
the facilities of their Customers or suppliers, and the
Acquired Assets (henceforth also referred to as the
"Assets") are free and clear of all Liens and Claims of any
kind or nature whatsoever, except for Permitted Liens and
the Liens required to be released under Sections 3.2 and
4.2(k). The consummation of the transactions contemplated
by this Agreement (including, without limitation, the
transfer or assignment of the Acquired Assets, and all
rights and interests therein, to Buyer as contemplated
herein) will not adversely affect such title or rights, or
any terms of the applicable agreements (whether written or
oral) evidencing, creating or granting such title or rights.
Except as otherwise disclosed in the Schedule entitled
"Contracts", none of the Assets are subject to, or held
under, any lease, mortgage, security agreement, conditional
sales contract or other title retention agreement, or are
other than in the sole possession and under the sole control
of the Companies. Each Company has the right under valid
and existing leases to occupy, use or control all properties
and assets leased by it. The delivery to Buyer of the
instruments of transfer of ownership contemplated by this
Agreement will vest good, marketable and exclusive title (as
to all Acquired Assets owned by an Asset Seller) or full
right to possess and use (as to all Acquired Assets not
owned by an Asset Seller) to the Acquired Assets in Buyer,
free and clear of all Liens and Claims of any kind or nature
whatsoever, except for current real estate Taxes or
governmental charges or levies which are a Lien but not yet
due and payable and Liens securing obligations under those
installment contracts, capital leases or vehicle sales
contracts that are disclosed on the Schedule entitled
"Contracts" and that will be assumed by Buyer (collectively,
"Permitted Liens"). The Schedule entitled "Fixed Assets"
attached hereto contains true, correct and complete lists of
all fixed assets with an individual net book value in excess
of $10,000 used in connection with the Business as of the
dates specified therein. No Company owns or holds any
marketable Securities.
(e) Real Property. The Schedule entitled "Real Estate
and Leases" attached hereto contains a true, correct and
complete list of all instruments and agreements creating any
interest or right in real property relating to the Business,
or leased or occupied by any Company. No Seller owns or has
any rights to any fee interest in real property. True,
correct and complete copies of the instruments and
agreements identified in such Schedule have been delivered
to Buyer. Each such instrument and agreement is in full
force and effect and is a legal, binding, and enforceable
obligation of the applicable Seller. Each Company has the
right to quiet enjoyment of all real property subject to
leaseholds under any such instruments, for the full term of
each such lease and, subject to proper exercise thereof, any
renewal option related thereto. There has been no
disturbance of or challenge to any Company's quiet
possession under each such lease, and no leasehold or other
interest of any Company in such real property is subject to
or subordinate to any Liens except Permitted Liens.
Neither the whole nor any portion of any real property
leased or occupied by any Company has been condemned,
requisitioned or otherwise taken by any Governmental
Authority, and, to Sellers' knowledge, no such condemnation,
requisition or taking is threatened or contemplated. To
Sellers' knowledge, no building, structure, fixture or
appurtenance comprising part of the real properties of any
Company has any material defects or is in need of
maintenance or repair, except for ordinary maintenance and
repairs.
(f) Leases. Each Lease Agreement described on the
Schedule entitled "Real Estate and Leases" has not been
modified, altered, terminated or revoked, and is in full
force and effect. No Company, as the present tenant under
its respective Lease Agreements, is in default under any of
the terms of such Lease Agreements, and there are no
existing facts or conditions which could give rise to any
such default. To Sellers' knowledge, the present lessors
under the Lease Agreements, are not in default thereunder,
or in breach thereof, and there are no existing facts or
conditions which could give rise to any such breach or
default.
(g) Contracts. The Schedule entitled "Contracts"
attached hereto contains a complete list or summary
description of (i) each license, contract, agreement,
commitment and undertaking (whether written or oral)
(A) relating to the Business or to which any Company is a
party (1) which involves the purchase of inventories or the
sale of products, and involves aggregate future payments in
excess of $50,000, or which extends for a period of more
than one year, or (2) which does not involve the purchase of
inventories or the sale of products, and involves aggregate
future payments in excess of $50,000 or extends for a period
of more than one year, (B) between any Company and any
distributor, manufacturers' agent or selling agent used or
retained in connection with the Business, or pursuant to
which any Company sells or distributes Products, in each
case described in this subsection (B) regardless of the size
or term or such licenses, contracts, agreements, commitments
and undertakings, (ii) each loan or credit agreement,
promissory note, security agreement, guaranty, indenture,
mortgage, pledge or other agreement or instrument evidencing
indebtedness of any Company, or to which any Company is a
party, (iii) any conditional sale or other title retention
agreement, equipment obligation, or lease purchase agreement
involving (in the aggregate) amounts annually in excess of
$25,000 relating to any Company or the Business, or to which
any Company is a party, (iv) any power of attorney given by
any Company to any Person, firm or corporation or otherwise
relating to the Business or the Assets, (v) any non-
competition, restrictive covenant or other agreement that
restricts any Company or any employee, consultant, agent or
director of any Company from conducting the Business
anywhere in the world, (vi) each contract, agreement,
commitment or undertaking presently in effect, whether or
not fully performed, between any Company and any current or
former officer, director, consultant or other employee (or
group thereof) retained or employed in connection with the
Business, or any current or former shareholder (or group of
shareholders) of any Company, (vii) any contract, agreement,
commitment or undertaking evidencing the acquisition or
disposition by any Company of any business, all or
substantially all assets (other than Inventories in the
normal and ordinary course of business), or shares of
capital stock of any Person during the past five years or as
to which any material obligation or liability (contingent or
not) still exists, and (viii) any other contract, agreement,
commitment or undertaking that is material to the condition
(financial or otherwise), results of operations, properties,
assets, liabilities or business of any Company or the
Business (the items described in clauses (i) through (viii)
being herein collectively referred to as the "Contracts").
Each Company has performed all obligations required to be
performed by it to date under the Contracts, and neither any
Company nor, to Sellers' knowledge, any other party to any
Contract has breached or improperly terminated any Contract
by which it is bound, and there exists no condition or event
which after notice or lapse of time or both, would
constitute any such breach, termination or default by
Sellers or, to Sellers' knowledge, by any other party. No
Company is a party to, and the Business does not involve,
any contracts, agreements, commitments or undertakings which
are subject to the Federal Acquisition Regulations,
Chapter 48 of the Code of Federal Regulations and all agency
supplements thereto, the Cost Accounting Standards set forth
in Chapter 4 of the Code of Federal Regulations, or the Cost
Principles set forth in Chapter 31 of the Code of Federal
Regulations. Each of the Contracts is in full force and
effect, and is a legal, binding and enforceable obligation
of or against Sellers, except as such enforceability may be
limited by (i) bankruptcy, insolvency or similar laws
affecting creditors' rights generally or (ii) general
principles of equity, whether considered in a proceeding in
equity or at law.
(h) Financial Statements. Each Company has heretofore
delivered to Buyer the following financial statements
(collectively, together with the notes thereto and the
financial statements to be delivered pursuant to
Section 7.2(b), the "Financial Statements"):
(i) the unaudited Balance Sheet of such Company
(the "Unaudited Balance Sheet") as of
November 30, 1999 (the "Balance Sheet Date"),
and the unaudited Statement of Income of such
Company for the eleven (11) months ended
November 30, 1999 (collectively, the
"Unaudited Financial Statements");
(ii) (A) the unaudited Balance Sheet of AFC as of
November 30, 1999, and the unaudited
Statement of Income for the eleven months
ended November 30, 1999; and the unaudited
Balance Sheet of H&H, and the unaudited
Statement of Income for the eleven months
ended November 30, 1999 (which includes
interim periods for predecessor companies,
Hearth & Home, Distributors, Inc. and
Hearth & Home Doors LLC); the audited Balance
Sheet of AFC as of December 31, 1998, the
audited Statement of Income for the year
ended December 31, 1998, and the audited
Statement of Cash Flows for the year ended
December 31, 1998, together with the
footnotes thereto and the report thereon by
C.W. Amos and Company LLC, certified public
accountants; the audited Balance Sheet of AFC
as of December 31, 1997, the audited
Statement of Income for the year ended
December 31, 1997, and the audited Statement
of Cash Flows for the year ended December 31,
1997, together with the footnotes thereto and
the report thereon by C.W. Amos and Company
LLC, certified public accountants; and the
audited Balance Sheet of AFC as of
December 31, 1996, the audited Statement of
Income for the year ended December 31, 1996,
and the audited Statement of Cash Flows for
the year ended December 31, 1996, together
with the footnotes thereto and the report
thereon by C.W. Amos and Company LLC,
certified public accountants, and (B) the
audited Balance Sheet of Hearth & Home
Distributors, Inc. as of March 31, 1998, the
audited Statement of Income for the year
ended March 31, 1998, and the audited
Statement of Cash Flows for the year ended
March 31, 1998, together with the footnotes
thereto and the report thereon by Weil,
Akman, Baylin & Coleman, P.A.; the audited
Balance Sheet of Hearth & Home Distributors,
Inc. as of March 31, 1997, the audited
Statement of Income for the year ended
March 31, 1997, and the audited Statement of
Cash Flows for the year ended March 31, 1997,
together with the footnotes thereto and the
report thereon by Weil, Akman, Baylin &
Coleman, P.A.; and the audited Balance Sheet
of Hearth & Home Doors, LLC as of
December 31, 1996, the audited Statement of
Income for the year ended December 31, 1996,
and the audited Statement of Cash Flows for
the year ended December 31, 1996, together
with the footnotes thereto and the report
thereon by Weil, Akman, Baylin & Coleman,
P.A.; and
(iii)Each of the Financial Statements was prepared
from the books and records kept by each
Company for the Business, and fairly
presents the financial position of each Company
as of such dates, and the results of each
Company's operations and each Company's cash flows
for the periods then ended in accordance
with generally accepted accounting principals
("GAAP") consistently applied (except,
in the case of the Unaudited Financial Statements,
for normally recurring year-end adjustments, which
adjustments will not be material, either individually
or in the aggregate) and without footnote disclosures,
and the related internal accounting practices and
policies of such Company disclosed on the Schedule
entitled "Financial Statements" or in the notes to
the Audited Financial Statements (the "Accounting
Practices"). Except as set forth in the Schedule
entitled "Changes in Circumstances" or the Financial
Statements, since the Balance Sheet Date, (x) the
Companies' business, working capital and cash
flow have been managed and operated in
the ordinary and normal course of business
consistent with past practice, (y) neither
the Companies nor any of their affiliates
have accelerated or materially altered the
collection or management of any Accounts
Receivable, or extended the payment term of
or materially altered any Assumed Liabilities,
including, without limitation, account payables
and expenses of the Companies, and (z) there has
been no material adverse change in the condition
(financial or otherwise), results of operations,
properties, assets, liabilities or business
of any Company or the Business, nor has there
been any event or condition of any character
which has materially and adversely affected,
or which would reasonably be expected to
materially and adversely affect, the
condition (financial or otherwise), results
of operations, properties, assets, liabilities or
business of any Company (other than as a result
of any matter set forth in the proviso to
Section 6.1(c)). The Unaudited Balance Sheet
reflects all properties and assets, real, personal or
mixed, that are currently used in connection
with each Company's Business and which would
be required under GAAP to be shown in the
Financial Statements, except for (A) inventory
purchased or sold consistent with past practice
and in the ordinary and normal course of business
since the Balance Sheet Date, (B) other immaterial
properties and assets (other than capital assets)
purchased or sold since the Balance Sheet
Date consistent with past practice and in the
ordinary and normal course of business,
(C) capital assets purchased since the
Balance Sheet Date in the ordinary course of
business consistent with past practice, and
(D) purchase commitments that are for
immaterial properties and assets or are
disclosed on the Schedule entitled "Liabilities".
(i) Liabilities. Except as disclosed in paragraphs 1
or 4 of the Schedule entitled "Changes in Circumstances",
no Company has any liabilities or obligations of any nature
whatsoever, whether absolute, accrued, contingent or
otherwise, and whether known or unknown, including, without
limitation, liabilities for Taxes, forward or long-term
commitments, or unrealized or anticipated losses from any
unfavorable conditions or occurrences, or from write-downs
or write-offs of assets (including Inventories and Accounts
Receivable), except for those (i) reflected or reserved on
the Unaudited Balance Sheet, (ii) incurred or accrued since
the Balance Sheet Date in the ordinary and normal course of
the Companies' business in transactions in the ordinary and
normal course, consistent with past practice, which
transactions are consistent with the representations,
warranties, covenants, obligations and agreements contained
in this Agreement, (iii) arising, in the ordinary course of
business, under Contracts (exclusive of any liabilities or
obligations arising from breaches or defaults by any
Company), or (iv) set forth on Schedule 2.1(b) attached
hereto.
(j) Accounts Receivable; Collection; Trade Payables.
Except for Accounts Receivable with respect to which
applicable reserves are set forth on the Unaudited Balance
Sheet, all Accounts Receivable included in the Assets and
outstanding as of the Closing Date will represent sales
actually made in the ordinary and normal course of business.
To Sellers' knowledge, other than as provided for in
reserves as contemplated above, there are no counterclaims
or setoffs against (or any basis therefor), or any other
matter or condition likely to interfere with full and timely
collection of, any of such Accounts Receivable. The
Schedule entitled "Accounts Receivable" sets forth an aged
listing by Customer of the Accounts Receivable included in
the Assets that are outstanding as of January 6, 2000. No
Company has experienced or suffered undue delay in its
payment of its liabilities and obligations to its trade
creditors (including suppliers) or trade debt.
(k) Inventories. Except as set forth in the Schedule
entitled "Financial Statements", the value at which the
Inventory included in the Assets is carried on the Unaudited
Balance Sheet reflects the lower of cost or market value or
as otherwise described in the notes to the Financial
Statements and reflects writeoffs or writedowns for damaged
or obsolete items, or items of below standard quality, in
accordance with the historical inventory policy and
practices of the Companies, a complete and accurate
description of which is included in the description of the
Accounting Practices set forth in the Schedule entitled
"Financial Statements". The Inventory, taken as a whole,
included in the Assets is not (as of the date hereof) and
will not be (as of the Closing Date) excessive in kind or
amount in light of the ordinary and normal course of conduct
and reasonably anticipated needs of the Business.
(l) Litigation. Except as set forth on the Schedule
entitled "Litigation", no Company is subject to any order
of, or written agreement or memorandum or understanding
with, any Governmental Authority, and there exists no
litigation, action, suit, claim or proceeding pending, or,
to Sellers' knowledge, any litigation, action, suit,
investigation, claim or proceeding threatened against or
affecting any Company, the Business or the Assets, or which
would affect the transactions contemplated by this
Agreement, at law or in equity or before any Governmental
Authority, including, without limitation, claims for product
warranty, product liability, antitrust, unfair competition,
price discrimination or other liability or obligation
relating to Products, whether manufactured, installed or
sold by any Company, any of its Affiliates or any of their
respective predecessors-in-interest in respect of the
Business, or which would adversely affect the transactions
contemplated by this Agreement, and, to Sellers' knowledge,
no one has grounds to assert any such litigation, action,
suit, claim or proceeding. Set forth on the Schedule
entitled "Litigation" is a description of (i) all
litigation, actions, suits, investigations, claims and
proceedings asserted, brought or threatened against any
Company or its Affiliates or predecessors-in-interest in
respect of the Business during the three-year period
preceding the date hereof, together with a description of
the outcome or present status thereof, and (ii) all
judgments, orders, decrees, writs or injunctions entered
into by, in favor of, or against any Company.
(m) Customers and Suppliers. No Company is involved
in any material controversy with any of the customers or
suppliers to the Business. The Schedule entitled "Customers
and Suppliers" sets forth a true, correct and complete list
of each of the Companies' (i) 20 largest customers in terms
of sales during the twelve (12)-month period ended December,
1999 and (ii) suppliers that, during the twelve (12) months
ended December, 1999, individually accounted for $200,000 or
more of orders for the purchase of raw materials, supplies,
equipment or parts. Except for the customers and suppliers
named in the Schedule entitled "Customers and Suppliers",
the Companies have not had any customer who accounted for
more than 5% of the Companies' sales during the period from
January to December 1999, or any supplier from whom the
Companies purchased more than 5% of the goods or services
purchased during the period from January to December 1999.
Except as otherwise disclosed in the Schedule entitled
"Contracts", no Company has been advised by any such
customer or supplier, that such customer or supplier was or
is intending to terminate its relationship with such Company
or would not continue to purchase supplies or services for
future periods on account of any dissatisfaction with such
Company's performance. All business placed by all employees
of each Company has been placed in the name of such Company,
and all fees on such business have been paid to and are the
property of such Company.
(n) Regulatory Compliance. Except as set forth on the
Schedule entitled "Litigation", the Business has been
conducted, all Assets have been maintained and each Company
is currently in compliance with all applicable Laws
(including, without limitation, all laws relating to zoning,
building codes, civil rights, occupational health and
safety, antitrust, consumer protection, currency exchange,
equal opportunity, pensions, securities and trading-with-the-
enemy), except to the extent that failure to comply would
not, individually or in the aggregate, result in a Material
Adverse Effect upon the Companies, taken as a whole, and no
material expenditures are or will be required to comply with
any such laws, regulations and orders of Governmental
Authorities. No Company is in default under, and no event
has occurred which, with the lapse of time or action by a
third party, could result in default under, the terms of any
judgment, decree, order, writ or injunction of any
Governmental Authority, whether at law or in equity, to
which such Company is a party.
(o) Brokers, Finders and Agents. No Company is
directly or indirectly obligated to anyone acting as a
broker, finder or in any other similar capacity in
connection with this Agreement or the transactions
contemplated hereby, except as provided in Section 9.2.
(p) Intellectual Property. The Schedule entitled
"Intellectual Property" attached hereto sets forth a
complete and correct list (with an indication of the record
owner and identifying number) of all patents, trademarks,
service marks, trade names, domain names and copyrights for
which registrations have been obtained (and all applications
for, or extensions or reissuances of, any of the foregoing)
which are or have been used in the conduct of, or which
relate to, the Business or which are owned by any Company.
True, correct and complete copies of such patents,
trademarks, service marks, trade names, domain names and
copyrights (and all applications for, or extensions or
reissuances of, any of the foregoing) identified on such
Schedule have been delivered to Buyer. Except as otherwise
disclosed in the Schedule entitled "Intellectual Property",
each Company is the sole owner and has the exclusive right
to use, free and clear of any payment, restriction or
encumbrance, all such patents, trademarks, service marks,
trade names, domain names and copyrights listed on such
Schedule under such Company's name. Except patents and
trademarks owned by R. Wayne Newsome and licensed to Sellers
pursuant to the license agreement to be assigned to Buyer
pursuant to Section 4.6(f), no patents, trademarks, service
marks, trade names, domain names and copyrights (or
applications for, or extensions or reissuances of any of the
foregoing) which are or have been used in the conduct of, or
which relate to, the Business are owned otherwise than by
such Company. There is no claim or demand of any Person
pertaining to, or any proceedings which are pending or, to
Sellers' knowledge, threatened, which challenge (i) the
exclusive rights of the Companies in respect of any patents,
trademarks, service marks, trade names, domain names or
copyrights (or applications for, or extensions or
reissuances of, any of the foregoing) which are or have been
used in the conduct of, or which relate to, the Business or
which are owned by such Company, or (ii) the rights of any
Company in respect of any processes, formulas, confidential
information, trade secrets, know-how, engineering data,
technology or other intellectual property (including the
Intangibles) which are or have been used in the conduct of,
or which relate to, the Business or which are owned by such
Company. No patent, trademark, service mark, trade name,
domain name, copyright, process, formulas, confidential
information, trade secret, know-how, engineering data,
technology or other intellectual property (including the
Intangibles) which is owned by any Company or which is or
has been used in the conduct of, or which relates to, the
Business is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any Governmental
Authority or any contract, agreement, commitment or
undertaking with any Person, or infringes or, to Sellers'
knowledge, is being infringed by others or is used by others
(whether or not such use constitutes infringement). To
Sellers' knowledge, the Business does not involve employment
of any Person in a manner which violates any non-competition
or non-disclosure agreement which such Person entered into
in connection with any former employment. Except patents
and trademarks owned by R. Wayne Newsome and licensed to
Sellers pursuant to the license agreement to be assigned to
Buyer pursuant to Section 4.6(f), all patents, trademarks,
service marks, trade names, domain names or copyrights (or
applications for, or extensions or reissuances of, any of
the foregoing) or processes, formulas, confidential
information, trade secrets, know-how, engineering data,
technology or other intellectual property, or rights
thereto, owned or held, directly or indirectly by any
officer, director, shareholder, employee or any Affiliate of
any Company or any Seller have been, or prior to the Closing
Date will have been, duly and effectively transferred to the
Companies. Set forth on the Schedule entitled "Intellectual
Property" is a description all litigation, actions, suits,
investigations, claims and proceedings, asserted, brought or
threatened against the Company within the three (3) years
preceding the date hereof, together with a description of
the outcome or present status thereof, relating to any
patent, trademark, service mark, trade name, domain name,
copyright, process, formula, confidential information, trade
secret, know-how, engineering data, technology or other
intellectual property.
(q) Permits. The Schedule entitled "Permits" attached
hereto contains a true, correct and complete list of all
Permits issued to any Company. Each Company has, and is in
full compliance with, all Permits which are necessary or
required for the operation of the Business as it is
currently being operated and its present activities on its
properties and facilities, all of which Permits are in full
force and effect, except to the extent (i) detailed on the
Schedule entitled "Permits" (all of which such Permits not
in full force and effect at Closing will be obtained, at
Sellers' sole cost and expense, within ninety (90) days of
Closing) or (ii) that failure to obtain such Permits or so
comply would not, individually or in the aggregate, result
in a Material Adverse Effect upon the Companies, taken as a
whole. No Company's operation of the Business during the
pendency of its applications, if any, for Permits violates
any law, regulation or order of any Governmental Authority.
(r) Employee Relations; Collective Bargaining
Agreements. There are no material controversies, including
strikes, disputes, slowdowns or work stoppages, pending, or
to Sellers' knowledge, threatened which involve any
employees of any Company. Each Company has complied and is
complying with all Laws relating to the employment of labor,
including, without limitation, any provision thereof
relating to wages, hours, collective bargaining, employee
health, safety and welfare, and the payment of social
security and similar taxes, except to the extent that
failure to comply would not, individually or in the
aggregate, result in a Material Adverse Effect upon the
Companies, taken as a whole. No Company has experienced any
material labor difficulties, including, without limitation,
strikes, slowdowns, or work stoppages, within the five-year
period preceding the date hereof. No Company is a party to
any collective bargaining or union contract, and to Sellers'
knowledge, there exists no current union organizational
effort with respect to any Company's employees.
(s) Employees and Employee Plans. (1) Except as set
forth on Schedule 5.1(s)(2), no Company is or was a party
to, maintains or has maintained, or contributes or has
contributed to, any (A) severance or employment agreement
with any current or former director, officer or employee,
(B) severance plan, program, policy or arrangement, (C) plan
or arrangement relating to its current or former directors,
officers or employees which contains change in control
provisions, (D) any Employee Plan, or (E) any collective
bargaining agreement or consulting agreement (clauses (A)
through (E) are, collectively, the "Company Plans"), nor has
any such Company or any officers or directors of any such
Company, taken any action directly or indirectly which
obligates such Company to institute or modify or change any
such Company Plan, any change in any actuarial or other
assumption used to calculate funding obligations with
respect to any Company Plan, or any change in the manner in
which contributions to any Company Plan are made or the
basis on which such contributions are determined.
(2) Schedule 5.1(s)(2) lists each Company Plan.
True, complete and correct copies of each Company Plan
and summary plan description, the most recent Internal
Revenue Service determination letters, the most recent
annual reports on Internal Revenue Service Form 5500
and actuarial reports, if applicable, and if not
applicable, statement of trust assets, have been made
available and delivered to Buyer.
(3) With respect to each Company Plan, and to any
other employee benefit plan, program, agreement or
arrangement to which a Company or any other trade or
business, whether or not incorporated (an "ERISA
Affiliate"), that together with such Company would be
deemed a "single employer" within the meaning of
Section 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended (the "Code"), has made, or was
required to make, contributions at any time prior to
the date hereof, no event has occurred, and to Seller's
knowledge there exists no condition or set of
circumstances, in connection with which any such
Company could be subject to any liability under ERISA,
the Code or any other applicable law.
(4) Each Company Plan has been administered in
accordance with its terms, and each Company Plan has
been operated and is in compliance with the applicable
provisions of ERISA, the Code and all other applicable
laws. Each Company Plan that is intended to be
qualified under Section 401(a) or 401(k) of the Code is
so qualified and has received a favorable determination
letter from the Internal Revenue Service (the "IRS")
with respect to its qualified status covering the Tax
Reform Act of 1986 and any other legislation for which
the applicable remedial amendment period has expired,
and each trust established in connection with any
Company Plan that is intended to be exempt from federal
income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that such
trust is so exempt, and no fact or event has occurred
since the date of any determination letter from the IRS
which is reasonably likely to adversely affect the
qualified status of any such Company Plan or the exempt
status of any such trust. There are no pending or
threatened or anticipated claims, investigations or
audits under or with respect to any Company Plan by or
on behalf of any current or former director, officer or
employee, or dependent or beneficiary thereof, or
otherwise (other than routine claims for benefits).
All contributions required to be made by each Company
under applicable Law or the terms of any Company Plan
or collective bargaining agreement as of the Closing
Date have been made as of such date.
(5) No Company Plan is, and no Company or ERISA
Affiliate has ever maintained or contributed to, (i) a
"defined benefit plan"(as defined in Section 3(35) of
ERISA), (ii) a "multiemployer plan" within the meaning
of Section 3(37) of ERISA, (iii) a "multiple employer
plan" within the meaning of Code Section 413 or a
"multiple employer welfare arrangement" within the
meaning of Section 3(40) of ERISA, or (iv) a "welfare
benefit fund" as defined in Section 419(e) of the Code.
(6) Except as disclosed on Schedule 5.1(s)(2), no
Company Plan provides medical, life or other welfare
benefits (whether or not insured), with respect to any
current or former employee of any Company after
retirement or other termination of service (other than
coverage mandated by applicable law). With respect to
any contract or arrangement with an insurance company
providing funding under any Company Plan, there is no
material liability for any retroactive rate adjustment.
Each Company has the right to amend or terminate its
participation with respect to each Company Plan which
it maintains or in which participates. Each Company
Plan that is a "group health plan," as defined in
Section 5000 of the Code has been operated in
compliance with Section 4980B of the Code and the
secondary payor requirements of Section 1862(b) of the
Social Security Act.
(7) Except as disclosed on Schedule 5.1(s)(2), no
current or former employee of any Company will be
entitled to any payment, additional benefits or any
acceleration of the time of payment or vesting of any
benefits under any Company Plan as a result of the
transactions contemplated by this Agreement (either
alone or in conjunction with any other event such as a
termination of employment) and no trustee under any
"rabbi trust" or similar arrangement in connection with
any Company Plan will be entitled to any payment as a
result of the transactions contemplated by this
Agreement.
(8) None of the Companies or any of their current
or former directors, officers, employees or any other
"fiduciary", as such term is defined in Section 3(21)
of ERISA, has committed any breach of fiduciary
responsibility imposed by ERISA or any other applicable
law with respect to the Company Plans which would
subject Buyer, any Company or any of their respective
directors, officers or employees to any material
liability under ERISA or any applicable law.
(9) None of the Companies has incurred any
liability under Title IV of ERISA, any lien under Code
Section 401(a)(29) or any material liability for any
tax or civil penalty imposed by Sections 4971, 4975 or
4976 of the Code or Section 502 of ERISA and no
condition or set of circumstances exists that presents
a risk to any of the Companies of incurring any such
lien or liability.
(10) Each Company (A) is in compliance in all
material respects with all applicable laws respecting
employment, employment practices, terms and conditions
of employment and wages and hours (including, but not
limited to, WARN, the Age Discrimination in Employment
Act, as amended, the Civil Rights Act of 1964, as
amended, the Equal Pay Act, the Occupational Safety and
Health Act, the Fair Labor Standards Act, the Americans
with Disability Act of 1990, the Family and Medical
Leave Act of 1993, the Immigration and Nationality Act
of 1952, as amended by the Immigration Reform and
Control Act of 1986 and the regulations promulgated
thereunder, and any other federal, state or local law
regulating employment or protecting employee rights),
in each case, with respect to current and former
employees and independent contractors of the Company,
(B) has withheld all material amounts required by
applicable laws or by agreement to be withheld from the
wages, salaries and other payments to such current and
former employees and independent contractors, (C) is
not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the
foregoing, and (D) is not liable for any payment to any
trust or other fund or to any governmental entity with
respect to unemployment compensation benefits, workers
compensation, social security or other benefits for
current or former employees and independent contractors
of any Company.
(11) Except as provided on Schedule 5.1(s)(2),
each Company Plan covers only those employees who are
employed by a Company (and their eligible spouses and
beneficiaries), except for persons covered for medical
benefits under an employee welfare benefit plan
pursuant to COBRA (as hereinafter defined).
(t) Environmental and Safety Compliance.
(i) General. Except as disclosed on the Schedule
entitled "Environmental Matters", no Company, nor, to
Sellers' knowledge, any other previous owner, tenant,
occupant or user of the real property, including Leased
Property, listed on the Schedule entitled "Real Estate
and Leases," (hereinafter collectively referred to as
the "Property") nor, to Sellers' knowledge, any other
Person, has engaged in or permitted any operations or
activities upon, or any use or occupancy of the
Property, or any portion thereof, resulting in the
emission, release, discharge, transport, dumping or
disposal of any Hazardous Materials (as hereinafter
defined) on, from, under, in or about the Property,
nor, to Sellers' knowledge, have any Hazardous
Materials migrated or been transported from the
Property to, upon, about or beneath other properties,
nor, to Sellers' knowledge, have any Hazardous
Materials migrated or been transported or threatened to
migrate or be transported from other properties to,
upon, about or beneath the Property.
(ii) Specific Environmental Representations and
Warranties. Except as specified in the Schedule
entitled "Environmental Matters":
(A) To Sellers' knowledge, there is not, nor has there
been, constructed, placed, deposited, stored,
disposed of or located on the Property any
asbestos in any form which has become friable.
(B) To Sellers' knowledge, no underground
improvements, including but not limited to
treatment or storage tanks, sumps, or water, gas
or oil wells, are or have been located on the
Property.
(C) To Sellers' knowledge, there are no
polychlorinated biphenyls (PCBs) or transformers,
capacitors, ballasts, or other equipment which
contains dielectric fluid containing PCBs at
levels in excess of fifty parts per million
(50ppm) constructed, placed, deposited, stored,
disposed of or located on the Property.
(D) The Property and its existing uses and activities
and, to Sellers' knowledge, its prior uses and
activities, comply and have at all times complied
in all material respects with all Environmental
Requirements (as hereinafter defined), and each
Company has obtained all Permits necessary under
applicable Environmental Requirements, except to
the extent that failure to comply or obtain such
Permits would not, individually or in the
aggregate, result in a Material Adverse Effect
upon the Companies, taken as a whole.
(E) No Company, nor to Sellers' knowledge, any prior
owner or occupant of the Property, has received
any notice or other communication concerning any
alleged violation of Environmental Requirements,
whether or not corrected to the satisfaction of
the appropriate authority, nor any notice or other
communication concerning alleged liability for
Environmental Damages in connection with the
Property, and there exists no judgment, decree,
order, writ or injunction outstanding, nor any
litigation, action, suit, claim (including
citation or directive) or proceeding pending or,
to the Sellers' knowledge, any litigation, action,
suit, investigation, claim or proceeding
threatened, relating to the ownership, use,
maintenance or operation of the Property by any
Person, or from the alleged violation of
Environmental Requirements, or from the suspected
presence of quantities of Hazardous Material
thereon or potential migration thereto, nor, to
Sellers' knowledge, are there any existing facts
or conditions which could give rise to any such
violation or liabilities.
(iii)Definitions.
(A) For purposes of this Section 5.1(t), the term
"Hazardous Material" means any substance:
(1) the presence of which requires investigation
or remediation under any federal, state or
local statute, regulation, ordinance, order,
action, policy or common law; or
(2) which is or has been identified as a
potential "hazardous waste," "hazardous
substance," pollutant or contaminant under
any federal, applicable state or local
statute, regulation, rule or ordinance or
amendments thereto including, without
limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42
U.S.C. Sections 9601 et seq.) and/or the Resource
Conservation and Recovery Act (42 U.S.C.
Sections 6901 et seq.); or
(3) which is toxic, explosive, corrosive,
flammable, infectious, radioactive,
carcinogenic, mutagenic, reactive, or
otherwise hazardous and has been identified
as regulated by any Governmental Authority.
(B) For purposes of this Section 5.1(t) the term
"Environmental Requirements" means all applicable
Laws, Permits and similar items of all
Governmental Authorities and all applicable
judicial, administrative, and regulatory
judgments, decrees, orders, writs or injunctions
relating to the protection of human health or the
environment, including, without limitation:
(1) All requirements pertaining to reporting,
licensing, permitting, investigation, and
remediation of emissions, discharges,
releases, or threatened releases of Hazardous
Materials;
(2) All requirements pertaining to the protection
of the health and safety of employees or the
public; and
(3) All other limitations, restrictions,
conditions, standards, prohibitions,
obligations, schedules and timetables
contained therein or in any notice or demand
letter issued, entered, promulgated or
approved thereunder.
(C) For purposes of this Section 5.1(t), the term
"Environmental Damages" means any and all
Liabilities (as defined in Section 11.1) which are
incurred at any time as a result of the existence
or disposal prior to Closing of Hazardous Material
upon, about, from, beneath the Property or
migrating or threatening to migrate to or from the
Property, or the existence of a violation of
Environmental Requirements pertaining to the
Property, regardless of whether the existence of
such Hazardous Material or the violation of
Environmental Requirements arose prior to the
present ownership or operation of the Property,
and including without limitation:
(1) Damages for personal injury, or injury to
property or natural resources occurring upon
or off of the Property, foreseeable or
unforeseeable, including, without limitation,
lost profits, consequential damages, the cost
of demolition and rebuilding of any
improvements on real property, interest and
penalties;
(2) Fees incurred for the services of attorneys,
consultants, contractors, experts,
laboratories and all other costs incurred in
connection with the investigation or
remediation of such Hazardous Materials or
violation of Environmental Requirements
including, but not limited to, the
preparation of any feasibility studies or
reports or the performance of any cleanup,
remediation, removal, response, abatement,
containment, closure, restoration or
monitoring work required by any Governmental
Authority, or reasonably necessary to make
full economic use of the Property or any
other property in a manner consistent with
its intended use or otherwise expended in
connection with such conditions, and
including without limitation any attorneys'
fees, costs and expenses incurred in
enforcing this Agreement or collecting any
sums due hereunder;
(3) Liability to any third Person or Governmental
Authority to indemnify such Person or agency
for costs expended in connection with the
items referenced in subparagraph (C)(2) of
this Section 5.1(t); and
(4) Diminution of the value of the Property, and
damages for the loss of business and
restriction on the use of or adverse impact
on the marketing of rentable or usable space
or of any amenity of the Property.
(u) Changes in Circumstances. Except as disclosed in
the Schedule entitled "Changes in Circumstances", since the
Balance Sheet Date no Company has (i) sold, transferred or
otherwise disposed of any properties or assets (including
the Assets) outside the ordinary and normal course of
business or to any Affiliate of any Company; (ii) mortgaged,
pledged or subjected to any Lien, any of the Assets;
(iii) acquired any property or assets (including the Assets)
outside the ordinary and normal course of business or from
any Affiliate of any Company; (iv) sustained any material
damage, loss or destruction of or to the Assets (whether or
not covered by insurance); (v) entered into any transaction
or otherwise conducted the Business other than in the
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